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7.2. SR 02-20-2007 City of Elk River REQUEST FOR COUNCIL ACTION Agenda Section Meeting Date Administration Februa 20, 2007 Item Description Consider Resolution Approving Elk River Municipal Utilities' Participation in Development of Brookings-Twin Cities Transmission Pro' ect Administrator Introduction Elk River Municipal Utilities (ERMU) is considering entering into an agreement with Central Minnesota Municipal Power Agency (CMMP A) to participate in the development of the Brookings- Twin Cities Transmission Project. ERMU must have City approval to enter into the agreement before CMMP A will allow ERMU to participate. Discussion At its February 20 meeting, ERMU is considering entering into the CMMP A agreement. ERMU can't own real property in its name, but because this is not considered real property, ERMU is allowed to own the transmission line. Therefore, ERMU may enter into this agreement directly as long as the City Council authorizes ERMU to do so. ERMU will then be responsible for all future action required for the project including action required to continue to the next phase of development of the project. Since ERMU will be party to the agreement with CMMP A, the risks and benefits of participating will be ERMU's. The attached memo from Bryan Adams explains the project and reasons why ERMU is considering participating in this project. Mr. Adams and Jerry Tackle, President of the ERMU Commission, will be at the meeting to relate the action taken at the Commission's meeting and to answer questions from the Council. Financial Impact ERMU will be responsible the financial risks for this project. ERMU will be required to adjust electric rates if needed to provide funds for the project. Attachments · Resolution Approving Elk River Municipal Utilities' Participation in the Development of the Brookings-Twin Cities Transmission Project · Memo from Bryan Adams, ERMU General Manager regarding MMTG Membership and CapX 2020 Investment including the CMMP A Brookings- Twin Cities Project Development Agreement Action Requested The Council is asked to consider the Resolution Approving Elk River Municipal Utilities' Participation in the Development of the Brookings- Twin Cities Transmission Project s: \ Council\Lori \2007\ ERMU CAPX.doc Council Action Follow Up Motion by _ Second by _ Vote s: \ Council \Lori \2007\ERMU CAPX.doc Elk River Municipal Utilities 13069 Orono Parkway Elk River, MN 55330 phone: 763.441.2020 Fax: 763.441.8099 February 13,2007 To: Elk River Municipal Utilities Commission Jerry Takle Jim Tralle Jerry Gumphrey Elk River City Council Stephanie Klinzing Larry Farber Jerry Gumphrey Paul Motin Nick Zerwas From: Bryan Adams Subject: MMTG Membership and CapX 2020 Investment The CapX 2020 initiative is a group of electric utilities joining together to identify and construct necessary generation and transmission facilities to meet Minnesota's needs for the year 2020. In short, 6300 MW of new generation capacity and 3300 miles of additional transmission facilities will be required. Transmission costs alone are estimated to be $2.7 billion. Generation and transmission rates will rise to pay for these additional facilities. Elk River Municipal Utilities' charge is to keep our rates as lowas possible for our customers. Municipal utilities in general own very little transmission and tend to rent their transmission needs and therefore are very susceptible to transmission rate increases. This is Elk River's case. One way to reduce transmission costs is to own vs. rent. In May 2006, the Elk River Municipal Utilities Commission authorized joining Midwest Municipal Transmission Group (MMTG) as a vehicle to explore the potential to buy into the transmission system. Due to the successful negotiating efforts ofMMTG, we now have the opportunity of buying into the transmission system. The first transmission project is a 345 kv line from Brookings to Twin Cities at a cost of approximately $600 million. Elk River's load share is approximately $2 million. CapX 2020 participants include Wisconsin Public Power Inc. (WPPI), Central Minnesota Municipal Power Agency (CMMP A), Missouri River Energy Services (MRES), Minnesota Power (MP), Otter Tail Power (OTP), Xcel Energy (Xcel), Great River Energy (GRE), Dairyland Power Cooperative (DPC), the City of Rochester (RPU), Southern Minnesota Municipal Power Agency (SMMP A), and Missouri Basin Municipal Power Agency (MBMPA). CMMPA will be executing the agreement on behalf of MMTG and CMMP A members that are participating in the development of the CapX Brookings- Twin Cities Project. Elk River Municipal Utilities will be part of the MMTG group associated with CMMP A. At the November 21,2006 Elk River Municipal Utilities special commission meeting, authorization was given for Elk River Municipal Utilities to proceed with MMTG/CMMP A initiative with a cap of $2,000,000. Enclosed is the following information for your review. 1) Executive summary of December 2004 CapX 2020 Interim Report. 2) Proposed Brookings- Twin Cities Project Development Agreement. All participants sign very similar agreements. 3) Projected financial analysis reflecting a levelized annual margin of 5.3%. 4) Resolution approving the development agreement between CMMPA and Brookings- Twin Cities Project. The preliminary investments payments are as follows: Deposit -.009% $2,000,000 18,000 by December 2006 Project Development Costs $32,000 in February or March 2007 Certificate of Needs & future $300,000 total-paid in monthly contract development costs. installments over a 36 month time frame Construction $2,000,000-$350,000 $1,650,0002011 time frame The term of the attached project development agreement is in the three to five year time frame. This agreement establishes the ground rules to develop the final ownership agreement, operating and maintenance agreement including cost reimbursement. The agreement allows the project to move forward with certificate of need and transmission line routing procedure. This agreement also allows the following offramps to CMMPA.. a) Fail to receive regulatory approval. b) Major scope change created by certificate of need (CON). c) Major increase in development budget. d) Choose to exit at anytime prior to ownership signing. This agreement is rather lengthy because some participants will be bonding for these funds initially. Elk River will not bond until construction starts in three to five years. The pro's and con's of this venture are as follows: Pro's 1) Municipal Utilities have long asked for the ability to buy into the transmission system. 2) Viable strategy to keep rates lower, own vs. rent. 3) Have input & influence as transmission issues develop. 4) Rate of return of 5% - 6% is equivalent to our existing 5% - 6% margin. Financial analysis is very conservative. 6) 7) Con's 1) 2) 3) 4) 5) 6) 7) 8) 9) Has no effect on bond rating or future borrowing as long as cash flow can support debt payment & electric rates stay in line. If we proceed, still have a way out of the agreement with specified off ramps. MISO is a very imperfect system at high cost, but the electric industry has gone too far down the road to turn back. Status of deregulation is still in flux. Adequate transmission is still key to functioning wholesale electric market system. MMTG/CMMP A arrangement at this time is still somewhat loose. Constructional arrangements are not clear and still in development. Rate of return not as large as hoped. Due to unknown, there is some risk. We would be a very small fish in a big sea when it comes to input & influence. Small influence in budgeting process. 4 to 5 year lead time before we see benefits. (Certificate of need process and construction). Building transmission is seen as negative to public. New transmission to support renewable energy may help mediate negativity. Additional bonding ties up capital for coverage. (Cash flow to support 150% principal and interest payments). Staff recommends that authorization be given to proceed and the attached resolution be adopted. Ii I ,:: I,. o' CAPX 2020 INTERIM REpORT DECEMBER 2004 IDENTIFYlNG MINNESOTA'S ELECTRIC TRANSMISSION INFRASTRUCTURE NEEDS: AN INTERIM REpORT Minnesota's electric transmission infrastructure-a network of high voltage transmission lines of230 kilovolts and higher-requires major upgrades and expansion over the next 15 years to support customers' growing demand for electricity. To ensure the backbone transmission system is developed and available to serve these growing needs, the five largest Minnesota transmission-owning utilities initiated the CapX 2020 project. CapX 2020 is short for Capital Expenditures by the year 2020. CapX 2020's mission is to: · Create a joint vision of required transmission infrastructure investments needed to meet growing demand for electricity inMinnesota and the region; and · Work to create an environment that allows these projects to be developed in a timely, efficient manner; consistent with the public interest. Great River Energy, Minnesota Power, Otter Tail Power Company and Xcel Energy jointly fonned Cap X 2020 in the summer of2004; Missouri River Energy Services subsequently joined this ~ffort, and other investor-owned utilities, cooperatives, and municipal utilities have been following the initiative. This Interim Report presents our work to date. Its purpose is to create awareness of the significant need for new transmission investment, to inform stakeholders of our study efforts underway, and to begin a public dialogue on transmission issues. We present this report in the following sections: Our future needs, presenting forecasts of customer demand over the next 15 years. Our current system, outlining the characteristics and capacity of our current backbone transmission system. A changed market, describing how management of the transmission network operates under federal reforms, The CapX 2020 planning effort, providing an overview of our CapX 2020 study. Our preliminary results, presenting our findings to date. · . Next steps, discussing the continued planning effort and inviting stakeholder dialogue. . . . . . FUTURE NEEDS A robust bulk electric system supports our national and state economies. Data from the U.S. Department of Energy's Energy Infonnation' Administration (EIA) show a parallel between the nation's gross domestic product (GDP) and electricity sales,! As the GDP increases or . decreases, so does electricity demand. '~//W~\,~"c)-,u;lg~.,gg'y/ 0 iar/ aco/c les; tri <ity . htrI1J). 3 ~t' .,- - ;if' , i ~i ~i ..t Et , .-~. . ...."..,V"i.-..-. CAP X 2020 INTERIM REpORT DECEMBER 2004 foresee continuing growth in the state's population, economy and 'city, Through 2020, Minnesota electric utilities predict an annual average Orners' demand for electricity of2.49 percent,2 far above the national , crit per year.~ Meeting this increased demand is expected to require an ';'Watts of generating capacity. To provide context for this amount, the tationin Minnesota - the Sherburne County (Sherco) plant near Becker- 'pproximately2,300 megawatts of generating capacity. projected increased need for electric generating capacity, customers' ~quality has increased. Sophisticated electrical equipment and new '(frs, such as high-speed data processing centers, require highly reliable 'it~;; To meet these requirements, transmission and distribution infrastructure '~~t()meet increasingly higher power quality standards. viii~s further background and detail regarding customer requirements and "dsin Attachment A. " SYSTEM ':fLhuilt inthe 1960s and '70s, the high voltage transmission facilities (230 '4~~ove) act as the supporting structure, or backbone, of the bulk electric system, :.;,'City from power plants to load centers. The system is designed to maintain ,,'[evenw.hen faced with various contingencies that arise due to weather or other ':,'~ftemp6rarily may remove a particular transmission facility from service. The ,;'qtthese facilities were built in the 1970s, with the last of this class built in id~;~ith,construction of Unit 3 at the Sherco power plant, which began operating in :;\~~~:/"; ':": ' studies include information from the following utilities: Alliant Energy, Great River Energy, Power Cooperative, Minnesota Power, Missouri R.i ver Energy Services, Otter Tail Power Company, Municipal Power AgencyIRochester Public Utilities and XceI Energy. growth in electric sales for 2002.2025 (1LttPJL':Y~~;"iil,(h~~..g~illq,f/aeQi~ectn.fit.y.hJ!:T\D 4 CAPX 2020 INTERIM REpORT DECEMBER 2004 highway system. A subsequent series of initiatives by the Federal Energy Regulatory Commission (FERC) has provided further change to industry structure. As a result, the way the electricity industry operates has changed considerably. A key change is the functional separation of transmission from generation to ensure equal access to the grid, which the FERC mandated in 1996. The upshot of this change is that generation . and transmission planning must now be performed separately and in a nondiscriminatory manner; transmission planning and development must be prepared to meet the needs of all regional market participants rather than just those of the individual utility or specific generation resource type. Attachment C provides an overview of these changes, including the transition to regional transmission organizations. THE CAPX 2020 PLANNING EFFORT It is clear that our current transmission network will be unable to accommodate the required new generation and increased customer demand without significant upgrades and new facilities. To identify projects needed to meet customer needs well intothe future, CapX 2020 has unpertaken two technical studies on major transmission facilities needs in Minnesota: the Vision Study and the Red River Valley Study. We expect both to be completed in May 2005. The Vision Study will outline key infrastructure improvements needed to meet future needs under a variety of possible scenarios. Our planners are considering various potential scenarios of generation development to determine what system investments will be required regardless of location of new power plants. With this study, we will identify projects that will meet our customers' and the region's needs. Our goal is to identify the next major transmission backbone investments required to ensure a robust network capable of accommodating growth and providing continued reliable service well into the future. Transmission investments of this magnitude take several years; therefore, the planning process for meeting these needs has begun. The Red River Valley Study focuses on near-term transmission needs to address known transmission reliability issues in west-central Minnesota. CapX 2020 undertook the Red River Valley Study to build on a recent study by utility transmission planners that revealed this area to be the most immediately vulnerable. Studies show that within the next three years, low voltages along with potential voltage collapse c;ould occur during winter peak conditions. Additionally, the study will address reliability issues in central Minnesota. While more local in nature, this study will produce detailed information capable of supporting a certificate of need for the projects found to be most appropriate. . . i. . Concurrent with these technical studies, CapX 2020 is reviewing state processes to determine whether they are able to support development of the required transmission infrastructure in a timely, efficient manner, consistent with the public interest. In particular,CapX 2020 is reviewing current approaches to certification and cost recovery, while also evaluating industry structure, routing and jurisdictional issues. CapX 2020 is committed to working to create an environment that allows needed transmission infrastructure additions and 5 j i , i ~ ~. CAP X 2020 INTERIM REpORT DECEMBER 2004 improvements to be developed in a timely, efficient manner consistent with the public ..... Attachment D provides more detail on these technical studies, while Attachment E . summarizes our on-going review of state planning and regulatory issues. PRELIMINARY RESULTS Preliminary results from these studies show that the current transmission system will not support the forecasted need for new generation facilities to meet projected customer demand. Absent new investment in transmission facilities; our preliminary analysis anticipates significant line and equipment overloads by 2020, assuming customer requirements develop as projected. These overloads occur under even the most optimistic scenario that has all . major transmission lines and equipment in service. Many more overloads occur when other facilities must be removed from service because of storm damage, for routine maintenance or for any other reason. Under the Vision Study, we are considering several possible scenarios of generation development and the transmission additions needed to serve each. ,Comparing the resulting plans will allow us to identify the projects needed to reinforce the grid regardless of how generation develops. All told, the study is examining approximately 3,300 miles of additional transmission facilities with an estimated cost of $2.7 billion. While all of these facilities may not be needed to address the customer needs in 2020, CapX 2020 believes it is important to identify for stakeholders the magnitude of investment and projects under review. Preliminary findings from the Red River Valley study recommend short-term upgrades to ensure reliability in the near future and a long-term system solution. While work has already begun on many of the short-term upgrades, the best long-term alternative includes a new 345 kilovolt line from Fargo, N.D., to St. Cloud, Minn., and a 230 kilovolt line from Bemidji, Minn., to Grand Rapids, Minn. Our further study will confirm whether this project is still the best long-term solution. NEXT STEPS CapX 2020 is committed to making the necessary investments to upgrade the grid that delivers power to customers. We agree now is the time to strengthen the electricity system's backbone, before new power plants are constructed and in time to meet customer needs, ,. . . Our next steps include: ,...'............... -, . f . Completion of the technical studies in May 2005. Dialogue with policymakers and stakeholders regarding the CapX 2020 studies and state process issues. Outreach to other transmission providers to share information and collaborate on solutions. 't' . . . ~ 6 i, @. I .~..'.. ~. ~ !> !,jj I :i:." CAPX 2020 INTERIM REpORT DECEMBER 2004 Minnesotans will require access to new generation facilities to meet projected growth. They will need a robust transmission system, one that can provide service reliably into the future, "'to support the new generation facilities. To meet these needs, significant transmission line '_ upgrades and new transmission construction will be required over the next 15 years. CapX ;; 2020 understands these needs and believes planning and construction must be done wisely, serving the public interest through a deliberate process that includes all stakeholders. We ": look forward to working with stakeholders to ensure these objectives are met. CAPX 2020 VISION TEAM MEMBERS Will Kaul Vice President, Transmission Great River Energy Elk: River, Minnesota \N""WW. greatn vcrenergy.com Tom Ferguson Vice President, Power Delivery and Transmission Minnesota Power Duluth, Minnesota w\N'"\v.mnpower.com Rod Scheel Vice President, Asset Management Otter Tail Power Company Fergus Falls, Minnesota www.otpco.com Raymond 1. Wahle Director, Power Supply and Operations Missouri River Energy Services Sioux Falls, South Dakota "\Il"\vw.mrenergy.com Doug Jaeger Vice President, Transmission, Safety & Technical Training - and Don Jones Director, Transmission Asset Management Xcel Energy Minneapolis, .Minnesota www.xcelencrgy.com 7 !/i- f J I I ~Mt= l iW. l ~- - BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT C:\Documents and Setlings\Bryan\Local Setlings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 2 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT T ABLE OF CONTENTS ARTICLE 1 TERM AND TERMINATION OF AGREEMENT; DEFINITIONS.... 6 Section 101. Term and Termination ............................................................................6 Section 102. Definitions .. .... .................. ........ .............. ........... ..................................... 6 ARTICLE 2 CERTAIN OBLIGATIONS OF CMMPA AND PARTICIPANT ......10 Section 201. Transmission Project and Development Project; Payment Obligations; Additional Transmission Development Project ........................................................ 10 Section 202. Election Share ...................................................................................... 11 Se~tion 203. Estimated Development Project Costs ................................................. 11 Section 204. Development Project Decisions; Development Project Coordinating Committee ............................................................. .-................................................... 11 Section 205. Relationship to Other Instruments ........................................................ 11 Section 206. Tax Covenants .... ............ ....... ......... ..... ................. ..... .......... .... ............. 12 Section 207. Insurance .... ............................ ............................... ... ......... .............. ..... 13 ARTICLE 3 CERTAIN OBLIGATIONS OF THE P ARTICIP ANT ....................... 13 Section 301. Participant Opinion............................................................................... 13 Section 302. Participant Issuance of Bonds .............................................................. 13 Section 303. Participant Rate and System Maintenance Covenant ........................... 14 Section 304. Unconditional Payment Obligation ......................................................14 Section 305. Source of Payments .....,'.. ...................... ............ .................. .................. 14 ARTICLE 4 BUDGET, BILLING AND PAYMENT OBLIGATIONS ...................14 Section 401. Annual Budget ...................................................................................... 14 Section 402. Billing Statement ...... ..................................................................... ....... 14 Section 403. Billing Adjustments .............................. ................................................ 15 Section 404. Billing Disputes .......................... .......................................................... 16 ARTICLE 5 REPORTS; RECORDS AND ACCOUNTS; P ARTICIP ANT INFORMATION ................................. ............ ..... ............................. ..... .............. .......... 16 Section 501. Reports ....................................................................................... .......... 16 Section 502. Records and Accounts .......................................................................... 17 Section 503. Participant Information ......................................................................... 17 ARTICLE 6 ISSUANCE OF BONDS .......................................................................... 17 Section 601. Bonds .................................................................................................... 17 Section 602. Issuance of Bonds for Additional Project Costs and Refunding .......... 17 Section 603. Issuance of Taxable and Tax Exempt Bonds ........................................ 17 ARTICLE 7 END OF DEVELOPMENT PROJECT .................................................18 Section 701. Ending of Development Project and Agreement Termination .............. 17 C:\Documents and Settings\8ryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 3 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ARTICLE 8 OBLIGATIONS IN THE EVENT OF DEFAULT ...............................18 Section 801. Participant Failure to Pay..................................................................... 19 Section 802. Participant Payment Default ................................................................. 20 Section 803. Other Participant Default ...................................................................... 20 ARTICLE 9 - reserVed for Future use ARTICLE 10 MISCELLANEOUS PROVISIONS ....................................................20 Section 1001. Modification and Uniformity of Agreements .....................................20 Section 1 002. Notices ................................................................................................ 20 Section 1003. Arbitration ...................................................... ..................................;. 21 Section 1004. Applicable Law .................................................................................. 21 Section 1005. Severability ... .......... ................ ........ ........ ..... ......... ....... ........ .... ........... 21 Section 1006. Assignment of Agreement ..................................................................22 Section 1007. No Adverse Distinction ......................................................................22 Section 1008. Duly Authorized Signatories; Binding Effect of Execution ............... 22 Section 1009. Confidentiality of Information ...........................................................22 Section 1010. Participant Obligations to MMTG ...................................................... 30 ATTACHMENT 1: DESCRIPTION OF TRANSMISSION PROJECT AND ADDITIONAL DEINITIONS ESTIMATED DEVELOPMENT PROJECT COSTS P ARTICIP ANTS AND PARTICIPANT ELECTION SHARES MONTHLY DEVELOPMENT PROJECT COSTS MONTHLY DEVELOPMENT PROJECT CAPITAL COSTS DEVELOPMENT PROJECT AGREEMENTS P ARTICIP ANT OPINION ATTACHMENT 2: ATTACHMENT 3: A TT ACHMENT 4A: ATTACHMENT 4B: ATTACHMENT 5: ATTACHMENT 6: C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 4 c1ean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT THIS AGREEM~NT is executed by and between the Central Minnesota Municipal Power Agency ("CMMP A" or "Agency"), which has heretofore been duly created and incorporated as a municipal corporation and a political subdivision of the State of Minnesota under provisions of the Minnesota Statutes, Chapter 453, Sections 453.51 to 453.62 (the "Act"), and the undersigned city of the State of Minnesota, the State of Iowa or other state of the United States of America or other party as permitted by the Act, which has executed this Agreement (the "Participant"). WHEREAS, CMMP A has duly executed and filed with the Secretary of State of the State eff Minnesota an Agency Agreement originally executed on the 1st day of July, 1987, as restated on January 15, 1997 and August 11,2004, as the same may be restated from time to time; and WHEREAS, CMMP A shall have all of the powers enumerated in the Act, including those in Section 453.54 of the Act, and in the exercise thereof shall be deemed to be performing an essential governmental function and exercising a part of the sovereign powers of the State of Minnesota; and WHEREAS, the Participant is a city defined in Subdivision (3) of Section 453.52 of the Act or is otherwise organized and authorized to be a Participant; and WHEREAS, CMMP A proposes to participate in the development of the Brookings- Twin Cities transmission project described in Attachment 1 hereto (the "Transmission Project"); and WHEREAS, the Participant has determined that, to meet the needs of its current and future customers, it is desirable to enter into this Agreement to pursue Development Work for the Transmission Project (the "Development Project"); and WHEREAS" the Midwest Municipal Transmission Group ("MMTG") with the other CapX 2020 participants entered into a "Transmission Project Memorandum of Understanding" dated r ,] 2006, as amended, (the "Development Project MOU") pursuant to which the parties to that agreement have previously undertaken certain matters, actions and activities. The Transmission Project is one of several proposed transmission projects initially planned and coordinated through the CapX 2020 initiative process (the "CapX 2020 Projects"). The Transmission Project is being undertaken to assist in the maintenance of and enhance system reliability for electric customers in the upper Midwest region. The CapX 2020 Development Agreement will replace and supersede the Development Project MOU, as amended; and C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 5 clean. doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT WHEREAS, MMTG and CMMP A entered into a Letter of Understanding dated October 4, 2006 in which the parties agreed to their respective roles with regard to the Development Project and future development of other CapX 2020 Projects; and WHEREAS, MMTG also entered into on CMMPA's behalf with the other CapX 2020 participants a Participation Agreement dated r ,] 2006, (the "CapX Participation Agreement") pursuant to which the parties to that Agreement have previously undertaken certain matters, actions and activities in the development of transmission in the upper midwest region. The CapX Participation Agreement is one wherein MMTG represents its members in the pursuit of new projects similar to those that are presently being pursued by CapX 2020 in which CMMP A and other MMTG members may participate and invest in at the desire of the Participants and other MMTG members who become interested at a later date; and WHEREAS, the CapX 2020 participants desire to pursue Development Work for the Transmission Project(which was initiated under and pursuant to the Development Project MOU) pursuant to the terms and conditions of the CapX 2020 Development Agreement that is anticipated to be executed in the near term by CMMP A; and WHEREAS, the Participant is entering into this Agreement with CMMP A to facilitate the pursuit of the Development Project by CMMPA on the Participant's behalf; and WHEREAS, certain Participants executing this Agreement may choose to fund their obligations pursuant to this Agreement from a separate source of indebtedness ("Open Participants") and if so shall be required to issue debt separate and apart from any debt issued by CMMP A on behalf of all other Development Project Participants ("Agency Participants"); and WHEREAS, CMMP A plans and intends to become a Midwest Independent System Operator ("MISO") transmission owner to facilitate payment to CMMP A and Participants for their costs related to the Development Project and the Transmission Project, if the Transmission Project is undertaken, 'including returns on their investments, and to benefit CMMP A and the Participants. Furthermore, CMMP A and the Participants intend to execute a separate agreement to address the parties obligations and responsibilities pertaining to CMMP A becoming a MISO transmission owner; and WHEREAS, the Participants recognize that this Development Agreement addresses the development phase of the Transmission Project and that following the completion of the Development Work and CMMPA's decision to participate in the Transmission Project, CMMPA will replace this Agreement with an agreement providing for the Participant's entitlement and other related rights and arrangements pertaining to the Transmission Project ("Brookings - Twin Cities Project Agreement"). C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 6 c1ean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT Now, THEREFORE, the parties hereto mutually agree as follows: C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 7 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ARTICLE 1 TERM AND TERMINATION OF AGREEMENT; DEFINITIONS Section 101. Term and Termination This Agreement shall be effective upon: (i) execution and delivery of the Brookings- Twin Cities Development Project Agreements by CMMP A and each of the Participants listed on and having the Participant Election Shares specified on Attachment 3 hereto; and (ii) the effective date of theCapX 2020 Development Agreement. The initial term of this Agreement shall be five years from the date set forth on the front of the CapX 2020 Development Agreement. In the event Development Work is not completed at the end of the initial term, this Agreement shall automatically extend in one-year increments until Development Work has been completed. This Agreement shall terminate or may be terminated in accordance with Article 7 of this Agreement. Section 102. Definitions. As used herein: (a) "Act" means that certain 1976 Act of the Legislature of the State of Minnesota, compiled and published in Minnesota Statutes, Chapter 453, Sections 453.51 to 453.62, as the same has been heretofore or may be hereinafter amended. (b) "Additional Transmission Development Project" means a project in addition to the Project for which CMMP A undertakes development work. (c) "Additional Transmission Development Project Costs" mean all costs related to the study and development of an Additional Transmission Development Project, including, without limitation, costs of the type described in the definition of Development Project Costs. (d) "Agency Participant" means a Participant that finances the Development Project through CMMP A. (e) "Agreement" and "Brookings-Twin Cities Development Project Agreement" mean this Agreement with the Participant and all the Agreements, including this Agreement, entered into by CMMPA and the Participant, in each case as the same may be amended from time to time, including all Attachments to this Agreement, as any such Attachment may be revised and updated from time to time by CMMP A when necessary, and any substantially similar agreement entered into by CMMPA in connection with any transfer of any Participant's Election Share pursuant to Section 801 ( c) of this Agreement. (1) "Annual Budget" means the budget effective for any Contract Year pursuant to Section 401 of this Agreement which itemizes the estimated Monthly Development Project Costs and Monthly Development Project Capital Costs during a Contract Year, or, in the case of an amended Annual Budget, during the remainder of a Contract Year. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 8 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT (g) "Annual Development Project Costs" mean, with respect to a Contract Year, the total of all Monthly Development Project Costs and Monthly Development Project Capital Costs that are paid by CMMP A during each month of such Contract Year. (h) "Billing Statement" means the written statement, which may include a statement transmitted by facsimile, email, or other electronic means, prepared monthly by CMMP A and delivered to the Participant which shows the amounts to be paid for such month to CMMP A by the Participant as the Participant's Election Share of the Monthly Development Project Costs and Monthly Development Project Capital Costs as set forth in an Annual Budget or an amended Annual Budget. (i) "Bond Resolution" means anyone or more resolutions, indentures, loan agreements, or other similar instruments providing for the issuance of Bonds issued or to be issued by CMMPA to fund all or any portion of Development Project Costs. (j) "Bonds" means any bonds, notes or other evidences of indebtedness issued from time to time by CMMP A (i) to pay Development Project Costs and (ii) for the purposes authorized by Sections 601 and 602 of this Agreement. (k) "Brookings Share" means CMMP A's share of the Project as set forth in the CapX 2020 Development Agreement. (I) "Brookings - Twin Cities Project Agreement" means the agreement to be executed in the future between CMMPA and Participant setting forth the Participant's entitlement and other related rights to the Transmission Project should the Participant elect to participate in the Transmission Project via its Election Share. (m) "CapX 2020 Development Agreement" means the agreement to be entered into by the CapX 2020 participants that desire to pursue Development Work which was initiated under and pursuant to the Development Project MOO, pursuant to the terms and conditions of that agreement. (n) "CapX 2020 Projects" mean the Transmission Project and one or more additional transmission projects that may be developed by or through CapX 2020 under other project agreements. (0) "Carrying Costs" shall have the meaning given such term in Attachment 1 of this agreement. (p) "CMMPA Debt Related Monthly Development Project Costs" means those Monthly Development Project Costs associated with the issuance of Bonds byCMMP A on behalf of Agency Participants that shall include, but not be limited to, those costs so identified in Attachment 4A ofthis Agreement. (q) "Contract Year" means the 12-month period commencing on January 1 and ending December 31 of each year during the term of this Agreement, except that the first Contract Year shall commence on the earliest of (i) the date to which interest is capitalized on all of the Bonds issued to finance the Development Project costs but not later than one year prior to the first principal installment date for such Bonds, or (ii) the C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 9 c1ean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT date on which any Monthly Development Project Costs or Monthly Development Project Capital Costs shall become payable, and the last Contract Year shall end at the date of termination of this Agreement as provided in Article 7 of this Agreement. (r) "Development Costs" has the meaning given such term in Attachment 1 of this Agreement. (s) "Development Manager" has the meaning given such term in Attachment 1 of this Agreement. (t) "Development Project" means all actions and activities related to Development Work for the Transmission Project. (u) "Development Project Agreements" mean any and all of the agreements that CMMP A has entered into with other CapX 2020 participants relating to the Development Project, which agreements are set forth in Attachment 5, as the same may be amended from time to time. (v) "Development Project Coordinating Committee" means the committee established pursuant to Section 204 of this Agreement. (w) "Development Project Costs" mean: (1) all costs relating to study and development of the Transmission Project, including Development Costs and related Carrying Costs, preliminary survey, investigation and development costs, engineering, contractors' fees, permits, licenses and approvals, labor, materials, equipment, lands, rights of way, franchises, easements and other interests in land, utility services and supplies, payments to other public agencies, training and testing costs, insurance premiums, fees and expenses of trustees and paying agents, legal and financing costs, administrative and general costs, and all other costs incurred by or on behalf of CMMP A and properly allocable to the development of the Transmission Project, including repayment of any interim borrowing costs to provide for the foregoing; (2) if Bonds are issued by CMMP A on behalf of Agency Participants to finance all or part of the Development Project, funds required for: (a) the deposit or deposits from the proceeds of Bond in any funds or a,ccounts established pursuant to the Bond Resolution as reserves for renewals, replacements, contingencies and working capital; (b) the deposit or deposits from the proceeds of Bonds in any fund or account established pursuant to the Bond Resolution to meet reserve requirements for Bonds; (c) (d) tall costs of issuance, including underwriting fees, bank commitment and letter of credit fees, legal fees, financial advisory fees, engineering fees, bond insurance and indemnity fees, any swap premium or swap termination payment, and any other costs of issuance. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 10 c1ean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT (3) if indebtedness is issued by Open Participants to finance or refinance all or part of the Development Project, funds required for (a) the deposit or deposits from the proceeds of indebtedness in any funds or accounts established pursuant to the bond resolution as reserves for renewals, replacements, contingencies, and working capital; ; (b) the deposit or deposits from the proceeds of indebtedness in any fund or account established pursuant to the bond resolution to meet reserve requirements for indebtedness; and (c) all costs of issuance, including--underwriting fees, bank commitment and letter of credit fees, legal fees, financial advisory fees, engineering fees, bond insurance and indemnity fees, any swap premium or swap termination payment, and any other costs of issuance. (4) all federal, state and local taxes and payments in lieu of taxes legally paid in connection with the Development Project; (5) all costs relating to injury and damage claims arising out of the Development Project; (6) any termination payments under swap or other similar arrangements that may enter into relating to the Development Project; and (7) all other costs incurred by or on behalf of CMMP A and properly allocable to the development, acquisition, financing, and construction of the Project. (x) "Development Work" has the meaning given such term in Attachment 1 of this Agreement. (y) "Joint Development Work" has the meaning given that term in Attachment 1 ofthis Agreement. (z) "Monthly Development Project Capital Costs" means, with respect to a Contract Year, Development Project Costs that are paid by CMMPA on behalf of Open Participants during each month (or shorter time period as determined at the reasonable discretion of CMMP A) of such Contract Year allocable to the Project, which Development Project Costs shall include, but are not limited to, those items referred to in Attachment 4B of this Agreement. (aa) "Monthly Development Project Costs" means, with respect to a Contract Year, to the extent not paid out of the proceeds of Bonds as a part of the Development Project Costs, all costs, expenses and credits/revenues of CMMP A paid or received by CMMP A during each month (or shorter time period as determined at the reasonable discretion of CMMP A) of such Contract Year allocable to the Development Project, which costs, expenses and credits/revenues shall include, but are not limited to, those items of cost, expenses and credits/revenues referred to in Attachment 4 of this Agreement. With C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 11 clean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT respect to Open Participants, Monthly Development Project Costs shall exclude certain debt related costs as set forth in Attachment 4A of this Agreement. (a b) "Non-Debt Related Monthly Development Project Costs" means all other Monthly Development Project Costs other than CMMP A Debt Related Monthly Development Project Costs that shall include, but not be limited to, those costs so identified in Attachment 4A of this Agreement. (ac) "Open Participant" means a Participant that does not participate in CMMP A financing of the Development Project. (ad) "Participant" means each entity that is specified in Attachment 3 hereto, and which enters into a Brookings- Twin Cities Development Project Agreement, collectively, the "Participants" and shall include Agency Participants and Open Participants. (ae) "Participant Election Share" and "Election Share" mean, with respect to a Participant, that percentage set forth for such Participant in Attachment 3 hereto representing the Participant's percentage share for which it may elect in the future to participate in the Project pursuant to Section 2 of this Agreement. The Participant Election Share is subject to adjustment pursuant to Section 802 of this Agreement and pursuant to any other adjustments set forth in Attachment 3 to this Agreement. (at) "Prudent Utility Practice" at a particular time means any practices, methods and acts (including but not limited to the practices, methods and acts engaged in or approved by a significant portion of the electrical utility industry prior thereto) which, in the exercise of reasonable judgment in the light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice shall apply not only to functional parts of the Project but also to appropriate structures, landscaping, painting, signs, lighting, or facilities and public relations programs reasonably designed to promote public enjoyment, understanding and acceptance of the Project. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act, to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts. In evaluating whether any matter conforms to Prudent Utility Practice, the parties shall take into account (i) the fact that CMMP A is a body politic and corporate and a political subdivision under the laws of the State of Minnesota, with the statutory duties and responsibilities thereof, and (ii) in the case of any joint facility, the applicable ownership or participation agreement between the owners or participants of the facility. (ag) "Taxable Bonds" means Bonds the interest on which is not excluded from gross income for federal income tax purposes. (a h) "Tax-Exempt Bonds" means Bonds the interest on which is excluded from gross income for federal income tax purposes. (ai) "Transmission Project" means the project described in Attachment 1. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 12 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT (aj) "Uncontrollable Forces" mean any cause beyond the control of CMMPA which by the exercise of due diligence CMMP A is unable to prevent or overcome, including but not limited to, failure or refusal of any other person or entity to comply with then existing contracts with CMMP A or with a Participant, an act of God, fire, flood, explosion, strike, sabotage, pestilence, and act of the public enemy, civil and military authority including court orders, injunctions, and orders of governmental agencies with proper jurisdiction, insurrection or riot, and act of the elements, failure of equipment, or inability of CMMP A or any contractors engaged in work on the Development Project to obtain or ship materials or equipment because of the effect of similar causes on suppliers or carriers, or inability of CMMP A to sell or issue its Bonds. When possible, CMMP A shall act with reasonable dispatch to correct or limit the effect of uncontrollable force events. ARTICLE 2 CERTAIN OBLIGATIONS OF CMMPA AND PARTICIPANT Section 201. Transmission Project and Development Project; Payment Obligations; Additional Transmission Development Projects. (a) The proposed Transmission Project, the development of which constitutes the Development Project is described in Attachment 1. (b) The Participant shall pay CMMP A for its Participant Election Share of Monthly Development Project Costs and Monthly Development Project Capital Costs pursuant to the terms of this Agreement. The amounts to be paid for each Contract Year by the Participant to CMMP A for its Participant Election Share of Monthly Development Project Costs and Monthly Development Project Capital Costs shall be in accordance with Attachments 4A and 4B of this Agreement. Monthly Development Project Costs shall be categorized as either Non-Debt Related Monthly Development Project Costs or CMMP A Debt Related Monthly Development Project Costs as set forth in Attachment 4 B to this Agreement. (c) In the event that CMMP A and the Participants agree to pursue any Additional Transmission Development Project pursuant to this Agreement, this Agreement shall be amended to the extent necessary to pursue such Additional Transmission Development Project. Section 202. Election Share. The Participant acknowledges and agrees that it has initially subscribed for an Election Share as set forth in Attachment 3 of this Agreement. Such subscription and Election Share entitles the Participant to the rights in the future to participate in the Transmission Project. A Participant shall be required to participate in the Transmission Project unless the CMMP A Board elects not to participate in the Transmission Project consistent with C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 13 clean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT its rights pursuant to the CapX 2020 Development Agreement. The Project Committee shall make a recommendation to the CMMPA Board regarding CMMPA's participation in the Transmission Project. The CMMP A Board shall consider the Development Project Committee's recommendation when determining whether to participate in the Transmission Project. The Participant's participation in the Transmission Project, including its entitlement and other related rights to the Transmission Project shall be addressed in a separate agreement with CMMP A known as the Brookings -Twin Cities Project Agreement. For purposes of this Agreement, the Participant's Election Share as set forth in Attachment 3 shall be subject to adjustment in accordance with Section 802 of , this Agreement and in accordance with Attachment 3 of this Agreement. Section 203. Estimated Development Project Costs The Participant hereby approves the estimate of the Development Costs and allocable CMMP A costs that are included as Development Project Costs, which estimate has been developed by CMMP A based on information provided by the Development Manager. Participant acknowledges that such estimate may change from time to time. Such changed estimates are hereby approved by the Participant. Attachment 2 sets forth the current estimate of the Development Costs and allocable CMMP A costs prepared as of the date indicated. When substantial changes in estimated costs are anticipated, CMMP A shall deliver revised estimates of the Development Costs and allocable CMMP A costs to the Participant in advance of anticipated payments with the number of days of advancement being consistent with that provided for in the CapX 2020 Development Agreement. Section 204. Development Project Decisions; Development Project Coordinating Committee (a) CMMPA shall have responsibility for decisions on behalf of the Participants with respect to all Development Project-related matters. Within the decision-making process, the individual needs and desires of the Participants within the Development Project shall be given consideration by CMMP A, consistent with the overall best interests of all Participants and CMMPA's requirements, obligations or covenants pursuant to the Bond Resolution, Development Project Agreements, other legal requirements, or other instruments relating to the Development Project or other projects of CMMP A. (b) A Development Project Coordinating Committee shall be established, consisting of one representative appointed by each of the Participants, one member of the CMMP A Board of Directors and one staff person of CMMP A, both appointed by the CMMP A Board of Directors. The Development Project Coordinating Committee will meet as necessary to discuss the administration of the Development Project and will make recommendations to CMMP A regarding the decisions to be made about the Development Project, including the decision regarding whether to participate in the Transmission Project upon completion of Development Work. The Development C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 14 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT Project Coordinating Committee will elect a chairperson who will serve as liaison to CMMP A. Section 205. Relationship to Other Instruments. It is recognized by the Participant and CMMP A that CMMP A in the Development Project and in the development, ownership or participation, construction, and acquisition of the Transmission Project must comply with the requirements of any other Development Project Agreements relating thereto, the Bond Resolution and all licenses, permits and regulatory approvals necessary for such development, ownership or participation, construction, and acquisition ("Other Instruments"). It is therefore agreed that this Agreement is made cognizant of the terms and provisions of such Development Project Agreements, the Bond Resolution and all such licenses, permits and regulatory approvals, as they may be amended or supplemented from time to time. The Participant acknowledges that the terms and conditions of such Other Instruments are binding and (unless they can be amended or ameliorated) that CMMPA must comply with these Other Instruments. Section 206. Tax Covenants. This Section is only applicable to Agency Participants and therefore does not apply to Open Participants. (a) In order to maintain the Federal Tax Exemption of interest on CMMPA's Bonds, and for no other purpose, the Participant covenants to comply with each applicable requirement of the Internal Revenue Code of 1986 or any successor code (the "Code") necessary to qualify CMMP A's Bonds as obligations described in section 103(a) of the Code. In furtherance of these covenants, Participant also agrees to provide any information required by CMMPA to maintain the Federal Tax Exemption of its Bonds. (b) The Participant covenants and agrees it shall not take any action or omit to take any action, which action or omission, if reasonably expected on the applicable delivery date, would cause interest on any ofCMMPA's Bonds to be included in gross income for federal income tax purposes. (c) The Participant recognizes that provisions of law related to the Federal Tax Exemption may limit the arrangements permitted with respect to sale, assignment or other disposition of the Participant's Election Share, including its obligations to pay Development Project Costs and Monthly Project Development Costs hereunder. The Participant shall comply with the policies adopted by CMMP A with respect to allocation of the private use permitted under such provisions. CMMP A shall not adopt any such policy that would adversely affect the Federal Tax Exemption when applicable to any debt issued in connection with the Development Project. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 15 c1ean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT (d) In the event that the action (or inaction) of Participant results in the loss of Federal Tax Exemption with respect to any of CMMP A's Bonds or requires any action or payments by CMMP A or any other Participant to prevent such loss of Federal Tax Exemption, Participant shall be responsible for all costs related to such loss or prevention of loss of Federal Tax Exemption (including, without limitation, payments to bondholders, payments to the IRS, costs incident thereto, and attorney fees of CMMP A or any other Participant related thereto). (e) As used in this Section 206, Federal Tax Exemption means the exclusion from gross income of interest on CMMP A's Bonds for federal income tax purposes. (f) Notwithstanding any other provisions of the Bond Resolution to the contrary, so long as necessary in order to maintain the Federal Tax Exemption of CMMPA's Bonds, the covenants contained in this Section shall survive the payment of such Bonds and the termination of this agreement. The covenants contained in this Section 206 do not apply to any Bonds of CMMPA to which the Federal Tax Exemption was not intended to apply. Section 207. Insurance. CMMP A shall procure and maintain in force for the benefit of the Development Project and the Participants as their respective interests shall appear, as a Development Project expense, such insurance as will satisfy the requirements of the Bond Resolution and applicable statutes and regulations thereunder, and such other insurance as may be required by the Development Project Agreements, Open Participant requirements, or that CMMP A may reasonably deem desirable. Subject to Article 7 of this Agreement, provisions of the Bond Resolution, and provisions of the Development Project Agreements, any proceeds of such insurance received by CMMPA relating to the Development Project shall be used to offset costs of the Development Project. Subject to the Bond Resolution, Development Project Agreements and applicable statutes and regulations, CMMP A may elect to self-insure any or all risks related to the Development Project, and to establish a self-insurance reserve fund, the costs of which shall be included in Monthly Development Project Costs and Monthly Development Project Capital Costs. ARTICLE 3 CERTAIN OBLIGATIONS OF THE P ARTICIP ANT Section 301. Participant Opinion. Upon the execution and delivery of this Agreement and at such other times as CMMP A shall reasonably request, the Participant shall furnish CMMP A with an opinion by an attorney or firm of attorneys, addressed to CMMP A and such other parties as CMMP A requests, to the effect ofthe matters set forth on Attachment 6 hereto. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 16 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT Section 302. Participant Issuance of Bonds. The Participant may issue bonds, notes or other evidences of indebtedness payable from and secured by a lien on the revenues derived from the ownership or operation of its electric system provided that the payment of operating expenses (including Monthly Development Project Costs and Monthly Development Project Capital Costs hereunder) from such revenues are ahead of debt service on such bonds, notes or other evidences of indebtedness. If a Participant chooses to issue bonds, notes or other evidences of indebtedness that is not consistent with the requirements of the preceding sentence, then Participant shall be required to comply with the following provisions: (a) an independent consultant with special skill, knowledge and experience in analyzing the operations of electric utility systems provides an opinion that the financing and operation of the facilities for which such bonds, notes or other evidences of indebtedness are being issued are not (or were not when the Participant undertook such issuance) reasonably expected to materially adversely affect the ability of the Participant to pay operating expenses (including Monthly Development Project Costs and Monthly Development Project Capital Costs) for which it is or will be liable; and (b) obtain the written approval of CMMP A' which shall not be unreasonably withheld. The Participant shall be responsible for all costs incurred in complying with the requirements of (a) and (b) above in this Section 302, including all reasonable CMMP A related cost. This paragraph shall not apply to the Participant's obligations with respect to bonds, notes or other evidences of indebtedness issued under joint ownership or participation agreements to which the PartIcipant is a party as of the date hereof, or to refund bonds, notes or other evidences of indebtedness heretofore issued, or hereafter issued by the Participant in compliance herewith, payable from and secured by a lien on revenues in priority to operating expenses; or (c) payments to CMMP A under this agreement that are funded from the Participant's own bonds, notes or other indebtedness. Section 303. Participant Rate and System Maintenance Covenant. The Participant will establish, maintain and collect rates and charges for the electric service of its electric system so as to provide revenues sufficient, together with available electric system reserves, to enable the Participant to pay to CMMP A all amounts payable under this Agreement, all other amounts payable from and all lawful charges against or liens on the revenue of its electric system and to operate and maintain its electric system in a sound, businesslike manner in accordance with Prudent Utility Practice. Section 304. Unconditional Payment Obligation. The Participant shall pay the Monthly Development Project Costs and Monthly Development Project Capital Costs associated with its Participant Election Share, whether or not the Transmission Project is actually developed and completed and whether or not work on the Development Project is suspended or terminated or the Development Project itself is terminated at any time; and such payments shall not be subject to reduction, whether by offset or otherwise, and shall. not be conditioned upon the C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 17 c1ean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT performance or nonperformance by any party of any agreement for any cause whatsoever. Section 305. Source of Payments. The Participant shall not be required to make any payments to CMMP A under this Agreement except from the revenues and other moneys derived by the Participant from its electric system. The Participant hereby agrees that amounts payable by the Participant under this Agreement shall be paid by the Participant as an operating expense of the Participant's electric system. ARTICLE 4 BUDGET, BILLING AND PAYMENT OBLIGATIONS Section 401. Annual Budget. At least 90 days prior to each Contract Year, CMMP A shall deliver to the Participant an Annual Budget for the Contract Year setting forth the plan for the Development Project and all components of Monthly Development Project Costs and Monthly Development Project Capital Costs, which are set forth in Attachments 4A and 4B. Such Annual Budgetshall be based on, among other things, annual budgeting information provided by the Development Manager and CMMP A estimates of other Development Project related costs. Section 402. Billing Statement. On or before the 1 st day of each month of each Contract Year or other time period as determined by CMMP A, CMMP A shall prepare and deliver, including by facsimile, email, or other electronic transmission, to the Participant a Billing Statement showing the amount payable by the Participant as the Participant's Election Share of the Monthly Development Project Costs and its Participant's Election Share of Monthly Development Project Capital Costs, as shown in the Annual Budget for such Contract Year or in an amended Annual Budget for the remainder of such Contract Year. CMMP A shall have the right to true-up the monthly Billing Statement to the extent that amounts paid by CMMP A pursuant to the CapX 2020 Development Agreement vary from the costs included therein. CMMP A shall be permitted to issue and collect in a single Billing Statement Monthly Development Project Costs and Monthly Development Project Capital Costs for multiple months including the current month. The amounts shown in the Billing Statement to be paid to CMMP A by the Participant shall be due and payable on the fifteenth day of the month, and any amounts due and not paid by the Participant on or before the close of business on the 15th day of the month shall bear interest until paid at the rate of one and one-half percent (1 'li%) per month. Remittances received by mail will be accepted without assessment of said charges, provided that the postmark indicates that the payment was mailed on or before such day. If the 15th day of the month is a Sunday or other non-business day of the Participant, the next following business day shall be the last day on which payment may be mailed without addition of said charges. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 18 clean.doc BROOKlNGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT Section 403. Billing Adjustments. (a) On or before one hundred twenty days after the end of each Contract Year, CMMPA shall submit to the Participant a statement of the actual aggregate Monthly Development Project Costs and Monthly Development Capital Costs for such Contract Year. If the actual aggregate Monthly Development Project Costs, Monthly Development Project Capital Costs, and any other amounts payable for such Contract Year exceed the amounts on the basis of which the Participant has been billed, the deficiency shall be added to the next succeeding Billing Statement or at CMMP A's discretion spread over the remainder of the then current Contract Year. If the actual aggregate Monthly Development Project Costs, Monthly Development Project Capital Costs, or other amounts payable for such Contract Year are less than the amounts on the basis of which the Participant has been billed, CMMP A shall credit such balance on the next succeeding Billing Statement, or by agreement of the Participant and CMMP A on the Billing Statements delivered to the Participant for the remainder ofthe then current Contract Year. (b) CMMPA shall apply, as a credit against Monthly Development Project Costs and Monthly Development Project Capital Costs, all available receipts, revenues and other moneys ~received by it from insurance proceeds, the sale of surplus Project equipment, materials and supplies, interest earned on investments if and to the extent not credited against the Costs of Acquisition and Construction and any other moneys to be credited thereto under the Bond Resolution or Project Agreements. Section 404. Billing Disputes. (a) Except as set forth below in paragraph (b) of this Section 404, the Participant shall not have the right to challenge any Billing Statement or other bill, invoice or statement rendered by CMMP A, invoke arbitration of the same or bring any court or administrative action of any kind questioning the propriety of the same after a period of twenty-four months from the date of rendering. In the case of a Billing Statement or other bill, invoice or statement containing estimates, the Participant shall not have the right to challenge its accuracy after a period of twenty-four months from the date of its adjustment to reflect the actual amounts due. (b) In the event of any dispute as to any portion of any Billing Statement (including its reasonableness or appropriateness), the Participant shall nevertheless pay the full amount of the disputed charges when due and shall give written notice of the dispute (other than any dispute based upon information not reasonably available to the Participant at the time required to give notice under this paragraph (b)) to CMMPA not later than the date such payment is due. Such notice shall identify the amount in dispute and set forth a full statement of grounds on which such dispute is based. No adjustment shall be considered or made for disputed charges unless notice is given, as C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 19 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT aforesaid. CMMP A shall give consideration to such dispute and shall advise the Participant with regard to its position relative thereto within one hundred and twenty (120) days following receipt of such written notice. Upon final determination (whether by agreement, arbitration, adjudication or otherwise) of the correct amount, any difference between such correct amount and such full amount shall be properly reflected in the Billing Statement next submitted to the Participant after such determination. The difference shall include an interest accrual. ARTICLE 5 REPORTS; RECORDS AND ACCOUNTS; P ARTICIP ANT INFORMATION Section 501. Reports. (a) CMMPA shall prepare, or cause to be prepared, and issue to the Participants the following reports for each Contract Year: (1) Financial and Operating Statement relating to the Development Project; (2) Status of Annual Budget; (3) Status of the Development Work. (b) CMMP A shall cause to be prepared and issued to the Participants the following reports no later than 180 days, or no later than such time as may be set forth in the Bond Resolution, after the conclusion of each Contract Year: (1) an Annual Audit as provided for in Section 502 of this Agreement; and (2) certain reports that may be required by the Bond Resolution. Section 502. Records and Accounts. CMMP A shall keep accurate records and accounts for the Development Project in a manner similar to the Federal Energy Regulatory Commission (FERC) Uniform System of Accounts and Generally Accepted Accounting Principles or such other system as may be reasonably approved by CMMP A. Such records and accounts shall be separate and distinct from CMMPA's other records and shall contain information supporting the allocation of CMMPA's indirect costs associated with the Development Project. A firm of certified public accountants, experienced in electric utility accounting for a similar organization, to be employed by CMMP A, shall audit such records and accounts annually. Such records and accounts shall be made available for inspection by the Participant at any reasonable time. Such annual certified audit, including all written comments and recommendations of such accountants, will be provided to the Participants in accordance with Section 501 ofthis Agreement. Section 503. Participant Information. The Participant agrees to supply CMMP A, upon request, with such information and documentation, including any opinions by an attorney or firm of attorneys, as CMMP A C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 20 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT shall reasonably determine to be requisite to and necessary or desirable with respect to the Development Project and the financing thereof, and other matters pertaining to the Development Project, including financial statements and other information reasonably available to allow CMMP A to respond to requests for such information from any federal, state or local regulatory body or as may be required in connection with the issuance of Bonds. ARTICLE 6 ISSUANCE OF BONDS. This Article is only applicable to Agency Participants and therefore does not apply to Open Participants. Section 601. Bonds. CMMP A may issue Bonds in series from time to time, including Bonds issued in accordance with a Bond Resolution, to fund all or any portion of Development Project Costs associated with the Agency Participants' portion of CMMP A's Brookings Share of the Transmission Project as delineated in the CapX 2020 Development Agreement and other costs covered by this Agreement. Section 602. Issuance of Bonds for Additional Project Costs, and Refunding. (a) In addition to the issuance of Bonds to pay Agency Participants' Development Project Costs as provided in Section 601 of this Agreement, CMMP A may issue Bonds at any time and from time to time, in the event funds are required to pay Additional Development Project Costs to the extent such costs are not otherwise paid as part of Monthly Development Project Costs. The Annual Budget delivered to the Participant for the Contract Year in which such Bonds are issued, or an amended Annual Budget for such Contract Year, shall also set forth the financing plan and budget of expenditures with respect to such Bonds and the proceeds thereof. (b) Bonds may also be issued to refund any Bonds in order to reduce the CMMP A Debt Related Monthly Development Project Costs or in the event, in the opinion of CMMP A, it may otherwise be advantageous. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 21 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT Section 603. Issuance of Taxable and Tax Exempt Bonds. Bonds and additional bonds or refunding bonds may be issued as Taxable Bonds or Tax- Exempt Bonds. Subject to the approval of CMMP A and in accordance with the applicable Bond Resolution, individual Participants may have different portions of their respective Development Project Costs financed from the proceeds of Taxable Bonds or Tax-Exempt Bonds, based on their specific circumstances. Any Taxable Bonds and any portion of the Development Project financed or refinanced by Taxable Bonds shall not be subject to the tax covenants set forth in Section 206 of this Agreement. Agency Participants may have their respective share of CMMP A Debt Related Monthly Development Project Costs adjusted to reflect a mix of Taxable Bonds and Tax Exempt Bonds per Attachment 4A of this Agreement. ARTICLE 7 END OF DEVELOPMENT PROJECT Section 701. Ending of Development Project and Agreement Termination. (a) CMMPA shall determine when the Development Project shall be terminated. Such decision shall be made in accordance with Prudent Utility Practice, provided that: (a) termination of the Development Project shall comply with the provisions of the CapX 2020 Development Agreement between CMMP A and the other CapX 2020 participants in the Transmission Project, (b) termination of Development Project and this Agreement shall not occur so long as any Bonds are outstanding or until adequate provision for the payment thereof has been made in accordance with provisions of the applicable Bond Resolutions, and (c) termination of the Development Project and this Agreement will not occur until all costs, obligations and liabilities of CMMP A for the Development Project have been provided for. (b) To the extent that there are outstanding liabilities and costs that CMMP A is obligated to pay as of termination of Development Project, the Participant shall be responsible for payment for its Participant Election Share of the amount of such outstanding liabilities and costs. ( c) The Parties recognize that this Agreement may be superseded by the Brookings- Twin Cities Project Agreement. ARTICLE 8 OBLIGATIONS IN THE EVENT OF DEFAULT Section 801. Participant Failure to Pay. (a) Upon failure of the Participant to make any payment in full when due under this Agreement or to perform any obligation herein, CMMP A shall make demand upon the Participant, and if said failure is not cured within 20 days from the date of such C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 22 clean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT demand it shall constitute a default at the expiration of such period. Notice of such demand shall be provided to the other Participants by CMMP A. (b) If the Participant in good faith disputes the legal validity of said demand, it shall make such payment or perform such obligation within said 20-day period under protest directed to CMMP A. Such protest shall specify the reasons upon which the protest is based. (c) Upon the failure of any Participant to make any payment which failure constitutes a default under this Agreement, CMMP A shall use its best efforts to sell and transfer all or a portion of such Participant's Election Shares for all or a portion of the remainder of the term of this Agreement, to the extent such sale and transfer is consistent with CMMPA's rights pursuant to the CapX 2020 Development Agreement. The other Participants shall each have the first right to accept such disposal pro rata based on Participant Election Shares among those exercising such right as further provided for pursuant to Attachment 3 of this Agreement before a transfer is made to a non Participant. If all or any portion of the Participant's Election Share is transferred pursuant to this paragraph, the Participant's Election Share shall not be reduced, and the Participant shall remain liable to CMMPA (and to the non-defaulting Participants) to pay the full amount of Monthly Development Project Costs and Monthly Development Project Capital Costs for its Participant Election Share as if such sale had not been made, except that such liability shall be discharged to the extent that CMMP A shall receive payment from the purchaser or purchasers thereof. If a transfer to a non Participant is required, preference shall be given to municipal utilities and cooperatives, subject to the requirements of the CapX 2020 Development Agreement. Section 802. Participant Payment Default. (a) Upon failure of any other Participant(s) to make any payment which failure constitutes a default under this Agreement, and except as transfers are made pursuant to paragraph ( c) of Section 801, the Participant's Election Share shall be automatically increased for the remaining term of this Agreement pro rata with that of the other non-defaulting Participant(s) as further provided for in Attachment 3 of this Agreement and the defaulting Participant's(s') Election Share(s) shall be reduced correspondingly; provided, that no such reduction shall reduce the defaulting Participant's(s') obligations under paragraph (b) of this Section 802. (b) If the Participant shall fail or refuse to pay any amounts due to CMMP A hereunder, the fact that other Participants have assumed the obligation to make such payments shall not relieve the Participant of its liability for such payments, and any Participants assuming such obligation, either individually or as a member of a group, shall have a right of recovery from the Participant (diminished to the extent such Participants have received value from the concomitant election rights). CMMP A or any Participant as their interests may appear, jointly or severally, may commence such suits, actions or proceedings, at law or in equity, including suits for specific performance, as may be C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 23 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT necessary or appropriate to enforce the obligations of this Agreement against the Participant. (c) CMMPA (and the non-defaulting Participants) shall be entitled to recover from the defaulting Participant any and all legal fees and other costs incurred by CMMPA (and the non-defaulting Participants) as a result of the Participant's default. Section 803. Other Participant Default. In the event of any default by the Participant under any covenant, agreement or obligation of this Agreement, other than a failure to make a payment required to be made under this Agreement, CMMP A may bring any suit action, or proceeding in law or in equity, including mandamus, injunction, specific performance, declaratory judgment, or any combination thereof, as may be necessary or appropriate to enforce any covenant, agreement or obligation of this Agreement against the Participant. Such remedies shall be in addition to all other remedies provided for herein. ARTICLE 9 SERVICE - reserved for future use ARTICLE 10 MISCELLANEOUS PROVISIONS Section 1001. Modification and Uniformity of Agreements. (a) This Agreement shall not be subject to termination by any party under any circumstances, whether based upon the default of any other party under this Agreement, or any other instrument, or otherwise, except as specifically provided in this Agreement. (b) This Agreement shall not be amended, modified, or otherwise changed by agreement of the parties in any manner that will materially and adversely affect the security afforded by the provisions of this Agreement for the payment of the principal of and premium, if any, and interest on any of the Bonds, and any other obligations of CMMP A ranking pari passu therewith as to the security afforded by the provisions of this Agreement, as they respectively become payable, so long as any of the Bonds and such obligations are outstanding and unpaid or funds are not set aside for the payment or retirement thereof in accordance with the Bond Resolution. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 24 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT Section 1002. Notices. Any notice, demand, approval, proposal, protest, direction or request provided for in this Agreement to be delivered, given or made to the Participant shall be deemed delivered, given or made if delivered in writing in person or mailed by registered or certified mail, postage prepaid, return receipt requested, addressed to the person and at the address designated in writing filed with CMMP A by the Participant. The Participant may change such designation, at any time and from time to time, by giving notice to CMMP A as below provided. Any such notice, demand or request to be delivered, given or made to CMMP A shall be deemed delivered, given or made if delivered in writing, in person, or sent by mail as above provided to the following address: Executive Director Central Minnesota Municipal Power Agency 459 South Grove Street Blue Earth, Minnesota 56013 or such other address designated by CMMP A, as provided above. Section 1003. Arbitration. Any dispute under this Agreement may be submitted to arbitration at the request of either CMMP A or the Participant provided that the other party agrees. Copies of any such request shall be given to all other Participants and it shall specify the issue or issues in dispute. Within ten days after receipt of such a request CMMP A and the Participant shall confer and attempt to agree upon appointment of a single arbitrator. If such agreement is not accomplished, CMMP A or the Participant may request the American Arbitration Association to appoint an arbitrator. The arbitrator shall conduct a hearing within thirty days thereafter, unless such time is extended by agreement of CMMPA and the Participant, shall notify the parties of his or her decision, stating his or her reasons for such decision, in writing, and separately listing his or her findings of fact and conclusions of law. The arbitrator shall not have power to amend or add to this Agreement. Subject to such limitation, the decision of the arbitrator shall be final and binding on CMMP A and the Participant except that either party may petition a court of competent jurisdiction for review of the arbitrator's decision. The pendency of arbitration shall affect neither the obligation of the Participant to make any payment in full when due under this Agreement nor the obligations of this Agreement upon the failure of the Participant to make any payment in full when due under this Agreement. The prevailing party of a disputed matter shall be entitled to recover from the other party its reasonable legal fees and other costs of arbitration and court proceedings. Section 1004. Applicable Law. This Agreement is made under and shall be governed by the law of the State of Minnesota. Section 1005. Severability. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 25 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT If any section, paragraph, clause or provISIOn of this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid, the remainder of this Agreement shall be unaffected by such adjudication and all of the remaining provisions of this Agreement shall remain in full force and effect as though such section, paragraph, clause or provision or any part thereof so adjudicated to be invalid had not been included herein. However, the parties shall attempt to negotiate provisions that reasonably substitute for the invalid provision in order to place the parties in the position that they would have been had the stricken clause or provision not been found invalid. Section 1006. Assignment of Agreement. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the parties to this Agreement; provided, that neither this Agreement, nor any interest or rights conferred herein, shall be assigned or transferred or sold by the Participant, including in connection with any sale, transfer or other disposition of Participant's system, except as provided herein, (a) without the written consent of CMMP A, (b) nor if in the opinion of counsel to CMMP A such assignment or transfer or sale would adversely affect the exemption from Federal Income Taxation of the interest on the Bonds. In the event of a proposed assignment, transfer, sale or other disposition of the Participant's system, the Participant shall provide timely notification to CMMP A, and CMMP A and the Participant will establish an agreeable schedule for CMMPA and its counsel to respectively address the requirements of part (a) and part (b) of the preceding sentence. No such assignment, transfer, sale or other disposition shall relieve the Participant of any obligation hereunder. Notwithstanding the foregoing provisions in this section of the Agreement, any assignment, transfer, sale or other disposition shall be consistent with CMMP A's rights pursuant to the CapX 2020 Development Agreement. The parties shall seek to reasonably facilitate transfers among Participants, to entities related to Participant, to other municipal entities and municipal power agencies and like entities. Section 1007. No Adverse Distinction. The terms, conditions and provisions of this Agreement shall apply to all Participants in the Development Project and CMMP A shall not make any unreasonable adverse distinction among Agency or Open Participants in the Development Project. Section 1008. Duly Authorized Signatories; Binding Effect of Execution. CMMP A as to its signatory and the Participant as to its signatory each hereby represents and warrants that the person executing this Agreement on its respective behalf is duly authorized to do so, and that, by such execution set forth on the following page of this Agreement, such party is herby duly and lawfully bound by this Agreement. Section 1009. Confidentiality of Information. To the extent that CMMPA provides confidential or proprietary information to the Participants in connection with the Development Project, then the use and treatment of C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 26 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT such confidential or proprietary information shall be as provided for in the CapX 2020 Development Agreement or other limiting agreements. Section 1010. Participant Obligations to MMTG. The Participant acknowledges that it is currently a member in good standing of MMTG and agrees that it shall remain a member in good standing for the term of this Agreement. The requirement for the Participant to remain a member of MMTG may be waived by the written consent of CMMP A. C:\Documents and Settings\Bryan\Local Setlings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 27 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the _day of ,20_ CENTRAL MINNESOTA MUNICIPAL POWER AGENCY By Title: President By Title: Secretary , MINNESOTA By Title: By Title: , MINNESOTA By Title: , IOWA By Title: , IOWA C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 28 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ATTACHMENT 1 DESCRIPTION OF TRANSMISSION PROJECT AND ADDITIONAL DEFINITIONS Description - BrookinJ!s. S.D. - Southeast Twin Cities 345 kV Line The proposed Transmission Project consists of: 1) an approximately 200-mile, 345 kV transmission line between Brookings, S.D., and the southeast Twin Cities; and 2) a related approximately 3D-mile, 345 kV transmission line between Marshall, Minn., and Granite Falls, Minn. The first step in the regulatory process for the Project is to establish a notice plan to provide potentially interested people the opportunity to participate in the certificate of need proceeding. This is presently being done by Great River Energy, the Development Project Manager. The Brookings, S.D., to southeast Twin Cities proposal is a 345 kV transmission line between'the Brookings County Substation near Brookings, S.D., and a new substation in the southeastern quadrant of the Twin Cities area, plus a 345 kV transmission line between Marshall and the Granite Falls area. Alternatively, a portion of the proposal could follow an existing 230 kV line corridor between Granite Falls and near New Prague, Minn. Parts of the new transmission infrastructure may be located in the following Minnesota counties: Brown, Carver, Chippewa, Dakota, LeSueur, Lincoln, Lyon, McLeod, Redwood, Renville, Rice, Scott, Sibley and Yellow Medicine. The proposal also includes the following connections to the existing transmission system: · Brookings County Substation near Brookings, S.D. · Lyon County Substation near Marshall, Minn. · A new substation (Hazel Run) near Granite Falls, Minn. · A 230 kV line from Hazel Run to Minnesota Valley Substation on the east side of Granite Falls. · Franklin Substation or a new substation in the Franklin area. · A new substation (Union Hill), west of New Prague, to connect with the existing Twin Cities to Mankato 345 kV line. · Lake Mation Substation or a new substation further south in the Interstate 35 corridor to connect to an existing 115 kV line. · A new substation (Hampton Comer) to connect the line to an existing 345 kV line northeast of Hampton, Minnesota. At this early stage in the regulatory process, detailed analysis of routing alternatives for the proposed Brookings, S.D. to southeast Twin Cities transmission lines and sites for the C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 29 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT new substations has not been completed. However, broad corridors, one or two townships wide, within which Great River Energy estimates the proposed transmission lines may be located, have been identified. Great River Energy proposes to provide notice to rural residents affected by these corridors. The notice plan consists of four parts: . Direct mail notice to rural landowners with property in the notice corridors. . Direct mail notice to others with rural mailing addresses within the notice corridors. · Direct mail notice to tribal governments and local units of government with part of their jurisdiction within the notice corridors. . General notice by publishing ads in local papers serving parts of the notice corridors. As of the date of this Agreement, the current estimate construction costs for completion of the Transmission Project is $594 million. The current targeted Transmission Project in-service is 2012. Additional Definitions The following are definitions that have been adapted from the CapX 2020 Development Agreement: (a) Carrying Costs: The carrying costs associated with Monthly Development Project Costs that are computed by the Development Manager and included on the invoice for Monthly Development Project Costs as provided for pursuant to the CapX 2020 Development Agreement. (b) Development Costs: The costs of carrying out Development Work and Joint Development Work, as well as those costs which, pursuant to the terms of this Agreement and the CapX 2020 Development Agreement are, or are deemed to be, Development Costs. (c) Development Manager: A Participant under the CapX 2020 Development Agreement who shall be responsible, in accordance with the terms of that Agreement, for carrying out Development Work and Joint Development Work on behalf of all participants. The Development Manager for the Development Project is Great River Energy. (d) Development Work: The term Development Work shall have the meaning ascribed thereto in Section 5.1 of the CapX 2020 Development Agreement. Development Work shall include Joint Development Work except as specifically provided otherwise therein. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 30 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT (e) Joint Development Work. The term Joint Development Work shall have the meaning ascribed thereto in Section 5.3.2 of the CapX 2020 Development Agreement. (f) Monthly Development Costs: The term Monthly Development Costs shall have the meaning ascribed thereto in Section 8.1 of the CapX 2020 Development Agreement. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 31 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT A TT ACHMENT 2 ESTIMATED DEVELOPMENT PROJECT COSTS The following estimate of the Development Project Costs associated with the Development Project was prepared by the CapX Development Manager as of February _2007. Allocable CMMPA costs have been estimated by CMMPA as of February 9, 2007. Estimated Cost in 2006$ 1. Estimated Development Project Costs 2. Estimated CMMP A Brookings Share 3. Estimated CMMP A Brookings Share 4. Estimated Allocable CMMP A Costs 5. Total Estimated Development Project Costs $28,000,000 2.2% $616,000 $1,340,000 $1,956,000 This total will be spread over a period of 3-5 years and each Participant shall be responsible for their Election Share of Development Project Costs. C:\Docurnents and Settings\Bryan\local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 32 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ATTACHMENT 3 P ARTICIP ANTS AND P ARTICIP ANT ELECTION SHARES There are sixteen Participants that have entered into Brookings- Twin Cities Project Development Project Agreements with CMMPA for the Development Project. Subject to CMMPA's written approval and prior to CMMPA's issuance of Bonds to fund Development Project Costs pursuant to this Agreement, a Participant shall have a single opportunity to switch from the original designation as an Agency or Open Participant as set forth in this Attachment 3. CMMP A shall provide ninety days' prior written notice to the Participant of its intent to issue Bonds and the Participant shall be required to provide written notice to CMMP A of its desire to switch its original designation within thirty days of its receipt of CMMP A's written notice. Ten of the sixteen Participants are Agency Particpants and six are Open Participants. The Participants and the Participant Election Shares are listed below: CapX Participant Participant Participant Election Election Share ($) Share (0,10) Agency Participants 1. Blue Earth LiQht & Water $2,591,732 19.70% 2. Delano Municipal Utilities 695,952 5.29 3. Fairfax City of 177,606 1.35 4. Granite Falls, City of 415,730 3.16 5. Janesville Utilities 184,184 1.40 6. Kenyon Municipal Utility 331,531 2.52 7. Mountain Lake Municipal Utilities 285,485 2.17 8. Sleepy Eye Public Utilities 997,225 7.58 9. Springfield Public Utilities Commission 368,368 2.80 10. Windom, City of 878.821 6.68 Subtotal Agency Participants $6.926.634 52.65% Open Participants 11. Elk River $1,993,134 15.15% 12. Independence Light & Power 248,648 1.89 13. Indianola Municipal Utilities 498,612 3.79 14. Montezuma Municipal Light & Power 99,986 0.76 15. Waverly Light & Power 99,986 0.76 16. Willmar Municipal Utilities 3.289.000 25.00 Subtotal Open Participants $6229.366 47.35% Total Participants ~H_l.:::t; nnn 100% C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 33 c1ean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT The Participant Election Share may be subject to adjustment pursuant to the conditions set forth in the following three paragraphs. 1. The Participant Election Share is subject to adjustment pursuant to Section 802 Participant Default, as set forth in this Agreement, and as further provided for in this Attachment 3. · With respect to a Agency Participant Default pertaining to the payment ofCMMP A Debt Related Monthly Development Project Costs, the non-defaulting Agency Participant Election Share shall be automatically increased for the remaining term of this Agreement pro rata with that of the other non-defaulting Agency Participant(s) and the defaulting Agency Participant's(s') Election Share(s) shall be reduced correspondingly; provided the following; (i) no such increase in the Agency Participant's Election Share shall exceed 35% (accumulatively for all payment defaults under this Agreement) of the Agency Participant's initial Election Share prior to such increases; and (ii) that no such reduction shall reduce the defaulting Agency Participant's(s') obligations under paragraph (b) of Section 802 of this Agreement. Open Participant Election Shares shall not be subject to adjustment for non-payment by an Agency Participant of CMMP A Debt Related Development Monthly Project Costs. · With respect to a Participant Default pertaining to the payment of Non-Debt Related Monthly Project Costs, the non-defaulting Participant Election Share shall be automatically increased for the remaining term of this Agreement pro rata with that of the other non- defaulting Participant(s) and the defaulting Participant's(s') Election Share(s) shall be reduced correspondingly; provided the following; (i) no such increase in the Participant's Election Share shall exceed 35% (accumulatively for all payment defaults under this Agreement) of the Participant's initial Election Share prior to such increases; and (ii) that no such reduction shall reduce the defaulting Participant's(s') obligations under paragraph (b) of Section 802 of this Agreement. · With respect to an Open Participant Default pertaining to the payment of Monthly Development Project Capital Costs, the non-defaulting Open Participant Election Share shall be automatically increased for the remaining term of this Agreement pro rata with that of the other non-defaulting Open Participant(s) and the defaulting Open Participant's(s') Election Share(s) shall be reduced correspondingly; provided the following; (i) no such increase in the Open Participant's Election Share shall exceed 35% (accumulatively for all payment C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 34 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT defaults under this Agreement) of the Open Participant's initial Election Share prior to such increases; and (ii) that no such reduction shall reduce the defaulting Open Participant's(s') obligations under paragraph (b) of Section 802 of this Agreement. Agency Participant Election Shares shall not be subject to adjustment for non-payment by an Open Participant of Monthly Development Project Capital Costs. . As a result of the application of an adjustment in Participant Election Share described in the preceding three paragraphs a Participants may have different Participant Election Shares relating to CMMP A Debt Related Monthly Development Project Costs, Non-Debt Related Monthly Development Project Costs and Monthly Development Project Capital Costs. 2. In addition, the Participant Election Share shall be subject to adjustment if CMMP A's Brookings Share is adjusted pursuant to the CapX 2020 Development Agreement. For each occurrence of such an event, each Participant shall have the first right to voluntarily accept an increase or decrease pro rata based on its Participant Election Share among those exercising such right before an automatic increase or decrease is made to all Participants pro rata. The Participant Election Share, as adjusted by the preceding sentence, shall then be further adjusted until the sum of all Participant Election Shares is equal to 100% of the adjusted CMMPA's Brookings Share under the Brookings-Twin Cities Project Development Project Agreement. C:\Documents and Settings\Bryan\local Settings\Temporary Internet Files\OlK53\Cap X Brookings 2-12-07 35 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ATTACHMENT 4A MONTHL Y DEVELOPMENT PROJECT COSTS "Monthly Development Project Costs" shall mean all of CMMP A's costs and revenue/credits, to the extent: (i) not included in Development Project Costs and funded from the proceeds of Bonds; and (ii) not included in Monthly Development Project Capital Costs, resulting from the Development Project. Such costs shall include, but are not limited to, the items of cost that are paid or incurred by CMMP A during each month. of each Contract Year in connection with the Development Project and identified in this Attachment 4A. Monthly Development Project Costs shall be categorized as either Non- Debt Related Development Monthly Project Costs or CMMP A Debt Related Monthly Development Project Costs. Non-Debt Related Monthlv Development Proiect Costs a) Amounts paid by CMMPA for Development Costs and Carrying Costs that have not been funded from the proceeds of Bonds and are not included as Monthly Development Project Capital Costs; and b) Such other costs as may be determined by CMMP A to be allocable to the Development Project. c) Amounts that CMMP A is required to pay for taxes or payments in lieu thereof for the Development Project; d) Amounts for payment or deposit into any fund or account outside the pledge of the Bond Resolution attributable to costs or reserves of the Development Project; e) Amounts set aside by CMMPA for the termination ofthe Project; f) Amounts relating to injury and damage claims arising from the development, acquisition, construction, termination, or administration of the Development Project; amounts relating to payments for insurance required pursuant to Section 208 of this Agreement, including contributions to a self insurance reserve fund; g) All costs of developing the Transmission Project for the Participants including but not limited to (1) administrative and general costs, insurance and overhead costs and any charges payable by CMMP A in connection with the development of the Transmission Project; (2) working capital reasonably required for the Development Project; and (3) a share, reasonably determined by CMMP A to be allocable to the Development Project, of all operation and maintenance costs related to the operation and conducting of the business of CMMP A, including salaries, fees for legal, engineering, and other services and all other expenses properly related to the conduct of the affairs of CMMP A; h) Amounts required to pay the cost of or to provide reserves for (1) extraordinary cost of development (2) or participation in the Transmission Project or any facility C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2~12-07 36 c1ean.doc BROOKINGS-TWIN CITIES DEVELOPMENT PROJECT AGREEMENT thereof to the extent that CMMP A is not reimbursed therefore from the proceeds of insurance or funds for such payments are not available to CMMP A therefore from any funds or accounts reasonably established by CMMP A, or funds for such payment are not provided or to be provided by the issuance of Bonds; and i) Amounts to be paid for any scheduled or termination payments under swap or other similar arrangements that CMMP A may enter into relating to the Development Project. Both Agency and Open Participants shall be responsible to pay Non-Debt Related Monthly Development Project Costs. CMMPA Debt Related Month Iv Development Proiect Costs a. Debt Service amounts that CMMP A is required to pay on Bonds issued to finance or refinance all or a part of the Development Project, including any portion for Additional Transmission Development Project Costs, and any regularly scheduled payments required to be made on any swaps or other similar arrangements relating to the Bonds; b. Certain amounts that may be required for coverage on Debt Service amounts in item (a) above, reserves on Bonds issued to finance or refinance all or a part of the Development Project, and financing-related costs; c. Certain amounts that CMMP A is required under the Bond Resolution to payor deposit into any fund or account established by the Bond Resolution, including any reserve requirements for the Bonds. Agency Participants shall be responsible for paying CMMP A Debt Related Monthly Development Project Costs. Agency Participants may have their respective share of CMMP A Debt Related Monthly Development Project Costs adjusted to reflect a mix of Taxable Bonds and Tax Exempt Bonds. Open Participants shall not be responsible for paying CMMP A Debt Related Monthly Development Project Costs. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 37 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ATTACHMENT 4B OPEN PARTICIPANTS - MONTHLY DEVELOPMENT PROJECT CAPITAL COSTS "Monthly Development Project Capital Costs" shall mean all of CMMP A's Development Project Costs not funded from the proceeds of Bonds and not included in Non-Debt Related Monthly Development Project Cost that are paid or incurred by CMMP A during each month of each Contract Year in connection with the Development Project on behalf of the Open Participants. Monthly Development Project Capital Costs shall not include CMMP A's Development Project costs that are paid or incurred by CMMP A during each month of each Contract Year in connection with the Development Project on behalf of the Agency Participants. Open Participants shall be responsible for paying their Election Share of Monthly Development Project Capital Costs. Agency Participants shall not be responsible for paying Monthly Development Project Capital Costs. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 38 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ATTACHMENT 5 DEVELOPMENT PROJECT AGREEMENTS CMMP A has adopted an Agency Agreement and has entered into, or will enter into, a number of agreements that pertain to the CapX 2020 Development Agreement related to the Transmission Project and arrangements for further development, acquisition and construction of the Transmission Project. Such Development Project Agreements, which are subject to change from time to time during the Term ofthis Agreement, are: A reement Second Restated Agency Agreement, Central Minnesota Municipal Power Agency, Originally Adopted July 1, 1987, Restated as of January 15, 1997 Brookings- Twin Cities Development Project Agreement between Central Minnesota Municipal Power Agency and the following Participants: Date Executed Second Restatement as of 8/11/04 To be executed Agency Participants 1. Blue Earth Light & Water 2. Delano Municipal Utilities 3. Fairfax City of 4. Granite Falls, City of 5. Janesville Utilities 6. Kenyon Municipal Utility 7. Mountain Lake Municipal Utilities 8. Sleepy Eye Public Utilities 9. Springfield Public Utilities Commission 10. Windom, City of Open Participants 11. Elk River 12. Independence Light & Power 13. Indianola Municipal Utilities 14. Montezuma Municipal Light & Power 15. Waverly Light & Power 16. Willmar Municipal Utilities To be executed ? C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 39 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 40 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT ATTACHMENT 6 P ARTICIP ANT OPINION In accordance with Section 301 of this Agreement, the Participant shall furnish CMMP A with an opinion by an attorney or firm of attorneys to the effect that: (a) Valid Existence. The Participant is a municipal corporation or other eligible person or entity duly created and validly existing pursuant to the Constitution and Statutes of the State of Minnesota or other State of the United States, or is otherwise organized and authorized as a Participant. (b) Performance. The Participant has full legal right and authority to enter into this Agreement and to carry out its obligations hereunder. (c) Rates and Charges. The Participant has full legal right and authority to fix, impose and collect rates and charges, and such rates and charges are not subject to the regulatory jurisdiction of any State government, local government (other than that of the Participant), or regulatory authority. (d) Ownership of Electric Distribution System. The Participant has legal title to and the beneficial interest in and is beneficially possessed of the electric utility system or integrated utility system such Participant owns, maintains, and operates. (e) Authorization, Execution. At meetings duly called and held at which quorums were present and acting throughout, the governing body of the Participant duly approved this Agreement and its execution and delivery on behalf of the Participant, this Agreement has been duly authorized, executed and delivered by the appropriate officers of the Participant, and assuming that CMMP A has all the requisite power and authority to execute and deliver, and has duly authorized, executed and delivered, this Agreement, this Agreement constitutes the legal, valid and binding obligation of the Participant in accordance with its tenns subject, however, to the effect of, and to restrictions and limitations imposed by or resulting from, bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally. No opinion need be rendered as to the availability of any particular remedy. (f) No Violation, Etc. The execution and delivery of this Agreement by the Participant, the performance by the Participant of its obligations hereunder and the consummation of the transactions contemplated herein do not and will not contravene any provision of the Charter or Certificate of Incorporation or any other organizational document of the Participant and any amendment thereto under which the Participant is organized and presently operating or any existing law or any existing order, injunction, judgment, decree, rule or regulation of any court or administrative agency having jurisdiction over the Participant or its property or result in a breach or violation of any of the terms and provisions of, or constitute a default under, any existing bond C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 41 clean.doc BROOKINGS- TWIN CITIES DEVELOPMENT PROJECT AGREEMENT resolution, indenture, mortgage, deed of trust or other agreement to which the Participant is a party or by which it or its property is bound. (g) Approvals. All approvals, consents or authorizations of, or registrations or filings with, any governmental or public agency, authority or person required on the part of the Participant in connection with the execution, delivery and performance of this Agreement have been obtained or made. (h) Litigation. To the knowledge of such attorney or firm of attorneys after due inquiry, there is no litigation or other proceedings pending or threatened in any court or other tribunal of competent jurisdiction (either State or Federal) questioning the creation, organization or existence of the Participant or the validity, legality or enforceability of this Agreement. C:\Documents and Settings\Bryan\Local Settings\Temporary Internet Files\OLK53\Cap X Brookings 2-12-07 42 clean.doc c: o .. .. c. 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C1l U Oi Z Cll <i E C1l )( Cll<O .~ ~ ~~ N ~ ...~ RESOLUTION - -- A RESOLUTION OF THE CITY OF ELK RIVER A RESOLUTION APPROVING THE DEVELOPMENT AGREEMENT BETWEEN CENTRAL MINNESOTA MUNICIPAL POWER AGENCY AND BROOKINGS-TWIN CITIES PROJECT WHEREAS, it was previously determined that it was in the best interest of the City of Elk River (City) to utilize the resources and services of the Central Minnesota Municipal Power Agency (CMMP A) to participate in the development and investment in the acquisition, construction, ownership, and operation of high voltage transmission of electrical energy and capacity, negotiation of contracts, planning, including transmission needs studies, transmission arrangements, engineering and technical assistance; and WHEREAS, the City now wishes to properly update and supplement its relationship with CMMP A and also authorize the City's participation in the Brookings - Twin Cities High Voltage Transmission Line project; and l~> .!'tfteCity db~S p~reby~pptove the Brookingsc Twin Cities Proj~ct ~~e~1il'lent.withth~~entraltv1i11,nesotaM u11,icipal. PowerAge11,'Cyamlits iit.ltlleprojectjdeIItifiedabove and the financing thereof, if any. NOW, THEREFORE, BE IT RESOLVED that the CMMPA Brookings-Twin Cities Project Development Agreement is hereby approved in the form presented at this meeting. The Mayor and are hereby authorized and directed to execute such Project Development Agreement for and on behalf of the City, the same to be exclusively evidenced by such execution. Passed and adopted this 20th day of February 2007. Stephanie Klinzing, Mayor ATTEST: Tina Allard, City Clerk C: \Documents and Settings \ljohnson.ELKRlVERPD \Local Settings \ Temporary] ntemet Files \ OLK 45 \ CMMP A.doc CERTIFICATE the of the City of Elk River, do hereby certify that attached hereto is a true and correct copy of a resolution (other than the exhibits thereto) I, duly adopted by the City Council at a meeting duly held on the day of , 2007, notice of such meeting having been given in accordance with law and at which meeting a quorum was present and acting throughout. I also do hereby certify that such resolution has not been amended in any way from that date of such adoption to date hereof. IN WITNESS WHEREOF I have hereunto set my hand this day of ,2007. C\Documents and Settings\ljohnson.ELKRIVERPD\Local Settings\Temporary Internet Files\OLK45\Cl\,1MPA.doc RESOLUTION 07-_ A RESOLUTION OF THE CITY OF ELK RIVER A RESOLUTION APPROVING ELK RIVER MUNICIPAL UTILITIES PARTICIPATION IN THE BROOKINGS-TWIN CITIES HIGH VOLTAGE TRANSMISSION LINE PROJECT WHEREAS, the City of Elk River Municipal Utilities Commission (ERMU) has determined that it is in the best interest of the City of Elk River (City) to utilize the resources and services of the Central Minnesota Municipal Power Agency (CMMP A) to participate in the development and investment in the acquisition, construction, ownership, and operation of high voltage transmission of electrical energy and capacity, negotiation of contracts, planning, including transmission needs studies, transmission arrangements, engineering, and technical assistance; and WHEREAS, the ERMU has requested that the City Council of the City of Elk River approve ERMU's participation in the Brookings-Twin Cities High Voltage Transmission Line project. NOW THEREFORE BE IT RESOLVED: that the City does hereby approve the ERMU's participation in the Brookings-Twin Cities High Voltage Transmission Line project. Passed and adopted by the Elk River City Council this 20th day of February, 2007. Stephanie Klinzing, Mayor ATTEST: Tina Allard, City Clerk