Applicable Assets | Type of Applicable Asset | Products | Minimum Throughput Commitment (on a MSCFD basis) | Tolling Fee | Tolling Fee Adjustment | PPI Adjustment Minimum/ Cap | Fee Adjustment Commencement Date | Assumed OPEX | Purchase Price | Accrued Turnaround Cost | Assumed Fuel Gas Cost | Initial Term (all times are Dallas, TX time) | Extension Term (all times are Dallas, TX time) |
El Dorado Assets | Hydrogen Generation Unit | Hydrogen1 | 5,948 MSCFD | $3.8121/ MSCF2 | PPI/HFC Merit Comp Adjustment3 Turnaround Surcharge4 Fuel Gas Surcharge5 | Subject to 1% Minimum/ 3% Cap3 | July 1, 2017 | __ | $37,159,081 | $2.3M4 | $136,1565 | From 12:01 a.m. on November 1, 2015 (the “Effective Time”) to 12:00 midnight on October 31, 2030 | The Applicable Refinery Owner shall have the option to extend the Applicable Term beyond the Initial Term for one additional five (5) year period beginning at 12:01 am on November 1, 2030 and ending at 12:00 midnight on October 31, 2035 on the same terms and conditions as in existence for the Initial Term. |
1. | The “Feedstock” is fungible natural gas to be supplied via pipeline. |
2. | The Tolling Fee shall never be less than $4.07 per MSCF of Feedstock, subject to a one-time potential reduction in the Tolling Fee for the adjustment in paragraph 4 below. |
3. | The Tolling Fee, as previously adjusted on a cumulative basis, shall be adjusted on July 1 of each calendar year, commencing July 1, 2017, by an amount equal to a percentage calculated as follows: (A) 0.75 x the change in the PPI as described below, plus (B) 0.25 x the annual HollyFrontier Merit Compensation Adjustment (positive or negative) for such calendar year. The change in the PPI is the upper change in the annual change rounded to four decimal places of the Producers Price Index-Commodities-Finished Goods, (PPI), et al. (“PPI”), produced by the U.S. Department of Labor, Bureaus of Labor Statistics. The series ID is WPUSOP3000– located at http://www.bls.gov/data/. The change in PPI for each year shall be calculated as follows: annual PPI index (most current year) less annual PPI index (most current year minus 1) divided by annual PPI index (most current year minus 1); provided that the change in PPI in any year shall not be less than one percent (1%) or more than three percent (3%). For the avoidance of doubt, if the change in PPI in any year is less than one percent (1%) it will be rounded up to one percent (1%) and if the change in PPI in any year is greater than three percent (3%) it will be rounded down to three percent (3%). If either index is no longer published, the Parties shall negotiate in good faith to agree on a new index (as applicable) that gives comparable protection against inflation or deflation, and the same method of adjustment for increases or decreases in the new index shall be used to calculate increases or decreases in the Tolling Fee. If the Parties are unable to agree on a new index, a new index |
(1) | if the change in PPI is 0% and the HFC Merit Compensation Adjustment is 3.5%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x 3.5%) = 1.625% |
(2) | if the change in PPI is 2% and the HFC Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 2%) + (0.25 x 2%) = 2% |
(3) | if the change in PPI is 5% and the HFC Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 3%) + (0.25 x 2%) = 2.75% |
(4) | if the change in PPI is 0% and the HFC Merit Compensation Adjustment is -2%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x (-2%)) = 0.25% |
4. | After the first turnaround on the Applicable Asset during the Applicable Term, HEP Operating will calculate its aggregate Turnaround Costs incurred in connection therewith. In the event such aggregate Turnaround Costs for the Applicable Asset exceeds the Accrued Turnaround Cost set forth above then (A) a turnaround surcharge (the “Turnaround Surcharge”) will be added to the Tolling Fee based on each MSCFD of Feedstock (using the Minimum Throughput Commitment) in order to allow HEP Operating to recover (i) such Turnaround Costs in excess of the Accrued Turnaround Cost plus (ii) a ten percent (10%) return on such excess (the aggregate amount specified in clauses (i) and (ii), the “Turnaround Payment”). Such Turnaround Surcharge shall be paid by the Applicable Refinery Owner to HEP Operating on each MSCFD of Feedstock processed through the Applicable Asset until the earlier to occur of (i) the expiration of the Applicable Term or (ii) the recovery by HEP Operating of the Turnaround Payment. In addition, the Tolling Fee will be adjusted by the amount necessary to recover the new estimated turnaround expense for the remainder of the Applicable Term (based on the Minimum Throughput Commitment). |
5. | If at the end of any calendar month during the Applicable Term the aggregate cost of gas incurred by HEP Operating in connection with the operation of the Applicable Assets exceeds $136,156 (the “Assumed Fuel Gas Cost”), the Applicable Refinery Owner shall promptly pay to HEP Operating an amount equal to the positive difference, if any, of (i) the aggregate cost of fuel gas incurred by HEP Operating in connection with the operation of the Applicable Assets during such calendar month less (ii) the Assumed Fuel Gas Cost. |