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HomeMy WebLinkAboutSolomon Gultch CVEA Efficiency Upgrade Grant Ap 08-24-11Copper Valley Electric Association, Inc. Solomon Gulch Unit 2 Efficiency Upgrade AEA 12 - 001 Renewable Energy Fund V Grant Application August 24, 2011 Copper Valley Electric Association, Inc. PO Box 45 Glennallen, Alaska 99588 (907-)822-3211 * Fax (907) 822-5586 Renewable Energy Fund Round 5 Grant Application AEA 12-001 Application Page 1 of 17 7/1/2011 Solomon Gulch Unit 2 Efficiency Upgrade Grant Application AUGUST 2011 Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 2 of 17 7/1//2011 Application Forms and Instructions The following forms and instructions are provided to assist you in preparing your application for a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA) and the forms are available online at: http://www.akenergyauthority.org Grant Application Form GrantApp5.doc Application form in MS Word that includes an outline of information required to submit a complete application. Applicants should use the form to assure all information is provided and attach additional information as required. Application Cost Worksheet Costworksheet 5.doc Summary of Cost information that should be addressed by applicants in preparing their application. Grant Budget Form GrantBudget5. doc A detailed grant budget that includes a breakdown of costs by milestone and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget Form Instructions GrantBudgetIn structions5.doc Instructions for completing the above grant budget form. Authorized Signers Form Authorized signers form5.doc Form indicating who is authorized to sign the grant, finance reports and progress reports and provides grantee information. If you are applying for grants for more than one project, provide separate application forms for each project. Multiple phases for the same project may be submitted as one application. If you are applying for grant funding for more than one phase of a project, provide milestones and grant budget for completion of each phase. If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. If you have additional information or reports you would like the Authority to consider in reviewing your application, either provide an electronic version of the document with your submission or reference a web link where it can be downloaded or reviewed. REMINDER: Alaska Energy Authority is subject to the Public Records Act AS 40.25, and materials submitted to the Authority may be subject to disclosure requirements under the act if no statutory exemptions apply. All applications received will be posted on the Authority web site after final recommendations are made to the legislature. In accordance with 3 AAC 107.630 (b) Applicants may request trade secrets or proprietary company data be kept confidential subject to review and approval by the Authority. If you want information is to be kept confidential the applicant must: o Request the information be kept confidential. o Clearly identify the information that is the trade secret or proprietary in their application. o Receive concurrence from the Authority that the information will be kept confidential. If the Authority determines it is not confidential it will be treated as a public record in accordance with AS 40.25 or returned to the applicant upon request. o Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 3 of 17 7/1//2011 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Copper Valley Electric Association, Inc. (CVEA) Type of Entity: Electric Utility Fiscal Year End: December Tax ID # 92-0023631 Tax Status: For-profit or x non-profit ( check one) Mailing Address PO Box 45 Glennallen, AK 99588 Physical Address Mile 187 Glenn Highway Glennallen, AK 99588 Telephone 907-822-3211 Fax 907-822-5586 Email Matthews@cvea.org 1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER Name Jaime L. Matthews Title Manager of Administration & Finance Mailing Address PO Box 45 Glennallen, AK 99588 Telephone 907-822-8311 Fax 907-822-5586 Email Matthews@cvea.org 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) x An electric utility holding a certificate of public convenience and necessity under AS 42.05, or An independent power producer in accordance with 3 AAC 107.695 (a) (1), or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes or No 1.2.2. Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If the applicant is a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate Yes or No in the box ) Yes or No 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes or No 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) Yes or No 1.2.5 We intend to own and operate any project that may be constructed with grant funds for the benefit of the general public. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 4 of 17 7/1//2011 SECTION 2 – PROJECT SUMMARY This is intended to be no more than a 1-2 page overview of your project. 2.1 Project Title – (Provide a 4 to 5 word title for your project) Solomon Gulch Unit 2 Efficiency Upgrade 2.2 Project Location – Include the physical location of your project and name(s) of the community or communities that will benefit from your project. The Solomon Gulch project is located directly across from the City of Valdez on Dayville Road. This project serves the members of Copper Valley Electric Association (CVEA). CVEA is a member-owned electric cooperative providing central station electric service to a relatively large geographic area of Eastern Interior and Prince William Sound. CVEA is a stand-alone (not interconnected to another power system) electric utility. The service territory is divided into two districts, the Valdez District and the Copper River Basin District. The Valdez District is comprised of the organized area of the city of Valdez. The Copper River Basin District incorporates many outstretched communities including: Glennallen, Gakona, Gulkana, Tazlina, Copper Center, Kluti-Kaah, Copperville, Kenny Lake, Tolsona, Mendeltna, Nelchina, Eureka, and Sheep Mountain. Solomon Lake Valdez Marine Terminal Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 5 of 17 7/1//2011 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind Biomass or Biofuels X Hydro, including run of river Transmission of Renewable Energy Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources Hydrokinetic Solar Storage of Renewable X Other (Describe): Improvement in Efficiency 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) Reconnaissance Design and Permitting Feasibility X Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. CVEA is currently in the process of purchasing a new runner for Unit 2 at the Solomon Gulch hydroelectric facility. This project will increase CVEA’s renewable energy capacity. The new runner will be manufactured utilizing state of the art flow analysis which will result in efficiency gains of approximately 10%. The installation of the runner along with the overhaul of Unit 2 will occur in late fall 2012. 2.5 PROJECT BENEFIT Briefly discuss the financial and public benefits that will result from this project, (such as reduced fuel costs, lower energy costs, etc.) Solomon Gulch is a vital asset to CVEA. In 2010 CVEA overhauled Unit 1 and with the installation of the runner and overhaul on Unit 2, this ensures CVEA’s asset remains operationally viable for decades to come. Benefits include: 1. Displaces fuel 2. Reduced emissions 3. Saves money 4. More efficient utilization of existing resources With technology advances made in runner design, CVEA can now create more power without increasing the use of water. In effect, this is a new source of energy to CVEA’s system not present today. Installing the runner upgrade during an overhaul reduces the cost of the project since the rotor will already be removed. Reduced fuel costs which lead to lower energy costs for CVEA’s members is an additional benefit. With the guarantee of 10% in efficiency, this equates to an additional 2,437,309 kWhs generated from the Solomon Gulch hydroelectric facility. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 6 of 17 7/1//2011 At $3.51 per gallon, and 14 kWh/gallon efficiency, the cost per kWh for diesel fuel is 25.07¢ per kWh. CVEA charges 9¢ per kWh out of Solomon Gulch. The difference of 16.07¢ per kWh equates to a savings of $391,710 per year which is a 6.2 year payback. 2.6 PROJECT BUDGET OVERVIEW Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source of other contributions to the project. The total project cost for the Solomon Gulch Unit 2 Efficiency Upgrade Project is $2,440,000. Through July 2011 CVEA has committed $1,082,600 with a remaining $1,367,400 eligible during the grant period. CVEA is requesting 50% funding through Round 5 of the Renewable Energy Grant Fund which amounts to $687,700. The additional amount will be paid by CVEA. See section 4.4.1 for additional details. 2.7 COST AND BENEFIT SUMARY Include a summary of grant request and your project’s total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $687,700 2.7.2 Other Funds to be provided (Project match) $687,700 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $1,357,400 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.4 Total Project Cost (Summary from Cost Worksheet including estimates through construction) $2,440,000 2.7.5 Estimated Direct Financial Benefit (Savings) $391,712 / year 2.7.6 Other Public Benefit (If you can calculate the benefit in terms of dollars please provide that number here and explain how you calculated that number in your application (Section 5.) $ Unknown, see Section 5 SECTION 3 – PROJECT MANAGEMENT PLAN Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application. 3.1 Project Manager Tell us who will be managing the project for the Grantee and include contact information, a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management support. If the applicant expects project management assistance from AEA or another government entity, state that in this section. Please see Attachment A for all resumes. CVEA has contracted Voith Hydro to manufacture, install the runner, and complete the overhaul on Unit 2. Voith is the original equipment manufacturer who has high standards for quality control. Voith successfully completed CVEA’s overhaul on Unit 1 in 2010. A brochure relating to their hydro expertise is attached. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 7 of 17 7/1//2011 CVEA’s Chief Executive Officer (CEO) Robert A. Wilkinson has been in the utility industry for 25 years. Robert provides support to CVEA Management and communicates results and decisions to CVEA’s Board of Directors. CVEA’s Manager of Administration & Finance is Jaime Matthews who has worked in the utility industry for 11 years. Jaime will be the grant manager for CVEA. CVEA’s Project Engineer is Aaron Remer who will assist in managing this project. Aaron managed the Unit 1 overhaul project for CVEA. 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) CVEA plans to start the project in September 2012. It takes approximately 60 days to complete the overhaul. The tentative schedule for this project is as follows: 08-29-12 Project Mobilization 08-30-12 Start Overhaul 09-07-12 Disassembly of Unit 2 Complete 10-20-12 Reassembly of Unit 2 Complete 10-26-12 Testing and Commissioning The schedule is critical as each kWh generated out of the Solomon Gulch is important to CVEA’s Cost of Power. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. The Milestones must also be included on your budget worksheet to demonstrate how you propose to manage the project cash flow. (See Section 2 of the RFA or the Budget Form.) 2nd Quarter 2012 - Finalize contract with Voith Hydro, Inc. - Complete detailed scope document - Issue purchase order for spare parts due to lead time 3rd Quarter 2012 - Project mobilization and begin overhaul - Disassemble Unit 2 4th Quarter 2012 - Reassemble Unit 2 - Integration and testing A detailed scoping document was compiled for the overhaul on Unit 1. This included approximately 57 steps for the project. In addition a detailed timeline was developed. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 8 of 17 7/1//2011 3.4 Project Resources Describe the personnel, contractors, equipment, and services you will use to accomplish the project. Include any partnerships or commitments with other entities you have or anticipate will be needed to complete your project. Describe any existing contracts and the selection process you may use for major equipment purchases or contracts. Include brief resumes and references for known, key personnel, contractors, and suppliers as an attachment to your application. Voith Hydro Inc. is the original equipment manufacturer (OEM) who successfully performed the overhaul on hydro Unit 1 in 2010. An extensive performance evaluation was done at that time which included interviews with four prior clients of Voith Hydro. For Voith Hydro, Inc. the staffing will consist of an on-site Technical Supervisor and Working Foreman along with four Millwrights. Specific personnel are not known at this time; however, a company brochure has been included in Attachment A. CVEA’s Plant Operators provide support on site. For the overhaul on Unit 1, CVEA Operators were very involved to understand fully the mechanical aspects of the unit and facilitate with any tools/equipment necessary from the contractor. Due to the lead time of the Runner, a contract was entered into with Voith in 2010. A purchase order was issued on October 1, 2010. The equipment is scheduled to be on site in October 2011. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. CVEA’s Project Engineer will provide daily support on-site. A detailed schedule and scope allows CVEA to hold the contractor accountable for delays in schedules. When CVEA conducted the overhaul on Unit 1, the contract provided for liquidated damages for schedule delays caused by the contractor. A similar contract will be put in place for this project. CVEA will communicate to AEA as required by the grant agreement. This is typically through quarterly reports; however, because this project occurs within 60 days, CVEA can communicate more often if necessary to meet AEA’s expectations. 3.6 Project Risk Discuss potential problems and how you would address them. On the Overhaul of Unit 1, CVEA performed an evaluation to identify the potential risks and consequences associated with this project. There were 13 risks identified in planning for overhaul of Unit 1. These risks were assessed based on the probability of occurrence and the consequences that may result if the event is experienced during the project. For each risk that was deemed unacceptable, measures were taken in the form of contingency plans designed to be prepared to effectively deal with the risk during the project, proactively versus reactively. CVEA will conduct a similar assessment for the Unit 2 project. Attachment B details the assessment done during the overhaul on Unit 1. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 9 of 17 7/1//2011 SECTION 4 – PROJECT DESCRIPTION AND TASKS Tell us what the project is and how you will meet the requirements outlined in Section 2 of the RFA. The level of information will vary according to phase(s) of the project you propose to undertake with grant funds. If you are applying for grant funding for more than one phase of a project provide a plan and grant budget form for completion of each phase. If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. The proposed energy resource currently exists but is not obtainable with the old runner. By upgrading an existing unit to include a new runner, CVEA will gain 10% efficiency on Unit 2. Attachment C is the runner contract which specifies the details of the guarantee on Page 6-8. This gain in efficiency equates to an additional 2,437,309 kWhs per year generated from the Solomon Gulch Project. An overhaul of Unit 2 is already scheduled for 2012 but a regular overhaul will gain no efficiencies in power production. If CVEA takes advantage of this down time and makes a capital investment towards a new technology runner, a 10% efficiency can be made with the same amount of water usage. The only con identified for this project is the risk of spilling water during the installation. The project is scheduled to avoid this risk. The timing of this project is critical to CVEA’s cost of power. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. CVEA generates electrical power at its two diesel plants, one in Valdez and one in Glennallen, a Cogeneration project in Valdez, and a 12 megawatt hydro facility in Valdez. Power is transferred between the two districts on a 106-mile transmission line through Thompson Pass and the Chugach Mountains. The CVEA Cogeneration Plant is a state-of-the-art facility located at the Petro Star Valdez Refinery. It is a 5.2 megawatt Solar turbine and heat recovery unit that utilizes "light straight run" as its fuel source and provides exhaust heat to the attached crude heater for Petro Star’s use in the refining process. The plant was completed in the spring of 2000 and is remotely controlled from the Solomon Gulch hydroelectric facility. Efficiency for this unit is 9.3 kWhs per gallon for production of electricity but the project sells heat at a combined efficiency of 75-80%. Annual O&M costs for 2011 are budgeted at $51,500 which does not include labor. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 10 of 17 7/1//2011 The Glennallen Diesel Plant (GDP) is the oldest of CVEA’s three thermal plants. It has expanded over the years to meet the needs of CVEA’s customers. The available generation capacity of the plant is 11 megawatts. The GDP houses a total of seven diesel engines; three Fairbanks Morse 38D8 1/8 opposed piston units, two Enterprise DSR 46 units, one Caterpillar 3516B unit, and one EMD unit with a capacity of 2.8 megawatts. The five largest units are remotely controlled from the Solomon Gulch hydroelectric facility. The current average efficiency is 14 kWhs per gallon. Annual O&M costs for 2011 are budgeted at $332,000 which does not include labor. The Valdez Diesel Plant (VDP) was constructed after the 1964 Good Friday Earthquake that caused the city of Valdez to relocate to its present location. The plant houses one Fairbanks Morse 38D8 1/8 opposed piston unit, three Enterprise DSR 46 units, and a trailer-mounted Solar Centaur turbine unit. The available generation capacity of this plant is 8.9 megawatts. The three largest units are remotely controlled from the Solomon Gulch hydroelectric facility. The average efficiency is 13.7 kWhs per gallon. Annual O&M costs for 2011 are budgeted at $168,000 which does not include labor. Previously owned by the Four Dam Pool Power Agency, CVEA acquired ownership of the Solomon Gulch hydroelectric facility in February 2009. The 12-megawatt Solomon Gulch hydroelectric facility is located on Dayville Road in Valdez. Power is generated by two Fuji Francis water turbines. The facility began providing power to CVEA customers in 1982. CVEA operates its dispatch center from this facility. The plant is manned 24 hours a day, seven days a week. Plant operators are responsible for the operation of up to four generation plants at one time via remote control operations. From the hydro plant, operators can start and stop units in any or all of CVEA's three generation facilities: Glennallen diesel, Valdez diesel, or the cogeneration plant, as well as the hydro project. Annual O&M costs for 2011 are budgeted at $532,000 which does not include labor. CVEA's service areas are connected with a 106-mile, 138-kilovolt transmission line that is owned and operated by CVEA. The transmission line provides a link to all four generating plants. Power can flow from any of the generating facilities to end consumers. Historically, power flows from the Solomon Gulch hydro plant to the Copper River Basin District during the summer months. The transmission line traverses severe terrain between the two districts and parts of it, in the Thompson Pass area, has severe avalanche risk. The transmission line was last damaged by an avalanche in December 2009. CVEA’s Rates CVEA’s base rates have not changed since 1998. The Cost of Power Charge changes monthly based on actual fuel and the cost of hydro. This has caused the overall rate to vary based on seasonal generation. Rates are lower in the summer while generating close to 90% hydro and higher in the winter when we are generating with fuel. The graph on the following page illustrates CVEA’s average revenue per kWh collected for 2008, 2009 and 2010. The average revenue includes the cost of power charge which is included in a separate line. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 11 of 17 7/1//2011 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. On an average year Solomon Gulch produces approximately 52% of the generation for CVEA’s system. Each kWh increase in hydro benefits the members of CVEA. By increasing the hydro by 2,437,309 kWhs per year, this is approximately 2.51% less kWhs that have to be generated by fossil fuel as identified on the graph below. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. This project would have a positive impact on CVEA’s members by reducing the amount of fossil fuel generation. In addition, the life of the hydro unit is extended which will continue to provide reliable hydro energy into the future for CVEA’s members. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 12 of 17 7/1//2011 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system: A description of renewable energy technology specific to project location Optimum installed capacity Anticipated capacity factor Anticipated annual generation Anticipated barriers Basic integration concept Delivery methods Voith Hydro has studied unit data provided by CVEA to determine the design of the new runner with a focus on increasing unit output and efficiency as well as improving the reliability of the units. Replacement runner designs are computer generated designs that incorporate all the constraints of the existing prototype wheel-case configuration. The analysis is performed by proprietary finite element techniques, which include both singularity and finite element methods, based on the fundamental equations of fluid dynamics. These analysis programs predict parameters such as fluid inlet and discharge angles and cavitation performance, thus allowing development of optimum blade profiles. A loss analysis was completed on CVEA’s data and the runner designed used state of the art tools to optimize the efficiency. The chart below shows the expected performance curves at various heads. This is discussed in more detail in Attachment C. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 13 of 17 7/1//2011 The installation of the runner along with the overhaul on Unit 2 will ensure this vital asset remains operationally viable. The overhaul on Unit 1 was successfully completed in 2010 and the unit was restored to a “like new” condition. The overhaul reduced overall vibrations by 25%, improved wicket gate response time by 50%, and improved the unit frequency control. 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. There are no land ownership issues with this project. Solomon Lake, the penstock, and power house are on state land. 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues. List of applicable permits Anticipated permitting timeline Identify and discussion of potential barriers No permits are required for this project but the project will require approval from the Federal Energy Regulatory Commission. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: Threatened or Endangered species Habitat issues Wetlands and other protected areas Archaeological and historical resources Land development constraints Telecommunications interference Aviation considerations Visual, aesthetics impacts Identify and discuss other potential barriers There are no environmental issues associated with this project. 4.4 Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 14 of 17 7/1//2011 the project. Cost information should include the following: Total anticipated project cost, and cost for this phase Requested grant funding Applicant matching funds – loans, capital contributions, in-kind Identification of other funding sources Projected capital cost of proposed renewable energy system Projected development cost of proposed renewable energy system The table below summarizes the total costs for this project. CVEA is requesting 50% funding through round 5 of the renewable energy grant fund which amounts to $687,700. The additional amount will be paid for by CVEA. If CVEA’s request is funded, out of the total project cost of $2,440,000, the $687,700 equates to a 28% state investment and a 72% CVEA investment. 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant. (Note: Operational costs are not eligible for grant funds however grantees are required to meet ongoing reporting requirements for the purpose of reporting impacts of projects on the communities they serve.) Annual O&M costs for 2011 are budgeted at $532,000 for Solomon Gulch which does not include labor. This project will not increase O&M costs. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: Identification of potential power buyer(s)/customer(s) Potential power purchase/sales price - at a minimum indicate a price range Proposed rate of return from grant-funded project CVEA currently charges members 9¢ for each kWh generated out of Solomon Gulch. This project increases the Solomon Gulch hydro kWhs by 2,437,309 annually. With current fuel prices at 25.07¢ per kWh, this is a savings of 16.07¢ per kWh. Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 15 of 17 7/1//2011 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Please see attached document. SECTION 5– PROJECT BENEFIT Explain the economic and public benefits of your project. Include direct cost savings, and how the people of Alaska will benefit from the project. The benefits information should include the following: Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or cost based rate) Potential additional annual incentives (i.e. tax credits) Potential additional annual revenue streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available) Discuss the non-economic public benefits to Alaskans over the lifetime of the project The ten year average kWhs generated from Unit 2 is 24,373,090. A 10% increase equates to an additional 2,437,309 kWhs generated by the Solomon Gulch facility. CVEA’s average diesel efficiency is 14 kWh/gallon. This is approximately 174,094 gallons of diesel per year. At CVEA’s current price of $3.51 per gallon, this equates to an annual fuel displacement of $611,070. CVEA currently charges 9¢ for every kWh sold out of the Solomon Gulch Project. This equates to $219,358 for the annual cost. The difference between the fuel savings and the cost of the new resource is $391,712 annually. This project increases CVEA’s hydro production by 2.51% as discussed in Section 4.2.2. This eliminates 174,094 gallons of diesel fuel per year which in turn eliminates 1,986 tons of CO2 emissions annually. SECTION 6– SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum: Proposed business structure(s) and concepts that may be considered. How you propose to finance the maintenance and operations for the life of the project Identification of operational issues that could arise. A description of operational costs including on-going support for any back-up or existing systems that may be require to continue operation Commitment to reporting the savings and benefits CVEA has existing procedures in place for the Solomon Gulch project. No new processes are required for this project. As stated earlier in the application, no new O&M charges will occur. SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS Renewable Energy Fund Grant Application Round 5 AEA12-001 Grant Application Page 16 of 17 7/1//2011 Discuss what you have done to prepare for this award and how quickly you intend to p roceed with work once your grant is approved. Tell us what you may have already accomplished on the project to date and identify other grants that may have been previously awarded for this project and the degree you have been able to meet the requirements of previous grants. CVEA has entered into a contract for the runner due to the long lead time on this equipment. CVEA has not applied for other grants on the Solomon Gulch Unit 2 Efficiency Upgrade Project. SECTION 8– LOCAL SUPORT Discuss what local support or possible opposition there may be regarding your project. Include letters of support from the community that would benefit from this project. CVEA members support renewable energy development and, in particular, development that will relieve the burden on electric rates caused by high oil prices. With the nature of this project, CVEA has not solicited any local support. The Solomon Gulch project is very favorable amongst CVEA’s members as it is the lowest cost resource on the system. SECTION 9 – GRANT BUDGET Tell us how much you want in grant funds Include any investments to date and funding sources, how much is being requested in grant funds, and additional investments you will make as an applicant. Include an estimate of budget costs by milestones using the form – GrantBudget5.doc Through June 2012, CVEA will have invested $1,082,600 into this project. CVEA is requesting $687,700 from this round of grant funds with CVEA matching $687,700 which brings the tot al project cost to $2,440,000. Please see the attached estimate of budget costs by milestone. Renewable Energy Fund Round 5 Project Cost/Benefit Worksheet RFA AEA12-001 Application Cost Worksheet Page 1 7-1-11 Please note that some fields might not be applicable for all technologies or all project phases. The level of information detail varies according to phase requirements. 1. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. 2,437,309 kWh Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) 2. Existing Energy Generation and Usage a) Basic configuration (if system is part of the Railbelt1 grid, leave this section blank) i. Number of generators/boilers/other 14 (see page 9 of grant application for breakdown) ii. Rated capacity of generators/boilers/other 37.1 MW (see page 9 of grant application) iii. Generator/boilers/other type Fairbanks Morse, Enterprise, Caterpillar, Solar iv. Age of generators/boilers/other Ranges from 1952-2009 v. Efficiency of generators/boilers/other Ranges from 9.3 kWh/gallon to 15.2 kWh/gallon, average diesel efficiency 14.0 kWh/gallon b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor $1,288,458 ii. Annual O&M cost for non-labor $1,083,500 c) Annual electricity production and fuel usage (fill in as applicable) (if system is part of the Railbelt grid, leave this section blank) i. Electricity [kWh] 86,662,011 kWh’s – 2010 gross generation ii. Fuel usage Diesel [gal] 817,700 gallons per year – 2010 actual Other LSR: 3,494,000 gallons per year – 2010 actual iii. Peak Load 13.50 MW – 2010 actual iv. Average Load 12.00 MW – 2010 actual v. Minimum Load 10.60 MW – 2010 actual vi. Efficiency Ranges from 9.3 kWh/gallon to 15.2 kWh/gallon vii. Future trends Minimal growth d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] N/A ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other 1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power. Renewable Energy Fund Round 5 Project Cost/Benefit Worksheet RFA AEA12-001 Application Cost Worksheet Page 2 7-1-11 3. Proposed System Design Capacity and Fuel Usage (Include any projections for continued use of non-renewable fuels) a) Proposed renewable capacity (Wind, Hydro, Biomass, other) [kW or MMBtu/hr] Hydro, efficiency upgrade b) Proposed annual electricity or heat production (fill in as applicable) i. Electricity [kWh] 2,437,309 kWhs will be produced with hydro vs. fossil fuel ii. Heat [MMBtu] c) Proposed annual fuel usage (fill in as applicable) i. Propane [gal or MMBtu] ii. Coal [tons or MMBtu] iii. Wood [cords, green tons, dry tons] iv. Other 4. Project Cost a) Total capital cost of new system $2,440,000 b) Development cost N/A c) Annual O&M cost of new system N/A d) Annual fuel cost N/A 5. Project Benefits a) Amount of fuel displaced for i. Electricity 174,094 gallons x $3.51 = $611,070 b) Current price of displaced fuel $3.51 per gallon ($110/barrel) c) Other economic benefits d) Alaska public benefits 6. Power Purchase/Sales Price a) Price for power purchase/sale 9¢ / kWh x 2,437,309 = $219,358 7. Project Analysis a) Basic Economic Analysis Project benefit/cost ratio Using a 30 year life estimate (30 years x annual benefit of $391,712) = $11,751,360 benefits / $2,440,000 = 4.81 Payback (years) $2,440,000 / $391,710 = 6.2 years Renewable Energy Fund Grant Round V Grant Budget Form 7-1-11 Milestone or Task Anticipated Completion Date RE- Fund Grant Funds Grantee Matching Funds Source of Matching Funds: Cash/In-kind/Federal Grants/Other State Grants/Other TOTALS (List milestones based on phase and type of project. See Attached Milestone list. ) $ $ $ Design and feasibility requirements are complete 2010 $ $ $ Completion of bid documents & vendor selection 2010 $ $ $ Purchase spare parts for project 3rd Quarter 2012 $ 79,200 $ 79,200 Cash $ 158,400 Complete overhaul 4th Quarter 2012 $ 599,500 $ 599,500 Cash $1,199,000 Integration & testing 4th Quarter 2012 $ $ $ Purchase spare parts for project 3rd Quarter 2012 $ $ $ Complete overhaul 4th Quarter 2012 $ $ $ Integration & testing 4th Quarter 2012 $ $ $ $ $ $ $ $ $ TOTALS $678,700 $678,700 $1,357,400 Budget Categories: Direct Labor & Benefits $ $ $ Travel & Per Diem $ $ $ Equipment $ $ $ Materials & Supplies $79,200 $79,200 $ 158,400 Contractual Services $ 599,500 $ 599,500 $1,199,000 Construction Services $ $ $ Other $ $ $ TOTALS $678,700 $678,700 $1,357,400 Applications should include a separate worksheet for each project phase (Reconnaissance, Feasibility, Design and Permitting, and Construction)- Add additional pages as needed Proven strength under a new name. Voith Hydro. Voith Hydro Simply moving. The power of water. Inexhaustible. And pure fascination. Water is part of our everyday life. In many countries, it is taken for granted. This clear, inexhaustible natural element, and in partic- ular the potential that it holds, represents pure fascination – regardless of how you look at it. From a purely chemical point of view, water is a compound of the elements oxygen and hydrogen. Seen from a broader perspective, we find water almost everywhere. After all, 71 percent of the earth’s surface is covered by water. And from a technical point of view? Water has the power to move many things. Gen- erating energy from the power of water represents large amounts of clean, renew- able energy. Much to move, great things to achieve – that was, is and will continue to be our company’s quest. With the focus always on the inexhaustible and fascinating power of water. 3 Voith Hydro. Ready and well equipped. Exacting and reliable. Voith Hydro is a division of the Voith AG group and a leading provider of equipment and services in the field of hydroelectric power. Since the establishment of the joint venture with Siemens in April 2000, our company has been hugely successful in developing its strong position as a highly- competent full-service provider for elec- trical and hydraulic equipment. With almost 4,000 employees worldwide and order intake worth over a billion euros per year, the com- pany has established itself well in the market. The name and statistics say a great deal. Think of hydroelectric power and the name Voith springs to mind. We have never under- estimated the roots of the company, which is now over 140 years old, and this still holds true today: Voith is a robust and innovative company with excellent market development, which meets the very highest demands all around the world. “Engineered reliability” defines our promise to the customer. Our reliable and exacting engineered products and services are designed specifically for our customers’ needs. Until now, you have known us under the joint venture name of Voith Siemens Hydro Power Generation. This name has changed: we are now called Voith Hydro. The two share- holders retain their shares in the company, Voith with 65 percent and Siemens with 35 percent. We are and will remain the suc- cessful joint venture in the field of hydro- electric power that has substantially expanded its expertise over recent years and secured a robust market position. 4 Customers and business partners can still rely upon our high level of competence, our technical reliability and our commitment to research and development. Our portfolio remains unchanged; as a full-service provider, Voith Hydro continues to produce generators, turbines and the associated control systems to put the power of water to work. Ever ex- acting and creative, always efficient and economical, and, above all, environmentally friendly. With our considerable share of the world market Voith Hydro continues to lead the way in traditional hydroelectric power and in innovative approaches to the generation of energy from the oceans. We will continue to invest all our energies into strengthening this leading position in the global market for hydroelectric power so we can continue to provide the best solutions. The present and future belong to Voith Hydro. Dr. Roland Münch Chairman of the Board Voith Hydro Holding GmbH & Co. KG 5 6 Leading the way in hydroelectric power. Throughout the world. Always an individual solution. International. Tradition and innovation are in no way mutually exclusive – in an ideal world, they go hand in hand. If you can look back upon a solid and successful company history which is still char- acterized by attributes like “quality”, “reliability” and “leading-edge technology”, you are ideally equipped for the future. The facts and figures speak for themselves: Voith has installed over 40,000 generators and turbines – a total capa- city of around 300,000 MW. This represents a third of the world’s installed hydroelectric power. Voith sees itself as a long-term partner and service provider to its customers. Quality, reliability and financial stability are at the core of its corporate philosophy. Its thoughts and actions have always been based on clear corporate principles. Voith’s technical inno- vations help customers to stay successful and competitive at all times. 7 This is also true in the field of hydroelectric power, both now and in the future. Voith Hydro is at your disposal as a strong partner for chal- lenging projects. Globally. Our international network provides resources with identical best-in-class processes and tools. A range of services, from engineering through production and project management to commissioning, makes the company a leading service provider. This network also ensures that we can meet special customized requirements: from individ- ual components to project planning, through project management and plant maintenance. Voith Hydro has branches and production facilities for electrical and hydraulic machines and components in Europe, Asia and North and South America. Voith Hydro’s international network is superbly established world-wide, located close to customers and hydroelectric power markets. And its international customer relationships culture is impressive. Regardless of where and on what continent: Voith Hydro employs staff whose dedicated activities on an international level are consistently and uniquely customer- and solution-oriented. 8 Initiator and pioneer. Voith Hydro. Extensive expertise. Profitable for all. What is true of Voith AG is true of Voith Hydro: technical reliability – particularly in the pro- cess and project cycle – takes top priority, to the complete satisfaction of each individual customer and business partner. Its leading position in international markets is the result of the innovative power that has characterized Voith for decades and has produced numerous technical innovations. Wherever you are in the world: under the name of Voith Hydro, the joint venture draws upon proven and ever-increasing capabilities and skills. The company is in demand – for new plants or modernization projects, for professional or technical services, for individ- ual electrical or mechanical components or for complete electromechanical systems. We employ specific expertise to develop syn- ergies that benefit partners and customers and improve the hydroelectric system as a whole. This begins in the technology center in Heidenheim and carries through the global network of production facilities for generators, turbines and control technology. 9 What can the power of water move? A multi- tude of landmark projects, in which Voith has been able to prove its competence and its internationalism. Voith has always been there when new records for size and performance have been broken. Right from the beginning: Niagara Falls in 1903 was a milestone in the history of power generation and, for the com- pany, a historic order for what were at the time the largest turbines in the world. This success has continued right up to the present day with machines for the largest hydroelectric power stations currently in existence: from eight megawatts in 1903 to 800 megawatts in 2009. The company is also a trend-setter in the field of “new renewables” – wave power stations and tidal current power technology from Voith Hydro are amongst the pioneering initiatives for the commercial exploitation of the power of the oceans in the foreseeable future. Four strong group divisions. A family company with an international reputation. With paper, energy, transportation, and service. For technological progress. At the top: as an operational management holding company, Voith AG directs the com- mercial strategy of the group as a whole. More than 43,000 staff are employed by the group at over 290 sites. Voith comprises the four divisions of Voith Paper, Voith Hydro, Voith Turbo and Voith Industrial Services. Its core business is the development of techno- logical innovations in the markets for paper, transportation, energy and industrial services. Voith AG Voith Paper Voith Hydro Voith Turbo Voith Industrial Services 10 Voith Hydro Holding GmbH & Co. KG Alexanderstraße 11 89522 Heidenheim/Germany Tel. +497321370 Fax +497321377828 www.voithhydro.com A Voith and Siemens Company t3324 e 02.09 10.000 , Project Risk Matrix Item Risk Type Prob Conseq.Impact Approach Action Plan Trigger 1 Older version of generator brakes had asbestos S, C L M Discovery of materials unprepared to deal with would push schedule out and costs up. Eliminate Per design documents, current brake pads do not contain asbestos; however testing determined there was asbestos in the generator. Plans & resources are in place to deal w/ asbestos Pre outage preparation 2 Asbestos is an insulator for generator windings which if damaged could be present S, C M M Discovery of materials unprepared to deal with would push schedule out and costs up. Based on photographs of last inspection, insulators appeared to be in good condition Mitigate Perform a swab sample and determine if asbestos is present- ensure project resources are available to abate Samples were taken and tested and the generator was inspected in acessable areas. There appears to be no degradation on winding insulation and therefore asbestos source is most likely the brake pads. Pre outage testing Project resources Project schedule and cost Still subject to future seizure-original problem will not be resolved Clean generator rotor and stator -Plan to clean Perform through electrical testing to validate continued health -Determine testing No current indication of leaks -Plan to air test Perform post cleaning air test -Acquire tube plugs Have on hand tube plugs Mitigate Lead check on spare wicket and test confirmed; establish project resources to remove in spiral 4 Current gates are carbon overlaid w/ SS clad. Repair turnaround time and future seizure implications S,C H H Eliminate Purchase new SS wicket gates 3 Lead paint on components and spiral case S, C H M Discovery of materials unprepared to deal with would push schedule out Material lead time 5 Dust & Oil on main generator-increased heating S,C H H Left unchecked could lead to s significant problem Eliminate Contingency6Potential for generator lube oil cooler leaks S,C L H Leaks could lead to water/oil contamination Page 1 of 2 Project Risk Matrix Item Risk Type Prob Conseq.Impact Approach Action Plan Trigger Significant costs for new SB Excess packing leakage Verify with drawings and field measurements that the ring can come out given the obstructions Drawings and field info says we can remove Verify we could machine in place if forced Field machining can hold tolerances however will increase time due to sensitive nature 9 Radial and thrust bearing worn beyond tolerances S,C M H Excessive wear would result in the need to re- babbit the bearings—turnaround time will not support schedule Eliminate Acquire new bearings Pre outage preparation 10 Possible runout on stub shaft between generator and turbine S,C L M Excessive runout results in vibration Mitigate Transport stub shaft to Roteq for check and adjustment if needed. Pre outage preparation Plan to work two shifts 6x10; increase to 7x12 if needed. Engage in-house resources Put hold on routine inspections Post signage on generators that asbestos is present Train personnel on asbestos awareness Eliminate during overhaul 13 Is our lifting and rigging equipment adequate and inspected? S,C L H Rigging failures, equipment damage & personnel safety Eliminate Roteq will supply the needed rigging as they have an active program to test and inspect their rigging equipment Pre outage preparation 7 Pitting in suffing box and packing wear S,C H L Mitigate Remove during outage, bore out and install sleeve Pre outage preparation 8 Wear on main support ring S,C H H To ensure tolerances are held, it is best to machine at Roteq but can it be physically removed? Mitigate 11 Schedule Slippage S,C M M Unexpected events or conditions Contingency Pre outage preparation Daily review of schedule 12 Is there airborne or fixed asbestos in the generator housing now? NA H L Personnel exposed to asbestos during routine inspections Mitigate and eliminate Page 2 of 2 Runner Contract – Attachment C Attached is the contract between CVEA and Voith for the Runner. Referenced several times in the grant application is the 10% guarantee. This is located on page Pages 6-8. In summary, the new runner allows for a 10% increase in energy using the same amount of water. This is calculated based on head pressures, water flows, etc. This calculation will be done to ensure CVEA receives the guarantee. Additional details are included throughout the contract. Voith Hydro Quotation for SOLOMON GULCH Vertical Francis Runner Replacement SUBMITTED TO: Cooper Valley Electric Association SUBMITTED BY: VOITH HYDRO, INC. 760 East Berlin Rd. York, PA 17408-8701 VOITH HYDRO QUOTATION CR412000348 Rev02 September 28, 2010 This document contains information proprietary to Voith Hydro, Inc. (“Voith Hydro”). Your acceptance of it is an acknowledgment of a confidential relationship between you and Voith Hydro. It is to be used solely by you for the purpose of which it is furnished, and we require it to be returned or destroyed when no longer required for that purpose. We also require that neither this document nor any information obtained therefore is to be reproduced, transmitted, disclosed or used otherwise in whole or in part without the written authorization of Voith Hydro, Inc. Voith Hydro Table of Contents Section Executive Summary Price and Payment Conditions Schedule Technical Description Terms and Conditions Qualifications and Experience Project Plan and Subcontractors Voith Hydro York, PA USA A Voith and Siemens Company 1. Executive Summary Being the OEM for the Solomon Gulch turbines through our sister company Voith Fuji in Japan, has allowed us to gather all the information necessary to provide an optimal uprated solution for the runners at Solomon Gulch. Voith Hydro has also carefully studied the unit data provided by CVEA, and determined the design of the new runners with a focus on increasing unit output and efficiency, as well as improving the reliability of the units with the discussed specific operation requirements during the Winter season. Our team has worked diligently to analyze and optimize the runner design options and has clarified the requirements for runaway speed and shaft and runner key material with CVEA prior to bidding. We understand the need to reduce the maintenance requirements with this runner replacement, and we acknowledge that CVEA may have further ideas toward this goal, on which we welcome discussion. Voith Hydro has proposed an uprated runner design based upon the previous Fuji runner and a detailed technical description of the runner design, performance and references are presented herein. Voith has based this quotation on the negotiated between Voith and CVEA terms and conditions of sale. This has allowed us to expedite the response time on this inquiry. It is understood, that given previous project experience, we will work during contract negotiations to finalize and agree to the commercial terms included in the final contract documents. Project Approach Voith Hydro (VH) is pleased to present the following quotation for the Solomon Gulch runner replacement. We have focused our uprated hydraulic design on optimizing the total installed cost to CVEA. Our focus for the duration of this quotation effort has been on  providing CVEA with the highest quality runner that maximizes hydraulic performance,  implementation & delivery schedule, and  overall cost of the equipment being offered. As you will read in more detail in Section 4 of this quotation, VH always puts the quality and reliability of our goods and services at the highest of priorities. This quotation incorporates this high quality of goods with and the most cost-effective solutions available. Section 4 of this quotation includes the detailed technical description for the VH scope for supply of the runner. Please feel free to discuss any portion of this work with us that may not be clear to you. Understanding that the field disassembly/reassembly work is still to be finalized for the Fall 2011 outage, Voith has included the stationary seal rings as well as the new coupling hardware and drive key in the pricing for the first unit. This will facilitate the interface of the new runner with the stationary parts upon installation of the new runner next Fall. Voith will be fabricating the complete Francis turbine runners at our facility here in York, PA. We have extensive manufacturing experience in York, where we have been manufacturing hydroelectric equipment for more than 125 years. The project management and lead engineering roles will be handled from our York, PA offices as well. As always, we welcome open discussion and feedback regarding any points within this quotation that you feel may need further clarification. Voith Hydro York, PA USA A Voith and Siemens Company 2 Price and Payment Conditions 2.1. Turbine Runner Replacement New Turbine Runner (qty. 1) and hardware ............................US$ 625,600 With extended warranty: three years from date of initial commercial operation (see commercial terms for complete definition) The price above includes all engineering and manufacturing services of the new uprated runner; the supply of new stationary upper and lower seal rings, as well as new coupling hardware. Price includes transportation and insurance of the new runner to Solomon Gulch Power Plant. CVEA will be responsible for unloading the equipment upon arrival at site. No taxes have been included in the prices above. Should CVEA not be able to provide VHY with an appropriate tax exemption certificate, VHY will invoice for any applicable taxes as necessary. Any requested field supervision/technical direction services will be quoted according to the VHY Published Rate Sheet (available upon request). Voith Hydro York, PA USA A Voith and Siemens Company 2.2. Payment Terms VH has structured this quotation considering the milestone payments shown below, with payments due net 30 after receipt of invoice. This will allow VH to remain cash neutral through the life of the project which allows VH to forego the need of including finance costs in the bid prices to Copper Valley Electric Association, Alaska. # Activity Payment Anticipated Invoice date 1 Upon Contract award 20% of total sum 30-Sep-2010 2 Procurement of runner material 25% of total sum 30-Nov-2010 3 Upon receipt of blade material 10% of total sum 22-Mar-2011 4 Upon receipt of crown and band material 20% of total sum 18-May-2011 5 Completion of blade machining 15% of total sum 06-Jun-2011 6 Completion of runner assembly 5% of total sum 18-Sep-2011 7 Upon delivery of runner U1 at site 5% of total sum 04-Oct-2011 The due dates for payment shall be net 30 days based on the date of invoice received and accepted by the Buyer or date of receipt of satisfactory goods. CVEA will receive a schedule for the runner manufacturing in 45 days after releasing PO and it will be updated monthly through the life of the project. All pricing is valid until 01-Oct-2010 Voith Hydro York, PA USA A Voith and Siemens Company 3 Schedule and Validity 3.1. Schedule VH has adopted a cost effective manufacturing strategy for the replacement turbine runners at Solomon Gulch while keeping quality and schedule of utmost importance. VH has been successful in achieving CVEA’s request to have the delivery of the turbine runner to site in fall 2011. Activity Delivery Schedule (calendar days after contract award) Delivery of the Runner to site 369 Based on a contract award of 30-September-2010, the above mentioned delivery schedule would allow for the following: Runner Delivery at Plant .....................................04-Oct-2011 The runner delivery date is contingent upon acceptance of a P.O. in VH for contract release no later than 30-Sept -2010. Any change to this date could affect the delivery and payment schedules in at least a day for day adjustment. VH recommends the fit up of the new runner and the shaft to be according the description in Section 04 - 4.8.2 This quotation is valid until 01-Oct -2010. Any change to this date may affect the delivery and payment schedules. Voith York, PA USA A Voith and Siemens Company 4 Technical Description 4 TECHNICAL DESCRIPTION ...............................................................................4–1 4 TECHNICAL PROPOSAL .......................................................................................2 4.1 Turbine Hydraulic Design .............................................................................................................3 4.2 Loss Analysis and CFD .................................................................................................................3 4.3 Loss Analysis Comparison ...........................................................................................................4 4.4 Guaranteed Performance ..............................................................................................................6 4.5 Expected Turbine Performance Curve.........................................................................................9 4.6 Field Testing .................................................................................................................................11 4.7 Materials and Workmanship .......................................................................................................12 4.8 Scope of Supply ...........................................................................................................................12 4.8.1 Turbine Runner ..........................................................................................................................12 4.8.2 Turbine Runner to Shaft Fitup ...................................................................................................17 4.9 Attachments .................................................................................................................................18 Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 2 of 18 4 Technical Proposal Replacement runner designs are computer generated designs that incorporate all the constraints of the existing prototype wheel-case configuration. The analysis is performed by proprietary finite element techniques, which include both singularity and finite element methods, based on the fundamental equations of fluid dynamics. These analysis programs predict parameters such as fluid inlet and discharge angles and cavitation performance, thus allowing development of optimum blade profiles. Adequate factors of safety will be used throughout the design and especially in the design of all parts subject to cyclic stresses. Equipment material stresses under guaranteed operating conditions will have adequate factors of safety and will comply with VH’s Engineering practices for hydraulic turbine machinery, and where required, finite element analysis, material fracture analysis, and computer aided design. The equipment supplied under this quotation will be capable of withstanding the dynamic stresses induced under guaranteed normal operating conditions, including unit runaway speed. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 3 of 18 4.1 Turbine Hydraulic Design Voith replacement runner designs are computer generated designs that incorporate all the constraints of the existing turbine component configuration. The analysis is performed by state-of-the-art 3D viscous CFD codes based on the fundamental equations of fluid dynamics. 4.2 Loss Analysis and CFD The Solomon Gulch loss analysis was performed at the rated point of the turbine. The rated point is the flow at a specified rated head that provides the peak efficiency. Determining the rated point is an iterative process in which the losses for a given flow are analyzed and flow is adjusted accordingly to match power and efficiency demands. The process is repeated until the design goals are optimized. Several Francis models that were designed, built, and tested by Voith Hydro (VH) were selected as the reference models upon which component loss comparisons were made to Solomon Gulch. The Francis reference models were selected because of the similarity to the operating conditions and hydraulic geometry at Solomon Gulch, allowing accurate loss comparisons to the spiral case, stay vanes, guide vanes, and draft tube. A component by component loss analysis comparison based on the geometry differences between the proposed Solomon Gulch unit and the reference models was then performed to estimate the proposed Solomon Gulch performance at the design point. Within each component (e.g. Stay Vane), specific characteristics (e.g. Inlet Height) determine the overall losses for the component. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 4 of 18 4.3 Loss Analysis Comparison The derivation of the peak efficiency for the proposed Solomon Gulch turbine is as follows: Derived from Baseline Baseline Model Peak 94.13% Sum of Adjustments -2.45% Proposed Model Peak 91.68% Step-Up 1.07% Proposed Prototype Peak 92.75% The efficiency presented here is hydraulic efficiency, without mechanical losses. Efficiency values also assume that smoothing air is not being admitted to the turbine. Model efficiencies have been corrected to a Reynolds number of 2 x107. A second value for efficiency was also calculated. This is the weighted efficiency. Based on the 2007 hourly load data supplied by the Copper Valley Electric Company the following histogram was created to analyze the flows that the machine ran at during 2007. This histogram can be seen below. 2007 Flows at Solomon Gulch2.5%0.0%18.5%29.3%18.3%6.6%3.4%11.0%4.0%2.3%1.1%1.1%0.6%0.4%0.3%0.1%0.1%0.5%0% 5% 10% 15% 20% 25% 30% 35%1.52.252.753.253.754.255.578910111213141530.552.75Flow (m3/s)% of time Figure 1 Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 5 of 18 Using this histogram the flow ranges that the machine is most likely to run at can be found and the corresponding efficiencies can then be calculated. The efficiencies were then calculated at the most prevalent flows and then these flows were average using a mean weighted efficiency based on the number of occurrences of each of the most prevalent flows. The below table summarizes the results of the weighted efficiencies at five different points. Point 1 2 3 4 5 Head (m) 200 200 200 200 200 Flow (m^3/s) 1.5 2.75 3.25 3.75 4.2 Weight Factor 2.5% 21.8% 40.3% 22.3% 8.9% Power (MW) 2.18 4.63 5.56 6.42 7.15 Efficiency 78.49% 90.8% 92.27% 92.28% 91.74% The mean weighted efficiency (W ŋ ) was then found by the following equation. n W W n 1 *  Equation 1 Where W is weight factor and ŋ is efficiency at that point the n is the number of points. Using this method the mean weighted efficiency was found to be 91.53%. The proposed Solomon Gulch prototype peak efficiency was found to be relatively consistent when derived from several different models. In the end, VH has submitted efficiency based on a Baseline model tested in one of the Voith Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 6 of 18 laboratories because it has similar dimensions to Solomon Gulch, and its performance characteristic and efficiency curve shape are expected to be a close match to the proposed Solomon Gulch turbine. 4.4 Guaranteed Performance  Guaranteed Turbine output The replacement runner is guaranteed to have a max power output of 7.6 MW at the rated net head of 200m (656.17 ft).  Guaranteed Mean Weighted Efficiency The mean weighted efficiency of the replacement runner is guaranteed to be at least 91.53% at net head 200m as calculated in accordance with the table on page 5 above.  Cavitation guarantee The replacement runner and all stationary water passage components will be guaranteed against excessive loss of metal due to pitting caused by cavitation in accordance with IEC Publication 60609 for an 8000 hour period of operation within the warranty period beginning no more than one (1) year from the date the turbine with replacement runner is placed in service, and not exceed two (2) years from the date of final completion and offer of shipment, provided that during the cavitation pitting guarantee period the turbine is operated within the following conditions:  The turbine is operated within a head range between 616.47 ft and 686.35 ft. During the guarantee period the turbine will operate no more than 100 hours outside this range.  During the guarantee period the turbine will operate no more than 100 hours above the maximum continuous power indicated below. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 7 of 18  During the guarantee period the turbine will operate no more than 500 hours below the minimum continuous power indicated below and above the minimum temporary range.  During the guarantee period the turbine will operate no more than 50 hours above the maximum continuous net head of 686.35 ft. Net Head (ft) Maximum Continuous Power (MW) Minimum Continuous Power (MW) Minimum Temporary Power (MW) Minimum Tailwater Elevation (ft above sea level) 616.47 7.1 4.05 2.0 15 656.17 7.6 4.5 2.2 15 686.35 8.0 4.7 2.3 15  At no time shall the unit be operated at more than 5% above the maximum capacities listed.  The turbine distributor centerline is at 20 ft above sea level and the minimum tailwater elevation shall at no time be less than listed above.  Voith Hydro reserves the right to inspect the runner during the cavitation guarantee period and make adjustments to the runner, if deemed necessary.  Surfaces which have a peak-to-valley height of less than 0.5 mm are not considered as having been affected by cavitation. Erosion or damage caused by solid particles in the water and corrosion caused by aggressive chemical substances in the water, or by galvanic, microbial or electrolytic actions, are not covered by the pitting guarantee. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 8 of 18  Runaway speed The runaway speed of the uprated turbine, after runner replacement, is expected not to exceed 1550 rpm at maximum net head of 686.35 ft. If this expected increase in runaway speed is outside of the limits of CVEA, please advise, and the hydraulic solution contained herein may need altered.  Hydraulic thrust The hydraulic thrust of the modernized turbine, after runner replacement, is expected not to exceed 98 kN at maximum net head of 686.35 ft. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 9 of 18 4.5 Expected Turbine Performance Curve The Solomon Gulch replacement runner will be designed using state-of-the-art CFD tools to optimize the efficiency for the new runner. The following page shows the expected performance curves at various heads for the Solomon Gulch replacement runner. EXPECTED PROTOTYPE TURBINE PERFORMANCESPEED = 900 RPM, CENTERLINE ELEVETION = 6.1 mSolomon GulchTurbine Power (MW)Turbine EfficiencyFlow Rate (m³/s)Voith Hydro, Inc. © 2010 VOITH PREP: CDB/AMS 21 July 2010YORK, PA U.S.A. ALL RIGHTS RESERVED APPR: SRM 21 July 201087.4%87.6%87.8%88.0%88.2%88.4%88.6%88.8%89.0%89.2%89.4%89.6%89.8%90.0%90.2%90.4%90.6%90.8%91.0%91.2%91.4%91.6%91.8%92.0%92.2%92.4%92.6%92.8%3.54.04.55.05.56.06.57.07.58.08.59.02.42.62.83.03.23.43.63.84.04.24.44.64.85.05.25.45.65.86.06.26.46.66.87.07.27.47.67.8Max Net Head = 205.1 mRated Net Head = 189.0 mMin Net Head = 180.0 mOperating LimitsSolid Line Style = EfficiencyBroken Line Style = Flow Rate Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 11 of 18 4.6 Field Testing If a field test is to be done to verify the performance of the replacement runner, it is requested that an index field test be preformed. An index test compares the output of the plant before and after the runner replacement to verify the performance of the new runner. An index test is completed by measuring the heads and flows through several operating points of the existing runner and recording the output of the generator. Then, the new runner is installed. The operating points that were tested for the old runner are then matched for the new runner; meanwhile, the power output is recorded for those operating points. The difference between the outputs of the old and new runner is then found. From this difference, the overall performance improvement can be calculated as the difference between the outputs at a particular operating point. This method of field testing will take into account such variables as the surface roughness of the existing water passage and other efficiencies for machinery that has not been replaced. This method accurately allows the Copper Valley Electric Company to measure the efficiency and power upgrade as a result of a replacement runner. If significant difference is found between the as-found output of the machine from the expected OEM performance curve, the performance contained herein may need altered. This would be due to an unknown in the existing unit condition outside of the control of a new turbine runner design. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 12 of 18 4.7 Materials and Workmanship Materials used in construction of the new runner will be manufactured to and identified with an American Society for Testing and Materials (ASTM) designation or established Commercial Standards. Materials used in construction of the equipment will be new and of high quality in accordance with established VH Engineering practice. Materials used in construction of the equipment will be tested, if required by Voith engineering, to conform to designated ASTM or established commercial standard. Certified material test reports can be furnished to the Purchaser, if requested. These certificates will identify the part number for which the material is to be used and will contain all information necessary to verify compliance with the specifications. Work will be subjected to the Voith Quality Assurance Program, ISO-9001-2000 Quality System Model, which is designed to prevent, detect, and correct non- conformances, assuring equipment is fit for use and function. Material, mechanical and dimensional shop tests will be performed, if required by Voith engineering, to confirm the equipment meets requirements of this quotation and agreed to codes and standards. Unacceptable indications revealed as a result of these tests would be rectified at no additional cost to the Purchaser. 4.8 Scope of Supply 4.8.1 Turbine Runner Additional work scope that may be required and is not specifically described in this quotation will be quoted separately as applicable. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 13 of 18 VH has optimized the turbine runner for performance and output while paying close attention to costs and material deliveries. The runner that is described in this section will be a welded fabrication consisting of a stainless steel crown, stainless steel band and stainless plate-steel blades. The blades will be hot pressed, milled and ground as necessary to meet VH standard requirements for surface finish and tolerances. The components will be weld assembled, machined, and dynamically balanced. Materials will be in accordance with the following specifications: Stainless Steel Plate ...............................................ASTM A240, UNS 41500 Stainless Steel Forging...............................................ASTM A182, Gr.F304L Stainless Steel Castings .....................................ASTM A487M, Gr. CA-6NM Stainless Steel upper and lower Wearing Rings.........ASTM A182, Gr.F316L VH reserves the right to substitute comparable material selections upon detail engineering completion of the runner components. As part of the runner supply, VH has included in our price 8 (eight) coupling bolts to attach the runner to the turbine shaft. A new drive key and new stationary wearing rings are quoted within the price shown in Section 2.1. The final layout and coordination with CVEA for shaft fit-up and coupling design will be performed after contract award. The replacement runner will be designed and supplied to fit within the Fuji turbine wheel-case original drawings. The runner will be manufactured in accordance with the requirement of IEC 60193. The number of runner blades will be selected to minimize vibration during operation, as well as, to minimize the possibility of resonance with the existing fixed turbine features such as wicket gates and stay vanes. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 14 of 18 Templates will be supplied for use in checking the runner blade shapes to their original contour during future maintenance work. The templates supplied will be for the same locations used during the manufacturing process. We are confident that we have proposed a high quality and best overall cost solution to CVEA and we would be happy to discuss any other options or possibilities with you. The equipment offered by VH in this proposal (new uprated runner, coupling bolts, key and upper & lower stationary wearing rings) will be suitable for use at the uprated conditions. VH has not, and shall not, perform any studies, analyses, or calculations or make any recommendations regarding the suitability for uprated conditions of power train equipment (generator etc.) that VH is not furnishing. It is the responsibility and sole liability of CVEA to determine the suitability for uprated conditions of existing equipment. If additional analyses are required, CVEA will request these as additional work. 4.8.1.1 Runner Welding Prior to assembling the runner components for welding, all accessible water passage surfaces will be finish machined and/or ground to the correct contour, except in those areas that, due to the manufacturing procedure, must be finished following the completion of all welding. The welded connections between the blades, crown, and band will have full- penetration welds a minimum of fifteen (15) percent of the connection length, in from the entrance and discharge edges at the hub. The remaining weld connection between the full-penetration welds will be fillet welds. VH standard design is a runner which is welded using 300 series weld material. The selection of 300-series weld material and the weld procedures precludes the need for pre-heat and post-heat treatment of the welded connections of the blades to the hub. This selection savings in the welding process provides two advantages: Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 15 of 18 a.) Elimination of the need for stress relief of the runner and b.) Considerable savings in manufacturing time and cost. The tungsten inert gas (TIG) welding process may be used to upgrade the runner blade fillet welding surfaces, if required, to achieve finished welds that are of acceptable quality in order to meet performance guarantees. Grinding of runner blade fillet welds at the crown and band will be performed for the full length. VH standard is to perform Non Destructive Examination (NDE) on the welds during fabrication stage and after final machining to ensure a quality product. Locations and type of NDE will be determined based upon Voith Standard Engineering practices, and will be identified on the drawings and manufacturing documents. 4.8.1.2 Finish Specifications The runner will be manufactured to VH standards such that the water passage dimensions, finish and fairness conform to design requirements and dimensional tolerances. Runner fillet sizes will be verified in the appropriate areas to confirm acceptance within design tolerance. Surface fairness of the runner blades will be verified both perpendicular and parallel to the direction of flow of water to confirm acceptance within design tolerances. All surfaces exposed to the flow of water will be finished so as to be free from hollows, depressions, cracks or projections. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 16 of 18 4.8.1.3 Balance Hydraulic Balance: Hydraulic vent opening between runner blades at the discharge edge will be measured and recorded to confirm acceptance within design tolerance. Hydraulic unbalance of the runner vent will be held to +/- 3% maximum. Mechanical Balance: The finished runner will be dynamically balanced in accordance with the latest revision of ISO-1940, "Balance Quality of Rotating Rigid Bodies", with a balance quality of G 6.3. If required for balancing, weight will be added or removed in such a manner that there will be no projections or depressions in finished water passage surfaces. 4.8.1.4 Protective Coatings The runner supplied will be furnished with protective coatings and is consistent with the VH Standard Paint Specification 2664-0179. Finish machined surfaces on the runner will be coated with a suitable rust- resisting compound prior to shipment. All other surfaces of the runner will be coated with All-Purpose Aluminum prior to shipment. 4.8.1.5 Shipment, Handling, and Storage Equipment will be carefully cleaned, and machined surfaces protected for transportation and short-term storage. The new turbine runner and the associated parts will be shipped to the Solomon Gulch project site and standard shipping charges and insurances are included in our proposal. VH has not included in the price of this quotation, any special transport, unloading or handling needs. VH has assumed that the runner can be shipped directly to the Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 17 of 18 job site without any hindrance between highways and actual powerhouse location. It is the responsibility of CVEA to address and correct all environmental conditions that may be detrimental to operation of the equipment, problems such as oil dust, high humidity up to saturation, high dust content, high ozone concentration and other hazardous situations must be addressed. CVEA will also address and correct any rodent or termite infestation, as well as, flora and fauna conditions like mussels that may impede the operation of or actually damage turbine components and electrical systems. Upon award of contract, VH will assist in evaluating potential environmental problems and will cooperate with CVEA in terms of schedule allowances for corrective action if necessary. 4.8.2 Turbine Runner to Shaft Fitup VH will supply the new runner with finish allowance stock remaining on the spigot bore (slightly undersize of the OEM design diameter) to allow for any size variation encountered during the inspection of the shaft (male) spigot. The runner keyway will be supplied completely finish machined (slightly wider than the OEM design width) to allow for any size variation encountered during the inspection of shaft key and keyway. The runner spigot bore and the shaft keyway must be final machined to size and finish before the runner to shaft fit-up operation can take place. VH recommends the existing turbine shaft (male) spigot and keyway be cleaned, lead abated (if necessary), dimensionally examined and NDE inspected at all critical areas. At a minimum, these areas should receive 100% VIS visual inspection. Diameter and runout measurements of the existing turbine shaft (male) spigot should be recorded in accordance with the requirements of IEEE-810. Voith Hydro York, PA USA A Voith and Siemens Company VH Quotation CR412000348 Rev_02 Page 18 of 18 Dimensions of the existing shaft keyway should also be recorded and the results of all readings will be evaluated by CVEA and Voith Engineering during the runner design stage. VH recommends the new runner be setup, centered and level on a VBM for the finish machining operation. The new runner final bore will be machined in accordance with the requirements of IEEE-810. The final surface finish for the runner spigot bore (and shaft turn, if needed) should be 125 RMS. The final surface finish for the shaft keyway should be 125 RMS all over. The scope of work and costs associated with this Shaft Fitup procedure is not included in this quotation. 4.9 Attachments • VH Distributor Section - drawing 2TF000-0000-0060999 • VH standard language for drawing submittals • VH Standard Paint Specification 2664-0179 RevisionsRevLoc.Dftg. / Date / App. / CopyrightABCDEFGGHIKLLKIHFEDCBA67891011121314151616151413121110976543821MM54321Geometrical Tolerances for machined surfaces: for Dimensions 3000 mm per ISO 2768-K-E for Dimensions > 3000 mm per DIN 7168-TGeneral Tolerances for welded parts per ISO 13920-BFFor further information about general tolerances seeVN 1803Chamfers:Inside radii:Reaming:Surface Quality Ra in µm per ANSI B46.10.2 min1.6 max+0.04 / -0.01Thread tolerance class: 6g for external threads 6H for internal threadsGeneral Tolerances for machined surfaces: for Dimensions 4000 mm per ISO 2768-m for Dimensions > 4000 mm per DIN 7168-mUnless otherwise specified, all bolting prestress torquesare for a lubricated condition00PRELIMINARY© 2010 Voith Hydro, Inc.All Rights reserved.Refer to protection notice ISO 16016.A0NameDate2010-08-03Dimensions i nmmRev.TitleAppr.Dftg.Chk.Dept.Release noteDISTRIBUTOR SECTION SheetFacilityof-11ReferenceDEHPRELIMINARYDrawing No.H211909SalesOrder No.Material No.ProjectSOLOMON GULCH 2TFV00-0000-00609998CR4120003480ERFERkg 0RMass(Weight)FScale1:2 O1200G.P.C.O300O250NEW KEY ANDCOUPLINGHARDWARENEW 15 BLADE RUNNERNEW STATIONARYWEARING RINGSEXISTINGPROPOSEDNOTES:1. DIMENSIONS AND DRAWING SHOWN ARE PRELIMINARY AND SUBJECT TO FINAL DESIGN.2. DRAWING FOR REFERENCE ONLY. NOT TO BE USED FOR DETAIL DESIGN.148.5PAD HT.O1020O75380320EL. 6.096 M STANDARD DRAWING CLAUSE FOR PROPOSALS All drawings submittals originating from Voith Siemens Hydro Power Generation, Inc. (VSH) will be accompanied by a sequentially numbered transmittal record sheet which will denote critical contract information as well as drawing title, number, revision, number/type of documents provided and approval action status. Customer returned transmittals shall include this form signed and appropriately marked with approval action status noted as either (A=Approved, AN=Approved As Noted, AR=Amend Resubmit or RF=Reference). In the event that a drawing is returned "AR" and VSH chooses or has chosen to proceed with work it will be at VSH risk. All drawings submitted shall be returned no later than 30 days after transmittal. Drawings not returned after 30 days will be deemed "A" approved. Drawings and the transmittal form will be sent to the Customer via electronic method either via email or to/thru a Customer supplied gateway to be finalized during contract negotiations. Drawings will be in .tif format. All reports and other 8 1/2 X 11 documents will be provided in .pdf format. Initial and subsequent submittals will be electronic consisting of a single electronic file for each drawing or document. Subsequent submittals will also be sent with a sequentially numbered transmittal sheet clearly indicating a "resubmital". All Customer comments shall be consolidated onto a single drawing and returned as either an electronic .tif file or as a hard copy with markups. Any markups shall be clearly designated either in color, by "clouding" or by other method so as to draw attention to the comment or clarification. VSH will review and address comments as necessary and resubmit revised drawings no later than 45 days after receipt of Customer comments provided a drawing has been returned with approval action "AN" or "AR". Final submittal shall be electronic consisting of a single electronic file (.tif or .pdf as applicable) for each drawing stored on a sufficient number of CD's in order to have one (1) complete record of all submittals. Additionally, the final submittal will also include one (1) vellum reproducible suitable for microfilm or other reproduction method except 8 1/2 X 11 documents which will be provided on regular paper as a single copy. A schedule for drawing submittals will be negotiated at the time of contract award. Voith Hydro York, PA USA A Voith and Siemens Company 5 Commercial Terms The as-negotiated Terms and Conditions of Sale according to the latest discussions between Voith and CVEA are included in this section. Voith Hydro A Voith and Siemens Company Solomon Gulch - Rev 02, 9/28/2010 - Terms and Conditions of Sale TERMS AND CONDITIONS OF SALE Article 1 -- Limited Warranty Seller warrants title to the product(s) and also warrants the product(s) on date of delivery at Destination to Buyer to be of the kind and quality described herein, and free of defects in workmanship and material. Seller warrants its field services performed by it to be competent and that any recommendations of its Representative shall reflect his best judgment. Seller warrants its engineering services performed by it to be of the kind and quality described herein and in accordance with generally accepted standards and practices prevailing in the industry at the time performed. Seller warrants its installation and/or any other services performed by it, on date of performance, to be of the kind and quality described herein, in accordance with generally accepted standards and practices prevailing in the industry at the time performed, and free of defects in workmanship. THIS WARRANTY IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, including but not limited to implied warranties of merchantability and fitness of use, AND CONSTITUTES THE ONLY WARRANTY OF SELLER WITH RESPECT TO THE PRODUCTS AND SERVICES. If within four years from date of delivery by Seller, but not more than three years from date of initial commercial operation of any item of product(s) or from date of performance of services by Seller, Buyer discovers that any item of the product or any service was not as warranted above and promptly notifies Seller in writing thereof, Seller shall remedy such nonconformance by, at Seller’s option, adjustment or repair or replacement of the item and any affected part of the product(s) or by re-performance of the service, as the case may be, or by refund of a portion of the purchase price applicable to the nonconforming item or nonconforming service. The same obligations and conditions shall extend to replacement parts furnished by Seller hereunder. Seller shall have the right of disposal of parts replaced by it. The responsibility and expense for the removal and reinstallation of a product pursuant to a warranty claim under this Article 1 will be established in a subsequent agreement for the field service support of Solomon Hydro Unit #2 planned for the fall of 2011. THIS STATES BUYER’S EXCLUSIVE REMEDY AGAINST SELLER AND ITS SUPPLIERS/SUBCONTRACTORS RELATING TO THE PRODUCT(S) AND SERVICES, WHETHER IN CONTRACT OR IN TORT OR UNDER ANY OTHER LEGAL THEORY, and whether arising out of warranties, representations, instructions, installations or defects from any cause. Buyer shall assume responsibility for, and Seller may rely upon, the accuracy and completeness of information furnished by Buyer; Seller’s product guarantees of power, efficiency and/or other similar output guarantees are contingent upon the input parameters provided by the Buyer. Seller and its suppliers/subcontractors shall have no obligation as to any product either which is not furnished by Seller or which has been improperly stored or handled or which has not been operated or maintained according to instructions in Seller or supplier furnished manuals. Voith Hydro A Voith and Siemens Company Solomon Gulch - Rev 02, 9/28/2010 - Terms and Conditions of Sale Article 2 -- Limitation of Liability NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY, NEITHER SELLER NOR ITS SUPPLIERS/SUBCONTRACTORS SHALL BE LIABLE, WHETHER IN CONTRACT OR IN TORT OR UNDER ANY OTHER LEGAL THEORY, FOR LOSS OF USE, REVENUE OR PROFIT, OR FOR COST OF CAPITAL OR OF SUBSTITUTE USE OR PERFORMANCE, OR FOR INCIDENTAL, INDIRECT, OR SPECIAL OR CONSEQUENTIAL DAMAGES, OR FOR ANY OTHER LOSS OR COST OF SIMILAR TYPE, OR FOR CLAIMS BY BUYER FOR DAMAGES OF BUYER’S CUSTOMERS. Likewise, SELLER SHALL NOT, UNDER ANY CIRCUMSTANCE, BE LIABLE FOR THE FAULT, NEGLIGENCE, OR WRONGFUL ACTS OR OMISSIONS OF BUYER OR BUYER’S EMPLOYEES, or Buyer’s other contractors or suppliers. ANY INDEMNITY OR OBLIGATION TO DEFEND OR HOLD HARMLESS OF BUYER BY SELLER SHALL BE LIMITED TO ACTIONS AND/OR OMISSIONS OF SELLER THAT RESULT IN CLAIMS OF BODILY INJURY, WRONGFUL DEATH AND/OR PROPERTY DAMAGE AND FURTHERMORE SHALL RESPOND ONLY TO SUCH CLAIMS FROM THIRD PARTIES TO THIS CONTRACT. Under no circumstance shall Seller be liable to or defend, indemnify and hold harmless Buyer for the sole negligence of Buyer. Neither the Seller nor its Field Service Representative shall be responsible for the acts, omissions or workmanship of employees, contractors, subcontractors or agents of the Buyer or for their failure to follow the advice or instructions of the Seller’s Field Service Representative, or for performing any work or giving any advice in respect of goods or services to the Buyer by Seller or others. Notwithstanding, the total liability of Seller to Buyer under all circumstances shall not exceed the contract price. THIS LIMITATION OF LIABILITY ARTICLE SHALL PREVAIL OVER ANY CONFLICTING OR INCONSISTENT PROVISION CONTAINED IN ANY OF THE DOCUMENTS WHICH COMPRISE THIS CONTRACT. Article 3 -- Patents PATENTS - Seller shall pay costs and damages finally awarded in any suit against Buyer or its vendees to the extent based upon a finding that the design or construction of the product(s) as furnished infringes a United States’ patent (except infringement occurring as a result of incorporating a design or modification at Buyer’s request) provided that Buyer promptly notifies Seller of any claim of such infringement, and Seller is given the exclusive right at its expense to settle such claim and to defend or control the defense of any suit based upon such claim. THIS ARTICLE SETS FORTH SELLER’S EXCLUSIVE LIABILITY WITH RESPECT TO PATENT INFRINGEMENT. Voith Hydro A Voith and Siemens Company Solomon Gulch - Rev 02, 9/28/2010 - Terms and Conditions of Sale Article 4 -- Delays If Seller suffers delay in performance due to any cause beyond its control, including but not limited to acts of God, war, act or failure to act of government, act or omission of Buyer, fire, flood, strike or labor trouble, sabotage, or terrorism, the time of performance shall be extended for a period of time equal to the period of the delay and its consequences. Seller will give to Buyer notice in writing within a reasonable time after Seller becomes aware of any such delay. Article 5 -- Title, Risk of Loss and Insurance Title to the product(s) and risk of loss or damage shall pass to Buyer at the time of Delivery to Destination except that a security interest in the product(s) and proceeds and any replacement shall remain in Seller, regardless of mode of attachment to realty or other property, until the full price has been paid in cash. Buyer agrees to do all acts necessary to perfect and maintain said security interest, and to protect Seller’s interest by adequately insuring the product(s) against loss or damage from any external cause with Seller named as insured or co-insured. Buyer is entitled to inspect the goods at the Destination prior to transfer of the risk of loss. Article 6 -- Taxes and Currency All prices specified are in US dollars unless otherwise stated. Sales tax (including, without limitation goods and services tax, value added tax and retail sales tax) and all other taxes and duties other than those on income levied on Voith Hydro under applicable income tax laws are not included in the price as specified and are payable by Buyer. Article 7 -- General a. BUYER DATA - Timely performance by Seller is contingent upon Buyer’s supplying to Seller, when needed, all required technical information, including drawing approval, and all required commercial documentation. b. NONCANCELLATION - Buyer may not cancel or terminate for convenience, or direct suspension of manufacture, except on mutually acceptable terms. c. STORAGE - Any item of the product(s) on which manufacture or shipment is delayed by causes within Buyer’s control, or by causes which affect Buyer’s ability to receive the product(s), may be placed in storage by Seller for Buyer’s account and risk. d. Delivery to Destination means delivery to the Solomon Gulch Hydro Plant, Valdez, Alaska in accordance with the delivery terms of this order. Seller is permitted partial deliveries. Seller shall select method of transportation and route. Voith Hydro A Voith and Siemens Company Solomon Gulch - Rev 02, 9/28/2010 - Terms and Conditions of Sale e. SPECIAL SHIPPING DEVICES - On shipments to a destination in the continental United States or Canada, Seller has the right to add to the invoice, as a separate item, the value of any special shipping device (oil barrel, reel, tarpaulin, cradle, crib and the like) used to contain or protect the product(s) invoiced, while in transit. Except as to oil barrels, full credit will be given on the return to Seller of the device in a reusable condition, CIP INCOTERMS 2000 destination. As to oil barrels, arrangement for return and credit must be made by Buyer with the refiner. f. Compliance with OSHA or similar federal, state, provincial, or local laws during any operation or use of the product(s) is the sole responsibility of Buyer. g. INTEREST - Buyer shall without notice pay interest at the rate of 2% per month (which is equivalent to 26.84% per annum, calculated annually) on any overdue payment and at the same rate on all other amounts required to be paid by Buyer hereunder which have been paid by Voith Hydro. Such interest is to be calculated and compounded monthly, not in advance and to accrue from the date from when such arrears were due and payable hereunder before and after maturity default and judgment until such arrears are paid in full. Payments of purchase price, and any other amounts due, are payable without set-off, abatement, deduction or counter-claim. h. Assignment may be made only with written consent of both parties. Article 8 -- Laws, Disputes and Venue The laws of the State of Alaska shall govern the validity, interpretation and enforcement of any contract of which these provisions are a part. The parties hereby exclude the application of the United Nations Convention on the International Sale of Goods to this contract. Any dispute arising under this contract which cannot be resolved by the negotiation of the parties shall be finally resolved by arbitration under the Rules of the American Arbitration Association by a single arbitrator appointed in accordance with those Rules. The proceedings shall be conducted in English and the venue for the proceeding shall be situated in Philadelphia or some other mutually agreeable forum. Any determination or award shall be set forth in writing and shall be final and binding on the parties. The prices of this contract are based upon laws in effect sixty (60) days prior to the effective date of this contract. Article 9 -- Contract This contract together with any amendments thereto which are accepted in writing by Voith Hydro constitute the entire agreement between Voith Hydro and Buyer pertaining to the purchase and installation of the product(s). No modification to this contract shall be binding upon a party hereto unless duly executed by a proper officer thereof in writing. No representation as to the product(s) or any other matter to Buyer shall in any way affect Buyer’s obligation to pay the purchase price or perform its obligations under this contract. Voith Hydro A Voith and Siemens Company Solomon Gulch - Rev 02, 9/28/2010 - Terms and Conditions of Sale Article 10 -- Not Used Article 11 -- Intellectual Property Seller retains all ownership of Intellectual Property on this contract. Seller provides a non- transferable non-exclusive license to Buyer to use, reproduce, or display the technical data on this contract. This license does not permit the Buyer to reverse engineer the technical data; nor to release, perform, display, disclose, or authorize the use of the technical data to others; nor to use the technical data to manufacture additional quantities of the items on this contract. Article 12 -- Damages For Lateness And Failure To Meet Capacity Guarantees 1. Delivery and Substantial Completion: It is agreed that should Delivery of the Runner be delayed beyond the 4th of October, 2011, including extensions thereof, additional cost may result to the Buyer. It is difficult to determine this exact cost. This being the case, it is agreed that an amount of $ 400.00 per day will be paid for each calendar day that delivery occurs later than the contract date, not as a penalty but in compensation for late delivery. It is further agreed that, if any late delivery of the runner does not impact the installation project schedule, the damage and liquidated damage may be waived at the Buyer’s sole discretion. 2. Performance Guarantees: (a) It is agreed that should the equipment not perform as guaranteed, a financial loss will be suffered by the Buyer. Since it is difficult to determine the exact impact, it is agreed that an amount equal to $ 100 per kW of capacity at the rated net head (see Guarantees) will be paid by the Seller to the Buyer as liquidated damages, and not as a penalty, for each kW below the guaranteed amount. (b) It is agreed that should the equipment not perform as guaranteed, a financial loss will be suffered by the Buyer. Since it is difficult to determine the exact impact, it is agreed that an amount equal to $ 1,500 per 0.1% of efficiency at the rated net head (see Guarantees,) will be paid by the Seller to the Buyer as liquidated damages, and not as a penalty, for each 0.1% below the guaranteed amount. Voith Hydro York, PA USA A Voith and Siemens Company 7 Project Plan and Subcontractors 7.1 Organization and Management .....................................................................7–2 7.1.1 Project Management .............................................................................. 7–2 7.1.2 Engineering............................................................................................ 7–3 7.1.3 Manufacturing ........................................................................................ 7–4 7.1.4 Site Technical Advisor ........................................................................... 7–4 7.2 Quality Plan...................................................................................................7–5 7.3 Health, Safety and Environmental Plan ........................................................7–5 7.4 Subcontracting Plan ......................................................................................7–6 7.5 Attachments ..................................................................................................7–7 Voith Hydro York, PA USA A Voith and Siemens Company 7.1 Organization and Management Voith is setting standards in paper technology, power transmission, energy technology and industrial services. Voith was founded in 1867 and today, with approximately 24000 employees, a turnover of 3.3 billion Euros and over 200 locations worldwide, is one of the largest privately owned companies in Europe. Voith Hydro is a Group Division of Voith with a workforce of 2250 employees and an order intake of 680 million Euros in the past business year. Voith Hydro is a worldwide leading company for hydropower equipment and services. One third of world’s hydropower energy is generated with Voith turbines and generators. Voith Hydro offers customers all the engineering and manufacturing capabilities required for modernization, both electrically and mechanically, such as high-voltage stator windings, field engineering and evaluation services, new or rebuilt bearings, thrust collars and runners, lube system components and retrofit, to name a few. This capability is available not only for the Voith Hydro installed hydro base, but also for competitor installed equipment, worldwide. 7.1.1 Project Management Bringing projects in on time and under budget is a mixture of art and science. However, there are basic principles of good management that must be applied to assure maximum results – even when some project activities do not go as planned. The Voith project management team brings unparalleled experience to a project. Comprised of cross-trained engineers, with experience in design engineering, manufacturing and field supervision, our project managers average over 22 years of experience in the hydroelectric industry. Voith is committed to further developing the skills of our project managers through a certified Project Management Institute (PMI) education program. Voith Hydro York, PA USA A Voith and Siemens Company 7.1.2 Engineering The Voith engineering group has both an Electrical design and a Mechanical design department. A wealth of design and manufacturing information is available to them, including all Westinghouse, Siemens-Allis and Allis-Chalmers generators produced in Canada and the USA. These records encompass an extensive history, including many industry design firsts. The Mechanical section is active in design reviews of existing equipment for purposes of specifications, for (a) replacement parts, (b) modifications to meet changing requirements, (c) uprating of the machine, and (d) life extension. In short, they are responsible for all work relating to mechanical considerations of these machines. Similarly, the Electrical group deals with electrical considerations pertaining to hydraulically driven machines as well as some smaller steam turbine generators. The Field Installation section provides the necessary people and skills for the complete installation of a machine or parts thereof including winding installations, commissioning and tests. Voith Hydro York, PA USA A Voith and Siemens Company 7.1.3 Manufacturing Headquartered in York, Voith Hydro’s United States operations are home to one of the world’s largest dedicated hydro turbine equipment manufacturing facilities. Voith Hydro is the only turbine manufacturer in the United States with a hydraulic laboratory. Our experienced engineers design all systems and equipment for hydro turbine installations and skilled craftsman manufacture the custom engineered equipment in the York manufacturing facility. The company takes great pride in its own people and customer references, as well as the ability to provide the highest quality, cost effective products and services to its customers. The Voith factory in York, PA has many large machine tools capable of precision machining of the even the most complicated hydro electric turbine and generator components. Some of the key Voith manufacturing capabilities are illustrated on the following pages. 7.1.4 Site Technical Advisor If Cooper Valley Electric Association chooses, Voith will have an on-site representative during the execution of the work. Our on-site managers are carefully selected and have a successful vocational history with proven job experience in the same function. All of the Voith site managers have good communication skills, both written and spoken, good self presentation and a vocation for leadership and foster a cooperative relationship with customer, supervisors, and all other workers on a daily basis. All of the Voith on-site representatives are well disciplined and have complete know-how in the use of specific tools such as, non-conformance reporting tools and registries, and project data management systems and tools such as access and retrieval of drawings through web based applications. Voith Hydro York, PA USA A Voith and Siemens Company 7.2 Quality Plan Voith is an ISO certified company. Attached please find the Voith Quality plan for Solomon Gulch Runner Manufacturing. 7.3 Health, Safety and Environmental Plan Voith has a strong emphasis on safety, both in our own factories and on our project sites. Attached please find the Voith standard Health and Safety Plan. Voith Hydro York, PA USA A Voith and Siemens Company 7.4 Subcontracting Plan Although the Voith factory in the USA is of the world’s largest dedicated hydro turbine equipment manufacturing facilities, some part of the work scope must none the less be subcontracted or outsourced. For this project, Voith plans the following sourcing and subcontracting plan. Item Proposed supplier or subcontractor Plate SST material G.O Carlson, PA Crown and Band SST casting material Bradken, Canada Voith Hydro York, PA USA A Voith and Siemens Company 7.5 Attachments  Voith ISO Certificate;  Voith Standard Health and Safety Plan;  Voith Quality Plan for Solomon Gulch Runner Manufacturing;