-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ugc0PMjJ4mMqhSGNiggMF+nhq+PlWO9gJ6SriidybGnnZI3ywrK4dZELR0mER0To 9Iao/HhBbRlZVD+u3PsZ0A== 0000898430-96-002171.txt : 19960522 0000898430-96-002171.hdr.sgml : 19960522 ACCESSION NUMBER: 0000898430-96-002171 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960521 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN ELECTRIC CO INC CENTRAL INDEX KEY: 0000046207 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 990040500 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-04955 FILM NUMBER: 96570487 BUSINESS ADDRESS: STREET 1: 900 RICHARDS ST CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 8085437771 MAIL ADDRESS: STREET 1: 900 RICHARDS STREET CITY: HONOLULU STATE: HI ZIP: 96813 FORMER COMPANY: FORMER CONFORMED NAME: HAWAIIAN ELECTRIC CO LTD DATE OF NAME CHANGE: 19670212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN ELECTRIC INDUSTRIES INC CENTRAL INDEX KEY: 0000354707 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 990208097 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-08503 FILM NUMBER: 96570488 BUSINESS ADDRESS: STREET 1: 900 RICHARDS ST CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 8085435662 MAIL ADDRESS: STREET 1: 900 RICHARDS STREET CITY: HONOLULU STATE: HI ZIP: 96813 10-K405/A 1 FORM 10-K405/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION REGISTRANT; STATE OF INCORPORATION; I.R.S. EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ----------------------------------- ------------------ 1-8503 HAWAIIAN ELECTRIC INDUSTRIES, INC. 99-0208097 (A Hawaii Corporation) 900 Richards Street Honolulu, Hawaii 96813 Telephone (808) 543-5662 1-4955 HAWAIIAN ELECTRIC COMPANY, INC. 99-0040500 (A Hawaii Corporation) 900 Richards Street Honolulu, Hawaii 96813 Telephone (808) 543-7771 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE REGISTRANT TITLE OF EACH CLASS ON WHICH REGISTERED ---------- ------------------- ---------------------- Hawaiian Electric Common Stock, Without New York Stock Exchange Industries, Inc. Par Value Pacific Stock Exchange Hawaiian Electric First Mortgage Bonds, New York Stock Exchange Company, Inc. Series S, 7 5/8% SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: REGISTRANT TITLE OF EACH CLASS ---------- ------------------- Hawaiian Electric Industries, Inc. .......... None Hawaiian Electric Company, Inc. ............. Cumulative Preferred Stock ================================================================================ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X] =============================================================================== PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS The following financial statements contained in HEI's 1995 Annual Report to Stockholders and HECO's 1995 Annual Report to Stockholder, portions of which are filed by HEI as Exhibit 13 and, portions of which are filed by HECO as Exhibit 13, respectively, are incorporated by reference in Part II, Item 8, of this Form 10-K:
1995 Annual Report to Stockholder(s) (Page/s) ---------------------------- HEI HECO - ------------------------------------------------------------------------------------------------ Independent Auditors' Report.................................. 37 31 Consolidated Statements of Income, Years ended December 31, 1995, 1994 and 1993............................ 38 11 Consolidated Statements of Retained Earnings, Years ended December 31, 1995, 1994 and 1993............................ 38 11 Consolidated Balance Sheets, December 31, 1995 and 1994....... 39 12 Consolidated Statements of Capitalization, December 31, 1995 and 1994.................................. na 13-14 Consolidated Statements of Cash Flows, Years ended December 31, 1995, 1994 and 1993............................ 40 15 Notes to Consolidated Financial Statements.................... 41-61 16-30 - ------------------------------------------------------------------------------------------------
(a)(2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedules for HEI and HECO are included in this Report on the pages indicated below:
Page/s in Form 10-K ---------------------------- HEI HECO - ------------------------------------------------------------------------------------------------ Independent Auditors' Report................................... 54 55 Schedule I Condensed Financial Information of Registrant, Hawaiian Electric Industries, Inc. (Parent Company) as of December 31, 1995 and 1994 and Years ended December 31, 1995, 1994 and 1993........................................... 56-58 na Schedule II Valuation and Qualifying Accounts, Years ended December 31, 1995, 1994 and 1993......... 59 59
Certain Schedules, other than those listed, are omitted because they are not required, or are not applicable, or the required information is shown in the consolidated financial statements or notes included in HEI's 1995 Annual Report to Stockholders and HECO's 1995 Annual Report to Stockholder, which financial statements are incorporated herein by reference. 52 (A)(3) EXHIBITS Exhibits for HEI and HECO and their subsidiaries are listed in the "Index to Exhibits" found on pages 60 through 66 of this Form 10-K. The exhibits listed for HEI and HECO are listed in the index under the headings "HEI" and "HECO," respectively, except that the exhibits listed under "HECO" are also considered exhibits for HEI. (B) REPORTS ON FORM 8-K HEI AND HECO: During the fourth quarter of 1995, HEI and HECO filed Current Reports, Forms 8-K, with the SEC dated December 11, 1995 and December 13, 1995. These reports contained information under Item 5, Other events, regarding HECO's receipt of a 1995 final rate order (Form 8-K dated December 11, 1995) and regarding an update of the HELCO power situation and discontinued operations (Form 8-K dated December 13, 1995). 53 [KPMG Peat Marwick letterhead] Independent Auditors' Report ---------------------------- The Board of Directors and Stockholders Hawaiian Electric Industries, Inc.: Under date of January 25, 1996, we reported on the consolidated balance sheets of Hawaiian Electric Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, retained earnings and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP Honolulu, Hawaii January 25, 1996 54 [KPMG Peat Marwick letterhead] Independent Auditors' Report ---------------------------- The Board of Directors and Stockholder Hawaiian Electric Company, Inc.: Under date of January 25, 1996, we reported on the consolidated balance sheets and consolidated statements of capitalization of Hawaiian Electric Company, Inc. (a wholly owned subsidiary of Hawaiian Electric Industries, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, retained earnings and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to stockholder. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in the accompanying index. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP Honolulu, Hawaii January 25, 1996 55 Hawaiian Electric Industries, Inc. SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT HAWAIIAN ELECTRIC INDUSTRIES, INC. (PARENT COMPANY) CONDENSED BALANCE SHEETS
December 31, ------------------------ (in thousands) 1995 1994 - ------------------------------------------------------------------------------ ASSETS Cash and equivalents................................. $ 673 $ 223 Advances to and notes receivable from subsidiaries... 40,576 27,696 Accounts receivable.................................. 2,404 2,565 Other investments.................................... 810 809 Property, plant and equipment, net................... 2,455 2,460 Other assets......................................... 2,537 5,857 Investment in wholly owned subsidiaries, at equity... 967,437 888,651 ------------------------ $1,016,892 $928,261 ======================== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable..................................... $ 7,152 $ 9,246 Advances from subsidiaries........................... -- 2,293 Commercial paper..................................... 45,393 12,750 Long-term debt....................................... 223,500 209,500 Deferred income taxes................................ 3,053 4,301 Unamortized tax credits.............................. 41 29 Other................................................ 8,150 8,053 ------------------------ 287,289 246,172 ------------------------ Stockholders' equity Common stock......................................... 585,387 546,254 Retained earnings.................................... 144,216 135,835 ------------------------ 729,603 682,089 ------------------------ $1,016,892 $928,261 ======================== Note to Balance Sheets - ---------------------- Long-term debt, consisted of the following: Promissory notes, 6.3% - 7.6%, due in various years through 2005.......................... $ 143,000 $113,000 Promissory notes, 8.2% - 9.9%, due in various years through 2011.......................... 45,500 61,500 Promissory note, variable rate (6.32% at December 31, 1995) due 1999............... 35,000 35,000 ------------------------ $ 223,500 $209,500 ========================
As of December 31, 1995, HEI guaranteed debt of its subsidiaries and affiliates amounting to $10 million. The aggregate payments of principal required on long-term debt subsequent to December 31, 1995 are $42 million in 1996, $51 million in 1997, $1 million in 1998, $41 million in 1999, $10 million in 2000 and $79 million thereafter. 56 Hawaiian Electric Industries, Inc. SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) HAWAIIAN ELECTRIC INDUSTRIES, INC. (PARENT COMPANY) CONDENSED STATEMENTS OF INCOME
Years ended December 31, ------------------------------- (in thousands) 1995 1994 1993 - -------------------------------------------------------------------------- REVENUES.................................. $ 2,923 $ 3,318 $ 3,353 Equity in income from continuing operations of subsidiaries............... 89,198 84,819 74,764 ------------------------------- 92,121 88,137 78,117 ------------------------------- EXPENSES: Operating, administrative and general..... 7,543 7,786 6,897 Taxes, other than income taxes............ 282 292 226 Depreciation and amortization of property, plant and equipment............ 491 587 569 ------------------------------- 8,316 8,665 7,692 ------------------------------- 83,805 79,472 70,425 Interest expense.......................... 17,922 15,195 18,355 ------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT................ 65,883 64,277 52,070 Income tax benefit........................ (11,610) (8,753) (9,614) ------------------------------- Income from continuing operations......... 77,493 73,030 61,684 Loss from discontinued operations, net of income tax benefit................ -- -- (13,025) ------------------------------- NET INCOME................................ $ 77,493 $73,030 $ 48,659 ===============================
57 Hawaiian Electric Industries, Inc. SCHEDULE I-- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED) HAWAIIAN ELECTRIC INDUSTRIES, INC. (PARENT COMPANY) CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, ----------------------------------- (in thousands) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations.................................. $ 77,493 $ 73,030 $ 61,684 Adjustments to reconcile income from continuing operations to net cash provided by operating activities Equity in income from continuing operations of subsidiaries...................................... (89,198) (84,819) (74,764) Common stock dividends received from subsidiaries............................................... 51,435 43,909 53,305 Depreciation and amortization of property, plant and equipment................................... 491 587 569 Other amortization............................................... 239 209 294 Deferred income taxes and tax credits, net....................... (1,236) 367 232 Changes in assets and liabilities Decrease (increase) in accounts receivable...................... 161 4,114 (6,211) Increase (decrease) in accounts payable......................... (2,094) 385 (16,506) Changes in other assets and liabilities......................... 1,880 (15,485) 34,733 ----------------------------------- 39,171 22,297 53,336 Cash flows from discontinued operations............................ -- 36 2,525 ----------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... 39,171 22,333 55,861 ----------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Net decrease (increase) in advances to and notes receivable from subsidiaries................................ (12,880) (16,141) 8,756 Capital expenditures............................................... (486) (177) (193) Additional investments in subsidiaries............................. (39,610) (25,510) (65,000) Other.............................................................. (2) -- 50 ----------------------------------- NET CASH USED IN INVESTING ACTIVITIES.............................. (52,978) (41,828) (56,387) ----------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in advances from subsidiaries with original maturities of three months or less........................................... (2,293) 2,293 (185) Repayment of other short-term borrowings........................... -- -- (36,000) Net increase in commercial paper................................... 32,643 12,750 -- Proceeds from issuance of long-term debt........................... 30,000 35,000 37,000 Repayment of long-term debt........................................ (16,000) (26,000) (22,500) Net proceeds from issuance of common stock......................... 19,322 13,602 88,658 Common stock dividends............................................. (49,415) (47,676) (42,012) Other.............................................................. -- (2,634) 1,949 ----------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................ 14,257 (12,665) 26,910 ----------------------------------- Net increase (decrease) in cash and equivalents................... 450 (32,160) 26,384 Cash and equivalents, beginning of year............................ 223 32,383 5,999 ----------------------------------- CASH AND EQUIVALENTS, END OF YEAR.................................. $ 673 $ 223 $ 32,383 ===================================
Supplemental disclosures of noncash activities: In 1995 and 1994, $1.3 million and $16.9 million, respectively, of HEI advances to HEIDI were converted to equity in a noncash transaction. Common stock dividends reinvested by stockholders in HEI common stock in noncash transactions amounted to $20 million in 1995, $18 million in 1994 and $17 million in 1993. 58 Hawaiian Electric Industries, Inc. and Hawaiian Electric Company, Inc. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 1995, 1994 and 1993
=================================================================================================================================== Col. A Col. B Col. C Col. D Col. E - ----------------------------------------------------------------------------------------------------------------------------------- Additions -------------------------------- Charged to Balance at costs and Balance at beginning of other Charged to end of (in thousands) period expenses accounts Deductions period - ----------------------------------------------------------------------------------------------------------------------------------- 1995 ---- Allowance for uncollectible accounts Hawaiian Electric Company, Inc. and subsidiaries....... $ 1,136 $ 2,492 $ 1,266 $ 3,793 $ 1,101 Other companies............... 280 400 -- 38 642 --------- --------- --------- --------- --------- $ 1,416 $ 2,892 $ 1,266(a) $ 3,831(b) $ 1,743 ========= ========= ========= ========= ========= Allowance for uncollectible interest (ASB)................ $ 1,101 $ 172 $ -- $ -- $ 1,273 ========= ========= ========= ========= ========= Allowance for losses for loans receivable (ASB).... $ 8,793 $ 4,887 $ 392(a) $ 1,156(b) $ 12,916 ========= ========= ========= ========= ========= 1994 ---- Allowance for uncollectible accounts Hawaiian Electric Company, Inc. and subsidiaries....... $ 1,357 $ 2,177 $ 674 $ 3,072 $ 1,136 Other companies............... 220 130 2 72 280 --------- --------- --------- --------- --------- $ 1,577 $ 2,307 $ 676(a) $ 3,144(b) $ 1,416 ========= ========= ========= ========= ========= Allowance for uncollectible interest (ASB)................ $ 341 $ 760 $ -- $ -- $ 1,101 ========= ========= ========= ========= ========= Allowance for losses for loans receivable (ASB)........ $ 5,314 $ 3,983 $ 67(a) $ 571(b) $ 8,793 ========= ========= ========= ========= ========= 1993 ---- Allowance for uncollectible accounts Hawaiian Electric Company, Inc. and subsidiaries...... $ 1,120 $ 1,521 $ 815 $ 2,099 $ 1,357 Other companies............... 172 155 1 108 220 --------- --------- --------- --------- --------- $ 1,292 $ 1,676 $ 816(a) $ 2,207(b) $ 1,577 ========= ========= ========= ========= ========= Allowance for uncollectible interest (ASB)................ $ 482 $ -- $ -- $ 141 $ 341 ========= ========= ========= ========= ========= Allowance for losses for loans receivable (ASB)........ $ 5,157 $ 779 $ 36(a) $ 658(b) $ 5,314 ========= ========= ========= ========= =========
(a) Primarily bad debts recovered. (b) Bad debts charged off. 59 INDEX TO EXHIBITS The exhibits designated by an asterisk (*) are filed herein. The exhibits not so designated are incorporated by reference to the indicated filing. A copy of any exhibit may be obtained upon written request for a $0.20 per page charge from the HEI Stock Transfer Division, P.O. Box 730, Honolulu, Hawaii 96808-0730.
EXHIBIT NO. DESCRIPTION - ----------- ----------- HEI: - ---- 3(i).1 HEI's Restated Articles of Incorporation (Exhibit 4(b) to Registration No. 33-7895). 3(i).2 Articles of Amendment of HEI filed June 30, 1990 (Exhibit 4(b) to Registration No. 33-40813). 3(ii) HEI's By-Laws (Exhibit 4(c) to Registration No. 33-21761). 4.1 Agreement to provide the SEC with instruments which define the rights of holders of certain long-term debt of HEI and its subsidiaries (Exhibit 4.1 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, File No. 1-8503). 4.2 Indenture, dated as of October 15, 1988, between HEI and Citibank, N.A., as Trustee (Exhibit 4 to Registration No. 33- 25216). 4.3 First Supplemental Indenture dated as of June 1, 1993 between HEI and Citibank, N.A., as Trustee, to Indenture dated as of October 15, 1988 between HEI and Citibank, N.A., as Trustee (Exhibit 4(a) to HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-8503). 4.4 Officers' Certificate dated as of November 9, 1988, pursuant to Sections 102 and 301 of the Indenture, dated as of October 15, 1988, between HEI and Citibank, N.A., as Trustee, establishing Medium-Term Notes, Series A (Exhibit 4.2 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-8503). 4.5 Pricing Supplements Nos. 1 through 11 to the Registration Statement on Form S-3 of HEI (Registration No. 33-25216) filed in connection with the sale of Medium-Term Notes, Series A (filed under Rule 424(b) in connection with Registration No. 33-25216). 4.6 Pricing Supplements Nos. 1 through 9 to the Registration Statement on Form S-3 of HEI (Registration No. 33-58820) filed in connection with the sale of Medium-Term Notes, Series B (Exhibit 4(b) to HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-8503). 4.7 Pricing Supplement No. 10 to Registration Statement on Form S-3 of HEI (Registration No. 33-58820) filed in connection with the sale of Medium-Term Notes, Series B (Exhibit 4.7 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-8503). 4.8 Pricing Supplement No. 11 to Registration Statement on Form S-3 of HEI (Registration No. 33-58820) filed on December 1, 1995 in connection with the sale of Medium-Term Notes, Series B (Exhibit 4.8 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-8503). 4.9 Pricing Supplement No. 12 to Registration Statement on Form S-3 of HEI (Registration No. 33-58820) filed on February 12, 1996 in connection with the sale of Medium-Term Notes, Series B (Exhibit 4.9 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-8503).
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EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.10 Purchase Agreement dated March 7, 1991 among HEI and the Purchasers named therein, together with the Notes issued to such Purchasers, each dated March 7, 1991, pursuant to the Purchase Agreement (Exhibit 4.5 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8503). 4.11 Composite conformed copy of the Note Purchase Agreement dated as of December 16, 1991 among HEI and the Purchasers named therein (Exhibit 4.6 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File No. 1-8503). 10.1 PUC Order Nos. 7070, 7153, 7203 and 7256 in Docket No. 4337, including copy of "Conditions for the Merger and Corporate Restructuring of Hawaiian Electric Company, Inc." dated September 23, 1982 (Exhibit 10 to Amendment No. 1 to Form U-1). 10.2 Regulatory Capital Maintenance/Dividend Agreement dated May 26, 1988, between HEI, HEIDI and the Federal Savings and Loan Insurance Corporation (by the Federal Home Loan Bank of Seattle) (Exhibit (28)-2 to HEI's Current Report on Form 8-K dated May 26, 1988, File No. 1-8503). 10.2(a) OTS letter regarding release from Part II.B. of the Regulatory Capital Maintenance/Dividend Agreement dated May 26, 1988 (Exhibit 10.3(a) to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, File No. 1-8503). 10.3 Executive Incentive Compensation Plan (Exhibit 10(a) to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, File No. 1-8503). 10.4 HEI Executive's Deferred Compensation Plan (Exhibit 10.5 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8503). 10.5 Retirement Benefit Agreement--Andrew T. F. Ing and HEI (Exhibit 10(b) to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, File No. 1-8503). 10.6 1987 Stock Option and Incentive Plan of HEI as amended and restated effective April 21, 1992 (Exhibit A to Proxy Statement of HEI, dated March 6, 1992, for the Annual Meeting of Stockholders, File No. 1-8503). 10.7 HEI Long-Term Incentive Plan (Exhibit 10.11 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-8503). 10.8 HEI Supplemental Executive Retirement Plan effective January 1, 1990 (Exhibit 10.9 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8503). 10.9 HEI Excess Benefit Plan (Exhibit 10.13 (Exhibit A) to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-8503). 10.10 Change-in-Control Agreement (Exhibit 10.14 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-8503). 10.11 Nonemployee Director Retirement Plan, effective as of October 1, 1989 (Exhibit 10.15 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-8503).
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EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.12 HEI 1990 Nonemployee Director Stock Plan (Exhibit 10(a) to HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, File No. 1-8503). 10.13 HEI Nonemployee Directors' Deferred Compensation Plan (Exhibit 10.14 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8503). 10.14 HEI and HECO Executives' Deferred Compensation Agreement. The agreement pertains to and is substantially identical for all the HEI and HECO executive officers (Exhibit 10.15 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File No. 1-8503). 10.15 Settlement Agreement and General Release made and entered into on February 10, 1994, by and between the Insurance Commissioner as Rehabilitator/Liquidator, HIG and its subsidiaries, the Hawaii Insurance Guaranty Association, HEI, HEIDI and others. (Exhibit 10.20 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-8503). *11 Computation of Earnings per Share of Common Stock. Filed herein as page 67. *12 Computation of Ratio of Earnings to Fixed Charges. Filed herein as pages 68 and 69. 13 Pages 25 to 62 of HEI's 1995 Annual Report to Stockholders (with the exception of the data incorporated by reference in Part I, Part II, Part III and Part IV, no other data appearing in the 1995 Annual Report to Stockholders is to be deemed filed as part of this Form 10-K Annual Report) (Exhibit 13 to HEI's Current Report on Form 8-K dated February 21, 1996, File No. 1-8503). *21 Subsidiaries of HEI. Filed herein as page 71. *23 Consent of Independent Auditors. Filed herein as page 73. 27.1 HEI and subsidiaries financial data schedule, December 31, 1995 and year ended December 31, 1995 (Exhibit 27.1 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-8503). HECO: - ----- 3(i).1 HECO's Certificate of Amendment of Articles of Incorporation (filed June 30, 1987) (Exhibit 3.1 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-4955). 3(i).2 Statement of Issuance of Shares of Preferred or Special Classes in Series for HECO Series R Preferred Stock filed December 15, 1989 (Exhibit 3.1(a) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4955). 3(i).3 Articles of Amendment to HECO's Amended Articles of Incorporation filed December 21, 1989 (Exhibit 3.1(b) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No 1-4955). 3(ii) HECO's By-Laws (Exhibit 3.2 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-4955). 4.1 Agreement to provide the SEC with instruments which define the rights of holders of certain long-term debt of HECO, HELCO and MECO (Exhibit 4 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-4955). 4.2 Indenture dated as of December 1, 1993 between HECO and The Bank of New York, as Trustee (Exhibit 4(a) to Registration No. 33- 51025).
62
EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.3 Indenture dated as of December 1, 1993 among MECO, HECO, as guarantor, and The Bank of New York, as Trustee (Exhibit 4(b) to Registration No. 33-51025). 4.4 Indenture dated as of December 1, 1993 among HELCO, HECO, as guarantor, and The Bank of New York, as Trustee (Exhibit 4(c) to Registration No. 33-51025). 4.5 Officers' Certificate dated as of December 22, 1993, pursuant to Sections 102 and 301 of the Indenture dated as of December 1, 1993 between HECO and The Bank of New York, as Trustee, establishing the $20,000,000 Notes, 5.15% Series Due 1996 (Exhibit 4.5 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-4955) 4.6 Officers' Certificate dated as of December 22, 1993, pursuant to Sections 102 and 301 of the Indenture dated as of December 1, 1993 between HECO and The Bank of New York, as Trustee, establishing the $30,000,000 Notes, 5.83% Series Due 1998 (Exhibit 4.6 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-4955). 4.7 Officers' Certificate dated as of December 22, 1993, pursuant to Sections 102 and 301 of the Indenture dated as of December 1, 1993 among MECO, HECO, as guarantor, and The Bank of New York, as Trustee, establishing the $10,000,000 Notes, 5.15% Series Due 1996 (Exhibit 4.7 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-4955). 4.8 Officers' Certificate dated as of December 22, 1993, pursuant to Sections 102 and 301 of the Indenture dated as of December 1, 1993 among HELCO, HECO, as guarantor, and The Bank of New York, as Trustee, establishing the $10,000,000 Notes, 4.85% Series Due 1995 (Exhibit 4.8 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-4955). 10.1 Power Purchase Agreement between Kalaeloa Partners, L.P., and HECO dated October 14, 1988 (Exhibit 10(a) to HECO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, File No. 1-4955). 10.1(a) Amendment No. 1 to Power Purchase Agreement between HECO and Kalaeloa Partners, L.P., dated June 15, 1989 (Exhibit 10(c) to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, File No. 1-4955). 10.1(b) Lease Agreement between Kalaeloa Partners, L.P., as Lessor, and HECO, as Lessee, dated February 27, 1989 (Exhibit 10(d) to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, File No. 1-4955). 10.1(c) Restated and Amended Amendment No. 2 to Power Purchase Agreement between HECO and Kalaeloa Partners, L.P., dated February 9, 1990 (Exhibit 10.2(c) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4955). 10.1(d) Agreement to Extend the "Cancellation Window" in the Kalaeloa Power Purchase Agreement dated June 21, 1990 (Exhibit 10(e) to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, File No. 1-4955). 10.1(e) Amendment No. 3 to Power Purchase Agreement between HECO and Kalaeloa Partners, L.P., dated December 10, 1991 (Exhibit 10.2(e) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File No. 1-4955).
63
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.2 Purchase Power Agreement between AES Barbers Point, Inc. and HECO, entered into on March 25, 1988 (Exhibit 10(a) to HECO's Quarterly Report on Form 10-Q for the quarter ended March 31, 1988, File No. 1-4955). 10.2(a) Agreement between HECO and AES Barbers Point, Inc., pursuant to letters dated May 10, 1988 and April 20, 1988 (Exhibit 10.4 to HECO's Annual Report on Form 10-K for fiscal year ended December 31, 1988, File No. 1-4955). 10.2(b) Amendment No. 1 to the Purchase Power Agreement between AES Barbers Point, Inc. and HECO (Exhibit 10 to HECO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989, File No. 1-4955). 10.2(c) HECO's Conditional Notice of Acceptance to AES Barbers Point, Inc. dated January 15, 1990 (Exhibit 10.3(c) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4955). 10.3 Amended and Restated Power Purchase Agreement between Hilo Coast Processing Company and HELCO dated March 24, 1995 (Exhibit 10 to HECO's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-4955). 10.4 Agreement between MECO and Hawaiian Commercial & Sugar Company pursuant to letters dated November 29, 1988 and November 1, 1988 (Exhibit 10.8 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-4955). 10.4(a) Amended and Restated Power Purchase Agreement by and between A&B- Hawaii, Inc., through its division, Hawaiian Commercial & Sugar Company, and MECO, dated November 30, 1989 (Exhibit 10(e) to HECO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, File No. 1-4955). 10.4(b) First Amendment to Amended and Restated Power Purchase Agreement by and between A&B-Hawaii, Inc., through its division, Hawaiian Commercial & Sugar Company, and MECO, dated November 1, 1990, amending the Amended and Restated Power Purchase Agreement dated November 30, 1989 (Exhibit 10(f) to HECO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, File No. 1- 4955). 10.5 Purchase Power Contract between HELCO and Thermal Power Company, dated March 24, 1986 (Exhibit 10(a) to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, File No. 1-4955). 10.5(a) Firm Capacity Amendment between HELCO and Puna Geothermal Venture (assignee of AMOR VIII, who is the assignee of Thermal Power Company), dated July 28, 1989, amending Purchase Power Contract between HELCO and Thermal Power Company, dated March 24, 1986 (Exhibit 10(b) to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, File No. 1-4955). 10.5(b) Performance Agreement and Fourth Amendment, dated February 12, 1996, to the Purchase Power Contract dated March 24, 1986 as Amended between HELCO and Puna Geothermal Venture. (Exhibit 10.5(b) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-4955). 10.6 Purchase Power Contract between HECO and the City and County of Honolulu dated March 10, 1986 (Exhibit 10.9 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, File No. 1-4955).
64
EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.6(a) Firm Capacity Amendment, dated April 8, 1991, to Purchase Power Contract, dated March 10, 1986, by and between HECO and the City & County of Honolulu (Exhibit 10 to HECO's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991, File No. 1-4955). 10.7 Purchase Power Contract between MECO and Zond Pacific, Inc., dated May 24, 1991 (Exhibit 10 to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991, File No. 1-4955). *10.8 Low Sulfur Fuel Oil Supply Contract by and between CUSA and HECO dated as of November 20, 1995. (Confidential treatment has been requested for portions of this Exhibit.) *10.9 Inter-Island Industrial Fuel Oil and Diesel Fuel Contract by and between CUSA and HECO, MECO, HELCO, HTB and YB dated as of November 20, 1995. (Confidential treatment has been requested for portions of this Exhibit.) 10.10 Facilities and Operating Contract by and between CUSA and HECO dated as of November 20, 1995. (Exhibit 10.10 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-4955). *10.11 Low Sulfur Fuel Oil Supply Contract between BHP and HECO dated December 5, 1995. (Confidential treatment has been requested for portions of this Exhibit.) *10.12 Inter-Island Industrial Fuel Oil and Diesel Fuel Oil Contract by and between BHP and HECO, MECO and HELCO dated December 5, 1995. (Confidential treatment has been requested for portions of this Exhibit.) 10.13 Low Sulfur Fuel Oil Sale/Purchase Contract between HECO and C. Itoh & Co. (America), Inc. dated June 7, 1990 (Exhibit 10(c) to HECO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990, File No. 1-4955). 10.14 Contract of private carriage by and between HITI and HELCO dated November 10, 1993 (Exhibit 10.13 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1- 4955). 10.14(a) Extension, dated December 18, 1995, of the contract of private carriage by and between HITI and HELCO dated November 10, 1993. (Exhibit 10.14(a) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-4955). 10.15 Contract of private carriage by and between HITI and MECO dated November 12, 1993 (Exhibit 10.14 to HECO's Annual Report on Form 10-K for the fiscal year ended December 1, 1993, File No. 1- 4955). 10.15(a) Extension, dated December 18, 1995, of the contract of private carriage by and between HITI and MECO dated November 12, 1993. (Exhibit 10.15(a) to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-4955). 10.16 HECO Nonemployee Directors' Deferred Compensation Plan (Exhibit 10.16 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, File No. 1-4955). 10.17 HEI and HECO Executives' Deferred Compensation Agreement. The agreement pertains to and is substantially identical for all the HEI and HECO executive officers (Exhibit 10.15 to HEI's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, File No. 1-8503). 11 Computation of Earnings Per Share of Common Stock. See note on page 2 of HECO's 1995 Annual Report to Stockholder (HECO Exhibit 13). *12 Computation of Ratio of Earnings to Fixed Charges. Filed herein as page 70.
65
EXHIBIT NO. DESCRIPTION - ----------- ----------- 13 Pages 2 to 31 and 33 of HECO's 1995 Annual Report to Stockholder (with the exception of the data incorporated by reference in Part I, Part II, Part III and Part IV, no other data appearing in the 1995 Annual Report to Stockholder is to be deemed filed as part of this Form 10-K Annual Report) (Exhibit 13 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-4955). *21 Subsidiaries of HECO. Filed herein as page 72. 27.2 HECO and subsidiaries financial data schedule, December 31, 1995 and year ended December 31, 1995 (Exhibit 27.2 to HECO's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 1-4955). *99 Reconciliation of electric utility operating income per HEI and HECO Consolidated Statements of Income. Filed herein as page 74.
66 HEI Exhibit 11 Hawaiian Electric Industries, Inc. COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK Years ended December 31, 1995, 1994, 1993, 1992 and 1991
(in thousands, except per share amounts) 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------- NET INCOME (LOSS) Continuing operations.................. $77,493 $73,030 $ 61,684 $ 61,715 $55,620 Discontinued operations................ -- -- (13,025) (73,297) (794) ------- ------- -------- -------- ------- $77,493 $73,030 $ 48,659 $(11,582) $54,826 ======= ======= ======== ======== ======= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.................... 29,187 28,137 25,938 24,275 22,882 ======= ======= ======== ======== ======= EARNINGS (LOSS) PER COMMON SHARE Continuing operations.................. $ 2.66 $ 2.60 $ 2.38 $ 2.54 $ 2.43 Discontinued operations................ -- -- (0.50) (3.02) (0.03) ------- ------- -------- -------- ------- $ 2.66 $ 2.60 $ 1.88 $ (0.48) $ 2.40 ======= ======= ======== ======== =======
Note: The dilutive effect of stock options is not material. 67 HEI Exhibit 12 (page 1 of 2) Hawaiian Electric Industries, Inc. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Years ended December 31, 1995, 1994, 1993, 1992 and 1991
1995 1994 1993 ------------------------ -------------------- ------------------- (dollars in thousands) (1) (2) (1) (2) (1) (2) --------------------------------------------------------------------------------------------------------- FIXED CHARGES Total interest charges The Company (3)................. $117,494 $206,790 $ 82,306 $158,815 $ 68,254 $145,905 Proportionate share of fifty-percent-owned persons... 867 867 539 539 564 564 Interest component of rentals.... 3,857 3,857 3,819 3,819 3,944 3,944 Pretax preferred stock dividend requirements of subsidiaries.... 11,433 11,433 11,899 11,899 11,018 11,018 -------- -------- -------- -------- -------- -------- TOTAL FIXED CHARGES.............. $133,651 $222,947 $ 98,563 $175,072 $ 83,780 $161,431 ======== ======== ======== ======== ======== ======== EARNINGS Pretax income from continuing operations...................... $133,233 $133,233 $126,049 $126,049 $108,770 $108,770 Fixed charges, as shown.......... 133,651 222,947 98,563 175,072 83,780 161,431 Interest capitalized The Company..................... (6,337) (6,337) (4,924) (4,924) (3,881) (3,881) Proportionate share of fifty-percent-owned persons.... (867) (867) (539) (539) (408) (408) -------- -------- -------- -------- -------- -------- EARNINGS AVAILABLE FOR FIXED CHARGES......................... $259,680 $348,976 $219,149 $295,658 $188,261 $265,912 ======== ======== ======== ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES 1.94 1.57 2.22 1.69 2.25 1.65 ======== ======== ======== ======== ======== ========
(1) Excluding interest on ASB deposits. (2) Including interest on ASB deposits. (3) Total interest charges exclude interest on nonrecourse debt from leveraged leases which is not included in interest expense in HEI's consolidated statements of income. 68 HEI Exhibit 12 (page 2 of 2) Hawaiian Electric Industries, Inc. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Years ended December 31, 1995, 1994, 1993, 1992 and 1991--Continued
1992 1991 -------------------- ------------------------ (dollars in thousands) (1) (2) (1) (2) -------------------------------------------------------------------------------------- FIXED CHARGES Total interest charges The Company (3)................... $ 67,559 $161,756 $ 69,957 $168,691 Proportionate share of fifty-percent-owned persons..... 1,051 1,051 1,875 1,875 Interest component of rentals...... 3,254 3,254 2,231 2,231 Pretax preferred stock dividend requirements of subsidiaries...... 9,606 9,606 10,449 10,449 -------- -------- -------- -------- TOTAL FIXED CHARGES................ $ 81,470 $175,667 $ 84,512 $183,246 ======== ======== ======== ======== EARNINGS Pretax income from continuing operations........................ $ 91,244 $ 91,244 $ 87,953 $ 87,953 Undistributed earnings from less than fifty-percent-owned persons.. (244) (244) (278) (278) Fixed charges, as shown............ 81,470 175,667 84,512 183,246 Interest capitalized The Company....................... (2,104) (2,104) (1,945) (1,945) Proportionate share of fifty-percent-owned persons...... (803) (803) (1,875) (1,875) -------- -------- -------- -------- EARNINGS AVAILABLE FOR FIXED CHARGES........................... $169,563 $263,760 $168,367 $267,101 ======== ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES. 2.08 1.50 1.99 1.46 ======== ======== ======== ========
(1) Excluding interest on ASB deposits. (2) Including interest on ASB deposits. (3) Total interest charges exclude interest on nonrecourse debt from leveraged leases which is not included in interest expense in HEI's consolidated statements of income. 69 HECO Exhibit 12 Hawaiian Electric Company, Inc. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Years ended December 31, 1995, 1994, 1993, 1992 and 1991
(dollars in thousands) 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------- FIXED CHARGES Total interest charges................. $ 44,377 $ 37,340 $ 35,287 $ 33,011 $ 33,248 Interest component of rentals.......... 672 808 970 1,070 1,130 Pretax preferred stock dividend requirements of subsidiaries......... 4,494 4,651 3,425 3,117 3,409 ----------------------------------------------------------- TOTAL FIXED CHARGES.................... $ 49,543 $ 42,799 $ 39,682 $ 37,198 $ 37,787 =========================================================== EARNINGS Income before preferred stock dividends of HECO.................... $ 77,023 $ 65,961 $ 56,126 $ 53,678 $ 46,210 Fixed charges, as shown................ 49,543 42,799 39,682 37,198 37,787 Income taxes (see note below).......... 50,198 43,588 36,897 23,843 23,816 Allowance for borrowed funds used during construction.................. (5,112) (4,043) (3,869) (2,095) (1,307) ----------------------------------------------------------- EARNINGS AVAILABLE FOR FIXED CHARGES... $171,652 $148,305 $128,836 $112,624 $106,506 =========================================================== RATIO OF EARNINGS TO FIXED CHARGES..... 3.46 3.47 3.25 3.03 2.82 =========================================================== NOTE: Income taxes is comprised of the following Income tax expense relating to operating income for regulatory purposes.......................... $ 50,719 $ 43,820 $ 37,007 $ 26,254 $ 24,137 Income tax benefit relating to nonoperating loss................. (521) (232) (110) (2,411) (321) ----------------------------------------------------------- $ 50,198 $ 43,588 $ 36,897 $ 23,843 $ 23,816 ===========================================================
70 HEI Exhibit 21 Hawaiian Electric Industries, Inc. SUBSIDIARIES OF THE REGISTRANT The following is a list of all subsidiary corporations of the registrant as of March 19, 1996:
Name Place of incorporation - -------------------------------------------------------------------------------- Hawaiian Electric Company, Inc., including subsidiaries Maui Electric Company, Limited and Hawaii Electric Light Company, Inc. ......................... State of Hawaii HEI Investment Corp. ......................... State of Hawaii Lalamilo Ventures, Inc. ...................... State of Hawaii Malama Pacific Corp., including subsidiaries Malama Waterfront Corp., Malama Property Investment Corp., Malama Development Corp., Malama Realty Corp., Malama Elua Corp., TMG Service Corp., Malama Hoaloha Corp., Malama Mohala Corp. and Baldwin*Malama (a limited partnership in which Malama Development Corp. is the sole general partner)..................................... State of Hawaii Hawaiian Tug & Barge Corp., including subsidiary Young Brothers, Limited...................................... State of Hawaii HEI Diversified, Inc., including subsidiary American Savings Bank, F.S.B. and its subsidiaries, American State of Hawaii (except Savings Investment Services Corp., ASB American Savings Bank, Service Corporation, AdCommunications, Inc. F.S.B., which is federally and Associated Mortgage, Inc. ............... chartered) Pacific Energy Conservation Services, Inc. ... State of Hawaii HEI Power Corp. .............................. State of Hawaii
71 HECO Exhibit 21 Hawaiian Electric Company, Inc. SUBSIDIARIES OF THE REGISTRANT The following is a list of all subsidiary corporations of the registrant as of March 19, 1996:
Name Place of incorporation - -------------------------------------------------------------------------------- Maui Electric Company, Limited................ State of Hawaii Hawaii Electric Light Company, Inc. .......... State of Hawaii
72 [KPMG Peat Marwick letterhead] HEI Exhibit 23 The Board of Directors Hawaiian Electric Industries, Inc.: We consent to incorporation by reference in Registration Statement Nos. 33-56561 and 33-58820 on Form S-3 and in Registration Statement Nos. 33-65234 and 33- 52911 on Form S-8 of Hawaiian Electric Industries, Inc. of our report dated January 25, 1996, relating to the consolidated balance sheets of Hawaiian Electric Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, retained earnings and cash flows for each of the years in the three-year period ended December 31, 1995, which report is incorporated by reference in the 1995 annual report on Form 10-K of Hawaiian Electric Industries, Inc. We also consent to incorporation by reference of our report dated January 25, 1996 relating to the financial statement schedules of Hawaiian Electric Industries, Inc. in the aforementioned 1995 annual report on Form 10-K, which report is included in said Form 10-K. /s/ KPMG Peat Marwick LLP Honolulu, Hawaii March 19, 1996 73 HECO Exhibit 99 Hawaiian Electric Company, Inc. RECONCILIATION OF ELECTRIC UTILITY OPERATING INCOME PER HEI AND HECO CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, ----------------------------------- (in thousands) 1995 1994 1993 - --------------------------------------------------------------------------- [S] [C] [C] [C] Operating income from regulated and nonregulated activities before income taxes (per HEI Consolidated Statements of Income).... $159,043 $136,628 $119,565 Deduct: Income taxes on regulated activities.. (50,719) (43,820) (37,007) Revenues from nonregulated activities. (6,732) (6,411) (5,100) Add: Expenses from nonregulated activities. 1,130 915 627 ----------------------------------- Operating income from regulated activities after income taxes (per HECO Consolidated Statements of Income)............................ $102,722 $ 87,312 $ 78,085 =================================== 74 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signatures of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof. HAWAIIAN ELECTRIC INDUSTRIES, INC. HAWAIIAN ELECTRIC COMPANY, INC. (Registrant) (Registrant) By /s/ Curtis Y. Harada By /s/ Paul Oyer ---------------------- --------------------- Curtis Y. Harada Paul A. Oyer Financial Vice President, Controller of HEI Treasurer and Director of HECO (Principal Accounting Officer (Principal Financial Officer of HEI) of HECO) Date: April 30, 1996 Date: April 30, 1996 75 EX-10.8 2 LOW SULPHER FUEL OIL SUPPLY CONTRACT HECO Exhibit 10.8 LOW SULFUR FUEL OIL SUPPLY CONTRACT by and between CHEVRON U.S.A. INC. and HAWAIIAN ELECTRIC COMPANY, INC. * * * * * * * * * LOW SULFUR FUEL OIL SUPPLY CONTRACT BY AND BETWEEN CHEVRON U.S.A. INC. AND HAWAIIAN ELECTRIC COMPANY, INC. TABLE OF CONTENTS ARTICLE 1: Definitions.................................... 1 ARTICLE 2: Term of Contract............................... 1 ARTICLE 3: Purchase Volumes and Delivery Rates............ 1 Section 3.1: Purchase Volumes..................................... 1 Section 3.2: Delivery Rates....................................... 1 ARTICLE 4: Quality........................................ 2 ARTICLE 5: Price.......................................... 3 Section 5.1: Price Per Physical Barrel............................ 3 Section 5.2: Flexibility in Supply Source......................... 4 Section 5.3: Fees, Taxes, Assessments, Levies, etc................ 4 Section 5.4: Rounding of Index Averages........................... 4 ARTICLE 6: [INTENTIONALLY OMITTED]........................ 4 ARTICLE 7: Pipeline Delivery.............................. 5 Section 7.1: LSFO Delivery........................................ 5 Section 7.2: Determination of Quality............................. 5 Section 7.3: Measurement of Quantity.............................. 5 Section 7.4: Disputes of Quality and Quantity..................... 5 ARTICLE 8: Marine Delivery................................ 6 Section 8.1: Notification of Use of HECO's Barbers Point Tankage.. 6 Section 8.2: Delivery of Marine Cargo............................. 6 Section 8.3: Determination of Quantity and Quality................ 6 Section 8.4: Delayed Invoicing.................................... 6 ARTICLE 9: Line Displacement Stock and Blend Stock........ 6 Section 9.1: Line Displacement Stock.............................. 6 Section 9.2: Blend Stock.......................................... 6 ARTICLE 10: Invoicing and Payment.......................... 7 Section 10.1: Invoices............................................ 7 Section 10.2: Payments............................................ 7 Section 10.3: Method of Payment................................... 7 ARTICLE 11: Contingencies.................................. 7 Section 11.1: Definition of Contingency........................... 7 Section 11.2: Obligations to Sell................................. 8 Section 11.3: Obligations to Purchase............................. 8 Section 11.4: Price Effectiveness................................. 8 Section 11.5: Combustion Specifications........................... 8 Section 11.6: Effective Date...................................... 9 Section 11.7: Refining and/or Delivery Operations Ownership....... 9 ARTICLE 12: Effect of Suspension or Reduction.............. 9 Section 12.1: Notice of Suspension or Reduction................... 9
Section 12.2: Option to Terminate................................. 9 Section 12.3: Prompt Notices...................................... 9 Section 12.4: U.S. Currency....................................... 9 Section 12.5: Substitute Suppliers................................ 9 ARTICLE 13: Waiver and Non-Assignability........................... 10 Section 13.1: Waiver.............................................. 10 Section 13.2: Non-Assignability................................... 10 Section 13.3: Definitions......................................... 10 ARTICLE 14: Default................................................ 10 ARTICLE 15: Conflict of Interest................................... 10 ARTICLE 16: Applicable Law......................................... 11 ARTICLE 17: Public Utility Commission Approval..................... 11 ARTICLE 18: Miscellaneous.......................................... 11 Section 18.1: Headings............................................ 11 Section 18.2: Entire Agreement.................................... 11 Section 18.3: Contract is Not an Asset............................ 11 Section 18.4: Notices............................................. 11 Section 18.5: Unenforceable Terms................................. 11 Section 18.6: Successors and Assigns.............................. 11 Section 18.7: Termination of Prior Agreement...................... 12
ADDENDUM No. 1: Sample Price Calculation ADDENDUM No. 2: Quality Adjustments ADDENDUM No. 3: Recovery of Worldscale Fixed Differential For Oil Pollution Liability Insurance LOW SULFUR FUEL OIL SUPPLY CONTRACT THIS CONTRACT dated as of November 20, 1995, by and between CHEVRON U.S.A. INC., a Pennsylvania corporation, ("Chevron") and HAWAIIAN ELECTRIC COMPANY, INC., a Hawaii corporation, ("HECO"), with the purpose for the sale and purchase of Low Sulfur Fuel Oil ("LSFO") and other petroleum products. WHEREAS, Chevron is a supplier of petroleum fuels with terminal and refinery facilities in Hawaii. WHEREAS, HECO is a utility engaged in the generation and sale of electricity, with terminal facilities, in Hawaii. NOW THEREFORE, the parties agree as follows: ARTICLE 1: Definitions Except where otherwise indicated, the following definitions shall apply throughout this contract: 1. "LSFO" means Chevron Low Sulfur Fuel Oil No. 6 per Section 4.1. 2. "physical barrel" means 42 American bulk gallons at 60 degrees F. 3. "year" means a calendar year. ARTICLE 2: Term of Contract The term of this Contract shall be from January 1, 1996 (the "Effective Date"), through December 31, 1997, and shall continue thereafter for additional 12-month periods (each 12-month period being an "Extension") beginning each successive January 1, unless HECO or Chevron gives written notice of termination at least 120 days before the beginning of an Extension. ARTICLE 3: Purchase Volumes and Delivery Rates Section 3.1: Purchase Volumes Chevron shall sell and deliver to HECO and HECO shall purchase and receive from Chevron, LSFO at a reasonably uniform rate during each month. This monthly volume shall equate to an average daily rate in physical barrels per day which is no less than the Tier 1 minimums nor more than the Tier 2 maximums as set out below:
Tier 1 Tier 2 ------ ------ Year Minimum Maximum Minimum Maximum - ---- ------- ------- ------- ------- 1996 1997 Extension
Pursuant to Section 5.1, the Tier 1 maximum, when multiplied by the number of days in each month, designates the maximum purchase volume during that month which shall occur at Tier 1 pricing. The minimum annual volume of LSFO to be delivered is . The maximum ---------- annual volume of LSFO to be delivered is . In the event of an ---------- extension which falls during a leap year (1996), minimum and maximum LSFO volumes are and respectively. ---------- ---------- Section 3.2: Delivery Rates (a) HECO shall advise Chevron of its nominated rate of delivery for each month seventy-five days prior to the beginning of that month. (b) Except to the extent that marine deliveries which are required by Chevron to meet the delivery requirement are prevented by the unavailability of HECO's Barbers Point tankage, beginning the 5th day of each month, at all times Page 1 during that month, Chevron's actual LSFO delivery rate, expressed in barrels per day, shall not fall below 85% of HECO's nominated volume to be delivered in the month of nomination as computed on a month-to- date ratable basis, found by multiplying the month of nomination's date by the nominated rate of delivery for that month, without the express prior agreement of HECO. (c) Chevron and HECO shall make best efforts to coordinate their separate LSFO marine and pipeline deliveries into and out of HECO's storage tanks at Barbers Point to minimize operational difficulties and costs, including but not limited to tankage availability and vessel demurrage. (d) Unless waived by HECO, Chevron's marine deliveries of LSFO shall be limited to 250,000 barrels, during: (i) any ten day period, and (ii) any calendar month, except during months when Chevron's LSFO production facilities at Barbers Point are not operating. (e) Unless waived by HECO, Chevron's actual LSFO deliveries during any month shall be limited to 200,000 barrels above HECO's nomination for that month. (f) Unless waived by HECO, Chevron shall not deliver LSFO from its Barbers Point Refinery into HECO's storage tanks at Barbers Point during the fifteen (l5) days immediately preceding the scheduled delivery of a marine cargo from a vessel chartered by HECO or HECO's representative pursuant to the Facilities and Operating Contract between Chevron and HECO, as long as Chevron's LSFO can be delivered directly to HECO's storage tanks at Kahe, Waiau or Iwilei. ARTICLE 4: Quality The LSFO delivered hereunder shall comply with the following specifications:
LSFO ASTM Test Specification Specification Method Units Limits - ------------- --------- ----- ------------- API Gravity D4052 Deg 12 min 24 max Sulfur D4292 Wt % 0.50 max Flash Point (1) D93 Deg F 150 min Pour Point D97 Deg F 125 max Viscosity D445 SSU at l00 min 210 Deg F 450 max Ash D482 Wt % 0.05 max Gross Heating D240 MM BTU/Bbl 6.000 min Value Nitrogen D4629 Wt % 0.50 Water & Sediment D1796 Wt % 0.50
Note: (1) Flash point shall be at least 50 degress F above the pour point or 150 degrees F, whichever is greater. Page 2 CHEVRON MAKES NO WARRANTY, EXPRESSED OR IMPLIED IN FACT OR BY LAW, AS TO THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE CONCERNING THE LSFO OTHER THAN IT SHALL COMPLY WITH THE QUALITY HEREIN SPECIFIED, AND THAT IT SHALL BE SUITABLE FOR USE AS A BOILER FUEL. ARTICLE 5: Price Section 5.1: Price Per Physical Barrel For the monthly cumulative volume which is at or below the Tier 1 maximum limit of Section 3.1 multiplied by the number of days in the month, the price of LSFO delivered to meet the nominated commitment of a calendar month shall be determined as follows: - ------------------------ For the monthly cumulative volume which exceeds the Tier 1 maximum limit of Section 3.1 multiplied by the number of days in the month, the price of LSFO delivered to meet the nominated commitment of a calendar month shall be determined as follows: - ------------------------ where: P1= Billing price per physical barrel of LSFO delivered to meet that portion of the nominated commitment of a calendar month that falls at or below the Tier 1 maximum regardless of the actual delivery date, in U.S. dollars. P2= Billing price per physical barrel of LSFO delivered to meet that portion of the nominated commitment of a calendar month that exceeds the Tier 1 maximum, regardless of the actual delivery date, in U.S. dollars. LSWR = a market index for low sulfur fuel oil, defined as the average of the Friday high and low prices per barrel published by Platt's Oilgram Price Report for 0.3% Sulfur Low Sulfur Waxy Resid Mixed/Cracked sold in Singapore, during the period beginning the 21st of the second month immediately preceding the nominated month of delivery and ending the 20th day of the month immediately preceding the nominated month of delivery, plus the government fees pursuant to Section 5.3 except the Hawaii General Excise Tax and any other taxes imposed on the sale of LSFO. If Platt's Oilgram does not publish a high and low price for a particular Friday during the relevant period, the high and low prices for the closest preceding day for which a Report is published will be used. FREIGHT = a market index for freight, defined for each calendar quarter as the multiplication product of (a) and (b) below, plus the fixed rate differential described in (c) below: (a) the simple average of the Average Freight Rate Assessment ("AFRA") Worldscale Points for the average of Large Range 1 vessels, as published monthly by London Tanker Brokers Panel Limited for the three monthly publications in the calendar quarter immediately preceding the calendar quarter of the nominated month of delivery. Monthly publications show rates of vessel voyages which occurred during the last half of the second month immediately preceding that publication and the first half of the month immediately preceding that publication, and (b) the Worldscale 100 rate for voyages between Singapore and Barbers Point, Hawaii, applicable to the year of the quarter defined in (a) above; expressed in New Worldscale rates, as published by Worldscale Associates (London Limited) in its New Worldwide Nominal Freight Scale (Worldscale); plus (c) There shall be added to the multiplication product of (a) and (b) above, a fixed rate differential, if and as provided by Worldscale, with respect to the Additional Insurance Premiums for Basic ($500 Million) and Excess ($200 Million) coverage of Oil Pollution Liability Insurance on vessels carrying persistent oils to and from the U.S.A., consistent with a typical vessel as derived in Addendum No. 3 attached to this Contract. The FREIGHT rate will be expressed in U.S. dollars per barrel, using a conversion factor of 6.75 barrels per metric ton. Page 3 LA BUNKER = a market index for industrial fuel oil, defined as the simple average of the Tuesday high and low prices of the Los Angeles Bunker C fuel as reported by the Platt's Bunkerwire during the period beginning the 21st of the second month immediately preceding the nominated month of delivery and ending the 20th day of the month immediately preceding the nominated month of delivery. If Platt's Bunkerwire does not publish a high and low price for a particular Tuesday during the relevant period, the high and low prices for the closest preceding day for which a Bunkerwire is published will be used. The rate will be expressed in U.S. dollars per barrel, using a conversion factor of 6.368 barrels per metric ton. BTU = the actual gross heat content of each LSFO delivery, pursuant to Section 7.2, expressed in million BTU's per barrel and rounded to three decimal places. T = the Hawaii General Excise Tax, the Hawaii Environmental Response Tax, and any other tax imposed on the sale of LSFO. The price for LSFO delivered shall be based on the price for the month of delivery originally nominated by HECO, regardless of the month in which the quantity of LSFO nominated is actually delivered. Addendum No. 1 hereto contains an illustrative schedule of prices calculated pursuant to this Section 5.1, including a copy of the monthly London Tanker Brokers Panel Limited publication. Section 5.2: Flexibility in Supply Source To provide the flexibility needed by Chevron to meet its obligations to HECO, the source and type of crude oil and other raw material, the place of manufacture, and the manufacturer of LSFO for delivery to HECO hereunder shall be determined solely by Chevron. The price of all LSFO delivered by Chevron to HECO hereunder shall be determined in accordance with the terms of this Contract regardless of where, how and by whom such LSFO is manufactured and regardless of the type or source of crude oil or other raw materials used in its manufacture. Section 5.3: Fees, Taxes, Assessments, Levies, etc. In addition to all other amounts payable by HECO under this Contract, HECO shall reimburse Chevron for all taxes, assessments, levies and imposts of whatsoever kind or nature imposed on Chevron by any governmental or quasi-governmental body, including without limitation the Hawaii General Excise Tax, the Hawaii Environmental Response Tax, the Customs User Fee, the Federal Superfund Act and oil spill liability fees, with respect to the sale of product under this Contract or the receipt by Chevron of payments hereunder. Notwithstanding the foregoing, HECO shall not be required to reimburse Chevron for any tax measured by or based on the net income of Chevron or for real property taxes. To avoid duplication of recovery, HECO shall not be required to reimburse Chevron under this Section 5.3 for any item expressly mentioned by Platt's Oilgram Price Report or Bunkerwire, or confirmed by Platt's in writing upon inquiry by either Chevron or HECO, as being included in a price used to compute the billing price under Section 5.1. As of the effective date of this Contract, the governmental fees, etc. which are currently in effect are the Hawaii General Excise Tax (4.167%), the Superfund Petroleum fee ($0.097 per barrel), the Customs User Fee ($0.002 per barrel), and the Hawaii Environmental Response Tax ($0.05 per barrel). The Hawaii General Excise Tax and the Hawaii Environmental Response Tax will be added to the invoiced price. The Superfund Petroleum fee and the Customs User fee will be added to the LSWR Index of Section 5.1, since Platt's is not currently including them in their published prices; these fees will not be added to the LA Bunker index since Platt's is currently including them in their published prices. Section 5.4: Rounding of Index Averages All prices, index averages, adjustments thereto and other sums payable hereunder shall be stated in the nearest thousandth of a dollar. ARTICLE 6 [INTENTIONALLY OMITTED] Page 4 ARTICLE 7: Pipeline Delivery Section 7:1: LSFO Delivery Delivery of LSFO by pipeline shall be by one of the following methods. (a) Chevron may deliver LSFO by pipeline from Chevron's Refinery into HECO's storage tanks at Barbers Point. Title and risk of loss of LSFO so delivered shall pass to HECO at the discharge flanges of Chevron's main pipeline feeder/blender pumps, P2027 and P2027A, where Chevron's piping systems a connect to HECO's LSFO delivery line leading to its storage tanks. (b) Pursuant to the Facilities and Operating Contract between Chevron and HECO, Chevron may deliver LSFO by pipeline from Barbers Point (either Chevron's refinery or HECO's storage tanks) into HECO's storage tanks at Kahe, Waiau and Iwilei. Title and risk of loss of LSFO delivered from Chevron's refinery shall pass to HECO at the discharge flanges of the main pipeline booster pumps at Chevron's refinery. Title and risk of loss of the LSFO delivered from HECO's storage tanks shall remain with HECO at all times. HECO agrees to pay a per barrel pipeline pumping fee for the LSFO delivered under Section 7.1 (b). The pipeline pumping fees and the measurement of the pumped quantities are described in the Facilities and Operating Contract between Chevron and HECO. Section 7.2: Determination of Quality The quality of LSFO delivered to HECO shall be determined on the basis of samples drawn by Chevron in such a manner as to be representative of each individual delivery. Samples shall be drawn from Chevron's tanks prior to delivery to HECO and shall be divided into four parts. Separate parts shall be provided to both HECO and Chevron to determine quality. The remaining parts shall be sealed and retained separately by Chevron and HECO. The official heat content determination shall be based upon an average of Chevron's and HECO's test results, provided that such results fall within the ASTM reproducibility standard (currently 50,000 BTU per barrel) for Test D-240. Chevron and HECO will make best efforts to evaluate heat content and exchange results within 3 working days. In the event of an unresolvable difference between HECO and Chevron, HECO's sealed part shall be provided to an independent laboratory for an official determination, which shall be final. In cases of disagreement or excessive delays in HECO's determination of heat content, Chevron shall have the right to invoice the sale using a provisional heat content of 6.2 MM BTU per barrel, with any required adjustments made after final agreement is reached. Chevron and HECO shall share equally the cost of independent tests and determinations. Section 7.3: Measurement of Quantity Quantities of LSFO and line displacement stock delivered hereunder shall be determined at the time of delivery by gauging Chevron's tanks before and after pumping. Measurements shall be taken by Chevron or Chevron's agent and witnessed by HECO or HECO's agent. However, at HECO's option, measurements may be taken by a mutually agreed upon independent inspector at both Chevron's refinery and HECO's receiving facilities. If a mutually agreed upon independent inspector is used, Chevron and HECO shall share equally the cost of such independent inspections. Volumes delivered hereunder shall be converted to 60 degrees F, using the latest revision of ASTM Table 6. Section 7.4: Disputes of Quality and Quantity If Chevron or HECO has reason to believe that the quality or quantity of product stated for a particular delivery per Sections 7.2 or 7.3 is incorrect, that party shall within sixty days of the delivery date, present the other party with documentation supporting such determination and the parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quality and quantity, if justified, for the deliveries in question. Page 5 ARTICLE 8: Marine Delivery Section 8.1: Notification of Use of HECO's Barbers Point Tankage Chevron shall provide HECO at least sixty days advanced notice of its planned use of a specified volume of no more than 300,000 barrels of HECO's storage capacity at Barbers Point and HECO shall set aside the requested storage capacity for the purpose of accepting Chevron's marine delivery. Chevron shall then provide HECO with weekly updates on the anticipated arrival date of the marine cargo. If Chevron is unable to provide sixty days advance notice, HECO will make all commercially reasonable efforts to provide Chevron with up to 300,000 barrels of storage capacity at Barbers Point. Section 8.2: Delivery of Marine Cargo Chevron may deliver the volume of LSFO specified in Section 8.1 from Chevron's vessel directly into HECO's storage tanks at Barbers Point. Chevron shall not deliver more than the specified volume without prior written approval from HECO. Chevron may not deliver LSFO from Chevron's vessels directly into HECO's storage tanks at Kahe, at Waiau or at Iwilei, without HECO's prior written approval. Such approval may be given during unusual circumstances, such as pipeline maintenance. Title and risk of loss of LSFO shall pass to HECO at the flanges where Chevron's piping systems connect to HECO's piping systems for HECO's tankage at Barbers Point, Kahe, Waiau or Iwilei. Section 8.3: Determination of Quantity and Quality The quantity and quality of LSFO delivered by marine vessel shall be determined in the manner specified in Sections 7.2, 7.3 and 7.4 of this Contract, except as follows: (a) all measurements and samples shall be made and drawn by or under the supervision of an independent inspector, and the costs thereof shall be shared equally by Chevron and HECO. (b) volume shall be determined by gauging HECO's receiving tank(s) before and after pumping; and (c) samples to determine quality shall be drawn after the LSFO is discharged on Oahu. Section 8.4: Delayed Invoicing Invoicing of marine deliveries of LSFO, in any ten day period, shall be limited to ten times the average daily rate of HECO's nomination for the month against which the marine delivery applies. ARTICLE 9: Line Displacement Stock and Blend Stock Section 9.l: Line Displacement Stock. HECO shall purchase from Chevron whatever line displacement stock that is required for Chevron to complete the deliveries of LSFO and that is received into HECO's tankage at Kahe, Waiau and Iwilei. The price of No. 2 diesel fuel or No. 6 fuel oil used as line displacement stock shall be the then-current pricing for the fuel comprising the line displacement stock in Chevron's supply contract with HECO and HECO's affiliates, if such a supply contract is in effect; otherwise its price shall be the then-current Honolulu posted price for such fuel, less normally available discounts, if any, at the time of purchase. The price of No. 5 fuel oil used as line displacement stock shall be the sum of 40% of the then-current No. 2 diesel fuel pricing and 60% of the then-current No. 6 fuel oil pricing in Chevron's supply contract with HECO and HECO's affiliates, if such a supply contract is in effect; otherwise its price shall be the then-current Honolulu posted price for No. 5 fuel oil, less normally available discounts, if any, at the time of purchase. HECO's minimum purchase obligation and Chevron's maximum purchase obligation set forth in Article 3 shall be reduced by each physical barrel of line displacement stock sold. Section 9.2: Blend Stock In the event HECO desires to adjust the quality of its LSWR in its Barbers Point tanks to meet the specifications of Article 4, Chevron shall supply the necessary blend stock pursuant to Addendum 2. Page 6 ARTICLE 10: Invoicing and Payment Section 10.1: Invoices Invoices, which will show the price per physical barrel of LSFO, blend stock and line displacement stock sold will be prepared and dated following delivery and shall be rendered from time to time each calendar month. The invoices shall also show as a separate item the estimated amounts of any reimbursements to which Chevron is entitled pursuant to Section 5.3. Section 10.2: Payments Payments of such invoices shall be made in U.S. dollars. Timing of payments for sales and deliveries received shall be based upon the invoice issue date which shall be the invoice date or postmarked mailing date of the invoice, whichever is later, as follows: (a) Payment for a received invoice dated from the 1st through the 10th of a month is due on the 20th of the same month. (b) Payment for a received invoice dated from the 11th through the 20th of a month is due by the last day of the same month. (c) Payment for a received invoice dated from the 21st through the last day of the month is due on the 10th day of the following month. Due dates are the dates payments are to reach Chevron. If the due date falls on a Saturday, the payment shall be made on the preceding business day. If such date falls on a Sunday or a holiday, payment shall be made the following business day. Section 10.3: Method of Payment Payments shall be by bank wire transfer of immediately available funds to: Chevron U.S.A. Inc. Account Number 59-51755 First National Bank of Chicago, Chicago, IL ABA Ref. No. 071000013 For identification purposes, all wires must clearly indicate that payment is being made by order of HECO and provide the invoice reference number. In addition, written documentation evidencing specific invoices being paid shall be immediately forwarded to: Utility Fuel Receivables/Room 3338 Chevron U.S.A. Inc. P.O. Box 7006 San Francisco, California 94120-7006 Fax (415) 894-1195 ARTICLE 11: Contingencies Section 11.1: Definition of Contingency As used in this Article 11, the term "contingency" means: (a) any event reasonably beyond the control of the party affected; (b) compliance, voluntary or involuntary, with a direction or request of any government or person purporting to act with governmental authority; excluding, however, any such direction or request restricting or otherwise regulating combustion of the LSFO to be purchased by HECO hereunder, the effect of which restrictions or regulation upon the parties' performance shall be governed by Section 11.5 of this Contract; (c) total or partial expropriation, nationalization, confiscation, requisitioning or abrogation or breach of government contract or concession; Page 7 (d) closing of, or restriction on the use of, a port or pipeline; (e) maritime peril (including but not limited to, negligence in navigation or management of vessel, collision, stranding, destruction, or loss of vessel), storm, earthquake, flood; (f) accident, fire, explosion; (g) hostilities or war (declared or undeclared), embargo, blockage, riot, civil unrest, sabotage, revolution, insurrection; (h) strike or other labor difficulty (whomever's employees are involved), even though the strike or other labor difficulty could be settled by acceding to the demands of a labor group; or (i) loss or shortage of supply, production, manufacturing, distribution, refining, transportation, delivery facilities, receiving facilities, equipment, labor, material, power generation or power distribution caused by circumstances which the affected party is not able to overcome by the exercise of reasonable diligence or which the affected party is able to overcome only at substantial additional expense in relation to the expected revenue, benefits or rights related directly to this Contract. Section 11.2: Obligations to Sell Chevron shall not be obligated to sell or deliver LSFO to the extent that performance of this Contract is prevented, restricted or delayed by a contingency which significantly affects Chevron's ability to supply, manufacture or transport LSFO to HECO under this Contract from Chevron's U.S. West Coast and Hawaiian refineries. In such circumstances, deliveries of LSFO to HECO may be reduced on a basis as equitable to HECO as to Chevron's and its affiliates' other customers of crude and petroleum products, and Chevron shall not be obligated to acquire additional crude or LSFO but to the extent that it does acquire additional crude or LSFO, HECO shall be entitled to an equitable share of the LSFO acquired or derived from the crude acquired, at a price to be agreed from time-to-time. Section 11.3: Obligations to Purchase HECO shall not be obligated to purchase, receive or use LSFO to the extent that performance of this Contract in the customary manner is prevented, restricted or delayed by a contingency. In such circumstances, purchases from Chevron may be reduced on any basis as equitable to Chevron as to HECO's other suppliers of LSFO. Section 11.4: Price Effectiveness If at any time any price determined under this Contract cannot be given effect because to do so would violate a direction or request of any government or person purporting to act with governmental authority, HECO and Chevron shall attempt to agree on an alternate course of action, but failing agreement within 10 days the party adversely affected may suspend performance with respect to the quantity of LSFO affected by the direction or request. Section 11.5: Combustion Specifications To the extent that any governmental regulation requires combustion of LSFO meeting more stringent specifications or permits combustion of LSFO meeting less stringent specifications than those in Article 4, HECO and Chevron shall negotiate in good faith to agree on an alternative course of action that will allow HECO to comply with such regulation while purchasing the equivalent of the full quantity of LSFO it would be required to purchase under Article 3, at a price and on other terms and conditions that are fair to both parties. Chevron shall have no obligation to deliver LSFO meeting new specifications if it is not available for purchase from third parties and Chevron cannot manufacture such LSFO in existing facilities without new capital investment. If HECO and Chevron do not agree on such an alternate course of action, then HECO may comply with such regulation in any reasonable manner it chooses, including the option to purchase from other sources for its plants located within the area in which such regulation specifically applies, fuels which will enable HECO to comply with such regulation. In such case, HECO's minimum purchase obligations and Chevron's maximum supply obligations under Article 3 shall be reduced accordingly. Page 8 To the extent HECO is unable to utilize fuel to be supplied by Chevron under this Contract, but HECO does not purchase fuel which meets such requirements from other sources in an amount equal to the amount by which deliveries under this Contract are reduced, then purchases from Chevron may be reduced on any basis as equitable to Chevron as to HECO'S other suppliers of similar fuel oil. Any adjustments in price pursuant to this Section 11.5 shall be governed by Section 11.6, except that the adjustments shall apply to all LSFO delivered which meets the new specifications. Section 11.6: Effective Date In the event of retroactive adjustments hereunder, the charge or credit to HECO shall be computed and billed to HECO as soon as practical after the adjustment is known. In the event of retroactive changes which cause adjustments hereunder after termination of this Contract, payment shall be made within 15 days after receipt of written demand therefor by the other party. Section 11.7: Refining and/or Delivery Operations Ownership Chevron's obligations under this Contract shall be contingent on Chevron's continued ownership or operation of its refining or delivery facilities in Hawaii or the U.S. West Coast. Chevron shall have the right to terminate this Contract in the event the ownership and operation of its refining and delivery facilities in Hawaii and the U.S. West Coast are transferred to an entity other than an affiliate. Chevron shall give HECO 180 days' written notice. ARTICLE 12: Effect of Suspension or Reduction Section 12.1: Notice of Suspension or Reduction In the event of any suspension or reduction of sales and deliveries under Article 11, Chevron shall not be obligated to sell and HECO shall not be obligated to buy, after the period of suspension or reduction, the undelivered quantity of LSFO which normally would have been sold and delivered hereunder during the period of suspension or reduction. Section 12.2: Option to Terminate If sales and deliveries are suspended under Article 11 for more than 180 days, Chevron or HECO shall have the option while such suspension continues to terminate its obligations to the other party under this Contract on 30-days' written notice to the other party. Section 12.3: Prompt Notices Any party which relies upon Article 11 shall give the other party prompt notice thereof specifying the anticipated amount and duration of any suspension or reduction of deliveries. It shall also give prompt notice when it no longer expects to rely on Article 11 and deliveries shall be reinstated subject to all conditions of this Contract, unless this Contract has been terminated previously under Section 12.2. Section 12.4: United States Currency Nothing in Article 11 shall relieve HECO of the obligation to pay in full in United States currency for the LSFO sold and delivered hereunder and for other amounts due by HECO to Chevron under this Contract. Section 12.5: Substitute Suppliers While deliveries are suspended or reduced by Chevron pursuant to Article 11, it shall not be a breach of this Contract for HECO to buy from a supplier other than Chevron the quantities of LSFO which Chevron does not deliver. During this period of time there will be no minimum volume requirements. After any suspension or reduction has ended, minimum and maximum volume requirements of Article 3 for the annual period in which the suspension or reduction occurred will be reduced in proportion to the ratio of the number of days within the annual period during which no suspension or reduction was in effect, to the number of days within the annual period. Page 9 ARTICLE 13: Waiver and Non-Assignability Section 13.1: Waiver Waiver by one party of the other's breach of any provision of this Contract shall not be deemed a waiver of any subsequent or continuing breach of such provisions or of the breach of any other provision or provisions hereof. Section 13.2: Non-Assignability This Contract shall not be assignable by either party without the written consent of the other, which shall not be unreasonably withheld, except that either party may assign this Contract to any affiliate, provided that any such assignment shall not release that party from any of its obligations hereunder, and except that HECO may assign this Contract to the Trustee under its First Mortgage Bond Indentures. Chevron does not, by agreement to such an assignment, waive any right it may have to terminate this Contract for any breach hereof occurring at any time before or after any such assignment or release HECO of any obligations arising under this Contract after any such assignment. Following any such assignment, no further assignment may be made without the consent of Chevron. Section 13.3: Definitions In this Article 13 and Sections 11.2 and 11.7, "affiliate" shall mean any corporation controlling, controlled by or under common control, with either Chevron or HECO. "Control" of a corporation shall mean ownership, directly or indirectly, or at least 50% of the voting shares of such corporation. ARTICLE 14: Default If HECO or Chevron considers the other party to be in default of any obligation under this Contract, such party shall give the other party notice thereof. Such other party shall then have 30 days in which to remedy such default. If the default is not cured, the other party may, without prejudice to any other right or remedy of such party in respect of such breach, terminate its obligations under this Contract, except for HECO's obligation to pay in full in United States currency for the LSFO sold and delivered hereunder and for other amounts due by HECO to Chevron under this Contract by 45 days notice to the party in breach. Any termination shall be without prejudice to accrued rights. All rights and remedies hereunder are independent of each other and election of one remedy shall not exclude another. In no event shall either party be liable for any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise. ARTICLE 15: Conflicts of Interest Conflicts of interest related to this Contract are strictly prohibited. Except as otherwise expressly provided herein, neither party nor any director, employee or agent of a party shall give to or receive from any director, employee or agent of the other party any gift, entertainment or other favor of significant value, or any commission, fee or rebate. Likewise, neither party nor any director, employee or agent of a party shall enter into any business arrangement with any director, employee or agent of the other party (or any affiliate), unless such person is acting for and on behalf of the other party, without prior written notification thereof to the other party. In the event of any violation of this Article 15, including any violation occurring prior to the date of this Contract which resulted directly or indirectly in one party's consent to enter into this Contract with the other party, such party may, at its sole option, terminate this Contract at any time and, except for obligations to pay in full in United States currency for the outstanding payment obligations hereunder, shall be relieved of any further obligation under this Contract. Both parties agree to immediately notify the other of any known violation of this Article. Page 10 ARTICLE 16: Applicable Law This Contract shall be construed in accordance with, and all disputes arising hereunder shall be determined in accordance with, the local law of the State of Hawaii, U.S.A. ARTICLE 17: Public Utility Commission Approval This Contract is required to be filed with the Hawaii Public Utilities Commission ("PUC") for approval. If in the proceedings initiated as a result of the filing of this Contract, the PUC disapproves or fails to authorize the recovery of the fuel costs incurred under this Contract through HECO's "Energy Cost Adjustment Clause", HECO may terminate this Contract by 30 days written notice to Chevron. ARTICLE 18: Miscellaneous Section 18.1: Headings Headings of the Articles and Sections are for convenient reference only and are not to be considered part of this Contract. Section 18.2: Entire Agreement This document contains the entire agreement between the parties covering the subject matter and cancels, as of the effective date hereof, all prior agreements of any kind between the parties covering such subject matter and any amendments thereto. There are no other agreements which constitute any part of the consideration for, or any condition to, either party's compliance with its obligations under this Contract. Section 18.3: Contract is Not an Asset This Contract shall not be deemed to be an asset in, and, at the option of a party, shall terminate in the event of any voluntary or involuntary receivership, bankruptcy or insolvency proceedings affecting the other party. Section 18.4: Notices Except as otherwise expressly provided herein, all notices shall be given in writing, by letter, facsimile, telegraph or telex to the following addresses, or such other address as the parties may designate by notice, and shall be deemed given upon receipt. Seller: Manager, Petroleum Coke, Heavy Fuels & Sulfur Chevron U.S.A. Inc. P.O. Box 7006 San Francisco, CA 94120-7006 Facsimile: (415) 894-1195 Buyer: Manager, Power Supply Services Department Hawaiian Electric Company, Inc. Box 2750 Honolulu, HI 96840-0001 Facsimile: (808) 543-7788 Section 18.5: Unenforceable Terms If any term or provision, or any part of any term or provision, of this Contract is held by any court or other competent authority to be illegal or unenforceable, the remaining terms, provisions, rights and obligations shall not be affected. Section 18.6: Successors and Assigns This Contract shall inure to the benefit of and be binding upon the parties hereto, their successors and permitted assigns. Page 11 Section 18.7: Termination of Prior Agreement Effective as of the Effective Date of the Term hereunder, this Contract hereby supersedes that certain Low Sulfur Fuel Oil Supply Contract between the parties dated May 29, 1990, and all amendments thereto. IN WITNESS WHEREOF, the parties hereto have executed this Low Sulfur Fuel Oil Supply Contract as of the day and year first hereinabove written. CHEVRON U.S.A. INC. HAWAIIAN ELECTRIC COMPANY, INC. By /s/ Phillip H. Fisher By /s/ Edward Y. Hirata Phillip H. Fisher Edward Y. Hirata (Printed or Typed Name) Its Manager, Petroleum Coke Its Vice President Heavy Fuels & Sulfur Regulatory Affairs By /s/ M. M. Egged Molly M. Egged (Printed or Typed Name) Its Secretary Page 12 ADDENDUM No. 1 Sample Price Calculation July 1995 I. Singapore LSWR Mixed/Cracked A. Platt's Index Platt's Oilgram Prices-$/Bbl Low High May 26, 1995 16.50 16.70 June 2, 1995 15.95 16.15 June 9, 1995 15.40 15.60 June 16, 1995 14.40 14.90 ----- Average 15.70 B. Government Fees -- $/Bbl Superfund Petroleum fee 0.097 Customs User fee 0.002 ----- Total Government Fees 0.099 C. LSWR Index -- $/Bbl 15.799 II. FREIGHT FREIGHT = {(Previous Quarter Average AFRA Worldscale LR-1 multiplied by New Worldscale 100) divided by 100] divided by 6.75} plus (Worldscale Fixed Differential per barrel as per Addendum No. 3) A. AFRA Worldscale Large Range 1 average Publication Date New Worldscale Large Range 1 Points April 1995 128.2 May 1995 128.3 June 1995 120.3 ----- Average 125.6 B. New Worldscale 100 Rate between Singapore and Barbers Point effective January 1, 1995 was $9.14 per Metric Ton C. FREIGHT = {[(125.6*$9.14/MT) / 100] / 6.75Bbls/MT} + ($0.044/Bbl) = $1.745 / Bbl III. LA Bunker Platt's Bunkerwire Prices - $/MT Low High --- ---- May 23, 1995 103.00 106.00 May 30, 1995 103.00 106.00 June 6, 1995 102.00 104.00 June 13, 1995 103.00 108.00 June 20, 1995 93.00 96.00 Average--$/MT 102.40 $/Bbl $16.080 ($102.40 / 6.368 Bbl/MT) IV. Taxes A. Hawaii General Excise Tax is 4.167% of pre-tax price. B. Hawaii Environmental Response Tax is $0.05 per barrel V. Monthly Price @ 6.2 MM BTU/Bbl A. Tier 1 For Nominated Purchases up to 16,000 Bbls per day. -------------------------------------------------------- B. Tier 2 For Nominated Purchases above 16,000 Bbls per day -------------------------------------------------------- VI. Price of Individual July-Priced Delivery with Assumed Heat Content Other Than 6.2MM BTU/Bbl A. Analysis Per Chevron 6.280MM BTU/Bbl Per HECO 6.258MM BTU/Bbl B. Tolerance Difference 0.022MM BTU/Bbl Limit per Section 7.2 0.050MM BTU/Bbl Results are within tolerance C. "BTU" is the average of analyses within tolerance Average 6.269MM BTU/Bbl D. Tier 1 Price Computation -------------------------------------------------------- E. Tier 2 Price Computation -------------------------------------------------------- Addendum No. 1 LONDON TANKER BROKERS' PANEL LIMITED Directors: Prince Rupert House E. F. Shawyer (Chairman) 64 Queen Street M. G. Johnson LONDON EC4R 1AD A. G. Burgess R. W. Park Telephone: 0171-248 4747 P. C. Delaney Telex: 885118 G C. Waaler Fax: 0171-489 0536 R. W. Porter (Managing) 1st June 1995 Hawaiian Electric Company Inc P. O. Box 2750 Honolulu HI 96840-0001 Hawaii Attn: Mr. J. C. Aicken Dir. Fuel Resource Dear Sirs AFRA The results of the monthly average freight rate assessments made over the period 16th April 1995/15th May 1995 are as follows: MEDIUM RANGE (25,000/ 44,999 (LONG) TONS) WORLDSCALE 161.6 LARGE RANGE 1 (45,000/ 79,999 (LONG) TONS) WORLDSCALE 120.3 LARGE RANGE 2 (80,000/159,999 (LONG) TONS) WORLDSCALE 87.8 VLCC (160,000/319,999 (LONG) TONS) WORLDSCALE 54.9 ULCC (320,000/549,999 (LONG) TONS) WORLDSCALE 43.1 We would remind you that, in accordance with the agreement between us, these assessments are provided to you on the condition they will not be reproduced, supplied or disclosed to any other person. Yours faithfully LONDON TANKER BROKERS' PANEL LIMITED /s/ R.W. Porter R. W. Porter Managing Director ADDENDUM NO. 2 Quality Adjustments Section 1: Adjustments to Quality of HECO's Oil In the event HECO desires to adjust the quality of its LSWR in its Barbers Point tanks to meet the specifications of Article 4 and provided that the LSWR meets the qualities of Section 2(a), Chevron shall supply the necessary blend stock, quality analysis and other services necessary to complete the adjustment. HECO will provide LSWR of the quality generally available in the Singapore market. Section 2: Quality and Quantity Determination (a) HECO shall give Chevron 45 days advance notice of the quantity and quality of any LSWR for which it desires an adjustment. The LSWR shall meet the following viscosity-sulfur relationship:
LSWR Viscosity -- cs at 122 degrees F ------------------------------------------ Maximum For Pipeline Delivery LSWR Sulfur ----------------------------- Wt % Minimum To Waiau/Iwilei To Kahe ----------- ------- --------------- ------- 0.100-0.149 12.9 230 1,170 0.150-0.199 14.5 260 1,230 0.200-0.249 15.9 290 1,330 0.250-0.300 17.5 320 1,430
(b) The specific quality and quantity of the LSWR in HECO's tankage before adjustment shall be determined in accordance with Sections 7.2, 7.3 and 7.4, except that the samples shall be taken and gauging shall be done on HECO tanks at Barbers Point prior the Chevron's adjustment of quality. (c) The specific quality and quantity of the LSWR in HECO's tankage after adjustment shall be determined in accordance with Sections 7.2, 7.3 and 7.4, except that the samples shall be taken and gauging shall be done on HECO tanks at Barbers Point after Chevron has completed the adjustment of quality. Section 3: Compensation (a) HECO shall purchase from Chevron whatever blend stock that is required for Chevron to complete the adjustment. The price of the oil used for adjustment shall be the ---------------------------- in -------------------------------------------- if such a supply contract is in effect; otherwise, its price shall be the --------------------------------. (b) HECO shall pay Chevron a processing fee of --------------- on the total adjusted volume of Section 2(c) above. Section 4: Invoices Invoices for the above will be submitted by Chevron and paid by HECO in accordance with Article 10 of this Contact. Section 5: Sample Price Calculation (a) Price of Blend Stock Basis: 1) ------------------------------ per barrel (from Addendum No. 1) 2) Tax currently in effect is the Hawaii General Excise Tax of 4.167% of pre-tax price (from Section 5.3). Price of Blend Stock = ---------------------------------- = ---------------------- = ---------------------- = ---------------------- (b) Processing Fee Basis: 1) HECO provides 250,000 barrels of LSWR 2) Chevron provides 25,000 barrels of Blend Stock 3) LSWR is $15.799 and ---------------- (from Addendum No. 1) 4) Tax currently in effect is the Hawaii General Excise Tax of 4.167% of pre-tax price (from Section 5.3) and Hawaii Environmental Response Tax of $9.05 per barrel. Processing Fee = --------------------------- = --------------------------- = --------------------------- ADDENDUM NO. 3 Recovery of Worldscale Fixed Differential For Oil Pollution Liability Insurance The price formula for LSFO in Section 5.1 of the Contract includes the component "FREIGHT" that refers to a Worldscale 100 rate published in the current edition of Worldscale which incorporates a Fixed Rate Differential to reflect the cost of additional premiums for Oil Spill Liability Insurance on vessels carrying Persistent Oils applicable to voyages having a destination in the U.S.A.. Chevron acknowledges that any vessel used to transport LSFO that is sold and purchased under the Contract, including its components and the crude oil from which the LSFO is derived, shall be required to possess oil spill liability insurance coverage in the amount of $700 million. The price formula component "FREIGHT" refers to an AFRA rate applicable to a vessel size classification of LR-1, or Large Range 1. This vessel classification references tanker vessels ranging in size from 45,000 Long Tons Deadweight to 79,999 Long tons Deadweight. In order to derive an approximation of the relationship between Deadweight and Gross Registered Tons for a nominal vessel consistent with the mathematical average of this vessel size classification, the average of two vessels that have transported LSFO or its components to Hawaii in the recent past that are approximately equal to the midpoint of the LR-1 range were referenced. These vessels are described as follows:
Name Deadweight Tons (DWT) Gross Registered Tons (GRT) M/T London Spirit 62,097 36,865 M/T London Victory 62,156 36,865 Average 62,127 36,865
The Worldscale 100 rate that is to be included in the computation of FREIGHT is to be derived in the same manner as the following illustrative example calculations: 1. The Worldscale 100 rate in effect from February 19, 1995, shall include a Fixed Rate Differential which shall be the sum of a. and b. and shall be computed as follows: a. Fixed Rate Differential with respect to the additional insurance premiums For Basic $500 million coverage of Oil Pollution Liability Insurance on vessels carrying Persistent Oils to and from the U.S.A. Fixed Rate Differential = $0.27/GRT X 36,865 GRT 62,127 = $0.160 per Metric Tonne For illustrative purposes, this rate may be expressed in U.S. dollars per barrel as follows: = $0.160/Metric Tonne 6.75 barrels/Metric Tonne = $0.024/barrel b. Fixed Rate Differential with respect to the additional insurance premiums for Excess $200 million coverage of Oil Pollution Liability Insurance on vessels carrying Persistent Oils to and from the U.S.A. Fixed Rate Differential = $0.2225/GRT X 36,865 GRT 62,127 = $0.132 per Metric Tonne For illustrative purposes, this rate may be expressed in U.S. dollars per barrel as follows: = $0.132/Metric Tonne 6.75 barrels/Metric Tonne = $0.020/barrel The sum of which shall equal $0.2920 per Metric Tonne, or $0.044 expressed in U.S. dollars per barrel. 2. The AFRA Worldscale Points and their related Worldscale 100 rate applicable for each calendar quarter are based upon an average of the three monthly AFRA publications in the calendar quarter immediately preceding the calendar quarter of the nominated month of delivery. Therefore the relevant Fixed Rate Differentials computed above should be applied as follows: A. With respect to volumes of LSFO nominated during the three (3) months of the quarter following a change in the published rate (typically February of each year), the relevant Fixed Rate Differential to be included in the computation of the price component "FREIGHT" shall be the sum of: 50/90 multiplied by the Fixed Rate Differential computed prior to the rate change: and 40/90 multiplied by the Fixed Rate Differential computed using the revised rate: B. With respect to volumes of LSFO nominated for subsequent months, and continuing for so long as the Fixed Rate Differentials as set forth in Worldscale Circular shall be applicable, the relevant Fixed Rate Differential to be included in the computation of the price component "FREIGHT" shall be as derived in part 1 above. EX-10.9 3 INTER-ISLAND IND FUEL OIL AND DIESEL FUEL CONTRACT HECO Exhibit 10.9 INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL CONTRACT By and Between CHEVRON U.S.A. INC. and HAWAIIAN ELECTRIC COMPANY, INC.; MAUI ELECTRIC COMPANY, LTD.; HAWAII ELECTRIC LIGHT CO., INC.; HAWAIIAN TUG & BARGE CORP.; and YOUNG BROTHERS, LIMITED.
TABLE OF CONTENTS ARTICLE PAGE I. DEFINITIONS............................... 1 II. TERM...................................... 4 III. QUANTITY.................................. 4 IV. QUALITY................................... 8 V. PRICE, BTU DETERMINATION.................. 10 VI. DELIVERIES................................ 14 VII. DETERMINATION OF QUALITY.................. 17 VIII. MEASUREMENT OF QUANTITY................... 18 IX. INVOICING AND PAYMENT.................... 19 X. SELLER'S FACILITIES ON OAHU............... 21 XI. SELLER'S FACILITIES ON MAUI AND HAWAII.... 22 XII. CONTINGENCIES............................. 31 XIII. EFFECT OF SUSPENSION OR REDUCTION......... 33 XIV. WAIVER AND NONASSIGNABILITY............... 35 XV. CONFLICT OF INTEREST...................... 35
XVI. DEFAULT................................... 36 XVII. APPLICABLE LAW............................ 37 XVIII. INDEMNITY................................. 37 XIX. PUBLIC UTILITIES COMMISSION............... 39 XX. INSURANCE................................. 40 XXI. SAFETY AND TERMINAL PROTECTION............ 42 XXII. POLLUTION MITIGATION...................... 43 XXIII. MISCELLANEOUS............................. 44
ADDENDUMS NO. 1 SAMPLE PRICE CALCULATIONS---NOVEMBER, 1995 NO. 2 QUALITY CONTROL SAMPLES 3/4 SUMMARY AND SCHEMATIC OF SAMPLE LOCATIONS
INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL CONTRACT THIS CONTRACT, dated as of November 20, 1995, by and between CHEVRON U.S.A. INC., a Pennsylvania corporation ("Seller"), and HAWAIIAN ELECTRIC COMPANY, INC.; MAUI ELECTRIC COMPANY, LTD.; HAWAII ELECTRIC LIGHT CO., INC.; HAWAIIAN TUG & BARGE CORP.; and YOUNG BROTHERS, LIMITED, each a Hawaii corporation (collectively referred to as "Buyers" and individually referred to as "Buyer" herein unless otherwise indicated). WHEREAS, Seller is a supplier of petroleum fuels with terminal and refinery facilities in Hawaii. WHEREAS, Buyers are engaged in various business activities: HECO, HELCO, and MECO are utilities engaged in the generation, purchase and sale of electricity in Hawaii; HT&B is a tug and barge company; YB is a barge company engaged in general marine transportation. NOW, therefore, the parties agree as follows: ARTICLE I DEFINITIONS Except where otherwise indicated, the following definitions shall apply throughout this Contract: 1. "CIFO" means Chevron Industrial Fuel Oil No. 6 per Section 4.1. 2. "Fuel Oil" means either Chevron Industrial Fuel Oil No. 6 or third party industrial fuel oil similar to Chevron Industrial Fuel Oil No. 6. 3. "Diesel" means Chevron Diesel Fuel No. 2 per Section 4.2. Page 1 4. "diesel" means either Chevron Diesel Fuel No. 2 or a third party diesel fuel similar to Chevron Diesel Fuel No. 2. 5. "Jet" means Chevron Jet Fuel per Section 4.3. 6. "jet" means either Chevron Jet Fuel or a third party jet fuel similar to Chevron Jet Fuel. 7. "Oil" means either Chevron Industrial Fuel Oil No. 6 or Chevron Diesel Fuel No. 2. 8. "oil" means Chevron Industrial Fuel Oil No. 6, Chevron Diesel Fuel No. 2, a third party industrial fuel oil similar to Chevron Industrial Fuel Oil No. 6, or a third party diesel fuel similar to Chevron Diesel Fuel Oil No. 2. 9. "HECO" means Hawaiian Electric Company, Inc., which has electrical generating facilities on the island of Oahu. 10. "MECO" means Maui Electric Company, Ltd., which has electrical generating facilities on the islands of Maui, Lanai and Molokai. For the purposes of this Contract "MECO" refers to the operations on the island of Maui only. 11. "MECO-Molokai" means the Molokai Division of Maui Electric Company, Ltd., which has electrical generation facilities on the island of Molokai. 12. "HELCO" means Hawaii Electric Light Co., Inc., which has electrical generating facilities on the island of Hawaii. 13. "HT&B" means Hawaiian Tug & Barge Corp., which operates a tug and barge fleet. 14. "YB" means Young Brothers, Limited, which operates a general marine transportation business. Page 2 15. "HMT" means Seller's Honolulu Marine Terminal at Honolulu Harbor Piers 30 and 31. 16. "HDT" means Seller's Honolulu Distribution Terminal at Honolulu Harbor Pier 35. 17. "Kaunakakai Terminal" means a third party Marine Terminal at Kaunakakai Harbor, Molokai. 18. "Oahu P/L" means Seller's Light product distribution pipeline between Seller's Barbers Point oil refinery and HECO's Waiau electric generating station. 19. "affiliate", except where otherwise expressly provided, means a corporation controlling, controlled by or under common control with Seller or Buyer, as the case may be. 20. "Carrier" means Buyer's nominated barge or designated trucking company. 21. "gallon" means a United States gallon of 231 cubic inches at 60 degrees F. 22. "physical barrel" means 42 American bulk gallons at 60 degrees F. 23. "year" means a calendar year. 24. "Deliver, Delivery, Deliveries or Delivered" refers to the Oil or Jet sold by Seller and purchased by Buyer. 25. "Loaded", when used in conjunction with Oil or Jet, refers to Buyer's Delivered Oil or Jet mixed with any cargo retains within Buyer's nominated barge. 26. "loaded", when used in conjunction with Oil or Jet, refers to Buyer's Delivered Oil or Jet or a third party's delivered oil or jet mixed with any cargo retains within Buyer's nominated barge. Page 3 27. "Received", when used in conjunction with Oil or Jet, refers to Buyer's Oil or Jet to be received by Seller into its terminals on Maui and Hawaii. "Received", when used in conjunction with oil, means a third party industrial fuel oil similar to Chevron Industrial Fuel Oil No. 6 or a third party diesel fuel similar to Chevron Diesel Fuel Oil No. 2 received by Seller into its terminals on Maui and Hawaii from Buyer's nominated barge. 28. "Returned", when used in conjunction with Oil, oil or Jet, refers to the Oil, oil or Jet returned by Seller from its terminals on Maui and Hawaii to Buyer for Buyer's use in Buyer's electrical generating facilities. ARTICLE II TERM The term of this Contract shall be from January 1, 1996 (the "Effective Date"), through December 31, 1997, and shall continue thereafter for additional 12-month periods (each 12-month period being an "Extension") beginning each successive January 1, unless Buyer or Seller gives written notice of termination at least 120 days before the beginning of an Extension. ARTICLE III QUANTITY Section 3.1 Seller shall sell and deliver to Buyer, and Buyer shall ----------- purchase and receive from Seller no less than the minimum nor more than the maximum annual quantity of CIFO, Diesel and Jet as set out below for each Buyer and described in Article IV, from the HMT, the HDT, the Oahu P/L, or a Chevron-nominated barge at the Kaunakakai Terminal, as described in Article VI. The purchase of CIFO and Diesel shall be at a reasonably uniform rate. All quantities shall be stated in annual physical barrels. Page 4 i. CIFO 1996 Minimum Maximum ---- ------- ------- HELCO ----- ----- MECO ----- ----- TOTAL ----- ----- 1997 Minimum Maximum ---- ------- ------- HELCO ----- ----- MECO ----- ----- TOTAL ----- ----- ii. Disel 1996 Minimum Maximum ---- ------- ------- HECO ----- ----- HELCO ----- ----- MECO ----- ----- MECO-Molokai 80,000 100,000 HT&B and YB 80,000 125,000 TOTAL 1997 Minimum Maximum ---- ------- ------- HECO ----- ----- HELCO ----- ----- MECO ----- ----- MECO-Molokai 80,000 100,000 HT&B and YB 80,000 125,000 TOTAL ----- ----- Page 5 iii. Jet 1996 Minimum Maximum ---- ------- ------- HELCO 5,000 MECO 5,000 TOTAL 10,000 1997 Minimum Maximum ---- ------- ------- HELCO 5,000 MECO 5,000 TOTAL 10,000 The volumes of CIFO, Diesel and Jet shown for 1997 shall also apply to any Extensions, unless otherwise revised. Section 3.2 Prior to the 15th day of each month, HECO shall give Seller a forecast of each Buyer's monthly lifting of Diesel, CIFO and Jet from each supply point for each of the coming three months. Each Buyer recognizes the importance to Seller of reasonably accurate lifting forecasts because of Seller's need to plan production and shipments. Section 3.3 Buyers' purchases and Seller's Deliveries of CIFO and Diesel will occur in a ratable fashion throughout the year. At the end of each calendar year, Buyers' CIFO and Diesel purchase performance will each be reviewed by Seller for ratability. i. If upon review Buyers' volumes in any calendar quarter were less than 15% of the total minimum annual liftings for either CIFO or Diesel, a premium of $0.42/barrel will be charged to Buyer for the difference between 15% of total minimum annual liftings of that product and Buyers' actual liftings of that product. ii. If upon review Buyers' volumes in any calendar quarter were greater than 35% of the total maximum annual liftings for either CIFO or Diesel, a premium of $0.42/barrel will be Page 6 charged to Buyer for the difference between Buyers' actual liftings of that product and 35% of total maximum annual liftings of that product. iii. Seller understands Buyers' jet fuel purchases will occur in a non- ratable fashion and no ratability premiums will be applied to jet fuel purchases. Section 3.4 ...HELCO's anticipated demands for CIFO or Diesel results in Buyers' aggregate anticipated demand on an annual basis during any calendar year during the term of this Contract for CIFO or Diesel to...then Buyers shall give written notice to Seller of Buyers' request that Seller accept...Seller shall have 15 days within which to...or...and/or the...If Seller either accepts Buyers'...or fails to give any notice of acceptance or rejection within said 15 day period, then Buyers'...shall be deemed to have been accepted by Seller and shall become effective upon the expiration of said 15 day period. Should Seller reject Buyers' request for the...then, within 60 days following the date of any such rejection notice,...or...in a manner mutually satisfactory to both Seller and HELCO, then Seller, upon 30 days written notice, may...Until Buyers'...(i) is...(ii) a...or (iii) Page 7 - --------------- in accordance with this Section 3.4, the terms and conditions of this Contract ------------------- ARTICLE IV QUALITY Section 4.1 The CIFO to be supplied hereunder shall be Seller's regular commercial grade of Chevron Industrial Fuel Oil No. 6, having the following specifications:
ASTM Item Specifications Test Method Gravity, API 6.5 min. D1298 or D4052-86 Flash, degrees F 150 min. D93 Viscosity, SSF @ 122 degrees F 179 min., 226 max. D445/D2161 Pour Point, degrees F 55 max. D97 Sulfur, % Wt. 2.0 max. D1552, D2622 or D4294 Sediment & Water, % Vol. 0.5 max. D1796 Heat Value, Gross** 6.0 D240
MM BTU/BBL ** Typical Value is 6.3. Section 4.2 The Diesel to be supplied hereunder shall be similar to Seller's regular commercial grade of Chevron Diesel Fuel No. 2 and have the following specifications:
Specification Test Item Units Limits Method Gravity @ 60 degrees F degrees API 30.0 min. D1298 or D4052-86 Specific 0.88 max. Viscosity @ 100 degrees F SSU 32.3 - 40.0
Page 8
Specification Test Item Units Limits Method Heat Value, Gross** MM BTU/BBL 5.84 Calculated or D240 Flash Point, PM degrees F 150 min. D93 Pout Point** degrees F 35 D97 Ash PPM, wt. 100 max. D482 Cetane Index 40 min. D4737 Carbon Residue, 10% Residuum %, wt. 0.35 max. D524 Sediment & Water %, vol. 0.05 max. D1796 Sulfur %, wt. 0.40 max. D1552, D2622 or D4294 Distillation 90% Recovered degrees F 540 - 650 D86 Sodium + Potassium PPM, wt. 0.5 max. D3605
** Chevron does not provide specifications on these items. Values are typical; they are not guaranteed. Section 4.3 The Jet to be supplied hereunder shall be similar to Seller's regular commercial grade of Chevron Jet Fuel; provided, however, Buyer agrees that the Jet shall be used exclusively as stationary combustion turbine start-up fuel. Any other use, including without limitation its use for aviation purposes, shall constitute unforeseeable misuse. Section 4.4 SELLER MAKES NO WARRANTY, EXPRESSED OR IMPLIED IN FACT OR BY LAW, AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE concerning the Oil other than it shall comply with the quality herein specified, that the Diesel shall be suitable for use as a fuel, the CIFO shall be suitable for use as a boiler fuel, and the Jet shall be suitable for use as stationary combustion turbine start-up fuel. Page 9 ARTICLE V PRICE, BTU DETERMINATION Section 5.1 i. NO. 2 DIESEL FUEL a. For HECO, MECO, HELCO, HT&B or YB: where: Total Diesel purchases per Section 3.1(ii) are as follows: b. For MECO-Molokai: where: PD1 = Price per physical gallon for the calendar month of delivery for No. 2 Diesel Fuel purchased by HELCO, MECO, HELCO, HT&B or YB, in $/gallon. PD2 = Price per physical gallon for the calendar month of delivery for No. 2 Diesel purchased by MECO-Molokai, in $/gallon. DI = Index for No. 2 Diesel Fuel, which shall be the average of the Thursday high and low Pacific Northwest spot 0.5% No. 2 prices for Diesel Fuel, as reported by Oil Price Information Service ("OPIS") from the 21st day of the second preceding month to the 20th day of the month preceding delivery, expressed, in $/gallon. If OPIS is not published or does not publish a high and low price for a particular Thursday during the relevant period, the high and low prices for the closest preceding day for which OPIS publishes a price report will be used. Page 10 TD1/TD2 = The Hawaii General Excise Tax and any other tax imposed on the sale of Diesel Fuel. ii. CIFO where: PF = Price per physical barrel for the calendar month of delivery for CIFO in $/gallon. FI = Current Index for CIFO which shall be the simple average of the low and high prices of the Los Angeles Bunker Fuel Oil market as reported by the Platt's Bunkerwire for all dates of publication from the 21st day of the second preceding month to 20th day of the month preceding delivery. API gravity 11.5 degrees F for a conversion factor of 6.368 BBL/MT. If Bunkerwire is not published or does not publish a high or a low price for a particular week during the relevant period, the high and low prices for the closest preceding day for which Bunkerwire publishes a price report will be used. TF = The Hawaii General Excise Tax and any other tax imposed on the sale of Fuel Oil. iii. Jet. PJ = JI + $0.079/gallon + TJ where: PJ = price per physical barrel for the calendar month of delivery for Jet, in $/gallon. JI = Current Index for jet fuel which shall be the average West Coast Spot Pipeline price for jet fuel in Los Angeles in the month preceding delivery, as reported Page 11 by the Platt's Oilgram Price Report from the 21st of the second preceding month to the 20th day of the month preceding delivery. If Platt's is not published or does not publish a high and low price for a particular Friday during the relevant period, the high and low prices for the closest preceding day for which Platt's publishes a price report will used. TJ = The Hawaii General Excise Tax and any other tax imposed on the sale of Jet Fuel. Addendum 1 hereto contains an illustrative schedule of prices calculated pursuant to this Section 5.1 The pricing of CIFO, Diesel and Jet includes applicable Superfund and Oil Spill Liability Trust Fund charges. Section 5.2 To provide the flexibility needed by Seller to meet its obligations to Buyer, the source and type of crude oil and other raw material, the place of manufacture, and the manufacturer of Oil for delivery to Buyer hereunder shall be determined solely by Seller. The price of all Oil Delivered by Seller to Buyer hereunder shall be determined in accordance with the terms of this Contract regardless of where, how and by whom such Oil is manufactured and regardless of the type or source of crude oil or other raw materials used in its manufacture. Section 5.3 In addition to all other amounts payable by Buyer under this Contract, Buyer shall reimburse Seller for all taxes, assessments, levies and imposts of whatsoever kind or nature imposed on Seller by any governmental or quasi-governmental body, including without limitation the Hawaii General Excise (Gross Income) Tax, the Hawaii Environmental Response Tax and Hawaii Liquid Fuel Tax, where applicable, with respect to the execution or performance of this Contract or the receipt by Seller of payments hereunder. Notwithstanding the foregoing, Buyer shall not be required to reimburse Seller for any tax measured by or based on the net income of Seller or for real property taxes. To avoid duplication of recovery, Buyer shall not be required to reimburse Seller under this Section 5.3 Page 12 for any item expressly mentioned by Platt's or Bunkerwire, or confirmed by Platt's or Bunkerwire in writing upon inquiry by either Buyer or Seller, as being included in a price used to compute PD1, PD2, PF or PJ under Section 5.1. As of the Contract execution date, the Superfund Petroleum fee of the Superfund Revenue Act of 1986 is the only tax, assessment, levy or impost implicitly reimbursed to Seller through inclusion in the Platt's listings within DI, FI and JI of Section 5.1. Section 5.4 Seller will draw representative samples of all Diesel Delivered to buyer to determine the BTU content per Section 7.1. If the BTU content per gallon of the representative sample falls within the range of 137,000 to 141,000, no price adjustment will be made. If the BTU content per gallon is below 137,000, or above 141,000, the price charged for the Diesel Delivered to Buyer shall be adjusted by multiplying the price determined in Article V, by the ratio of the actual heat content to 139,000 BTU. Seller shall credit Buyer's account for overpayments and Buyer shall pay Seller for underpayments resulting from the BTU adjustments as soon as possible after the close of each month, but in no event later than 60 days after the close of a month. Such adjustments to either Buyer or Seller will be handled as separate credits or invoices and each individual invoice drawn during the month will not be corrected and reissued. Section 5.5 Seller will draw representative samples of each CIFO Delivery, which will be used to determine the CIFO BTU content per Section 7.1. If the weighted average BTU content of the CIFO Delivered to Buyer during any half of any annual period is less than 6.2 MM BTU per physical barrel, the price of such CIFO delivered to Buyer during each month of that semiannual period shall be adjusted by multiplying the CIFO price as determined by Section 5.1.ii. for each month by a ratio of actual average heat content to 6.2 MM BTU and Seller shall issue Buyer a credit for the difference between such aggregate and the adjusted price. Section 5.6 All prices, adjustments thereto and other sums payable hereunder shall be stated in the nearest thousandth of a dollar. Page 13 ARTICLE VI DELIVERIES Section 6.1 i. Seller agrees to Deliver and MECO and HELCO agree to receive their Oil into their nominated barge, F.O.B. the HMT. The delivery rate on Diesel shall be 3,000 BPH minimum. The delivery rate on CIFO shall be 1,600 BPH minimum. Seller agrees to make its best, reasonable efforts in operating its current CIFO delivery systems to Deliver CIFO into the nominated barge at a temperature above 120(degrees)F. Buyer acknowledges that the CIFO delivery temperature is determined by Seller's and HECO's scheduling of other fuels in Seller's pipeline, and hence cannot be guaranteed. ii. When mutually agreed to, Seller may Deliver and MECO and HELCO may receive their Diesel into their nominated barge, F.O.B. Honolulu Harbor Piers 31 or 32. The delivery rate shall be 2,000 BPH minimum. iii. When mutually agreed to, Seller may Deliver and MECO and HELCO may receive their Oil into their nominated barge, F.O.B. Barbers Point Piers 5 or 6. The delivery rate shall be 4,000 BHP minimum. iv Seller and Buyer's agent or a mutually agreed upon independent inspector shall inspect the receiving barge cargo tanks to ensure that they contain only minimal remains of the previous cargo, before Seller will Deliver Oil to be terminaled per Article XI. Remains exceeding common commercial practice shall be removed by Buyer to protect the quality of the Delivered Oil. Buyer or Buyer's agent may remove the remains by any legal method at their disposal, including pumping the remains into Seller's slop tank at the HMT, if convenient to Seller. Seller shall have the right to charge Buyer for accepting remains if the quantity to be removed from any barge or the number of barges Page 14 requiring remains to be removed becomes excessive. Seller shall have the right to flush the receiving barge cargo tanks with a small quantity of Seller's Oil before loading the Delivered Oil. v. Seller and Buyer's agent or a mutually agreed upon independent inspector shall take a representative sample of the oil in the barge cargo tanks, after Seller has delivered Oil into MECO's and HELCO's nominated barges. See Addendum 2 hereto for an overview on all sampling. This sample will be divided into two parts and dated. One part shall be labeled "Seller's Loaded Sample." One part shall be sealed and labeled "Buyer's Loaded Retain." These samples shall indicate the quality of the mixture of Delivered Oil and the previous cargo remains and will provide an early warning of any quality problems with the Received Oil as described in Section 11.3. Section 6.2 Seller agrees to Deliver and HT&B and YB agree to receive their Diesel into their nominated vessel F.O.B. the HMT, Pier 31 or 32. The delivery rate shall be 175 BPH minimum. Section 6.3 Seller agrees to Deliver and HECO agrees to receive its Diesel under either of the options below. i. Seller will Deliver Diesel from the HDT into HECO's nominated tank truck at a delivery rate of 190 BPH minimum. ii. Seller will Deliver Diesel from the Oahu P/L into HECO's storage at HECO's Waiau Power Plant, at a delivery rate of 1,000 BPH minimum. Section 6.4 Seller agrees to deliver and MECO and HELCO agree to receive Jet at MECO's or HELCO's respective power plant truck unloading rack. Section 6.5 Seller agrees to Deliver and MECO-Molokai agrees to receive its Oil into its nominated marine terminal at Kaunakakai Harbor, Molokai. The delivery rate shall be 1,000 BPH minimum. Buyer will provide discharge facilities through an independent third party; Seller has no responsibility to procure discharge facilities on the island of Molokai. Page 15 Section 6.6 i. For the Delivered Oil under Sections 6.1 and 6.2, care, custody, control, title and risk of loss shall pass to Buyer as the Oil passes the flange connecting the cargo hose of the Buyer's nominated barge or vessel and Seller's pipeline. ii. For the Delivered Diesel under Section 6.3.i., care, custody, control, title and risk of loss shall pass to Buyer as the Oil passes the flange connecting the cargo hose of the Buyer's nominated tank truck or vessel and Sellers' truck loading rack. iii. For the Delivered Diesel under Section 6.3.ii., care, custody, control, title and risk of loss shall pass to Buyer as the Oil passes the flange connecting Buyer's pipeline at the Waiau Power Plant to the Oahu P/L. iv. For the Delivered Diesel under Section 6.5, care, custody, control, title and risk of loss shall pass to Buyer as the Oil passes the flange connecting the cargo hose of the Seller's nominated barge or vessel and the Buyer's designated pipeline. v. For the delivered Jet under section 6.4, care, custody, control, title and risk of loss shall pass to Buyer as the jet passes the flange connecting the cargo hose of the Seller's tank truck and Buyer's truck unloading rack at HELCO's and MECO's respective power plant. Section 6.7 Buyer agrees to provide Seller with five (5) days advance written notice of Oil to be Delivered under Section 6.1, 6.3.ii. or 6.4, and telephone notification for Diesel to be Delivered under Section 6.2 or 6.3.i. Seller shall make all reasonable effort to comply with this notice and advise Buyer promptly if the delivery time cannot be met. Page 16 ARTICLE VII DETERMINATION OF QUALITY Section 7.1 The quality of the Oil purchased by HECO and the quality of Jet purchased by HELCO and MECO shall be determined on the basis of composite samples drawn by Seller in such a manner as to be representative of each Delivery. The quality of the Oil purchased by MECO or HELCO, i.e., barge cargos, shall be determined on the basis of composite samples drawn by Seller, collected at a point prior to entry into each barge, in such a manner as to be representative of each barge cargo. The quality of the Oil purchased by MECO- Molokai shall be determined on the basis of composite samples drawn by Seller from receiving tanks at the Kaunakakai Terminal after each delivery. The heat content of the Oil shall be determined on a monthly weighted average basis for each Buyer from the same composite samples drawn by Seller at the time and place described above. See Addendum 2 hereto for an overview on all sampling. Such samples shall be divided into three (3) parts and dated. 1. One part shall be used by Seller to determine the heat content (gross BTU) per physical gallon and, if needed, the other qualities of Article IV ("Seller's Delivered Sample"). 2. One part shall be provided to Buyer for the purpose of verifying Seller's determinations ("Buyer's Delivered Sample"). 3. One sealed part shall be provided to Buyer ("Buyer's Delivered Retain"). Section 7.2 Within sixty (60) days after the end of each month, Buyer shall give Seller notice of any disagreement with Seller's quality or heat content determination for Delivered Oil and Delivered Jet during such month. In the event that such disagreement is not resolved within thirty (30) days, Buyer's Delivered Retain shall be submitted to a mutually agreed upon independent laboratory for inspection, whose determination shall be final and binding on both parties. Seller and Buyer shall share equally the cost of such independent inspections. Page 17 Section 7.3 If Buyer and Seller agree or the independent inspector determines that the quality of Delivered Oil and Delivered Jet did not equal the qualities described in Article IV (regardless if such Oil and Jet passed tests of conditional acceptance), the Buyer and Seller shall attempt to minimize the impact. This may include specification waiver especially if use of Oil and Jet will not harm Buyer or Seller, or delivering higher quality Oil and Jet in a timely manner to produce a specification quality blend in Seller's terminal. If all such, or similar efforts fail to resolve the quality problem, then Seller at Seller's expense, shall exchange the non-specification Oil and Jet and other oil downgraded by commingling with Seller's Oil and Jet, with Oil and Jet meeting the qualities of Article IV. However, in no event shall Seller be liable for any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise allegedly caused by or based upon the qualities of the Oil and Jet. ARTICLE VIII MEASUREMENT OF QUANTITY Section 8.1 Quantities of the Oil sold and purchased under this Contract at the HMT shall be determined at the time of each Delivery by gauging the HMT tanks before and after pumping. Diesel sold and purchased under this Contract from the Oahu P/L shall be determined at the time of each Delivery by gauging Seller's tanks at its Barbers Point Refinery before and after pumping. Diesel sold and purchased under this Contract at the Kaunakakai Terminal shall be determined at the time of each Delivery by gauging Buyers' tanks at Kaunakakai before and after pumping. Volumes Delivered hereunder shall be converted to 60(degrees)F, using the latest revision of Table 6 of ASTM IP Petroleum Measurement Tables, American Edition, ASTM Designation D-1250. Measurements shall be taken by Seller and witnessed by Buyer or Buyer's agent. However, at Buyer's option, such measurements shall be taken by a mutually agreed upon independent inspector. Seller and Buyer shall share equally the Page 18 cost of independent inspections. Seller reserves the right to install meters on the Oahu P/L and to determine quantity as in Section 8.2. Section 8.2 Diesel sold and purchased under this Contract at the HDT and Jet sold and purchased by HELCO and MECO shall be determined at the time of each Delivery by reading calibrated meters, corrected in each instance to volume at 60(degrees)F in accordance with the latest issue of Table 6 of ASTM IP Petroleum Measurement Tables, American Edition, ASTM Designation D-1250. The meters used at the HDT and Seller's terminals on Hawaii and Maui shall be Seller's meters. Both Buyer and Seller shall have the right to review each other's routine certification documents. Section 8.3 If Buyer or Seller has reason to believe that the quantity of Oil and Jet stated for a particular Delivery per Sections 8.1 or 8.2 is incorrect, the party shall within sixty (60) days of the Delivery date, present the other party with documentation supporting such determination and the parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quantity, if justified, for the deliveries in question. ARTICLE IX INVOICING AND PAYMENT Section 9.1 Invoices for the sale of CIFO, Diesel, and Jet and for the services provided by Seller as outlined in Article XI shall be rendered promptly to Buyer, upon receipt of all required information. Section 9.2 Payments shall be made in U.S. dollars. Timing of payments of invoices shall be as follows: i. Invoices to HECO, MECO, MECO-Molokai and HELCO: Page 19 a. Payment for Deliveries and services from the first through the tenth calendar day of a month for which invoices have been received is due on the twentieth day of the month. b. Payment for Deliveries and services from the eleventh through the twentieth calendar day of a month for which invoices have been received is due on the last day of the month. c. Payment for Deliveries and services from the twenty-first through the last calendar day of a month for which invoices have been received is due on the tenth day of the following month. Due dates are dates payments are to reach Seller. If the due date falls on a Saturday, the payment shall be due on the preceding business day. If such date falls on a Sunday or a holiday, payment shall be due the following business day. ii. Payment for Deliveries to HT&B and YB for which invoices have been received shall be paid within thirty (30) days of the Delivery date. Section 9.3 Method of payment shall be as follows: i. Payments of HECO, MECO, MECO-Molokai, and HELCO shall be by bank wire transfer of immediately available funds to: First National Bank of Chicago, Chicago, Illinois 60607 Attention: GFTS for credit to the following accounts, depending on which Buyer is making a payment: a. HECO Chevron U.S.A. Inc. - Section #632 Account No. 1184762 Page 20 b. HELCO Chevron U.S.A. Inc. - Section #632 Account No. 1237632 c. MECO Chevron U.S.A. Inc. - Section #632 Account No. 1237636 d. MECO-Molokai Chevron U.S.A. Inc. - Section #632 Account No. 6049549 For identification purposes, all wires must clearly indicate that payment is being made by order of Buyer and indicate the invoice reference number. In addition, written documentation evidencing specific invoices being paid shall be immediately forwarded to: Chevron U.S.A. Inc P.O. Box R Concord, California 94524 ii. Payment by HT&B and YB shall be mailed to: Chevron U.S.A. c/o First Interstate Bank Dept. 7351 Los Angeles, CA 90088 Payment shall include written documentation evidencing specific invoices being paid. ARTICLE X SELLER'S FACILITIES ON OAHU Seller agrees to provide the use of its Oahu P/L for the Diesel Delivered to HECO's Waiau Power Plant per Section 6.3.ii. Page 21 ARTICLE XI SELLER'S FACILITIES ON MAUI AND HAWAII As used in this Article XI, "Buyer" will refer only to MECO or HELCO. Section 11.1 i. Seller agrees to provide MECO the use of its storage and handling facilities for Diesel Received at Kahului, Maui, and to provide HELCO the use of its storage and handling facilities for Diesel and CIFO Received at Hilo, Hawaii; for the Delivered Oil under Article VI and the third party oil purchased as a result of the force majeure conditions of Article XIII, on the terms and conditions described in this Article XI. To provide operating flexibility to a valued, long- term customer, Seller shall grant HELCO the non-exclusive right to terminal oil purchased from third parties at Seller's facility at Hilo, Hawaii up to a maximum quantity per calendar year of ------ of diesel and ------of fuel oil, which meet the specifications set out herein. Buyer agrees to schedule its deliveries such that they contain a minimum of ------ of oil such that they arrive at regular intervals. For the same reasons, Seller shall grant MECO the non-exclusive right to terminal No. 2 diesel fuel purchased from third parties at Seller's facility on Maui up to a maximum quantity of ------ per calendar year, which meets the specifications set out herein. Buyer agrees to schedule its deliveries such that they contain a ------ of diesel fuel and that they arrive at regular intervals. ii. Whenever Buyer purchases third party oil which is to be terminaled in Seller's facilities, Buyer shall obtain a sample representative of the oil in the barge cargo tanks, after the third party supplier has completed the loading of such oil into Buyer's nominated barge. See Addendum 2 hereto for an overview on all sampling. This sample shall be divided into three parts and dated. One part shall be labeled "Supplier's loaded sample" and delivered to Seller's representative as soon as possible. One part shall be labeled "Buyer's loaded sample." One part shall be sealed and labeled "Buyer's loaded retain." These samples shall indicate the quality of this mixture of purchased oil and the previous Page 22 cargo remains. To provide an early warning of any quality problems with the Received oil, Buyer agrees to perform a preliminary analysis on the Buyer's loaded sample consisting of API gravity, appearance and, in the case of diesel fuel, flash point, at the time such third party oil is loaded for transport. Buyer also agrees to deliver one copy of such preliminary analysis promptly to Seller's representative at the Honolulu Marine Terminal and to carry a second copy on board Buyer's nominated barge for delivery to Seller's representative upon arrival at the appropriate outer island terminal. Buyer further agrees that the cost of any additives which may be required to eliminate compatibility problems between third party oil and Seller's Oil at the outer island terminal shall be solely for Buyer's account. Section 11.2 Buyer shall provide Seller with estimated arrival times of the barge transporting the oil for which Buyer desires to use Seller's facilities on Maui or Hawaii. Buyer or Buyer's agent shall provide radio or phone notification to Seller's representative at each unloading location at least seven days prior to a third-party supplied oil delivery and at least 24 hours prior to a Seller supplied oil delivery. Buyer or Buyer's agent shall also provide the Captain of the Port with radio or phone notification at least 24 hours prior to any delivery. Should the estimated time of arrival change by two or more hours following the 24 hour arrival report, Buyer or Buyer's agent shall promptly report the change to Seller's representative and the Captain of the Port at the place of planned arrival. Section 11.3 i. Seller shall analyze Seller's Loaded sample of Section 6.1.iv and Buyer's supplied results from any Buyer's loaded sample of Section 11.1.ii for conditional acceptance for receiving the oil, and if warranted, analyze Seller's Loaded sample of Section 6.1.iv and Supplier's loaded sample of Section 11.1.ii for all the qualities described in Article IV, while Buyer's nominated barge is enroute to Maui or Hawaii, to reduce the risk of contaminating Seller's terminal inventories. See Addendum 2 hereto for an overview of Page 23 all sampling. If the loaded sample fails conditional acceptance, Seller shall promptly notify Buyer of any quality problems with the loaded oil. Both Buyer and Seller shall attempt to minimize the impact of any quality problem by specifications waiver especially if use of the loaded oil will not harm either Buyer or Seller, or by Buyer or Seller delivering higher quality oil in a timely manner to produce a specification quality blend at Seller's terminal. If all such, and similar, efforts fail to resolve the quality problem, then Buyer's loaded oil shall not be unloaded into Seller's terminal tanks. Buyer may return nonspecification Loaded Oil to Seller's Barbers Point refinery, in which case Seller shall replace the non-specification Loaded Oil by delivering an equal volume of Oil into Buyer's nominated barge at the HMT, in a timely manner. ii. All costs and expenses, including transportation, re-refining and handling costs incurred in returning and replacing non-specification loaded oil and Loaded Oil shall be paid by the party responsible for the contamination. Responsibility shall be determined by analyzing the Delivered Oil samples of Section 7.1 and the loaded oil samples of Section 6.1.iii and Section 11.1.ii. If Buyer and Seller cannot agree whether the Delivered Oil or the loaded oil meet the qualities specified in Article IV, then the sealed retain of the oil in question, Buyer's Delivered retain, Buyer's Loaded retain or Buyer's loaded retain shall be submitted to a mutually agreed upon independent laboratory, whose determination shall be final and binding on both parties. Seller shall have the responsibility for Buyer's transportation and handling costs for its own re-refining cost if it is determined that the qualities described in Article IV are not met by the Delivered Oil. Otherwise, Buyer shall be responsible for Seller's handling and re-refining cost and its own transportation and handling costs. The responsible party shall reimburse the other party for such costs and expenses within sixty (60) days of the delivery date of the non-specification loaded oil. However, in no event shall such party be responsible for any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise Page 24 allegedly caused by or based upon the quality of the non-specification loaded oil. Seller and Buyer shall share equally the cost of any independent inspections. Section 11.4 Buyer shall be responsible for meeting all Coast Guard dock watch requirements at Hilo, Hawaii and Kahului, Maui. Charges levied by any governmental agency for the use of their facilities at Hilo, Hawaii or Kahului, Maui, including but not limited to the State of Hawaii's wharf and pipeline fees, shall be for Buyer's account. Section 11.5 Seller will take care, custody and control of Received oil having conditionally acceptable quality per Section 11.6 at the flange connecting Seller's independently owned pipeline at each location to the multiparty diesel pipeline at Kahului Harbor, Maui and the multiparty diesel and fuel oil pipelines at Hilo Harbor, Hawaii. Title and risk of loss shall remain with Buyer. Seller shall not be responsible for any type of loss of the oil while it is in Seller's custody except when loss or damage is caused by Seller's failure to use reasonable care in receiving, handling, storing, or delivering such oil. Received oil will be commingled with Seller's Oil in Seller's tankage at Seller's Kahului, Maui or Hilo, Hawaii terminals. Section 11.6 i. Quality of Received oil at the unloading location shall be determined by testing representative samples taken from Carrier's barge tanks. See Addendum 2 hereto for an overview of all sampling. Seller, or a mutually agreed third party, shall perform the sampling and testing as prescribed in the latest API-ASTM laboratory testing standards. Samples will be divided into four parts and dated. One part shall be tested promptly per Section 11.6.ii. One part shall be labeled "Seller's Received Sample," one part shall be sealed and labeled "Seller's Received Retain" and one part shall be labeled "Buyer's Received Sample" and provided to Buyer. ii. To facilitate Buyer's barge turnaround, one part of the sample taken in Section 11.6.i will be promptly tested for its API gravity, appearance and in the case of Diesel also for its Page 25 flash point. Received Oil will be considered conditionally acceptable if its API gravity is within 0.3 degrees of its gravity delivered to Buyer under Article VI. Received oil will be considered acceptable if its API gravity is within 0.3 degrees of the Supplier's loaded sample gravity as determined in Section 11.1.ii, and for diesel cargos, if its Flash point is above its 150 (degrees)F specification of Section 4.2. iii. Notwithstanding the above conditional acceptance, Seller may use Seller's Received Sample to determine all the qualities described in Article IV for Received oil. Within thirty (30) days after each oil cargo unloading, Seller shall give Buyer notice of any claim of contamination of Seller's Oil from commingling with Received oil. In the event that such claim is not resolved within thirty (30) days of the original claim, Seller's Received Retain shall be submitted to a mutually agreed upon independent laboratory for inspection, whose determination shall be final and binding on both parties. Seller and Buyer shall share equally the cost of such independent inspections. iv. If Buyer and Seller agree or the independent inspector determines that the quality of the Received oil did not meet the qualities described in Article IV, and the most recent Delivered Oil did meet the quality described in Article IV, both Buyer and Seller shall attempt to minimize the impact of any quality problem on Buyer by waiver of Buyer's requirement to meet specifications especially if Seller's use of the oil will not significantly harm Seller, or by Buyer or Seller delivering higher quality oil in a timely manner to produce a specification quality blend at Seller's terminal. If all such, and similar, efforts fail to resolve the quality problem, then Buyer will reimburse Seller the transportation, handling and re-refining costs of exchanging Buyer's and Seller's oil, with oil meeting the qualities described in Article IV. Such reimbursement shall occur within 60 days of Seller's original claim. However, in no event shall Buyer be liable for any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise allegedly caused by or based upon the quality of the Received oil. Page 26 Section 11.7 The quantity of Received oil and Received Oil over which Seller takes custody shall be determined at the time of each barge cargo unloading by gauging Seller's terminal tank before and after pumping. Free water shall be drawn off prior to each level measurement. Volumes delivered hereunder shall be converted to 60(degrees)F, using the latest revision of Table 6 of ASTM IP Petroleum Measurement Tables, American Edition, ASTM Designation D-1250. Measurements shall be taken by Seller and witnessed by Buyer or Buyer's agent. However, at Buyer's option, such measurement shall be taken by a mutually agreed upon independent inspector. Buyer and Seller shall share equally the cost of independent inspections. Section 11.8 In the event that Buyer and Seller have agreed to commingle their oil in a barge or vessel compartment to reduce freight costs, and there are discrepancies between either the quantities of oil loaded per Section 6.1 and unloaded per Section 11.7 or the qualities of oil loaded per Section 7.1 and unloaded per Section 11.6, then Buyer and Seller shall share the benefits or losses of the discrepancy proportionally to the loaded volumes. Section 11.9 Buyer will provide Seller's terminal representative, during normal working hours, at least 24-hour notice of any transfers required from Seller's facilities in Kahului or Hilo. Section 11.10 Buyer shall regain care, custody and control of Returned Fuel Oil at the flange connecting Seller's Hilo terminal pipeline to Buyer's pipeline. i. The quantity of Fuel Oil over which Seller returns custody shall be determined at the time of each transfer by gauging Seller's terminal tanks before and after pumping. Volumes Returned hereunder shall be converted to 60(degrees)F, using the latest revision of Table 6 of ASTM IP Petroleum Measurement Tables, American Edition, ASTM Designation D-1250. Measurements shall be taken by Seller and witnessed by Buyer or Buyer's agent. However, at Buyer option, such measurements shall be taken by a mutually agreed upon Page 27 independent inspector. Buyer and Seller shall share equally the cost of independent inspections. ii. Buyer and Seller agree that Buyer shall maintain a positive inventory of Fuel Oil at Seller's Hilo terminal for Buyer's use, but acknowledge that a small negative inventory may occasionally result after Fuel Oil custody transfers from Seller to Buyer. Seller shall maintain a record of Buyer's net Fuel Oil inventory stored in its Hilo terminal based on receipts as determined in Section 11.7 and returns as determined in Section 11.10.i. Seller will provide book inventory records once each week, convenient to Seller's normal weekly inventory period. If at the end of any annual period, the net Fuel Oil inventory is negative, Seller will invoice Buyer and Buyer will pay Seller an amount equal to the net negative inventory in barrels multiplied by the sum of the December CIFO sales price at the end of the annual period per Section 5.1 and the December commercial freight rate charged by HELCO's carrier for a minimum cargo size of 38,000 barrels to Seller at the end of the annual period for CIFO transport between Honolulu Harbor, Oahu and Hilo Harbor, Hawaii. Section 11.11 Buyer shall regain care, custody and control of Returned diesel at the end of the fill pipe connecting Seller's terminal pipelines to Carrier's tank trucks. Transfers will be made in minimum 5,000 gallons per delivery load. i. The quantity of diesel over which Seller returns custody shall be determined at the time of each transfer by reading Seller's calibrated meters corrected in each instance to volume at 60(degrees)F using the latest revision of Table 6 of ASTM IP Petroleum Measurement Tables, American Edition, ASTM Designation D-1250. If Buyer or Seller have reason to believe that the quantity of Returned diesel stated for a particular transfer is incorrect, that party shall within fifteen days of the transfer date, present the other party with documentation supporting such determination and the parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quantity, if justified, for the transfers in question. Page 28 ii. Seller shall maintain records of Buyer's net diesel inventories stored at each of its Kahului, Maui and Hilo, Hawaii terminals, based on receipts as determined in Section 11.7 and returns as determined in Section 11.11.i. Seller will provide book inventory records once each week, convenient to Seller's normal weekly inventory period. iii. Seller will periodically reconcile meter measurements with tank gaugings. Buyer may review Seller's reconciliation calculations. However, there will be no retroactive adjustments to the volumes delivered or received as a result of this procedure. Section 11.12 Seller shall be under no obligation to provide Buyer quantities of Returned oil greater than Buyer's current net oil inventory. However, Seller will attempt to meet Buyer's unanticipated needs, after considering the needs of its other customers and its own available inventory. Section 11.13 i. Returned oil transferred by Seller shall meet the qualities described in Article IV. Seller shall verify the quality of the Returned oil by taking a representative sample of the oil in Seller's tanks on Maui and Hawaii after each receipt of Buyer's or Seller's oil. See Addendum 2 hereto for an overview of all sampling. This sample shall be promptly tested by Seller for its API gravity, appearance and in the case of diesel also for its flash point. Buyer and Seller agree that successful passage of the prompt test on this sample is sufficient evidence for Seller to return oil to Buyer, without limiting Buyer's rights within Section 11.13.ii. Seller shall also take samples representative of the Returned oil after each receipt of Buyer's or Seller's oil into Seller's terminal. These samples will be divided into three parts and dated. One part shall be labeled "Seller's Returned Sample." One part shall be sealed and labeled "Buyer's Returned Retain" and one part shall be labeled "Buyer's Returned Sample." Both shall be provided to Buyer. ii. Notwithstanding the above conditional acceptance, Buyer may use Buyer's Returned Sample to determine all the qualities described in Article IV for the Returned oil. Within Page 29 thirty (30) days after each oil delivery, Buyer shall give Seller notice of any claim of contamination and of resulting losses. In the event that such claim is not resolved within thirty (30) days of the original claim, Buyer's Returned Retain shall be submitted to a mutually agreed upon independent laboratory for inspection, whose determination shall be final and binding on both parties. Seller and Buyer share equally the cost of such independent inspections. iii. If Buyer and Seller agree or the independent inspector determines that the quality of the Returned oil did not meet the qualities described in Article IV and that the most recent Received Oil and Received oil did meet the qualities described in Article IV, both Buyer and Seller shall attempt to minimize the impact of any quality problem on Seller by waiver of Seller's requirement to meet specifications, especially if Buyer's use of the oil will not significantly harm Buyer, or by Seller returning higher quality oil to produce a specification quality blend at Buyer's plants. If all such, and similar, efforts fail to resolve the quality problem, then Seller will, at Seller's expense, exchange Buyer's Returned oil and, if appropriate, any of Buyer's other similar oil which has been downgraded by commingling with the Returned oil, with oil meeting the qualities described in Article IV. Seller shall make its best, reasonable effort to replace Buyer's oil in a timely manner. However, in no event shall Seller be liable for any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise allegedly caused by or based upon the quality of the Returned oil. Section 11.14 Seller will invoice Buyer and Buyer will pay Seller per ------------- Article IX, terminating and handling fees based on the quantities of oil determined in Section 11.7 at the rates listed below. i. At Kahului, Maui, the terminating and handling fee shall be - -------------- Page 30 ii. At Hilo, Hawaii, the terminaling and handling fee shall be --------- For the purpose of invoicing, the terminaling and handling services shall be considered received by Buyer when Seller first takes custody of Buyer's oil per Section 11.5. ARTICLE XII CONTINGENCIES Section 12.1 As used in this Article XII, the term "contingency" means: (a) any event reasonably beyond the control of the party affected; (b) compliance, voluntary or involuntary, with a direction or request of any government or person purporting to act with governmental authority; excluding, however, any such direction or request restricting or otherwise regulating combustion of the oil to be purchased by Buyer hereunder, the effect of which restrictions or regulation upon the parties' performance shall be governed by Section 12.5 of this Contract; (c) total or partial expropriation, nationalization, confiscation, requisitioning or abrogation or breach of a government contract or concession; (d) closing of, or restriction on the use of, a port or pipeline; (e) maritime peril (including but not limited to, negligence in navigation or management of vessel, collision, stranding, destruction, or loss of vessel), storm, earthquake, flood; (f) accident, fire, explosion; (g) hostilities or war (declared or undeclared), embargo, blockage, riot, civil unrest, sabotage, revolution, insurrection; (h) strike or other labor difficulty (whomever's employees are involved), even though the strike or other labor difficulty could be settled by acceding to the demands of a labor group; or, (i) loss or shortage of supply, production, manufacturing, distribution, refining, transportation, delivery facilities, receiving facilities, equipment, labor, material, power Page 31 generation or power distribution caused by circumstances which the affected party is not able to overcome by the exercise of reasonable diligence or which the affected party is able to overcome only at substantial additional expense in relation to the expected revenue, benefits or rights related directly to this Contract. Section 12.2 Seller shall not be obligated to sell or deliver Oil or Jet to the extent that performance of this Contract is prevented, restricted or delayed by a contingency which significantly affects Seller's ability to supply, manufacture or transport Oil or Jet to Buyer under this Contract from Seller's U.S. West Coast and Hawaiian refineries. In such circumstances, Deliveries of Oil or Jet to Buyer may be reduced on a basis as equitable to Buyer as to Seller's and its affiliates' other customers of crude and petroleum products, and Seller shall not be obligated to acquire additional crude, oil or jet but to the extent that it does acquire additional crude, oil or jet, Buyer shall be entitled to an equitable share of the oil or jet acquired or derived from the crude acquired, at a price to be agreed from time to time. Section 12.3 Buyer shall not be obligated to purchase, receive or use Oil or Jet to the extent that performance of this Contract in the customary manner is prevented, restricted or delayed by a contingency. In such circumstances, purchases from Seller may be reduced on any basis as equitable to Seller as to Buyer's other suppliers of oil or jet. Section 12.4 If at any time any price determined under this Contract cannot be given effect because to do so would violate a direction or request of any government or person purporting to act with governmental authority, Buyer and Seller shall attempt to agree on an alternate course of action but failing agreement within 10 days the party adversely affected may suspend performance with respect to the quantity of Oil or Jet affected by the direction or request. Page 32 Section 12.5 To the extent that any governmental regulation requires combustion of oil or jet meeting specifications other than those in Article IV, Buyer and Seller shall negotiate in good faith to agree on an alternative course of action that will allow Buyer to comply with such regulation while purchasing the equivalent of the full quantity of oil or jet it would be required to purchase under Article III, at a price and on other terms and conditions that are fair to both parties. Seller shall have no obligation to deliver oil or jet meeting new specifications if it is not available for purchase from third parties and Seller cannot manufacture such oil or jet in existing facilities without new capital investment. If Buyer and Seller do not agree on such an alternative course of action, then Buyer may comply with such regulation in any reasonable manner it chooses, including the option to purchase from other sources for its plant located within the area in which such regulation specifically applies, fuels which will enable Buyer to comply with such regulation. In such case, Buyer's minimum purchase requirement under Article III shall be reduced accordingly. Section 12.6 Seller's obligations under this Contract shall be contingent on Seller's continued ownership or operation of its refining or delivery facilities in Hawaii or the U.S. West Coast. Seller shall have the right to terminate this Contract in the event the ownership and operation of its refining and delivery facilities in Hawaii and the U.S. West Coast are transferred to an entity other than an affiliate. Seller shall give Buyer 180 days' written notice. ARTICLE XIII EFFECT OF SUSPENSION OR REDUCTION Section 13.1 In the event of any suspension of sales and Deliveries under Article XII, Seller shall not be obligated to sell and Buyer shall not be obligated to buy, after the period of suspension or reduction, the undelivered quantity of Oil or Jet which normally would have been sold and delivered hereunder during the period of suspension or reduction. Page 33 Section 13.2 If sales and Deliveries are suspended under Article XII for more than 180 days, Seller or Buyer shall then have the option while such suspension continues to terminate its obligations to the other party under this Contract on 30 days' written notice to the other party. Section 13.3 Any party which relies upon Article XII shall give the other party prompt notice thereof specifying the anticipated amount and duration of any suspension or reduction of Deliveries. It shall also give prompt notice when it no longer expects to rely on Article XII and Deliveries shall be reinstated subject to all conditions of this Contract, unless this Contract has been terminated previously under Section 13.2. Section 13.4 Nothing in Article XII shall relieve Buyer of the obligations to pay in full in United States currency for the Oil or Jet sold and Delivered hereunder and for other amounts due to Buyer to Seller under this Contract, nor relieve Seller of the obligation to return to Buyer the net positive inventory of Buyer's oil stored in Seller's Hilo, Hawaii and Kahului, Maui terminals. Section 13.5 While Deliveries are suspended or reduced by Seller pursuant to Article XII, it shall not be a breach of this Contract for Buyer to buy from a supplier other than Seller the quantities of Oil or Jet which Seller does not Deliver. During this period of time, there will be no minimum volume requirements. After any suspension or reduction has ended, minimum and maximum volume requirements for the semiannual period in which the suspension or reduction occurred will be reduced in proportion to the ratio of the number of days within the semiannual period during which no suspension or reduction was in effect, to the number of days within the semiannual period. Page 34 ARTICLE XIV WAIVER AND NONASSIGNABILITY Section 14.1 Waiver by one party of the other's breach of any provision of this Contract shall not be deemed a waiver of any subsequent or continuing breach of such provisions or of the breach of any other provision or provisions hereof. Section 14.2 This Contract shall not be assignable by either party without the written consent of the other, which shall not be unreasonably withheld, except that Seller may assign this Contract to any affiliate, provided that any such assignment shall not release Seller from any of its obligations hereunder, and except that HECO, MECO, MECO-Molokai, and HELCO may assign their interests in the Contract to the Trustee under their respective First Mortgage Bond Indentures. Seller does not, by agreement to such an assignment, waive any right it may have to terminate this Contract for any breach hereof occurring at any time before or after any such assignment or release Buyer of any obligations arising under this Contract after any such assignment. Following any such assignment, no further assignment may be made without the consent of Seller. ARTICLE XV CONFLICT OF INTEREST Conflicts of interest related to this Contract are strictly prohibited. Except as otherwise expressly provided herein, neither party nor any director, employee or agent of a party shall give to or receive from any director, employee or agent of the other party any gift, entertainment or other favor of significant value, or any commission, fee or rebate. Likewise, neither party nor any director, employee or agent of a party shall enter into any business arrangement with any director, employee or agent of the other party (or any affiliate), unless such person is acting for and on behalf of the other party, without prior written notification thereof to the other party. In the event of any violation of this paragraph, including any violation occurring prior to the date of this Contract which resulted directly or indirectly in one party's consent to enter into this Page 35 Contract with the other party, such party may, at its sole option, terminate this Contract at any time and, except for Buyer's obligation to pay in full in United States currency for the Oil sold and Delivered hereunder and for other amounts due by Buyer to Seller under this Contract, and for Seller's obligation to return to Buyer the net positive inventory of Buyer's oil stored in Seller's Hilo, Hawaii and Kahului, Maui terminals, shall be relieved of any further obligation under this Contract. Both parties agree to immediately notify the other of any known violation of this Article. ARTICLE XVI DEFAULT If Buyer or Seller considers the other party to be in default of any obligation under this Contract, such party shall give the other party notice thereof. Such other party shall then have 30 days in which to remedy such default. If the default is not cured, the other party may, without prejudice to any other right or remedy of such party in respect of such breach, terminate its obligations under this Contract, except for Buyer's obligation to pay in full in United States currency for the Oil or Jet sold and delivered hereunder and for other amounts due by Buyer to Seller under this Contract, and for Seller's obligation to return to Buyer the net positive inventory of Buyer's oil stored in Seller's Hilo, Hawaii and Kahului, Maui terminals, by 45 days' written notice to the party in breach. Any termination shall be without prejudice to accrued rights. All rights and remedies hereunder are independent of each other and election of one remedy shall not exclude another. Except as provided under Sections 18.2 and 18.4, in no event shall either party be liable for any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise. Seller's termination of its obligations to a Buyer in this Contract due to default by that Buyer shall not terminate Seller's obligations to the remaining Buyers not in default of this Contract. Page 36 ARTICLE XVII APPLICABLE LAW This Contract shall be construed in accordance with, and all disputes arising hereunder shall be determined in accordance with, the local law of the State of Hawaii, U.S.A. ARTICLE XVIII INDEMNITY Section 18.1 Seller shall indemnify, defend and hold harmless Buyer, its directors, officers, employees and agents (including but not limited to affiliates and contractors and their employees) from and against all liabilities, damages, losses, penalties, claims, demands, suits, costs, expenses (including reasonable attorneys' fees), and proceedings of any nature whatsoever for personal injury (including death), or property damage, including but not limited to Buyer's facilities (collectively "Injury or Damage"), that results from non-specification or contaminated Delivered Oil or Jet, or that arises out of or is in any manner connected with the Delivery or Receipt of Oil or Jet related to this Contract at Seller's facilities when in the custody of Seller or the transportation of Oil or Jet related to this Contract when in the custody of Seller, except to the extent that such Injury or Damage may be attributable to the negligence or willful action of Buyer. This Section 18.1 shall not include any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise. Section 18.2 Without limiting the generality of Section 18.1, Seller shall indemnify, defend and hold harmless Buyer, its directors, officers, employees and agents (including but not limited to affiliates and contractors and their employees) from and against all liabilities, damages, losses, penalties, claims, demands, suits, costs, expenses, and proceedings of any nature whatsoever directly or indirectly arising out of or attributable to the release, threatened release, discharge, disposal or presence of Oil, Jet or hazardous material related to this Contract when in the custody of Seller, or of MECO-Molokai Diesel related to this Contract when in the custody Page 37 of any carrier, except to the extent that such release, threatened release, discharge, disposal or presence of Oil, Jet or hazardous material may be attributable to the negligence or willful action of Buyer, including without limitation: (1) all foreseeable and unforeseeable consequential damages; (2) the reasonable costs of any required or necessary repair, cleanup or detoxification of an area of oil, jet or hazardous material and the preparation and implementation of any closure, remedial or other required plans; (3) the reasonable costs of the investigation of any environmental claims by Buyer; (4) the reasonable costs of Buyer's enforcement of this Contract; and (5) all reasonable costs and expenses incurred by Buyer in connection with clauses (1), (2), (3), and (4), including without limitation reasonable attorneys' fees and court costs. Section 18.3 Buyer shall indemnify, defend and hold harmless Seller, its directors, officers, employees and agents (including but not limited to affiliates and contractors and their employees) from and against all liabilities, damages, losses, penalties, claims, demands, suits, costs, expenses (including reasonable attorneys' fees), and proceedings of any nature whatsoever for personal injury (including death), or property damage, including but not limited to Seller's facilities (collectively "Injury or Damage"), that results from non-specification or contaminated Received oil or jet, or that arises out of or is in any manner connected with the delivery or receipt of oil or jet at Seller's facilities when in the custody of Buyer, any carrier or subsequent buyer of oil or jet related to this Contract or the transportation of oil or jet when in the custody of Buyer, any carrier or subsequent buyer of oil or jet related to this Contract, except to the extent that such Injury or Damage may be attributable to the negligence or willful action of Seller. This Section 18.3 shall not include any indirect, consequential, special or incidental damages of any kind whether based in contract, tort (including without limitation negligence or strict liability), warranty or otherwise. Section 18.4 Without limiting the generality of Section 18.3, Buyer shall indemnify, defend and hold harmless Seller, its directors, officers, employees and agents (including but not limited to affiliates and contractors and their employees) from and against all liabilities, damages, Page 38 losses, penalties, claims, demands, suits, costs, expenses, and proceedings of any nature whatsoever directly or indirectly arising out of or attributable to the release, threatened release, discharge, disposal or presence of oil, jet or hazardous material related to this Contract when in the custody of Buyer, any carrier (except any carrier of MECO-Molokai diesel related to this Contract) or subsequent buyer of oil or jet related to this Contract, except to the extent that such release, threatened release, discharge, disposal or presence of oil, jet or hazardous material may be attributable to the negligence or willful action of Seller, including without limitation: (1) all foreseeable and unforeseeable consequential damages; (2) the reasonable costs of any required or necessary repair, cleanup or detoxification of an area of oil, jet or hazardous material and the preparation and implementation of any closure, remedial or other required plans; (3) the reasonable costs of the investigation of any environmental claims by Seller; (4) the reasonable costs of Seller's enforcement of this Contract; and (5) all reasonable costs and expenses incurred by Seller in connection with clauses (1), (2), (3), and (4), including without limitation reasonable attorneys' fees and court costs. ARTICLE XIX PUBLIC UTILITIES COMMISSION Section 19.1 This Contract is required to be filed with the Hawaii Public Utilities Commission ("PUC") for approval. If in the proceedings initiated as a result of the filing of this Contract the PUC disapproves or fails to authorize the recovery of the fuel costs incurred under this Contract through Buyer's Energy Cost Adjustment Clause, Buyer may terminate this Contract by 30 days' written notice to Seller. Section 19.2 In the event that a Decision and Order or other action by a governmental regulatory body impairs Seller's ability to enforce any terminal and safety protection or operation provisions under this Contract, Buyer and Seller shall attempt to agree on an alternate course of action, but failing agreement within 10 days, the Seller may suspend performance with respect to Page 39 the quantity of oil or jet affected by said Decision and Order after giving Buyer 90 days' written notice. ARTICLE XX INSURANCE Section 20.1 Without in any way limiting Buyer's liability pursuant to this Contract, Buyer shall maintain and require any carrier or subsequent buyer of oil or jet related to this Contract to maintain the following insurance and all insurance that may be required under the applicable laws, ordinances, and regulations of any governmental authority: i. Workers' Compensation and Employers' Liability Insurance as prescribed by applicable law, including insurance covering liability under the Longshoremen's and Harbor Workers' Act, the Jones Act and the Outer Continental Shelf Land Act, if applicable. ii. Commercial General Liability Insurance including Bodily Injury and Property Damage Insurance with a limit not less than $1,000,000 combined single limit per occurrence. iii. Automobile Bodily Injury and Property Damage Liability Insurance on all owned, non-owned and hired vehicles used in receiving oil or jet from Seller's facilities with a limit not less than $1,000,000 combined single limit per occurrence for bodily injury and property damage. iv. Hull and Machinery Insurance including collision liability and tower's liability on vessels engaged in towage with a limit at least equal to the actual value of each vessel and barge. v. Marine Insurance under one of the two following options: Option One: Protection and Indemnity Insurance including coverage for injuries to or death of masters, mates and crew and excess collision liabilities. The limits of such insurance shall not be less than $25 million per occurrence. Vessel pollution liability insurance including coverage for TOVALOP liabilities and Page 40 pollution liabilities imposed by federal and state laws now or hereafter in effect in an amount not less than $500 million; or, Option Two: Protection and Indemnity Insurance on a full entry basis with an International Group P&I Club. Such insurance shall include, but not be limited to, coverage for injuries to or death of masters, mates and crew; excess collision liabilities and pollution liabilities imposed by federal and state laws now or hereafter in effect as well as TOVALOP liabilities (if applicable). Such insurance shall be unlimited as per International Group, P&I Club rules except for pollution liabilities which shall be limited to $500 million or the maximum pollution limit offered by the P&I Clubs of the International Group. Section 20.2 The above insurance shall include a requirement that the insurer provide Seller with 30 days' written notice prior to the effective date of any cancellation or material change of the insurance. The insurance specified in Sections 20.1 (i) and 20.1 (iv) shall contain a waiver of subrogation against Seller and an assignment of statutory lien, if applicable. The insurance specified in Sections 20.1 (ii), 20.1 (iii), and 20.1 (v) Option One Protection and Indemnity Insurance shall name Seller as additional insured. Section 20.3 Before performance of this Contract, Buyer shall provide Seller with certificates or other documentary evidence satisfactory to Seller of the insurance coverages and endorsements. Section 20.4 Without in any way limiting Seller's liability, Seller shall obtain from any Seller carrier or subsequent buyer from Seller of oil or jet related to this Contract the insurance coverages and endorsements set forth in this Article excepting that both Seller and Buyer be named as additional insureds. Page 41 Section 20.5 The terminaling and handling fees listed in Section 11.14 do not include any insurance covering loss of Buyer's oil or jet while it is in the custody of Seller. It is expressly understood and agreed that insurance, if any is desired by Buyer, shall be carried by Buyer at its own expense. ARTICLE XXI SAFETY AND TERMINAL PROTECTION Section 21.1 Any buyer or carrier of oil or jet related to this Contract or their agents shall comply with all of the operating and safety regulations of Seller, as amended from time-to-time, when alongside, upon, or when approaching the premises of Seller for the purpose of loading oil or jet related to this Contract or when departing Seller's premises after loading oil or jet related to this Contract. In particular, all smoking shall be limited to such locations and occasions as are specifically authorized in writing by Seller. If Seller determines that an unsafe condition exists, Seller may, at its absolute discretion, cease the loading or unloading operations and order any buyer or carrier of oil or jet related to this Contract or their agents to leave its place of mooring. Any loss or damage incurred by Seller, any buyer or carrier of oil or jet related to this Contract or their agents due to any violation by any buyer or carrier of oil or jet related to this Contract or their agents of Seller's operating and safety regulations shall be for Buyer's or Carrier's account. Copies of Seller's operating and safety regulations are available upon request. Section 21.2 In addition to its rights under Section 21.1, Seller shall have the right to refuse acceptance of any barge or vessel nominated by Buyer to load or discharge if in Seller's Terminal's sole opinion such barge or vessel for any reason is unacceptable. Seller's Terminal's acceptance or rejection of Buyer's nominated barge or vessel shall be communicated to Buyer within forty- eight (48) hours after the Terminal's receipt of nomination, and in the event Buyer's barge nomination is rejected, Seller shall provide Buyer satisfactory documentation of the basis for the rejection of such nomination. Seller's Terminal's acceptance or rejection of any barge or Page 42 vessel shall not constitute a continuing acceptance or rejection of such barge or vessel for subsequent loading or discharge. Seller shall not be liable for any loss, damage or delay caused by its rejection of a vessel nomination hereunder, nor any loss, damage or delay caused by its rejection of a vessel for failure to comply pursuant to Section 21.1. In no event shall the acceptance of a vessel by Seller be construed in any manner as a representation as to the vessel's operational, environmental or safety status. Neither Buyer nor any other party shall be entitled to rely on any such acceptance of a vessel by Seller hereunder. ARTICLE XXII POLLUTION MITIGATION Section 22.1 In the event an escape or discharge of oil or jet occurs from any barge or vessel carrying oil or jet related to this Contract and causes or threatens to cause pollution damage, Buyer or carrier will promptly take whatever measures are necessary to prevent or mitigate such damage. Buyer hereby authorizes Seller, or its agent, at Seller's option, upon notice to Buyer or master on the tug, to undertake such measures as are reasonably necessary to prevent or mitigate the pollution damage. Seller or its agent shall keep Buyer advised of the nature and results of any such measures taken and, if time permits, intended to be taken. Any of the aforementioned measures shall be at Buyer's sole expense (except to the extent that such escape or discharge was caused by the negligence or willful action of Seller or its agent), provided that if Buyer considers said measures should be discontinued, Buyer shall so notify Seller or its agent and thereafter Seller or its agent shall have no right to continue said measures at Buyer's authority or expense except as provided in Section 18.4. This provision shall be applicable only between Buyer and Seller and shall not affect, as between Buyer and Seller, any liability of Buyer to any third parties, including but not limited to governments. Section 22.2 In addition to its duties under Section 22.1, Buyer agrees to cooperate with all efforts and to pay all reasonable costs associated with preventive booming or other preventive measures that Seller reasonably determines is advisable on an isolated or routine basis. Page 43 ARTICLE XXIII MISCELLANEOUS Section 23.1 Headings of the Articles and Sections are for convenient reference only and are not to be considered part of this Contract. Section 23.2 This document contains the entire agreement between the parties covering the subject matter and cancels, as of the effective date hereof, all prior agreements of any kind between the parties covering such subject matter and any amendments thereto. There are no other agreements which constitute any part of the consideration for, or any condition to, either party's compliance with its obligations under this Contract. Section 23.3 Except as otherwise expressly provided herein, all notices shall be given in writing, by letter, facsimile, telegraph or telex to the following addresses, or such other address as the parties may designate by notice, and shall be deemed given upon receipt. Seller: Manager, Petroleum Coke, Heavy Fuels & Sulfur Chevron U.S.A. Inc. P.O. Box 7006 San Francisco, CA 94120-7006 FAX: (415) 894-1195 Buyer: Manager, Power Supply Services Department Hawaiian Electric Company, Inc. Box 2750 Honolulu, HI 96840-0001 FAX: (808) 543-7788 Page 44 The Manager, Power Supply Services Department, for Hawaiian Electric Company, Inc., shall be responsible for forwarding notices to the other parties to this Contract. Section 23.4 If any term or provision, or any part of any term or provision, of this Contract is held by any court or other competent authority to be illegal or unenforceable, the remaining terms, provisions, rights and obligations shall not be affected. Section 23.5 This Contract shall inure to the benefit of and be binding upon the parties hereto, their successors and permitted assigns. Section 23.6 Effective as of the Effective Date of the Term hereunder, this Contract hereby supersedes that certain Inter-Island Industrial Fuel Oil and Diesel Fuel Contract between the parties dated September 23, 1991, and all amendments thereto. IN WITNESS WHEREOF, the parties have caused these presents to become effective as of the day and year first hereinabove written. ACCEPTED AND AGREED: "Seller" CHEVRON U.S.A. INC. BY: /s/ Phillip H. Fisher Phillip H. Fisher TITLE: Manager, Petroleum Coke, Heavy Fuels & Sulfur Page 45 "Buyers" HAWAIIAN ELECTRIC COMPANY, INC. MAUI ELECTRIC COMPANY, LTD. BY: /s/ Edward Y. Hirata BY: /s/ Edward Y. Hirata Edward Y. Hirata Edward Y. Hirata (Printed or Typed Name) (Printed or Typed Name) Vice President TITLE: Regulatory Affairs TITLE: Vice President BY: /s/ Molly M. Egged BY: /s/ Molly M. Egged Molly M. Egged Molly M. Egged (Printed or Typed Name) (Printed or Typed Name) TITLE: Secretary TITLE: Secretary HAWAII ELECTRIC LIGHT COMPANY, INC. HAWAIIAN TUG & BARGE CORP. BY: /s/ Edward Y. Hirata BY: /s/ Glenn K. Y. Hong Edward Y. Hirata President Glenn K. Y. Hong (Printed or Typed Name) (Printed or Typed Name) TITLE: Vice President TITLE: President BY: /s/ Molly M. Egged BY: /s/ Molly M. Egged Molly M. Egged Molly M. Egged (Printed or Typed Name) (Printed or Typed Name) TITLE: Secretary TITLE: Secretary Page 46 YOUNG BROTHERS, LIMITED BY: /s/ Glenn K. Y. Hong Glenn K. Y. Hong (Printed or Typed Name) TITLE: President BY: /s/ Molly M. Egged Molly M. Egged (Printed or Typed Name) TITLE: Secretary Page 47 ADDENDUM NO. 1 SAMPLE PRICE CALCULATIONS-NOVEMBER, 1995 I. FUEL OIL A. FI = Current Index for CIFO
Date High Low Average ---- ---- --- ------- 9/26/95 $78.50 $69.50 $74.000 10/3/95 82.00 80.00 81.000 10/10/95 80.00 59.00 69.500 10/17/95 83.00 78.00 80.500 ------ $76.250/M TON
FI =$76.250/6.368 Bbl/M Ton =$11.974 per barrel B. TF - Hawaii General Excise Tax at 4.167% + Hawaii Environmental Response Tax at $0.05/barrel -- = -------------------------------- = ------------------------- C. PF - Price per physical barrel PF = ------------------ PF = -------------------------------- = ------------------ HEAT CONTENT ADJUSTMENT CALCULATION: LAB ANALYSIS: 6.150 MMBtu/BBL ADJUSTED TO: 6.200 MMBtu/BBL ADJUSTED PRICE = (6.150/6.200) x ----- = --------------- II. DIESEL FUEL NO. 2 A. DI = Current Index for No. 2 Diesel Fuel
Date Superfund High Low Average Superfund - ---- --------- ---- --- ----------------- 9/21/95 $0.0023 $0.5850 $0.5800 $0.5848 9/28/95 0.0023 0.5950 0.5900 0.5948 10/5/95 0.0023 0.5900 0.5850 0.5898 10/12/95 0.0023 0.5900 0.5800 0.5873 10/19/95 0.0023 0.5800 0.5750 0.5798 $0.5873/gal
DI = $0.5873 per gallon B. --------------------------------------------- ------ = ------------------------------------------- TD - Hawaii General Excise Tax at 4.167% For calculation of PD1: TD1 = --------------------------------------- = --------------------------------------- For calculation of PD2: TD2 = ---------------------------------------- = ---------------------------------------- C. PD1 - Price per physical gallon for Diesel Fuel No. 2 purchased by HECO, MECO, HELCO, HT&B, or YB. PD1 = ----------------------------------------- = ----------------------------------------- = ----------------------------------------- HEAT CONTENT ADJUSTMENT CALCULATION: LAB ANALYSIS: 136,000 Btu/Gal ADJUSTED TO: 139,000 Btu/Gal ADJUSTED PRICE = (136,000/139,000) x ----------- = ------------------------------- D. PD2 - Price per physical gallon for Diesel Fuel No. 2 purchased by MECO - Molokai PD2 = ------------------------------ PD2 = ------------------------------ = ------------------------------ HEAT CONTENT ADJUSTMENT CALCULATION: LAB ANALYSIS: 136,000 Btu/Gal ADJUSTED TO: 139,000 Btu/Gal ADJUSTED PRICE = (136,000/139,000) x ------------ = --------------------------------- III. JET FUEL A. JI - Current Index for Jet Fuel
Date High Low Average - ---- ---- --- ------- 9/22/95 $0.5750 $0.5650 $0.5700 9/29/95 0.5900 0.5800 0.5850 10/6/95 0.5750 0.5675 0.5713 10/13/95 0.5850 0.5750 0.5800 10/20/95 0.5750 0.5675 0.5713 ------- $0.5755/gal
JI = $0.5755 per gallon B. TJ - Hawaii General Excise Tax at 4.167% TJ = ($0.5755 + $0.0790) x 0.04167 = $0.0273 per gallon C. PJ - Price per physical barrel of jet PJ = JI + $0.0790 + TJ = $0.5755 + $0.0790 + $0.0273 = $0.6818 per gallon ADDENDUM NO. 2 QUALITY CONTROL SAMPLES SUMMARY
Frequency Sample Sample Method & Type Label Tanking Analysis Location 1. Refinery Production --- After Each Tank Receipt After Each Receipt Composite from Refinery Tank 2. HMT Inventory --- After Each Tank Receipt After Each Receipt Composite from HMT Tank 3. Delivered A. Buyer's During Each Barge Loading Only if Necessary Drip From Loading Line at Sample or Monthly HMT or Composite from B. Seller's Seller's Tanks at Barbers Sample Point C. Buyer's Retain 4. Loaded A. Seller's After Each Barge Loading A. After Each Loading Composite from Barge Tank Sample B. Only if Necessary at HMT B. Buyer's Retain 5. Loaded (Third- A. Buyer's After Each Barge Loading of A. After Each Loading Composite from Barge Party) Sample Third-Party Oil B. (Only if Necessary Tanks at Third-Party B. Supplier's C. ( Supplier's Dock Sample C. Buyer's Retain 6. Received A. Prompt Before Each Barge A. Before Each Unloading Composite from Barge B. Buyer's Unloading Whether Buyer's B. (Only if Necessary Tanks at Hilo or Kahului Sample or Seller's C. ( Harbor C. Seller's D. ( Sample D. Seller's Retain 7. Returned A. Prompt After Each Barge Unloading A. After Each Barge Composite from Seller's B. Buyer's Whether Buyer's or Seller's Unloading Tanks at Hilo or Kahului Sample B. (Only if Necessary Terminals C. Seller's C. ( Sample D. Buyer's Retain Applicable Contract Selection Sample Sample Action on Type Taking Analysis Failure 1. Refinery Production N/A N/A N/A 2. HMT Inventory N/A N/A N/A 3. Delivered 7.1 7.2 7.3 4. Loaded 6.1iii 11.3i 11.3i & 11.3ii 5. Loaded (Third- 11.1ii 11.3i 11.3i & 11.3ii Party) 6. Received A. (11.6i 11.6ii 11.6iv B. (11.6i 11.6iii 11.6iv C. ( D. ( 7. Returned A. 11.13i 11.13i 11.13iii B. (11.13i 11.13ii 11.13iii C. ( D. (
Description of Addendum No. 2 to the Inter-Island Industrial Fuel and Diesel Fuel Contract by and between Chevron U.S.A. Inc. and Hawaiian Electric Company, Inc., Maui Electric Company, Ltd., Hawaii Electric Light Company, Inc., Hawaiian Tug & Barge Corp. and Young Brothers, Ltd. dated November 20, 1995 (the "Interisland Contract"): Page 2: Page two of Addendum No. 2 consists of one page entitled "ADDENDUM NO. 2 - QUALITY CONTROL SAMPLES SCHEMATIC" which in addition to the printed text, includes a diagram of the flow of 'DIESEL FUEL" and "INDUSTRIAL FUEL OIL" from refinery or third-party source to purchasers' locations, then to supplier's marine terminal where fuel is to be loaded into a vessel, then to the harbor where the vessel is to be discharged, through a multi-party pipeline, to the supplier's, purchaser's or a third-party terminal at the purchaser's destination island, and then to the purchaser. At numerous points in the flow of fuel sold, shipped and stored under the Interisland Contract, there are letters referencing 11 notes which are located at the bottom of the form and which provide a sample name, description, point of custody transfer, type of analysis to be performed or description of an inspection step. EX-10.11 4 LOW SULPHER FUEL OIL SUPPLY CONTRACT HECO EXHIBIT 10.11 LOW SULFUR FUEL OIL SUPPLY CONTRACT BETWEEN BHP PETROLEUM AMERICAS REFINING INC. AND HAWAIIAN ELECTRIC COMPANY, INC. This Contract is made by and between BHP PETROLEUM AMERICAS REFINING INC., a corporation duly incorporated under the laws of the State of Hawaii, having its principal place of business at 733 Bishop Street, Honolulu, Hawaii 96813, (hereinafter called "SELLER"), and HAWAIIAN ELECTRIC COMPANY, INC., a corporation duly incorporated and authorized to do business under the laws of the State of Hawaii, having its principal place of business at 900 Richards Street, Honolulu, Hawaii, (hereinafter called "BUYER"). NOW, THEREFORE, the parties agree as follows: ARTICLE I AGREEMENT SELLER shall sell and deliver or cause to be delivered, and BUYER shall buy, receive and pay for Low Sulfur Fuel Oil suitable for use as a boiler fuel of the specifications provided herein (the "Product") and in the quantity described herein. 1 ARTICLE II TERM The term of this Contract shall be for a two (2) year period commencing January 1, 1996, at 12:01 a.m. through December 31, 1997, at 12:00 midnight, Hawaiian time, subject to the provisions and conditions contained herein. ARTICLE III PRODUCT & QUALITY SELLER shall sell and deliver and BUYER shall receive and pay for Product that shall comply with the specifications as shown in Exhibit A attached hereto and incorporated herein by reference. ARTICLE IV QUANTITY 4.1 Quantity. During each calendar year that this Contract is in effect, -------- SELLER shall sell and deliver to BUYER and BUYER shall purchase and receive from SELLER, Product at a reasonably uniform rate during each month. Except as otherwise expressly provided herein, this monthly volume shall equate to an average daily rate in physical barrels per day of no less than ------ barrels per day nor more than --------- barrels per day. The minimum annual volume of Product to be nominated, sold and purchased under this Contract during calendar year 1996 is 2 - ------------------------------------------------------------------------------- The maximum annual volume of Product to nominated, sold and purchased under this Contract during calendar year 1996 is ------------------------- . The minimum annual volume of Product to be nominated, sold and purchased under this Contract during calendar year 1997 is ----------------------. The maximum annual volume of Product to be nominated, sold and purchased under this Contract during calendar year 1997 is -------------- barrels. The term "barrel" as used in this Contract means 42 United States Gallons at 60 degrees F. 4.2 Optional Purchases. The BUYER will provide the SELLER a notice of ------------------ product requirements in excess of Section 4.1. This notice will be provided to SELLER at least ninety (90) days prior to the first day of the month in which optional purchases are proposed to be delivered. SELLER will respond within fifteen (15) days of BUYER's notice stating the quantity of additional product that is available at SELLER's option. If the notice of available quantities is different from BUYER's original notice of product requirements, acceptance of new quantities shall be subject to BUYER's approval, with BUYER notifying SELLER five (5) days after BUYER receives SELLER's response. The price of the optional purchases under this Contract shall be determined monthly based on the following formula: ------------------------------------- Where: 3 -- = --------------- F1 = A factor for quality differential of Product delivered as defined in Article V of this Contract. F2 = The actual gross heat content of each Product Delivery as defined in Article V of this Contract. F3 = A factor for tanker freight as defined in Article V of this Contract. -- = --------------- T = Taxes imposed upon the sale of Product as defined in Article V of this Contract. A sample calculation of the formula for determining the price for optional purchases is included in Exhibit B, part II. Platt's Oilgram Price Report, Platt's Bunkerwire and --- shall include any successor publication(s) and, in the event of 4 4.3 Reallocation of Deliveries. If during any 15 calendar day period, deliveries of LSFO by SELLER to Kalaeloa Partners, L.P. ("Kalaeloa") are less than 20,000 barrels due to an unanticipated equipment outage at the oil-fired combined cycle facility owned by Kalaeloa at Campbell Industrial Park, SELLER and BUYER shall agree to reallocate deliveries of LSFO by SELLER, to the extent required by BUYER and not required by Kalaeloa, to BUYER. The reallocated LSFO shall be priced on the same basis as optional purchases as provided for in Section 4.2. ARTICLE V PRICE The Product Price in U.S. Dollars ("USD") per barrel shall be determined monthly based on the following price formula: -------------------------------- Where: P = Product Price in U.S. Dollar per barrel for the calendar month of delivery. S1 = Base price which shall consist of Platt's assessed value of Singapore Cargoes 0.3% sulfur LSWR Mixed/Cracked. The price per barrel shall be the simple average of Friday's high and low prices for all dates of publication of Platt's during the period beginning the 21st of the second month immediately preceding the nominated month of delivery and ending the 20th of the month immediately preceding the nominated month of 5 delivery. If Platt's does not publish a high and low prices for a particular Friday during the relevant period, the high and low prices for the closest preceding day for which a Platt's Oilgram Price report is published will be used. S2 = The simple average of the high and low prices for Los Angeles Bunker C fuel as reported by the Platt's Bunkerwire for all dates of publication during the period beginning the 21st day of the second month immediately preceding the nominated month of delivery and ending the 20th day of the month immediately preceding the nominated month of delivery, expressed in USD per barrel using a conversion factor of 6.368 barrels per metric ton. F1 = A factor for quality differential of Product delivered such as sulfur content where F1 = 0.10 x (S2 - S1). F2 = The actual gross hear content of each Product Delivery pursuant to Section 6.3 and Exhibit A, expressed in million BTUs per barrel with three significant figures to the right of the decimal point. F3 = A factor for tanker freight defined as follows: F3 = F5 + FRD1 + FRD2 Where F3 is a market index for freight, defined for each calendar quarter as the sum of: F5 = The simple average of the Average Freight Rate Assessment ("AFRA") Worldscale Points for the average of Large Range 1 vessels, as published monthly by London Tanker Brokers Panel Limited for the three monthly publications in the calendar quarter immediately preceding the calendar quarter of the nominated month of delivery, multiplied by the Worldscale 100 rate for voyages between Singapore and Barbers Point, Hawaii, applicable to the year of the quarter of the applicable AFRA data, expressed in New Worldscale rates, as published by Worldscale Associates (London Limited) in its New Worldscale Nominal Freight Scale (Worldscale). Monthly AFRA publications show rates of vessel voyages which occurred during the period beginning the 16th day of the second month immediately preceding that publication and ending the 15th day of 6 the month immediately preceding the publication. Exhibit B includes an illustrative computation; plus, FRD1 = A fixed rate differential, if and as provided by Worldscale, with respect to the Additional Insurance Premium for Basic ($500 Million) coverage of Oil Pollution Liability Insurance on vessels carrying persistent oils to and from the U.S.A., consistent with a typical vessel derived in Exhibit C attached to this Contract, plus. FRD2 = A fixed rate differential, if and as provided by Worldscale, with respect to the Additional Insurance Premium for Excess ($200 Million) coverage of Oil Pollution Liability Insurance on vessels carrying persistent oils to and from the U.S.A., consistent with a typical vessel derived in Exhibit C attached to this Contract. This market index for freight will be expressed in USD per barrel, using a conversion factor of 6.75 barrels per metric ton. T = The Hawaii General Excise Tax, the Hawaii Environmental Response Tax, the Federal Superfund Petroleum Fee, the Federal Oil Spill Liability Trust Fund Fee, if and when applicable, and any other tax imposed on the sale of Product. A sample calculation of the formula for determining the Product Price is included in Exhibit B, part I. Platt's Oilgram Price Report and Platt's Bunkerwire shall include any successor publication(s) and, in the event of discontinuance of these publications, or the publications referred to in the freight adjustment Exhibit C, the parties shall mutually agree upon the use of a similar reporting service. 7 The price for Product delivered shall be based on the price for the month of delivery originally nominated by the BUYER, regardless of the month in which the quantity of Product nominated is actually delivered. A Delivery is defined as beginning with the initiation of pumping from SELLER's refinery tank, nominated issuing tank or vessel to BUYER's Barbers Point Tank Farm and ending with the subsequent cessation of continuous pumping of Product in such amount as is determined by the independent inspector's Certificate of Quantity. All prices, price components, price component elements, including their averages and factors, adjustments thereto and other sums payable hereunder in this Contract shall be stated in the nearest thousandth of a dollar unless specifically stated otherwise. ARTICLE VI DELIVERY 6.1 Notification and Product Delivery. Subject to the minimum and maximum amounts specified in Section 4.1, BUYER will provide SELLER notice ("Nomination") of the amount to be sold and delivered by SELLER and bought and received by BUYER for each calendar month no later than seventy-five (75) days prior to the first day of said month ("Nomination Month"). The Nomination shall specify both the quantities of Product and the delivery timing for the amount to be sold for the first and second half of the Nomination Month, respectively. No later than 10 days prior to the beginning of each calendar month, SELLER will provide BUYER a schedule of deliveries to be made for the following two months. The delivery 8 schedule shall specify the approximate quantity, the approximate date and a characterization of the approximate viscosity, either low, 100 - 200 SSU at 210 DF, medium, 201 - 350 SSU at 210 DF or high, over 350 SSU at 210 DF of each separate delivery. SELLER shall notify BUYER of a change to said delivery schedule because of one of the following causes with respect to each individual delivery when it shall become known to SELLER: a) A change in volume, if such change is in excess of 10% of the previously advised delivery volume; or b) A change in date, if such change is greater than 2 days from the previously advised date; or c) A change in the previously advised viscosity characterization. BUYER shall not be required to take Delivery, and SELLER shall not be required to make Delivery of more than fifty percent of a monthly nomination in any ten consecutive day period. The minimum and maximum amounts specified in Section 4.1 to be delivered in any given month may be further modified upon mutual agreement of the parties. If for reasons other than Force Majeure, BUYER's anticipated demand for LSFO on an annual basis during any calendar year during the term of this Contract declines below the BUYER's minimum annual quantity set forth in Section 4.1 (the difference between BUYER's anticipated demand and BUYER's minimum annual quantity being a "Purchase Deficit Position"), then BUYER shall give prompt written notice to SELLER. 9 If for reasons other than Force Majeure, SELLER shall have delivered Product for the Nomination Month such that the delivery rate, expressed in barrels per day, is below 85% of the nominated volume as computed on a month-to- date ratable basis, found by multiplying the day of the Nomination Month by the nominated rate of delivery for that month ("Failure to Supply Position"), then SELLER shall give prompt written notice to BUYER. 6.2 Title and Risk of Loss. Title to Product and the risk of loss of Product shall pass to BUYER at the connection between the flange of SELLER's pipeline and BUYER's tank farm pipeline at Barber's Point. 6.3 Determination of Quality. The quality and heat content of the Product shall be determined on the basis of a composite sample(s) drawn by a mutually agreed upon independent inspector from SELLER's issuing tank(s) in such a manner as to be representative of each individual Delivery. SELLER and BUYER shall share equally the cost of independent inspections. If the Delivery of Product is from more than one issuing tank, the specifications of the total Delivery of Product shall be determined on a volumetric weighted average from the representative samples drawn by the independent inspector. The representative samples drawn from SELLER's tank(s) shall be divided into a minimum of three (3) parts: 1. One part shall be used by for an analysis by SELLER's laboratory to determine quality and heat content (gross Btu) per barrel. 2. One part shall be provided to BUYER for the purpose of verifying SELLER's determinations. 10 3. At least one part shall be sealed and provided to BUYER, or to the independent inspector, to be retained. SELLER agrees to provide BUYER a copy of SELLER's laboratory analyses of the tank final samples, or a preliminary laboratory analyses if the analyses of the tank final samples is not available, showing sulfur content, flash point and sediment and water content prior to commencing delivery of the Product, provided, however, that SELLER shall provide BUYER the complete Certificate of Quality no later than two working days after the completion of the Delivery. BUYER shall have the right to perform laboratory analyses in order to verify the results of SELLER's laboratory analyses. The official determination of gross heat content shall be based upon SELLER's laboratory results provided that the arithmetic difference between SELLER's and BUYER's laboratory results is equal or less than the then existing reproducibility standard (currently 0.40 MJ/kg) for ASTM test D-240. If the difference between SELLER's and BUYER's laboratory results is greater than this ASTM reproducibility standard, the parties will confer, in good faith, to resolve the difference. In the event of an unresolvable difference between BUYER and SELLER, BUYER's sealed sample will be provided to an independent laboratory for an official determination, which shall be binding upon the parties. SELLER and BUYER shall share equally the costs of independent tests and determinations. The Product received by BUYER in a Delivery may include some amount of pipeline displacement stock ("Pipeline Fill"). The specification of the Pipeline Fill shall be determined by the SELLER on the basis of SELLER's representative sample of the storage tank from the which 11 the Pipeline Fill was issued. SELLER agrees to provide BUYER a copy of a laboratory analysis of the Pipeline Fill's specifications prior to shipment. To provide an early warning of any quality problems with the Product, SELLER agrees to perform a pre-shipment computer simulation blend ("Blend") of LSFO from each issuing tank and Pipeline Fill on a volumetric weighted average basis. The computer simulation shall provide confirmation of the Blend's API gravity, viscosity and percent by weight sulfur content. SELLER agrees to inform BUYER or BUYER's representative of the Blend results prior to shipment. SELLER agrees that under no circumstances shall it deliver Product to BUYER should the percent by weight of sulfur content of the Blend, determined by computing the weighted average by volume of LSFO issued from the SELLER's tank(s) and the Pipeline Fill volume, be greater than 0.50%, without BUYER's express written permission. If SELLER or BUYER has reason to believe that the quality or quantity of Product stated for a specific Delivery per Section 6.3 or Section 6.4 is incorrect, that party shall within thirty (30) days after the later of the date of the complete Certificate of Quality or the date of the final determination of gross heat content, present the other party with documents supporting such determination and the parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quality and quantity, if justified, for the Delivery in question. In the event of an unresolvable difference between SELLER and BUYER, the sealed part of the representative sample in the possession of BUYER or the independent 12 inspector shall be provided to an independent laboratory for an official determination, which shall be final. SELLER and BUYER shall share equally the cost for such independent laboratory determination. If the quality of the Product received by BUYER fails to conform to the requirements of Article III of this Contract, both BUYER and SELLER shall attempt to minimize the impact of any quality problem by specification waiver if the use of the Product will not unreasonably cause harm to BUYER, or by SELLER delivering higher quality oil in a timely manner to produce a specification quality blend in BUYER's storage tank(s). If all such, and similar, efforts fail to resolve the quality problem, then BUYER may return non-specification Product to SELLER, in which case SELLER shall replace the non-specification Product to BUYER in a timely manner. All reasonable costs and expenses, including BUYER's handling costs incurred in returning and replacing non- specification Product, shall be paid by SELLER. 6.4 Determination of Quantity. Quantities of the Product delivered hereunder shall be determined at the time of each Delivery by gauging SELLER's tank(s) immediately before and after pumping. Volumes delivered hereunder shall be converted to 60 [degrees] F, using the latest revision of ASTM Table 6B. Measurements shall be taken jointly by representatives of SELLER and BUYER or by a mutually agreed upon independent inspector. SELLER and BUYER shall share equally the cost of independent inspections. 6.5 Purchase Deficit. So long as the BUYER is in a Purchase Deficit Position as defined in Section 6.1. 13 - ----------------------- - ----------------------- provided that SELLER can supply the balance of BUYER's Product requirements within the month nominated. The Purchase Deficit position shall terminate when total cumulative purchases under this Contract exceed the minimum annual quantities prorated on a monthly basis. Nothing in this Section 6.5 shall be construed as a waiver or limitation of any rights or remedies SELLER may have with respect to BUYER's failure to comply with Section 4.1. 6.6 Failure to Supply. In the event that the SELLER is in a Failure To Supply Position, both BUYER and SELLER shall attempt to minimize the impact of any Failure To Supply Position such that it not impose an unreasonable risk to BUYER. If the amount of deficient Product is such that SELLER's Delivery of Product to BUYER in the Nomination Month at the nominated volume, as computed on a month-to-date ratable basis, is deficient in aggregate by 50,000 barrels, BUYER may, at its option, purchase the undelivered Product elsewhere at the then prevailing market rates. The BUYER will invoice, and the SELLER shall pay, the cost difference between purchased Product and cost of Product if it had been delivered by SELLER. If the BUYER elects to purchase Product from other sources under this Section 6.6, the annual purchase requirement referenced in Section 4.1 and Section 6.1 shall be reduced correspondingly. 14 ARTICLE VII PAYMENT 7.1 Method of Payment. Invoices shall be prepared by SELLER after a Delivery has been completed. Invoices shall be accompanied by full documentation, acceptable to the BUYER, including quality certificates, quantity documentation, and price calculation. Payment shall be made without discount in USD within 7 business days from the receipt of invoice by wire transfer of immediately available funds to: Citibank, New York ABA # 021000089 BHP Petroleum Americas Refining Inc. Account #4064332 7.2 Payments. If SELLER's final laboratory result for gross heat content is unavailable or if said laboratory result is disputed by BUYER pursuant to Section 6.3, SELLER may issue a provisional invoice calculated on the basis of the heat-content standard of 6.2 million BTU per barrel. BUYER shall make payment for such provisional invoice in accordance with Section 7.1. If an invoice incorporating an item other than a heat rate adjustment which is disputed has been sent to BUYER, then BUYER shall make payment in accordance with Section 7.1 for such invoice items or that portion of the invoiced delivery which is not disputed by BUYER and in which case BUYER shall make such adjustment to taxes and other value-dependent items as are reasonable under the circumstances. The provisional invoice or invoice incorporating items in dispute shall be adjusted in accordance with the terms of Article V by subsequent invoicing or by issuing a credit or debit with respect to the original invoice within 7 15 business days of receipt of the independent laboratory determination pursuant to Section 6.3 or other resolution of the issue in dispute. BUYER shall make payment for such subsequent invoices or debits in accordance with Section 7.1. BUYER shall have the option to apply such credit against payments to be made subsequent to the receipt of the credit, or if such payments are not expected to be made within 7 business days, BUYER shall be able to receive said credit in immediately available funds within 3 business days of SELLER's receipt of BUYER's written instructions. 7.3 Interest. Interest will accrue on all amounts not paid within 7 business days of receipt of provisional or final invoice at the then existing London Inter-Bank Offered Rate (LIBOR). ARTICLE VIII NOTICES Any notice to be given hereunder shall be in writing unless specified otherwise and shall be deemed to have been duly given when sent or personally delivered to the other party at the address noted below: BUYER: HAWAIIAN ELECTRIC COMPANY, INC. P. O. Box 2750 Honolulu, Hawaii 96840 Attn: Vice President, Power Supply Facsimile: (808) 543-7707 16 SELLER: BHP PETROLEUM AMERICAS REFINING INC. P.O. Box 3379 Honolulu, Hawaii 96842 Attn: Vice President-Marketing Facsimile: (808) 547-3796 Notices may be by first class mail, postage prepaid, by elctronic transmission (facsimile or telex) or by personal delivery. The parites may substitute other addresses upon the giving of proper notice from time to time in the manner provided above. ARTICLE IX RENEGOTIATION It is understood and agreed that both parties entered into this Contract in reliance on governmental laws, rules, decrees, orders, regulations, and interpretations or implementation thereof in effect on the date of execution of this Contract or any subsequent amendments hereto, to the extent that they directly or indirectly affect the Product sold hereunder. If at any time any of the said laws, rules, regulations, implementations or interpretations thereof are changed or if new laws, rules, regulations or new interpretations and implementations thereof become effective, and such change or new laws, rules, regulations, interpretations or implementations thereof have a significant adverse economic effect upon either party, such that performance of this Contract would be inequitable or cause financial hardship to the affected party, then the affected party shall have the option to call for renegotiation of the Product Price or any other provision of this Contract the performance of which by the affected party would be inequitable or cause financial 17 hardship. Such option shall be exercised by the affected party at any time after such a change or new law, rule, regulation, interpretation or implementation thereof is effective, by giving notice to the other party of the call to renegotiate. Within ten (10) calendar days after the date of such notice, the parties shall enter into negotiations and in the event that the parties do not agree upon a new Product Price or other provision satisfactory to both parties within forty (40) calendar days after the date of such notice, the affected party shall have the right to terminate this Contract effective thirty (30) days after giving notice of termination to the other party within thirty (30) days immediately following the forty (40) day negotiation period. Until a mutually satisfactory new Product Price or other provision has been agreed upon, or until this Contract is terminated as provided herein, the Product Price or other provision that was in effect when the request for renegotiation was made shall continue in full force and effect. ARTICLE X TAXES, ASSESSMENTS, LEVIES AND IMPOSTS BUYER shall reimburse SELLER for all taxes, assessments, levies and imposts of whatsoever kind or nature imposed on SELLER by any governmental or quasi- governmental body (including without limitation the Hawaii Gross Excise Tax) with respect to the sale of Product under this Contract. Notwithstanding the foregoing, BUYER shall not be required to reimburse SELLER for any tax measured by or based on the net income of SELLER or for real 18 property taxes or to duplicate any item of expense of SELLER which is included in the Product Price as provided for in Section 4.2 and Article V of this Contract. ARTICLE XI FORCE MAJEURE 11.1 Force Majeure. As used in this contract, an event or act of "force majeure" is defined as follows: acts of God, wars, riots, strikes, labor disputes, lockouts, blockades, insurrections, inability to secure materials or labor by reason of allocations promulgated by governmental agencies, unavailability of shipping of crude oil supplies, epidemics, landslides, lightning, earthquakes, fires, floods, tidal waves, volcanic eruptions, explosions, failure of machinery or pipelines, or any other causes not within the control of the affected party. 11.2 Obligations Suspended. BUYER's obligation to purchase or receive Product, or SELLER's obligation to sell or delivery Product, shall be suspended to the extent performance is prevented by an event or act of force majeure for any period in which such event or act exists as to the party claiming force majeure; and so long as such party is exercising its good faith efforts to overcome such force majeure event. However, nothing in this Article excuses BUYER from its obligation to make payments of money due SELLER for Product already delivered to BUYER. 11.3 Notice of Force Majeure. The party claiming force majeure agrees to give the other party prompt written notice of an act or event of force majeure. The party claiming force majeure shall use due diligence to cure any act or event of force majeure, and shall give the other 19 party prompt notice after the act or event of force majeure has terminated. This Article shall not require any party to settle or compromise any strike or labor dispute. 11.4 No Make-Up Requirement. After the act or event of force majeure has terminated, SELLER shall not be obligated to sell and deliver and BUYER shall not be obligated to purchase and receive the undelivered quantity of Product that normally would have been sold and delivered during the period of force majeure. ARTICLE XII PRICE AND ALLOCATION CONTROLS 12.1 Regulatory Price Suspension. If SELLER is precluded by statute, or by regulation, rule, interpretation or order implementing such statute from obtaining any increase in Product Price, as determined pursuant to this Contract, the increase shall be suspended until said law, regulation, rule, interpretation or order permits the increase in whole or in part. In the event the law, regulation, rule, interpretation or order is terminated or is later modified to permit the increase, in whole or in part, the Product Price shall be increased for deliveries of the Product made thereafter to the level permitted under this Contract without further action by the parties. 12.2 Government Regulations. If the delivery or supply of Product pursuant to this Contract conflicts with or is limited or prohibited by any federal, state or local regulations, then to the extent of such conflict, limitation or prohibition, SELLER shall have no obligation to deliver or supply BUYER with the Product under this Contract and BUYER shall have no 20 obligation to purchase or receive the Product under this Contract. BUYER, in BUYER's discretion, may elect to complete and file any and all required Federal or state regulatory forms to permit, facilitate, or enable the supply of Product to BUYER under this Contract. SELLER shall fully cooperate with BUYER in the completion and filing of the foregoing forms. ARTICLE XIII ASSIGNMENT This Contract shall not be assigned by either party without prior written consent of the other party, and any assignment without such written consent, shall be void; provided, however, BUYER may assign this Contract to the Trustee under BUYER's First Mortgage Indenture dated December 1, 1938. ARTICLE XIV APPLICABLE LAW This Contract shall be deemed to be a Contract made under and shall be governed by and construed in accordance with the laws of the State of Hawaii. The parties hereby consent to the personal jurisdiction of the federal and state courts in the State of Hawaii. 21 ARTICLE XV PUBLIC UTILITIES COMMISSION This Contract is required to be filed with the Hawaii Public Utility Commission (PUC) for approval. If in the proceedings initiated as a result of the filing of this Contract, the PUC disapproves or fails to authorize the recovery of the fuel cost incurred under this Contract through the BUYER's Energy Cost Adjustment Clause, BUYER may terminate this Contract at any time within 90 days of disapproval by giving 60 days written notice to the SELLER. ARTICLE XVI ENTIRE AGREEMENT, WAIVER AND ILLEGALITY This Contract incorporates the entire agreement between the parties with reference to the subject matter and cancels and supersedes as of the date of execution hereof all prior oral or written understandings, or agreements, between the parties with respect to the subject matter and may only be modified by written instrument executed by duly authorized representatives of the parties. There are no other agreements which constitute any part of the consideration for, or any condition to, either party's compliance with its obligations under this Contract. Failure to insist upon strict performance of any provision shall not constitute a waiver of the right to require such performance, nor shall a waiver in one case constitute a waiver with respect to a later breach, whether of a similar nature or otherwise. If any term or provision of this Contract is held by any Court to be illegal or unenforceable, the remaining terms, provisions, rights and obligations shall 22 not be affected. The headings or captions are for convenience only and have no force or effect on legal meaning in the construction or enforcement of the Contract. Time shall be of the essence in this Contract. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound thereby, have caused this Contract to be executed in duplicate originals by their duly authorized officers. HAWAIIAN ELECTRIC COMPANY, INC. By /s/ Edward Y. Hirata Its Vice President, Regulatory Affairs By /s/ Molly M. Egged Its Secretary BUYER Date: December 5, 1995 BHP PETROLEUM AMERICAS REFINING INC. By /s/ Faye W. Kurren Its Vice President SELLER Date: December 5, 1995 23 EXHIBIT A PRODUCT SPECIFICATIONS LSFO Specification - Test Item Measurement Unit Limits ASTM Method GRAVITY @ 60 DEGREES F. Degrees API 12.0 Min. D-4052 24.0 Max. VISCOSITY SSU At 210 DF 100 Min. D-445 450 Max. or D-2161 HEAT VALUE, GROSS MM BTU/BBL 6.0 million D-240 Min. or D-4868 * FLASH POINT Degrees F. 150 Min. D-93 POUR POINT Degrees F. 125 Max. D-97 ASH Percent, Weight 0.05 Max. D-482 SEDIMENT & WATER Percent, Weight 0.50 Max. D-1796 SULFUR Percent, Weight 0.50 Max. D-4292 NITROGEN Percent, Weight 0.50 Max. D-3431, D-4629 * Flash point shall be at least 50 DF above the pour point or 150 DF, whichever is greater. 24 EXHIBIT B EXAMPLE PRICE CALCULATION Illustrative Product Price Calculation for August, 1995 I. Determination Of Product Price Under Article V on Nominated Product The Product Price in U.S. Dollars ("USD") per barrel shall be determined monthly on the following price formula: S1 = Platt's Oilgram Price Report 0.3% Singapore LSWR Mixed/Cracked - ------------------------------------------------------------------- Date of Price Prices in USD per barrel Low High ----- ------ 6/23/95 $13.50 $14.00 6/30/95 $12.80 $13.30 7/07/95 $12.30 $12.80 7/14/95 $12.10 $12.60 Average of mean in USD per barrel: S1 = $12.925 per barrel S2 = Platt's Bunkerwire Los Angeles Bunker C - -------------------------------------------- Date of Price Prices in USD per barrel Low High ----- ------ 6/22/95 $93.00 $96.00 6/27/95 $91.00 $94.00 6/29/95 $93.00 $96.00 7/06/95 $91.00 $93.00 7/11/95 $89.00 $92.00 7/13/95 $89.00 $91.00 7/18/95 $85.00 $89.50 Average of mean in USD per metric ton: $91.607 Expressed in USD per Bbl: S2 = $14.386 per barrel (= $91.607/MT / 6.368 Bbl/MT) 25 F1 = 0.10 x (S2 - S1) = 0.10 x (14.386 - 12.925) = $0.146 per barrel F5 = base tanker freight from Singapore to Barbers Point - -------------------------------------------------------- a. AFRA Worldscale Large Range 1 Average Date of Publication: New Worldscale Large Range 1 "Points" (percentage of Worldscale 100 Rate) April 1995 128.2 May 1995 128.3 June 1995 120.3 Average: 125.6 b. New Worldscale 100 Rate between Singapore and BHP SBM Barbers Point effective January 1, 1995 was $9.25 per Metric Ton F5 = [($9.25/MT * (125.6/100)]/6.75 = $1.72 per barrel FRD1 = tanker freight fixed rate differential for oil spill liability insurance - ------------------------------------------------------------------------------- FRD1 = $.020 per barrel, derived as illustrated in Exhibit C attached hereto. FRD2 = tanker freight fixed rate differential for oil spill liability insurance - ------------------------------------------------------------------------------- FRD2 = $.016 per barrel, derived as illustrated in Exhibit C attached hereto. F3 = F5 + FRD1 + FRD2 26 = $1.72/Bbl + $.020/Bbl + $.016/Bbl = $1.756 per barrel = T = Taxes applicable to sale of Product - --------------------------------------- Taxes before application of Hawaii General Excise Tax (HGET): Federal Superfund Petroleum Fee = $0.097 per barrel HGET = 4.167% of pre-HGET price Hawaii Environmental Response Tax applied after HGET = $0.05 per barrel = = = = Product Price For Delivery with Assumed Gross Heat Content Other than Standard 6.2 MM Btu per barrel Assumed gross heat content is 6.275 MM Btu per barrel = = = = 27 EXPLANATION OF TAXES: Taxes in the Product Price currently in effect include Superfund Tax of $0.097 per barrel and the Hawaii Environmental Response Tax of $0.050 per barrel. Also, Hawaii State General Excise Tax of 4.167% will be paid on all components of the Product Price, except the Hawaii Environmental Response Tax. 28 II. Determination Of Price Of Optional Purchases Under Article IV The price of the optional purchases under this Contract shall be determined monthly based on the following formula: ----------------------------- - ----------------------------------------------------------------- Determination of Mean of Platt's Singapore LSWR Mixed/Cracked
Date of Price Price in USD per barrel Low High Mid --- ---- --- 21-Jun-95 $14.00 $14.50 $14.25 22-Jun-95 $13.75 $14.25 $14.00 23-Jun-95 $13.50 $14.00 $13.75 26-Jun-95 $13.00 $13.50 $13.25 27-Jun-95 $13.30 $13.70 $13.50 28-Jun-95 $13.30 $13.70 $13.50 29-Jun-95 $13.10 $13.60 $13.35 30-Jun-95 $12.80 $13.30 $13.05 3-Jul-95 $12.70 $13.00 $12.85 4-Jul-95 $12.70 $13.00 $12.85 5-Jul-95 $12.50 $13.00 $12.75 6-Jul-95 $12.30 $12.80 $12.55 7-Jul-95 $12.30 $12.80 $12.55 10-Jul-95 $12.30 $12.80 $12.55 11-Jul-95 $12.30 $12.80 $12.55 12-Jul-95 $12.30 $12.80 $12.55 13-Jul-95 $12.10 $12.60 $12.35 14-Jul-95 $12.10 $12.60 $12.35 17-Jul-95 $12.20 $12.70 $12.45 18-Jul-95 $12.20 $12.70 $12.45 19-Jul-95 $12.40 $12.90 $12.65 20-Jul-95 $12.40 $12.90 $12.65 AVERAGE $12.943
29 - --------------------------------------------------------------------
- -------------------- ------------------------ ---------------- ---------------- ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ - $ ---------------- - -------------------- $ ---------------- $ - $ ---------------- - -------------------- $ ---------------- $ - $ ---------------- - -------------------- $ ---------------- $ - $ ---------------- - -------------------- $ ---------------- $ - $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- - -------------------- $ ---------------- $ ---------------- $ ---------------- -----------------------------
- -------------- - ------------------------ - ---------------------------- S2 = Platt's Bunkerwire Los Angeles Bunker C - -------------------------------------------- Date of Price Price in USD per barrel Low High ------ ------ 6/22/95 $93.00 $96.00 30 6/27/95 $91.00 $94.00 6/29/95 $93.00 $96.00 7/06/95 $91.00 $93.00 7/11/95 $89.00 $92.00 7/13/95 $89.00 $91.00 7/18/95 $85.00 $89.50 Average of mean in USD per metric ton: $91.607 Expressed in USD per Bbl: S2 = $14.386 per barrel (= $91.607/MT/6.368 Bbl/MT) F1 = 0.10 x (S2 - S1) = 0.10 x (14.386 - ------------------ = -------------- F5 = base tanker freight from Singapore to Barbers Point - -------------------------------------------------------- a. AFRA Worldscale Large Range 1 Average Date of Publication: New Worldscale Large Range 1 "Points" (percentage of Worldscale 100 Rate) April 1995 128.2 May 1995 128.3 June 1995 120.3 Average: 125.6 b. New Worldscale 100 Rate between Singapore and BHP SBM Barbers Point effective January 1, 1995 was $9.25 per Metric Ton F5 = [($9.25/MT * (125.6/100)]/6.75 = $1.72 per barrel FRD1 = tanker freight fixed rate differential for oil spill liability insurance - ------------------------------------------------------------------------------- 31 FRD1 = $.020 per barrel, derived as illustrated in Exhibit C attached hereto. FRD2 = tanker freight fixed rate differential for oil spill liability --------------------------------------------------------------------- insurance --------- FRD2 = $.016 per barrel, derived as illustrated in Exhibit C attached hereto. F3 = F5 + FRD1 + FRD2 = $1.72/Bbl + $.020/Bbl + $.016/Bbl = $1.756 per barrel ------------------------- T = Taxes applicable to sale of Product --------------------------------------- Taxes before application of Hawaii General Excise Tax (HGET): Federal Superfund Petroleum Fee = $0.097 per barrel HGET = 4.167 % of pre-HGET price Hawaii Environmental Response Tax applied after HGET = $0.05 per barrel ------------------------------------------------- = ---------------------------------------- = ------------------------------- = ---------------------------------------- = -------------------- Product Price For Delivery with Assumed Gross Heat Content Other than Standard 6.2 MM Btu per barrel 32 Assumed gross heat content is 6.275 MM Btu per barrel = ---------------------------------------------------- = ---------------------------------------------------- = ---------------------------------------------------- = --------------------------------------------------- EXPLANATION OF TAXES: Taxes in the price of optional purchases currently in effect include Superfund Tax of $0.097 per barrel and the Hawaii Environmental Response Tax of $0.050 per barrel. Also, Hawaii State General Excise Tax of 4.167% will be paid on all components of the Product Price, except the Hawaii Environmental Response Tax. 33 EXHIBIT C EXAMPLE DETERMINATION OF FREIGHT COMPONENTS PURSUANT TO ARTICLE IV AND ARTICLE V Article IV and Article V of this Contract provide for the determination of the price per physical barrel of LSFO; which price determination includes the use of a tanker freight component which references the Worldscale 100 rate for voyages between Singapore and Barbers Point, Hawaii, expressed in New Worldscale rates, as published by Worldscape Associates (London) Limited in its New Worldwide Nominal Freight Scale ("Worldscale"). The current edition of Worldscale incorporates a Fixed Rate Differential to reflect the cost of additional insurance premiums for Oil Spill Liability Insurance on vessels carrying Persistent Oils applicable to voyages having a destination in the U.S.A. SELLER acknowledges that any vessel used to transport LSFO that is sold and purchased under this Contract, including its components and the crude oil from which the LSFO is derived, shall be required to possess oil spill liability insurance coverage in the amount of $700 million. The price formula component "F5" refers to an AFRA rate applicable to a vessel size classification of LR-1, or Large Range 1. This vessel classification references tanker vessels ranging in size from 45,000 Long Tons Deadweight to 79,999 Long Tons Deadweight. In order to derive an approximation of the relationship between Deadweight and Gross Registered Tons for a nominal vessel consistent with this vessel size classification, the average size characteristics of two vessels that have transported LSFO or crude oil to Hawaii are used as reference data. These vessels are described as follows:
Name Deadweight Tons(DWT) Gross Registered Tons(GRT) ---- -------------------- -------------------------- S/T ARCO Prudhoe Bay 71,342 35,646 S/T ARCO Sag River 71,342 35,646 ------ ------ Average 71,342 35,646
The Worldscale rate data that is to be included in the computation of tanker freight price formula components "FRD1" and "FRD2," consistent with the computation of "F5," is to be derived in the same manner as the following illustrative example calculations. 34 1. Worldscale 100 rate in effect from February 20, 1995, onwards shall include Fixed Rate Differentials a. and b. below and shall be computed as follows: a. Fixed Rate Differential with respect to the additional insurance premiums for Basic $500 million coverage of Oil Pollution Liability Insurance on vessels carrying Persistent Oils to and from the U.S.A., "FRD1" is derived: FRD1 = $0.27/GRT X 35,646 GRT ---------------------- 71,342 = $0.135 per Metric Ton For illustrative purposes, this rate may be expressed in U.S. dollars per barrel as follows: = $0.135/Metric Ton ----------------- 6.75 barrels/Metric Ton = $0.020/barrel b. Fixed Rate Differential with respect to the additional insurance premiums for Excess $200 million coverage of Oil Pollution Liability Insurance on vessels carrying Persistent Oils to and from the U.S.A., "FRD2" is derived: FRD2 = $0.2225/GRT X 35,646 GRT ------------------------ 71,342 For illustrative purposes, this rate may be expressed in U.S. dollars per barrel as follows: = $0.111/Metric Ton ----------------- 6.75 barrels/Metric Ton = $0.016/barrel 35 For informational purposes, the total applicable Fixed Rate Differential is equal to $0.246 per Metric Ton, or $0.036 per barrel. 2. The AFRA Worldscale Points and their related Worldscale 100 rate applicable for each calendar quarter are based upon an average of the three monthly AFRA publications in the calendar quarter immediately preceding the calendar quarter of the nominated month of delivery. Therefore the relevant Fixed Rate Differentials computed above may properly be prorated for certain quarterly periods. Such proration may be computed as follows: A. With respect to volumes of LSFO nominated during the three (3) months of the calendar quarter following a change in the published Worldscale rate (typically February of each year), the relevant Fixed Rate Differentials to be included in the computation of the tanker freight price formula component shall be prorated for illustrative purposes as follows: 50/90 multiplied by the Fixed Rate Differential computed prior to the rate change. and 40/90 multiplied by the Fixed Rate computed using the revised rate. B. With respect to volumes of LSFO nominated for subsequent months, and continuing for so long as the Fixed Rate Differentials as set forth in Worldscale Circular shall be applicable, the relevant Fixed Rate Differentials to be included in the computation of the price components "FRD1" and "FRD2" shall be as derived as in part 1 above. 36 EX-10.12 5 INTER-ISLAND IND. FUEL OIL AND DIESEL FUEL OIL CON HECO Exhibit 10.12 INTER-ISLAND INDUSTRIAL FUEL OIL AND DIESEL FUEL OIL CONTRACT This Contract is made and entered into this 5th day of December, 1995, by and between BHP PETROLEUM AMERICAS REFINING INC., a Hawaii corporation, (hereinafter called "SELLER"), and HAWAIIAN ELECTRIC COMPANY, INC., and its wholly-owned subsidiaries Maui Electric Company, Ltd. and Hawaii Electric Light Company, Inc., Hawaii corporations, (hereinafter collectively called "BUYER"). NOW, THEREFORE, the parties agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Except where otherwise indicated, the following definitions shall apply throughout this Contract: 1. "Fuel Oil" means Industrial Fuel Oil No. 6 in accordance with Article IV and Exhibit A. 2. "Diesel" means Diesel Fuel Oil No. 2 in accordance with Article IV and Exhibit B. 3. "Product" means both Fuel Oil and Diesel. 4. "HECO" means Hawaiian Electric Company, Inc. 5. "HELCO" means Hawaii Electric Light Company, Inc. 6. "MECO" means Maui Electric Company, Ltd. 7. "gallon" means a United States gallon of 231 cubic inches at 60 degrees Fahrenheit. 8. "barrel" or "Bbl" means 42 United States gallons at 60 degrees Fahrenheit. 9. "SELLER's Loading Pier" means Piers 5 or 6 located at the Barbers Point Harbor, Oahu, Hawaii, and connected by pipeline to SELLER's Refinery at Barber's Point, Oahu, Hawaii. 10. "SELLER's SPM" means SELLER's offshore Single Point Mooring at Barbers Point, Oahu, Hawaii. 11. "LIBOR" means the simple average of London Inter-Bank Offered Rates for one month as published in the Wall Street Journal during past due period. SECTION 1.2 As to any purchase of Product by MECO, the term "BUYER" shall exclude HELCO, and as to any purchase of product by HELCO, the term "BUYER" shall exclude MECO. Furthermore, for purposes of this Contract (excluding any payments due from, and liabilities and indemnities attributable to, a BUYER) the term "BUYER" shall be deemed to mean MECO or HELCO, as applicable, and its authorized agent(s) for this purpose, unless otherwise specified or clearly inappropriate in the context. 2 ARTICLE II TERM The term of this Contract shall be from January 1, 1996 through December 31, 1997 (the "Original Term") and shall continue thereafter for additional successive 12-month periods (the "Additional Terms") beginning January 1, 1998, unless BUYER or SELLER gives written notice of termination at least seventy-five (75) days prior to the expiration of any previous term, including the Original Term. ARTICLE III QUANTITY SELLER shall sell to BUYER, and BUYER shall purchase and receive from SELLER in the manner set forth in Section 7.1 the annual quantities of Product as set out below: Fuel Oil Diesel Subject to availability SELLER will sell and BUYER purchase and receive such additional volumes as are mutually agreed. ARTICLE IV QUALITY The quality of the Fuel Oil and Diesel shall be as set forth in the attached Exhibits A and B, respectively. 3 ARTICLE V PRICE SECTION 5.1 - ----------- Effective January 1, 1996, or upon initial purchase and monthly thereafter, the price of the Fuel Oil shall be the simple average of the high and low quotations for the Los Angeles Bunker C Fuel Oil as reported by the Platt's Bunkerwire on all dates of publication during the period beginning the 21st day of the second month preceding the month of delivery and ending the 20th day of the month preceding the month of delivery, expressed in U.S. dollars ("USD") per barrel, converting to barrels from metric tons by dividing by 6.368, ---- All prices, price formula, including their averages and factors, adjustments thereto and other sums payable with respect to Fuel Oil hereunder shall be stated in the nearest thousandth of a dollar unless specifically stated otherwise. A sample calculation for the determination of the price of Fuel Oil as defined in this Section 5.1 is included in this Contract as Exhibit C. SECTION 5.2 - ----------- The price of Diesel during a calendar month shall be the simple average of the Average Weekly Prices for all Pricing Weeks the Thursday date (or, in the event the Thursday price is not reported, the last reported date) of which fall during the period beginning the 21st day of the second month preceding the month of delivery and ending the 20th day of the month preceding the month of delivery, expressed in USD per gallon, -------- The simple average of the high and low Pacific Northwest Spot prices for No. 2 Diesel with a maximum 4 sulfur content of 0.5% by weight as assessed by Oil Price Information Service ("OPIS") for Monday, Tuesday, Wednesday and Thursday of each week ("Pricing Week") shall comprise the "Average Weekly Price." If OPIS is not published or does not publish a high and low price for a particular Monday, Tuesday, Wednesday or Thursday during any particular week, the high and low prices for those days in the week for which OPIS does publish a high and low price will be used in the calculation of the Average Weekly Price. All prices, price formula, including their averages and factors, adjustments thereto and other sums payable with respect to Diesel hereunder shall be stated in the nearest ten-thousandth of a dollar unless specifically stated otherwise. A sample calculation for the determination of the price of Diesel as defined in this Section 5.2 is included in this Contract as Exhibit D. SECTION 5.3 - ----------- In addition to all other amounts payable by BUYER under this Contract, BUYER shall reimburse SELLER for all taxes, assessments, levies, and imposts of whatsoever kind or nature imposed on SELLER by any governmental or quasi-governmental body, including without limitation the Hawaii General Excise Tax, with respect to the execution or performance of this Contract or the receipt by SELLER of payments hereunder. Notwithstanding the foregoing, BUYER shall not be required to reimburse SELLER for any tax measured by or based on the net income of SELLER or for real property taxes, or to duplicate any item of expense of SELLER which is recovered by SELLER under the Product prices provided for in Sections 5.1 and 5.2. At 5 the execution of this contract, the taxes, etc. which are currently in effect include the Hawaii General Excise Tax (4.167%), the Superfund Petroleum Fee ($0.097 per barrel or $0.0023 per gallon), the Hawaii Environmental Response Tax ($0.05 per barrel or $0.0012 per gallon) and Hawaii Liquid Fuel Tax ($0.0100 per gallon). The Federal Oil Spill Liability Trust Fund Fee ($0.05 per barrel or $0.0012 per gallon) is expected to go into effect January 1, 1996. The Hawaii Environmental Response Tax and Hawaii Liquid Fuel Tax are not subject to Hawaii General Excise Tax. SECTION 5.4 - ----------- OPIS and Platt's Bunkerwire shall include any successor publication(s) and, in the event of discontinuance of these publications or assessments for No. 2 Diesel having a maximum sulfur content of 0.5% by weight or Bunker C Fuel Oil, respectively, the parties shall agree upon the use of a similar reporting service. SECTION 5.5 - ----------- Should the gross heat content ("BTU content") per barrel of the representative sample of Fuel Oil drawn in accordance with the procedures set forth in Article VIII fall within the range of 6.2 Million ("MM") BTU per Bbl to 6.45 MM BTU per Bbl, no price adjustment will be made. If the BTU content per barrel is below 6.2 MM BTU per Bbl, or above 6.45 MM BTU per Bbl, the price charged for the Fuel Oil delivered to BUYER shall be adjusted by multiplying the price determined in Section 5.1, by the ratio of the actual heat content to 6.325 MM BTU per Bbl. A sample calculation for the determination of the price adjustment for Fuel Oil as defined in this Section 5.5 is included in Exhibit C of this Contract. 6 Should the BTU content per gallon of the representative sample of Diesel drawn in accordance with the procedures set forth in Article VIII fall within the range of 137,000 to 141,000, no price adjustment will be made. If the BTU content per gallon is below 137,000, or above 141,000, the price charged for the Diesel delivered to BUYER shall be adjusted by multiplying the price determined in Section 5.2, by the ratio of the actual heat content to 139,000 BTU. A sample calculation for the determination of the price adjustment for Diesel as defined in this Section 5.5 is included in Exhibit D of this Contract. The official heat content determination shall be based upon SELLER's laboratory results provided that the arithmetic difference between SELLER's and BUYER's laboratory results is equal to or less than the then existing ASTM reproducibility standard (currently 0.40 MJ/kg) for test D-240. If the difference between SELLER's and BUYER's laboratory results for measured gross heat content should be greater than the reproducibility standard for ASTM test D-240, the parties will confer, in good faith, to resolve the difference. In the event of an unresolvable difference between BUYER and SELLER, BUYER's sealed Barge Tank Samples (as defined in Section 8.3), and also BUYER's sealed Retain Samples (as defined in Section 8.3) if relevant in the opinion of the Independent Inspector, will be provided to an independent laboratory for a final determination, which shall be binding upon the parties. SELLER and BUYER shall share equally the costs of independent tests determinations. 7 ARTICLE VI PAYMENT SECTION 6.1 Invoices shall be prepared by SELLER and dated after a Delivery has been completed. A copy of the invoice will be sent to BUYER by facsimile. SELLER will transmit an original of the invoice to the BUYER on the same date by mail to the addresses set forth in Section 6.2. Original invoices shall be accompanied by full documentation, acceptable to the BUYER, including quality certificates, quantity documentation, and price calculation. Payment shall be made by BUYER within fifteen (15) calendar days from date of SELLER's invoice by bank wire transfer of immediately available funds to: Citibank, New York ABA # 021000089 BHP Petroleum Americas Refining Inc. Account #4064332 If SELLER's final laboratory result for gross heat content is unavailable or if said laboratory result is disputed by BUYER pursuant to Article VIII, SELLER may issue a provisional invoice calculated on the basis of the Diesel and Fuel Oil heat-content standards pursuant to Article V. BUYER shall make payment for such provisional invoice in accordance with the instructions of this Section 6.1. If an invoice incorporating an item other than a heat rate adjustment which is disputed has been sent to BUYER, then BUYER shall make payment in accordance with the instructions in this Section 6.1 for such invoice items or that portion of the invoiced Delivery which is not disputed by BUYER and in which case BUYER shall make such adjustment to taxes and other value-dependent items as are reasonable under the circumstances. 8 The provisional invoice or invoice incorporating items in dispute shall be adjusted in accordance with the terms of Article V by subsequent invoicing or by issuing a credit or debit with respect to the original invoice within 7 business days of receipt of the independent laboratory determination pursuant to Article VIII or other resolution of the issue in dispute. BUYER shall make payment for such subsequent invoices or debits in accordance with the instructions in this Section 6.1. BUYER shall have the option to apply such credit against payments to be made subsequent to the receipt of the credit, or if such payments are not expected to be made within 15 calendar days, BUYER shall be able to receive said credit in immediately available funds within 3 business days of SELLER's receipt of BUYER's written instructions. At SELLER's option and election, interest will accrue on all amounts not paid within 15 days of the date of the invoice at the then existing LIBOR. SECTION 6.2 Invoices which have been prepared in accordance with Section 6.1 shall be sent to the respective BUYER at the following address: MECO - Maui Electric Company, Ltd. P. O. Box 398 Kahului, Hawaii 96732 Attention: Production Department HELCO - Hawaii Electric Light Co., Inc. P. O. Box 1027 Hilo, Hawaii 96720 Attention: Purchasing Division Certificates of quality and quantity, reports of the independent petroleum inspector and other documents having to do with the quantity, quality, loading of Product onto BUYER's nominated 9 vessel or otherwise with the Product sold and purchased hereunder if directed to BUYER's agent, are to be sent in accordance with the provisions of Section 15.2 of this Contract. ARTICLE VII DELIVERIES, TITLE AND RISK OF LOSS SECTION 7.1 - ----------- SELLER agrees to deliver and BUYER agrees to receive Product into BUYER'S nominated barge, at SELLER's Loading Pier, third-party pier or wharf or other place of loading nominated by SELLER ("Third-Party Pier") or at SELLER's SPM pursuant to Section 7.4. Title and risk of loss of the Product shall pass to BUYER at the receiving flange of BUYER's nominated barge or the receiving hoses of BUYER's nominated barge. The delivery rate and barge receiving capability on Fuel Oil shall be ----------------The delivery rate and barge receiving capability on Diesel shall be ------------- SELLER agrees to make its best, reasonable effort to load two products concurrently; provided, however, that BUYER's nominated barge is capable of receiving same. Fuel Oil will be delivered into BUYER's nominated barge at a temperature above --------Delivery volumes will be subject to a ---------- to a ----------------- of Fuel Oil and to a -------------to a --------------------- however, BUYER may receive a quantity in excess of said maximum delivery volumes of Fuel Oil and Diesel as may be mutually agreed by BUYER and SELLER; and provided further that SELLER shall have no obligation to deliver to BUYER an amount of Diesel in excess of - -----------during any calendar month. There will 10 be at least --------- between ---------------------------------- of Diesel. - ---------------------------------------------------------------------- SELLER shall deliver, and BUYER shall receive, at least 15% and no more than 35% of the total annual volume of Fuel Oil and Diesel each calendar quarter. SECTION 7.2 Prior to the 20th day of each month, BUYER shall give SELLER a forecast of liftings of Diesel and Fuel Oil for each of the next two months. BUYER shall be responsible for scheduling dock space at SELLER's Loading Pier for the barge with the State Harbors Division, and provide SELLER 48 hour notice of the proposed loading time. BUYER shall also provide 24 hours notice to SELLER during SELLER's regular business hours Monday through Friday (excluding holidays) of the final quantity to be loaded, subject to a +10% loading - tolerance; provided, however, that in the event of a loading on Monday, or on Tuesday, if Monday is a holiday, BUYER shall provide SELLER notice of the final quantity to be loaded, subject to a +10% loading tolerance, by 12 noon the - previous Friday, or by 12 noon the previous Thursday if Friday is a holiday. The final quantity notice must also be within 5,000 barrels of the 20th day forecast volumes. SECTION 7.3 BUYER's nominated barge shall comply with all applicable federal, state and local laws, rules and regulations, and SELLER's vessel acceptance standards, such as that portion of the "BHP Transport Petroleum Tanker Inspection Checklist" as may be applicable to unmanned petroleum tank barges, and shall be fit in every way to receive and carry Product. SELLER shall 11 provide BUYER its Operations Manual, other safety and operations procedures and vessel acceptance standards, and any amendments thereto, during the term of this Contract. While at SELLER's Loading Pier, BUYER's nominated barge shall operate in compliance with SELLER's Operations Manual as approved by the U.S. Coast Guard. In addition, a minimum of two qualified tankermen shall be provided by BUYER's barge during all loading operations at SELLER's Loading Pier or Third- Party Pier. BUYER's nominated barge shall vacate SELLER's Loading Pier or Third-Party Pier as soon as loading is completed, except if such delay is caused by any event or acts beyond the reasonable control of BUYER, including but not limited to acts of God, fire, governmental acts or labor disturbances. Dues and other charges on the barge (whether or not such dues or charges are based on the quantity of Product loaded or on the freight and without regard from whom such dues or charges are withheld) shall be paid by BUYER. Any taxes on freight shall be borne by BUYER. BUYER shall be responsible for any State fee imposed for use of SELLER's Loading Pier or Third-Party Pier in the nature of wharfage or pipeline toll. BUYER shall employ and also be responsible for costs of any support vessels, pilots, mooring masters, or line handlers supplied by SELLER or otherwise required at SELLER's Loading Pier, SPM, or Third-Party Pier, all of which shall become borrowed servants of BUYER. Neither SELLER, nor any of its associated or affiliated companies, nor any of the employees, servants, representatives and agents of any of the foregoing, shall be responsible for any losses, damages, delays or liabilities resulting from any negligence, incompetence or 12 incapacity of any pilot, line handler, mooring master required at SELLER's Loading Pier, SPM or Third-Party Pier or employed by BUYER or otherwise assisting BUYER at the express authorization of BUYER or BUYER's agent or the personnel of any tug(s) or other support vessels or arising from any unseaworthiness or any insufficiency of any tug or other support vessel employed by BUYER or otherwise assisting BUYER at the express authorization of BUYER or BUYER's agent and BUYER agrees to indemnify and hold SELLER harmless from and against any and all such losses, damages, delays or liabilities. At SELLER's Loading Pier or Third-Party Pier, laytime shall commence six hours after Notice of Readiness is tendered or three hours after BUYER's nominated barge is all secure at pier, whichever shall first occur. Allowable laytime shall be 14 hours; provided, however, that in the event that a part cargo or part cargoes belonging to a third party or third parties is/are loaded onto BUYER's nominated barge, allowable laytime shall be prorated and BUYER's allowable laytime shall be calculated on the basis of the ratio of the bill of lading volume of BUYER's cargo to the total bill of lading volume of the entire cargo loaded onto BUYER's nominated barge or vessel. Laytime shall cease when the hoses are disconnected; however, in the event part cargoes are loaded for BUYER and a third party or parties, BUYER's laytime shall commence as provided above if BUYER's cargo is loaded first, or shall commence upon commencement of loading of BUYER's cargo if BUYER's cargo is not the first to be loaded, and shall cease upon completion of loading of BUYER's cargo. Laytime is allotted and calculated using the barge currently named NOHO HELE (having approximately a 56,000 Bbl capacity). In the event that BUYER's nominated tank vessel is other than the NOHO HELE, laytime shall be the capacity of 13 the substitute tank vessel divided by 4,000 Bbl per hour; e.g., a 40,000 Bbl barge shall have an allocable laytime of 10 hours. Demurrage shall be payable at a rate equal to BUYER'S actual cost of tug and tow per hour for each hour used and prorated for each portion of an hour used in excess of allowable laytime. In the event the condition of Buyer's nominated barge renders it incapable of receiving cargo at the minimum delivery rate, such that the time spent loading BUYER's nominated barge (all cargoes) is in excess of nineteen (19) hours, SELLER shall have the right to suspend loading operations and order BUYER's nominated barge to vacate SELLER's Loading Pier or Third-Party Pier. SELLER shall not be liable for demurrage to the extent that allowed laytime is exceeded due to the condition of BUYER's nominated barge or tug, or is due to events or acts beyond SELLER's reasonable control. SECTION 7.4 While it is the intention of the parties to make deliveries of Product at SELLER's Loading Pier or Third-Party Pier, subject to mutual agreement, deliveries may be made at SELLER's SPM. In addition to those provisions of this Article VII not specific to SELLER's Loading Pier or Third-Party Pier, the following additional provisions will also apply to these SPM deliveries. SELLER agrees to make best, reasonable effort to deliver Fuel Oil into the BUYER's nominated barge at a temperature above 110 deg. F. BUYER's nominated barge shall operate in compliance with SELLER's Operations Manual approved by the U.S. Coast Guard and shall also comply with SELLER's current requirements for loading at its SPM as amended from time to time. SELLER may refuse to berth or load BUYER's nominated barge at SELLER's SPM for 14 failure to comply with SELLER's Operations Manual or requirements as aforesaid and shall not be liable for any resulting delays or expenses of BUYER. An accepted delivery day shall be determined in respect of each SPM loading pursuant to the provisions of this section. BUYER shall provide SELLER a proposed 3-day delivery window upon no less than seven (7) days' notice from the first proposed delivery day. The notice shall also specify the amount of the Product to be delivered, subject to a variation of plus or minus ten (10) percent at BUYER's option. The delivery window shall be narrowed to two (2) days upon no less than three (3) days' notice from the first proposed delivery day and one (1) day upon no less than two (2) days' notice from the first proposed delivery day. A final 24 hour accepted delivery day will be set by mutual agreement upon receipt of the two (2) day notice. SELLER may reject the final proposed delivery day upon providing BUYER 24 hours notice, with an alternate delivery day being set within one (1) day of BUYER's proposed delivery day. Notices may be given by telex, facsimile, radio or telephone. When BUYER's nominated barge is ready to load, the master of the barge's tug shall provide SELLER notice of readiness (NOR), and laytime shall commence six (6) running hours after receipt of the NOR, or upon the barge's arrival in berth (all fast), whichever first occurs. SELLER shall be allowed 24 hours laytime for loading the entire cargo requested in the seven (7) days' notice. BUYER's nominated barge shall vacate the SPM as soon as loading is completed. BUYER shall be responsible for any actual loss or damage incurred by SELLER as a direct result of the failure of BUYER's nominated barge to promptly vacate the SPM except if such delay is 15 caused by any event or acts beyond the reasonable control of BUYER, including but not limited to acts of God, fire, governmental acts or labor disturbances. In no event shall either party be responsible for prospective profits, or consequential damages allegedly caused by or based upon failure of BUYER's nominated barge to promptly vacate the SPM. SECTION 7.5 When an escape or discharge of oil or any polluting substance occurs in connection with or is caused by BUYER's nominated barge or its tow, or occurs from or is caused by loading operations, BUYER or its agents shall promptly take whatever measures are necessary or reasonable to prevent or mitigate environmental damage, without regard to whether or not said escape or discharge was caused by a negligent act or omission of BUYER's nominated barge or SELLER or BUYER or others. Failing such action by BUYER or its agents, SELLER, upon notice to BUYER and on BUYER's behalf, may promptly take whatever measures are reasonably necessary to prevent or mitigate pollution damage. Each party shall keep the other advised of the nature and results of the measures taken, and if time permits, the nature of the measures intended to be taken. Each party shall provide notice to the other pursuant to Section 15.2 or as otherwise provided in writing from time to time during the term of this Contract. The cost of all such measures taken shall be borne by BUYER except to the extent such escape or discharge was caused or contributed to by SELLER, and prompt reimbursement shall be made as appropriate; provided, however, that should BUYER or its agents give notice to SELLER to discontinue said measures (and to the extent government authorities allow SELLER to discontinue said measures) the continuance of SELLER's actions will no longer be deemed to 16 have been taken pursuant to the provisions of this clause. Notwithstanding any other provision in this Contract, the foregoing provisions shall be applicable only between BUYER and SELLER and shall not affect, as between BUYER and SELLER, any liability of BUYER to any third parties, including the State of Hawaii and the U.S. Government, if BUYER shall have such liability. Should SELLER incur any liability under Chapter 128D of the Hawaii Revised Statutes as a result of a spill from BUYER's nominated barge during transport, BUYER shall indemnify and hold SELLER harmless to the extent not caused by SELLER's negligence. BUYER warrants that any vessel used to load Product purchased from SELLER shall have in place Primary and Excess full Form Protection and Indemnity insurance including cover for Oil Pollution Clean-Up Liability and Liability for Oil Pollution Damage with a policy limit of $700,000,000, or the maximum available, as reflected by the coverage carried by other vessels calling at SELLER's SPM. ARTICLE VIII MEASUREMENT, SAMPLING AND TESTING SECTION 8.1 A mutually agreed upon independent petroleum inspector (Independent Inspector) shall attend every Product Delivery. A Delivery is defined as beginning with the initiation of pumping of each of Diesel or Fuel Oil from SELLER's refinery tank or nominated issuing tank to BUYER's nominated vessel and ending with the subsequent cessation of continuous pumping of Diesel or 17 Fuel Oil in such amount as is determined by the Independent Inspector's Certificate of Quantity. Reasonable charges rendered by the Independent Inspector shall be borne equally by BUYER and SELLER. SECTION 8.2 Quantity determination will be made by the Independent Inspector gauging SELLER's Product shore tanks before and after delivery. BUYER may verify SELLER's tank strapping tables at BUYER's election and sole expense. All measurements shall be made on the basis of net standard volumes in barrels corrected to 60 degrees Fahrenheit using the applicable ASTM-IP volume correction factor tables and should state whether such volumes are measured in air or in vacuum, with conversion in accordance with the most recent ASTM-IP Petroleum Measurement Tables (IP200) issued at the date of loading and otherwise by manual measurements such as ASTM-IP, Chapter 17 Procedures. The Independent Inspector shall (1) prepare and sign a certificate stating the quantity of the load, such certificate to utilize ASTM-IP standards, including measurement of sediment and water and API specific gravity, (2) furnish BUYER and SELLER each with a copy of such certificate; and (3) cable or advise by facsimile the quantity loaded to BUYER and SELLER. The data in the inspector's certificate of quantity prepared as provided herein shall, absent fraud or errors and omissions, be binding and conclusive upon both parties, and shall be used for verification of the invoice and Bill of Lading. 18 SECTION 8.3 Unless otherwise specifically provided herein, quality and heat content determination shall be based upon composite samples drawn from SELLER's issuing tanks and pipeline in accordance with ASTM sampling procedures in such a manner as to be representative of each individual Delivery of Fuel Oil and Diesel, respectively. If a Delivery of Diesel or Fuel Oil is from more than one issuing tank, the specifications of the total Delivery of Diesel or Fuel Oil shall be determined on a volumetric weighted average basis. The Independent Inspector shall draw (a) composite samples of diesel and fuel oil retain ("Retain Samples") prior to the loading of BUYER's nominated barge, if such diesel and fuel oil retain is accessible to standard sampling equipment, and (b) barge tank composite samples ("Barge Tank Samples") at the completion of loading the Diesel and at the completion of loading the Fuel Oil onto BUYER's nominated barge, in such a manner as to be representative of the total volume of diesel and fuel oil retain and of each individual Delivery, respectively. The samples described in subsections (a) and (b) herein shall be divided into a minimum of three (3) parts: 1. One part shall be retained by SELLER's laboratory for a period of three (3) months. 2. One part shall be provided to BUYER for the purpose of verifying SELLER's determinations. 3. At least one part shall be sealed and provided to BUYER, or to the Independent Inspector, to be retained. 19 SELLER agrees to provide BUYER a copy of SELLER's laboratory analyses of the issuing tank and pipeline samples showing API gravity, sulfur content, flash point and sediment and water content prior to commencing Delivery. SELLER shall provide BUYER the complete Certificate of Quality of the Diesel and the Fuel Oil no later than two working days after the completion of the Delivery. BUYER shall have the right to perform laboratory analyses in order to verify the results of SELLER's laboratory analyses. If SELLER or BUYER has reason to believe that the quality or quantity of Product stated for a specific Delivery is incorrect, including a dispute as to the test results of BUYER's samples and SELLER's shore tank and pipeline samples, then that party shall within thirty (30) days after the later of the date of the complete Certificate of Quality or the date of the final determination of gross heat content, present the other party with documents supporting such determination and the parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quality and quantity, if justified, for the Delivery in question. In the event of an unresolvable difference between SELLER and BUYER, BUYER's sealed Barge Tank Samples, and also BUYER's sealed Retain Samples if relevant in the opinion of the Independent Inspector, shall be provided to an independent laboratory for a final determination, which shall be binding on the parties. SELLER and BUYER shall share equally the cost for such independent laboratory determination. In the event of any quality problems occurring, both SELLER and BUYER shall attempt to minimize the impact of any such quality problems. If efforts to resolve the quality problem fail, BUYER may return off-specification loaded Product to the SELLER's Barbers Point 20 refinery, in which case SELLER shall replace the off-specification Product by delivering an equal volume of Product into BUYER's nominated barge in a timely manner. All reasonable costs and expenses, including testing, transportation, re-refining, and handling costs incurred in returning and replacing off- specification Product shall be paid by the responsible party, as determined by the independent laboratory test results and any other applicable evidence. In no event shall either party be responsible for prospective profits, or consequential damages allegedly caused by or based upon any quality problem with the Product. ARTICLE IX RENEGOTIATION It is understood and agreed that both parties entered into this Contract in reliance on governmental laws, rules, decrees, orders, regulations, and interpretations or implementation thereof in effect on the date of execution of this Contract or any subsequent amendments hereto, to the extent that they directly or indirectly affect the Product sold or purchased hereunder. If at any time any of the said laws, rules, regulations, implementations or interpretations thereof are changed or if new laws, rules, regulations or new interpretations and implementations thereof become effective, and such change or new laws, rules, regulations, interpretations or implementations thereof have a significant adverse economic effect upon either party such that performance of this Contract would be inequitable or cause substantial financial hardship to the affected party, then the affected party shall have the option to call for renegotiation of the price of the Product or any other provision of this Contract the performance of which by the affected 21 party would be inequitable or cause substantial financial hardship. Such option shall be exercised by the affected party at any time after such a change or new law, rule, regulation, interpretation or implementation thereof is effective, by giving written notice to the other party of the call to renegotiate. Within ten (10) calendar days after the date of such notice, the parties shall enter into negotiations and in the event that the parties do not agree upon a new price for the Product or other provision satisfactory to both parties within forty (40) calendar days after the date of such notice, the affected party shall have the right to terminate this Contract effective thirty (30) days after giving notice of termination to the other party. Said notice of termination shall be given within thirty (30) days immediately following the forty (40) day negotiation period. Until a mutually satisfactory new price for the Product or other provision has been agreed upon, or until this Contract is terminated as provided herein, the price for the Product or other provision which was in effect when the request for renegotiation was made shall continue in full force and effect. ARTICLE X FORCE MAJEURE SECTION 10.1 Force Majeure. As used in this contract, an event or act of "force majeure" is defined as follows: acts of God, wars, riots, strikes, labor disputes, lockouts, blockades, insurrections, inability to secure materials or labor by reason of allocations promulgated by governmental 22 agencies, epidemics, landslides, lightning, earthquakes, fires, floods, tidal waves, volcanic eruptions, explosions, or any other causes not within the control of the affected party. SECTION 10.2 Obligations Suspended. BUYER's obligation to purchase or receive Product, or SELLER's obligation to sell or deliver Product, shall be suspended to the extent performance is prevented by an event or act of force majeure for any period in which such event or act exists as to the party claiming force majeure; and so long as such party is exercising its good faith efforts to overcome such force majeure event. However, nothing in this Article excuses BUYER from its obligation to make payments of money due SELLER for Product already delivered to BUYER. SECTION 10.3 Notice of Force Majeure. The party claiming force majeure agrees to give the other party prompt written notice of an act or event of force majeure. The party claiming force majeure shall use due diligence to cure any act or event of force majeure, and shall give the other party prompt notice after the act or event of force majeure has terminated. This Article shall not require any party to settle or compromise any strike or labor dispute. SECTION 10.4 No Make-Up Requirement. After the act or event of force majeure has terminated, SELLER shall not be obligated to sell and deliver and BUYER shall not be obligated to purchase and receive the undelivered quantity of Product which normally would have been sold and delivered during the period of force majeure. 23 ARTICLE XI PRICE AND ALLOCATION CONTROLS SECTION 11.1 Regulatory Price Suspension. If SELLER is precluded by statute, or by regulation, rule, interpretation or order implementing such statute from obtaining any increase in Product Price, as determined pursuant to this Contract, the increase shall be suspended until said law, regulation, rule, interpretation or order permits the increase in whole or in part. In the event the law, regulation, rule, interpretation or order is terminated or is later modified to permit the increase, in whole or in part, the Product Price shall be increased for deliveries of the Product made thereafter to the level permitted under this Contract without further action by the parties. SECTION 11.2 Government Regulations. If the delivery or supply of Product pursuant to this Contract conflicts with or is limited or prohibited by any federal, state or local regulations, then to the extent of such conflict, limitation or prohibition, SELLER shall have no obligation to deliver or supply BUYER with the Product under this Contract and BUYER shall have no obligation to purchase or receive the Product under this Contract. BUYER, in BUYER's discretion, may elect to complete and file any and all required Federal or state regulatory forms to permit, facilitate, or enable the supply of Product to BUYER under this Contract. SELLER shall fully cooperate with BUYER in the completion and filing of the foregoing forms. If purchase and receipt of Product pursuant to this contract conflicts with or is limited or prohibited by any 24 Federal, State, or local regulations, then to the extent of such conflict, limitation, or prohibition, BUYER shall have no obligation to purchase and receive the Product under this Contract. ARTICLE XII ASSIGNMENT This Contract shall not be assigned by either party without prior written consent of the other party, and any assignment without such written consent shall be void; provided, however, HECO, HELCO, and MECO may assign their interests in this Contract to the Trustee under their respective First Mortgage Indentures. ARTICLE XIII APPLICABLE LAW This Contract shall be deemed to be a Contract made under and shall be governed by and construed in accordance with the laws of the State of Hawaii. The parties hereby consent to the personal jurisdiction of the federal and state courts in the State of Hawaii. ARTICLE XIV PUBLIC UTILITIES COMMISSION APPROVAL This Contract is required to be filed with the Hawaii Public Utilities Commission for approval. If in proceedings initiated as a result of the filing of this Contract, the Public Utilities Commission disapproves or fails to authorize the recovery of fuel costs incurred under this 25 Contract through the BUYER's Energy Cost Adjustment Clause, BUYER may terminate this Contract at any time within ninety (90) days of disapproval by giving sixty (60) days written notice to the SELLER. ARTICLE XV ENTIRE AGREEMENT, WAIVER AND ILLEGALITY SECTION 15.1 This Contract incorporates the entire agreement between the parties with reference to the subject matter and cancels and supersedes as of the date of execution hereof all prior oral or written understandings, or agreements, between the parties with respect to the subject matter and may only be modified by written instrument executed by duly authorized representatives of the parties. There are no other agreements which constitute any part of the consideration for, or any condition to, either party's compliance with its obligations under this Contract. Failure to insist upon strict performance of any provision shall not constitute a waiver of the right to require such performance, nor shall a waiver in one case constitute a waiver with respect to a later breach, whether of a similar nature or otherwise. If any term or provision of this Contract is held by any Court to be illegal or unenforceable, the remaining terms, provisions, rights and obligations shall not be affected. The headings or captions are for convenience only and have no force or effect on legal meaning in the construction or enforcement of the Contract. Time shall be of the essence in this Contract. 26 SECTION 15.2 Except as otherwise expressly provided herein, all notices shall be given in writing, by letter, telegram, or telex to the following addresses, or such other addresses as the parties may designate by notice, and shall be deemed given upon receipt. SELLER: Vice President - Marketing BHP Petroleum Americas Refining Inc. 733 Bishop Street Honolulu, Hawaii 96813 Facsimile: (808) 547-3796 BUYER: Hawaiian Electric Company, Inc. P.O. Box 2750 Honolulu, Hawaii 96840 Attn: Manager, Power Supply Services Department Facsimile: (808) 543-7788 The Manager, Power Supply Services Department, for Hawaiian Electric Company, Inc. shall be responsible for forwarding notices to the other parties to this Contract. 27 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound thereby, have caused this Contract to be executed in duplicate originals by their duly authorized officers. HAWAIIAN ELECTRIC BHP PETROLEUM AMERICAS COMPANY, INC. REFINING INC. By /s/ Edward Y. Hirata By /s/ Faye W. Kurren Its Vice President Its Vice President Regulatory Affairs SELLER By /s/ Molly M. Egged Its Secretary HAWAII ELECTRIC LIGHT COMPANY, INC. By /s/ Edward Y. Hirata Its Vice President By /s/ Molly M. Egged Its Secretary BUYER MAUI ELECTRIC COMPANY, LTD. By /s/ Edward Y. Hirata Its Vice President By /s/ Molly M. Egged Its Secretary BUYER 28 EXHIBIT A NO. 6 INDUSTRIAL FUEL OIL SPECIFICATIONS
Specification - Test Item Measurement Unit Limits ASTM Method GRAVITY @ 60 DEGREES F. Degrees API 6.5 Min. D-1298, D-4052-86 FLASH POINT Degrees F. 150 Min. D-93 VISCOSITY SSF At 77 DF - - - D-445, D-2161 VISCOSITY SSF At 122 DF 179 Min. D-445, 226 Max. D-2161 POUR POINT Degrees F. 55 Max. D-97 SULFUR Percent, Weight 2.00 Max. D-1552, D-2622, D-4294 SEDIMENT & WATER Percent, Volume 0.5 Max. D-1796 HEAT VALUE, GROSS MM BTU/BBL 6.2 million D-240 Min. LOADING TEMPERATURE Degrees F. 110 Min. n/a 150 Max.
29
EXHIBIT B DIESEL SPECIFICATIONS Specification - Test Item Measurement Unit Limits ASTM Method GRAVITY @ 60 DEGREES F. Degrees API 30.0 Min. D-1298, D-4052-86 SPECIFIC GRAVITY 60/60 DEGREES F. n/a .8762 Min. D-1298, D-4052-86 VISCOSITY SSU At 100 DF 32.6 Min. D-445, 40.1 Max. D-2161 FLASH POINT, PM Degrees F. 150 Min. D-93 POUR POINT Degrees F. 35 Max. D-97 ASH PPM, Wt. 100 Max. D-482 CETANE INDEX n/a 40 Min. D-4737 CARBON RESIDUE, 10% RESIDUUM %, Wt. .35 Max. D-524 SEDIMENT & WATER Percent, Volume 0.05 Max. D-1796 SULFUR Percent, Weight 0.40 Max. D-1552, D-2622, D-4294 DISTILLATION, 90% RECOVERED Degrees F. 540 - 650 D-86 SODIUM+POTASSIUM PPM, Wt. 0.5 Max. D-3605 NITROGEN PPM, Wt. Report D-4629 * HEAT VALUE, GROSS MM BTU/BBL 5.86 D-240, D-4868
* Typical Value 30 EXHIBIT C No. 6 FUEL OIL EXAMPLE PRICE CALCULATION Illustrative Price Calculation for August, 1995 The price in U.S. Dollars ("USD") per barrel of No. 6 Fuel Oil shall be determined monthly on the basis of the following price formula for a Delivery wit a standard gross heat content (no less than 6.2 million Btu per barrel nor more than 6.45 million Btu per barrel, as measured): -------------- BP = Platt's Bunkerwire Los Angeles Bunker C - -------------------------------------------- Date of Price Price in USD per barrel Low High --- ---- 6/22/95 $93.00 $96.00 6/27/95 $91.00 $94.00 6/29/95 $93.00 $96.00 7/06/95 $91.00 $93.00 7/11/95 $89.00 $92.00 7/13/95 $89.00 $91.00 7/18/95 $85.00 $89.50 Average of mean in USD per metric ton: $91.607 Expressed in USD per Bbl: BP = $14.386 per barrel (= $91.607/MT / 6.368 Bbl/MT) - --------------------- T = Taxes applicable to sale of Fuel Oil - ---------------------------------------- Taxes before application of Hawaii General Excise Tax (HGET): Federal Superfund Petroleum Fee = $0.097 per barrel HGET = 4.167% of pre-HGET price Hawaii Environmental Response Tax applied after HGET = $0.05 per barrel 31 Price For Fuel Oil With Standard Gross Heat Content (6.2 - 6.45 MM Btu Per Barrel) = ------------------------------------------ = ------------------------------------------ = ------------------------------------------ The price in USD per barrel of No. 6. Fuel Oil shall be determined monthly on the basis of the following price formula for a Delivery with other than a standard gross heat content (less than 6.2 million Btu per barrel or more than 6.45 million Btu per barrel, as measured): ----------------------------------- HC = The actual gross heat content of each Fuel Oil Delivery pursuant to Section 5.5 expressed in million BTUs per barrel with three significant figures to the right of the decimal point. Fuel Oil Price For Delivery with Assumed Gross Heat Content Other than Standard For an assumed HC value of 6,498 MM Btu per barrel = ------------------------------------------ = ------------------------------------------ = ------------------------------------------ = ------------------------------------------ EXPLANATION OF TAXES: - -------------------- Taxes in the Fuel Oil price currently in effect include Superfund Tax of $0.097 per barrel and the Hawaii Environmental Response Tax of $0.050 per barrel. Also, Hawaii State General Excise Tax of 4.167% will be paid on all components of the Fuel Oil price, except the Hawaii Environmental Response Tax. 32 EXHIBIT D --------- DIESEL EXAMPLE PRICE CALCULATION -------------------------------- Illustrative Price Calculation for August, 1995 The price in U.S. Dollars ("USD") per gallon of Diesel shall be determined monthly on the basis of the following price formula for a Delivery with a standard gross heat content (no less than 137,000 Btu per gallon nor more than 141,000 Btu per gallon, as measured): --------------------- DP = Oil Price Information Service Pacific Northwest Spot .5% Sulfur - -------------------------------------------------------------------- Diesel Price - ------------
Date of Price Price in USD per gallon Low High --- ---- 6/19/95 $0.5200 $0.5250 6/20/95 $0.5250 $0.5300 6/21/95 $0.5200 $0.5250 6/22/95 $0.5200 $0.5250 6/26/95 $0.5150 $0.5200 6/27/95 $0.5100 $0.5150 6/28/95 $0.5100 $0.5200 6/29/95 $0.5150 $0.5250 7/05/95 $0.5250 $0.5350 7/06/95 $0.5225 $0.5300 7/10/95 $0.5300 $0.5350 7/11/95 $0.5250 $0.5350 7/12/95 $0.5250 $0.5350 7/13/95 $0.5250 $0.5350 7/17/95 $0.5300 $0.5350 7/18/95 $0.5300 $0.5400 7/19/95 $0.5400 $0.5450 7/20/95 $0.5300 $0.5400
Average of mean in USD per gallon: $0.5270 DP = $0.5270 per gallon - ----------------- 33 T = Taxes applicable to sale of Diesel - -------------------------------------- Taxes before application of Hawaii General Excise Tax (HGET): Federal Superfund Petroleum Fee = $0.097 per barrel, $0.0023 per gallon HGET = 4.167% of pre-HGET price Taxes after application of Hawaii General Excise Tax (HGET): Hawaii Environmental Response Tax = $0.05 per barrel, $0.0012 per gallon Hawaii Liquid Fuel Tax = $0.01 per gallon PRICE FOR DIESEL WITH STANDARD GROSS HEAT CONTENT (137,000 - 141,000 BTU PER GALLON) = --------------------------- = ------------------------------------ = --------------------------- The price in USD per gallon of Diesel shall be determined monthly on the basis of the following price formula for a Delivery with other than a standard gross heat content (less than 137,000 Btu per gallon or more than 141,000 Btu per gallon, as measured): -------------------------- HC = The actual gross heat content of each Diesel Delivery pursuant to Section 5.5 expressed in BTUs per gallon. PRICE FOR DELIVERY OF DIESEL WITH ASSUMED GROSS HEAT CONTENT OTHER THAN STANDARD For an assumed HC value of 136,000 Btu per gallon = --------------------------- = --------------------------- = --------------------------- = --------------------------- 34 EXPLANATION OF TAXES: Taxes in the Diesel price currently in effect include Superfund Tax of $0.097 per barrel ($0.0023 per gallon), the Hawaii Environmental Response Tax of $0.050 per barrel ($0.0012 per gallon) and the Hawaii Liquid Fuel Tax of $0.01 per gallon. Also, the Hawaii State General Excise Tax of 4.167% will be paid on all components of the Diesel price, except the Hawaii Environmental Response Tax and the Hawaii Liquid Fuel Tax. 35 -----END PRIVACY-ENHANCED MESSAGE-----