10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 0-368

OTTER TAIL CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	41-0462685
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

215 South Cascade Street, Box 496, Fergus Falls, Minnesota	56538-0496
(Address of principal executive offices)	(Zip Code)

866-410-8780

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

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 þ NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). YES þ NO o

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:

July 31, 2005 – 29,219,279 Common Shares ($5 par value)

OTTER TAIL CORPORATION

INDEX

	Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets – June 30, 2005 and December 31, 2004 (not audited)		2 & 3
Consolidated Statements of Income — Three and Six Months Ended June 30, 2005 and 2004 (not audited)		4
Consolidated Statements of Cash Flows — Six Months Ended June 30, 2005 and 2004 (not audited)		5
Notes to Consolidated Financial Statements (not audited)		6-18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19-35
Item 3. Quantitative and Qualitative Disclosures about Market Risk		35-38
Item 4. Controls and Procedures		38
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 4. Submission of Matters to a Vote of Security Holders		39
Item 6. Exhibits		40
Signatures		41
Big Stone II Power Plant Participation Agreement
Big Stone II Power Plant Operation & Maintenance Services Agreement
Big Stone I and Big Stone II 2005 Joint Facilities Agreement
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Otter Tail Corporation

Consolidated Balance Sheets
(not audited)
-Assets-

	June 30,		December 31,
	2005		2004
	(Thousands of dollars)
Current assets
Cash and cash equivalents	$	16,179	$	—
Accounts receivable:
Trade—net		120,232		116,141
Other		9,634		9,872
Inventories		95,808		72,504
Deferred income taxes		4,875		4,852
Accrued utility revenues		19,699		15,344
Costs and estimated earnings in excess of billings		25,120		18,145
Other		16,545		7,800
Assets held for sale from discontinued operations		9,938		30,937
Total current assets		318,030		275,595
Investments and other assets		45,985		42,650
Goodwill—net		97,970		92,196
Other intangibles—net		21,549		19,600
Deferred debits
Unamortized debt expense and reacquisition premiums		6,828		7,291
Regulatory assets and other deferred debits		17,046		16,692
Total deferred debits		23,874		23,983
Plant
Electric plant in service		894,398		890,200
Nonelectric operations		216,045		208,311
Total plant		1,110,443		1,098,511
Less accumulated depreciation and amortization		449,240		436,856
Plant—net of accumulated depreciation and amortization		661,203		661,655
Construction work in progress		22,920		18,469
Net plant		684,123		680,124
Total	$	1,191,531	$	1,134,148

See accompanying notes to consolidated financial statements

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Otter Tail Corporation

Consolidated Balance Sheets
(not audited)
-Liabilities-

	June 30,			December 31,
	2005			2004
	(Thousands of dollars)
Current liabilities
Short-term debt	$	78,000		$	39,950
Current maturities of long-term debt		4,834			6,016
Accounts payable		75,294			84,433
Accrued salaries and wages		15,524			17,330
Accrued federal and state income taxes		19,311			3,700
Other accrued taxes		9,535			11,391
Other accrued liabilities		12,335			10,417
Liabilities from discontinued operations		1,835			8,585
Total current liabilities		216,668			181,822
Pensions benefit liability		18,652			16,703
Other postretirement benefits liability		25,957			25,053
Other noncurrent liabilities		13,719			11,874
Deferred credits
Deferred income taxes		119,084			121,301
Deferred investment tax credit		9,901			10,477
Regulatory liabilities		58,020			56,909
Other		4,587			1,662
Total deferred credits		191,592			190,349
Capitalization
Long-term debt, net of current maturities		259,615			261,805
Class B stock options of subsidiary		1,271			1,832
Class B stock of subsidiary		728			—
Cumulative preferred shares authorized 1,500,000 shares without par value; outstanding 2004 and 2003 — 155,000 shares		15,500			15,500
Cumulative preference shares — authorized 1,000,000 shares without par value; outstanding — none		—			—
Common shares, par value $5 per share authorized 50,000,000 shares; outstanding 2005 — 29,170,703 and 2004 — 28,976,919		145,854			144,885
Premium on common shares		91,233			87,865
Unearned compensation		(2,351	)		(2,577	)
Retained earnings		215,011			199,427
Accumulated other comprehensive loss		(1,918	)		(390	)
Total common equity		447,829			429,210
Total capitalization		724,943			708,347
Total	$	1,191,531		$	1,134,148

See accompanying notes to consolidated financial statements

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Otter Tail Corporation

Consolidated Statements of Income
(not audited)

	Three months ended					Six months ended
	June 30,					June 30,
	2005			2004		2005		2004
	(In thousands, except share					(In thousands, except share
	and per share amounts)					and per share amounts)
Operating revenues	$	256,378		$	203,457	$	488,511	$	403,040
Operating expenses
Production fuel		10,549			11,193		25,726		25,790
Purchased power — system use		19,904			9,903		31,442		20,825
Electric operation and maintenance expenses		25,334			22,202		49,252		43,479
Cost of goods sold (excludes depreciation; included below)		140,042			110,941		263,676		213,958
Other nonelectric expenses		25,720			21,259		48,461		41,831
Depreciation and amortization		11,553			10,529		22,938		21,036
Property taxes — electric operations		2,408			2,359		5,081		4,848
Total operating expenses		235,510			188,386		446,576		371,767
Operating income		20,868			15,071		41,935		31,273
Other income		215			755		409		766
Interest charges		4,841			4,324		9,407		8,709
Income from continuing operations before income taxes		16,242			11,502		32,937		23,330
Income taxes — continuing operations		5,275			3,694		10,920		7,264
Income from continuing operations		10,967			7,808		22,017		16,066
Discontinued operations
(Loss) income from discontinued operations net of taxes of ($96); $149; $237 and $153 for the respective periods		(149	)		224		348		225
Net gain on disposition of discontinued operations — net of taxes of $6,820 and $5,769 for the three and six months ended June 30, 2005		11,486			—		9,910		—
Net income from discontinued operations		11,337			224		10,258		225
Net income		22,304			8,032		32,275		16,291
Preferred dividend requirements		183			184		367		368
Earnings available for common shares	$	22,121		$	7,848	$	31,908	$	15,923
Basic earnings per common share:
Continuing operations (net of preferred dividend requirement)	$	0.37		$	0.29	$	0.74	$	0.61
Discontinued operations	$	0.39		$	0.01	$	0.35	$	0.01
	$	0.76		$	0.30	$	1.09	$	0.62
Diluted earnings per common share:
Continuing operations (net of preferred dividend requirement)	$	0.37		$	0.29	$	0.74	$	0.60
Discontinued operations	$	0.39		$	0.01	$	0.35	$	0.01
	$	0.76		$	0.30	$	1.09	$	0.61
Average number of common shares outstanding — basic		29,158,140			25,891,440		29,142,118		25,842,241
Average number of common shares outstanding — diluted		29,263,643			26,013,519		29,244,698		25,969,648
Dividends per common share	$	0.280		$	0.275	$	0.560	$	0.550

See accompanying notes to consolidated financial statements

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Otter Tail Corporation

Consolidated Statements of Cash Flows
(not audited)

	Six months ended
	June 30,
	2005			2004
	(Thousands of dollars)
Cash flows from operating activities
Net income	$	32,275		$	16,291
Adjustments to reconcile net income to net cash provided by operating activities:
Net gain from sale of discontinued operations		(9,910	)		—
Income from discontinued operations		(348	)		(225	)
Depreciation and amortization		22,938			21,037
Deferred investment tax credit		(576	)		(576	)
Deferred income taxes		(3,985	)		1,194
Change in deferred debits and other assets		3,766			401
Discretionary contribution to pension plan		(4,000	)		(2,000	)
Change in noncurrent liabilities and deferred credits		5,750			2,594
Allowance for equity (other) funds used during construction		(357	)		(390	)
Change in derivatives net of regulatory deferral		(736	)		(729	)
Other — net		825			988
Cash (used for) provided by current assets and current liabilities:
Change in receivables		(3,198	)		3,409
Change in inventories		(20,414	)		(6,390	)
Change in other current assets		(17,625	)		(6,466	)
Change in payables and other current liabilities		(9,329	)		(15,328	)
Change in interest and income taxes payable		8,214			3,097
Net cash provided by continuing operations		3,290			16,907
Net cash (used in) provided by discontinued operations		(878	)		1,456
Net cash provided by operating activities		2,412			18,363
Cash flows from investing activities
Capital expenditures		(27,145	)		(21,412	)
Proceeds from disposal of noncurrent assets		3,503			2,672
Acquisitions—net of cash acquired		(10,661	)		(393	)
Increases in other investments		(2,269	)		(1,923	)
Net cash used in investing activities — continuing operations		(36,572	)		(21,056	)
Net proceeds from the sales of discontinued operations		33,685			—
Net cash provided by (used in) investing activities — discontinued operations		558			(227	)
Net cash used in investing activities		(2,329	)		(21,283	)
Cash flows from financing activities
Change in checks written in excess of cash		(3,329	)		5,893
Net short-term borrowings		38,050			4,000
Proceeds from issuance of common stock, net of issuance expenses		4,820			5,229
Payments for retirement of common stock		(365	)		(345	)
Proceeds from issuance of long-term debt, net of issuance expenses		157			392
Payments for retirement of long-term debt		(3,948	)		(4,242	)
Dividends paid and other distributions		(16,691	)		(14,576	)
Net cash provided by (used in) financing activities — continuing operations		18,694			(3,649	)
Net cash used in financing activities — discontinued operations		(2,781	)		(1,141	)
Net cash provided by (used in) financing activities		15,913			(4,790	)
Effect of foreign exchange rate fluctuations on cash		183			—
Net change in cash and cash equivalents		16,179			(7,710	)
Cash and cash equivalents at beginning of period		—			7,710
Cash and cash equivalents at end of period	$	16,179		$	—
Supplemental cash flow information
Cash paid during the year from continuing operations for:
Interest (net of amount capitalized)	$	8,779		$	7,937
Income taxes	$	3,286		$	3,229
Cash paid during the year from discontinued operations for:
Interest (net of amount capitalized)	$	67		$	59
Income taxes	$	2,461		$	467

See accompanying notes to consolidated financial statements

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OTTER TAIL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(not audited)

In the opinion of management, Otter Tail Corporation (the Company) has included all adjustments (including normal recurring accruals) necessary for a fair presentation of the consolidated results of operations for the periods presented. The consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes as of and for the years ended December 31, 2004, 2003 and 2002 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Because of seasonal and other factors, the earnings for the three-month and six-month periods ended June 30, 2005 should not be taken as an indication of earnings for all or any part of the balance of the year.

Acquisitions

On January 3, 2005 the Company’s wholly-owned subsidiary, BTD Manufacturing, Inc. (BTD), acquired the assets of Performance Tool & Die, Inc. (Performance Tool) of Lakeville, Minnesota, for $4.1 million in cash. Performance Tool specializes in manufacturing mid to large progressive dies for customers throughout the Midwest, East and West Coasts, and the southern United States. Performance Tool’s revenues for the year ended December 31, 2004 were $4.1 million. The Company expects this acquisition to provide expanded growth opportunities for both BTD and Performance Tool.

Also, on January 3, 2005 the Company’s wholly-owned subsidiary, ShoreMaster, Inc. (ShoreMaster), acquired the common stock of Shoreline Industries, Inc. (Shoreline), of Pine River, Minnesota, and associated assets for $2.4 million in cash. Shoreline is a manufacturer of boatlift motors and other accessories for lifts and docks with sales throughout the United States, but primarily in Minnesota and Wisconsin. Shoreline’s revenues for the year ended December 31, 2004 were $2.1 million. The acquisition of Shoreline secures a source of components and expands potential markets for ShoreMaster products.

On May 31, 2005 ShoreMaster acquired the assets of Southeast Floating Docks, Inc., of St. Augustine, Florida for $4.0 million in cash. Southeast Floating Docks is a leading manufacturer of concrete floating dock systems for marinas. They have designed custom floating systems and conducted installations mainly in the southeast United States and the Caribbean. Southeast Floating Docks had revenues of $4.5 million in 2004. This acquisition enables ShoreMaster to offer a wider range of products to its customers and expands its geographic reach in the southeast region of the United States.

Disclosure of pro forma information related to the results of operations of the acquired entities for the periods presented in this report is not required due to immateriality.

6

Below, are condensed balance sheets, at the date of the business combinations, disclosing the preliminary allocation of the purchase price assigned to each major asset and liability category of the acquired companies:

	Performance		Shoreline		Southeast
(in thousands)	Tool		Industries		Floating Docks
Assets
Current assets	$	748	$	457	$	2,519
Plant		1,396		260		415
Goodwill		1,794		1,509		2,722
Other intangible assets		800		557		1,150
Total assets	$	4,738	$	2,783	$	6,806
Liabilities and equity
Current liabilities	$	324	$	86	$	318
Deferred revenue		—		—		2,520
Deferred income taxes		—		295		—
Long-term debt		298		—		—
Total liabilities	$	622	$	381	$	2,838
Cash paid	$	4,116	$	2,402	$	3,968

Goodwill and other intangible assets related to the Performance Tool acquisition are deductible for income tax purposes over 15 years. Other intangible assets related to the Performance Tool acquisition includes $239,000 for a nonamortizable trade name and $561,000 in other intangible assets being amortized over 3 to 15 years for book purposes. Goodwill and other intangible assets related to the Shoreline acquisition are not deductible for income tax purposes, except for a $171,000 noncompete agreement being amortized over 15 years for income tax purposes. Other intangible assets related to the Shoreline acquisition includes $149,000 for a nonamortizable brand name and $408,000 in other intangible assets being amortized over 5 to 20 years for book purposes. Goodwill and other intangible assets related to the Southeast Floating Docks acquisition are deductible for income tax purposes over 15 years. Other intangible assets related to the Southeast Floating Docks acquisition includes $1,000,000 for a nonamortizable brand name.

Revenue Recognition

Due to the diverse business operations of the Company, revenue recognition depends on the product produced or sold. The Company recognizes revenue when the earnings process is complete, evidenced by an agreement with the customer, there has been delivery and acceptance and the price is fixed and determinable. In cases where significant obligations remain after delivery, revenue is deferred until such obligations are fulfilled. Provisions for sale returns and warranty costs are recorded at the time of sale based on historical information and current trends. Amounts received in advance under customer service contracts are deferred and recognized on a straight-line basis over the contract period. In the case of derivative instruments, such as the electric utility’s forward energy contracts and the energy services company’s forward natural gas swap transactions, the Company recognizes gains and losses based on changes in the fair market value of derivative instruments over the period held, and also when realized on settlement, on a net basis in revenue in a manner prescribed by Emerging Issues Task Force (EITF) Issue 03-11. Gains and losses subject to regulatory treatment on forward energy contracts are deferred and recognized on a net basis in revenue in the period in which the contract settles.

For those operating businesses recognizing revenue when products are shipped, the operating businesses have no further obligation to provide services related to such product. The shipping terms used in these instances are FOB shipping point.

7

Some of the operating businesses enter into fixed-price construction contracts. Revenues under these contracts are primarily recognized on a percentage-of-completion basis. The method used to determine the percentage of completion is based on the ratio of labor costs incurred to total estimated labor costs at the Company’s wind tower manufacturer, square footage completed to total bid square footage for certain floating dock projects and costs incurred to total estimated costs on all other construction projects. The following summarizes costs incurred, billings and estimated earnings recognized on uncompleted contracts:

	June 30,			December 31,
(in thousands)	2005			2004
Costs incurred on uncompleted contracts	$	129,615		$	99,213
Less billings to date		(121,836	)		(96,413	)
Plus estimated earnings recognized		12,712			12,469
	$	20,491		$	15,269

The following amounts are included in the Company’s consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted contracts are included in accounts payable:

	June 30,			December 31,
(in thousands)	2005			2004
Costs and estimated earnings in excess of billings on uncompleted contracts	$	25,120		$	18,145
Billings in excess of costs and estimated earnings on uncompleted contracts		(4,629	)		(2,876	)
	$	20,491		$	15,269

The percent of revenue recognized under the percentage-of-completion method compared to total consolidated revenues was 20.5% for the six months ended June 30, 2005 compared with 20.3% for the six months ended June 30, 2004.

Stock-based compensation

The Company has elected to follow the accounting provisions of Accounting Principle Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, for stock-based compensation and to furnish the pro forma disclosures required under Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.

Had compensation costs for the stock options issued been determined based on estimated fair value at the award dates, as prescribed by SFAS No. 123, the Company’s net income for three and six month periods ended June 30, 2005 and June 30, 2004 would have decreased as presented in the table below. This may not be representative of the pro forma effects for future periods if additional options are granted.

8

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2005			2004			2005			2004
Net income
As reported	$	22,304		$	8,032		$	32,275		$	16,291
Total stock-based employee compensation expense determined under fair value based method for all awards net of related tax effects		(177	)		(330	)		(283	)		(544	)
Pro forma	$	22,127		$	7,702		$	31,992		$	15,747
Basic earnings per share
As reported	$	0.76		$	0.30		$	1.09		$	0.62
Pro forma	$	0.75		$	0.29		$	1.09		$	0.60
Diluted earnings per share
As reported	$	0.76		$	0.30		$	1.09		$	0.61
Pro forma	$	0.75		$	0.29		$	1.08		$	0.59

Adjustments and Reclassifications

Net income for the three and six months ended June 30, 2004 has been adjusted to reflect the effects of applying FASB Staff Position No. FAS 106-2 (FSP 106-2), Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act), retroactive to the beginning of 2004 on adoption in the third quarter of 2004. The adoption of FSP 106-2 had the effect of reducing operating expenses and increasing net income for the three and six months ended June 30, 2004 by $165,000 and $329,000, respectively. In accordance with the provisions of the Act, the expected subsidy has no effect on income tax expense.

Certain prior year amounts reported on the Company’s consolidated balance sheet have been reclassified to conform to 2005 presentation. On the Company’s consolidated balance sheets, regulatory assets and other deferred debits, previously disclosed on separate lines, have been combined on a single line. December 31, 2004 balance sheet amounts reflect the reclassification of certain assets and liabilities of both St. George Steel Fabrication, Inc. (SGS) and Chassis Liner Corporation (CLC) from continuing operations to discontinued operations as a result of the status of efforts to sell these businesses in the first and second quarters of 2005. The Company’s income statement for the three and six months ended June 30, 2004 reflects the reclassifications of the operating results to discontinued operations of Midwest Information Systems, Inc. (MIS) and SGS because these companies have been sold, and of CLC because its sale is pending. Such reclassifications had no impact on total consolidated assets, net income or shareholders’ equity.

On the Company’s consolidated statement of cash flows for the six months ended June 30, 2004 the change in the amount of checks issued in excess of cash, included in accounts payable on the Company’s consolidated balance sheet, was reclassified from change in payables and other current liabilities under cash flows from operating activities to change in checks written in excess of cash under cash flows from financing activities. This reclassification decreased cash flows from operating activities and increased cash flows from financing activities by $5,893,000 for the six months ended June 30, 2004.

9

Inventories

Inventories consist of the following:

	June 30,		December 31,
(in thousands)	2005		2004
Finished goods	$	43,197	$	34,081
Work in process		6,705		3,733
Raw material, fuel and supplies		45,906		34,690
	$	95,808	$	72,504

Goodwill and Other Intangible Assets

Goodwill increased $5,774,000 in the first six months of 2005 primarily due to the acquisitions of Performance Tool, Shoreline and Southeast Floating Docks.

The following table summarizes the components of the Company’s intangible assets at June 30, 2005 and December 31, 2004.

	June 30, 2005						December 31, 2004
	Gross				Net		Gross				Net
	carrying		Accumulated		carrying		carrying		Accumulated		carrying
(in thousands)	amount		amortization		amount		amount		amortization		amount
Amortized intangible assets:
Covenants not to compete	$	2,337	$	1,483	$	854	$	1,966	$	1,334	$	632
Customer relationships		10,544		364		10,180		10,045		148		9,897
Other intangible assets including contracts		2,696		1,500		1,196		2,523		1,387		1,136
Total	$	15,577	$	3,347	$	12,230	$	14,534	$	2,869	$	11,665
Non-amortized intangible assets:
Brand/trade name	$	9,319	$	—	$	9,319	$	7,935	$	—	$	7,935

Intangible assets with finite lives are being amortized over average lives ranging from one to twenty-five years. The amortization expense for these intangible assets was $543,000 for the six months ended June 30, 2005 compared to $262,000 for the six months ended June 30, 2004. The estimated annual amortization expense for these intangible assets for the next five years is: $1,146,000 for 2005, $903,000 for 2006, $789,000 for 2007, $720,000 for 2008 and $597,000 for 2009.

New Accounting Standards

SFAS No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4, was issued in November 2004 to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges. This statement also requires that allocation of fixed production overheads to the costs of converting materials into finished products be based on the normal capacity of the production facilities. The provisions of this statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005 with earlier application permitted. The Company does not expect the application of the requirements of SFAS No. 151 to have a material effect on the Company’s consolidated net income, financial position or cash flows.

SFAS No. 123(R) (revised 2004), Share-Based Payment, issued in December 2004 is a revision of SFAS No. 123, Accounting for Stock-based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The Company currently reports its stock-based compensation under the requirements of APB

10

Opinion No. 25 and furnishes related pro forma footnote information required under SFAS No. 123. Under SFAS No. 123(R), the Company will be required to record its stock-based compensation as an expense on its income statement over the period earned based on the fair value of the stock or options awarded on their grant date. The effective date for application of SFAS No. 123(R) for the Company is January 2006 with early adoption allowed. The Company will adopt SFAS No. 123(R) in January 2006. The application of SFAS No. 123(R) reporting requirements will have the effect of reducing 2006 net income by $163,000 for currently outstanding options.

FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, (FIN 47) issued in March 2005, clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. However, the obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires that the uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal years ending after December 15, 2005. Retroactive application of interim financial information is permitted, but not required. The Company is evaluating the impact of this interpretation, but does not expect it to have a material effect on the Company’s consolidated net income, financial position or cash flows.

SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, was issued in December 2004. This Statement addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. This Statement specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this statement shall be effective and applied prospectively for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 with earlier application permitted. The Company does not expect the application of the requirements of SFAS No. 153 to have a material effect on the Company’s consolidated net income, financial position or cash flows.

SFAS No. 154, Accounting for Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3, was issued in May 2005. This Statement provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. This Statement also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, with early adoption permitted. The Company does not expect the application of the requirements of SFAS No. 154 to have a material effect on the Company’s consolidated net income, financial position or cash flows.

Segment Information

The Company’s businesses have been classified into six segments based on products and services and reach customers in all 50 states and international markets. The six segments are: electric, plastics, manufacturing, health services, food ingredient processing and other business operations.

Electric includes the production, transmission, distribution and sale of electric energy in Minnesota, North Dakota and South Dakota under the name Otter Tail Power Company. Electric utility operations have been the Company’s primary business since incorporation.

11

Plastics consist of businesses producing polyvinyl chloride (PVC) and polyethylene (PE) pipe in the Upper Midwest and Southwest regions of the United States.

Manufacturing consists of businesses in the following manufacturing activities: production of waterfront equipment, wind towers, material and handling trays and horticultural containers, contract machining, and metal parts stamping and fabrication. These businesses are located primarily in the Upper Midwest and Missouri.

Health services consists of businesses involved in the sale of diagnostic medical equipment, patient monitoring equipment and related supplies and accessories. These businesses also provide service maintenance, diagnostic imaging, positron emission tomography and nuclear medicine imaging, portable X-ray imaging and rental of diagnostic medical imaging equipment to various medical institutions located throughout the United States.

Food ingredient processing, established as a result of the acquisition of IPH in August 2004, consists of IPH, which owns and operates potato dehydration plants in Ririe, Idaho; Center, Colorado and Souris, Prince Edward Island, Canada, producing dehydrated potato products that are sold in the United States, Canada, Europe, the Middle East, the Pacific Rim and Central America.

Other business operations consists of businesses involved in residential, commercial and industrial electric contracting industries; fiber optic and electric distribution systems; waste-water, water and HVAC systems construction; transportation; energy services and natural gas marketing and the portion of corporate general and administrative expenses that are not allocated to other segments. These businesses operate primarily in the Central United States, except for the transportation company which operates in 48 states and six Canadian provinces.

The Company’s electric operations, including wholesale power sales, are operated as a division of Otter Tail Corporation, and the Company’s energy services and natural gas marketing operations are operated as a subsidiary of Otter Tail Corporation. Substantially all of the other businesses are owned by a wholly owned subsidiary of the Company.

The Company evaluates the performance of its business segments and allocates resources to them based on earnings contribution and return on total invested capital. Information on continuing operations for the business segments for three and six month periods ended June 30, 2005 and 2004 and total assets by business segment as of June 30, 2005 and December 31, 2004 is presented in the following tables.

Operating Revenue

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2005			2004			2005			2004
Electric	$	74,150		$	60,449		$	147,633		$	133,304
Plastics		36,004			32,636			68,159			59,072
Manufacturing		67,858			50,399			123,387			92,213
Health services		31,324			26,597			59,122			52,273
Food ingredient processing		8,234			—			17,489			—
Other business operations		39,707			33,906			74,604			67,421
Intersegment eliminations		(899	)		(530	)		(1,883	)		(1,243	)
Total	$	256,378		$	203,457		$	488,511		$	403,040

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Income (Loss) Before Income Taxes

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2005			2004			2005			2004
Electric	$	7,750		$	7,072		$	19,555		$	22,218
Plastics		3,950			3,827			8,357			4,899
Manufacturing		7,528			3,681			9,219			4,188
Health services		2,035			321			3,384			524
Food ingredient processing		410			—			1,609			—
Other business operations		(5,431	)		(3,399	)		(9,187	)		(8,499	)
Total	$	16,242		$	11,502		$	32,937		$	23,330

Identifiable Assets

	June 30,		December 31,
(in thousands)	2005		2004
Electric	$	636,113	$	634,433
Plastics		73,532		67,574
Manufacturing		189,311		150,800
Health services		66,556		66,506
Food ingredient processing		94,504		92,392
Other business operations		121,577		91,506
Discontinued operations		9,938		30,937
Total	$	1,191,531	$	1,134,148

No single external customer accounts for 10% or more of the Company’s revenues. Substantially all of the Company’s long-lived assets are within the United States except for a food ingredient processing dehydration plant in Souris, Prince Edward Island, Canada. For the three months ended June 30, 2005, 98.1% of the Company’s consolidated revenue came from sales within the United States, 1.0% came from sales in Canada and the remaining 0.9% came from sales in various foreign countries around the world. For the three months ended June 30, 2004, 97.4% of the Company’s consolidated revenue came from sales within the United States, 0.7% came from sales in Canada and the remaining 1.9% came from sales in various foreign countries around the world.

For the six months ended June 30, 2005, 98.1% of the Company’s consolidated revenue came from sales within the United States, 1.0% came from sales in Canada and the remaining 0.9% came from sales in various foreign countries around the world. For the six months ended June 30, 2004, 95.4% of the Company’s consolidated revenue came from sales within the United States, 3.5% came from sales in Canada and the remaining 1.1% came from sales in various foreign countries around the world.

Discontinued Operations

As part of an ongoing evaluation of the prospects and growth opportunities of the Company’s business operations, the Company decided to sell MIS, its telecommunications company located in Parkers Prairie, Minnesota, SGS, its structural steel fabricator located in St. George, Utah, and CLC, its manufacturer of auto and truck frame-straightening equipment and accessories located in Alexandria, Minnesota. In the second quarter of 2005, the Company completed the sales of MIS and SGS. Discontinued operations includes the operating results of MIS, SGS and CLC, and an after-tax gain on the sale of MIS of $11.9 million for the three and six month periods ended June 30, 2005, an after-tax loss on the sale of SGS of $1.8 million (an estimated loss of $1.6 million recorded

13

in the first quarter of 2005 plus an additional loss on disposition of $0.2 million recorded in the second quarter of 2005) and an estimated after-tax loss related to the anticipated sale of CLC of $0.2 million for the three and six month periods ended June 30, 2005 based on the expected sales price and the costs of disposition. MIS, SGS and CLC meet requirements to be reported as discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

The results of discontinued operations for the three and six months ended June 30, 2005 and 2004 are summarized as follows:

	Three months ended											Three months ended
	June 30, 2005											June 30, 2004
(in thousands)	MIS		SGS			CLC			Total			MIS		SGS			CLC			Total
Operating revenues	$	1,729	$	1,459		$	2,067		$	5,255		$	2,093	$	3,624		$	2,034		$	7,751
Income/(loss) before income taxes		897		(1,179	)		37			(245	)		834		(438	)		(23	)		373
Gain/(loss) on disposition — pretax		19,025		(419	)		(300	)		18,306			—		—			—			—
Income tax expense/(benefit)		7,467		(639	)		(104	)		6,724			333		(175	)		(9	)		149

	Six months ended										Six months ended
	June 30, 2005										June 30, 2004
(in thousands)	MIS		SGS			CLC			Total		MIS		SGS			CLC			Total
Operating revenues	$	3,773	$	6,329		$	3,772		$	13,874	$	4,070	$	6,579		$	4,104		$	14,753
Income/(loss) before income taxes		2,167		(1,563	)		(19	)		585		1,569		(1,089	)		(102	)		378
Gain/(loss) on disposition — pretax		19,025		(3,046	)		(300	)		15,679		—		—			—			—
Income tax expense/(benefit)		7,975		(1,843	)		(126	)		6,006		628		(435	)		(40	)		153

The results of discontinued operations for the quarters ended September 30, 2004 and December 31, 2004 are as follows:

	Quarter Ended September 30, 2004										Quarter Ended December 31, 2004
(in thousands)	MIS		SGS			CLC			Total		MIS		SGS		CLC		Total
Operating revenues	$	2,157	$	3,806		$	1,580		$	7,543	$	2,512	$	6,823	$	2,069	$	11,404
Income/(loss) before income taxes		881		(165	)		(125	)		591		1,247		322		65		1,634
Income tax expense/(benefit)		352		(65	)		(53	)		234		503		129		21		653

At June 30, 2005 and December 31, 2004 the major components of assets and liabilities of the discontinued operations were as follows:

	June 30, 2005								December 31, 2004
(in thousands)	SGS		CLC		Total		MIS		SGS		CLC		Total
Current assets	$	6,221	$	3,356	$	9,577	$	275	$	9,344	$	3,092	$	12,711
Investments and other assets		—		5		5		2,270		—		5		2,275
Goodwill—net		—		—		—		5,925		—		—		5,925
Other intangibles—net		—		43		43		—		18		74		92
Net plant		—		313		313		7,960		1,618		356		9,934
Assets of discontinued operations	$	6,221	$	3,717	$	9,938	$	16,430	$	10,980	$	3,527	$	30,937
Current liabilities	$	943	$	857	$	1,800	$	2,920	$	2,228	$	837	$	5,985
Deferred credits		—		33		33		581		271		33		885
Long-term debt		—		2		2		1,710		—		5		1,715
Liabilities of discontinued operations	$	943	$	892	$	1,835	$	5,211	$	2,499	$	875	$	8,585

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The remaining assets of SGS consist of accounts receivable, accounts payable and inventory at estimated fair market values that were not settled or disposed of as of June 30, 2005.

Class B Stock Options and Class B Stock of Subsidiary

In June 2005, option holders exercised 349 Idaho Pacific Holding, Inc. (IPH) class B common stock options, resulting in the issuance of 349 IPH class B common shares. Total cash paid to IPH on exercise of the options and issuance of the class B common shares was $166,000. On issuance, the class B common shares were immediately put back to IPH and will be redeemed by IPH prior to December 31, 2005 (181 days after issuance) for $728,000; the value of the shares on the date of issuance.

Common Shares and Earnings per Share

In January 2005, 175,000 common shares were issued as a result of the underwriters exercising a portion of their over-allotment option in connection with the Company’s December 2004 public offering. The proceeds to the Company of $24.50 per share were used to pay down debt borrowed to finance the acquisition of IPH. In addition, during the first six months of 2005, the Company issued 31,541 common shares for stock options exercised and 1,210 common shares for director’s compensation.

On April 11, 2005 the Company’s Board of Directors granted 74,900 stock options to key employees and 17,700 shares of restricted stock to the directors and certain key employees under the 1999 Stock Incentive Plan (the Plan). The exercise price of the stock options is equal to the fair market value per share at the date of the grant. The options vest six months from the grant date and expire ten years after the date of the grant. As of June 30, 2005 a total of 1,530,832 vested and unvested options were outstanding and a total of 232,134 shares of restricted stock had been issued under the Plan. The Company currently accounts for the Plan under APB Opinion No. 25.

On April 11, 2005 the Company’s Board of Directors approved performance award agreements under the Plan for the Company’s executive officers. Under these agreements, the officers could be awarded up to 75,150 common shares based on the Company’s stock performance relative to the stock performances of its peer group of companies in the Edison Electric Institute Index over a three year period ending on December 31, 2007. The number of shares earned, if any, would be issued at the end of the three year performance measurement period. The participants have no voting or dividend rights under these agreements until the shares are issued at the end of the performance measurement period.

In the first six months of 2005, the Company retired 14,547 common shares for tax withholding purposes related to restricted shares that vested and also retired 17,120 common shares related to the return to the Company of stock that was held in escrow for performance contingencies that were not achieved in a health services acquisition.

Basic earnings per common share are calculated by dividing earnings available for common shares by the average number of common shares outstanding during the period. Diluted earnings per common share are calculated by adjusting outstanding shares, assuming conversion of all potentially dilutive stock options. Stock options with exercise prices greater than the market price are excluded from the calculation of diluted earnings per common share.

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Comprehensive Income

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2005			2004			2005			2004
Net income	$	22,304		$	8,032		$	32,275		$	16,291
Other comprehensive income (net-of-tax)
Minimum pension liability adjustment		(1,263	)		—			(1,263	)		—
Foreign currency translation (loss) gain		(176	)		—			(259	)		—
Unrealized (loss) on available-for-sale securities		16			(20	)		(6	)		(20	)
Total other comprehensive income		(1,423	)		(20	)		(1,528	)		(20	)
Total comprehensive income	$	20,881		$	8,012		$	30,747		$	16,271

The minimum pension liability adjustment is associated with the Company’s Executive Survivor and Supplemental Retirement Plan. The foreign currency translation adjustments are associated with the Canadian operations of IPH.

Rate and Regulatory Matters

On November 30, 2004, Otter Tail Power Company filed a Report with the Minnesota Public Utilities Commission responding to claims of allegedly improper regulatory filings brought to the attention of the Company by certain individuals. In May and June 2005, the Energy Division of the Minnesota Department of Commerce, the Residential Utilities Division of the Office of Attorney General and the claimants filed comments in response to the report. On July 15, 2005, the Company filed reply comments. Resolution of this docket is not likely to occur until the fourth quarter, 2005.

Regulatory Assets and Liabilities

As a regulated entity the Company and the electric utility account for the financial effects of regulation in accordance with SFAS No. 71, Accounting for the Effect of Certain Types of Regulation. This accounting standard allows for the recording of a regulatory asset or liability for costs that will be collected or refunded in the future as required under regulation.

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The following table indicates the amount of regulatory assets and liabilities recorded on the Company’s consolidated balance sheet:

	June 30,		December 31,
(in thousands)	2005		2004
Regulatory assets:
Deferred income taxes	$	15,085	$	14,526
Debt expenses and reacquisition premiums		3,205		3,424
Deferred conservation program costs		748		1,203
Plant acquisition costs		218		240
Deferred marked-to-market losses		830		331
Accrued cost-of-energy revenue		10,688		3,348
Accumulated ARO accretion/depreciation adjustment		165		114
Total regulatory assets	$	30,939	$	23,186
Regulatory liabilities:
Accumulated reserve for estimated removal costs	$	50,345	$	49,823
Deferred income taxes		6,360		6,727
Deferred marked-to-market gains		1,156		197
Gain on sale of division office building		159		162
Total regulatory liabilities	$	58,020	$	56,909
Net regulatory liability position	$	27,081	$	33,723

The regulatory assets and liabilities related to deferred income taxes are the result of the adoption of SFAS No. 109, Accounting for Income Taxes. Debt expenses and reacquisition premiums are being recovered from electric utility customers over the remaining original lives of the reacquired debt issues, the longest of which is 17.1 years. Deferred conservation program costs represent mandated conservation expenditures recoverable through retail electric rates over the next 1.5 years. Plant acquisition costs will be amortized over the next 4.9 years. Accrued cost-of-energy revenue included in accrued utility revenues will be recovered over the next nine months. All deferred marked-to-market gains and losses are related to forward purchases and sales of energy scheduled for delivery prior to May 2006. The accumulated reserve for estimated removal costs is reduced for actual removal costs incurred. The remaining regulatory assets and liabilities are being recovered from, or will be paid to, electric customers over the next 30 years.

If, for any reason, the Company’s regulated businesses cease to meet the criteria for application of SFAS No. 71 for all or part of their operations, the regulatory assets and liabilities that no longer meet such criteria would be removed from the consolidated balance sheet and included in the consolidated statement of income as an extraordinary expense or income item in the period in which the application of SFAS No. 71 ceases.

Pension Plan and Other Postretirement Benefits

Pension Plan—Components of net periodic pension benefit cost of the Company’s noncontributory funded pension plan are as follows:

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2005			2004			2005			2004
Service cost—benefit earned during the period	$	1,034		$	900		$	2,068		$	1,800
Interest cost on projected benefit obligation		2,448			2,350			4,896			4,700
Expected return on assets		(2,996	)		(3,000	)		(5,992	)		(6,000	)
Amortization of prior-service cost		240			225			481			450
Net periodic pension cost	$	726		$	475		$	1,453		$	950

17

Cash Flows: The Company made $4.0 million and $2.0 million discretionary contributions to its pension plan during the six months ended June 30, 2005 and 2004 respectively.

Executive Survivor and Supplemental Retirement Plan—Components of net periodic pension benefit cost of the Company’s unfunded, nonqualified benefit plan for executive officers and certain key management employees are as follows:

	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2005		2004		2005		2004
Service cost—benefit earned during the period	$	92	$	205	$	184	$	410
Interest cost on projected benefit obligation		316		372		632		744
Amortization of prior-service cost		18		37		36		74
Recognized net actuarial loss		104		170		208		340
Net periodic pension cost	$	530	$	784	$	1,060	$	1,568

On January 31, 2005 the Board of Directors of the Company amended and restated the Otter Tail Corporation Executive Survivor and Supplemental Retirement Plan (the ESSRP). The amendments to the ESSRP provide for reduced future benefits effective January 1, 2005, which are expected to result in reduced expense to the Company.

Effective January 1, 2005 new participants in the ESSRP will accrue benefits under a new formula. The new formula is the same as the formula used under the Company’s qualified defined benefit pension plan but includes bonuses in the computation of covered compensation and is not subject to statutory compensation and benefit limits. Individuals who became participants in the ESSRP before January 1, 2005 will receive the greater of the old formula or the new formula until December 31, 2010. On December 31, 2010, their benefit under the old formula will be frozen. After 2010, they will receive the greater of their frozen December 31, 2010 benefit or their benefit calculated under the new formula. The amendments to the ESSRP also provide for increased service credits for certain participants and eliminate certain distribution features.

Postretirement Benefits—Components of net periodic postretirement benefit cost for health insurance and life insurance benefits for retired electric utility and corporate employees are as follows:

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands)	2005			2004			2005			2004
Service cost—benefit earned during the period	$	311		$	289		$	622		$	577
Interest cost on projected benefit obligation		666			645			1,332			1,290
Amortization of transition obligation		187			188			374			377
Amortization of prior-service cost		(77	)		(77	)		(154	)		(154	)
Amortization of net actuarial loss		156			171			312			343
Effect of Medicare Part D expected subsidy		(201	)		(189	)		(402	)		(378	)
Net periodic postretirement benefit cost	$	1,042		$	1,027		$	2,084		$	2,055

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2005 and 2004

Consolidated operating revenues were $256.4 million for the three months ended June 30, 2005 compared with $203.5 million for the three months ended June 30, 2004. Operating income was $20.9 million for the three months ended June 30, 2005 compared with $15.1 million for the three months ended June 30, 2004. The Company recorded diluted earnings per share from continuing operations of $0.37 for the three months ended June 30, 2005 compared to $0.29 for the three months ended June 30, 2004 and total diluted earnings per share from continuing and discontinued operations of $0.76, including $0.41 per share from a gain on the sale of Midwest Information Systems, Inc. (MIS), for the three months ended June 30, 2005 compared to $0.30 for the three months ended June 30, 2004.

Earnings increased across our electric and nonelectric businesses as compared to the same period in 2004. Electric segment earnings were up $0.9 million with better than anticipated results in wholesale power markets. The combined net earnings from continuing operations in our nonelectric segments were $5.3 million, which is up over 70% from second-quarter 2004 net earnings, reflecting improved results in the manufacturing and health services segments, along with continuing strong performance from the plastics segment.

Following is a more detailed analysis of our operating results by business segment for the three and six month periods ended June 30, 2005 and 2004, followed by our outlook for the remainder of 2005 and a discussion of changes in our financial position during the six months ended June 30, 2005.

Amounts presented in the segment tables below for the three month periods ended June 30, 2005 and 2004 for operating revenues, cost of goods sold and nonelectric segment operating expenses will not agree with amounts presented in the consolidated statements of income for those periods due to the elimination of intersegment transactions. The total intersegment eliminations include: $899,000 in operating revenues, $442,000 in cost of goods sold and $457,000 in other nonelectric expenses for the three months ended June 30, 2005; and $530,000 in operating revenues, $62,000 in cost of goods sold and $468,000 in other nonelectric expenses for the three months ended June 30, 2004.

Electric

	Three months ended
	June 30,							%
(in thousands)	2005		2004		Change			Change
Retail sales revenues	$	59,532	$	49,257	$	10,275			20.9
Wholesale revenues		9,440		5,281		4,159			78.8
Net marked-to-market gains		999		1,547		(548	)		(35.4	)
Other revenues		4,179		4,364		(185	)		(4.2	)
Total operating revenues	$	74,150	$	60,449	$	13,701			22.7
Production fuel		10,549		11,193		(644	)		(5.8	)
Purchased power – retail use		19,904		9,903		10,001			101.0
Other operation and maintenance expenses		25,334		22,202		3,132			14.1
Depreciation and amortization		6,103		6,015		88			1.5
Property taxes		2,408		2,359		49			2.1
Operating income	$	9,852	$	8,777	$	1,075			12.2

19

The increase in retail electric revenue is mainly due to an $8.1 million increase cost-of-energy adjustment revenues related to the recovery of increased purchase power costs in the second quarter of 2005. The remaining $2.2 million increase in retail revenues resulted from a 1.9% increase in retail megawatt-hours (mwh) sold between the periods. Increased sales reflect increases in consumption of 4.2% among commercial customers and 0.9% among residential customers, while mwh sales to industrial customers decreased 4.7%. Weather was also a factor contributing to the increase in sales as cooling-degree-days increased 223% in the second quarter of 2005 compared to the second quarter of 2004 as a result of warmer weather in June 2005.

Wholesale mwh sales from company-owned generation decreased 27.1% in the three months ended June 30, 2005, compared to the three months ended June 30, 2004 while the revenue per mwh sold increased 56.2%, resulting in an increase in revenue from sales off company-owned generation of $0.5 million between the periods. The increase in prices for company-owned generation resold is commensurate with general increases in fuel and purchased power costs across the Mid-Continent Area Power Pool (MAPP) region between the periods. Net margins on purchased power resold increased $3.6 million despite a 61.6% decrease in mwhs resold. This decrease was more than offset by an increase in the net margin per mwh of purchased power resold. The increased prices are partially due to warmer weather in the MAPP region between the quarters and partially due to a decrease in available electricity from hydro-generation in the region due to lower water levels in Upper-Missouri River reservoirs resulting from a prolonged drought in the Upper-Missouri River basin. The increase in wholesale prices also coincided with the inception of the Midwest Independent Transmission System Operator (MISO) electric markets on April 1, 2005.

The decrease in net marked-to-market gains on forward purchases and sales of electricity is related to a decline in activity in forward energy markets in the MAPP region due to uncertainty related to the implementation of the MISO electric market initiatives in April 2005. MISO electric market initiatives are designed to facilitate open access to electric transmission lines and generation sources and transparency in pricing for buyers and sellers of electricity in the geographical region under MISO control. The electric utility’s open forward contracts for the purchase and sale of electricity subject to mark-to-market accounting were lower in volume on June 30, 2005 than on June 30, 2004. The electric utility also has marked-to-market two 50 megawatt capacity agreements as of June 30 2005, one through October 2005 and one through April 2006.

The decrease in other electric operating revenues for the three months ended June 30, 2005 compared to the three months ended June 30, 2004 includes a $0.6 million decrease in transmission service revenue, load control and dispatching services related revenues and a $0.2 million decrease in revenue from steam sales, partially offset by a $0.6 million increase in revenue from contracted work performed for others in the second quarter of 2005 mainly related to transmission permitting work for MISO and the proposed Big Stone II project.

The decrease in fuel costs for the three months ended June 30, 2005 compared with the three months ended June 30, 2004 was the result of a 21.9% decrease in mwhs generated partially offset by a 20.7% increase in the cost of fuel per mwh generated between the periods. Generation used for wholesale electric sales decreased 27.1% while generation for retail sales decreased 20.6% between the quarters. The decrease in generation is mainly due to a scheduled seven-week maintenance shutdown of Big Stone Plant in the second quarter of 2005. The decrease in mwh generation at Big Stone Plant was partially offset by an increase in generation at our Hoot Lake plant where the cost of fuel per mwh of generation was 7.5% higher than at Big Stone Plant in the second quarter of 2005. Fuel costs per mwh of generation increased at all three of our coal-fired generating plants as a result of increases in coal and coal transportation costs between the periods. Approximately 90% of the fuel cost increases associated with generation to serve retail electric customers is subject to recovery through the fuel cost recovery component of retail rates.

The increase in purchased power expense for energy purchased for system use (sale to retail customers) is due to a 43.8% increase in mwhs purchased combined with a 39.7% increase in the cost per mwh purchased. Mwh purchases increased to make up for a net decrease in mwhs generated as a result of the scheduled seven-week maintenance shutdown of Big Stone Plant in the second quarter of 2005. The cost per mwh of purchased power has increased in part due to a general increase in fuel and purchased power costs across the MAPP region as a result of increases in

20

coal mining and transportation costs related to higher fuel prices and also for the reasons discussed above that contributed to the increase in wholesale mwh sales.

The increase in other operation and maintenance expenses for the three months ended June 30, 2005 compared with the three months ended June 30, 2004 reflects $1.3 million in increased labor expenses due to an increase in employee benefit costs, general wage and salary increases averaging approximately 3.6% and an increase in overtime pay in the second quarter of 2004. Material and operating supply expenses increased $0.9 million between the periods, most of which is attributable to maintenance costs incurred at Big Stone Plant during its scheduled seven-week maintenance shutdown in the second quarter of 2005. Costs of goods sold increased $0.5 million between the periods as a result of an increase in contracted work performed for others in the second quarter of 2005. Costs to repair damages caused by storms and other events increased $0.4 million between the quarters.

Plastics

	Three months ended
	June 30,							%
(in thousands)	2005		2004		Change			Change
Operating revenues	$	36,004	$	32,636	$	3,368			10.3
Cost of goods sold		29,664		26,491		3,173			12.0
Operating expenses		1,460		1,530		(70	)		(4.6	)
Depreciation and amortization		628		583		45			7.7
Operating income	$	4,252	$	4,032	$	220			5.5

Although pounds of polyvinyl chloride (PVC) pipe sold decreased 9.8% for the three months ended June 30, 2005 compared with the three months ended June 30, 2004, operating revenues for the plastics segment increased 10.3% between the periods mainly as result of a 21.4% increase in the price per pound of PVC pipe sold. The increase in PVC pipe prices is related to an increase in PVC resin prices. The resin cost per pound of PVC pipe shipped increased 20.7% for the three months ended June 30, 2005 compared with the three months ended June 30, 2004 and was the main contributing factor to the $3.2 million increase in cost of goods sold. The increase in depreciation and amortization expense is due to 2004 plant additions.

Manufacturing

	Three months ended
	June 30,							%
(in thousands)	2005		2004		Change			Change
Operating revenues	$	67,858	$	50,399	$	17,459			34.6
Cost of goods sold		51,519		38,417		13,102			34.1
Operating expenses		5,332		5,871		(539	)		(9.2	)
Depreciation and amortization		2,345		1,905		440			23.1
Operating income	$	8,662	$	4,206	$	4,456			105.9

Revenue increases at the manufacturing companies are due to a combination of factors including increased unit sales, increased sales of higher-priced products, higher prices related to material cost increases and 2005 acquisitions. The increase in costs of goods sold in the manufacturing segment was proportional to the increase in sales revenue resulting in a $4.4 million increase in gross profits in the manufacturing segment between the quarters.

21

Revenues at DMI Industries, Inc. (DMI), our manufacturer of wind towers, increased $10.2 million (110.2%) in the second quarter of 2005 compared with the second quarter of 2004 due to an increase in production and sales of wind towers mainly as a result of legislative action in the fall of 2004 extending production tax credits for investments in wind generation through 2005. The revenue increase for DMI also reflects continued improvements in productivity and plant utilization in 2005. Revenues at BTD Manufacturing, Inc. (BTD), our metal parts stamping and fabrication company, increased $4.6 million (30.1%) between the quarters as a result of a 16.9% increase in revenue per unit sold. The purchase of Performance Tool & Die, Inc. (Performance Tool) in January 2005 contributed $0.8 million toward BTD’s $4.6 million revenue variance. Revenues at ShoreMaster, our waterfront equipment manufacturer, increased $1.7 million (8.7%) in the second quarter of 2005 compared to the second quarter of 2004 as a result of increased production mainly in the area of large marina projects. Revenues at T.O. Plastics, our manufacturer of thermoformed plastic and horticultural products, increased $1.0 million (15.1%) between the quarters as a result of increased productivity and increased sales in addition to higher prices related to higher raw material costs.

DMI cost of goods sold increased $7.6 million between the quarters as a result of increased production and higher raw material costs and labor costs. Cost of goods sold at BTD increased $4.4 million as a result of higher raw material and labor costs mainly related to increased production. ShoreMaster’s increase in revenue was partially offset by a $0.8 million increase in costs of goods sold mainly related to increases in material costs. T.O. Plastics cost of goods sold increased $0.2 million between the quarters as a result of increased material costs.

Operating expenses at each of our manufacturing companies decreased in the second quarter of 2005 compared to the second quarter of 2004 mainly due to a lower level of selling, general and administrative expenses between the periods. Depreciation expense increased between the quarters as a result of 2004 equipment additions.

Health Services

	Three months ended
	June 30,							%
(in thousands)	2005		2004		Change			Change
Operating revenues	$	31,324	$	26,597	$	4,727			17.8
Cost of goods sold		22,795		20,225		2,570			12.7
Operating expenses		5,272		4,544		728			16.0
Depreciation and amortization		1,010		1,296		(286	)		(22.1	)
Operating income	$	2,247	$	532	$	1,715			322.4

The increase in health services operating revenues for the three months ended June 30, 2005 compared with the three months ended June 30, 2004 reflects a $4.1 million increase in imaging revenues combined with a $0.6 million increase in revenues from the sale and servicing of diagnostic imaging equipment. On the imaging side of the business, $2.5 million of the $4.1 million increase in revenue came from rentals and interim installations of scanning equipment along with providing technical support services for those rental and interim installations. The number of scans performed in the second quarter of 2005 compared with the second quarter of 2004 increased by 5.5%, while the fee per scan increased by 16.1%. The increase in health services revenue was partially offset by increases in cost of goods sold and operating expenses of $1.9 million to support the increases in imaging services activity. The increase in cost of goods sold is mainly related to increased equipment rental costs and increased labor costs. The increase in operating expenses is mainly due to increases payroll, contracted services and travel related expenses. The decrease in depreciation and amortization expense is the result of certain assets reaching the ends of their depreciable lives. When these assets are replaced, they are generally replaced with assets leased under operating leases.

22

Food Ingredient Processing

	Three months ended
(in thousands)	June 30, 2005
Operating revenues	$	8,234
Cost of goods sold		6,421
Operating expenses		536
Depreciation and amortization		821
Operating income	$	456

The food ingredient processing segment has been established as a result of the acquisition of Idaho Pacific Holdings, Inc. (IPH) in August 2004. See management’s outlook for this segment in the 2005 Outlook section that follows management’s discussion of the results of operations.

Other Business Operations

	Three months ended
	June 30,									%
(in thousands)	2005			2004			Change			Change
Operating revenues	$	39,707		$	33,906		$	5,801			17.1
Cost of goods sold		30,085			25,870			4,215			16.3
Operating expenses		13,577			9,782			3,795			38.8
Depreciation and amortization		646			730			(84	)		(11.5	)
Operating loss	$	(4,601	)	$	(2,476	)	$	(2,125	)		(85.8	)

Revenues at Midwest Construction Services, Inc. (MCS), our electrical design and construction services company, increased $6.4 million (117%) between the quarters as a result of an increase in work in progress, which was mostly offset by a $5.8 million increase in construction material and labor costs between the quarters. Revenues at Otter Tail Energy Services Co. (OTESCO), our natural gas marketing company, increased $1.6 million in the three months ended June 30, 2005 compared with the three months ended June 30, 2004. The increase in OTESCO revenues is directly related to increases in natural gas prices between the periods and was mostly offset by a $1.5 million increase in natural gas costs. Revenues at E.W. Wylie Corporation (Wylie), our flatbed trucking company, increased $0.8 million between the quarters mainly due to a 12.0% increase in miles driven by company-operated and owner-operated trucks. Wylie’s increased revenues also reflect increased fuel costs recovered through fuel surcharges between the quarters. Revenues at Foley Company, a mechanical and prime contractor on industrial projects, decreased $3.3 million in the second quarter of 2005 compared to the second quarter of 2004 due to a decrease in jobs in progress. The decrease in Foley’s revenues was mostly offset by a $3.0 million decrease in labor and subcontractor costs between the periods.

Of the $3.8 million increase in operating expenses, $2.8 million is due to increases in health and other insurance costs and other employee benefit costs that are not allocated to the other operating segments and independent auditor fees related to Sarbanes-Oxley requirements. Wylie’s increased revenue was more than offset by a $0.9 million increase in operating expenses mainly related to increases in truck leasing costs, higher fuel prices and increased fuel usage and labor costs related to the increase in miles driven between the periods. Wylie’s depreciation and amortization expenses decreased by $0.1 million between the quarters as a result of leasing rather than buying new fleet trucks in 2004.

23

Interest Charges and Income Taxes – Continuing Operations

The $0.5 million (12.0%) increase in interest charges in the three months ended June 30, 2005 compared with the three months ended June 30, 2004 is due to increased interest rates on short-term debt and an increase in the average level of short-term debt outstanding between the periods.

The $1.6 million (42.8%) increase in income taxes — continuing operations between the quarters is primarily the result of a $4.7 million (41.2%) increase in income from continuing operations before income taxes for the three months ended June 30, 2005 compared with the three months ended June 30, 2004. The effective tax rate for continuing operations for the three months ended June 30, 2005 was 32.1% compared to 32.5% for the three months ended June 30, 2004.

Discontinued Operations

Discontinued operations includes the operating results of MIS, our telecommunications company located in Parkers Prairie, Minnesota, SGS, our structural steel fabricator located in St. George, Utah, and CLC of Alexandria, Minnesota, our manufacturer of auto and truck frame-straightening equipment and accessories located in Alexandria, Minnesota. The sales of MIS and SGS were completed in the second quarter of 2005. The pending sale of CLC was in the process of negotiation as of June 30, 2005. Discontinued operations include net income (loss) from discontinued operations for the three month periods ended June 30, 2005 and 2004 and net after-tax gains and losses on the disposition of discontinued operations in the second quarter of 2005 as shown in the following table:

	Three months ended											Three months ended
	June 30, 2005											June 30, 2004
(in thousands)	MIS		SGS			CLC			Total			MIS		SGS			CLC			Total
Income/(loss) before income taxes	$	897	$	(1,179	)	$	37		$	(245	)	$	834	$	(438	)	$	(23	)	$	373
Gain/(loss) on disposition — pretax		19,025		(419	)		(300	)		18,306			—		—			—			—
Income tax expense/(benefit)		7,467		(639	)		(104	)		6,724			333		(175	)		(9	)		149
Net income	$	12,455	$	(959	)	$	(159	)	$	11,337		$	501	$	(263	)	$	(14	)	$	224

Comparison of the Six Months Ended June 30, 2005 and 2004

Consolidated operating revenues were $488.5 million for the six months ended June 30, 2005 compared with $403.0 million for the six months ended June 30, 2004. Operating income was $41.9 million for the six months ended June 30, 2005 compared with $31.3 million for the six months ended June 30, 2004. The Company recorded diluted earnings per share from continuing operations of $0.74 for the six months ended June 30, 2005 compared to $0.60 for the six months ended June 30, 2004 and total diluted earnings per share from continuing and discontinued operations of $1.09, including $0.41 per share from a gain on the sale of MIS and a reduction of $0.06 per share from a loss on the sale of SGS and $0.01 from a projected loss on the pending sale of CLC, for the six months ended June 30, 2005 compared to $0.61 for the six months ended June 30, 2004.

Amounts presented in the segment tables below for the six month periods ended June 30, 2005 and 2004 for operating revenues, cost of goods sold and nonelectric segment operating expenses will not agree with amounts presented in the consolidated statements of income for those periods due to the elimination of intersegment transactions. The total intersegment eliminations include: $1,883,000 in operating revenues, $953,000 in cost of goods sold and $930,000 in other nonelectric expenses for the six months ended June 30, 2005; and $1,243,000 in operating revenues, $122,000 in cost of goods sold and $1,121,000 in other nonelectric expenses for the six months ended June 30, 2004.

24

Electric

	Six months ended
	June 30,							%
(in thousands)	2005		2004		Change			Change
Retail sales revenues	$	122,847	$	112,385	$	10,462			9.3
Wholesale revenues		14,357		9,892		4,465			45.1
Net marked-to-market gains		1,103		3,159		(2,056	)		(65.1	)
Other revenues		9,326		7,868		1,458			18.5
Total operating revenues	$	147,633	$	133,304	$	14,329			10.7
Production fuel		25,726		25,790		(64	)		(0.2	)
Purchased power – retail use		31,442		20,825		10,617			51.0
Other operation and maintenance expenses		49,252		43,479		5,773			13.3
Depreciation and amortization		12,203		11,951		252			2.1
Property taxes		5,081		4,848		233			4.8
Operating income	$	23,929	$	26,411	$	(2,482	)		(9.4	)

The increase in retail electric revenue is mainly due to an $8.3 million increase in cost-of-energy adjustment revenues related to the recovery of increased purchase power costs in the second quarter of 2005. The remaining $2.2 million increase in retail revenues resulted from a 1.6% increase in retail mwhs sold in the first six months of 2005 compared to the first six months of 2004. Increased sales reflect increases in consumption of 2.4% among commercial customers and 1.4% among residential customers, while mwh sales to industrial customers decreased 1.6% between the periods. Weather was also a factor contributing to the increase in sales as cooling-degree-days increased 223% between the periods as a result of warmer weather in June 2005.

Wholesale mwh sales from company-owned generation decreased 21.2% in the six months ended June 30, 2005, compared to the six months ended June 30, 2004 while the revenue per mwh sold increased 35.8%, resulting in an increase in revenue from sales off company-owned generation of $0.6 million between the periods. The increase in prices for company-owned generation resold is commensurate with general increases in fuel and purchased power costs across the MAPP region between the periods. Net margins on purchased power resold increased $3.9 million despite a 59.6% decrease in mwhs resold between the periods. This decrease was more than offset by an increase in the net margin per mwh of purchased power resold. The increased prices are partially due to warmer weather in the MAPP region between the periods and partially due to a decrease in available electricity from hydro-generation in the region due to lower water levels in Upper-Missouri River reservoirs resulting from a prolonged drought in the Upper-Missouri River basin. An increase in wholesale prices also coincided with the inception of the MISO electric markets on April 1, 2005.

The decrease in net marked-to-market gains on forward purchases and sales of electricity is related to a decline in activity in forward energy markets in the MAPP region due to uncertainty related to the implementation of the MISO electric market initiatives in April 2005. The electric utility’s open forward contracts for the purchase and sale of electricity subject to mark-to-market accounting were lower in volume on June 30, 2005 than on June 30, 2004. The electric utility also has marked-to-market two 50 megawatt capacity agreements as of June 30 2005, one through October 2005 and one through April 2006.

The increase in other electric operating revenues for the six months ended June 30, 2005 compared to the six months ended June 30, 2004 includes $2.0 million in increased revenue from contracted construction services related to transmission line and substation projects done for another regional utility in the first six months of 2005. Revenue from transmission services and load control and dispatching services decreased $0.3 million and revenues from steam sales decreased $0.2 million between the periods.

25

The decrease in fuel costs for the six months ended June 30, 2005 compared with the six months ended June 30, 2004 was the result of a 11.1% decrease in mwhs generated partially offset by a 12.2% increase in the cost of fuel per mwh generated between the periods. Generation used for wholesale electric sales decreased 21.2% while generation for retail sales decreased 8.9% between the periods. The decrease in generation is mainly due to a scheduled seven-week maintenance shutdown of Big Stone Plant in the second quarter of 2005. The decrease in mwh generation at Big Stone Plant was partially offset by an increase in generation at our Hoot Lake plant where the cost of fuel per kwh of generation was 13.7% higher than at Big Stone Plant in the first six months of 2005. Fuel costs per mwh of generation increased at all three of our coal-fired generating plants as a result of increases in coal and coal transportation costs between the periods. Approximately 90% of the fuel cost increases associated with generation to serve retail electric customers is subject to recovery through the fuel cost recovery component of retail rates.

The increase in purchased power expense for energy purchased for system use (sale to retail customers) is due to a 16.7% increase in mwhs purchased combined with a 29.4% increase in the cost per mwh purchased. Mwh purchases were increased to make up for a net decrease in mwhs generated at company-owned power plants as a result of the scheduled seven-week maintenance shutdown of Big Stone Plant in the second quarter of 2005. The cost per mwh of purchased power has increased in part due to a general increase in fuel and purchased power costs across the MAPP region as a result of increases in coal mining and transportation costs related to higher fuel prices and also for reasons discussed above that contributed to the increase in wholesale mwh sales.

The increase in other operation and maintenance expenses for the six months ended June 30, 2005 compared with the six months ended June 30, 2004 reflects $3.1 million in increased labor expenses due to an increase in employee benefit costs, general wage and salary increases averaging approximately 3.6% and a reduction in capitalized labor of $0.4 million between the periods. Material and operating supply expenses increased $0.9 million between the periods, most of which is attributable to maintenance costs incurred at Big Stone Plant during its scheduled seven-week maintenance shutdown in the second quarter of 2005. Costs of goods sold increased $0.6 million between the periods mainly related to costs incurred on billable construction jobs in 2005. Costs to repair damages caused by storms and other events increased $0.3 million between the periods. The increase in property taxes between the periods is a result of increases in property tax rates and property values subject to taxation.

Plastics

	Six months ended
	June 30,						%
(in thousands)	2005		2004		Change		Change
Operating revenues	$	68,159	$	59,072	$	9,087		15.4
Cost of goods sold		55,081		49,803		5,278		10.6
Operating expenses		2,969		2,796		173		6.2
Depreciation and amortization		1,219		1,152		67		5.8
Operating income	$	8,890	$	5,321	$	3,569		67.1

Although pounds of PVC pipe sold decreased by 12.9% for the six months ended June 30, 2005 compared with the six months ended June 30, 2004, operating revenues for the plastics segment increased 15.4% between the periods mainly as result of a 30.7% increase in the price per pound of PVC pipe sold. The increase in PVC pipe prices is directly related to an increase in PVC resin prices. The resin cost per pound of PVC pipe shipped increased 24.6% for the six months ended June 30, 2005 compared with the six months ended June 30, 2004 and was the main contributing factor to the $5.3 million increase in cost of goods sold. The increase in operating expenses is mainly due to increases in employee benefit costs. The increase in depreciation and amortization expense is due to 2004 plant additions.

26

In the first six months of 2005, 94% of resin purchased was from two vendors; 46% from one and 48% from the other, with the remaining 6% provided by two other vendors. In the first six months of 2004, 100% of resin purchased was from two vendors; 50% from one and 50% from the other. We believe relationships with our key raw material vendors are good. However, the loss of a key supplier or any interruption or delay in the supply of PVC resin could have a significant impact on the plastics segment.

Manufacturing

	Six months ended
	June 30,						%
(in thousands)	2005		2004		Change		Change
Operating revenues	$	123,387	$	92,213	$	31,174		33.8
Cost of goods sold		96,878		72,572		24,306		33.5
Operating expenses		10,754		10,586		168		1.6
Depreciation and amortization		4,550		3,801		749		19.7
Operating income	$	11,205	$	5,254	$	5,951		113.3

Revenue increases at the manufacturing companies are due to a combination of factors including increased unit sales, increased sales of higher-priced products, higher prices related to material cost increases and 2005 acquisitions. The increase in costs of goods sold in the manufacturing segment was proportional to the increase in sales revenue resulting in a $6.9 million increase in gross profits in the manufacturing segment between the periods.

Revenues at DMI, our manufacturer of wind towers, increased $14.3 million (75.2%) in the six months ended June 30, 2005 compared with the six months ended June 30, 2004 due to an increase in production and sales of wind towers mainly as a result of legislative action in the fall of 2004 extending production tax credits for investments in wind generation through 2005. The revenue increase for DMI also reflects continued improvements in productivity and plant utilization in 2005. Revenues at BTD, our metal parts stamping and fabrication company, increased $11.1 million (40.6%) between the quarters as a result of a 12.2% increase in unit sales combined with a 19.7% increase in revenue per unit sold between the periods. The purchase of Performance Tool in January 2005 contributed $1.7 million toward BTD’s $11.1 million revenue increase. Revenues at ShoreMaster, our waterfront equipment manufacturer, increased $4.0 million (13.2%) in the first six months of 2005 compared to the first six months of 2004 as a result of increased production mainly in the area of large marina projects. Revenues at T.O. Plastics, our manufacturer of thermoformed plastic and horticultural products, increased $1.7 million (11.1%) between the quarters as a result of increased productivity and increased sales in addition to higher prices related to higher raw material costs.

DMI cost of goods sold increased $11.2 million between the periods as a result of increased production and higher raw material costs—especially steel—subcontractor and labor costs. Cost of goods sold at BTD increased $10.0 million as a result of higher raw material and labor costs mainly related to increased production. ShoreMaster’s increase in revenue was partially offset by a $2.9 million increase in costs of goods sold mainly related to increases in material costs. T.O. Plastics cost of goods sold increased $0.2 million between the periods as a result of increased material costs.

Operating expenses increased mainly due to increases in outside sales commission and advertising expenses between the periods. Depreciation expenses increased mainly as a result of manufacturing equipment purchases in 2004.

27

Health Services

	Six months ended
	June 30,							%
(in thousands)	2005		2004		Change			Change
Operating revenues	$	59,122	$	52,273	$	6,849			13.1
Cost of goods sold		43,087		39,622		3,465			8.7
Operating expenses		10,185		9,008		1,177			13.1
Depreciation and amortization		2,077		2,687		(610	)		(22.7	)
Operating income	$	3,773	$	956	$	2,817			294.7

The increase in health services operating revenues for the six months ended June 30, 2005 compared with the six months ended June 30, 2004 reflects a $7.1 million increase in imaging revenues offset by a $0.3 million decrease in revenues from the sale and servicing of diagnostic imaging equipment between the periods. On the imaging side of the business, $4.5 million of the $7.1 million increase in revenue came from rentals and interim installations of scanning equipment along with providing technical support services for those rental and interim installations. The number of scans performed in the first six months of 2005 compared with the first six months of 2004 increased by 6.7%, while the fee per scan increased by 8.6%. The increase in health services revenue was partially offset by increases in cost of goods sold and operating expenses of $4.7 million to support the increases in imaging services activity. The increase in cost of goods sold is mainly related to increased equipment rental costs and increased labor costs partially offset by decreases in materials and maintenance costs. The increase in operating expenses is mainly due to increased payroll and travel expenses and an increase in bad debt expenses between the periods. The decrease in depreciation and amortization expense is the result of certain assets reaching the ends of their depreciable lives. When these assets are replaced, they are generally replaced with assets leased under operating leases.

Food Ingredient Processing

	Six months ended
(in thousands)	June 30, 2005
Operating revenues	$	17,489
Cost of goods sold		13,106
Operating expenses		1,079
Depreciation and amortization		1,646
Operating income	$	1,658

The food ingredient processing segment has been established as a result of the acquisition of IPH in August 2004. See management’s outlook for this segment in the 2005 Outlook section that follows management’s discussion of the results of operations.

28

Other Business Operations

	Six months ended
	June 30,									%
(in thousands)	2005			2004			Change			Change
Operating revenues	$	74,604		$	67,421		$	7,183			10.7
Cost of goods sold		56,477			52,083			4,394			8.4
Operating expenses		24,404			20,562			3,842			18.7
Depreciation and amortization		1,243			1,445			(202	)		(14.0	)
Operating loss	$	(7,520	)	$	(6,669	)	$	(851	)		(12.8	)

Revenues at MCS, our electrical design and construction services company, increased $7.2 million (75.5%) between the periods as a result of an increase in work in progress, which was mostly offset by a $6.2 million increase in construction material and labor costs incurred between the periods. Revenues at OTESCO, our natural gas marketing company, increased $5.3 million in the six months ended June 30, 2005 compared with the six months ended June 30, 2004. The increase in OTESCO revenues is directly related to increases in natural gas prices between the periods and was entirely offset by a $5.3 million increase in natural gas costs. Revenues at Wylie, our flatbed trucking company, increased $1.9 million between the periods mainly due to a 12.2% increase in miles driven by company-operated trucks. Wylie’s increased revenues also reflect increased fuel costs recovered through fuel surcharges between the quarters. Revenues at Foley Company, a mechanical and prime contractor on industrial projects, decreased $7.3 million in the first six months of 2005 compared to the first six months of 2004 due to a decrease in jobs in progress. The decrease in Foley’s revenues was almost entirely offset by a $7.1 million decrease in material, subcontractor and labor costs between the periods.

Of the $3.8 million increase in operating expenses, $2.8 million is due to increases in health and other insurance costs and other employee benefit costs that are not allocated to the other operating segments and independent auditor fees related to Sarbanes-Oxley requirements. Wylie’s increased revenue was mostly offset by a $1.7 million increase in operating expenses mainly related to increases in truck leasing costs, higher fuel prices and increased fuel usage and labor costs related to the increase in miles driven between the periods. Wylie’s depreciation and amortization expenses decreased by $0.2 million between the periods as a result of leasing rather than buying new fleet trucks in 2004.

Interest Charges and Income Taxes – Continuing Operations

The $0.7 million (8.0%) increase in interest charges for the six months ended June 30, 2005 compared with the six months ended June 30, 2004 is due to increased interest rates on short-term debt and an increase in the average level of short-term debt outstanding between the periods.

The $3.7 million (50.3%) increase in income taxes — continuing operations between the quarters is primarily the result of a $9.6 million (41.2%) increase in income from continuing operations before income taxes for the six months ended June 30, 2005 compared with the six months ended June 30, 2004. The effective tax rate for continuing operations for the six months ended June 30, 2005 was 33.2% compared to 31.1% for the six months ended June 30, 2004. The increase in the effective tax rate is primarily due to the increase in net income before tax between the quarters.

Discontinued Operations

Discontinued operations includes the operating results of MIS, SGS and CLC The sales of MIS and SGS were completed in the second quarter of 2005. The pending sale of CLC was in the process of negotiation as of June 30, 2005. Discontinued operations include net income (loss) from discontinued operations for the six month periods

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ended June 30, 2005 and 2004; and net after-tax gains and losses on the disposition of discontinued operations in the first six months of 2005 as shown in the following table:

	Six months ended										Six months ended
	June 30, 2005										June 30, 2004
(in thousands)	MIS		SGS			CLC			Total		MIS		SGS			CLC			Total
Income/(loss) before income taxes	$	2,167	$	(1,563	)	$	(19	)	$	585	$	1,569	$	(1,089	)	$	(102	)	$	378
Gain/(loss) on disposition — pretax		19,025		(3,046	)		(300	)		15,679		—		—			—			—
Income tax expense/(benefit)		7,975		(1,843	)		(126	)		6,006		628		(435	)		(40	)		153
Net income	$	13,217	$	(2,766	)	$	(193	)	$	10,258	$	941	$	(654	)	$	(62	)	$	225

2005 OUTLOOK

The statements in this section are based on our current outlook for 2005 and are subject to risks and uncertainties described under “Forward Looking Information – Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995.”

We expect 2005 earnings to be in the range of $1.50 to $1.70 of diluted earnings per share from continuing operations. Total earnings, which include expected earnings, gains and losses from discontinued operations, are expected to be in the range of $1.80 to $2.00 of diluted earnings per share.

Contributing to the earnings guidance for 2005 are the following items:

• We expect solid performance in the electric segment in 2005 although net income is anticipated to be lower than 2004 levels. This is primarily because of uncertainty in the wholesale electric markets due to the implementation of MISO electric markets on April 1, 2005 and anticipated lower margins on retail sales. Regulated returns in 2005 for the electric segment are expected to be consistent with authorized levels.

• We expect the plastics segment will perform well in 2005 due to continuing strong demand in the southwestern region of the country and sustained high PVC resin prices. 2005 net earnings for this segment are expected to be similar to 2004 net earnings.

• The improving economy, continued enhancements in productivity and capacity utilization, and the extension of the production tax credit are expected to result in increased net income in our manufacturing segment.

• The health services segment is expected to grow net income in 2005 as it continues to realize earnings improvement from its imaging business.

• We expect our food ingredient processing business to generate net income in the range of $2.1 million to $3.8 million for the year ending December 31, 2005. The revision in the low end of the range is due to lower than expected sales volumes, high energy costs, the increasing value of the Canadian dollar relative to the U.S. dollar and excess capacity in the potato flake market.

• The other business operations segment is expected to show results similar to 2004. While the improving economy is having a positive impact on the transportation business and the extension of the production tax credit is expected to have a positive impact on our electrical contracting business, earnings growth in these businesses are expected to be offset by weaker performance in our other construction business, increased health and casualty insurance costs, and other employee benefit costs.

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FINANCIAL POSITION

For the period 2005 through 2009, we estimate funds internally generated net of forecasted dividend payments will be sufficient to meet scheduled debt retirements, to repay currently outstanding short-term debt and to provide for our estimated consolidated capital expenditures, which currently do not include the proposed generating unit at the Big Stone Plant site. Reduced demand for electricity, reductions in wholesale sales of electricity or margins on wholesale sales, or declines in the number of products manufactured and sold by our companies could have an effect on funds internally generated. Additional equity or debt financing will be required in the period 2005 through 2009 in the event the we decide to refund or retire early any of our presently outstanding debt or cumulative preferred shares, to complete acquisitions, to fund the construction of a new generating unit at the Big Stone Plant site if the permitting process allows us to move forward with the project or for other corporate purposes. There can be no assurance that any additional required financing will be available through bank borrowings, debt or equity financing or otherwise, or that if such financing is available, it will be available on terms acceptable to us. If adequate funds are not available on acceptable terms, our business, results of operations, and financial condition could be adversely affected.

In January 2005, we issued 175,000 common shares as a result of the underwriters exercising a portion of their over-allotment option in connection with our December 2004 public offering. Proceeds from the January 2005 issuance of $4.3 million were used to pay down debt borrowed to finance the acquisition of IPH. The common stock was issued under a universal shelf registration statement filed with the Securities and Exchange Commission that gives us the ability to issue up to an additional $256 million of common stock, preferred stock, debt and certain other securities from time to time. During the first six months of 2005, we also issued 31,541 common shares for stock options exercised and 17,700 shares of restricted stock to directors and certain key employees under the 1999 Stock Incentive Plan.

On April 27, 2005 we renewed our line of credit with U.S. Bank National Association, JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, and Bank Hapoalim B.M., and increased the amount available under the line from $70 million to $100 million. The renewed agreement expires on April 26, 2006. The terms of the renewed line of credit are essentially the same as those in place prior to the renewal. However, outstanding letters of credit issued by the Company can reduce the amount available for borrowing under the line by up to $20 million. Borrowings under the line of credit bear interest at LIBOR plus 0.6%, subject to adjustment based on the ratings of our senior unsecured debt. This line is an unsecured revolving credit facility available to support borrowings of our nonelectric operations. We anticipate that the electric utility’s cash requirements through April 2006 will be provided for by cash flows from electric utility operations. Our obligations under this line of credit are guaranteed by our 100%-owned subsidiary that owns substantially all of our nonelectric companies. As of June 30, 2005, $78.0 million of the $100 million line of credit in place at that date was in use and $12.0 million was restricted from use to cover outstanding letters of credit. Proceeds from the sale of MIS received on June 30, 2005 were used to pay down the line of credit in July 2005.

Our line of credit, $90 million 6.63% senior notes, and Lombard US Equipment Finance note contain the following covenants: a debt-to-total capitalization ratio not in excess of 60% and an interest and dividend coverage ratio of at least 1.5 to 1. The 6.63% senior notes also require that priority debt not be in excess of 20% of total capitalization. We were in compliance with all of the covenants under these financing agreements as of June 30, 2005.

Our obligations under the 6.63% senior notes are guaranteed by our 100%-owned subsidiary that owns substantially all of our nonelectric companies. Our Grant County and Mercer County pollution control refunding revenue bonds require that we grant to Ambac Assurance Corporation, under a financial guaranty insurance policy relating to the bonds, a security interest in the assets of the electric utility if the rating on our senior unsecured debt is downgraded to Baa2 or below (Moody’s) or BBB or below (Standard & Poor’s).

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Our current securities ratings are:

	Moody’s
	Investors	Standard
	Service	& Poor’s
Senior unsecured debt	A2	BBB+
Preferred stock	Baa1	BBB-
Outlook	Negative	Negative

Our disclosure of these securities ratings is not a recommendation to buy, sell or hold our securities. Downgrades in these securities ratings could adversely affect our company. Further downgrades could increase borrowing costs resulting in possible reductions to net income in future periods and increase the risk of default on our debt obligations.

Cash provided by operating activities from continuing operations decreased $13.6 million for the six months ended June 30, 2005 compared to the six months ended June 30, 2004, reflecting a $7.9 million increase in net income and depreciation expense from continuing operations and a $3.2 million decrease in cash used for noncurrent liabilities and deferred credits, offset by a $20.7 million increase in changes in working capital, a $2.0 million increase in discretionary pension contributions and a $2.0 million net increase in cash used for deferred taxes and other deferred debits between the periods. In addition to the $13.6 million decrease in cash provided by continuing operations, cash provided by discontinued operations decreased by $2.3 million between the quarters resulting in a decrease in net cash provided by continuing and discontinued operations of $16.0 million.

A major use of operating cash in the first six months of 2005 related to a $20.4 million increase in inventory during the period, exclusive of inventory from business acquisitions. Inventories increased $9.0 million among the manufacturing companies, $4.9 million in the plastics segment, $3.9 million in the food ingredient processing segment, $1.3 million in the health services segment and $1.0 million in the electric segment. The increase is due to typical increases in inventories during this time of year and also due to an increase in material prices and a backlog at DMI which caused more steel to be ordered to support production of wind tower orders. The $17.6 million increase in other current assets from December 31, 2004 to June 30, 2005 is mainly due to increases in costs in excess of billings at companies using percentage-of-completion accounting with DMI showing the largest increase as wind tower jobs in progress move closer to completion.

Excluding $33.7 million in net cash received from the sales of discontinued operations, net cash used in investing activities was $36.0 million for the six months ended June 30, 2005 compared with $21.3 million for the six months ended June 30, 2004. Cash used for capital expenditures increased by $5.7 million between the periods. An increase in capital expenditures in the manufacturing segment between the periods of $2.1 million was made up of the following: increased expenditures mainly related to the purchase of production and office equipment and warehouse improvements in 2005. Capital expenditures increased by $1.8 million in the electric segment between the periods reflecting purchases of substation and load management equipment and service meters and the installation of new underground and overhead service extensions in 2005. Capital expenditures at IPH were $0.9 million in the first six months of 2005 related to the installation of additional production capacity. Capital expenditures increased $0.7 million in our other business operations segment and $0.2 million in our plastics segment between the periods. We invested $10.5 million in cash, net of cash acquired, for acquisitions in the first six months of 2005. Proceeds from the disposal of noncurrent assets increased $0.8 million between the periods.

Net cash provided by financing activities from continuing and discontinued operations increased $20.7 million in the six months ended June 30, 2005 compared with the six months ended June 30, 2004 mainly due to a $24.8 million increase in short-term borrowings and checks issued in excess of cash between the quarters. This increase was partially offset by a $2.1 million increase in common dividends paid between the periods as a result of the issuance of over 3.2 million common shares since June 30, 2004 combined with a one-cent increase in the

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dividend paid per common share in the first and second quarters of 2005 compared with the first and second quarters of 2004, and a $1.6 million increase in cash used in financing activities of discontinued operations mainly related to the retirement of debt.

There has not been any material changes in our contractual obligations from those reported under the caption “Capital Requirements” on page 24 of our 2004 Annual Report to Shareholders. However, as a result of the Big Stone II plant project moving into the permitting phase, we have a commitment to spend $2 million on this project through October 2006. These funds were placed on deposit with a trustee in an interest-bearing account in June 2005. We do not have any off-balance-sheet arrangements or any relationships with unconsolidated entities or financial partnerships.

Critical Accounting Policies Involving Significant Estimates

The discussion and analysis of the consolidated financial statements and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We use estimates based on the best information available in recording transactions and balances resulting from business operations. Estimates are used for such items as depreciable lives, asset impairment evaluations, tax provisions, collectability of trade accounts receivable, self-insurance programs, valuation of forward energy contracts, unbilled electric revenues, unscheduled power exchanges, Midwest Independent Transmission System Operator (MISO) electric market residual load adjustments, service contract maintenance costs, percentage-of-completion and actuarially determined benefits costs. As better information becomes available or actual amounts are known, estimates are revised. Operating results can be affected by revised estimates. Actual results may differ from these estimates under different assumptions or conditions. Management has discussed the application of these critical accounting policies and the development of these estimates with the Audit Committee of the Board of Directors.

Goodwill Impairment

The Company currently has $1.0 million of goodwill recorded on its balance sheet related to OTESCO, its energy services subsidiary that markets natural gas to approximately 160 retail customers. An evaluation of projected cash flows from this operation in December 2004 indicated that the related goodwill was not impaired. However, actual and projected cash flows from this operation are subject to fluctuations due to low profit margins on natural gas sales combined with high volatility of natural gas prices. Reductions in profit margins or the volume of natural gas sales could result in an impairment of all or a portion of its related goodwill. The Company will continue to evaluate this reporting unit for impairment on an annual basis and as conditions warrant.

We currently have $6.7 million of goodwill recorded on our balance sheet related to the acquisition of Wylie. Highly competitive pricing in the trucking industry in recent years had resulted in decreased operating margins and lower returns on invested capital for Wylie. Wylie’s performance improved in 2004 and current projections are for operating margins to increase from current levels over the next three to five years as demand for shipping continues to increase relative to available shipping capacity and additional revenues are generated from added terminal locations and increased brokerage activity. If current trends reverse and operating margins do not increase according to our projections, the reductions in anticipated cash flows from transportation operations may indicate that the fair value of Wylie is less than its book value resulting in an impairment of goodwill and a corresponding charge against earnings. At December 31, 2004, assessment of Wylie indicated that its goodwill was not impaired. We will continue to evaluate this reporting unit for impairment on an annual basis and as conditions warrant.

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A discussion of critical accounting policies is included under the caption “Critical Accounting Policies Involving Significant Estimates” on pages 29 through 31 of our 2004 Annual Report to Shareholders. There were no material changes in critical accounting policies or estimates during the quarter ended June 30, 2005 with the exception of estimating residual load adjustment costs related to MISO Day 2 electric market operations.

Forward Looking Information — Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the Act), we have filed cautionary statements identifying important factors that could cause our actual results to differ materially from those discussed in forward-looking statements made by or on behalf of the Company. When used in this Form 10-Q and in future filings by the Company with the Securities and Exchange Commission, in our press releases and in oral statements, words such as “may”, “will”, “expect”, “anticipate”, “continue”, “estimate”, “project”, “believes” or similar expressions are intended to identify forward-looking statements within the meaning of the Act and are included, along with this statement, for purposes of complying with the safe harbor provision of the Act.

The following factors, among others, could cause actual results for the Company to differ materially from those discussed in the forward-looking statements:

• We are subject to government regulations and actions that may have a negative impact on our business and results of operations.

• Weather conditions can adversely affect our operations and revenues.

• Liquidated damages due to implementation of the MISO Day 2 electric markets.

• Federal and state environmental regulation could cause us to incur substantial capital expenditures which could result in increased operating costs.

• Our plans to grow and diversify through acquisitions may not be successful and could result in poor financial performance.

• Competition is a factor in all of our businesses.

• Economic uncertainty could have a negative impact on our future revenues and earnings.

• Volatile financial markets could restrict our ability to access capital and could increase borrowing costs and pension plan expenses.

• Our food ingredient processing segment operates in a highly competitive market and is dependent on adequate sources of raw materials for processing. Should the supply of these raw materials be affected by poor growing conditions, this could negatively impact the results of operations for this segment. This segment could also be impacted by foreign currency changes between Canadian and United States currencies and prices of natural gas.

• Our plastics segment is highly dependent on a limited number of vendors for PVC resin. The loss of a key vendor or an interruption or delay in the supply of PVC resin could result in reduced sales or increased costs for this segment.

• Our health services businesses may not be able to retain or comply with the dealership arrangement and other agreements with Philips Medical.

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For a further discussion of other risk factors and cautionary statements, refer to “Risk Factors and Cautionary Statements That May Affect Future Results” and “Critical Accounting Policies Involving Significant Estimates” on pages 25 through 31 of our 2004 Annual Report to Shareholders. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement or contained in any subsequent filings by the Company with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

At June 30, 2005 we had limited exposure to market risk associated with interest rates and commodity prices and limited exposure to market risk associated with changes in foreign currency exchange rates. Outstanding trade accounts receivable of the Canadian operations of IPH are not at risk of valuation change due to changes in foreign currency exchange rates because the Canadian company transacts all sales in U.S. dollars. However, IPH does have market risk related to changes in foreign currency exchange rates because approximately 25% of IPH sales are outside the United States and the Canadian operations of IPH pays its operating expenses in Canadian dollars.

The majority of our consolidated long-term debt has fixed interest rates. The interest rate on variable rate long-term debt is reset on a periodic basis reflecting current market conditions. We manage our interest rate risk through the issuance of fixed-rate debt with varying maturities, through economic refunding of debt through optional refundings, limiting the amount of variable interest rate debt, and the utilization of short-term borrowings to allow flexibility in the timing and placement of long-term debt. As of June 30, 2005, we had $23.2 million of long-term debt subject to variable interest rates. Assuming no change in our financial structure, if variable interest rates were to average one percentage point higher or lower than the average variable rate on June 30, 2005, interest expense and pretax earnings would change by approximately $232,000 on an annualized basis.

We have not used interest rate swaps to manage net exposure to interest rate changes related to our portfolio of borrowings. We maintain a ratio of fixed-rate debt to total debt within a certain range. It is our policy to enter into interest rate transactions and other financial instruments only to the extent considered necessary to meet our stated objectives. We do not enter into interest rate transactions for speculative or trading purposes.

The plastics companies are exposed to market risk related to changes in commodity prices for PVC resins, the raw material used to manufacture PVC pipe. The PVC pipe industry is highly sensitive to commodity raw material pricing volatility. Historically, when resin prices are rising or stable, margins and sales volumes have been higher and when resin prices are falling, sales volumes and margins have been lower. Gross margins also decline when the supply of PVC pipe increases faster than demand. Due to the commodity nature of PVC resin and the dynamic supply and demand factors worldwide, it is very difficult to predict gross margin percentages or to assume that historical trends will continue.

Our energy services subsidiary markets natural gas to approximately 160 retail customers. Some of these customers are served under fixed-price contracts. There is price risk associated with a limited number of these fixed-price contracts since the corresponding cost of natural gas is not immediately locked in. However, any price risk associated with these contracts is within the acceptable risk parameters established in our risk management policy. We do not consider this price risk to be material. These contracts call for the physical delivery of natural gas and are considered executory contracts for accounting purposes. Current accounting guidance requires losses on firmly committed executory contracts to be recognized when realized.

Our energy services subsidiary has entered into over-the-counter natural gas forward swap transactions that qualify as derivatives subject to mark-to-market accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Although our energy services subsidiary manages its risk by balancing its position in these transactions relative to its market position in the contracts entered into for physical delivery, these swap transactions

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do not qualify for the normal purchases and sales exception nor do they qualify for hedge accounting treatment under SFAS No. 133. These contracts are held for trading purposes with both realized and unrealized net gains and losses reflected in revenue on our consolidated statement of income for the three and six months ended June 30, 2005 in accordance with the guidance provided in EITF 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities.

The following table shows the effect of marking-to-market our energy services subsidiary’s forward natural gas swap transactions on our consolidated balance sheet as of June 30, 2005 and the change in our consolidated balance sheet position from December 31, 2004 to June 30, 2005:

(in thousands)	June 30, 2005
Current asset – marked-to-market gain	$	852
Current liability – marked-to-market loss		(812	)
Net fair value of marked-to-market gas contracts	$	40

	Year-to-date
(in thousands)	June 30, 2005
Fair value at beginning of year	$	134
Amount realized on contracts entered into in 2004 and settled in 2005		(62	)
Changes in fair value of contracts entered into in 2004		—
Net fair value of contracts entered into in 2004 at end of period		72
Changes in fair value of contracts entered into in 2005		(32	)
Net fair value end of period	$	40

The $40,000 in recognized but unrealized net gain on these forward natural gas swap transactions marked-to-market on June 30, 2005 is expected to be realized on settlement as scheduled over the following quarters in the amounts listed:

	3rd Quarter		4th Quarter
(in thousands)	2005		2005		Total
Net gain	$	37	$	3	$	40

We have minimal credit risk associated with the nonperformance or nonpayment by counterparties to these forward gas swap transactions as we have only one major counterparty to these transactions and this counterparty has a high investment grade credit rating.

The electric utility has market, price and credit risk associated with forward contracts for the purchase and sale of electricity. As of June 30, 2005 the electric utility had recognized, on a pretax basis, $1,130,000 in net unrealized gains on open forward contracts for the purchase and sale of electricity. Due to the nature of electricity and the physical aspects of the electricity transmission system, unanticipated events affecting the transmission grid can result in transmission constraints and the cancellation of scheduled transactions by the independent transmission system operator. In these situations, the counterparties to the cancelled transaction are generally not made whole for the difference in the contract price and the market price of the electricity at the time of cancellation. In some instances the electric utility may deliver on a sale where its offsetting purchase has been cancelled or is undeliverable, or take delivery on a purchase where its offsetting sale has been cancelled or is undeliverable. All forward energy transactions are subject to a small, and likely unquantifiable, risk of cancellation by the independent transmission system operator due to unanticipated physical constraints on the transmission system. At the time of cancellation, the electric utility could be in a gain or loss position depending on the market price of electricity relative to the contract price and the electric utility’s position in the transaction.

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The market prices used to value the electric utility’s forward contracts for the purchases and sales of electricity are determined by survey of counterparties by the electric utility’s power services’ personnel responsible for contract pricing and benchmarked to regional hub prices. Of the forward energy contracts that are marked-to-market as of June 30, 2005, 50% of the forward purchases of electricity had offsetting sales in terms of volumes and delivery periods. The amount of unrealized marked-to-market gains recognized on forward purchases of electricity that were not offset by forward sales of electricity was $748,000.

We have in place an energy risk management policy with a goal to manage, through the use of defined risk management practices, price risk and credit risk associated with wholesale power purchases and sales. With the advent of the MISO Day 2 market, several changes were made to the energy risk management policy to recognize new trading opportunities created by this new market. Most of the changes were in new volumetric limits and loss limits to adequately manage the risks associated with these new opportunities. In addition, a Value at Risk (VaR) limit was also implemented to further manage market price risk. Exposure to price risk on any open positions as of June 30, 2005 was not material.

The following tables show the effect of marking-to-market forward contracts for the purchase and sale of electricity on our consolidated balance sheet as of June 30, 2005 and the change in our consolidated balance sheet position from December 31, 2004 to June 30, 2005:

(in thousands)	June 30, 2005
Current asset – marked-to-market gain	$	4,143
Regulatory asset – deferred marked-to-market loss		830
Total assets		4,973
Current liability – marked-to-market loss		(2,687	)
Regulatory liability – deferred marked-to-market gain		(1,156	)
Total liabilities		(3,843	)
Net fair value of marked-to-market energy contracts	$	1,130

	Year-to-date
(in thousands)	June 30, 2005
Fair value at beginning of year	$	301
Amount realized on contracts entered into in 2004 and settled in 2005		(322	)
Changes in fair value of contracts entered into in 2004		21
Net fair value of contracts entered into in 2004 at end of period		0
Changes in fair value of contracts entered into in 2005		1,130
Net fair value end of period	$	1,130

The $1,130,000 in recognized but unrealized net gains on the forward energy purchases and sales marked-to-market on June 30, 2005 is expected to be realized on physical settlement as scheduled over the following quarter in the amount listed:

	3rd Quarter		4th Quarter		1st Quarter		2nd Quarter
(in thousands)	2005		2005		2006		2006		Total
Net gain	$	383	$	52	$	557	$	138	$	1,130

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We have credit risk associated with the nonperformance or nonpayment by counterparties to our forward energy purchases and sales agreements. We have established guidelines and limits to manage credit risk associated with wholesale power purchases and sales. Specific limits are determined by a counterparty’s financial strength. Our credit risk with our largest counterparty on delivered and marked-to-market forward contracts as of June 30, 2005 was $1.6 million. As of June 30, 2005 we had a net credit risk exposure of $4.1 million from eleven counterparties with investment grade credit ratings.

The $4.1 million credit risk exposure includes net amounts due to the electric utility on receivables/payables from completed transactions billed and unbilled plus marked-to-market gains/losses on forward contracts for the purchase and sale of electricity scheduled for delivery after June 30, 2005. Individual counterparty exposures are offset according to legally enforceable netting arrangements.

Counterparties with investment grade credit ratings have minimum credit ratings of BBB- (Standard & Poor’s), Baa3 (Moody’s) or BBB- (Fitch).

Item 4. Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2005, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2005.

On April 1, 2005, the MISO Day 2 market became effective which impacted the Company’s regulated electric generation and purchased power. In connection with the implementation of MISO Day 2, we have implemented new processes and modified existing process to facilitate participation in, and resultant settlements within the MISO market. Apart from this change, there have not been any other changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company does not have a publicly announced stock repurchase program. The following table shows previously issued common shares that were surrendered to the Company during the quarter ended June 30, 2005, by employees to pay taxes in connection with the vesting of restricted stock granted to such employees under the Company’s 1999 Stock Incentive Plan:

	Total number of		Average price
Period	shares purchased		paid per share
April 2005		14,295	$	25.10
May 2005		—		—
June 2005		—		—
Total		14,295

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of the Company was held on April 11, 2005, for the purpose of electing three nominees to the Board of Directors with terms expiring in 2008 and to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005. All nominees for directors as listed in the proxy statement were elected. The names of each other director whose term of office continued after the meeting are as follows: Karen M. Bohn, Thomas M. Brown, Arvid R. Liebe, John C. MacFarlane, Gary J. Spies, and Robert N. Spolum. The voting results are as follows:

	Shares		Shares Voted		Broker
Election of Directors	Voted For		Withheld Authority		Non-Votes
Dennis R. Emmen		22,524,766		1,274,497		-0-
Kenneth L. Nelson		23,167,503		631,760		-0-
Nathan I. Partain		23,307,042		492,221		-0-

Ratification of			Shares		Shares
Independent Registered	Shares		Voted		Voted		Broker
Public Accounting Firm	Voted For		Against		Abstain		Non-Votes
Deloitte & Touche LLP		23,214,836		347,494		236,933		-0-

39

Item 6. Exhibits

10.1	Big Stone II Power Plant Participation Agreement dated as of June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners. *
10.2	Big Stone II Power Plant Operation & Maintenance Services Agreement dated as of June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners, and Otter Tail Corporation dba Otter Tail Power Company, as Operator. *
10.3	Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., NorthWestern Corporation dba NorthWestern Energy, Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners. *
10.4	Form of 2005 Performance Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 15, 2005) **
10.5	Executive Annual Incentive Plan (Effective April 1, 2005) (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 15, 2005) **
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Confidential information has been omitted from this Exhibit and filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2.
**	Management contract or compensatory plan or arrangement required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OTTER TAIL CORPORATION

By:	/s/ Kevin G. Moug
	Kevin G. Moug
	Chief Financial Officer and Treasurer (Chief Financial Officer/Authorized Officer)

Dated: August 9, 2005

41

EXHIBIT INDEX

Exhibit Number	Description
10.1	Big Stone II Power Plant Participation Agreement dated as of June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners. *
10.2	Big Stone II Power Plant Operation & Maintenance Services Agreement dated as of June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners, and Otter Tail Corporation dba Otter Tail Power Company, as Operator. *
10.3	Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June 30, 2005 by and among Central Minnesota Municipal Power Agency, Great River Energy, Heartland Consumers Power District, Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc., NorthWestern Corporation dba NorthWestern Energy, Otter Tail Corporation dba Otter Tail Power Company, Southern Minnesota Municipal Power Agency and Western Minnesota Municipal Power Agency, as Owners. *
10.4	Form of 2005 Performance Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 15, 2005) **
10.5	Executive Annual Incentive Plan (Effective April 1, 2005) (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 15, 2005) **
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Confidential information has been omitted from this Exhibit and filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2.
**	Management contract or compensatory plan or arrangement required to be filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K

EX-10.1

Confidential information has been omitted from this Exhibit and filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2.

Exhibit 10.1

Big Stone II Power Plant

Participation Agreement

By And Among

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY,

GREAT RIVER ENERGY,

HEARTLAND CONSUMERS POWER DISTRICT,

MONTANA-DAKOTA UTILITIES CO., A DIVISION OF MDU
RESOURCES GROUP, INC.,

OTTER TAIL CORPORATION dba OTTER TAIL POWER COMPANY,

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, AND

WESTERN MINNESOTA MUNICIPAL POWER AGENCY

As

Owners

JUNE 30, 2005

Participation Agreement	Page i
Big Stone II Power Plant	June 30, 2005

TABLE OF CONTENTS

	Page
ARTICLE I DEFINITIONS, RULES OF INTERPRETATION		2
1.01 Rules of Construction		2
1.02 Interpretation with 2005 Joint Facilities Agreement		3
1.03 Defined Terms		3
ARTICLE II THE PROJECT		13
2.01 Project		13
2.02 Owners’ Commitment		14
2.03 Ratification and Acceptance of Phase I Activities		14
ARTICLE III DEVELOPMENT, FINANCING AND WITHDRAWAL		14
3.01 Development Phases		14
3.02 Financing Plan		15
3.03 Financing Obligations		15
3.04 General Prohibition on Withdrawal		17
3.05 Withdrawal Rights as a Result of (*)		17
3.06 Limited Withdrawal Rights of GRE, Otter Tail and Other Owners		18
3.07 Obligations of an Owner That Withdraws Pursuant to Section 3.06		19
3.08 General Obligations of a Withdrawing Owner		19
3.09 Reallocation of Ownership Shares		20
3.10 Termination for Failure to Obtain Financing Approvals		21
ARTICLE IV OWNERSHIP		21
4.01 Plant Property		21
4.02 Title		22
4.03 Waiver of Partition Rights		22
4.04 Right of Possession		22
4.05 Transfer of Title		22
ARTICLE V DISPOSITION OF OWNERSHIP INTERESTS		23
5.01 General Prohibition on Transfers of Ownership Interests		23
5.02 Acts or Circumstance Not Deemed Transfers		23
5.03 Right of First Refusal		24
5.04 Covenants Run With Land		26
ARTICLE VI PROJECT AND PLANT MANAGEMENT		26
6.01 Management by Committee		26
6.02 Composition of Committees		26
6.03 Authority of Representatives to Act on Behalf of Owner		26
6.04 Committee Operational Procedures		27
6.05 Coordination Committee		28
6.06 Actions Requiring Coordination Committee Approval		29
6.07 Engineering and Operating Committee		30

Participation Agreement	Page ii
Big Stone II Power Plant	June 30, 2005

	Page
6.08 Actions Requiring Unanimous Coordination Committee Approval		31
ARTICLE VII CONTRIBUTIONS; EXPENDITURES		31
7.01 Obligation to Pay Project Costs; Trust Account		31
7.02 Payment Procedures		32
7.03 Reservation of Right to Dispute Payments		33
7.04 Services and Property Contributed by Owners		33
7.05 Emergency Services		34
7.06 Taxes		34
7.07 Fuel		34
7.08 Station Power		35
7.09 Insurance		35
7.10 Assurances of Creditworthiness		36
7.11 Right to Obtain Financing		37
ARTICLE VIII CASUALTY LOSS; CONDEMNATION		37
8.01 Repair or Replacement		37
8.02 Eminent Domain		38
ARTICLE IX LIABILITY		39
9.01 Limitation and Release of Liability to Other Owners		39
9.02 Waiver of Certain Damages		40
9.03 Assignment of Rights		40
9.04 Reduction of Damages		40
9.05 Shared Liability		40
9.06 Indemnification for Willful Actions		40
9.07 Availability of Insurance Proceeds		40
9.08 Operator Indemnity		41
ARTICLE X ENTITLEMENT TO ENERGY AND CAPACITY		41
10.01 Interconnection and Transmission Upgrade Allocation Agreement		41
10.02 Generation Entitlement		41
10.03 Ancillary Services		42
10.04 Midwest ISO Market Development		44
10.05 Data to be Provided to the Midwest ISO		44
ARTICLE XI DEFAULTS AND REMEDIES		45
11.01 Event of Default		45
11.02 Contribution by Non-Defaulting Owners		45
11.03 Disputed Event of Default		46
11.04 No Waiver		46
11.05 Cumulative Rights		46
ARTICLE XII RELATIONSHIP OF PARTIES		47
12.01 Nature of Obligations		47
12.02 Tax Status		47
ARTICLE XIII DISPUTE RESOLUTION		47

Participation Agreement	Page iii
Big Stone II Power Plant	June 30, 2005

	Page
ARTICLE XIV TERM		47
14.01 Term		47
14.02 Windup Events		48
14.03 Termination by Agreement		48
14.04 Return of Real Property to Otter Tail		48
ARTICLE XV REPRESENTATIONS, WARRANTIES		48
15.01 Representations and Warranties		48
ARTICLE XVI MISCELLANEOUS		49
16.01 Publicity Policy		49
16.02 Successors and Assigns; Assignment		50
16.03 Notices		50
16.04 Force Majeure		50
16.05 Waiver		51
16.06 Survival		51
16.07 Severability		51
16.08 Governing Law		51
16.09 Consent to Jurisdiction		51
16.10 Waiver of Trial by Jury		52
16.11 No Third-Party Beneficiaries		52
16.12 Cooperation		52
16.13 Captions		52
16.14 Entire Agreement		52
16.15 Counterparts		52
16.16 Further Assurances		53

EXHIBIT A	55
EXHIBIT B	58
EXHIBIT B-1	59
SCHEDULE 3.02(A) OWNER FINANCING PLANS	60
SCHEDULE 3.03(A) REAL AND/OR PERSONAL PROPERTY INTENDED TO BE PLANT PROPERTY	61
SCHEDULE 3.05(A) REFERENCE RATE METHODOLOGY	63
SCHEDULE 7.01 TRUST AGREEMENT	64
SCHEDULE 10.01 INTERCONNECTION AND TRANSMISSION UPGRADE ALLOCATION AGREEMENT	79

Participation Agreement	Page 1
Big Stone II Power Plant	June 30, 2005

Participation Agreement

     THIS PARTICIPATION AGREEMENT (the “Agreement”) is made as of June 30, 2005 (the “Effective Date”), by and among Central Minnesota Municipal Power Agency, an agency incorporated under the laws of Minnesota (“CMMPA”), Great River Energy, a cooperative corporation incorporated under the laws of Minnesota (“GRE”), Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law (Chapter 49-35 of the South Dakota Codified Laws) (“Heartland”), Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a corporation incorporated under the laws of the State of Delaware (“Montana-Dakota”), Otter Tail Corporation, a corporation incorporated under the laws of Minnesota, doing business as Otter Tail Power Company (“Otter Tail”), Southern Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“SMMPA”), and Western Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“WMMPA”) (each individually a “Party” and, collectively, the “Parties”).

RECITALS

     WHEREAS, Otter Tail, Montana-Dakota, and NorthWestern Corporation (formerly known as NorthWestern Public Service Company) dba NorthWestern Energy, a corporation incorporated under the laws of the State of Delaware (“NorthWestern”), own an undivided interest in one hundred percent (100%) of the existing 450 MW coal-fired electric generating plant located in Grant County, South Dakota known as the Big Stone Plant (“BSP I”) and have entered into that certain Big Stone I and Big Stone II Joint Facilities Agreement on October 3, 2002, as amended and supplemented, which gave Otter Tail the right to develop BSP II (as such term is defined below); and

     WHEREAS, on June 30, 2005, NorthWestern and the Parties are entering into the Joint Facilities Agreements (as such term is defined below), pursuant to which the Parties have obtained certain rights to acquire property and to investigate, design, and construct BSP II; and

     WHEREAS, each of the Parties has its own needs for additional electric generating capacity and believes that, when compared with the costs to design, construct and operate separate plants to satisfy their respective electric generating capacity requirements, significant economies of scale can be achieved through the joint construction and operation of a single plant capable of producing the additional generating capacity the Parties collectively require. Accordingly, the Parties have determined to proceed with the joint development, construction and operation of BSP II, to be operated for their mutual benefit, in accordance with the rights obtained pursuant to the Joint Facilities Agreements; and

     WHEREAS, each Party desires that the new plant be capable of utilizing domestic coal and achieving both lower fuel costs and environmental benefits of lower emissions through the use of a high efficiency supercritical power plant design and advanced emissions-control technologies; and

Participation Agreement	Page 2
Big Stone II Power Plant	June 30, 2005

     WHEREAS, the magnitude of the cost to develop, build and operate BSP II necessitates that the Parties share the related financial burdens associated therewith, and each Party has determined that the sharing and allocation of such costs and BSP II’s generating capacity can best be accomplished by acquiring, owning and managing the related property rights necessary to build, own and operate BSP II as tenants in common; and

     WHEREAS, each Party intends to rely on the capacity and electric energy generated by BSP II as part of its system planning and reliability obligations and to serve the needs of its current and future customers; and

     WHEREAS, this Agreement is made by the Parties to provide for their ownership as tenants in common of BSP II, and sets forth certain responsibilities and mechanisms for the design, construction, ownership, operation, maintenance and repair of BSP II.

     NOW, THEREFORE, in consideration of the agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound by this Agreement, the Parties covenant and agree as follows:

AGREEMENTS

ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION

     1.01 Rules of Construction. The capitalized terms listed in this Article shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings as commonly used in the English language and, where applicable, in Prudent Utility Practice (as such term is defined below). Words not otherwise defined herein that have well-known and generally accepted technical or trade meanings are used herein in accordance with such recognized meanings. In addition, the following rules of interpretation shall apply:

(a)	The masculine shall include the feminine and neuter.
(b)	References to “Articles,” “Sections,” “Schedules,” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of this Agreement.
(c)	This Agreement was negotiated and prepared by each of the Parties with the advice and participation of counsel. The Parties have agreed to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such Party is the author of this Agreement or any part hereof.
(d)	The Parties shall act reasonably and in accordance with the principles of good faith and fair dealing in the performance of this Agreement.

Participation Agreement	Page 3
Big Stone II Power Plant	June 30, 2005

     1.02 Interpretation with 2005 Joint Facilities Agreement. The Parties, recognizing that they are also parties to the 2005 Joint Facilities Agreement with NorthWestern:

(a)	acknowledge that the terms of this Agreement are not binding upon NorthWestern; and
(b)	notwithstanding any other provision in this Agreement to the contrary, nothing in the Joint Facilities Agreements or the O&M Agreement shall alter or modify a Party’s rights, duties and obligations under this Agreement.

     1.03 Defined Terms. In addition to definitions appearing elsewhere in this Agreement, the following terms have the following meanings:

     2005 Joint Facilities Agreement: Shall mean that certain Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June 30, 2005 by and among the Parties and NorthWestern.

     Affiliate(s): Shall mean with respect to any Person:

(a)	any Person that directly or indirectly, controls or is controlled by or is under common control with such Person; or
(b)	any Person that beneficially owns or holds fifty percent (50%) or more of any class of voting securities of such Person or owns or holds fifty percent (50%) or more of an ownership interest (on a fully-diluted basis) in such Person.

For the purposes of this definition, “control,” “controlled by,” and “under common control with,” mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by contract or otherwise. Notwithstanding the foregoing provisions, Operator and Owners (except with regard to Otter Tail) shall not be deemed to be Affiliates of each other and any Person that is otherwise an Affiliate of Operator shall not be deemed to be an Affiliate of Operator for purposes of this Agreement to the extent such Person is acting in its capacity as an Owner.

     Agreement: Shall mean this Agreement, as amended from time to time.

     Ancillary Services: Shall mean those services that can be supplied by the Plant that are necessary to support the transmission of Capacity and Energy from resources to loads while maintaining reliable operation of the Transmission System in accordance with Prudent Utility Practice. As of the Effective Date, Ancillary Services include Spinning Reserve Service, Supplemental Reserve Service, Reactive Supply and Voltage Control From Generating Sources Service, and Regulation and Frequency Response Service as such terms are defined by NERC: Spinning Reserve Service shall mean providing additional capacity from electricity generators that are on-line, loaded to less than their maximum output, and available to serve customer demand immediately should a contingency occur; Supplemental Reserve Service shall mean providing additional capacity from electricity generators that can be used to respond to a contingency within a short period, usually ten (10) minutes; Reactive Supply and Voltage Control From Generating Sources Service shall mean providing reactive supply through changes

Participation Agreement	Page 4
Big Stone II Power Plant	June 30, 2005

to generator reactive output to maintain transmission line voltage and facilitate electricity transfers; and Regulation and Frequency Response Service shall mean providing for following the moment-to-moment variations in the demand or supply in a control area and maintaining scheduled interconnection frequency.

     Applicable Law: Shall mean:

(a)	any and all laws, legislation, statutes, codes, acts, rules, regulations, ordinances, treaties or other similar legal requirements enacted, issued or promulgated by a Governmental Authority;
(b)	any and all orders, judgments, writs, decrees, injunctions, Governmental Approvals or other decisions of a Governmental Authority; and
(c)	any and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (a) or (b) of this definition, enacted, issued or promulgated by a Governmental Authority;

to the extent, for each of the foregoing in (a), (b) and (c) of this definition, applicable to or binding upon (i) BSP II; (ii) a Party, its Affiliates, its members, it partners or their respective Representatives, to the extent any such Person is engaged in activities related to BSP II; or (iii) the property of a Party, its Affiliates, its members, its partners or their respective Representatives, to the extent such property is used in connection with BSP II or an activity related to BSP II.

     Blanket Easement Agreement: Shall mean that certain Easement Agreement dated as of June 30, 2005 by and among the Parties and NorthWestern.

     BSP I: Shall have the meaning given to such term in the recitals to this Agreement.

     BSP II or Plant: Shall mean the new, approximately 600 MW coal-fired electric generating plant to be located adjacent to BSP I, and owned jointly by the Parties.

     Capacity: Shall mean an electrical rating expressed in megawatts (MW).

     CMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

     Commercial Operation: Shall mean that the Plant is operating and producing Capacity and Energy on a continuous basis, and is delivering such Energy to the Owners at the Interconnection Point in accordance with Prudent Utility Practice and Applicable Law.

     Commercial Operation Readiness: Shall mean such time as the Plant has been completed in accordance with the Plans and Specifications, has successfully completed construction and operational testing specified in the Construction Contracts, is able to operate and produce Capacity and Energy on a continuous basis, and is able to deliver such Energy to the Owners at the Interconnection Point in accordance with Prudent Utility Practices and applicable Law.

Participation Agreement	Page 5
Big Stone II Power Plant	June 30, 2005

     Committee: Shall mean any Committee established pursuant to this Agreement.

     Common Interconnection Facilities: Shall mean (i) the new interconnection facilities identified in the Interconnection Study, which have been determined and specified pursuant to Attachment X of the Midwest ISO Tariff to be required to physically and electrically interconnect the Plant to the Transmission System, and (ii) Contributing Owner Facilities pursuant to Section 2.04 of the Interconnection and Transmission Upgrade Allocation Agreement.

     Construction Contracts: Shall mean the contracts and agreements for the construction of the Plant, including any transmission or other Common Interconnection Facilities, that are duly authorized and executed, as provided herein.

     Contributing Owner Facilities: Shall have the meaning given to such term in Section 2.03 of the Interconnection and Transmission Upgrade Allocation Agreement.

     Coordination Committee: Shall mean the Committee established and maintained pursuant to Section 6.05.

     Decision Period: Shall have the meaning given to such term in Section 3.09(b)(ii)(A).

     Determination Rate: Shall have the meaning given to such term in Section 3.05(a).

     Dispute: Shall have the meaning given to such term in Article XIII.

     Double Majority: Shall mean a majority of the Coordination Committee members and not less than a majority of Ownership Shares (it being a requirement that, when an Owner votes its Ownership Shares, it must vote all of such Ownership Shares).

     Effective Date: Shall have the meaning given to such term in the preamble of this Agreement.

     Election Period: Shall have the meaning given to such term in Section 5.03(a)(ii).

     EMT: Shall have the meaning given to such term in Section 10.05.

     Energy: Shall mean electric energy having characteristics commonly known as three phase alternating current, with a nominal frequency of sixty (60) Hertz, a nominal voltage equivalent to that of Otter Tail’s or its successor’s Transmission System, and measured in kilowatt-hours (kWh) or megawatt-hours (MWh).

     Engineering and Operating Committee or E&O Committee: Shall mean the Committee established and maintained pursuant to Section 6.07.

     Event of Default: Shall have the meaning given to such term in Section 11.01.

     FERC: Shall mean the Federal Energy Regulatory Commission or any Governmental Authority which preceded or hereafter may succeed the Federal Energy Regulatory Commission.

Participation Agreement	Page 6
Big Stone II Power Plant	June 30, 2005

     FERC Accounts: Shall mean the Uniform System of Accounts prescribed by FERC for Public Utilities and Licensees (Class A and B Electric Utilities) as in effect from time to time.

     Financial Closing: Shall mean the date on which all of the Parties shall have consummated their respective Financing necessary to fund their share of the cost of the Plant, which consummation shall include, but not be limited to, the execution of all documentation required to consummate said Financing.

     Financing: Shall have the meaning given to such term in Section 7.11.

     Financing and Approval Deadline: Shall mean the deadline by which each Party shall have obtained all financing and regulatory approvals necessary for it to obtain its Financing and own its Ownership Interest in the Plant, which deadline shall be ninety (90) days after the Record of Decision for the Plant is issued by WAPA, subject to possible extension as described in Section 3.06(a).

     Financing Documents: Shall mean the loan agreements, credit agreements, notes, bonds, indentures, security agreements, lease financing agreements, mortgages, deeds of trust, interest rate exchanges, pledge agreements, swap agreements, letters of credit, resolutions and other documents evidencing, securing or otherwise relating to the development, bridge, construction and/or permanent debt financing or other extension(s) of credit for BSP II, including any credit enhancement, credit support, swaps, caps, floors, collars, hedging agreements, working capital financing, or refinancing documents, and any and all amendments, modifications, or supplements to the foregoing that may be entered into from time to time in connection with development, construction, ownership, leasing, operation or maintenance of BSP II.

     Fixed Fuel: Shall mean the equivalent hourly British Thermal units (BTU) input to the boilers at the Plant required to provide the Minimum Net Generation requirements of the Plant.

     Force Majeure Event: Shall mean a cause or event beyond the reasonable control of, and without the fault or negligence of the Party, including, without limitation, an emergency, act of God; flood, earthquake, hurricane, or tornado and the like; sabotage; vandalism beyond that which could reasonably be prevented by a Party; terrorism; war; riot; fire; explosion; blockade; insurrection; strike, slow down or labor disruption (even if such could be resolved by conceding to the demands of a labor group); and action or failure to take actions by any Governmental Authority after the Effective Date (including, without limitation, the adoption or change in any Law, but only if such actions or failures to take action prevent or delay performance; and the inability, despite due diligence, to obtain any licenses, permits, or approvals required by any Governmental Authority; provided, however, that the following shall not be Force Majeure Events:

(a)	the refusal of RUS to approve GRE’s participation in the Project;
(b)	the refusal of the MNPUC to approve Otter Tail’s integrated resource plan with respect to BSP II; or

Participation Agreement	Page 7
Big Stone II Power Plant	June 30, 2005

(c) Owner’s failure to perform any obligation under this Agreement due to its inability to obtain an authorization or approval from a Governmental Authority where such Governmental Authority issuing the authorization or approval is also the Owner;

provided, however, that the occurrence of a Force Majeure Event shall not excuse or relieve a Party from any payment obligations hereunder.

     Fuel: Shall mean all types of fuel used in the operation of the Plant’s boilers, including, without limitation, coal and fuel oil.

     Governmental Approvals: Shall mean any material authorizations or permissions issued or granted by any Governmental Authority to BSP II, its Owners and their Affiliates in connection with any activity related to BSP II.

     Governmental Authority: Shall mean any federal, state, local or municipal governmental body; any governmental, quasi-governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; or any court or governmental tribunal; any independent system operator, regional transmission organization, reliability organization, or other regulatory body; in each case having jurisdiction over an Owner, the Project, BSP II, the Plant Site, or the Transmission System to which either Plant is interconnected.

     GRE: Shall have the meaning given to such term in the preamble to this Agreement.

     Heartland: Shall have the meaning given to such term in the preamble to this Agreement.

     Interconnection and Transmission Upgrade Allocation Agreement: Shall have the meaning given to such term in Section 10.01.

     Interconnection Study: Shall mean the Big Stone II Generator Interconnection Study performed by Otter Tail for the Midwest ISO dated November, 2004 prepared pursuant to Attachment X of the Midwest ISO open access transmission Tariff in connection with large generator interconnection request (MISO generator identification number G392) associated with the Project, and any amendments, supplements, subsequent studies, and interconnection agreement which may be issued pursuant to the aforementioned large generator interconnection request.

     Joint Facilities Agreements: Shall mean the 2005 Joint Facilities Agreement, the Option to Purchase Contract, and the Blanket Easement Agreement.

     Laws: Shall mean any and all federal, state, and local statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, tariffs, governmental agreements and governmental restrictions, whether now or hereafter in effect.

Participation Agreement	Page 8
Big Stone II Power Plant	June 30, 2005

     MAPP: Shall mean the Mid-Continent Area Power Pool or its successor.

     Materials and Supplies: Shall mean materials and supplies obtained for use in the operation, maintenance or repair of the Plant (exclusive of Fuel), the cost of which is charged to the applicable FERC Accounts.

     Midwest ISO or MISO: Shall mean the Midwest Independent Transmission System Operator, Inc., its successor, or any other applicable regional transmission organization.

     Midwest ISO Tariff: Shall mean the then effective Open Access Transmission Tariff of the MISO.

     Minimum Net Generation: Shall mean the lowest net load at which the Plant can reliably generate Energy on a continuous basis as determined by the Operator in accordance with the instructions from the Engineering and Operating Committee and in conformance with manufacturers’ warranties and Prudent Utility Practice; such Energy can be taken by any Owner in the form of Net Energy Generation, Ancillary Services, or a combination thereof, pursuant to this Agreement.

     Minimum Rating: Shall have the meaning given to such term in Section 7.10.

     MNPUC: Shall mean the Minnesota Public Utilities Commission or its successor.

     Montana-Dakota: Shall have the meaning given to such term in the preamble of this Agreement.

     NERC: Shall mean the North American Electric Reliability Council or its successor.

     Net Effective Generating Capacity: Shall mean the maximum continuous ability of the Plant to produce power (net of amounts needed for station use) as determined by the Operator, in accordance with instructions of the Engineering and Operating Committee, which level of power shall be the level above which the Plant should not be operated, except at the time of system peaks or during emergencies, in order to reduce maintenance and improve reliability.

     Net Energy Generation: Shall mean the Energy generated by the Plant that is available to the Owners at the Point of Interconnection.

     Network Resource: Shall mean a designated generating resource owned and operated to supply electricity to serve network load on a non-interruptible basis.

     Non-Transferring Owner: Shall have the meaning given to such term in Section 5.03(a).

     Non-Withdrawing Owner: Shall have the meaning given to such term in Section 3.09(b)(i).

     NorthWestern: Shall have the meaning given to such term in the recitals to this Agreement.

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     O&M Agreement: Shall mean the then effective Operation and Maintenance Services Agreement related to the operation and maintenance of the Plant.

     Operating Capacity: Shall mean the maximum ability of the Plant to produce power (net of amounts needed for station use) at any particular time as determined by the Operator in accordance with instructions from the Engineering and Operating Committee.

     Operating Capacity Entitlement: Shall mean the Capacity entitlement of each Owner that at any time shall equal the Operating Capacity multiplied by an Owner’s Ownership Share.

     Operating Plan and Budget: Shall mean the annual operating plan and operating budget for Phase IV developed and approved by the Engineering and Operating Committee.

     Operator: Shall mean the operator of the Plant pursuant to the O&M Agreement.

     Option to Purchase Contract: Shall mean that certain Option to Purchase Contract dated as of June 30, 2005 by and among the BSP I Owners and Otter Tail, as administrative agent for itself and the other BSP II Owners.

     Otter Tail: Shall have the meaning given to such term in the preamble to this Agreement.

     Owner Financing Plan: Shall have the meaning given to such term in Section 3.02.

     Owners: Shall mean the Parties to this Agreement and, thereafter, any permitted successors and assigns to the Parties’ rights, title and interests in the Plant Property.

     Ownership Share: Shall mean the undivided percentage ownership interest of a particular Owner in Plant Property as set forth on Exhibit B, as the same may be changed pursuant to this Agreement; provided, however, that solely for purposes of Section 3.09(b) and Section 5.03 it shall mean the percentage ownership of a particular Owner as set forth on Exhibit B-1, as the same may be changed pursuant to this Agreement.

     Party(ies): Shall have the meaning given to such term in the preamble to this Agreement.

     Performance Testing: Shall mean the acceptance tests, demonstration tests and/or performance tests set forth in the Construction Contracts or otherwise required by the Engineering and Operating Committee, to demonstrate that the Plant has been constructed in accordance with the Plans and Specifications and consistent with Prudent Utility Practice.

     Person: Shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint-stock company, a business trust, consumer power district, cooperative, unincorporated association, government or any subdivision thereof, or an organized group of individuals (whether incorporated or not), or a receiver, trustee or other liquidating agent of any of the foregoing in his capacity as such.

     Phase I: Shall mean the first phase of development of BSP II as defined in Section 3.01(a).

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     Phase II: Shall mean the second phase of development of BSP II as defined in Section 3.01(b).

     Phase III: Shall mean the third phase of development of BSP II as defined in Section 3.01(c).

     Phase IV: Shall mean the fourth phase of development of BSP II as defined in Section 3.01(d).

     Plans and Specifications: Shall mean the plans and specifications for the construction and design of the Plant, including the scope of work performed by any contractor under one or more of the Construction Contracts; all work drawings, engineering and construction schedules, project schedules, project monitoring systems, specifications status lists, material and procurement ledgers, drawings and drawing lists, manpower allocation documents, management and project procedures documents, project design criteria, and any other document referred to in the Construction Contracts, in each case as approved by the Operator.

     Plant Property: Shall have the meaning given to such term in Section 4.01.

     Plant Site: Shall mean the real property adjacent to BSP I on which the Plant is to be located, including the real property to be acquired pursuant to the Option to Purchase Contract and any and all easements, leases, licenses, option rights, rights-of-way and other rights used in connection with the Plant.

     Point of Interconnection: Shall mean the high-voltage terminals of the Plant generator step up transformer located at the Plant.

     Point of Physical Connection: Shall mean the physical and electrical interconnection between (i) the Common Interconnection Facilities or the Common Interconnection Facilities Upgrades and (ii) the Transmission System.

     Progress Payment: Shall mean an advance of Project Costs in an amount of Ten Million Dollars ($10,000,000) (and such additional amounts as determined by the Engineering and Operating Committee), which amounts are budgeted to complete Phase II and any additional amounts the Owners shall be obligated to pay on a proportional basis on the Effective Date, or as otherwise directed by the E&O Committee, and which amounts shall be deposited in the Trust Account to pay Project Costs as they arise.

     Project: Shall mean the undertaking of the Owners with respect to the development and construction of BSP II as set forth in Section 2.01.

     Project Agreements: Shall mean this Agreement, the Construction Contracts, the Joint Facilities Agreements, the O&M Agreement and every other contract or agreement relating to the development, construction, operation, maintenance or repair of the Plant or the Project.

     Project Budget: Shall mean the budget setting forth the Project Costs to be incurred for the Project during Phases II, III and IV, as developed and approved by the Engineering and Operating Committee.

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     Project Costs: Shall mean the aggregate of all costs and expenses of the Owners heretofore or hereafter incurred in respect of the Project, including, without limitation, the Progress Payment and the costs and expenses for the acquisition of Plant Property, costs of transmission delivery and interconnection studies performed by the Midwest ISO, transmission facility costs assigned to or otherwise borne by the Project, the construction of the Plant, and the operation, maintenance and repair of the Plant and other Plant Property, including, without limitation, renewals, replacements, additions and retirements in respect thereof (and including expenditures for Fuel to the extent provided in Section 7.07). Except as provided in this Agreement, expenses incurred by an Owner on account of its Ownership Share in Plant Property, including, without limitation, interest on its borrowed funds, its income, property, business and occupation and similar taxes, its internal overhead and administrative expenses, and fees and expenses of its independent certified public accountants, counsel and others providing it with professional or other services on account of such individual interest, shall be for the account of such Owner and shall not be Project Costs.

     Project Financing Plan: Shall have the meaning given to such term in Section 3.02.

     Proposed Purchaser: Shall have the meaning given to such term in Section 5.03(a).

     Prudent Utility Practice: Shall mean any of the practices, methods or acts required by Applicable Law, the National Electric Safety Code, MISO, the North American Electric Reliability Council, or the successors of any of them, whether or not a Party is a member thereof, or otherwise engaged in or approved by a significant portion of the utility electric generation industry during the relevant time period or any of the practices, methods and acts that in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the upper Midwest region.

     Record of Decision: Shall mean WAPA’s final record of its decision, published in the Federal Register, addressing how the findings of its Environmental Impact Statement, including consideration of alternatives, were incorporated into WAPA’s decision-making process and issued no earlier than the later of ninety (90) days after the issuance of a draft Environmental Impact Statement or thirty (30) days after the issuance of a final Environmental Impact Statement.

     Reference Rate: Shall mean (*) per megawatt hour.

     RUS: Shall mean the Rural Utilities Service of the United States Department of Agriculture or any successor thereof.

     SEC: Shall have the meaning given to such term in Section 7.10.

     SMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

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     Term: Shall have the meaning given to such term in Section 14.01.

     Termination Date: Shall have the meaning given to such term in Section 14.01.

     Total Load Regulation: Shall have the meaning given to such term in Section 10.03(d).

     Total Operating Reserves: Shall have the meaning given to such term in Section 10.03(b).

     Transfer, Transferred or Transferring: Shall mean any actual, attempted, proposed or purported sale, assignment, conveyance, transfer, gift, exchange, mortgage, pledge, encumbrance (including, but not limited to, liens of any kind), hypothecation or grant of a security interest in or other disposition of an Owner’s Ownership Interest, whether voluntary or involuntary.

     Transferring Owner: Shall have the meaning given to such term in Section 5.03(a).

     Transferred Share: Shall have the meaning given to such term in Section 5.03(a).

     Transmission System: Shall mean the facilities that are used to provide transmission service necessary for any of the Owners to deliver the Energy from the Point of Physical Connection to their respective points of delivery. The Transmission System includes, but is not limited to, facilities, the operational control of which has been transferred to the Midwest ISO subject to FERC approval under Section 203 of the Federal Power Act.

     Trust Account: Shall mean the segregated interest-bearing trust account already established by the Operator on behalf of the Owners to provide for obligations with respect to the Project and the Plant.

     Trust Account Deposit(s): Shall have the meaning given to such term in the O&M Agreement.

     URGE Testing: Shall mean the MAPP reliability testing procedure established by the MAPP regional reliability committee (designated Uniform Rating of Generating Equipment) used to determine the Capacity, less self-supplied station power use, that the Plant could supply as accredited Capacity to the interconnected systems of the MAPP members.

     WAPA: Shall mean the Western Area Power Administration or any successor thereof.

     Willful Action: Shall mean any act or omission of an Owner (including an Owner acting as Operator) by or on its behalf, at the direction of its directors, a corporate officer, or in the case of the Operator, a Plant Manager (as defined in the O&M Agreement), in respect of the matter involved, which:

(a) is knowingly or intentionally done or not done with conscious indifference to the consequences, or with the expectation that injury or damage to other Owners or any other Person would, or would be reasonably likely to, result therefrom; or

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(b) is determined by final judgment or decree of a court having jurisdiction, to be a material default under any Project Agreement, and occurs or continues beyond the time specified in such judgment or decree for curing such default, or if no time to cure is specified therein, occurs or continues beyond a reasonable time to cure such default.

     Withdrawing Owner: Shall have the meaning given to such term in Section 3.09(b)(i).

     Withdrawn Share: Shall have the meaning given to such term in Section 3.09(b)(ii).

     WMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

ARTICLE II
THE PROJECT

     2.01 Project. The Project shall consist of the following activities to be conducted during Phases I, II and III of the development of the Plant, as more fully described in Article III:

(a)	the acquisition of the Plant Site (including feasibility studies and testing), including, without limitation, the acquisition of all properties, easements, rights and public and private permits, licenses, orders and other authorizations necessary or desirable to provide access to the Plant Site by railroad and from public roads, to provide communications and other necessary utility services to the Plant Site, and to provide water of the quality and quantity required for the construction and operation of the Plant and allow discharge and/or storage of water and wastes from the Plant, and to enable in all other respects the construction, operation, maintenance and repair of the Plant and other Plant Property;
(b)	the design, construction, equipping and testing of the Plant on the Plant Site in preparation for Commercial Operation Readiness at a planned Capacity of approximately 600 MW, including the interconnection of the Plant to the Transmission System, including all related interconnection and transmission upgrades;
(c)	the arrangements for the supply of Fuel, or such substantial portion thereof as the Owners deem advisable, and for the delivery thereof to the Plant, as is necessary to test the Plant and to ensure operating of the Plant at Net Available Capacity thereafter during the Term;
(d)	the selection and training of the initial staff needed to test and operate the Plant;
(e)	the procurement of all Materials and Supplies (including an appropriate supply of spare parts) necessary to conduct Performance Testing and thereafter commence the Commercial Operation of the Plant;
(f)	coordination with BSP I and the owners thereof as contemplated in the Joint Facilities Agreements; and

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(g) all matters incidental to the foregoing, which, consistent with Prudent Utility Practice, should be done to prepare the Plant for Commercial Operation.

     2.02 Owners’ Commitment. Each of the Parties, as the initial Owners, for itself and its successors and permitted assigns which may hereafter become Owners, shall carry out the Project in accordance with this Agreement. The Owners shall cause the Plant to be operated for the benefit of the Owners.

     2.03 Ratification and Acceptance of Phase I Activities. Each Party hereby ratifies and accepts each of the Phase I activities carried out by the Parties, whether individually or collectively, relating to the Project prior to the Effective Date.

ARTICLE III
DEVELOPMENT, FINANCING AND WITHDRAWAL

     3.01 Development Phases. The Owners, pursuant to the Project Agreements, shall develop the Plant in four (4) phases, as follows:

(a)	“Phase I” shall consist of all development activities undertaken by the Owners, individually or collectively, relating to the Project prior to the Effective Date.
(b)	“Phase II” shall consist of due diligence, preparation for Financial Closing, design and engineering work, negotiation of the Construction Contracts and the other Project Agreements and other necessary activities on the Effective Date and continuing until one (1) day prior to the later of the date of Financial Closing or the date of execution of the Construction Contracts.
	During Phase II, to the extent not completed as of the Effective Date, the Owners, acting through the Engineering and Operating Committee, shall conclude all plans and preparations necessary for development and financing of the Project, including, but not limited to (i) the preparation of a development plan, Owner Financing Plan, Project Financing Plan, construction schedule and Project Budget, (ii) the preparation and negotiation of the Project Agreements, (iii) the application for, and acquisition of, such permits and other Governmental Approvals as are necessary for the development and construction of the Plant, and (iv) completion of all documentation and other preparations required for Financial Closing and execution and delivery of Construction Contracts.
(c)	“Phase III” shall consist of the construction, Performance Testing and start-up of the Plant. Phase III shall commence on the later of the date of Financial Closing or the date of execution of the Construction Contracts, and shall end one (1) day prior to the date the Plant commences Commercial Operation.
	During Phase III, the Owners, acting through the Engineering and Operating Committee, shall complete Financial Closing (if not previously completed), execute Construction Contracts (if not previously executed), cause construction, Performance Testing and start-up of the Plant to occur, prepare for

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	commencement of Commercial Operation (including the training and hiring of necessary operating staff) and obtaining any permits or Governmental Approvals not previously obtained that are required for the operation of the Plant.
(d)	“Phase IV” shall consist of the Commercial Operation of the Plant, which phase shall commence on the date the Plant commences Commercial Operation and end on the Termination Date.
	During Phase IV, the Owners, acting through the Engineering and Operating Committee, shall operate and maintain the Plant in accordance with Prudent Utility Practices and the Project Agreements. Subject to oversight by the Engineering and Operating Committee, the obligations of the Owners during Phase IV shall be carried out by the Operator in accordance with, and to the extent set forth in, the O&M Agreement.

     3.02 Financing Plan.

(a)

On or before the Effective Date, each Owner shall confirm that it has delivered to each of the other Owners a plan detailing how it will obtain all financing and regulatory approvals necessary for it to obtain its Financing and own its undivided interest in the Plant (each such plan, an “Owner Financing Plan”). A copy of each Owner Financing Plan is attached hereto as Schedule 3.02(a).

(b)

On or before the date that is six (6) months after the Effective Date, the Owners will collectively develop a final plan for the financing of the Project (the “Project Financing Plan”), taking into account the Owner Financing Plans provided by each of the Owners and any special financing benefits or restrictions. The Project Financing Plan will provide for the coordination among the Owners’ lenders and set forth in detail the Financing Documents that will be required for Financial Closing.

     3.03 Financing Obligations.

(a)

Attached hereto as Schedule 3.03(a) each Owner has described (i) all real and/or personal property held by such Owner as of the Effective Date that is intended to be Plant Property, including, but not limited to, interests in the Joint Facilities Agreements and the work product resulting from development activities undertaken during Phase I relating to the Project, but excluding Contributing Owner Facilities, and (ii) all Project Costs incurred by such Owner prior to the Effective Date, including, but not limited to, the costs to acquire the real and/or personal property and interests listed on Schedule 3.03(a).

(b)

On the Effective Date:

(i) each Owner that has incurred Project Costs prior to the Effective Date as listed in Schedule 3.03(a) shall be reimbursed by the other Owners in

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	proportion to their respective Ownership Shares, to the extent not previously reimbursed;
(ii)	to the extent reimbursement has been provided to the Owner as described in Section 3.03(b)(i), each Owner’s interest in its work product resulting from development activities undertaken prior to the Effective Date (other than its interests in personal property, real property and the Joint Facilities Agreements) as identified in Schedule 3.03(a), shall be transferred to and vest in the Owners as tenants in common in proportion to their respective Ownership Shares and each Owner transferring such property shall cause it to be transferred; and
(iii)	each Owner shall pay into the Trust Account its proportionate share, based on Ownership Share, of the Progress Payment to finance the development of the Project until the Financial Closing.

(c)

At least thirty (30) days before the date of the Financial Closing, each Owner shall amend its disclosures in Schedule 3.03(a) to reflect (i) any additional real and/or personal property held by such Owner that is intended to be Plant Property and that has not been previously transferred to the Owners as tenants in common, including, but not limited to, interests in the Joint Facilities Agreements and the work product resulting from development activities undertaken during Phase II relating to the Project, and (ii) all reasonable and documented Project Costs incurred by such Owner during Phase II, including, but not limited to, the costs to acquire the additional real and/or personal property listed on Schedule 3.03(a).

(d)

On the date of Financial Closing,

(i)	each Owner that has incurred Project Costs prior to the Financial Closing as listed in amended Schedule 3.03(a) shall be reimbursed by the other Owners in proportion to their respective Ownership Shares in accordance with Section 4.02, to the extent not previously reimbursed;
(ii)	to the extent not previously transferred, each Owner’s title to, or other property interest in all property and rights resulting from development activities undertaken prior to the Financial Closing (including, but not limited to, its interests in personal property, real property (including any rights necessary to exercise any options for real property) and the Joint Facilities Agreements) as identified in Schedule 3.03(a), but excluding Contributing Owner Facilities, shall vest in the Owners as tenants in common in proportion to their respective Ownership Shares in accordance with Section 4.02; and
(iii)	each Owner shall deliver its cash or binding financial obligation of a well-known financial institution to finance its Ownership Share and to fund its share of the balance of the Project Costs through the completion of construction and the commencement of Commercial Operation. Each

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Owner shall provide to the Engineering and Operating Committee and the other Owners such customary documents, including reasonable and customary legal opinions, consents to assignment and certificates as may be requested with respect to the financing of the Project and shall use its best efforts to cause its Lenders to enter into any intercreditor or similar documents as are customary in transactions of this nature.

(e) To the extent not otherwise specifically provided in any Project Agreement or other written agreement among the Owners, (i) any additional real and/or personal property or interests therein acquired after the Financial Closing intended to be Plant Property shall be acquired by the Owners, acting through the Engineering and Operating Committee, as tenants in common with undivided interests equal to their respective Ownership Shares and (ii) all Project Costs and other liabilities or obligations incurred with respect to the Project during Phase III shall be the responsibility and obligation of the Owners in proportion to their respective Ownership Shares.

     3.04 General Prohibition on Withdrawal. Except as specifically provided herein, an Owner may not terminate its participation in and withdraw from the Project.

     3.05 Withdrawal Rights as a Result of (*).

(a)	On June 20, 2006, the E&O Committee shall determine (*) (the “Determination Rate”), using the same methodology used in determining the Reference Rate, as detailed on Schedule 3.05(a) hereof, and which determination shall include only those anticipated costs properly authorized under this Agreement.
(b)	(*), then the Owners, acting through the Coordination Committee, shall meet on June 30, 2006 and shall take the following vote:

(i) If a Double Majority approves the continuation of the Project, then any Owner who did not vote to continue the Project may withdraw from the Project, so long as it: (A) provides written notice to the other Owners of its withdrawal within seven (7) days of the vote, and (B) deposits into the Trust Account on or before July 31, 2006, a payment equal to (*) per kilowatt multiplied by that Owner’s Ownership Share. An Owner who properly withdraws under this Section 3.05(b)(i) shall have no other obligations under this Agreement, except as required under Section 3.08. (*) If both Montana-Dakota and Otter Tail withdraw from the Project under this Section 3.05(b)(i), any of the Progress Payments paid by Montana-Dakota and Otter Tail prior to withdrawal under this Section 3.05(b)(i) that are not needed to pay Project Costs incurred prior to withdrawal under Section 3.05(b)(i) shall remain Plant Property and

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Montana-Dakota and Otter Tail shall have no claim to such Progress Payments. In the event that the Progress Payments paid by Montana-Dakota and Otter Tail prior to withdrawal under this Section 3.05(b)(i) are not sufficient to pay Montana-Dakota’s and Otter Tail’s respective shares of Project Costs incurred prior to withdrawal under this Section 3.05(b)(i), Montana-Dakota and Otter Tail shall pay into the Trust Account their respective amounts of the shortfall. Any such payments required of Montana-Dakota and Otter Tail shall be made within five (5) business days after the amount of the shortfall is determined.

(ii)

If a Double Majority does not approve the continuation of the Project, then those Owners who wish to withdraw from the Project may do so by providing written notice to the other Owners of their withdrawal within seven (7) days of the vote, and shall have no other obligations under this Agreement, except as required under Section 3.08; provided, however, that notwithstanding the lack of Double Majority approval to continue the Project, those Owners who do not withdraw from the Project may continue the Project under the Project Agreements as long as either Montana-Dakota or Otter Tail has not withdrawn from the Project. If Montana-Dakota and Otter Tail both withdraw from the Project pursuant to this Section 3.05(b)(ii), then the Project shall be wound up as provided for in Section 14.02 of this Agreement.

     3.06 Limited Withdrawal Rights of GRE, Otter Tail and Other Owners. GRE shall use its best efforts to obtain on or prior to the Financing and Approval Deadline the approval by RUS of GRE’s participation in the Project, as required pursuant to GRE’s mortgage with RUS. Otter Tail shall use its best efforts to obtain on or prior to the Financing and Approval Deadline the approval by MNPUC of Otter Tail’s integrated resource plan with respect to BSP II, which approval shall include authorization for Otter Tail to participate in the Project (*). GRE and Otter Tail shall provide written reports to the Owners regarding their progress in obtaining their required approvals and copies of all submissions to and responses from RUS and MNPUC, respectively. Notwithstanding the general prohibition on withdrawal set forth in Section 3.04:

(a)

GRE and Otter Tail may withdraw from the Project if they do not obtain their required approvals described above by giving written notice of withdrawal to the other Owners at least five (5) business days prior to the Financing and Approval Deadline. The withdrawal shall be effective as of the date of such notice. If such notice is given, then the Financing and Approval Deadline for the non-withdrawing Owners shall automatically be extended by sixty (60) days.

(b)

In the event GRE withdraws pursuant to Section 3.06(a), any other Owner may, for a period of thirty (30) days after GRE gives its notice of withdrawal, also withdraw from the Project by giving written notice to the other Owners. The withdrawal shall be effective as of the date of the withdrawing Owner’s written notice.

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     3.07 Obligations of an Owner That Withdraws Pursuant to Section 3.06. In the event an Owner withdraws pursuant to Section 3.06, all Progress Payments paid by the withdrawing Owner prior to withdrawal shall be used to pay the withdrawing Owner’s share of Project Costs incurred prior to withdrawal. Any of the Progress Payments paid by the withdrawing Owner prior to withdrawal that are not needed to pay Project Costs incurred prior to withdrawal shall remain Plant Property and the withdrawing Owner shall have no claim to such Progress Payments. In the event that the Progress Payments paid by the withdrawing Owner prior to withdrawal are not sufficient to pay the withdrawing Owner’s share of Project Costs incurred prior to withdrawal, the withdrawing Owner shall pay into the Trust Account the amount of the shortfall. The withdrawing Owner’s payment shall be made within five (5) business days after the amount of the shortfall is determined. Notwithstanding the foregoing, in the event that the non-withdrawing Owners elect to discontinue the Project, either (i) as a result of one or more withdrawals pursuant to Section 3.06, or (ii) at any time within six (6) months after any such withdrawal, a withdrawing Owner shall not have any liability or obligation pursuant to this Section 3.07, and the Owners shall wind up the Project and contribute to Project Costs as provided in other provisions of this Agreement.

     3.08 General Obligations of a Withdrawing Owner. In the event any Owner withdraws and terminates its participation in the Project as permitted under this Agreement or otherwise, the withdrawing Owner shall immediately:

(a)	transfer to the remaining Owners all rights it has under the Project Agreements;
(b)	transfer to the remaining Owners all rights it has to Plant Property, including, but not limited to, any amounts on deposit in the Trust Account and any previous paid Progress Payments;
(c)	with the exception of Contributing Owner Facilities, transfer to the remaining Owners any and all other rights, interests or property, whether real, personal, tangible or intangible or otherwise, relating in any way to the Project, the Plant, the Plant Site or otherwise;
(d)	to the extent not previously paid, pay its proportion (based upon its Ownership Share prior to termination) of Project Costs incurred through the withdrawal date; and
(e)	to the extent not previously paid, pay its proportion (based upon its Ownership Share prior to termination) of Project Costs incurred after the date of its withdrawal, provided such Project Costs relate to obligations created prior to the date of its withdrawal, and provided the remaining Owners are unable to mitigate those Project Costs with reasonable effort and minimal impact upon their ability to continue with the Project; provided, however that this Section 3.08(e) shall not apply to a withdrawal pursuant to Section 3.06.

     In the event that an Owner withdraws and/or otherwise terminates its participation in the Project for any reason, then said Owner, by its signature below, hereby appoints each of the remaining Owners its true and lawful agents and attorneys-in-fact to effect any of the foregoing

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obligations of this Section 3.08(a)-(e), Section 3.09 and otherwise with respect to the withdrawing Owner’s obligations under any of the Project Agreements or any other obligation thereof with respect to the Plant, the Project, the Plan Site or otherwise.

     3.09 Reallocation of Ownership Shares.

(a)

If Otter Tail and/or GRE withdraws from the Project pursuant to Section 3.06, then their rights that are forfeited, property transferred and money paid by either or both, as applicable, shall be transferred or allocated to all remaining Owners in proportion to their respective Ownership Shares (and such Ownership Shares shall be re-calculated without the withdrawing Owner’s Ownership Share). Notwithstanding anything in this Agreement to the contrary, if Otter Tail withdraws pursuant to Section 3.06 then, unless another owner of BSP I shall be a participant in the Project as an Owner, Otter Tail shall retain ownership of any real property rights it has in the Plant Site and any such rights previously transferred by Otter Tail to the Owners shall be returned to Otter Tail.

(b)

If an Owner withdraws from the Project pursuant to Section 3.05(b), and either Montana-Dakota or Otter Tail (or both) have not withdrawn, then:

(i)

After such withdrawal, the E&O Committee shall promptly meet and determine whether the non-withdrawing Owners (collectively, for purposes of this Section 3.09(b), the “Non-Withdrawing Owners”) are able to unanimously agree as to the reallocation of the withdrawing Owner’s (each, a “Withdrawing Owner” and collectively, the “Withdrawing Owners”) Ownership Shares without completing the reallocation process in Section 3.09(b)(ii). Withdrawing Owners may not participate in such determination by the E&O Committee, or any other decision of the E&O Committee under this Section 3.09(b).

(ii)

If the E&O Committee is unable to unanimously agree as to the reallocation of a Withdrawing Owner’s Ownership Shares (the “Withdrawn Share”) pursuant to Section 3.09(b)(i), then the Withdrawn Share shall be offered to each of the Non-Withdrawing Owners according to the following reallocation process:

(A)

The reallocation process shall occur within a sixty (60) day period, which period shall begin on the date after the E&O Committee has met as required under Section 3.09(b)(i) (the “Decision Period”). The reallocation process shall be administered by or at the direction of the E&O Committee, which shall have the authority and discretion to set the deadlines therefor, subject at all times to the requirement that the reallocation process be completed within the Decision Period.

(B)

Each Non-Withdrawing Owner shall promptly inform all other Non-Withdrawing Owners in writing whether it intends to accept

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reallocation of its ratable share of the Withdrawn Share. If any Non-Withdrawing Owner does not intend to accept its ratable share of the Withdrawn Share, then those Non-Withdrawing Owners that have elected to accept reallocation of their ratable share of the Withdrawn Share shall again have the opportunity to elect to accept reallocation of their ratable share of the unaccepted Withdrawn Share. This process shall continue until either (1) the Non-Withdrawing Owners have elected to accept reallocation of the entire Withdrawn Share, or (2) all Non-Withdrawing Owners have elected to not accept some amount of the Withdrawn Share.

(C)

If some amount of the Withdrawn Share remains unallocated by the earlier of the end of the process described in Section 3.09(b)(ii)(B) and the end of the Decision Period, then the E&O Committee shall meet to (1) determine if one or more of the Non-Withdrawing Owners will accept the unallocated Withdrawn Share, (2) reduce the size of the Project, or (3) wind up the Project as provided in Section 14.02(b) of this Agreement.

     3.10 Termination for Failure to Obtain Financing Approvals. If any Owner has not obtained all approvals necessary for it to finance and own its Ownership Share by the Financing and Approval Deadline, then all of the Owners who have obtained all such necessary approvals shall unanimously decide whether to either (i) extend the Financing and Approval Deadline, (ii) remove the Owner(s) who have not obtained such approvals and proceed with the Project, or (iii) terminate and wind up the Project. If all remaining Owners (which must include either Montana-Dakota or Otter Tail) have not obtained all approvals necessary to finance and own their Ownership Shares by the date that is twelve (12) months after the Financing and Approval Deadline, then this Agreement shall terminate and the Project shall be wound up in accordance with Article XIV unless the remaining Owners (which must include either Montana- Dakota or Otter Tail) shall have unanimously voted to extend this Agreement and continue with the Project.

ARTICLE IV

OWNERSHIP

     4.01 Plant Property. Plant Property shall consist of the Plant and of all other property (real, personal or fixtures; tangible and intangible) identified on Schedule 3.03(a), as such may be amended from time to time or acquired thereafter (either directly in the names of the Owners as tenants in common in accordance with this Agreement or indirectly for their account by any Owner, agent (including, but not limited to, the Operator), nominee, contractor or subcontractor) for exclusive use or consumption in connection with the construction, operation, maintenance or repair of the Plant, including, but not limited to, the following:

(a) the Project Site, including all land and interests in land not a part of such site but intended for exclusive use in connection with the construction, operation, maintenance or repair of the Plant, as from time to time located or contemplated;

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(b)	all public and private permits, licenses, orders and other authorizations issued or obtained in connection with the construction, operation, maintenance or repair of the Plant or other Plant Property;
(c)	all materials, parts and component equipment acquired for incorporation or installation in the Plant or other Plant Property, either in the initial construction thereof or as subsequent additions or betterments thereto or replacements thereof, and all tools and construction equipment acquired for use or consumption exclusively in connection with the construction, operation, maintenance or repair of the Plant or other Plant Property;
(d)	all products and byproducts produced from Plant Property;
(e)	all railroad equipment, vehicles, tools, office and other equipment and furnishings, Fuel and any other fuel supplies, spare parts, other Materials and Supplies and all other materials and supplies, whether to be located in the Plant or on the Plant Site or off-site, which are intended for exclusive use in connection with the construction, operation, maintenance or repair of the Plant or other Plant Property; and
(f)	all contracts regarding the Plant and all options and contract rights to acquire any of the foregoing Plant Property.

     4.02 Title. It is the intent of the Parties that the Owners own all Plant Property as tenants in common, in proportion to the respective Ownership Share of each Owner. No instruments by which title or other property interest in any Plant Property is acquired by the Owners, or by which the title or other property interest of the Owners in any Plant Property is evidenced, shall contain any provisions inconsistent with the intent of the preceding sentence.

     4.03 Waiver of Partition Rights. No Owner shall resort to any action at law or in equity to partition the Plant, the Plant Site, the Plant Property or the Project Agreements (either by partition in kind or by the sale of the subject property and division of the proceeds), and each Owner hereby expressly waives the benefit of all Laws that may now or hereafter authorize such partition for a term that is coterminous with the term of this Agreement or for such lesser period as may be required by Applicable Law.

     4.04 Right of Possession. No Owner shall lease or otherwise grant to another Person the right of possession as to any of the Plant Property, separate and apart from ownership of title to such property, without the prior written consent of all the other Owners.

     4.05 Transfer of Title. As soon as practicable, but no later than the Financial Closing, each Owner shall execute, deliver, record and file, as necessary, bills of sale, deeds, endorsements, assignments and other good and sufficient instruments of conveyance and transfer, to vest in the other Owners as tenants in common all the right, title and interest of that Owner in, to or under any or all of the property intended to be Plant Property and take all steps to put all Owners in actual possession and control of all the property intended to be Plant Property. From time to time following the Financial Closing, each Owner shall execute, deliver, record and

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file such other instruments of conveyance and transfer as the other Owners may reasonably request or as may be otherwise necessary to more effectively convey and transfer to, and vest in, all Owners and put all Owners in possession of, any part of the Plant Property, and, in the case of licenses, certificates, approvals, authorizations, agreements, contracts, leases, easements and other commitments included in the Plant Property (a) which cannot be transferred or assigned effectively without the consent of third parties which consent has not been obtained prior to the Financial Closing, to cooperate with all Owners at all Owners’ request in endeavoring to obtain such consent promptly, and if any such consent is unobtainable, to use its best efforts to secure to all Owners the benefits thereof in some other manner, or (b) which are otherwise not transferable or assignable, to use its best efforts jointly with all Owners to secure to all Owners the benefits thereof in some other manner. All real property to be transferred hereunder shall be transferred such that only the covenants of marketable title and quiet enjoyment are required to be contained therein. This provision shall survive the termination or expiration of this Agreement.

ARTICLE V

DISPOSITION OF OWNERSHIP INTERESTS

     5.01 General Prohibition on Transfers of Ownership Interests. A Party’s Ownership Interest in this Agreement and Plant Property may only be Transferred to another Person as permitted under this Agreement; provided, however, that in no event, may an Owner own an Ownership Interest consisting of less than a (*) megawatt share of the Plant’s Capacity. Any Party acquiring an ownership interest in this Agreement or Plant Property pursuant to a permitted transfer, shall take such ownership interest subject in all respects to the terms and conditions of this Agreement, including, but not limited to, the assurances of creditworthiness set forth in Section 7.10. Any attempted Transfer by an Owner other than in accordance with the terms and conditions of this Agreement shall be, and is hereby declared, null and void ab initio.

     5.02 Acts or Circumstance Not Deemed Transfers. The following shall not, under any circumstances, be deemed Transfers, as such term is defined herein, and are not subject to the general prohibition on Transfers of Section 5.01 and, accordingly, are permitted, provided that any terms and conditions contained in the following are complied with:

(a)	subject to the right of first refusal provisions of this Agreement, the sale by any Owner of all or part of its Ownership Share of the Plant Property or any part thereof if made by a trustee, mortgagee or other secured party as a remedy for a default under such encumbrance; provided that the transferee must agree to be bound by the terms of this Agreement and to perform the obligations of an Owner hereunder;
(b)	the transfer of the title of any Owner to all of its Ownership Share of the Plant Property as an incident to a sale, merger or other transfer of all or substantially all of such Owner’s assets as an entirety or of all or substantially all of such Owner’s assets used in its electric utility business, as an entirety;
(c)	liens for taxes not yet due, or non-material liens for taxes or material liens for taxes which are being reasonably contested;

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(d)	liens incurred in the ordinary course of business and not in connection with the borrowing of money, including, without limitation, liens incidental to the operation and maintenance of the Plant, liens in connection with construction improvements in compliance with any Project Documents or otherwise, liens in connection with an Owner’s maintenance of bank accounts, workers’ compensation, unemployment insurance and other types of social security, surety and appeal bonds, bids, and performance bonds (provided any of the foregoing liens that are material are being contested and adequate reserves are maintained with respect thereto);
(e)	the pledge or granting a security interest in, or assigning as collateral, all or any portion of an Ownership Share or the Plant Property or an Owner’s interest in this Agreement in order to obtain Financing. Any Person receiving such an interest in connection with a default by an Owner on its Financing shall be required to assume and become obligated to perform all of the obligations of Owner at such time as that Person including, without limitation, (i) perform any of that Owner’s obligations then outstanding with respect to the foregoing, (ii) cure any monetary defaults of such Owner and any non-monetary defaults that are reasonably capable of being performed by such Person, and (iii) be deemed to have assumed and become obligated to perform the obligations of such Owner thereafter arising under this Agreement in respect of such property; provided that the transferee must agree to be bound by the terms of this Agreement and to perform the obligations of an Owner hereunder;
(f)	the transfer of the title of any Owner to all or any part of its Ownership Share of the Plant Property to an Affiliate; provided, however, that any such Affiliate must satisfy the creditworthiness assurances set forth in Section 7.10; and
(g)	any necessary reallocation of Ownership Shares as a result of a decision by certain Owners to continue the Project under Section 3.05(b).

     5.03 Right of First Refusal. Notwithstanding anything in this Agreement to the contrary, an Owner may Transfer all or a portion of its Ownership Share (subject in all respects to the requirement that no Owner may own an Ownership Share consisting of less than a (*) megawatt share of the Plant’s Capacity) provided that such Owner complies in all respects with the right of first refusal process contained in this Section 5.03.

(a) If any Owner (the “Transferring Owner”) desires to transfer all or any part of its Ownership Share pursuant to a bona fide written offer from a third party including, without limitation, another Owner (the “Proposed Purchaser”), the Transferring Owner shall first offer the proportion of its Ownership Share that it desires to Transfer (the “Transferred Share”) to each of the other Owners (collectively, for purposes of this Section 5.03, the “Non-Transferring Owners”) according to the following procedure:

(i) The Transferring Owner shall notify the Non-Transferring Owners of its intention to Transfer the Transferred Share and furnish the Non-

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	Transferring Owners with a copy of the bona fide written offer signed by the Proposed Purchaser setting forth, in reasonable detail, the price, terms and conditions (including, without limitation, the source and terms of any financing) of the proposed Transfer. To be a bona fide offer, such offer must be for all cash and the Proposed Purchaser must satisfy the creditworthiness assurances set forth in Section 7.10.
(ii)	The right of first refusal process (including the closing of any transactions thereunder) shall occur within a one hundred eighty (180) day period, which period shall begin on the date the Transferring Owner provides the Non-Transferring Owners with a copy of the bona fide written offer pursuant to Section 5.03(a)(ii) (the “Election Period”). The right of first refusal process shall be administered by or at the direction of the E&O Committee, which shall have the authority and discretion to set the deadlines therefor, subject at all times to the requirement that the process be completed within the Election Period. Non-Transferring Owners who elect to purchase any portion of the Transferred Share must do so on all of the same terms and conditions as are set forth in the Proposed Purchaser’s bona fide offer to the Transferring Owner. Notwithstanding anything to the contrary in this Section 5.03, the Non-Transferring Owners, or one of them, must collectively purchase the entire Transferred Share in order to validly exercise the right of first refusal.
(iii)	Each Owner shall promptly inform the Transferring Owner in writing whether it intends to purchase its ratable share of the Transferred Share. If any Non-Transferring Owner does not elect to purchase its ratable share of the Transferred Share, then those Owners who have elected to purchase their ratable share of the Transferred Share shall again have the opportunity to elect to purchase their ratable share (vis-à-vis those Owners who elected to participate in the initial round). This process shall continue until either (A) the Non-Transferring Owners have elected to purchase the entire Transferred Share, or (B) the Non-Transferring Owners have not elected to purchase the entire Transferred Share.
(iv)	If the Non-Transferring Owners have not elected to purchase the entire Transferred Share, the Transferring Owner shall be entitled, for a period ninety (90) days after the end of the Election Period, to complete the transfer of the Transferred Share to the Proposed Purchaser, in all respects pursuant to the terms of its bona fide written offer; provided, however, that no such sale may occur unless the Proposed Purchaser shall have agreed, in writing, to be bound by all of the terms of this Agreement and any other Project Agreements to which all other Owners are parties.
(v)	If the sale of the Transferred Share is not completed within said ninety (90) day period, the Transferred Share may not be Transferred without again complying with the requirements of this Section 5.03.

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     5.04 Covenants Run With Land. The provisions of this Agreement, including, without limitation, the right of first refusal provisions contained in Section 5.03, shall constitute covenants running with the land as to the interests in real property which are made subject hereto and shall bind each Owner and their successors and assigns.

ARTICLE VI
PROJECT AND PLANT MANAGEMENT

     6.01 Management by Committee. The Owners’ rights and obligations with respect to the Plant, the Project and Plant Property shall be managed by the Owners acting through a Coordination Committee and an Engineering and Operating Committee established and maintained during the Term in accordance with this Article VI. The Coordination Committee and the Engineering and Operating Committee, from time to time, may establish and maintain such additional Committees as they deem advisable, but in no event may any such additional Committees have powers greater than those of the Committee that created such additional Committee.

     6.02 Composition of Committees. Each Owner shall have a natural Person designated to act as its primary representative on each Committee and a natural Person designated as an alternate who will act as its representative when the primary representative is unavailable. Each Owner shall notify the other Owners of its initial designations and of each subsequent change in the identity of the natural Persons who will serve as its primary representative and alternate representative, respectively, on each Committee, and with reasonable promptness shall fill vacancies in such positions as they occur. Each Owner shall designate, as soon as practicable, its primary representatives and alternative representatives on the Coordination Committee and the Engineering and Operating Committee, and such other Committees as the Owners may from time to time establish. Each Owner may change its primary representative and alternative representative by providing written notice of such change to every other Owner. An Owner may, but need not, appoint the same representative to serve as its representative on multiple Committees.

     6.03 Authority of Representatives to Act on Behalf of Owner.

(a)

The primary representative and alternative representative of any Owner on any Committee shall be deemed for all purposes to be duly authorized to represent and act on behalf of the Owner in respect of all business conducted by the Committee and each Owner agrees to be bound by action taken by each Committee on matters within the authority of such Committee, to the extent allowed by Applicable Law.

(b)

If both the primary representative and alternative representative of an Owner are unable to attend a Committee meeting, then an Owner shall send another natural Person to represent it at such Committee meeting and such natural Person shall presumptively be deemed to be duly authorized to represent and act on behalf of the Owner in respect of all business conducted by the Committee. Similarly, if a Committee proposes to act via a written action, an Owner shall ensure that a natural Person, duly authorized, duly considers such proposed written action.

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(c)

Failure of an Owner to send another natural Person or to respond to a request to take action by written action shall not preclude any Committee from taking such action on behalf of all Owners (provided that notice of such meeting or action was properly given and that the requisite approval to take such action is received), despite any such failure to be present or to respond to a request to act by written action. For the avoidance of doubt, it is the explicit agreement of the Owners that no Owner or Owners may prevent Committee action by failing to be present at a duly called Committee after receiving proper notice or to respond to a request for written action.

(d)

Notwithstanding anything in this Agreement to the contrary, an Owner’s representative on a Committee shall be prohibited from taking action, voting or otherwise approving or disapproving of any action under this Agreement if (i) such Owner has been removed from the Project pursuant to Section 3.10 because it has not obtained all approvals necessary for it to finance and own its Ownership Share by the Financing and Approval Deadline, (ii) such Owner’s right to vote its Ownership Share is under suspension pursuant to Section 11.02, or (iii) one or more other Owners have acquired such Owner’s rights in the manner described in Section 11.02(a) and the defaulting Owner has not repurchased those rights as described in Section 11.02(b). In the event an Owner’s representative is prohibited from taking action as described in the foregoing sentence, such Owner’s Ownership Share shall not be counted for the purpose of calculating the vote required to achieve a Double Majority except to the extent that one or more other Owners have acquired that Ownership Share pursuant to Section 11.02(a), and such Owner’s Committee representatives shall not be counted for the purpose of determining the number of Committee members required to take the action being considered.

     6.04 Committee Operational Procedures.

(a)	Each Committee shall meet with such frequency and in accordance with such rules and procedures as it deems advisable for the conduct of its business, including, by way of illustration only, Roberts’ Rules of Order; provided that, in any instance in which such rules or procedures conflict with this Agreement, the provisions of this Agreement shall control.
(b)	Each Committee shall designate one of its members as a chairperson, who shall prepare and maintain minutes of all meetings and records of written actions for all acts of a Committee taken without a meeting, copies of which shall be provided to each Owner as promptly as reasonably possible after each such meeting or action without a meeting.
(c)	Each Committee member shall be given advance written notice of any meeting of the Committee stating the place, date and hour of the meeting and the purpose(s) for which the meeting is called. Such advance written notice shall be given not less than three (3) days and no more than thirty (30) days in advance of a meeting. A Committee member who is present at a meeting shall be deemed to have

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	waived notice thereof. Physical presence shall not be required for attendance of a meeting of any Committee if, by telephone or other means, the Committee members not physically present are able simultaneously to hear and be heard by all other Committee members present. Each Committee member shall be given reasonable advance written notice of any proposed action to be taken.
(d)	The E&O Committee may conduct its business without meetings and may act by oral or written consent of the representatives; provided, however, that except when impracticable because of emergency conditions or except as to representatives who waive (in advance) this requirement, the representative of each Owner shall be consulted as to his approval or disapproval of any action proposed to be authorized by oral or written consent.
(e)	The Coordination Committee may conduct its business without meetings and may act by the unanimous written (but not oral) consent of the number of members of the Coordination Committee that is required at a minimum to take action at a meeting at which all Coordination Committee members are present.
(f)	Any two (2) Committee members of a particular Committee may call a Committee meeting by giving notice as required by this Agreement.
(g)	Any Committee member may put an item on the agenda for a Committee meeting, provided he serves on such Committee, and any Committee member may initiate any proposal for written action by a Committee of which he is a Committee member.
(h)	Whenever any Committee, except the Coordination Committee, is unable to act because of the inability or failure of Committee members to unanimously agree to take or not to take any particular action, then such matter shall be referred to the Coordination Committee for action.

     6.05 Coordination Committee.

(a)	Coordination Committee members shall be the most senior officer of each Owner or of an Owner’s operating utility, as applicable, or be a natural Person who has been granted the same level of authority of such more senior officer for purposes of acting on its behalf.
(b)	In addition to any purposes, responsibilities and authority specified elsewhere herein, the Coordination Committee shall have as its purposes, responsibilities and authority, the following:

(i)	to act as the liaison between the Owners as to matters relating to the Project, the Plant or other Plant Property and to supervise and coordinate the functions of the other Committees;
(ii)	to be the definitive policy-making body of the Owners in all matters relating to the Project, the Plant or other Plant Property which are not by

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	this Agreement or by action of the Coordination Committee delegated to another Committee;
(iii)	to take responsibility, or delegate such responsibility to another Committee including the responsibility for taking, all action necessary or deemed advisable in connection with the Project or the ownership, operation, maintenance or repair of the Plant or other Plant Property which has not been provided for in this Agreement or other contract heretofore or hereafter made by the Owners;
(iv)	to take action on all matters which are referred to it by the E&O Committee or another Committee; and
(v)	to remove and replace the Operator and appoint another as Operator if it finds that the then serving Operator has materially failed to perform the services required of it.

(c)	To the extent necessary, Coordination Committee members shall execute all documents required to effectuate a particular duly authorized and approved act of the Coordination Committee, regardless of whether a particular Coordination Committee member acted to approve such act.
(d)	In the event of conflict between the actions or decisions of the Coordination Committee and any other Committee, then the act or decision, as the case may be, of the Coordination Committee shall govern in all respects.
(e)	The approval of at least a Double Majority shall constitute an act of the Coordination Committee.

     6.06 Actions Requiring Coordination Committee Approval. Notwithstanding anything contained herein to the contrary, only the Coordination Committee may take action on the following:

(a)	awarding any Construction Contract;
(b)	any matter referred to the Coordination Committee by the Engineering and Operating Committee;
(c)	any contracts or arrangements with any Owner or Affiliate of any Owner;
(d)	to consider and take appropriate action against any defaulting Owner in the event of an Event of Default; and
(e)	removal of the Operator for any reason; provided, however, that an Owner who is also the Operator subject to removal may not vote on the termination of itself as Operator.

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     6.07 Engineering and Operating Committee.

(a) In addition to any purposes, responsibilities and authority specified elsewhere herein, the Engineering and Operating Committee shall have as its purposes, responsibilities and authority, the following:

(i)	to determine policy for the Owners on a day-to-day basis as to matters relating to the proper design, construction, operation, maintenance and repair of the Plant and Plant Property and to provide general supervision of the Operator as to such matters and of the planning and execution of the various undertakings involved in the Project and the operation, maintenance and repair of the Plant and Plant Property;
(ii)	to develop and approve a plan for development of the Project, construction schedule, Project Budget, Operating Plan and Budget and any material changes or amendments thereto;
(iii)	to advise and direct the Operator as to the identity and general form and content of the reports and formal statements of policies and procedures to be prepared by the Operator for review and approval of the Engineering and Operating Committee in respect to the construction, operation, maintenance and repair of the Plant and Plant Property;
(iv)	except as set forth herein or in the O&M Agreement, to approve the form and substance, and to authorize the execution, of the Joint Facilities Agreements, the O&M Agreement and other Project Agreements not executed as of the Effective Date;
(v)	to review and approve the procedures developed by the Operator for determining the Net Effective Generating Capacity, Minimum Net Generation and Net Energy Generation;
(vi)	to take all actions necessary in connection with the Project within the scope of its powers and responsibilities hereunder;
(vii)	to authorize and direct the Operator to approve mechanical completion, substantial completion and final completion of the Plant pursuant to the Construction Contracts and to accept the results of the Performance Testing, and to contest, settle, off-set or waive liquidated damages that may become due and payable pursuant to the terms of the Construction Contracts;
(viii)	to make the determination as to when the Plant has commenced Commercial Operation;
(ix)	subject to the terms of the O&M Agreement and taking into account the particular financing arrangements of the Owners, to determine when Plant Property should be retired and to authorize disposition by the Operator of

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	such Plant Property no longer needed for the operation, maintenance or repair of the Plant or other Plant Property;
(x)	to act upon all matters referred to it by the Coordination Committee and upon all matters relating to the Project or the operation, maintenance and repair of the Plant or other Plant Property referred to it by any other Committee;
(xi)	to take all action necessary or deemed advisable in connection with the Project or the operation, maintenance and repair of the Plant or other Plant Property for which provision has not otherwise been made by or on behalf of the Owners;
(xii)	to develop the Fuel procurement policies, Fuel cost allocation adjustment factor and other procedures necessary for the O&M Agreement; and
(xiii)	any contract in excess of Five Hundred Thousand Dollars ($500,000) if such contract is not provided for in the most recent BSP II annual budget.

(b) The Engineering and Operating Committee may act only by unanimous approval of its members and shall refer to the Coordination Committee for resolution any matters which it does not approve.

     6.08 Actions Requiring Unanimous Coordination Committee Approval. Notwithstanding anything contained herein to the contrary, any of the following actions require the unanimous act of all members of the Coordination Committee:

(a)	withdrawal of any Owner, except as provided in Section 3.05 and Section 3.06;
(b)	termination of this Agreement or sale of the Project or the Plant before the fiftieth (50th) anniversary of the date of Commercial Operation; and
(c)	reduction of size of Plant below 540 MW prior to Financial Closing.

ARTICLE VII

CONTRIBUTIONS; EXPENDITURES

     7.01 Obligation to Pay Project Costs; Trust Account.

(a) Except as otherwise provided in this Agreement, each Owner shall be liable for Project Costs in proportion to their Ownership Shares and each Owner shall deposit monies in the Trust Account as required to pay for its proportion of the Project Costs. Funds deposited into the Trust Account are Plant Property and are for the payment of Project Costs and otherwise for the account of the Project and the operation, maintenance or repair of the Plant or other Plant Property, and no Owner shall have any right, title or ownership interest in the Trust Account other than a beneficial interest, in proportion to its Ownership Share, nor right to

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withdraw or direct application of such funds, nor otherwise exercise control over such Trust Account, except as provided for in this Agreement.

(b)

The Operator, on behalf of the Owners, has caused the Trust Account to be established pursuant to a trust agreement substantially in the form attached hereto as Schedule 7.01. Each Owner hereby acknowledges that any such funds contributed by it for deposit in the Trust Account constitute a prepayment of its obligation to pay Project Costs. Each Owner further acknowledges that its interest in funds in the Trust Account are subject to applicable rights of set off, recoupment, and such other legal or equitable defenses as may be available to the Operator, and other Owners under Applicable Law.

     7.02 Payment Procedures.

(a) Funds to pay for Project Costs shall be requisitioned from the Owners as follows:

(i)	Before the Effective Date, the Operator, on behalf of the Engineering and Operating Committee, shall issue a written notice to the Owners, which written notice shall state the amount required to be deposited into the Trust Account for each Owner (i) to reimburse the Owners for the Project Costs that have been expended prior to the Effective Date in connection with Phase I activities but not yet reimbursed by the other Owners, and (ii) to provide a Progress Payment in the amount of Ten Million Dollars ($10,000,000). The Owners shall pay such amounts on the Effective Date.
(ii)	In the event that the Progress Payment made pursuant to Section 7.02(a)(i) or any subsequent Progress Payment is not sufficient to fund the completion of all Phase II activities, then prior to the depletion of all previously made Progress Payments, the Operator, on behalf of the Engineering and Operating Committee, shall issue a written requisition notice to the Owners, which written notice shall state the amount required to be deposited into the Trust Account for each Owner to provide for the Phase II Project Costs reasonably expected to be expended in excess of previously made Progress Payments. The Owners shall pay such amounts within thirty (30) days of such requisition.
(iii)	During Phases II, III and IV, unless the Engineering and Operating Committee directs otherwise, funds shall be requisitioned from the Owners from time to time as reasonably determined by the Operator. Unless otherwise directed by the Engineering and Operating Committee, the Operator shall issue a requisition notice to the Owners no later than the 15th of each month, which notice shall state amounts required to be deposited into the Trust Account by each Owner on each Monday (or the next Business Day in the event a Monday is a bank holiday) of the upcoming month, and include an accounting of the Project Costs then due and payable (or that will become due and payable before the end of the upcoming month) and copies of any invoices or other supporting

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	materials. The Owners shall promptly pay such amounts by electronic funds transfer into the Trust Account on the Monday (or next Business Day) so indicated on the notice. In no event shall the Engineering and Operating Committee direct requisitions for the Trust Account Deposits described in this Section 7.02(a)(iii) in any manner that would require deposits from all Owners to pay all Project obligations before they become due.
(iv)	To the extent funds are available in the Trust Account, the Operator shall pay all invoices for Project Costs, subject in all respects to the oversight of the E&O Committee. For purposes of this Agreement, Project Costs shall only be paid to the extent they are Project Costs identified and included in the Project Budget, additional expenses approved by the Engineering and Operating Committee as Project Costs or required to be expended in response to an emergency. The Engineering and Operating Committee may alter the payment procedures set forth in this Section 7.02 by issuance of directives to the Operator and shall have the right to request information regarding the Project Costs to be paid.
(v)	The Owners shall require Operator to prepare and deliver to the Owners, not later than forty-five (45) days following the end of each calendar year during the Term and not later than sixty (60) days following the date on which this Agreement is terminated, a cash-based reconciliation of Trust Account Deposits paid during the previous calendar year or, in the case of the reconciliation done following the termination of this Agreement, the period from January 1 of the calendar year in which termination of this Agreement occurs until the end of the Term. Such reconciliation shall also include an analysis of any differences between Project Costs on a cost basis and the applicable budget for such Project Costs. Owners may withdraw from the Trust Account the amount by which such reconciliation indicates the sum of all Trust Account Deposits exceeded the sum of all Project Costs paid or due and payable in accordance with this Agreement during the period to which the reconciliation applies. Not later than twenty (20) days following receipt of such reconciliation, Owners shall deposit in the Trust Account the amount in immediately available funds by which such reconciliation indicates the sum of all Project Costs paid or due and payable in accordance with this Agreement exceeds the sum of all Trust Account Deposits during the period to which the reconciliation applies.

     7.03 Reservation of Right to Dispute Payments. If an Owner shall dispute any portion of the amount of funds requisitioned by the Operator, the Owner shall make the disputed payment but such payment, if accompanied by notice of the Owner’s protest of the requisition, which must be made within a commercially reasonable period, shall not jeopardize the Owner’s right to have the Dispute resolved in accordance with the procedures set forth in Article XIII.

     7.04 Services and Property Contributed by Owners. Except for services of the Operator, for which any payment shall be made in accordance with the O&M Agreement, and

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except in the case of emergency situations, services or property for the Project or for the operation, maintenance or repair of the Plant or other Plant Property shall be supplied by an Owner on a cost-reimbursement basis and only pursuant to authorization, and upon terms approved, by the Engineering and Operating Committee. Notwithstanding any provision herein to the contrary, no Owner shall be entitled to, nor shall any Owner receive, any increased Ownership Share as a result of services or property for the Project or for the operation, maintenance or repair of the Plant or other Plant Property supplied by the Owner.

     7.05 Emergency Services. In the event of an emergency situation, any Owner may supply services or property without prior authorization by the Engineering and Operating Committee when obtaining such authorization is impracticable in the reasonable judgment of the Owner taking action to obtain such advance authorization, in which event the terms for such supply shall be as approved by the Engineering and Operating Committee after the event on a basis consistent with the cost-reimbursement principles expressed in Section 7.04.

     7.06 Taxes. The Owners shall use their best efforts to have each taxing authority which imposes taxes or assessments upon Plant Property assess, levy and bill the same to each Owner separately according to the respective Ownership Shares so that each Owner’s share of the total of such taxes and assessments shall be solely the responsibility of, and a lien upon, the particular Owner and its title to its Ownership Share of the Plant Property; and each Owner, in such event, agrees to so pay the taxes and assessments for which it is solely responsible, or to contest the same, in such a manner as to prevent involuntary sale or transfer of its title to its Ownership Share of the Plant Property on account of non-payment of such taxes and assessments. Failure to do so shall be a material breach of this Agreement. If any such taxes or assessments are assessed, levied and billed in a manner other than as specified in the preceding sentence, then the Operator shall be responsible for paying such taxes, and the protest or other contest thereof when appropriate in the judgment of the Operator or when directed by the Engineering and Operating Committee, and payments of such taxes shall be considered Project Costs.

     7.07 Fuel. All Fuel, whether obtained for prompt consumption or for reserves, shall be Plant Property (purchased for the account of each Owner). The cost of Fuel purchased shall be a Project Cost and shrinkage of Fuel shall be shared by the Owners according to their Ownership Shares.

(a)	The Engineering and Operating Committee shall establish practices and procedures for determining the Fixed Fuel requirements of the Plant.
(b)	Fuel, when delivered to the burners at the Plant, shall be charged from inventory to operation. The cost of Fuel delivered to the burners at the Plant shall consist of all charges to that account which under the FERC Accounts in effect on the Effective Date is designated account 501, including the cost of coal and ash handling, and shall be apportioned among the Owners as follows:

(i) the cost of the Plant’s Fixed Fuel requirements shall be apportioned among the Owners in accordance with their Ownership Shares; and

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(ii) the cost of all other Fuel requirements of the Plant shall be apportioned among the Owners in the same proportion that their respective generation scheduled in excess of their Ownership Share of the Minimum Net Generation bears to the total Net Energy Generation scheduled in excess of Minimum Net Generation;

provided, however, that for purposes of settling accounts among the Owners for the cost of Fuel delivered to the burners at the Plant, each unit of Fuel so consumed shall be treated as jointly owned by the Owners in proportion to their Ownership Shares.

     7.08 Station Power. All station power shall be provided by each Owner according to their Ownership Shares through on-site self-supply by netting station power usage against Net Energy Generation on a monthly basis to the fullest extent allowed by Law. If on-site self-supply by netting of station power usage against Net Energy Generation is allowed only through hourly netting, all station power shall be provided by each Owner according to their Ownership Shares through on-site self-supply by netting station power usage against Net Energy Generation on an hourly basis. If on-site self-supply is not allowed by Law or if the Plant’s station power usage exceeds its Energy output in a month (or an hour), each Owner shall arrange for its share of the Plant’s station power, through remote self-supply or third party supplied energy. The E&O Committee shall establish procedures for Owners to arrange for remote self-supply or third party supplied station power in the event on-site self supply is not allowed by Law or the Plant’s station power usage exceeds Plant Energy output in a month (or an hour).

     7.09 Insurance. The Owners shall jointly obtain a single policy or policies insuring Plant Property and the operations of the Plant against loss or damage from such hazards and risks in such amounts, for such limits and in such insurance carrier or carriers as may be determined by the Engineering and Operating Committee in accordance with the following policies:

(a)

During Phases I, II, and III of the Project, in accordance with the direction and specifications of the Engineering and Operating Committee, the Owners shall jointly procure or cause to be procured and maintain in force policies of comprehensive bodily injury and property damage liability insurance, pollution liability, professional liability, extra expense and delay in start up, all-risk builders risk insurance, employees’ dishonesty bond, automobile liability insurance, workers’ compensation insurance, and such other policies of insurance as are normally carried by utilities constructing facilities similar to the Project.

(b)

During Phase IV of the Project, in accordance with the direction and specifications of the Engineering and Operating Committee, the Owners shall jointly procure or cause to be procured and maintain in force policies of broad form property insurance, broad form boiler and pressure vessel insurance, workers’ compensation insurance covering employees of the Operator engaged in the performance of its responsibilities under the Project Agreements at the job site, comprehensive bodily injury and property damage liability insurance, pollution liability, professional liability, employees’ dishonesty bond, automobile liability insurance, and such other policies of insurance as are normally carried by utilities operating facilities similar to the Project.

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(c)	Each Owner shall be named an insured with the other Owners as their interests appear on all insurance, and when appropriate, the insurance shall carry cross-liability endorsements.
(d)	The insurable values, limits, deductibles, retentions and other special terms of the Owners Insurance shall be determined by the Engineering and Operating Committee prior to the placement of such Owners Insurance. After such determination, a policy of Owners Insurance shall not be changed without the prior approval of the Engineering and Operating Committee except for minor changes as to which notification shall be given to the Engineering and Operating Committee.
(e)	Each Owner shall be given a copy of the insurance policies forms together with a line sheet therefore naming the insurers and underwriters and the extent of their participation.
(f)	Each Owner shall have the right, by written notice to the party procuring the policy, to name any mortgage, trustee or secured party on all or any of the Owners Insurance policies as loss payees or additional insured as their interests may appear.
(g)	Insurance policies procured pursuant to this Section 7.09 shall be primary insurance for all purposes and shall be so endorsed.
(h)	It is expressly understood and agreed that each Owner has an insurable interest in the Project and may procure for its own account additional insurance with respect to its interest as it may determine. The cost of such insurance shall be paid by such Owner from its own funds and the proceeds of such insurance shall be payable to such Owner. Other Owners shall not have any rights or interest in such insurance or the proceeds thereof.

     7.10 Assurances of Creditworthiness. Throughout the Term, each Owner and any successors or permitted assigns thereof shall maintain a level of creditworthiness of at least a Standard & Poor’s “BBB” issuer credit rating (or, in the case of Owners who do not maintain an issuer credit rating, the rating of such Owner’s senior unsecured debt not subject to credit enhancement) or an equivalent rating of a nationally recognized statistical rating organization recognized by the United States Securities and Exchange Commission (the “SEC”) (the “Minimum Rating”). As of the Effective Date, the four nationally recognized statistical rating organizations recognized by the SEC are Moody’s Investors Service, Inc., Fitch, Inc., Standard & Poor’s, and Dominion Bond Rating Service Limited. Any Owner who, on the Effective Date, does not have a creditworthiness rating shall provide the other Owners with a copy of their most recent audited financial statements and any other financial information as may be reasonably requested by the E&O Committee. All Owners must achieve at least a Minimum Rating at least three (3) months prior to Financial Closing.

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(a) After Financial Closing, in order to demonstrate its ability to fulfill its ongoing obligations under this Agreement, each Owner shall submit to the Engineering and Operating Committee:

(i)	its audited or unaudited balance sheet and income statement on not less than a quarterly basis and audited annual financial statements, in each case in the form regularly prepared by such Owner or its accountants for such period and corresponding periods in previous years;
(ii)	evidence that it has a credit rating of at least the Minimum Rating; and
(iii)	such other financial information as may reasonably be requested by the Engineering and Operating Committee.

(b) If, after review of such financial information, the Engineering and Operating Committee determines that an Owner does not have a credit rating of at least the Minimum Rating, such Owner shall be required to deposit, in addition to any other amounts required to be deposited pursuant to this Agreement, a sum equal to the largest two (2) weeks of Project Costs anticipated to be requisitioned in the next twelve (12) months (as determined by the E&O Committee in its sole discretion) into the Trust Account until such Owner again achieves a credit rating of at least the Minimum Rating.

     7.11 Right to Obtain Financing. Each Owner shall have the right to obtain financing to purchase its Ownership Share in the Project (and its share of Project Costs) on the basis of loans, bonds, or otherwise; provided that such financing is non-recourse and off-balance sheet to all other Owners, or on other terms acceptable to the other Owners, as the case may be (“Financing”). Accordingly, the Owners agree that: (i) this Agreement and the other Project Agreements are intended to comply with standards and requirements for a multi-owner financed transaction so as to be acceptable to the Owners’ Lenders; (ii) each Owner shall cooperate in good faith with each other so as to satisfy the requirements of each Owner’s Financing arrangements, including where appropriate, the making of such amendments to the terms of this or any other Project Documents so long as such amendments are reasonable in scope and do not materially alter the economic benefits of this Agreement; and (iii) each Owner shall execute customary consents and estoppels and provide customary opinions, resolutions and related documents as may be reasonably required, as well as information regarding such Owner as may be reasonably requested by the other Owners’ lenders. Notwithstanding the foregoing, an Owner’s ability or inability to obtain third party project financing for its participation in the Project shall not be a condition precedent to such Owner’s obligations under this Agreement or any other Project Agreement.

ARTICLE VIII

CASUALTY LOSS; CONDEMNATION

     8.01 Repair or Replacement. If, due to any cause, the Plant or any other Plant Property shall be damaged or destroyed, the Coordination Committee shall within thirty (30) days thereafter estimate whether the cost of repair or replacement is less than, or equal to or more

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than, Thirty Million Dollars ($30,000,000), excluding any insurance proceeds. If such cost of repair or replacement shall be estimated by the Coordination Committee to be less than Thirty Million Dollars ($30,000,000), excluding any insurance proceeds, the Operator shall be directed to cause, as expeditiously as is possible, the damage or destruction to be repaired or replaced so as to restore the Plant (or other Plant Property) to substantially the same general character and use as existed immediately prior to such damage or destruction. The cost of such repair or replacement shall constitute Project Costs. If such cost of repair or replacement is estimated by the Coordination Committee to be Thirty Million Dollars ($30,000,000) or more, excluding any insurance proceeds, the same shall be repaired or replaced in the manner to be then agreed upon by the Owners, but if the Owners shall be unable to agree, within forty-five (45) days after such damage or destruction has occurred, upon the manner of such repair or replacement, or upon any alternative disposition of the matter, then the Operator shall be directed to cause the damage or destruction to be repaired or replaced so as to restore the Plant (or other Plant Property) to substantially the same general character and use as existed immediately prior to such damage or destruction and the cost thereof shall constitute Project Costs.

     8.02 Eminent Domain. If a part of the Plant Property is taken from the Owners by the exercise of the power of eminent domain (or by voluntary conveyance in lieu thereof), the Engineering and Operating Committee, within thirty (30) days after such taking, shall determine whether the part taken can be replaced and/or whether the remainder of the Plant Property can be restored in such a way that the Plant and other Plant Property, considered as a whole, will have substantially the same Net Effective Generating Capacity and operating and economic characteristics as existed immediately prior to such taking, and if so, whether the estimated cost of such replacement and/or restoration is less than, or equal to or more than Thirty Million Dollars ($30,000,000).

(a)

If all of the Plant is taken from the Owners by the exercise of the power of eminent domain (or by voluntary conveyance in lieu thereof), or if a part of the Plant Property is thus taken and the Engineering and Operating Committee determines, pursuant to this Section 8.02, that the part taken cannot be replaced and/or the remainder of the Plant Property cannot be restored in such a way that the Plant and other Plant Property, considered as a whole, will have substantially the same Net Effective Generating Capacity and operating and economic characteristics as existed immediately prior to such taking, then this Agreement shall be terminated by the Owners upon request by any Owner.

(b)

If a part of the Plant Property is taken from the Owners by the exercise of the power of eminent domain (or by voluntary conveyance in lieu thereof), and if the Engineering and Operating Committee determines, pursuant to this Section 8.02, that the part so taken can be replaced and/or the part not taken can be restored so that the Plant and other Plant Property, considered as a whole, will have substantially the same Net Effective Generating Capacity and operating and economic characteristics as existed immediately prior to such taking, then:

(i) if the cost of such replacement and/or restoration is estimated by the Engineering and Operating Committee to be less than Thirty Million Dollars ($30,000,000), the Operator shall be directed to cause, as

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expeditiously as possible, such replacement and/or restoration to be accomplished so as to restore the Plant and other Plant Property, considered as a whole, to substantially the same Net Effective Generating Capacity and operating and economic characteristics as existed immediately prior to such taking; and the cost thereof shall constitute Project Costs; or

(ii)

if the cost of such replacement and/or restoration is estimated by the Engineering and Operating Committee to be Thirty Million Dollars ($30,000,000) or more, the Operator shall be directed to cause such replacement and/or restoration to be accomplished in the manner agreed upon by the Owners, but if the Owners shall be unable to agree, within forty-five (45) days after the taking has occurred, upon the manner of such replacement and/or restoration or upon any alternative disposition of the matter, then the Operator shall be directed to cause such replacement and/or restoration to be accomplished so as to restore the Plant and other Plant Property, considered as a whole, to substantially the same Net Effective Generating Capacity and operating and economic characteristics as existed immediately prior to such taking; and the cost thereof shall constitute Project Costs.

ARTICLE IX

LIABILITY

     9.01 Limitation and Release of Liability to Other Owners. Except to the extent (1) resulting from Willful Action, (2) covered by valid and collectible Owners’ Insurance, or (3) otherwise provided in this Agreement, no Owner or any of its directors, officers or employees and no Committee member (acting in such capacity in good faith) shall be obligated to discharge, and is hereby released by the other Owners from, any liability to any other Owner for any direct, indirect or consequential loss, damage, claim, cost, charge or expense of any kind or nature to or involving the property of any such other Owner that has resulted or may result in the future (whether or not resulting from the negligence of any Owner, its directors, officers, members, affiliates, employees or any other Person or entity whose negligence would be imputed to such Owner) from:

(a)	the performance or non-performance of services or the supplying of, or failure to supply, any property, in connection with the Project, or the ownership, operation, maintenance or repair of the Plant or other Plant Property, or
(b)	the past or future performance or non-performance of the obligations of any Owner under this Agreement or any Project Agreement.

Any Owner that obtains a judgment against another Owner and its directors, officers and employees (or any of them) for a liability covered either by the release provided in the preceding sentence or by valid and collectible Owners’ insurance shall not execute, levy or otherwise enforce the same (including recording or otherwise effecting a judgment lien) against any such other Owner, its directors, officers or employees, or the property of any of them.

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     9.02 Waiver of Certain Damages. Notwithstanding any other provision of this Agreement (except to the extent indemnification payments are made as a result of an indemnified Party’s obligation to pay special, indirect, incidental, punitive or consequential damages to a third party (excluding any Owner’s or Party’s affiliates, officers, directors, shareholders or members) as a result of actions included in the protection afforded by the indemnification contained herein), no Owner or Party (nor any of their affiliates, contractors, consultants, officers, directors, shareholders, members or employees) shall be liable for special, indirect, incidental, punitive or consequential damages under, arising out of, due to, or in connection with its performance or non-performance of this Agreement or any of its obligations herein, whether based on contract, tort (including, without limitation, negligence), strict liability, warranty, indemnity or otherwise.

     9.03 Assignment of Rights. In the event any insurer providing Owners’ Insurance refuses to pay any judgment obtained by an Owner against another Owner on account of liability covered by such insurance, the Owner against which the judgment is obtained, at the request of the Owner which obtained such judgment and in consideration for the release granted in Section 9.01, shall execute such documents as may be necessary to effect an assignment of its contractual rights against the non-paying insurer and thereby give the prevailing Owner which obtained the judgment the opportunity to enforce its judgment directly against such insurer.

     9.04 Reduction of Damages. For the purpose of relieving each Owner, its directors, officers and employees, of any liability to make contribution to other non-Owner tortfeasors, the release stated in Section 9.01 hereby effects a reduction of all injured Owners’ damages recoverable against all other non-Owner tortfeasors to the extent of the pro rata share of the other Owners, their directors, officers and employees. The provisions of this Section 9.04 are intended to be cumulative to any other release heretofore set out.

     9.05 Shared Liability. Liability of one or more Owners for any loss, damage, claim, cost, charge or expense of any kind or nature (including direct, indirect or consequential loss, damage, claim, cost, charge or expense) suffered or incurred by any party other than an Owner, whether or not due to the negligence of any Owner, its directors, officers, employees or any other person or entity whose negligence would be imputed to such Owner, that results from the performance or non-performance of services or the supplying of, or failure to supply, any property, in connection with the Project or the ownership, operation, maintenance or repair of the Plant or other Plant Property, shall, as between the Owners, be shared by them in proportion to their Ownership Shares unless such liability shall have resulted from the Willful Action of any Owner, in which case the Owner(s) whose Willful Action resulted in the loss, damage, claim, charge or expense shall be liable pursuant to Section 9.06. Payments made in settlement of any claim of liability shall for these purposes be construed as a payment discharging liability in which the Owners shall share as provided in this Section 9.05.

     9.06 Indemnification for Willful Actions. Each Owner shall be responsible for the consequences of its Willful Actions and shall indemnify and hold harmless the other Owners from the consequences thereof.

     9.07 Availability of Insurance Proceeds. The provisions of this Article IX shall not be construed to relieve any insurer of its obligation to pay any insurance proceeds in accordance

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with the terms and conditions of policies of insurance maintained in force by the Owners, or any or some of them.

     9.08 Operator Indemnity. The reference to Owner or Owners in this Agreement shall include any Owner while acting as Operator.

ARTICLE X

ENTITLEMENT TO ENERGY AND CAPACITY; INTERCONNECTION

     10.01 Interconnection and Transmission Upgrade Allocation Agreement. Contemporaneously with the execution of this Agreement, the Owners shall enter into the Interconnection and Transmission Upgrade Allocation Agreement, substantially in the form attached hereto as Schedule 10.01 (the “Interconnection and Transmission Upgrade Allocation Agreement”).

     10.02 Generation Entitlement. Each Owner shall have entitlement to the Plant’s electrical generation as follows, subject to this Article X:

(a)	Initial Production. During Phase III, each Owner shall be entitled to its Operating Capacity Entitlement and its Ownership Share of Net Energy Generation including all that produced by Performance Testing, URGE Testing or through Plant start-up procedures. Each Owner shall take delivery of such Capacity and Energy at the Point of Interconnection. The Owners shall cause the Operator to provide the Owners with a schedule of when the Plant will be producing Energy related to testing. If an Owner cannot use Capacity and Energy produced during testing, then the Owners shall authorize the Operator to dispose of such Capacity and Energy in a commercially reasonable manner, including, but not limited to, transacting Energy in the Midwest ISO energy market or as unscheduled Energy into the Otter Tail control area. For any such transactions, the Owners shall cause the Operator to collect funds for any and all settlements and disburse the net proceeds (after deducting its reasonable transaction costs) to the Owner(s) based on its unscheduled amounts.
(b)	Regular Production Allocation. During Phase IV, each Owner shall own its Operating Capacity Entitlement and its Ownership Share of Net Energy Generation (or Ancillary Services if so elected pursuant to Section 10.03) produced by the Plant.
(c)	Minimum Obligations. When any Owner schedules its Ownership Share of Minimum Net Generation (or a greater amount, not to exceed its Ownership Share), every other Owner shall be required to schedule their Ownership Share of Minimum Net Generation (or a greater amount, not to exceed its Ownership Share). In the event one or more Owners with Ownership Shares equal to or greater than (*) desire that the Plant not be operated when it is otherwise available to be operated, and one or more Owners desire to schedule Energy and/or

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Ancillary Services from the Plant, the Owner or Owners desiring that the Plant not be operated may, in lieu of operating the Plant, provide an equal amount of Energy and/or Ancillary Services from other sources to the Owner(s) that desires to schedule Energy and/or Ancillary Services from the Plant; any such Energy and/or Ancillary Services provided from other sources shall be delivered to the Point of Interconnection (or such other point of delivery as may be agreed) in an amount equal to that desired to be scheduled. In the event any Owner with less than or equal to a (*) Ownership Share wishes to schedule Energy from the Plant, and any other Owner or Owners with greater than (*) Ownership Share do not wish to schedule Energy from the Plant when the Plant is available, the Owner or Owners not desiring to schedule shall have the option of providing lower cost energy from other sources as may be available to the Owner wishing to schedule from the Plant at such point of delivery as may be mutually agreed; provided however, that if one or more Owners with an aggregate Ownership Share of greater than or equal to (*) wish to schedule Energy from the Plant, then this option shall not apply and all Owners shall schedule at least their respective Ownership Share of the Minimum Net Generation as provided above.

(d)

Disposition of Plant Output. The Owners shall cause or otherwise direct the Operator to keep the system operator for each Owner advised of the Net Effective Generating Capacity (or Operating Capacity if lower). It is the intent of the Owners that the Plant will be operated as a high availability, base load Network Resource within the parameters of Prudent Utility Practice in order to maximize the life of the Plant and to avoid high maintenance costs that may be incurred due to operation of the Plant above its Net Effective Generating Capacity. It is recognized that at times of testing, when essential to fulfill applicable reliability organization or regional transmission organization obligations and in emergencies, it may become necessary to operate the Plant for short periods of time above its Net Effective Generating Capacity (up to the Rated Capacity). The Operator shall be directed by the Owners to keep such operations to a minimum.

10.03 Ancillary Services.

(a) Payment for Ancillary Services Generally. The Owners acknowledge that the markets for Ancillary Services are likely to evolve and that some or all Ancillary Services from the Plant may be sold either pursuant to a regional or other tariff rate, or a competitive market (e.g., allowing bidding) may develop for some or all Ancillary Services. Regardless of the specific market structures that exist at any point in time, the sale of Ancillary Services by the Owners from the Plant shall follow the following principles:

(i)	if the particular Ancillary Service is subject to a Midwest ISO or other applicable tariff, then the Owners shall be paid for Ancillary Service on a pro rata based on each Owner’s Ownership Share; and
(ii)	if a competitive market exists for the particular Ancillary Service then an Owner or Owners may sell the Ancillary Service into the competitive

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market and the selling Owner shall be entitled to the proceeds from such sale;

	provided, however, the remaining provisions of this Section 10.03 shall apply to any sales made under the immediately preceding clauses (i) or (ii).
(b)	Operating Reserves. The Owners hereby direct the E&O Committee, as soon as practicable, to determine the number of megawatts of spinning reserve and supplemental reserve Ancillary Services that the Plant, based on the Plant’s design, will be able to reasonably provide (the “Total Operating Reserves”). The E&O Committee may update the Total Operating Reserves from time to time. Each Owner shall be entitled to provide or sell Operating Reserves from the Plant in an amount no greater that its pro rata share of Total Operating Reserves based on its Ownership Share.
(c)	Reactive Power. Each Owner owns its Ownership Share of all reactive power produced or available from the Plant and shall have the right to sell such reactive power into the Midwest ISO market in accordance with this Section 10.03 or self-supply its own needs with its share of reactive power from the Plant; except that if the Midwest ISO (or other transmission operator authorized to make such a request) requires any Owner or the Plant Operator to provide Reactive Power from the Plant and to the extent the Plant is operated as a single plant as determined under Section 10.03(d) below, then the revenues and costs recovered by that Owner under the applicable tariff shall be allocated pro rata to the Owners based on each Owner’s Ownership Share; or to the respective Owner(s) providing such reactive power to the extent the Plant is operated on a pseudo-tie basis as determined under Section 10.03(d) below.
(d)	Load Regulation and Frequency Response Service. The Owners hereby direct the E&O Committee, as soon as practicable, to determine the extent to which Load Regulation and Frequency Response Service can be supplied by the Plant (“Total Load Regulation”). Each Owner shall be entitled to provide or sell Load Regulation and Frequency Response Service from the Plant in an amount no greater than its pro rata share of Total Load Regulation based on its Ownership Share.
(e)	Plant Operations; Pseudo-Tie. Because the Plant is interconnected with transmission systems whose owners are members of the Midwest ISO, the E&O Committee shall review the Midwest ISO Tariff Business Practices that are in effect at the time of Commercial Operation and determine whether the Plant will be operated as separate physical generators for the Owners on a pseudo-tie basis or as a single operating entity, taking into consideration the Owners’ ability to self-supply their needs for Reactive Power and other Ancillary Services from the Plant, and other appropriate factors (with appropriate accounting between the Owners) and the costs of the various operating options available to the Owners at that time. The E&O Committee shall also determine the amount of Reactive Power in VARS that can be supplied by the Plant from time to time and the effect

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	On Net Available Capacity of the Plant, and so inform the Operator for purposes of possible supply of Reactive Power to the market and for scheduling of the Net Available Capacity, associated Energy and bidding or self-supplying Reactive Power by the Owners. The determination of the E&O Committee may be revised from time to time as determined by the Owners through the E&O Committee. Should the E&O Committee determine to operate the Plant on a pseudo-tie or similar basis as if individual units were supplying such Reactive Power, the Operator may supply any unscheduled Reactive Power into the market to the extent individual Owners are not harmed and deposit the proceeds of such market transactions pro rata to Owners not scheduling or self-supplying Reactive Power during that hour of operation.
(f)	In the event an Owner takes Plant output in the form of Ancillary Services pursuant to this Agreement, the Owners shall cause the Operator to calculate a reduction in that Owner’s entitlement to Net Energy Generation and/or Operating Capacity, as appropriate.
(g)	Midwest ISO Directives. Notwithstanding anything to the contrary in Sections 10.03(a) through 10.03(f) above, each Owner that is a transmission-owning member or market participant in the Midwest ISO shall comply with all directives from the Midwest ISO regarding supply of Ancillary Services from the Plant.

     10.04 Midwest ISO Market Development. The Owners acknowledge that the final development of the Midwest ISO market and operations will be progressing during the development of the Project and that the final scheduling requirements and business practices of Midwest ISO could have a significant impact on the scheduling of the Net Energy Generation. In addition, the Owners could incur increased operating costs due to redispatching orders associated with Midwest ISO market or reliability organizational requirements during the life of the Plant. The E&O Committee shall consider, develop and provide policies to equitably share the cost burden between Owners depending upon their membership or market participation or non-membership or non-market participation from time to time when the Plant schedule is reduced or affected by the Midwest ISO market or reliability organization directives without specific Owner causation.

     10.05 Data to be Provided to the Midwest ISO. All Owners, whether or not Midwest ISO members, shall provide to the Midwest ISO in a timely manner, either directly or through the Operator or an authorized agent, the operational data the Midwest ISO reasonably requires for scheduling the output of the Plant, as set forth in Section 38.8.4 of the Midwest ISO energy markets tariff (“EMT”) and related business practices manuals and explanatory documents. Unless otherwise mutually agreed, no Owner shall be required to provide on behalf of any other Owner to the Midwest ISO: (i) any information that is required of a Market Participant; and (ii) any information required for pseudo-tie operation by individual Owners if the Plant is operated on a pseudo-tie basis.

     Any Owner not fully participating in the Midwest ISO Energy Markets with respect to its Ownership Share shall follow any applicable practices and procedures set forth in Section

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38.8.4.5 of the EMT. Any Owner that is fully participating in the Midwest ISO Energy Markets shall be permitted to use the Midwest ISO market redispatch.

ARTICLE XI

DEFAULTS AND REMEDIES

     11.01 Event of Default. Any of the following shall constitute an event of default by an Owner under this Agreement (each, an “Event of Default”):

(a)

the failure of any Owner (i) to pay funds to the Trust Account, upon requisition by the Operator on or before the date due, (ii) to provide the further assurances specified by the Coordination Committee at the times and in the amounts specified by the Coordination Committee in its notice to the Owners, or (iii) to pay funds to the Trust Account necessary to cure an Event of Default by that Owner in the ratio that its Ownership Share bears to the total Ownership Shares of the non-defaulting Owner or as otherwise required by this Agreement; and

(b)

the failure of any Owner to perform or observe any of the other covenants and conditions of this Agreement to be performed or observed by it, or the failure of any Owner to perform or observe any of the covenants and conditions to be performed or observed by it under any other contract made by the Owners for the Project or for the ownership, operation, maintenance or repair of the Plant or other Plant Property, which continues for a period of five (5) days after notice of such failure is given to it by any other Owner (unless a different notice period is expressly otherwise expressly provided for in this Agreement, in which case the other notice period shall control).

     11.02 Contribution by Non-Defaulting Owners. Upon the occurrence of an Event of Default by any Owner, the defaulting Owner’s rights, including, without limitation, the right to vote its Ownership Share under this Agreement, except for the cure right in Section 11.02(b), shall be suspended while all of its obligations shall continue. In addition, the non-defaulting Owners shall have the right, but not the obligation, to remedy the same (if capable of remedy by them) by commencing and continuously pursuing such remedy until completed, either by paying the necessary funds and/or rendering the necessary performance, with each non-defaulting contributing Owner contributing to the cost of such remedy in the ratio that its Ownership Share bears to the total Ownership Shares of all non-defaulting contributing Owners. No such payment or performance by the non-defaulting contributing Owners shall be construed as an undertaking of the non-defaulting contributing Owners to assume, guarantee, endorse, contingently agree to purchase or to provide funds for the payment of, or otherwise become liable in respect of, any present or future obligations of the defaulting Owner to any Party or third party.

(a) Upon any such payment or performance by non-defaulting contributing Owners, the defaulting Owner’s entitlement to Capacity and Energy generated by the Plant, including the defaulting Owner’s Operating Capacity Entitlement, any receivables and all related rights set forth in Article X and the Interconnection and Transmission Upgrade Allocation Agreement, or otherwise in this Agreement, including, without limitation, the right to vote its Ownership Share, shall be

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deemed transferred to such non-defaulting contributing Owners in proportion to their Ownership Shares (based on the ratio that each non-defaulting Owner’s Ownership Share bears to the total Ownership Shares of all non-defaulting Owners) and the defaulting Owner shall have no ownership or other rights with respect to such Energy or Operating Capacity Entitlement.

(b)

For a period of sixty (60) days from the date of the Event of Default, the defaulting Owner or a Lender may effect a repurchase of its Operating Capacity Entitlement by paying to the respective non-defaulting contributing Owners the total amount of money (and/or the reasonable equivalent in money for services or property provided) paid by each non-defaulting contributing Owner, together with interest thereon at a rate of interest one percent (1%) greater than the “prime rate” of interest published in The Wall Street Journal, Eastern Edition, from the date of expenditure by the non-defaulting contributing Owners to the date of payment by the defaulting Owner; provided, however, that such repurchase shall not entitle the defaulting Owner to any Capacity or Energy sold, used or scheduled from the date of non-payment or non-performance through such payment date, including any proceeds or receivables relating thereto, which shall remain for the account of the non-defaulting contributing Owners. If the defaulting Owner has not cured its default during the sixty (60) day cure period in this Section, such Event of Default shall be incurable and the non-defaulting contributing Owners shall have the right to continue to exercise their rights under this Section 11.02 for the remainder of the Term.

     11.03 Disputed Event of Default. If any Owner shall dispute that an Event of Default under this Agreement has occurred, such Owner shall pay the disputed payment or perform the disputed obligation, but may do so under protest which shall be in the form of a written notice to the other Owners. In the event it is determined by a court of competent jurisdiction that such Owner is entitled to a refund of all or a portion of the disputed payment or is entitled to the reasonable equivalent in money for services or property provided for the performance of the disputed obligation, the other Owners shall pay such amount to said Owner with interest at the interest rate referred to in Section 11.02(b) from time to time in effect from the date of payment or performance of the disputed obligation to the date of reimbursement. Such reimbursement shall be shared by the other Owners in the ratio that their respective Ownership Shares bear to the total of all their Ownership Shares unless otherwise prescribed by the decision of the arbitrators (or court order) in the aforementioned arbitration (or court) proceedings.

     11.04 No Waiver. No waiver by an Owner of its rights with respect to an Event of Default under this Agreement shall be effective unless all non-defaulting Owners waive their similar rights and any such waiver shall not be deemed a waiver with respect to any subsequent default. No delay, short of the statutory period of limitations, in asserting or enforcing any right hereunder shall be deemed a waiver of such right.

     11.05 Cumulative Rights. The rights and remedies provided in this Article XI shall be in addition to the rights and remedies of the Owners found elsewhere in this Agreement or under any other Project Agreement or other legal or equitable relief that may be otherwise available.

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ARTICLE XII

RELATIONSHIP OF PARTIES

     12.01 Nature of Obligations. The covenants, obligations and liabilities of the Owners are intended to be several and not joint, and nothing herein contained shall be construed to create an association, joint venture, trust or partnership, or to impose a trust or partnership covenant, obligation or liability on or with regard to any one or more of the Owners. Each Owner shall be individually, responsible for its own covenants, obligations and liabilities as herein provided. No Owner or group of Owners shall be under the control of or shall be deemed to control any other Owner or the Owners as a group. No Owner shall be the agent of or have a right or power to bind any other Owner without its express written consent, except as provided in this Agreement or in any other Project Agreements.

     12.02 Tax Status. The Owners hereby elect to be excluded from the application of Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, or such portion or portions thereof as may be permitted or authorized by the Secretary of the Treasury or his delegate insofar as such subchapter, or any portion or portions thereof, may be applicable to the Owners under this Agreement.

ARTICLE XIII

DISPUTE RESOLUTION

     All disputes arising under this Agreement (a “Dispute”) shall be addressed by the Coordination Committee. Any Owner can request that a Dispute be brought before the Coordination Committee by delivering a written request to the Coordination Committee. The Coordination Committee shall meet, negotiate and attempt in good faith to resolve the Dispute quickly, informally and inexpensively. In the event the Coordination Committee cannot resolve the Dispute within thirty (30) days after commencement of negotiations, any Party may seek available legal remedies to resolve the Dispute, whether at law or equity.

ARTICLE XIV

TERM

     14.01 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Agreement, shall continue in effect for a period extending through the fiftieth (50^th) anniversary of the date of Commercial Operation, but shall continue indefinitely past such fiftieth (50^th) anniversary unless any Owner gives written notice not less then two (2) years prior to the fiftieth (50^th) anniversary (the “Termination Notice”) that it desires to terminate this Agreement on such fiftieth (50^th) anniversary or at any time thereafter. The Termination Notice shall specify a date that this Agreement shall terminate that is no sooner than two (2) years after the date of the Termination Notice (the “Termination Notice Period”). The Coordination Committee shall, within sixty (60) days after the date of the Termination Notice, determine whether to sell the Plant as a going concern on a date as near as possible to the end of the Termination Notice Period or to decommission the Plant so that it ceases Commercial Operation at the end of the Termination Notice Period. If the Coordination Committee, with the approval of a Double Majority, approves the sale of the Plant or its decommissioning, the Plant shall be sold or decommissioned. The date that all actions necessary to complete the windup of

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the Plant have been completed is referred to herein as the “Termination Date,” and the period beginning on the Effective Date and ending on the Termination Date is referred to herein as the “Term.”

     14.02 Windup Events. In connection with any termination of this Agreement, the Owners shall complete the Windup Events. The Windup Events shall include the following actions by the Engineering and Operating Committee or its designee:

(a)	the termination of all Project Agreements upon the completion of the Windup Events in accordance with the terms thereof, the cancellation costs for which shall become Project Costs;
(b)	the timely disposition of all Plant Property by sale, auction, partition or otherwise;
(c)	the deposit of any proceeds from the disposition in the Trust Account (provided, however, than an Owner that withdraws from the Project pursuant to Section 3.05(b)(i) of this Agreement shall not be entitled to receive any payment paid by such Owner in connection with such withdrawal pursuant to Section 3.05(b)(i) of this Agreement or otherwise); and
(d)	any other steps necessary steps for the winding-up of the Project, including the disbursement to the Owners proportionately based on Ownership Shares of any balance remaining in the Trust Account after the payment of all obligations related in any way to the Project, the Plant or other Plant Property.

     14.03 Termination by Agreement. This Agreement may be terminated at any time by the unanimous written agreement of all the Owners and shall automatically terminate if at any time all the Ownership Shares become vested in a single Owner.

     14.04 Return of Real Property to Otter Tail. In the event this Agreement terminates for any reason prior to Financial Closing, then all real property rights previously owned by Otter Tail and transferred for the benefit of the Project shall be transferred and the Owners shall transfer title thereto to Otter Tail, free and clear of all liens or encumbrances and Otter Tail shall return any funds previously paid to Otter Tail by Owners therefore.

ARTICLE XV

REPRESENTATIONS, WARRANTIES

     15.01 Representations and Warranties. Each Owner represents and warrants as follows:

(a)	it is, as applicable, an agency, cooperative corporation, consumers power district, municipal corporation and political subdivision, corporation duly organized, validly existing and in good standing under the laws of the state of its formation and authorized to conduct business in South Dakota;
(b)	it has the power and authority to enter into and perform this Agreement and is not prohibited from entering into this Agreement or discharging and performing all

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	covenants and obligations on its part to be performed under and pursuant to this Agreement;
(c)	it has taken all action required by Applicable Law in order to approve, execute and deliver this Agreement;
(d)	the execution and delivery of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of and compliance by such Owner with the provisions of this Agreement will not conflict with or constitute a breach of or a default under or require any consent, license or approval that has not been obtained pursuant to any of the terms, conditions or provisions of any law, rule or regulation, any order, judgment, writ, injunction, decree, determination, award or other instrument or legal requirement of any court or other agency of government, the documents of its formation or any contractual limitation, restriction or outstanding trust indenture, deed of trust, mortgage, loan agreement, lease, other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound and will not result in a breach of or a default under any of the foregoing;
(e)	it has taken all such action as may be necessary or advisable and proper to authorize this Agreement, the execution and delivery hereof, and the consummation of transactions contemplated hereby;
(f)	there are no bankruptcy, insolvency, reorganization or receiverships pending or being contemplated by it, or to its knowledge threatened against it;
(g)	to its knowledge, there are no actions, proceedings, judgments, rulings or orders issued by, or pending before any court or other governmental body that would materially adversely affect its ability to perform its obligations under this Agreement; and
(h)	this Agreement is a legal, valid and binding obligation of such Owner enforceable in accordance with its terms, except as limited by laws of general applicability limiting the enforcement of creditor’s rights or by the exercise of judicial discretion in accordance with general principles of equity.

ARTICLE XVI

MISCELLANEOUS

     16.01 Publicity Policy. In recognition of the requirements and desire of the Parties to disclose information regarding their ownership and involvement with BSP II and its activities, a Party may:

(a)	disclose information regarding BSP II as may be required by any Applicable Law;
(b)	provide information regarding BSP II to its Affiliates, employees, agents, lenders, investors, consultants, advisors, contractors, accountants and counsel; and

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(c) publicize to any third-party (including, but not limited to, through press releases and other media) information about the general activities of BSP II and any otherwise publicly available information; provided, however, Parties shall seek to avoid publicizing to third parties:

(i)	financial information about BSP II, including the economics of the Project, except as required to obtain financing or to update rating agencies or an Owner’s lender;
(ii)	information regarding other Parties;
(iii)	information a Party specifically identifies as commercially sensitive (such as information about ongoing Project negotiations); and
(iv)	information respecting the positions of BSP II on federal or state policy matters (unless consistent with the policy goals or a policy initiative of BSP II as generally understood by the Parties).

If a Party desires to release information described in Sections 16.01(c)(i)-(iv), then that Party shall describe the intended release of information to the E&O Committee and the E&O Committee shall respond promptly to the Party with any concerns about such release.

     16.02 Successors and Assigns; Assignment. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Owners and Parties hereto, except as otherwise explicitly not permitted herein.

     16.03 Notices. Notices required by this Agreement from a Party hereto shall be addressed to the other Parties, at the addresses noted in Exhibit A, and may be updated from time to time by written notice to all Parties. Any notice, request, consent, or other communication required or authorized under this Agreement to be given by one Party to another Party shall be in writing. It shall either be hand delivered or mailed, postage prepaid, to the representative of said Party. If mailed, the notice, request, consent or other communication shall be simultaneously sent by facsimile or other electronic means. Any such notice, request, consent, or other communication shall be deemed to have been received by the close of the Business Day on which it was hand delivered or transmitted electronically (unless hand delivered or transmitted after the close of business, in which case it shall be deemed received at the close of the next Business Day). Real-time or routine communications concerning the operation of the Joint Facilities shall be exempt from this Section 16.03.

     16.04 Force Majeure. The performance of any obligation required hereunder shall be excused during the continuation of any Force Majeure Event suffered by the Owner whose performance is hindered in respect thereof, and the time for performance of any obligation that has been delayed due to the occurrence of a Force Majeure Event shall be similarly extended. The Owner experiencing the delay or hindrance shall use reasonable efforts to notify the other Owners in writing of the occurrence of such Force Majeure Event and the anticipated period of delay within ten (10) days after the commencement of the Force Majeure Event, provided that the failure of the Owner experiencing the delay or hindrance to notify the other Owners within

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such ten (10) day period shall not preclude such Owner from claiming a Force Majeure Event hereunder. Each Owner suffering a Force Majeure Event shall take, or cause to be taken, such action as may be necessary to overcome or otherwise to mitigate, in all material respects, the effects of any Force Majeure Event suffered by any of them and to resume performance hereunder as soon as practicable under the circumstances.

     16.05 Waiver. Failure to enforce any right or obligation by any Owner with respect to any matter arising in connection with this Agreement shall not constitute a waiver as to that matter nor to any other matter. Any waiver by any Owner or Party hereto of its rights with respect to a default under this Agreement or with respect to any other matters arising in connection with this Agreement must be in writing. Such waiver shall not be deemed a waiver with respect to any subsequent default or other matter.

     16.06 Survival. Notwithstanding any provisions herein to the contrary, the confidentiality obligations set forth in Section 16.01, the indemnity obligations set forth herein and the limitations on liabilities set forth herein shall survive (in full force) the expiration or termination of this Agreement, and shall continue to apply to all Owners and Parties hereto that either terminate or transfer their interest in this Agreement even after such termination or transfer.

     16.07 Severability. If any of the terms of this Agreement are finally held or determined to be invalid, illegal or void, all other terms of the Agreement shall remain in effect; provided that the Owners and Parties hereto shall enter into good faith negotiations concerning the terms affected by such decision for the purpose of achieving conformity with requirements of any Applicable Law and the intent of the Owners and Parties hereto.

     16.08 Governing Law. This Agreement shall be interpreted and enforced in accordance with the Laws of the State of South Dakota without regard to its conflict of laws provisions.

     16.09 Consent to Jurisdiction. Each of the Owners and Parties hereto hereby irrevocably consents and agrees that any legal action or proceedings with respect to this Agreement may be brought in any of the courts of the United States of America for the District of South Dakota having subject matter jurisdiction and, by execution and delivery of this Agreement and such other documents executed in connection herewith, each Owner and Party hereby:

(a)	accepts the non-exclusive jurisdiction of the aforesaid courts;
(b)	irrevocably agrees to be bound by any final judgment (after any and all appeals) of any such court with respect to such documents;
(c)	irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceedings with respect to such documents brought in any such court, and further irrevocably waives, to the fullest extent permitted by law, any claim that

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	any such suit, action or proceedings brought in any such court has been brought in any inconvenient forum;
(d)	agrees that service of process in any such action may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Owner or Party at its address set forth below, or at such other address of which the other Owners or Parties hereto shall have been notified; and
(e)	agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or limit the right to bring any suit, action or proceeding in any other jurisdiction.

     16.10 Waiver of Trial by Jury. EACH OF THE OWNERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OWNER OR PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE OWNERS AND PARTIES ENTERING INTO THIS AGREEMENT.

     16.11 No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Owners and Parties hereto and nothing contained herein shall be construed to create any duty to, or standard of care with reference to, or any liability to, or any benefit for, any Person not an Owner or a Party to this Agreement.

     16.12 Cooperation. The Owners and Parties hereto acknowledge that they are entering into a long-term arrangement in which the cooperation of all of them will be required. If, during the Term, changes in the operations, facilities or methods of any Owner or Party will materially benefit an Owner or Party without detriment to the other Owners or Parties, the Owners and Parties commit to each other to make reasonable efforts to cooperate and assist each other in making such change.

     16.13 Captions. All indexes, titles, subject headings, section titles, and similar items are provided for the purpose of reference and convenience and are not intended to affect the meaning of the content or scope of this Agreement.

     16.14 Entire Agreement. This Agreement shall supersede all other prior and contemporaneous understandings or agreements, both written and oral, among the Owners and Parties relating to the subject matter of this Agreement.

     16.15 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument, and may be executed by facsimile signature, which shall be considered as an original.

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     16.16 Further Assurances. Upon the receipt of a written request from any Owner or Party, each Owner and Party shall execute such additional documents, instruments and assurances and take such additional actions as are reasonably necessary and desirable to carry out the terms and intent hereof. This provision shall apply to Owners and Parties that either transfer or terminate their interest in this Agreement even after the termination or transfer. No Owner or Party shall unreasonably withhold, condition or delay its compliance with any reasonable request made pursuant to this Section 16.16; and if the Ownership Share of any Owner shall be changed or transferred in accordance with this Agreement, the Owners or their successors and permitted assigns shall execute appropriate amendments of this Agreement recognizing the changes in ownership and the addition or substitution of any new parties as Owners under this Agreement.

[The next page is the signature page.]

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     IN WITNESS WHEREOF, the Parties hereto have caused their names to be hereunto subscribed by their officers thereunto duly authorized, intending thereby that this Agreement shall be effective as of the Effective Date.

OWNERS:

CENTRAL MINNESOTA MUNICIPAL	GREAT RIVER ENERGY
POWER AGENCY
By /s/ Paul I. Leland	By /s/ David Saggau
Paul Leland	David Saggau
Its President	Its President and Chief Executive Officer
HEARTLAND CONSUMERS POWER	MONTANA-DAKOTA UTILITIES CO., a
DISTRICT	Division of MDU Resources Group, Inc.
By /s/ Michael McDowell	By /s/ Bruce T. Imsdahl
Michael McDowell	Bruce T. Imsdahl
Its General Manager	Its President and Chief Executive Officer
SOUTHERN MINNESOTA MUNICIPAL	OTTER TAIL CORPORATION dba Otter Tail
POWER AGENCY	Power Company
By /s/ Raymond A. Hayward	By /s/ Charles S. MacFarlane
Raymond A. Hayward	Charles S. MacFarlane
Its Executive Director and CEO	Its President
WESTERN MINNESOTA MUNICIPAL
POWER AGENCY
By /s/ Donald E. Habicht
Donald E. Habicht
Its President

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EXHIBIT A

PARTY

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY
459 South Grove Street
Blue Earth, MN 56013
Attn: Donald E. Kom, Executive Director
Telephone: (507) 526-2193
Facsimile: (507) 526-2527
E-mail: donk@utplus.com

GREAT RIVER ENERGY
17845 East Highway 10
Elk River, MN 55330
Attn: David Saggau, President and Chief Executive Officer
Telephone: (763) 241-2286
Facsimile: (763) 241-2366
E-mail: dsaggau@grenergy.com

HEARTLAND CONSUMERS POWER DISTRICT
203 West Center Street
Madison, SD 57042
Attn: Michael McDowell, General Manager
Telephone: (605) 256-6536
Facsimile: (605) 256-2990
E-mail: mmcdow@hcpd.com

MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources, Inc.
400 North Fourth Street
Bismarck, ND 58501
Attn: Andrea L. Stomberg, Vice President – Electric Supply
Telephone: (701) 222-7752
Facsimile: (701) 222-7606
E-mail: andrea.stomberg@mdu.com

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OTTER TAIL CORPORATION dba Otter Tail Power Company
215 South Cascade St.
P.O. Box 496
Fergus Falls, MN 56538-0496
Attn: Charles MacFarlane
Telephone: (218) 739-8353
Facsimile: (218) 739-8218
E-mail: cmacfarlane@otpoc.com

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. Peter J. Reinarts, P.E.
Manager – Generation, Operations and Marketing
Telephone: (507) 292-6452
Facsimile: (507) 292-6414
E-mail: pj.reinarts@smmpa.org

and

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. David P. Geschwind, P.E.
Chief Operating Officer
Telephone: (507) 292-6460
Facsimile: (507) 292-6414
E-mail: dp.geschwind@smmpa.org

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WESTERN MINNESOTA MUNICIPAL POWER AGENCY
25 N.W. 2^nd Street, Suite 102
Ortonville, MN 56278-1411
Attention: Mr. Don Habicht
Telephone: (320) 839-2549
Facsimile: (320) 839-2540
E-mail: david.fhmab@midconetwork.com

and

MISSOURI RIVER ENERGY SERVICES
3724 West Avera Drive
P.O. Box 88920
Sioux Falls, SD 57109-8920
Attn: Mr. Ray Wahle
Telephone: (605) 338-4042
Facsimile: (605) 978-9360
E-mail: rwahle@mrenergy.com

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EXHIBIT B

OWNER	OWNERSHIP SHARE
CMMPA	30 Megawatts (5%)
GRE	116 Megawatts (19.333333%)
Heartland	25 Megawatts (4.166667 %)
Montana-Dakota	116 Megawatts (19.333333%)
Otter Tail	116 Megawatts (19.333333%)
SMMPA	47 Megawatts (7.833333%)
WMMPA	150 Megawatts (25%)
Total:	600 Megawatts (100%)

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EXHIBIT B-1

CMMPA	30 (5.357143%)
GRE	116 (20.714286%)
Heartland	25 (4.464286%)
Montana-Dakota	116 (20.714286%)
Otter Tail	116 (20.714286%)
SMMPA	47 (8.392857%)
WMMPA	110 (19.642857%)
Total:	560 (100%)

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SCHEDULE 3.02(a)

OWNER FINANCING PLANS

(*) (19 pages omitted)

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SCHEDULE 3.03(a)

REAL AND/OR PERSONAL PROPERTY INTENDED TO BE PLANT PROPERTY

HELD BY OTTER TAIL

Located in Grant County, Big Stone Township, Sections 14 and 15, Township 121, Range 47, South Dakota.

Real Property Owned in Fee Title:

Rabe Family Trust. 295.78 acres, more or less, located in Section 14, Township 121, Range 46, purchased October 17, 2001.

        The North ¹/2 of the Southeast ¹/4 and the East ¹/2 of the Southwest ¹/4, except Lot 1 and a portion of Lot 2, Rabe Farm Subdivision located in the Southeast ¹/4 of Section 14, township 121, Range 47.

AND

The East ¹/2 of the Northwest ¹/4 and the West ¹/2 of the Northeast ¹/4, except Lots 1 and 2, Lagoon Addition located in the North ¹/2 of Section 14, Township 121 North, Range 47 West of the 5^th P.M.

AND

The South ¹/2 of the Southeast ¹/4, except Lot 2 (52.13 acres, more or less), Rabe Farm Subdivision located in the Southeast ¹/4 of Section 14, Township 121, Range 47.

EXCEPTION

Lot 1 (10.98 acres, more or less), Rabe Farm Subdivision, located in the Southeast ¹/4 of Section 14, Township 121 North, Range 47 West of the 5^th P.M.

Options to Purchase Real Property:

1.

Bray property, 34.31 acres, more or less. Lot 1, Bray Subdivision, located in the East 1/2 of the Northeast 1/4, and the East 1/2 of the Southeast 1/4, Section 15, Township 121 North, Range 47 West of the 5th P.M., Grant County, South Dakota. $699,940.50 to be paid upon exercise.

2.

E & M Farms, Inc., 305.75 acres, more or less. The East 1/2 of the Northwest 1/4, the West 1/2 of the Southeast 1/4, except Lot 1, E & M Farms, Inc. Addition in the Southwest 1/4 of the Southeast 1/4, the East 1/2 of the Southwest 1/4, and the West 1/2 of the Northeast 1/4, all in Section 15, Township 121 North, Range 47 West of the 5th P.M., Grant County, South Dakota. $749,087.50 to be paid upon exercise.

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3. Donald & Nicole Bray, Record Title Holder, and Timothy & Nikki Rabe, Contract for Deed Purchaser, 285.69 acres, more or less. The West ¹/2 of the West ¹/2 of Section 14, and the East ¹/2 of the East ¹/2 of Section 15, in Township 121 North, Range 47, except the building site and approximately 20 acres adjoining the buildings on the Southwest part of the East ¹/2 of the Southeast ¹/4 of Section 15, Township 121 North of Range 47 West of the 5^th P.M., Grant County, South Dakota, containing 256 tillable acres, EXCEPTION: Lot 1, Bray Subdivision, located in the East ¹/2 of the Northeast ¹/4 and the East ¹/2 of the Southeast ¹/4, Section 15, Township 121 North, Range 47 West of the 5^th P.M., Lot 1 contains 5.73 acres in the East ¹/2 of the Northeast ¹/4 and 28.58 acres in the East ¹/2 of the Southeast ¹/4, Section 15, Township 121 North, Range 47. Subject to easements and reservations of record. $84,059.50 to be paid upon exercise.

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SCHEDULE 3.05(a)

REFERENCE RATE METHODOLOGY

In order to arrive at the Reference Rate, the following were calculated as described below to obtain these figures in MWH.

(*)

If the scope of the Project is changed, the Reference Rate shall be revised accordingly.

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SCHEDULE 7.01

TRUST AGREEMENT

     This Trust Agreement (the “Trust Agreement”), dated as of the 25th day of June, 2005, is by and among Central Minnesota Municipal Power Agency, an agency incorporated under the laws of Minnesota; Great River Energy, a cooperative corporation incorporated under the laws of Minnesota; Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law (Chapter 49-35 of the South Dakota Codified Laws); Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a corporation incorporated under the laws of the State of Delaware; Otter Tail Corporation, a corporation under the laws of Minnesota doing business as Otter Tail Power Company (“Otter Tail”); Southern Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota; and Western Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (each individually a “BSP II Owner” and, collectively, the “BSP II Owners”), and U.S. Bank National Association, a national banking association (the “Trustee”).

WITNESSETH:

     WHEREAS, the BSP II Owners intend to enter into that certain Big Stone II Power Plant Participation Agreement effective as of June 30, 2005 (the “Participation Agreement”) and that certain Operation & Maintenance Services Agreement effective as of June 30, 2005 (the “O&M Agreement”) (the Participation Agreement and the O&M Agreement are collectively referred to herein as the “BSP II Agreements”), pursuant to which the BSP II Owners, among other things, provide for the establishment of a trust account by Otter Tail on behalf of the BSP II Owners; and

     WHEREAS, the BSP II Owners desire to retain the Trustee to serve as the trustee, and the Trustee desires to provide such services, as contemplated under the BSP II Agreements, on behalf of the BSP II Owners.

     NOW, THEREFORE, for and in consideration of these premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, Otter Tail and Trustee hereby agree as follows:

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     1. Deposit of Funds with Trustee. The BSP II Owners will make payments to the Trustee, to be deposited into Trustee’s trust account number (*) (the “Trust Account”), as provided in the BSP II Agreements, copies of which have been previously provided to Trustee by Otter Tail (the “Trust Funds”). The Trust Funds shall be held in the Trust Account and distributed by the Trustee strictly in accordance with the terms and conditions of this Trust Agreement; provided, however, that the Trustee and Otter Tail acknowledge that, with respect to the administration of the Trust Account and Trust Fund, in the event of conflict between this Trust Agreement and the BSP II Agreements, that the BSP II Agreements shall govern. The Trustee and Otter Tail further acknowledge that the BSP II Agreements are subject to amendment by the BSP II Owners at any time on or after June 30, 2005.

     2. Investment of Trust Funds. The Trustee shall invest the Trust Funds as indicated on Exhibit A hereto. The BSP II Owners shall be entitled to any interest accrued on the Trust Funds, as contemplated by the O&M Agreement; provided, however, that notwithstanding the foregoing, any BSP II Owner may irrevocably determine that any interest accruing with respect to such BSP II Owner’s deposits into the Trust Account shall be designated as Trust Funds for purposes of this Trust Agreement and, upon such determination, such interest shall be retained in the Trust Account. Such determination shall be made by written notice such BSP II Owner to the Trustee, with copies delivered to all other BSP II Owners (an “Irrevocable Determination”). Any amounts retained in the Trust Account for which an Irrevocable Determination has been made shall be credited against the next succeeding progress payment requisitioned from such BSP II Owner and such progress payment shall be reduced accordingly. Trustee shall distribute such interest accrued on the Trust Funds on a quarterly basis to the BSP II Owners, beginning on or about September 30, 2005. Otter Tail shall provide the Trustee payment instructions. The BSP II Owners acknowledge that the Trustee shall not be responsible for any diminution in the Trust Funds due to losses resulting from investments, unless such losses are the result of Trustee’s gross negligence, willful misconduct, or breach of this Trust Agreement.

     3. Trust Account Procedures.

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     (a) Otter Tail shall notify the Trustee in writing which individuals are authorized to make withdrawals from the Trust Account on behalf of Otter Tail, which individuals shall be designated as contemplated in Section 3.05 of the O&M Agreement and shall be corporate officers of Otter Tail or the BSP II Plant Manager;

     (b) On or before June 30, 2005, each BSP II Owner shall pay into the Trust Account the amount indicated required for it on Exhibit B to finance the development of the BSP II project until the BSP II financial closing;

     (c) After June 30, 2005, Trust Funds shall be requisitioned from the BSP II Owners as follows:

     (i) In the event that the progress payment made pursuant to Section 3(b) of this Agreement or any subsequent progress payment is not sufficient to fund the completion of all Phase II (as such term is defined in the Participation Agreement) activities, then prior to the depletion of all previously made progress payments, Otter Tail, as directed by the BSP II E&O Committee, shall issue a written requisition notice to the BSP II Owners, which written notice shall state the amount required to be deposited into the Trust Account for each BSP II Owner to provide for the Phase II project costs reasonably expected to be expended in excess of previously made progress payments. The BSP II Owners shall pay such amounts within forty-five (45) days of such requisition.

     (ii) During Phases II, III and IV (as such terms are defined in the Participation Agreement), unless the BSP II Engineering and Operating Committee directs otherwise, Trust Funds shall be requisitioned from the Owners from time to time as reasonably determined by Otter Tail, as directed by the BSP II E&O Committee. Unless otherwise directed by the BSP II Engineering and Operating Committee, Otter Tail shall issue a requisition notice to the BSP II Owners no later than the 15th of each month, which notice shall state amounts required to be deposited into the Trust Account

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by each BSP II Owner on each Monday (or the next business day in the event a Monday is a bank holiday) of the upcoming month, and include an accounting of the BSP II project costs then due and payable (or that will become due and payable before the end of the upcoming month) and copies of any invoices or other supporting materials. The BSP II Owners shall promptly pay such amounts by electronic funds transfer into the Trust Account on the Monday (or next business day) so indicated on the notice.

     (d) No BSP II Owner shall have any right, title or ownership interest in the Trust Account other than a beneficial interest, in proportion to its ownership share, nor any right to withdraw or direct application of Trust Funds, nor otherwise exercise control over the Trust Account. Trust Funds constitute and shall be a prepayment of the BSP II Owners’ obligations to pay BSP II project costs.

     (e) The BSP II Owners (either directly or through a third party retained by the BSP II Owners) shall be entitled, at their own expense, to review and audit all deposits and withdrawals by the Trustee from the Trust Account and Trustee shall cooperate with the BSP II Owners in connection with any such audit; provided, however, that the BSP II Owners shall provide the Trustee with at least twenty-four (24) hours prior written notice of their intent to do so.

     (f) Otter Tail shall have the right, at any time and from time to time, to withdraw from the Trust Account, with the prior concurrence of the BSP II E&O Committee, upon notice to the Trustee in the form of a request for withdrawal substantially in the form of Exhibit C attached hereto (“Request for Withdrawal”), signed by a duly authorized representative of Otter Tail. Otter Tail shall not be required to present any other statement or document in addition to a Request for Withdrawal in order to withdraw Trust Funds. All Requests for Withdrawal shall be signed by one of Otter Tail’s authorized representatives listed on Exhibit D attached hereto, which Exhibit D Otter Tail may, with notice to Trustee, amend from time to time.

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     4. Termination of Trust. The BSP II Owners may terminate the Trust for any reason or no reason with at least sixty (60) days’ prior written notice of such termination to the Trustee. Upon termination, any Trust Funds and other deposits that have been made to or other assets that have been placed into the Trust Account during the term of this Trust Agreement and that remain in the Trust Account shall be distributed as contemplated by the BSP II Agreements.

     5. Trustee Duties. The Trustee shall be responsible for (i) the safekeeping of the funds in the Trust Account and administering the Trust Account in accordance with the provisions of this Trust Agreement, and (ii) for exercising the standard of care with respect to the Trust Funds that a trustee engaged in the banking or trust company industry would observe in such affairs. Trustee shall incur no liability whatsoever (except for its gross negligence, willful misconduct, or breach of this Trust Agreement) so long as it has acted in good faith. The Trustee shall be under no responsibility in respect of the Trust Funds deposited with it, other than to follow the instructions herein contained. The Trustee may consult with counsel of its choice (and the BSP II Owners shall reimburse Trustee for reasonable attorneys’ fees incurred by Trustee in connection therewith) and shall be fully protected in any action taken in good faith pursuant to the Trust Agreement and in accordance with the advice of such counsel. It shall not be required to defend any proceeding which may be instituted against it by any third party with respect to the subject matter of these instructions, unless requested to do so by the BSP II Owners and indemnified against the reasonable and necessary cost and expense of such defense. The Trustee shall not be required to institute legal proceedings of any kind. It shall have no responsibility for the genuineness or validity of any document or other item deposited with it, and it shall be fully protected in relying upon any written notice, demand, certificate, or document which it in good faith believes to be genuine. The Trustee shall also be fully protected by acting in good faith in accordance with any written instructions given to it hereunder and believed by it to have been signed by the proper officers or persons from Otter Tail.

     6. Indemnification. The Trustee shall be indemnified, jointly and severally, and held harmless by the BSP II Owners, from and against any and all liability to a third party, including all

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expenses reasonably incurred in its defense, to which the Trustee shall be subject by reason of any action taken or omitted or any investment or disbursement of any part of the Trust Funds made by the Trustee pursuant to this Trust Agreement, except as a result of the Trustee’s own gross negligence, willful misconduct, or breach of this Trust Agreement. This right of indemnification shall survive for a period of ten (10) years after the termination of this Trust Agreement or resignation of the Trustee. To be entitled to this indemnity, Trustee must timely notify Otter Tail upon learning of an actual or potential claim against it that could result in a liability falling within the scope of this indemnity. The BSP II Owners shall have twenty (20) business days after receiving notice of such claim, unless such notice requires a response sooner, in which case the BSP II Owners shall respond in a timely manner, to: (i) agree to defend Trustee, (ii) agree to pay all reasonable and necessary costs incurred by Trustee in defending itself against the claim, or (iii) notify Trustee that they in good faith believe they have no obligation to indemnify Trustee.

     7. Resignation of Trustee. The Trustee may resign at any time by giving prior written notice thereof to Otter Tail; provided, however, that the Trustee must provide Otter Tail with at least sixty (60) days’ prior written notice of its intent to resign, and further provided that such resignation shall not be effective until a successor trustee shall have been appointed and shall have accepted such appointment in writing agreeable to the BSP II Owners. If an instrument of acceptance by a successor trustee shall not have been delivered to the Trustee within ninety (90) business days after the giving of such notice of resignation, Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. In the event of the appointment of a new trust agent, once the Trustee transfers all remaining Trust Funds and other necessary materials and information to the new trustee, the Trustee shall be fully released and relieved of all duties, responsibilities, and obligations under this Trust Agreement.

     8. Notice. Any notice required or permitted under this Trust Agreement may be personally delivered or may be given by registered or certified mail, return receipt requested, overnight delivery via UPS, FedEx, or the U.S. Postal Service, or, provided that a copy is also sent via first-class mail, by electronic facsimile (with acknowledgment of complete transmission), to the parties hereto at the

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addresses set forth below. Such addresses may be changed by written notice by one party to the other parties from time to time. Notice shall be deemed given when received if sent by overnight deliver or electronic facsimile, or five days after being mailed if sent by registered or certified mail.

     Notice to the Trustee shall be delivered, mailed or faxed to:

U.S.Bank National Association
Corporate Trust Services
60 Livingston Avenue- EP-MN-WS3C
St. Paul, MN 55107
Fax No.: (651) 495-8096
Tel. No.: (651) 495-3922
Attn: Beverly Thompson

     If to Otter Tail, addressed to such party as follows:

Otter Tail Corporation
4334 18^th Avenue South West
Fargo, ND 58103
Attn: Chief Financial Officer
Fax No.: (701) 232-6414
Tel. No.: (701) 232-6414

     with a mandatory copy to:

Bruce Gerhardson, Esq.
Associate General Counsel
Otter Tail Corporation
215 South Cascade Street
Fergus Falls, MN 56537
Fax No.: (218) 998-3165
Tel. No.: (218) 998-7108

     If to any other BSP II Owner, as indicated on Exhibit E attached hereto.

     9. Expenses. All of the Trustee’s fees are set forth in the letter attached hereto as Exhibit F. Such fees are payable as compensation for the ordinary administrative services to be rendered hereunder.

     10. Binding Effect. This Trust Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

     11. Counterparts. This Trust Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed an original, but all such counterparts shall together constitute but one and the same instrument. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

     12. Performance of Obligations. The parties hereto covenant, warrant, and represent to each other good faith, complete cooperation, due diligence, and honesty in fact in the performance of all obligations of the parties pursuant to this Trust Agreement.

     13. Governing Law. This Trust Agreement shall be construed, enforced, and administered in accordance with the laws of the State of Minnesota except its choice of law provisions.

[The next page is the signature page.]

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     IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date first above written.

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By:

BSP II OWNERS:

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY	GREAT RIVER ENERGY
By	By
Paul Leland	David Saggau
Its President	Its President and Chief Executive Officer
HEARTLAND CONSUMERS POWER DISTRICT	MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc.
By	By
Michael McDowell	Bruce T. Imsdahl
Its General Manager	Its President and Chief Executive Officer
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY	OTTER TAIL CORPORATION dba Otter Tail Power Company
By	By
Raymond A. Hayward	Charles S. MacFarlane
Its Executive Director and CEO	Its President
WESTERN MINNESOTA MUNICIPAL POWER AGENCY
By
Donald E. Habicht
Its President

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Exhibit A

AUTOMATIC MONEY MARKET INVESTMENTS
INVESTMENT AUTHORIZATION LETTER

U.S. Bank NA is hereby directed to invest and reinvest proceeds and other available moneys in the following funds as permitted by the operative documents. Please mark one space with an X for the investment vehicle selection.

     X First American Treasury Reserve Fund

SEE FIRST AMERICAN FUNDS, INC. PROSPECTUS WHICH HAS BEEN PROVIDED. NOTE THAT THE ABOVE FUNDS’ INVESTMENT ADVISOR, CUSTODIAN, DISTRIBUTOR AND OTHER SERVICE PROVIDERS AS DESCRIBED IN THE PROSPECTUS ARE AFFILIATES OF U.S. BANK NA. SHARES OF THE ABOVE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK INCLUDING U.S. BANK NATIONAL ASSOCIATION, U.S. BANK TRUST NATIONAL ASSOCIATION, OR ANY OF THEIR AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. U.S. Bank NA will not vote proxies for the First American Funds. Proxies will be mailed to you for voting.

Fee Basis: Approval of investment of any of these First American mutual funds includes approval of the fund’s fees and expenses as detailed in the enclosed prospectus, including advisory and custodial fees and shareholder service expenses (which may be so-called 12b-1 shareholder service fees), which fees and expenses are paid to U.S. Bank NA, a subsidiary of U.S. Bancorp.

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Exhibit B

Deposit requirements on June 30, 2005 for BSP II owners

Company	GRE			WMMPA			OTP			MDU			HCPD			SMMPA			CMMPA			Total
Ownership share		116			150			116			116			25			47			30			600
percentage		19.33	%		25.00	%		19.33	%		19.33	%		4.17	%		7.83	%		5.00	%		100.00	%
Progress Payment		1,933,333			2,500,000			1,933,333			1,933,333			416,667			783,333			500,000			10,000,000
Unreimbursed development costs		128,889			166,666			128,889			128,889			27,778			52,222			33,333			666,665
Total amount due		2,062,222			2,666,666			2,062,222			2,062,222			444,444			835,555			533,333			10,666,665

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Exhibit C

Form of Request for Withdrawal

     Otter Tail hereby requests that Trustee immediately transfer to Otter Tail [$___] from the Trust Account established by Otter Tail for the benefit of the BSP II Owners pursuant to the Trust Agreement dated as of June 20, 2005 entered into by and between Trustee and Otter Tail. [Insert transfer instructions.]

     This Request for Withdrawal is a “Request for Withdrawal” within the meaning of Section 3(f) of the Trust Agreement. All terms used but not defined herein shall have the meanings ascribed to them in the Trust Agreement.

	OTTER TAIL CORPORATION,
	DBA OTTER TAIL POWER COMPANY
Dated:	By
	Name:
	Title:

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Exhibit D

Person(s) Designated to Authorize Disbursement of Trust Funds

	Name (printed)	Signature
1.
2.
3.
4.

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Exhibit E

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY
459 South Grove Street
Blue Earth, MN 56013
Attn: Donald E. Kom, Executive Director
Telephone: (507) 526-2193
Facsimile: (507) 526-2527
E-mail: donk@utplus.com

GREAT RIVER ENERGY
17845 East Highway 10
Elk River, MN 55330
Attn: David Saggau, President and Chief Executive Officer
Telephone: (763) 241-2286
Facsimile: (763) 241-2366
E-mail: dsaggau@grenergy.com

HEARTLAND CONSUMERS POWER DISTRICT
203 West Center Street
Madison, SD 57042
Attn: Michael McDowell, General Manager
Telephone: (605) 256-6536
Facsimile: (605) 256-2990
E-mail: mmcdow@hcpd.com

MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources, Inc.
400 North Fourth Street
Bismarck, ND 58501
Attn: Andrea L. Stomberg, Vice President – Electric Supply
Telephone: (701) 222-7752
Facsimile: (701) 222-7606
E-mail: andrea.stomberg@mdu.com

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SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. Peter J. Reinarts, P.E.
Manager – Generation, Operations and Marketing
Telephone: (507) 292-6452
Facsimile: (507) 292-6414
E-mail: pj.reinarts@smmpa.org

and

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. David P. Geschwind, P.E.
Chief Operating Officer
Telephone: (507) 292-6460
Facsimile: (507) 292-6414
E-mail: dp.geschwind@smmpa.org

WESTERN MINNESOTA MUNICIPAL POWER AGENCY
25 N.W. 2nd Street, Suite 102
Ortonville, MN 56278-1411
Attention: Mr. Don Habicht
Telephone: (320) 839-2549
Facsimile: (320) 839-2540
E-mail: david.fhmab@midconetwork.com

and

MISSOURI RIVER ENERGY SERVICES
3724 West Avera Drive
P. O. Box 88920
Sioux Falls, SD 57109-8920
Attention: Mr. Ray Wahle
Telephone: (605)-338-4042
Facsimile: (605) 978-9360
E-mail: rwahle@mrenergy.com

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Exhibit F

TRUSTEE’S FEES

Annual administrative fee:
(first year’s fee payable upon opening account, nonrefundable)

	If all funds are invested in a U.S. Bank proprietary investment vehicle		$2,000.00
	If funds are invested other than above		$3,500.00
Transactional Charges*
Disbursements (checks or wires)			$20.00 each
Fee for security transactions:
	A.	Settlement of trades in the open market at direction of customer	$75.00 per buy or sell
	B.	Maturities	$50.00 per maturity
*(if all funds are invested in a U.S Bank proprietary investment instrument, transactional charges will not apply)
Out-of-Pocket Expenses:
	Expenses, including but not limited to stationery,		Billed at Cost
	postage, telephone, insurance, shipping, telex-telegram,
	reasonable services of outside counsel and agents.
	(Plus indirect out-of-pocket at 3% of administrative fee.)
Note:	Charges for performing other escrow services not specifically covered in this schedule will be determined by an appraisal of the services rendered. The fees shown in this schedule may be increased annually.

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SCHEDULE 10.01

Big Stone II Power Plant

Interconnection and
Transmission Upgrade
Allocation Agreement

By And Among

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY,

GREAT RIVER ENERGY,

HEARTLAND CONSUMERS POWER DISTRICT,

MONTANA-DAKOTA UTILITIES CO., A DIVISION OF MDU RESOURCES GROUP, INC.,

OTTER TAIL CORPORATION dbaOTTER TAIL POWER COMPANY,

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, AND

WESTERN MINNESOTA MUNICIPAL POWER AGENCY

JUNE 30, 2005

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TABLE OF CONTENTS

			Page
ARTICLE I		DEFINITIONS, RULES OF INTERPRETATION		82
	1.01	Rules of Construction		82
	1.02	Defined Terms		82
ARTICLE II		INTERCONNECTION AND TRANSMISSION ALLOCATION		87
	2.01	Interconnection and Transmission Allocation		87
	2.02	Generator Interconnection Study and Plan		88
	2.03	Common Interconnection Facilities: Ownership and Cost Responsibility		89
	2.04	Common Interconnection Facilities Upgrades: Ownership and Cost Responsibility		90
	2.05	Delivery Service Upgrades: Ownership and Cost Responsibility		91
	2.06	(*) Cost Allocation for Delivery Service Upgrades		92
	2.07	Alternative Arrangements		93
	2.08	Establishment and Restoration of Equitable Cost Impacts		93
	2.09	Conditions		94
	2.10	Financial Transmission Rights		95
	2.11	Repayments and Credits		95
	2.12	Implementation of Interconnection Plan by Operator		95
	2.13	Transmission Service Requests		96
ARTICLE III		MISCELLANEOUS		96
	3.01	Incorporation by Reference		96
	3.01	Captions		96
	3.02	Counterparts		96
EXHIBIT A				98

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Interconnection and Transmission Upgrade
Allocation Agreement

     THIS INTERCONNECTION AND TRANSMISSION UPGRADE ALLOCATION AGREEMENT (the “Agreement”) is made as of June 30, 2005 (the “Effective Date”), by and among Central Minnesota Municipal Power Agency, an agency incorporated under the laws of Minnesota, Great River Energy, a cooperative corporation incorporated under the laws of Minnesota (“GRE”), Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law (Chapter 49-35 of the South Dakota Codified Laws), Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a corporation incorporated under the laws of the State of Delaware, Otter Tail Corporation, a corporation incorporated under the laws of Minnesota, doing business as Otter Tail Power Company (“Otter Tail”), Southern Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota, and Western Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“WMMPA”) (each individually a “Party” and, collectively, the “Parties”).

RECITALS

     WHEREAS, the Parties have entered into the Participation Agreement, the 2005 Joint Facilities Agreement, and the O&M Agreement (as such terms are defined below) as of the Effective Date; and

     WHEREAS, under the Participation Agreement, each Party has determined that the sharing and allocation of BSP II’s generating capacity can best be accomplished by acquiring, owning and managing the related property rights necessary to build, own and operate BSP II as tenants in common; and

     WHEREAS, under the Participation Agreement, each Party intends to rely on the capacity and electric energy generated by BSP II as part of its system planning and reliability obligations and to serve the needs of its current and future customers; and

     WHEREAS, the Parties, under this Agreement, desire to document their agreement with respect to the interconnection and transmission upgrades to be made in connection with BSP II.

     NOW, THEREFORE, in consideration of the agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound by this Agreement, the Parties covenant and agree as follows:

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AGREEMENTS

ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION

     1.01 Rules of Construction. The capitalized terms listed in this Article shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings as commonly used in the English language and, where applicable, in Prudent Utility Practice (as such term is defined below). Words not otherwise defined herein that have well-known and generally accepted technical or trade meanings are used herein in accordance with such recognized meanings. In addition, the following rules of interpretation shall apply:

(a)	The masculine shall include the feminine and neuter.
(b)	References to “Articles,” “Sections,” “Schedules,” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of this Agreement.
(c)	This Agreement was negotiated and prepared by each of the Parties with the advice and participation of counsel. The Parties have agreed to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such Party is the author of this Agreement or any part hereof.
(d)	The Parties shall act reasonably and in accordance with the principles of good faith and fair dealing in the performance of this Agreement.

     1.02 Defined Terms. In addition to definitions appearing elsewhere in this Agreement, the following terms have the following meanings:

     2005 Joint Facilities Agreement: Shall mean that certain Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June 30, 2005 by and among the Parties and NorthWestern Corporation.

     Affiliate(s): Shall mean with respect to any Person:

(a)	any Person that directly or indirectly, controls or is controlled by or is under common control with such Person; or
(b)	any Person that beneficially owns or holds fifty percent (50%) or more of any class of voting securities of such Person or owns or holds fifty percent (50%) or more of an ownership interest (on a fully diluted basis) in such Person.

For the purposes of this definition, “control,” “controlled by,” and “under common control with,” mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by

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contract or otherwise. Notwithstanding the foregoing provisions, Operator and Owners (except with regard to Otter Tail) shall not be deemed to be Affiliates of each other and any Person that is otherwise an Affiliate of Operator shall not be deemed to be an Affiliate of Operator for purposes of this Agreement to the extent such Person is acting in its capacity as an Owner.

     Agreement: Shall mean this Agreement, as amended from time to time.

     Applicable Law: Shall mean:

(a)	any and all Laws, legislation, statutes, codes, acts, rules, regulations, ordinances, treaties or other similar legal requirements enacted, issued or promulgated by a Governmental Authority;
(b)	any and all orders, judgments, writs, decrees, injunctions, Governmental Approvals or other decisions of a Governmental Authority; and
(c)	any and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (a) or (b) of this definition, enacted, issued or promulgated by a Governmental Authority;

to the extent, for each of the foregoing in (a), (b) and (c) of this definition, applicable to or binding upon (i) BSP II; (ii) a Party, its Affiliates, its members, it partners or their respective Representatives, to the extent any such Person is engaged in activities related to BSP II; or (iii) the property of a Party, its Affiliates, its members, its partners or their respective Representatives, to the extent such property is used in connection with BSP II or an activity related to BSP II.

     ATRR: Shall have the meaning given to such term in Section 2.08(a).

     Baseline Rate Impact: Shall have the meaning given to such term in Section 2.08(a).

     BSP I: Shall mean the existing 450 MW coal-fired electrical generating plant located in Grant County, South Dakota known as the Big Stone Plant.

     BSP II or Plant: Shall mean the new, approximately 600 MW coal-fired electrical generating plant to be located adjacent to BSP I, and owned jointly by the Parties.

     Capacity: Shall mean an electrical rating expressed in megawatts (MW).

     Commercial Operation: Shall mean that the Plant is operating and producing Capacity and Energy on a continuous basis, and is delivering such Energy to the Owners at the Interconnection Point in accordance with Prudent Utility Practice and Applicable Law.

     Commercial Operation Readiness: Shall mean such time as the Plant has been completed in accordance with the Plans and Specifications, has successfully completed construction and operational testing specified in the Construction Contracts, is able to operate

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and produce Capacity and Energy on a continuous basis, and is able to deliver such Energy to the Owners at the Interconnection Point in accordance with Prudent Utility Practices and Applicable Law.

     Common Interconnection Facilities: Shall mean (i) the new interconnection facilities identified in the Interconnection Study, which have been determined and specified pursuant to Attachment X of the Midwest ISO Tariff to be required to physically and electrically interconnect the Plant to the Transmission System, and (ii) Contributing Owner Facilities pursuant to Section 2.03.

     Common Interconnection Facilities Upgrades: Shall mean the minimum necessary upgrades to the Transmission System that would not have been required but for the Owners’ interconnection request, including (i) upgrades necessary to remove overloads and voltage criteria violations, and (ii) upgrades necessary to remedy short-circuit and/or stability problems resulting from the connection of the Plant to the Transmission System, and (iii) other necessary transmission facilities as determined by the Owners to facilitate the needs of the Project. Interconnection System Upgrades shall not include upgrades to the Transmission System that may be required solely to move power from the Point of Physical Connection to load and shall not include facilities and equipment owned and/or controlled, operated and maintained by the Transmission Owner on the Transmission Owner’s side of the Point of Physical Connection, including any modifications, additions, or upgrades made to such facilities and equipment, that are necessary to physically and electrically interconnect the Facility to the Transmission System.

     Construction Contracts: Shall mean the contracts and agreements for the construction of the Plant, including any transmission or other Common Interconnection Facilities, that are duly authorized and executed, as provided herein.

     Contributing Owner: Shall have the meaning given to such term in Section 2.03(a).

     Contributing Owner Facilities: Shall have the meaning given to such term in Section 2.03(a).

     Delivery Service Upgrades or DSUs: Shall mean upgrades to the Transmission System that are necessary for any of the Owners to deliver Energy from the Plant via firm transmission service to their respective native customer loads, as identified in their respective delivery service requests made prior to the Effective Date; provided, however, that Delivery Service Upgrades shall not include Common Interconnection Facilities or Common Interconnection Facilities Upgrades.

     Effective Date: Shall have the meaning given to such term in the preamble of this Agreement.

     Energy: Shall mean electric energy having characteristics commonly known as three phase alternating current, with a nominal frequency of sixty (60) Hertz, a nominal voltage equivalent to that of Otter Tail’s or its successor’s Transmission System, and measured in kilowatt-hours (kWh) or megawatt-hours (MWh).

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     Facility Book Value: Shall have the meaning given to such term in Section 2.03(b)(i).

     FERC: Shall mean the Federal Energy Regulatory Commission or any Governmental Authority which preceded or hereafter may succeed the Federal Energy Regulatory Commission.

     Final Baseline Rate Impact: Shall have the meaning given to such term in Section 2.08(a).

     Governmental Approvals: Shall mean any material authorizations or permissions issued or granted by any Governmental Authority to BSP II, its Owners and their Affiliates in connection with any activity related to BSP II.

     Governmental Authority: Shall mean any federal, state, local or municipal governmental body; any governmental, quasi-governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; or any court or governmental tribunal; any independent system operator, regional transmission organization, reliability organization, or other regulatory body; in each case having jurisdiction over an Owner, the Project, BSP II, the Plant Site, or the Transmission System to which either BSP I or BSP II is interconnected.

     GRE: Shall have the meaning given to such term in the preamble to this Agreement.

     Interconnection Study: Shall mean the Big Stone II Generator Interconnection Study performed by Otter Tail for the Midwest ISO dated November, 2004 prepared pursuant to Attachment X of the Midwest ISO open access transmission tariff in connection with large generator interconnection request (MISO generator identification number G392) associated with the Project, and any amendments, supplements, subsequent studies, and interconnection agreement which may be issued pursuant to the aforementioned large generator interconnection request.

     Laws: Shall mean any and all federal, state, and local statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, tariffs, governmental agreements and governmental restrictions, whether now or hereafter in effect.

     Midwest ISO or MISO: Shall mean the Midwest Independent Transmission System Operator, Inc., its successor, or any other applicable regional transmission organization.

     Midwest ISO Tariff: Shall mean the then effective Open Access Transmission Tariff of the MISO.

     Net Energy Generation: Shall mean the Energy generated by the Plant that is available to the Owners at the Point of Interconnection.

     Non-Owner System DSUs: Shall have the meaning given to such term in Section 2.05.

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     O&M Agreement: Shall mean the then effective Operating and Maintenance Agreement related to the operation and maintenance of the Plant.

     Operator: Shall mean the operator of the Plant pursuant to the O&M Agreement.

     Otter Tail: Shall have the meaning given to such term in the preamble to this Agreement.

     Owner System DSUs: Shall have the meaning given to such term in Section 2.05.

     Owner(s): Shall mean the Parties to this Agreement and, thereafter, any permitted successors and assigns to the Parties’ rights, title and interests in the Plant Property.

     Ownership Share: Shall mean the undivided percentage ownership interest of a particular Owner in Plant Property as set forth on Exhibit B of the Participation Agreement, as the same may be changed pursuant to the Participation Agreement.

     Participation Agreement: Shall mean that certain Big Stone II Power Plant Participation Agreement dated as of June 30, 2005 by and among the Parties.

     Party(ies): Shall have the meaning given to such term in the preamble to this Agreement.

     Person: Shall mean an individual, a partnership, limited liability company, an association, a joint-stock company, corporation, a business trust, consumer power district, cooperative, unincorporated association, government or any subdivision thereof, or an organized group of individuals (whether incorporated or not), or a receiver, trustee or other liquidating agent of any of the foregoing in his capacity as such.

     Plans and Specifications: Shall mean the plans and specifications for the construction and design of the Plant, including the scope of work performed by any contractor under one or more of the Construction Contracts; all work drawings, engineering and construction schedules, project schedules, project monitoring systems, specifications status lists, material and procurement ledgers, drawings and drawing lists, manpower allocation documents, management and project procedures documents, project design criteria, and any other document referred to in the Construction Contracts, in each case as approved by the Operator.

     Plant Property: Shall have the meaning given to such term in the Participation Agreement.

     Plant Site: Shall mean the real property adjacent to BSP I on which the Plant is to be located, including the real property to be acquired pursuant to the Option to Purchase Contract and any and all easements, leases, licenses, option rights, rights-of-way and other rights used in connection with the Plant.

     Point of Interconnection: Shall mean the high-voltage terminals of the Plant generator step up transformer located at the Plant.

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     Point of Physical Connection: Shall mean the physical and electrical interconnection between (i) the Common Interconnection Facilities or the Common Interconnection Facilities Upgrades and (ii) the Transmission System.

     Project: Shall mean the undertaking of the Owners with respect to the development and construction of BSP II as set forth in the Participation Agreement.

     Project Funds: Shall mean funds maintained in the segregated interest-bearing trust account already established by the Operator on behalf of the Owners to provide for obligations with respect to the Project and the Plant, which Trust Account is an express trust, as defined under South Dakota Statutes Section 55-1-3, and was created pursuant to South Dakota Statutes Sections 55-1-4 and 55-1-5, and governed by South Dakota Statutes Chapter 55-3.

     Prudent Utility Practice: Shall mean any of the practices, methods or acts required by Applicable Law, the National Electric Safety Code, MISO, the North American Electric Reliability Council, or the successors of any of them, whether or not a Party is a member thereof, or otherwise engaged in or approved by a significant portion of the utility electric generation industry during the relevant time period or any of the practices, methods and acts that in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the upper Midwest region.

     Transmission Owner: Shall have the same meaning as assigned to such term in the Midwest ISO Tariff, or the entity owning the Transmission System in the event the MISO ceases to exist.

     Transmission Provider: Shall have the same meaning as assigned to such term in the Midwest ISO Tariff, or the entity owning the Transmission System in the event the MISO ceases to exist.

     Transmission System: Shall mean the facilities that are used to provide transmission service necessary for any of the Owners to deliver the Energy from the Point of Physical Connection to their respective points of delivery. The Transmission System includes, but is not limited to, facilities, the operational control of which has been transferred to the Midwest ISO subject to FERC approval under Section 203 of the Federal Power Act.

     WMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

ARTICLE II

INTERCONNECTION AND TRANSMISSION ALLOCATION

     2.01 Interconnection and Transmission Allocation.

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(a)	The provisions of the following Sections 2.02 through 2.13 express the intention of the Owners to enter into appropriate agreements that will allocate among them their respective obligations for, and rights to, transmission facilities that are the result of the Interconnection Request and Delivery Service Requests contemplated herein. Those facilities shall include: (i) Common Interconnection Facilities; (ii) Common Interconnection Facility Upgrades; and (iii) DSUs. The Owners agree that any transmission facilities and/or upgrades associated with generator interconnection and delivery of energy from the Plant to their respective customers will be assigned to one of the three types of facilities.
(b)	The Owners acknowledge that they will, in order to interconnect the Plant to the Transmission System, become parties to a Midwest ISO Interconnection Agreement and other definitive agreements setting forth the terms and conditions to implement the intentions expressed in Sections 2.02 through 2.13. The Owners agree to incorporate the principles and economic effect expressed herein into that Midwest ISO Interconnection Agreement and definitive agreements to the fullest extent possible. To the extent there is any conflict between this Agreement and the Midwest ISO Interconnection Agreement and other definitive agreements with regard to interconnection and transmission-related issues, those agreements shall control.
(c)	The Parties acknowledge that this Agreement must be filed with and approved by FERC. Accordingly, the Parties shall cooperate with the preparation of such filing and the pursuit of such approval.

     2.02 Generator Interconnection Study and Plan.

(a)

Interconnection Study and Updates to Request. The Owners acknowledge receipt of a copy of the Interconnection Study results. The Owners shall cooperate and promptly make any updates or revisions to the interconnection request that may be required for any proposed changes in the Plant design, size, interconnection configuration, or modeling data given in the request, recognizing that there may be additional interconnection costs incurred as a result. The E&O Committee shall approve any such changes.

(b)

Interconnection and Transmission Plan Identification. The Owners acknowledge that transmission tariffs of the Owners, Midwest ISO and other affected transmission providers in existence on the Effective Date may change one or more times prior to the date on which engineering and construction for the Common Interconnection Facilities, Common Interconnection Facilities Upgrades and DSUs must begin in order for the Plant to achieve scheduled Commercial Operation and therefore the allocation of costs for Common Interconnection Facilities and Common Interconnection Facilities Upgrades may not be readily ascertainable. In light of this, the Owners agree that they will as soon as practicable, develop, to facilitate planning and financing of the Project, a range of possible transmission scenarios and estimate the likelihood of each scenario

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occurring, with the goal of identifying the best plan for construction and usage of the Common Interconnection Facilities, Common Interconnection Facilities Upgrades and DSUs. The Owners shall use their best efforts to complete this by December 31, 2005. The development of such plans shall take into account the following goals: (i) equitable allocation of all costs (among Owners and appropriate non-Owners); (ii) to the greatest extent possible, allocation of all interconnection and delivery costs over areas wider than the Owners’ service territories; (iii) consistency with the regional transmission plans; (iv) avoidance of transmission rate pancaking to an Owner to deliver its entitlement of Capacity and Energy from the Plant to its load; (v) the intent of the Owners to implement the ownership, cost responsibility, and usage rights set forth in Sections 2.02 through 2.07 hereof; and (vi) the desire of the Owners to have a plan that will have the greatest likelihood of being permitted and constructed within the Project’s timelines; provided, however, that the Owners recognize that they may not be able to effectuate all of the above-referenced goals, and that if no single best approach is identified, the Owners shall pursue the most reasonable approach that does not unduly delay Commercial Operation.

     2.03 Common Interconnection Facilities: Ownership and Cost Responsibility.

(a)

Ownership. The Owners acknowledge that GRE, Otter Tail and WMMPA (each a “Contributing Owner”) have made investments in, and are currently the owners of certain transmission facilities (the “Contributing Owner Facilities”). Prior to Commercial Operation, the Owners shall use their respective best efforts to restructure the existing individual ownership of the Contributing Owner Facilities and structure the ownership of the new Common Interconnection Facilities so that prior to Commercial Operation each Owner will own a pro rata tenancy-in-common interest in all Common Interconnection Facilities and the right to a share of transfer capability in the Common Interconnection Facilities equal to (*). Responsibility, control and decision-making regarding the scheduling, operations and maintenance of such Common Interconnection Facilities shall vest in Otter Tail, unless otherwise agreed by the Owners. A definitive agreement shall be entered into among the Owners setting forth the maintenance arrangements for the Common Interconnection Facilities.

(b)

Cost Responsibility. The Owners acknowledge and agree that:

(i)	as of December 31, 2004, each of the Contributing Owner Facilities had a corresponding book value which shall be provided by the Contributing Owners to the other Owners as soon as reasonably practicable after the date hereof (the “Facility Book Value”);
(ii)	each Owner shall bear (*) of the total costs of the new Common Interconnection Facilities and the total value of the Contributing Owner Facilities to be provided by the Contributing Owners as soon as reasonably practicable after the date hereof; and

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(iii) the Contributing Owner shall be compensated for the Facility Book Value of the Contributing Owner Facilities (*) to the extent ownership in Contributing Owner Facilities is restructured as described in Section 2.03(a). Therefore:

(x)	in consideration of receipt of its undivided ownership interest in the new Common Interconnection Facilities and the Contributing Owner Facilities, each Owner shall (*)
(y)	in consideration of the restructured ownership and conveyance of such undivided interest in the Contributing Owner Facilities, each Contributing Owner shall (*)

     2.04 Common Interconnection Facilities Upgrades: Ownership and Cost Responsibility.

(a)	Ownership. To the extent Common Interconnection Facilities Upgrades are owned by the Owners, or any of them, the Owners shall use their best efforts to allocate ownership (*). It is contemplated that the provisions herein will be accomplished by allocating ownership in the new Common Interconnection Facilities Upgrades. The Owners acknowledge that each Owner may use the facilities comprising the Common Interconnection Facilities Upgrades, but owned by any other Owner, consistent with any applicable tariff.
(b)	Cost Responsibility. The Owners shall share in the cost of Common Interconnection Facilities Upgrades on the basis of (*). Each Owner shall be responsible for the cost of the Common Interconnection Facilities Upgrades in which it is allocated ownership pursuant to Section 2.04(a), subject to payment or credit of the difference between the cost so allocated and the cost determined on the basis of (*).
(c)	Direct Assignment Facilities (Non-Owner System). For any Common Interconnection Facilities Upgrades that are directly assigned to a non-Owner Transmission System, and the non-Owner offers such direct assignment Common Interconnection Facilities Upgrades for sale, the Owners may elect to purchase

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such facilities. If all Owners do not elect to purchase such facilities, then any Owner may elect to offer to purchase such facilities individually, subject to agreement among all Owners on a method of crediting or compensating the electing Owner for that Owner’s investment in such facilities.

(d) Operation and Maintenance Costs. Responsibility for operation and maintenance costs for Common Interconnection Facility Upgrades shall be addressed, if at all, in a separate agreement with the owners of such facility.

     2.05 Delivery Service Upgrades: Ownership and Cost Responsibility. The Owners currently contemplate two categories of DSUs: (A) “Owner System DSUs,” which shall include all DSUs made on the Transmission System of an Owner; and (B) “Non-Owner System DSUs,” which shall include all DSUs made on the Transmission System of any Person that is not an Owner.

(a) Owner System DSUs: Modifications to Existing Facilities. With respect to Delivery Service Upgrades that involve modification, upgrade, or replacement of the existing facilities belonging to an Owner, each Owner’s Ownership thereof and Cost responsibility therefor shall be as follows:

(i)

Ownership: Each Owner shall be entitled to retain one hundred percent (100%) of its ownership interest in any existing facilities (including modifications) comprising the Owner System DSUs.

(ii)

Cost Responsibility: The total cost of Owner System DSUs facilities that have been identified in the Midwest ISO delivery service request studies pursuant to the Owners’ delivery service requests (after taking into account any salvage value and unrecoverable investment in existing facilities that are to be upgraded or replaced, and the advancement costs of planned transmission projects) shall be allocated to each Owner by applying the cost allocation described in Section 2.06 hereof.

(b) Owner System DSUs: New Facilities. With respect to Delivery Service Upgrades that require the installation of new facilities and that do not fall under Section 2.04(a) hereof, each Owner’s Ownership thereof and Cost responsibility therefor shall be as follows:

(i) Ownership: The Owners agree to use their best efforts to allocate Ownership so that each Owner will, as nearly as possible, own new discrete facilities (*) (rather than jointly owning such facilities). In order to give effect to this provision, as part of finalizing any delivery service plan the Owners shall agree on a plan to transfer and/or vest title to each of the Owners in new discrete facilities and/or equipment comprising the Owner System DSUs such that each Owner receives title to Owner System DSU new facilities and/or equipment that are, as near as possible, equal in value to (*)

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By way of example, the Owners may accomplish this by assigning title to new substations and related new facilities, capacitor banks, and/or segments of transmission lines comprising the Owner System DSUs to individual Owners, or using such other methods or new facilities to which the Owners may agree.

(ii) Cost Responsibility: Notwithstanding the ratio of ownership interests in new facilities comprising Owner System DSUs set forth in Section 2.05(b)(i) above, each Owner shall be responsible for the cost of all new discrete facilities and/or equipment comprising the Owner System DSUs by applying the cost allocation described in Section 2.06 below.

(c)	Non-Owner System DSUs: Ownership. Ownership of Non-Owner System DSUs shall be as permitted by the tariff applicable to the relevant Transmission Owner.
(d)	Non-Owner System DSUs: Cost Responsibility. Each Owner shall be responsible for the cost of all Non-Owner System DSUs assessed directly to the Project by applying the cost allocation described in Section 2.06 below. Owners shall be entitled to any crediting or reimbursements that may be available pursuant to any applicable tariff in the same proportion as costs for such facilities were allocated to the Owners pursuant to this Section 2.05.
(e)	Operation and Maintenance Costs. Responsibility for operation and maintenance costs for DSUs shall be addressed, if at all, in a separate agreement with the owners of such facility.

     2.06 (*) Cost Allocation for Delivery Service Upgrades. In connection with the request made by the Owners for transmission delivery service to commence upon Commercial Operation of the Plant, certain likely and/or possible DSUs have been identified in the Midwest ISO delivery service study. As further Midwest ISO transmission delivery studies are performed the likely and/or possible DSUs may be supplemented following more definitive determinations of all DSUs. In consideration of the mutual obligations and benefits under this Agreement and as an essential element of their respective participation in the Project, the Owners agree to allocate the costs of the final DSUs identified by the Midwest ISO and agreed to by the Owners in the final interconnection and delivery plan as follows:

(a)	(*)
(b)	The amount of the costs due from each Owner based on (*) under this Section 2.06(b) shall be determined by the E&O Committee utilizing (*).
(c)	In no event shall any Owner be entitled to cost allocations hereunder for DSUs in excess of those necessary to deliver its Ownership Share of Net Energy Generation to its loads.

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     2.07 Alternative Arrangements. If after using their best efforts the Owners are unable to implement one or more of the specific facility ownership and cost allocation structures set forth in Sections 2.02 through 2.06 above, then the Owners shall use their best efforts to implement an alternative structure that is consistent with the goals of Section 2.01 hereof and, to the extent possible, results in the Owners being in the same economic positions as if the relevant Section of this Article II had been implemented; provided, however, that no Owner shall be required to: (i) sell, lease, assign or otherwise dispose of any existing facilities in order to mitigate any shortfall in the value of new facilities; or (ii) transfer or receive any facilities in such a manner that would jeopardize the tax-exempt status of that Owner’s debt. Successful implementation of any alternative structure shall not be a condition to the obligations of the Owners under this Agreement.

     2.08 Establishment and Restoration of Equitable Cost Impacts.

(a)

Establishment of Rate Impacts. As soon as reasonably practicable after the date hereof the Owners shall provide their best estimate, as of the Effective Date, of the impact (the “Baseline Rate Impact”) of the allocation to the specified Owners of the costs of the Common Interconnection Facilities, Common Interconnection Facilities Upgrades, and DSUs pursuant to Sections 2.02 through 2.07 on each such Owner’s annual transmission revenue requirements for all transmission facilities (“ATRR”). The Owners agree to periodically update such estimate as more current and reliable information becomes available, including prior to adoption of any final interconnection or transmission plan by the Owners. After actual construction of the Common Interconnection Facilities, Common Interconnection Facilities Upgrades, and DSUs pursuant to Sections 2.02 and 2.07, the Owners shall cause the E&O Committee to adopt a Final Baseline Rate Impact (the “Final Baseline Rate Impact”).

(b)

Restoration of Equitable Cost Impacts. If any Owner determines that (*) because of deviations from the cost allocation methodology agreed to by the Owners pursuant to this Agreement, and such Owner is without full cost recovery from parties other than the Owners, then such Owner shall promptly notify the other Owners. Any such notice shall be given by the later of Commercial Operation Readiness or the date that the last transmission facility (i.e., the Common Interconnection Facilities, Common Interconnection Facilities Upgrades, and DSUs) is placed in service. Upon receipt of such notice, the Owners, through the E&O Committee, shall use their best efforts to implement a true-up or other restoration mechanism, and/or payment or credit, that would result in (*). For illustration purposes only, and without limitation, the determination of the extent to which an Owner’s (*) shall take into account cost allocations required by MISO, or other Persons with jurisdiction over transmission facilities, that differ from this Agreement.

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2.09 Conditions.

(a) Conditions. In order that a final interconnection agreement with the Midwest ISO can be finalized in accordance with the Project schedule, each Owner shall in a timely fashion cooperate in the implementation of the provisions set forth in Sections 2.02 through 2.09; provided, however, no Party shall be obligated to implement any such ownership structure contemplated thereunder that would be inconsistent with the following:

(i)	each Owner shall have received all Governmental Approvals necessary to implement such ownership structures;
(ii)	each Owner shall have received any approvals or consents required by any Lender, trustee, bondholder or other Person providing any existing or proposed financing to such Owner;
(iii)	ownership and cost responsibility of the Common Interconnection Facilities, Common Interconnection Facilities Upgrades, and Delivery Service Upgrades shall be in accordance with Sections 2.02 through 2.08 above;
(iv)	the value of the Contributing Owner Facilities is recognized in accordance with Section 2.03;
(v)	implementation of any of the specific ownership structures set forth in Sections 2.03 through 2.08 shall not jeopardize the tax-exempt status of an Owner’s debt;
(vi)	any Owner that is or becomes a transmission owning member of the Midwest ISO shall have all rights under the Midwest ISO Tariff, or if not a transmission owning member of the Midwest ISO then under such other lawful tariff, in effect from time to time to: (A) recover its revenue requirements associated with its ownership of Common Interconnection Facilities, Common Interconnection Facilities Upgrades and DSUs; and/or (B) charge any lawful transmission service rate for service thereon;
(vii)	each Contributing Owner that is a transmission owning member of the Midwest ISO shall modify its transmission facilities controlled by the Midwest ISO under Appendix H of their respective MISO Agreement and adjust its rates for transmission revenue and rate recovery submitted under Attachment O and other provisions of the Midwest ISO Tariff to reflect the implementation of ownership structure for Common Interconnection Facilities pursuant to Section 2.03 (Owners who are not transmission owning members of Midwest ISO shall similarly remove the purchase price received from purchasing Owners from their transmission revenue requirements);

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(viii)

implementation of any of the proposed ownership structure of the Contributing Owner Facilities shall not be inconsistent with the terms of any grandfathered integrated transmission agreements or joint use obligations in effect and in favor of current transmission users with respect to the relevant structure; provided, however, that the Owners shall cooperate and make such revisions with respect to facility ownership restructuring, equalization accounts and facility investment records as required under such grandfathered agreements; and

(ix)

each Owner shall be responsible for its share of losses involved with transmission over the Common Interconnection Facilities and Interconnection Facility Upgrades.

(b) Waiver. The above conditions are for the benefit of each Owner and any Owner may choose to waive any or all conditions, but only as to itself.

     2.10 Financial Transmission Rights. The proceeds of any financial transmission rights that are allocated to, or received by, an Owner at no cost and as a result of the construction of any Common Interconnection Facilities, Common Interconnection Facilities Upgrades or DSUs shall be distributed to the Owners (*).

     2.11 Repayments and Credits. The Owners agree to share any and all cash repayments and credits received by any Owner from a Transmission Provider for direct assignment costs paid or embedded rate paid for such transmission Delivery Service Upgrades in accordance with this Agreement; such credits shall be calculated and determined on a discounted present value basis in accordance with commonly accepted accounting practices and procedures in a reasonable manner. The Owners shall assign or otherwise transfer any transmission credits, as necessary to effectuate the terms of this Agreement.

     2.12 Implementation of Interconnection Plan by Operator.

(a)

Construction of Common Interconnection Facilities and Common Interconnection Facilities Upgrades. The Owners shall cause the Operator to disburse Project Funds on behalf of the Owners for design, procurement, installation and construction of the Common Interconnection Facilities, the Common Interconnection Facilities Upgrades and the DSUs. The Owners shall also cause the Operator to supervise and oversee the execution of such construction as required by the Interconnection Study.

(b)

Third Party Interconnection Facility Upgrades. It is acknowledged that the Owners shall likewise cause the Operator to request and disburse Project Funds on behalf of the Owners for design, procurement, installation and construction of the Interconnection Facility Upgrades that are owned by third parties and identified in the Interconnection Study. The Owners shall also cause the Operator, on their behalf, to supervise and oversee the construction of any

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additions, modifications or upgrades of Common Interconnection Facilities Upgrades to achieve completion as required by the Interconnection Study.

     2.13 Transmission Service Requests. Each Owner acknowledges it is individually responsible for preparing and making all transmission service arrangements to deliver its entitlement from the Plant to its load. Each Owner that is not subject to the jurisdiction of the FERC under Part II of the Federal Power Act and that may own an undivided tenant-in-common interest in the Common Interconnection Facilities and the Common Interconnection Facilities Upgrades agrees to provide transmission service to the other Owners that is not unduly discriminatory or preferential; provided, however, that no Owner shall be required to provide any service that does not allow it to collect its revenue requirement and appropriate return, and to reliably serve its customers.

ARTICLE III

MISCELLANEOUS

     3.01 Incorporation by Reference. To the extent not inconsistent with the terms of this Agreement, the terms, conditions and agreements of the Participation Agreement are hereby incorporated herein by reference.

     3.02 Captions. All indexes, titles, subject headings, section titles, and similar items are provided for the purpose of reference and convenience and are not intended to affect the meaning of the content or scope of this Agreement.

     3.02 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument, and may be executed by facsimile signature, which shall be considered as an original.

[The next page is the signature page.]

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     IN WITNESS WHEREOF, the Parties hereto have caused their names to be hereunto subscribed by their officers thereunto duly authorized, intending thereby that this Agreement shall be effective as of the Effective Date.

OWNERS:
CENTRAL MINNESOTA MUNICIPAL POWER AGENCY	GREAT RIVER ENERGY
By	By
Paul Leland	David Saggau
Its President	Its President and Chief Executive Officer
HEARTLAND CONSUMERS POWER DISTRICT	SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
By	By
Michael McDowell	Raymond A. Hayward
Its General Manager	Its Executive Director and CEO
MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc.	WESTERN MINNESOTA MUNICIPAL POWER AGENCY
By	By
Bruce T. Imsdahl	Donald E. Habicht
Its President and Chief Executive Officer	Its President
OTTER TAIL CORPORATION dba Otter Tail Power Company
By
Charles S. MacFarlane
Its President

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EXHIBIT A

PARTY

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY
459 South Grove Street
Blue Earth, MN 56013
Attn: Donald E. Kom, Executive Director
Telephone: (507) 526-2193
Facsimile: (507) 526-2527
E-mail: donk@utplus.com

GREAT RIVER ENERGY
17845 East Highway 10
Elk River, MN 55330
Attn: David Saggau, President and Chief Executive Officer
Telephone: (763) 241-2286
Facsimile: (763) 241-2366
E-mail: dsaggau@grenergy.com

HEARTLAND CONSUMERS POWER DISTRICT
203 West Center Street
Madison, SD 57042
Attn: Michael McDowell, General Manager
Telephone: (605) 256-6536
Facsimile: (605) 256-2990
E-mail: mmcdow@hcpd.com

MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources, Inc.
400 North Fourth Street
Bismarck, ND 58501
Attn: Andrea L. Stomberg, Vice President – Electric Supply
Telephone: (701) 222-7752
Facsimile: (701) 222-7606
E-mail: andrea.stomberg@mdu.com

OTTER TAIL CORPORATION
dba Otter Tail Power Company
215 South Cascade St.
P.O. Box 496
Fergus Falls, MN 56538-0496
Attn: Charles MacFarlane
Telephone: (218) 739-8353
Facsimile: (218) 739-8218
E-mail: cmacfarlane@otpoc.com

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SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. Peter J. Reinarts, P.E.
Manager – Generation, Operations and Marketing
Telephone: (507) 292-6452
Facsimile: (507) 292-6414
E-mail: pj.reinarts@smmpa.org

and

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. David P. Geschwind, P.E.
Chief Operating Officer
Telephone: (507) 292-6460
Facsimile: (507) 292-6414
E-mail: dp.geschwind@smmpa.org

WESTERN MINNESOTA MUNICIPAL POWER AGENCY
25 N.W. 2^nd Street, Suite 102
Ortonville, MN 56278-1411
Attention: Mr. Don Habicht
Telephone: (320) 839-2549
Facsimile: (320) 839-2540
E-mail: david.fhmab@midconetwork.com

and

MISSOURI RIVER ENERGY SERVICES
3724 West Avera Drive
P.O. Box 88920
Sioux Falls, SD 57109-8920
Attn: Mr. Ray Wahle
Telephone: (605) 338-4042
Facsimile: (605) 978-9360
E-mail: rwahle@mrenergy.com

(*) Confidential information has been omitted and filed separately with the Commission pursuant to Rule 24b-2.

EX-10.2

Confidential information has been omitted from this Exhibit and filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2.

Exhibit 10.2

BIG STONE II POWER PLANT

Operation & Maintenance

Services Agreement

By and Among

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY,

GREAT RIVER ENERGY,

HEARTLAND CONSUMERS POWER DISTRICT,

MONTANA-DAKOTA UTILITIES CO., A DIVISION OF MDU
RESOURCES GROUP, INC.,

OTTER TAIL CORPORATION dba OTTER TAIL POWER
COMPANY,

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, AND

WESTERN MINNESOTA MUNICIPAL POWER AGENCY,

As Owners,

and

OTTER TAIL CORPORATION dba OTTER TAIL POWER
COMPANY,

As Operator

JUNE 30, 2005

Operation and Maintenance Services Agreement	Page i
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TABLE OF CONTENTS

			Page
OPERATION AND MAINTENANCE SERVICES AGREEMENT				1
ARTICLE I RULES OF CONSTRUCTION AND INTERPRETATION; DEFINED TERMS				2
	1.01	Rules of Construction		2
	1.02	Interpretation with the 2005 Joint Facilities Agreement		2
	1.03	Interpretation with Participation Agreement		3
	1.04	Defined Terms		3
ARTICLE II TERM & TERMINATION				14
	2.01	Term		14
	2.02	Suspension or Termination		14
	2.03	Suspension and Termination Payments		15
	2.04	Surviving Provisions		16
ARTICLE III OWNERS’ RIGHTS & RESPONSIBILITIES				16
	3.01	Engineering and Operating Committee		16
	3.02	Documents		17
	3.03	Utilities		17
	3.04	Fuel and Fuel Transportation		17
	3.05	Trust Account		17
	3.06	Authorizations		17
	3.07	Fines & Penalties		17
	3.08	Additional Agreements		17
	3.09	Notifications		18
	3.10	Audits		18
	3.11	On-Site Owner Representative		19
	3.12	Operation by Owners		19
	3.13	Monthly Financial Statements		19
ARTICLE IV OPERATOR RIGHTS & RESPONSIBILITIES				20
	4.01	Scope of Services		20
	4.02	Operational Standards		22
	4.03	Personnel		22
	4.04	Plant Manager		23
	4.05	Training		23
	4.06	Procurement		23
	4.07	Records and Reports		25
	4.08	BSP II Manuals		26
	4.09	Authorizations		26
	4.10	Notifications		26
	4.11	Emergency Actions		27

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	4.12	Cooperation in Financing	28
	4.13	Cooperation Following Termination	28
	4.14	Liens or Encumbrances	29
	4.15	Authority Limitations	29
ARTICLE V BUDGET AND OPERATING PLAN PROCEDURES			30
	5.01	Pre-Commercial Operation	30
	5.02	Operations Period	31
ARTICLE VI CONSIDERATION			32
	6.01	Compensation	33
ARTICLE VII INSURANCE			33
	7.01	Provided by Owners	33
	7.02	Provided by Operator	34
	7.03	Premiums & Deductibles	34
	7.04	Replacement Insurance By Operator	35
	7.05	Replacement Insurance By Owner	35
ARTICLE VIII INDEMNIFICATIONS			35
	8.01	Owners’ Indemnification	35
	8.02	Operator Indemnification	35
	8.03	Comparative Liability	35
	8.04	Notice and Participation	36
	8.05	Net Amount	37
ARTICLE IX DEFAULTS & REMEDIES			37
	9.01	Operator Events of Default	37
	9.02	Owners Events of Default	38
	9.03	Procedure and Remedies	38
	9.04	Operator Liability Limiting Events	38
	9.05	Remedies Cumulative	39
ARTICLE X LIABILITY LIMITATIONS			39
	10.01	No Consequential Damages	39
	10.02	No Warranties or Guarantees	39
	10.03	Assertion of Claims	40
ARTICLE XI DISPUTE RESOLUTION			40
	11.01	Resolution By Coordination Committee	40
	11.02	Continued Performance	40
ARTICLE XII REPRESENTATIONS & WARRANTIES			40
	12.01	Of Each Party	40
ARTICLE XIII MISCELLANEOUS			41
	13.01	Access	41

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	13.02	Cooperation of the Parties	42
	13.03	Force Majeure Event	42
	13.04	Publicity Policy	42
	13.05	Notices	43
	13.06	Transfers & Assignments	43
	13.07	Late Payments	44
	13.08	Third-Party Beneficiaries	45
	13.09	Title Passage	45
	13.10	Relationship of Parties	45
	13.11	Entire Agreement	45
	13.12	Amendments	45
	13.13	Governing Law	45
	13.14	Consent to Jurisdiction	45
	13.15	Waiver Of Trial By Jury	46
	13.16	Severability	46
	13.17	Waiver	46
	13.18	Counterparts	46
	13.19	Captions	46
EXHIBIT A			48
SCHEDULE 1.04			50
SCHEDULE 4.01			51
SCHEDULE 5.02(b)(i)			62

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Operation and Maintenance

Services Agreement

     THIS OPERATION AND MAINTENANCE SERVICES AGREEMENT (the “Agreement”) dated as of June 30, 2005 (the “Effective Date”), by and among Central Minnesota Municipal Power Agency, an agency incorporated under the laws of Minnesota (“CMMPA”), Great River Energy, a cooperative corporation incorporated under the laws of Minnesota (“GRE”), Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law (Chapter 49-35 of the South Dakota Codified Laws) (“Heartland”), Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a corporation incorporated under the laws of the State of Delaware (“Montana-Dakota”), Otter Tail Corporation, a corporation incorporated under the laws of Minnesota (“Otter Tail”), Southern Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“SMMPA”), and Western Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“WMMPA”) (each an “Owner” and collectively, the “Owners”) and Otter Tail, in its capacity as operator of BSP I and/or BSP II (“Operator”). Each of the Owners and the Operator is referred to herein individually as a “Party,” and collectively as the “Parties.”

RECITALS

     WHEREAS, Owners, for as long as they remain Owners, along with such other Persons that from time to time may be Owners of BSP II, are the developers and owners of the new, approximately 600 MW coal-fired electric generating plant in Big Stone City, South Dakota known as BSP II (as such term is defined below); and

     WHEREAS, Otter Tail owns fifty-three and nine-tenths percent (53.9%) of BSP I (as such term is defined below) and currently operates BSP I for itself, Montana-Dakota, and NorthWestern Corporation (formerly known as NorthWestern Public Service Company), a corporation incorporated under the laws of the State of Delaware, doing business as NorthWestern Energy (“NorthWestern”); and

     WHEREAS, on June 30, 2005, CMMPA, GRE, Heartland, Montana-Dakota, NorthWestern, Otter Tail, SMMPA, and WMMPA entered into the Joint Facilities Agreements (as such term is defined below); and

     WHEREAS, Owners believe that certain cost savings, efficiencies and economies can be realized through the joint operation and maintenance of BSP I and BSP II, and through the utilization of the experience and expertise which Operator has obtained from its operation and maintenance of BSP I; and

     WHEREAS, Owners desire to retain Operator to provide the Services (as such term is defined below) for BSP II, and Operator desires to perform the Services, upon the terms and conditions set forth in this Agreement.

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     NOW, THEREFORE, in consideration of the agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound by this Agreement, the Parties covenant and agree as follows:

ARTICLE I

RULES OF CONSTRUCTION AND INTERPRETATION; DEFINED TERMS

     1.01 Rules of Construction. The capitalized terms listed in this Article shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings as commonly used in the English language and, where applicable, in Prudent Utility Practice (as such term is defined below). Words not otherwise defined herein that have well-known and generally accepted technical or trade meanings are used herein in accordance with such recognized meanings. In addition, the following rules of interpretation shall apply:

(a)	The masculine shall include the feminine and neuter.
(b)	References to “Appendices,” “Articles,” “Sections,” “Schedules” or “Exhibits” shall be to appendices, articles, sections, schedules or exhibits of this Agreement. Any references to “Appendices,” “Sections,” “Schedules,” or “Exhibits” shall be deemed to mean, as applicable, as the same may be amended from time to time in accordance with the provisions of this Agreement.
(c)	This Agreement was negotiated and prepared by each of the Parties with the advice and participation of counsel. The Parties have agreed to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such Party is the author of this Agreement or any part hereof.
(d)	The Parties shall act reasonably and in accordance with the principles of good faith and fair dealing in the performance of this Agreement. Unless expressly provided otherwise in this Agreement, (i) where the Agreement requires the consent, approval, or similar action by a Party, such consent or approval shall not be unreasonably withheld, conditioned or delayed, and (ii) wherever the Agreement gives a Party a right to determine, require, specify or take similar action with respect to a matter, such determination, requirement, specification or similar action shall be reasonable.

     1.02 Interpretation with the Joint Facilities Agreements. The Parties, recognizing that they have entered into the Joint Facilities Agreements with each other and NorthWestern:

(a)	acknowledge that the terms of this Agreement are not binding upon NorthWestern; and
(b)	notwithstanding any other provision in this Agreement, nothing in the Joint Facilities Agreements (as such term is defined below) shall alter or modify a Party’s rights, duties and obligations under this Agreement. This Agreement shall

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not be construed to create any rights between the Parties and any Third Party, except to the extent specifically provided herein.

     1.03 Interpretation with Participation Agreement. The Parties recognize that they are contemporaneously entering into that certain Participation Agreement dated as of June 30, 2005 (the “Participation Agreement”) which defines, governs and controls the relationship between the Owners in connection with their ownership of BSP II.

1.04 Defined Terms.

     In addition to definitions of other terms appearing elsewhere in this Agreement, the following terms, when used herein, have the meanings specified:

     Additional Agreement: Shall mean:

(a)	any contract, instrument or agreement; or
(b)	any amendment, modification or supplement to, or restatement of, a Project Document; in either case that (i) is entered into after the Effective Date, and (ii) may materially affect Operator’s obligations or liabilities under this Agreement, the performance of the Services, BSP II or the Joint Facilities.

     Affiliate(s): Shall mean with respect to any Person:

(a)	any Person that directly or indirectly, controls or is controlled by or is under common control with such Person; or
(b)	any Person that beneficially owns or holds fifty percent (50%) or more of any class of voting securities of such Person or owns or holds fifty percent (50%) or more of an ownership interest (on a fully diluted basis) in such Person.

For the purposes of this definition, “control,” “controlled by,” and “under common control with,” mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by contract or otherwise. Notwithstanding the foregoing provisions, Operator and Owners (except with regard to Otter Tail) shall not be deemed to be Affiliates of each other and any Person that is otherwise an Affiliate of Operator shall not be deemed to be an Affiliate of Operator for purposes of this Agreement to the extent such Person is acting in its capacity as an Owner or as a Representative of an Owner.

     Agreement: Shall mean this Agreement, as amended from time to time.

     Applicable Law: Shall mean:

(a)	any and all Laws enacted, issued or promulgated by a Governmental Authority;
(b)	any and all orders, judgments, writs, decrees, injunctions, Governmental Approvals or other decisions of a Governmental Authority; and
(c)	any and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (a) or (b) of this definition, enacted, issued or promulgated by a Governmental Authority;

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to the extent, for each of the foregoing in (a), (b) and (c) of this definition, applicable to or binding upon (i) BSP II; (ii) a Party, its Affiliates, its members, it partners or their respective Representatives, to the extent any such Person is engaged in activities related to BSP II; or (iii) the property of a Party, its Affiliates, its members, its partners or their respective Representatives, to the extent such property is used in connection with BSP II or an activity related to BSP II.

     Authorization: Shall mean any corporate, governmental or other license, permit, approval, entitlement, allowance, franchise, or other authorization, including Governmental Approvals, applicable to or binding upon:

(a)	BSP II;
(b)	a Party, its Affiliates, its partners or their respective Representatives, to the extent any such Person is engaged in activities related to BSP II; or
(c)	the property of a Party, its Affiliates, its partners or their respective Representatives, to the extent such property is used in connection with BSP II or an activity related to BSP II.

     Bankruptcy: Shall mean with respect to a Person, any situation in which:

(a)

such Person (i) applies for or consents to the appointment of, or the taking of possession by, a trustee, receiver, custodian, liquidator or the like of itself or of all or a substantial part of its property; (ii) admits in writing its inability, or becomes generally unable, to pay its debts as such debts become due; (iii) makes a general assignment for the benefit of its creditors or takes any other similar action for the protection or benefit of its creditors; (iv) commences a voluntary case under the Federal Bankruptcy Code; (v) files a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, composition or adjustment of debts or other relief for debtors; or (vi) takes any action for the purpose of effecting any of the foregoing; or

(b)

a proceeding or case is commenced without the application or consent of such Person in any court of competent jurisdiction, seeking (i) such Person’s liquidation, reorganization, dissolution, winding-up, composition or readjustment of its debts or other relief for its debtors; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person or of all or a substantial part of its property under any law relating to bankruptcy, insolvency, reorganization, winding-up, composition or adjustment of its debts or other relief for its debtors; or (iii) a warrant of attachment, execution or similar process against all or a substantial part of the assets of such Person; and such proceeding or case shall continue undismissed, or any order, judgment or decree approving or ordering any of the foregoing in (b) (i), (ii) or (iii) of this definition shall be entered and continue unstayed and in effect, for a period of ninety (90) or more days, or any order for relief against such Person shall be entered in an involuntary case under the Federal Bankruptcy Code.

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     Benefits: Shall mean:

(a)	time for which Operator’s employees are paid but during which they are not actually working including, but not limited to, vacations, company holidays, floating holidays, sick leave, jury duty, funeral leave, parental leave, military leave, paid time off, weather-related limitations on work, rest periods, standby pay, and any excused absences;
(b)	accrued vacations (for which the employees have not yet been paid); provided, however, that such amounts shall not be double-counted;
(c)	expenses of, and related to, other reasonable and customary Benefits, including, but not limited to, employee stock ownership plans, employee stock purchase programs, employee charitable donation matching programs, education expense reimbursement programs, employee assistance programs, adoption assistance, and employee interest free financing programs;
(d)	pension plan expenses, post-retirement medical expenses and long-term disability medical expenses, actuarially calculated per the guidelines of FASB 87, FASB 106 and FASB 112, respectively, the cost of the employer’s match of employees’ 401(k) contributions (per Operator’s company policy), and any other retirement and post-retirement benefits, costs and expenses;
(e)	the employer’s share of medical, vision, dental, accidental death and dismemberment insurance, disability and life insurance benefits for Operator’s employees and their dependents;
(f)	the employer’s share of Social Security and Medicare tax and government mandated disability insurance, unemployment insurance, and workers’ compensation insurance and benefits; and
(g)	without duplication, any benefits provided pursuant to collective bargaining agreements.

     Blanket Easement Agreement: Shall mean that certain easement agreement dated June 30, 2005 by and among the Parties and NorthWestern.

     BSP I: Shall mean the existing 450 MW coal-fired electric generating plant located in Grant County, South Dakota, and owned by Otter Tail, NorthWestern and Montana-Dakota.

     BSP Workforce: Shall mean those employees of Operator who perform work on behalf of BSP II at BSP II.

     BSP II or Plant: Shall mean the new, approximately 600 MW coal-fired electric generating plant to be located adjacent to BSP I, and owned jointly by the Owners.

     BSP II Manuals: Shall mean, with respect to BSP II:

(a)	the administrative policies and procedures manual(s);
(b)	the operations and maintenance manual(s);

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(c)	the safety manual(s);
(d)	the environmental compliance manual(s);
(e)	the training manual(s);
(f)	the emergency response plan; and
(g)	any other manuals or plans (except for accounting and operating records, logs and reports) associated with operation and maintenance of BSP II or performance of the Services that are, in either case, required by this Agreement, Applicable Law or that are routinely prepared by Operator;

in each case as the same may be amended, supplemented or replaced from time to time.

     Business Day: Shall mean any day other than Saturday, Sunday or a weekday that is a legal holiday in the State of South Dakota.

     Capacity: Shall mean an electrical rating expressed in megawatts (MW).

     CMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

     Commencement Date: Shall mean the date, as set forth in a Notice prepared by Owners and delivered to Operator in accordance with Section 2.01, on which Operator assumes the full care, custody and control of the operation and maintenance of BSP II.

     Commercial Operation: Shall mean that the Plant is operating and producing Capacity and Energy on a continuous basis, and is delivering such Energy to the Owners in accordance with Prudent Utility Practice and Applicable Law.

     Construction Contracts: Shall mean the contracts and agreements for the construction of BSP II, including any transmission or other interconnection facilities, that are duly authorized and executed.

     Default Budget: Shall mean, in the absence of an approved Operating Plan & Budget for performing the Services due to a disagreement between the Parties, the cost budget prepared by Operator in accordance with Section 5.02(c).

     Demobilization Costs: Shall mean the costs and expenses reasonably incurred and paid or payable by Operator as a result of a suspension of the Services or a termination of this Agreement as contemplated in Section 2.03(b), including, without limitation, any cancellation or termination charges incurred by Operator in accordance with any BSP II or Services related agreement to which Operator is a party and that is not assigned to Owners.

     Demobilization Invoice: Shall mean the invoice for Demobilization Costs prepared by Operator and submitted to Owners in accordance with Section 2.03(b).

     Dispute: Shall mean any controversy, dispute or claim between the Parties in connection with, relating to, or arising out of this Agreement (including any question regarding a controversy’s, dispute’s or claim’s existence, validity, interpretation, or termination or the performance or non-performance of a Party) that cannot be resolved informally by the Plant

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Manager and the Engineering and Operating Committee within seven (7) days of such controversy, dispute or claim being brought to the attention of one Party by another Party.

     Effective Date: Shall have the meaning given to that term in the preamble to this Agreement.

     Emergency: Shall mean any condition or circumstance related to BSP I, BSP II or the Joint Facilities that, in the reasonable opinion of Operator, requires prompt action in order to avoid or mitigate personal injury, substantial property damage, violation of an Applicable Law or any other material adverse impact on BSP II, the Parties, any other Person, or the performance of the Services.

     Energy: Shall mean energy having characteristics commonly known as three phase alternating current, with a nominal frequency of sixty (60) Hertz, a nominal voltage equivalent to that of Otter Tail’s or its successor’s transmission system, and measured in kilowatt-hours (kWh) or megawatt-hours (MWh).

     Engineering and Operating Committee or E&O Committee: Shall have the meaning given to such terms in Section 3.01.

     Escalation Factor: Shall mean the Gross Domestic Product Implicit Price Deflator as published routinely by the Bureau of Economic Analysis, U. S. Department of Commerce, its successor or such other reasonably appropriate indicator of inflation agreed to in writing by the Parties.

     FASB: Shall mean the Financial Accounting Standards Board or any successor thereof.

     Final Expenses & Fees Invoice: Shall mean the invoice prepared by Operator and submitted to Owners in the event of termination of this Agreement in accordance with Section 2.03(a).

     Force Majeure Event: A cause or event beyond the reasonable control of, and without the fault or negligence of the Party, including, without limitation, an Emergency, act of God; flood, earthquake, hurricane, or tornado and the like; sabotage; vandalism beyond that which could reasonably be prevented by a Party; terrorism; war; riot; fire; explosion; blockade; insurrection; strike, slow down or labor disruption (even if such could be resolved by conceding to the demands of a labor group); and action or failure to take actions by any Governmental Authority after the Effective Date (including, without limitation, the adoption or change in any Law, but only if such action or failure to take action prevents or delays performance) and the inability, despite due diligence, to obtain any license, permit, or approval required by any Governmental Authority; provided, however that an Owner’s action or failure to take any action if such Owner is a Governmental Authority shall not be deemed a Force Majeure Event; provided, however, that the occurrence of a Force Majeure Event shall not excuse or relieve a Party from any payment obligations hereunder.

     Fully Loaded Wages: Shall mean the sum of the following: Wages + (Wages x Labor Loading).

     Governmental Approvals: Shall mean any and all Authorizations issued or granted by any Governmental Authority to BSP II or to any Party, its Affiliates, its partners, its members or their

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respective Representatives in connection with such Person’s participation in any activity related to BSP II.

     Governmental Authority(ies): Shall mean any federal, state, local or municipal governmental body; any governmental, quasi-governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; any court or governmental tribunal; any independent system operator, regional transmission organization, reliability organization, or other regulatory body; in each case having jurisdiction over any Owner, the Operator, the Project, Site, or the transmission system to which either Plant is interconnected.

     GRE: Shall have the meaning given to such term in the preamble to this Agreement.

     Heartland: Shall have the meaning given to such term in the preamble to this Agreement.

     Indemnified Party: Shall mean any Person entitled to be indemnified pursuant to this Agreement.

     Indemnifying Party: Shall mean the Party required to indemnify the Indemnified Party pursuant to this Agreement.

     Joint Facilities: Shall mean those facilities identified as such in the Joint Facilities Agreements.

     Joint Facilities Agreements: Shall mean that certain Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated as of June 30, 2005, by and among CMMPA, GRE, Heartland, Montana-Dakota, NorthWestern, Otter Tail, SMMPA, and WMMPA, a copy of which is attached hereto as Schedule 1.04., the Option to Purchase Contract, and the Blanket Easement Agreement.

     Key Performance Indicators or KPIs: Shall mean those performance indicators that the E&O Committee may use to measure the operating performance under this Agreement, including, without limitation, those KPIs listed on Schedule 5.02(b)(i) hereto.

     Labor Expenses: Shall mean:

(a)	the Fully Loaded Wages of the BSP Workforce;
(b)	the Fully Loaded Wages of Operator’s employees who are not members of the BSP Workforce who provide services for the benefit of and directly attributable to BSP II, plus a (*) thereon; and
(c)	all directly attributable, legitimate and verifiable costs of administering the compensation and Benefit programs and any such other costs and expenses relating to the employment or employment termination of the BSP Workforce, but excluding any bonuses paid to the BSP Workforce (unless required by a collective bargaining agreement).

     Labor Loading: Shall mean a percentage equal to the ratio of the total cost of Benefits to the total Wages paid for all employees working in Operator’s electric utility operations.

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     Laws: Shall mean any and all federal, state, and local statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, governmental agreements and governmental restrictions of any Governmental Authority, whether now or hereafter in effect.

     Lender: Shall mean a Person providing financing or refinancing to any Owner in connection with the development, construction, alteration, rehabilitation, or working capital needs of BSP II.

     Lenders’ Consent: Shall have the meaning given to such term in Section 4.12.

     Liability Limiting Event: Shall have the meaning given to such term in Section 9.04.

     Losses: Shall mean, with respect to a Party, its Affiliates, its partners or their respective Representatives, any and all costs, expenses, liabilities, damages, injuries or other financial losses of any kind or nature, including fines, penalties, claims, awards, judgments, demands, insurance deductibles, court costs and reasonable attorneys’ fees, incurred by such Person.

     Manufacturers’ Recommendations: Shall mean the written instructions, procedures and recommendations relating to the operation, maintenance and repair of equipment used at BSP II which are issued by the manufacturer of such equipment, and any revisions thereto, issued by the manufacturer, which:

(a)	have been delivered to Operator;
(b)	are consistent with the requirements, if any, of the insurance underwriters for BSP II; and
(c)	have not been superseded by written agreement of Owners and Operator.

     MAPP: Shall mean the Mid-Continent Area Power Pool or any successor thereof.

     Montana-Dakota: Shall have the meaning given to such term in the preamble to this Agreement.

     Non-Recurring Operating Expenses: Shall mean Operating Expenses that do not occur or are not expected to occur consistently at least once every year.

     Notice: Shall mean a written communication regarding:

(a)	the occurrence of an event related to BSP II or the Joint Facilities;
(b)	the intent to take or omit to take any action related to BSP II or the Joint Facilities;
(c)	a consent, approval or the request therefor;
(d)	other similar type of communication related to BSP II or the Joint Facilities; or
(e)	any other communication required to be given under this Agreement;

delivered, in each of the foregoing in (a), (b), (c), (d), and (e) of this definition, by one Party to the other Party or to a Lender in accordance with Sections 3.09 and 13.05 of this Agreement.

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     Notification Matrix: Shall mean the specific procedures for notifications by Operator as required by Applicable Law and Section 4.10.

     On-Site Representative: Shall mean the individual designated by an Owner or Owners in accordance with Section 3.11.

     Operating Expenses: Shall mean, without duplication, all properly authorized and directly attributable BSP II costs and expenses incurred in connection with Operator’s provision of Services in accordance with this Agreement, including, without limitation:

(a)	Labor Expenses, to the extent they are the result of direct, legitimate and verifiable services provided for the benefit of BSP II;
(b)	costs and expenses incurred in connection with the procurement and delivery of goods and services from Third-Party Suppliers and the administration of procurement contracts;
(c)	costs and expenses incurred in connection with reactive, preventive and predictive maintenance and repairs;
(d)	costs incurred in connection with capital improvements, additions, replacements and alterations; however, all such costs shall be separately accounted for and reported to Owner as capital improvements prepared pursuant to the Federal Energy Regulatory Commission’s Uniform System of Accounts;
(e)	costs and expenses incurred in connection with Emergencies, Force Majeure Events and Changes in Law;
(f)	costs and expenses incurred in connection with the use or consumption of water supply and telephone and other utility-related services;
(g)	costs and expenses incurred in connection with ash and waste handling and disposal;
(h)	costs and expenses incurred in connection with training the BSP Workforce;
(i)	costs and expenses incurred in connection with obtaining, maintaining and administering insurance protection, including, but not limited to, policy premiums, deductibles, self-insured retentions, broker fees and claims administration costs.
(j)	costs and expenses incurred in connection with legal, accounting, engineering and other professional services;
(k)	costs and expenses incurred in connection with Site security;
(l)	costs and expenses incurred in connection with obtaining, maintaining, renewing, extending and complying with Laws, Governmental Approvals and other Authorizations;

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(m)	costs and expenses incurred pursuant to and within the limitations of the Pre-Commercial Operation Operating Plan & Budget or the applicable Operating Plan & Budget, as the case may be;
(n)	Permitted Overruns;
(o)	fines paid by Operator relating to BSP II or the operations thereof that are not caused by the Willful Action of the Operator;
(p)	the Operator Incentive;
(q)	the obligations of the BSP II Owners pursuant to the Joint Facilities Agreements;
(r)	taxes or assessments by Governmental Authorities, including sales and gross receipts taxes, duties and levies, except for Operator’s income taxes and any taxes or assessments that are levied directly against any Owner; or
(s)	costs and expenses otherwise authorized by this Agreement or approved by the Owners.

To the extent that any cost or expense described above benefits BSP I and/or the Joint Facilities as well as BSP II, for the purposes of this Agreement such costs shall be Operating Expenses to the extent they are allocated to BSP II by the Joint Facilities Agreements or are otherwise legitimately allocable to BSP II.

     Operating Plan & Budget: Shall mean the operating plan and cost budget for performing the Services during the year specified in such plan and budget, approved by Owners in accordance with Section 5.02(b).

     Operator: Shall have the meaning given to such term in the preamble to this Agreement.

     Operator Event of Default: Shall have the meaning given to such term in Section 9.01.

     Operator Incentive: Shall mean (*), as adjusted annually using the Escalation Factor.

     Operator Indemnitee: Shall mean each of Operator and its respective Representatives, who is entitled to indemnification by Owners in accordance with Section 8.01.

     Option to Purchase Contract: Shall mean that certain option to purchase contract dated June 30, 2005 by and among the BSP I Owners and Otter Tail, as administrative agent on behalf of itself and the other BSP II Owners.

     Otter Tail: Shall have the meaning given to such term in the preamble to this Agreement.

     Overdue Payment Rate: Shall mean the interest rate published in The Wall Street Journal, Eastern edition, as the “prime rate” as of the date a payment required by this Agreement to which the Overdue Payment Rate is applied is first due and payable, plus an additional four percent (4%) per annum.

     Owner Indemnitee: Shall mean each of Owners, its partners and Affiliates, and their respective Representatives, who is entitled to indemnification by Operator in accordance with Section 8.02.

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     Owner(s): Shall mean those Persons designated as Owners under the Participation Agreement.

     Owners Event of Default: Shall have the meaning given to such term in Section 9.02.

     Participation Agreement: Shall have the meaning given to such term in Section 1.03.

     Party or Parties: Shall have the meaning given to such term in the preamble to this Agreement.

     Permitted Overrun(s): Shall mean any Operating Expense incurred in accordance with Prudent Utility Practices that is in excess of the budget for any given line item for such Operating Expenses as set forth in the Pre-Commercial Operation Operating Plan & Budget.

     Person: Shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint-stock company, a business trust, consumers powers district, cooperative, unincorporated association, government or any subdivision thereof, or an organized group of individuals (whether incorporated or not), or a receiver, trustee or other liquidating agent of any of the foregoing in his capacity as such.

     Plant Manager: Shall mean that individual designated by Operator, in accordance with Section 4.04, to act as the representative of Operator in matters relating to this Agreement.

     Pre-Commercial Operation Operating Plan & Budget: Shall mean the operating plan and cost budget for performing the Services during the Pre-Commercial Operation Period approved by the Parties in accordance with Section 5.01(b).

     Pre-Commercial Operation Period: Shall mean the period beginning with the date of approval of the Proposed Pre-Commercial Operation Operating Plan & Budget and ending with and including the day prior to the date of Commercial Operation.

     Project: Shall mean the undertaking of the Owners with respect to the development and construction of BSP II as set forth in Section 2.01 of the Participation Agreement.

     Project Documents: Shall mean any and all documents, agreements and Governmental Authorizations, as such may be amended from time to time, in accordance with their respective terms, related to the Plant and the Project.

     Proposed Operating Plan & Budget: Shall mean the proposed plan of operations and cost budget for a specified year prepared by Operator and submitted to Owners in accordance with Section 5.02(a).

     Proposed Pre-Commercial Operation Operating Plan & Budget: Shall mean the proposed cost budget and plan for performing Services during the Pre-Commercial Operation Period prepared by Operator and submitted to Owners in accordance with Section 5.01(a).

     Prudent Utility Practice: Shall mean any of the practices, methods or acts required by Applicable Law, the National Electric Safety Code, the Midwest Independent Transmission System Operator, Inc., any other applicable regional transmission organization, the North American Electric Reliability Council, or the successors of any of them, whether or not a Party is a member thereof, or otherwise engaged in or approved by a significant portion of the utility

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electric generation industry during the relevant time period or any of the practices, methods and acts that in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the Upper Midwest region.

     Reasonable Efforts: Shall mean a level of effort which, in the exercise of reasonable judgment in the light of facts or circumstances known, or which should reasonably be known, at the time a decision is made, can be expected by a reasonable Person to accomplish the desired result in a manner consistent with Prudent Utility Practice.

     Representative: Shall mean, with respect to a Party, any principal, shareholder, director, officer, employee or agent of such Party or its Affiliates, but only to the extent, in each case, such individual is engaged in the fulfillment of an obligation under this Agreement and is fulfilling such obligation in his or her capacity as a principal, shareholder, member, director, officer, employee or agent of such Party or its Affiliate.

     Services: Shall mean the obligations of Operator as set forth in this Agreement.

     Site: Shall mean the real property on which BSP II and the Joint Facilities are located, together with any easements, leases, licenses, option rights, rights-of-way, and other rights used in connection with BSP II.

     SMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

     Successor Operator: Shall mean the Person engaged by the Owners to operate BSP II upon the termination of this Agreement.

     Term: Shall have the meaning given to such term in Section 2.01 of this Agreement.

     Third Party(ies): Shall mean any Person other than a Party or an Affiliate of a Party.

     Third-Party Supplier: Shall mean any Person other than Operator and its Affiliates engaged by Operator to perform any portion of the Services, including supplying goods, in accordance with this Agreement.

     Third-Party Losses: Shall mean, with respect to a Person other than a Party and their respective Affiliates, any and all claims by such Person for any and all costs, expenses, liabilities, damages, injuries or other financial losses of any kind or nature, including fines, penalties, claims, awards, judgments, demands, insurance deductibles, court costs and attorneys’ fees.

     Trust Account: Shall mean the segregated trust account already established by Operator, in accordance with Section 3.05, for the payment of Operating Expenses.

     Trust Account Deposit: Shall have the meaning given to such term in Section 3.05.

     Wages: Shall mean all wages and salaries for all time worked by Operator’s employees, as contemplated by this Agreement, including, but not limited to, overtime and other wage premiums.

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     Willful Action: Shall mean any act or omission of a Party (including an Owner acting as Operator), done or not done, at the direction of its directors, a corporate officer or Plant Manager in respect of the matter involved, which:

(a)	is knowingly or intentionally done or not done with conscious indifference to the consequences, or with the expectation that injury or damage to other Owners or any other Person would, or would be reasonably likely to, result therefrom, which results in a material breach of any provision of this Agreement; or
(b)	is determined by final judgment or decree of a court having jurisdiction, to be a material default under this Agreement, and occurs or continues beyond the time specified in such judgment or decree for curing such default, or if no time to cure is specified therein, occurs or continues beyond a reasonable time to cure such default.

     WMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

ARTICLE II

TERM & TERMINATION

     2.01 Term. The term of this Agreement shall begin on the Effective Date and shall continue for twenty (20) years after the first day of Commercial Operation unless terminated earlier in accordance with the terms hereof (the “Term”). Owners shall deliver to Operator a Notice not later than sixty (60) days prior to the Commencement Date.

     2.02 Suspension or Termination.

(a) By Owners.

(i)	Owners may terminate this Agreement in accordance with Section 9.03 following an Operator Event of Default.
(ii)	Owners may terminate this Agreement in the event a Force Majeure Event that prevents operation of the Plant for a period of twelve (12) months or more; provided that Owners deliver a Notice of termination to Operator at least sixty (60) days prior to the effective date of such termination.
(iii)	Owners may terminate this Agreement for (*); provided that Owners deliver a Notice of termination to Operator at least one hundred eighty (180) days prior to the effective date of such termination; and provided further, that Owners may not terminate this Agreement (*).
(iv)	If the Plant becomes incapable of operation at any time after it commences Commercial Operation, and the Plant cannot reasonably be expected to recommence operations for a period of twelve (12) months or longer, then Owners may require that Operator suspend performance of all or any portion of the Services for such period, by delivering a Notice to Operator of such suspension. In such event, Operator shall be relieved of any obligation to perform the suspended Services during the period of

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suspension; provided that if such suspension follows an Operator Event of Default, such suspension shall not relieve Operator of any liability to Owners resulting from such Operator Event of Default.

(b) By Operator.

(i)	Operator may terminate this Agreement in accordance with Section 9.03 following an Owners Event of Default.
(ii)	Operator may suspend performance of the Services following an Owners Event of Default. Such suspension shall not relieve Owners of any liability to Operator resulting from such Owners Event of Default. The suspension shall end after the default is cured.
(iii)	Operator may terminate this Agreement (*).

     2.03 Suspension and Termination Payments.

(a) Expenses and Fees.

(i)

If this Agreement is terminated for any reason before the first date of Commercial Operation, then, no later than sixty (60) days following such termination, Owners shall, without duplication of any amounts otherwise paid in accordance with this Agreement: (A) pay to Operator a sum equal to four (4) months of Fully Loaded Wages of Operator’s employees who provide services exclusively for the benefit of BSP II, and (B) pay to any other Owner a sum equal to four (4) months of wages and benefits of any of such Owner’s employees who have been authorized to work exclusively for the benefit of BSP II.

(ii)

Not later than sixty (60) days following termination of this Agreement for whatever reason, Operator shall submit to Owners the Final Expenses & Fees Invoice which shall describe, in detail and with supporting documentation reasonably acceptable to Owners and without duplication of any amounts in any other invoice prepared in accordance with this Agreement, the following:

(1)	any and all Operating Expenses that: (A) were incurred by Operator in accordance with this Agreement, (B) were paid or are payable by Operator using other than Owners’ funds (including such funds that have been deposited in the Trust Account) and (C) were not previously reimbursed by Owners;
(2)	any Operator Incentive due to Operator and accrued prior to termination of this Agreement which has not previously been paid by Owners;
(3)	any and all reasonable costs and expenses incurred by Operator in connection with the performance of its termination cooperation obligations as set forth in Section 4.13;

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(4)	any and all amounts due from Operator to Owners pursuant to this Agreement, which amounts shall be offset against amounts due Operator; and
(5)	any damages determined by Operator to be due to Operator by reason of an Owners Event of Default or, if such amount cannot then be determined, such amounts as Operator estimates are likely to be due to Operator as damages by reason of such Owners Event of Default.

(iii) Not later than thirty (30) days after receiving the Final Expenses & Fees Invoice, Owners shall pay to Operator in immediately available funds the total amount due, as such amount is set forth in the Final Expenses & Fees Invoice; provided, however, that any disputed amounts shall be deposited into the Trust Account, pending resolution of any such Dispute. Any Dispute regarding the Final Expenses & Fees Invoice shall be resolved pursuant to Article XI of this Agreement.

(b) Demobilization. Not later than one hundred eighty (180) days after (i) suspension of the Services by Owners; or (ii) termination of this Agreement for any reason other than in accordance with Section 9.01 for an Operator Event of Default; Operator shall submit to Owners the Demobilization Invoice which shall describe the Demobilization Costs in detail and with supporting documentation reasonably acceptable to Owners. Not later than thirty (30) days after receiving the Demobilization Invoice, Owners shall either dispute the Demobilization Invoice or pay to Operator in immediately available funds the total amount of the Demobilization Costs, as such amount is set forth in the Demobilization Invoice. Any Dispute regarding the Demobilization Invoice shall be resolved pursuant to Article XI. Operator agrees to cooperate with and support Owners after termination of this Agreement per the requirements of Section 4.13 of this Agreement.

     2.04 Surviving Provisions. The termination of this Agreement shall not affect any rights or obligations which have arisen or accrued before such termination. In addition, the provisions of (a) Articles VIII, IX, X, XI, and XII and Sections 2.03, 3.11, 13.10, 13.11, and 13.13, shall each survive such termination indefinitely; and (b) Sections 3.10 and 13.04, shall each survive for a period of five (5) years following the date of such termination.

ARTICLE III

OWNERS’ RIGHTS & RESPONSIBILITIES

     3.01 Engineering and Operating Committee. The Engineering and Operating Committee established pursuant to the Participation Agreement (the “Engineering and Operating Committee” or “E&O Committee”) shall be authorized to act for and on behalf of Owners in all matters concerning this Agreement. Owners shall be bound by the communications, directions, requests and decisions made by the Engineering and Operating Committee. Owners shall deliver

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to Operator a Notice of the identity of the members of the Engineering and Operating Committee and the alternates thereto along with general contact information.

     3.02 Documents. Owners shall supply to Operator true and accurate copies of (a) the Project Documents and (b) any other documents, materials, records, accounts reports and other information related to BSP II in the possession of, or reasonably available to, Owners that (i) arose from, is related to or is the result of the process of obtaining and maintaining Authorizations and that is useful for identifying, interpreting and establishing the manner of compliance with Applicable Law with respect to the performance of the Services or (ii) in Owner’s reasonable discretion is otherwise necessary or desirable for the performance of the Services in accordance with this Agreement.

     3.03 Utilities. Operator shall procure, or cause to be procured, as an Operating Expense, all potable water, wastewater discharge service and telephone and data services required to perform the Services in accordance with this Agreement. Such utility services will be procured as per policies established by the Engineering and Operating Committee.

     3.04 Fuel and Fuel Transportation. Operator shall assist the E&O Committee with respect to the procurement of fuel transportation and all types of fuel used in the operation of BSP II, including coal and fuel oil. Fuel and fuel transportation will be procured at the direction of the E&O Committee, and in accordance with fuel procurement policies established by the Engineering and Operating Committee from time to time. It is contemplated that the E&O Committee may establish a subcommittee for this purpose. All fuel, whether obtained for prompt consumption or for reserves, shall be the property of the Owners. The cost of fuel purchased, including the cost of transportation, shall be an Operating Expense.

     3.05 Trust Account. Operator, on behalf of the Owners, has caused the Trust Account to be established in the name of Owners with a financial institution agreed to by Owners. The Plant Manager and certain other individuals designated by Operator with the prior concurrence of the Engineering and Operating Committee shall be authorized to direct the trustee of the Trust Account to make withdrawals from the Trust Account for the sole purpose of making Operating Expense payments. Any interest earned on funds in the Trust Account shall be deposited into the Trust Account and shall accrue to the benefit of Owners. Owners shall make payments into the Trust Account (each such deposit, a “Trust Account Deposit”), as provided for in the Participation Agreement.

     3.06 Authorizations. Owners shall obtain, renew or extend, as required, all Authorizations required for the performance of the Services except for those Authorizations which must be obtained by or in the name of Operator. Operator shall comply with all of the requirements of such Authorizations except for those requirements that can only be complied with by Owners.

     3.07 Fines & Penalties. Owners shall pay all charges, fees, fines or penalties assessed by any Governmental Authority against BSP II, the Operator, or its Affiliates, or their respective Representatives, except those caused by the Willful Action of Operator.

     3.08 Additional Agreements. Owners shall deliver to Operator a Notice of any Additional Agreement. Upon delivery of such Notice of Additional Agreement, Operator shall

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comply with the requirements of the applicable provisions of the Additional Agreement in the performance of the Services, unless compliance would require Operator to act in contradiction to this Agreement. Owners shall make any such amendments to the then applicable Operating Plan & Budget that is required by any such Additional Agreement.

     3.09 Notifications. Upon obtaining knowledge thereof, Owners shall as soon as practicable, but no later than five (5) Business Days after obtaining such knowledge, deliver to the Operator a Notice of the following:

(a)	any litigation, claim, Dispute, action or proceeding concerning BSP II, Operator, its Affiliates or the Services, which is either pending or threatened and material;
(b)	any refusal, or material threat of refusal, to grant, renew, or extend, or any pending litigation, claim, Dispute, action or proceeding that might, in the reasonable opinion of Owners, affect the granting, renewal or extension of any Authorization;
(c)	any incident requiring notification of any Governmental Authority in accordance with Applicable Law;
(d)	any notice from any Governmental Authority of any non-routine inspection of BSP II; and
(e)	any other event or circumstance that could be expected, in the reasonable opinion of Owners, to have a material adverse effect on BSP II, Operator or the performance of the Services.

     3.10 Audits. Owners (either directly or through a Third Party retained by Owners) shall be entitled to review and audit all:

(a)	records and reports prepared by Operator in accordance with this Agreement;
(b)	withdrawals by the trustee, at the direction of the Operator, from the Trust Account;
(c)	amounts paid by Operator directly, or as an agent of Owners, in accordance with this Agreement;
(d)	payroll and employee compensation records for the BSP Workforce and any Operator employees that allocate time to BSP II that are not members of the BSP Workforce;
(e)	records, reports and accounts relating to costs and expenses incurred by Operator or its Affiliates in connection with BSP I and the Joint Facilities; and
(f)	all other information regarding costs incurred by or allocated to BSP II;

together with any supporting documentation. Any such audit, if conducted on behalf of all Owners, shall be at the Owners’ expense. If, pursuant to such review and audit, it is determined that any amount previously withdrawn from the Trust Account or paid by Operator directly, or as an agent of Owners, was done so in breach of this Agreement, Owners may submit a claim to Operator indicating the amount of the challenged withdrawal or payment and the reasons for such

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challenge. Operator shall, not later than thirty (30) days after receiving Notice of such claim, pay Owners in immediately available funds an amount equal to that portion of the challenged withdrawal or payment not disputed by Operator in good faith plus the Overdue Payment Rate times the period of time such overpayment was retained by the Operator. Unless otherwise instructed by Owners, Operator shall keep all such financial records in a safe and secure place until such time as the Owners may determine that such records may be disposed of. Any Owner’s failure to audit or review the BSP II records for any year does not eliminate Owner’s right to audit or review these records in subsequent years or Owner’s right to reimbursement for amounts withdrawn from the Trust Account in breach of this Agreement for that year. Any Owner’s failure to detect amounts withdrawn from the Trust Account in breach of this Agreement during an audit or review does not eliminate Owner’s right to future reimbursements for such amounts.

     3.11 On-Site Owner Representative. The Owners (or any one or more of them) may designate an individual to be such Owners’ (or Owner’s) On-Site Representative. In no event, however, shall the Owners designate more than one On-Site Representative at any one time. The Owner or Owners electing to have an On-Site Representative shall be responsible for all costs associated with supporting such On-Site Representative, including but not limited to all costs relating to the On-Site Representative’s salary, benefits, overhead, and insurance. The Operator may, in its sole discretion, assign the On-Site Representative tasks and projects that are commensurate with the skills of the On-Site Representative with the goal of utilizing the On-Site Representative as an efficient resource at the Plant. An On-Site Representative shall have no independent authority to direct any activities at the Plant, unless expressly directed or assigned to do so by the Operator. The On-Site Representative shall be permitted full access to all Plant operations, to observe Plant operations and maintenance, and attend meetings of Plant personnel related to construction, operation or maintenance of the Plant; provided that the On-Site Representative complies with all Plant safety practices and does not interfere with Plant construction, operations or maintenance. Nothing herein shall require the Operator to provide to the On-Site Representative any private employee information or other information to which the Owners would not otherwise be entitled pursuant to this Agreement. The On-Site Representative shall, at his or her sole discretion, report information about construction, operation, maintenance, and other activities at the Plant to the Owner(s) that have so designated the On-Site Representative. An Owner requesting an On-Site Representative and the Operator shall enter into such other agreements as are reasonably requested by Operator to implement this provision.

     3.12 Operation by Owners. In the event, for a period exceeding twenty-four (24) consecutive hours, Operator fails to operate BSP II at all or substantially all of its full Capacity in breach of this Agreement or as a result of a strike or other form of labor action by the BSP Workforce, Owners shall have the right to (a) assume care, custody and control for operation and maintenance of BSP II and (b) retain such other Persons as Owners, in their reasonable discretion, deem necessary or advisable for such purposes. Owner shall permit Operator to resume the operation and maintenance of BSP II when such breach has been cured or such strike or labor action has been settled, and Operator is capable of resuming the operation and maintenance of BSP II in accordance with this Agreement.

     3.13 Monthly Financial Statements. Operator shall provide the following financial statements to the Owners on a monthly basis, prepared pursuant to the Federal Energy Regulatory Commission’s Uniform System of Accounts:

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(a)	BSP II balance sheet;
(b)	statement of expenses for each month and year-to-date, including a comparison to budget and explanation of significant variances;
(c)	statement of cash flows; and
(d)	any other reasonable information requested by the Owners.

ARTICLE IV

OPERATOR RIGHTS & RESPONSIBILITIES

     4.01 Scope of Services.

(a) Operator shall perform the Services in accordance with this Agreement. The Services shall include:

(i)	staffing, training, directing, supervising and otherwise managing the BSP Workforce personnel as required to operate and maintain and perform the Services in accordance with this Agreement;
(ii)	performing routine preventive and corrective maintenance of the equipment at BSP II to optimize equipment reliability and availability and minimize maintenance cost;
(iii)	implementing and maintaining a spare parts inventory control system;
(iv)	directing and supervising the work of Operator’s Affiliates engaged by Operator to perform any portion of the Services;
(v)	procuring in its own name, or in the name of Owners as Owners’ agent, all fuel, goods and services required to perform the Services in accordance with this Agreement;
(vi)	developing coal receipt and measurement procedures;
(vii)	coordinating the activities of Third-Party Suppliers, including administering procurement agreements;
(viii)	performing such other services or doing such other work as described in the Pre-Commercial Operation Operating Plan & Budget, the applicable Operating Plan & Budget, or as Owners may otherwise reasonably request;
(ix)	providing such periodic reports regarding any aspect of BSP II as are reasonably requested by the Engineering and Operating Committee (including, without limitation, personnel records of Operator’s employees who are or have provided services at BSP II, so long as such disclosure does not violate Applicable Law or any collective bargaining agreement governing such employee’s employment relationship with Operator (it being understood that such personnel records may be redacted by Operator

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	to remove any personally identifiable information such as names, Social Security Numbers and the like));
(x)	performing all other work necessary to operate and maintain BSP II; and
(xi)	if it occurs during the Term, retiring the Plant.

(b) During the Pre-Commercial Operation Period, the Services shall also include:

(i)	coordinating and providing general direction of work on the Project;
(ii)	administering and enforcing the Owners’ rights under the Construction Contracts;
(iii)	scheduling and conducting monthly progress meetings and reports for the Engineering and Operating Committee to address procedures, progress, problems, contractual issues, change orders and scheduling milestones related to the Project;
(iv)	reviewing and approving monthly progress estimates and requests by the construction contractors, auditing quality control programs and monitoring construction safety programs;
(v)	obtaining or assisting the construction contractor in obtaining all necessary construction and building permits;
(vi)	upon notification by any construction contractor that it has achieved a milestone for its work or a designated portion thereof, verifying that such event has occurred in accordance with the terms of the applicable Construction Contract, informing the construction contractor of any incomplete or unsatisfactory items and, when appropriate or required, obtain the Engineering and Operating Committee’s consent to approve completion of such milestone;
(vii)	preparing and delivering to Owners, for comments and approval, the Proposed Pre-Commercial Operation Operating Plan & Budget;
(viii)	reviewing the Project Documents and preparing and delivering to Owners, for comments and approval, a written description of the practices and procedures required to perform the Services in a manner that is consistent with the requirements of the Project Documents;
(ix)	preparing, reviewing and amending, as needed, and delivering to Owners, for comments, the BSP II Manuals;
(x)	preparing and delivering to Owners the Notification Matrix;
(xi)	preparing and delivering to Owners, for comments and approval, the Proposed Operating Plan & Budget for the first year of the Term;
(xii)	staffing the BSP Workforce in accordance with this Agreement and the Pre-Commercial Operation Operating Plan & Budget;

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(xiii)	training the BSP Workforce in accordance with the BSP II Manuals;
(xiv)	participating in the commissioning, start-up and testing of BSP II;
(xv)	procuring environmental allowances as per the Agreement of Representation attached hereto as Schedule 4.01; and
(xvi)	conducting testing and maintaining MAPP accreditation of the Plant.

(c) The Operator shall have the authority to enter into agreements and to execute documents for expenditures authorized under this Agreement, on behalf of the Owners for transactions involving less than Five Hundred Thousand Dollars ($500,000). Agreements in excess of such amounts must be approved in advance by the Engineering and Operating Committee. Agreements for expenditures that are part of an approved budget shall be deemed to be approved for purposes of this Section 4.01(c).

     4.02 Operational Standards. Operator shall perform the Services in accordance with:

(a)	all Applicable Laws and Authorizations;
(b)	this Agreement, including the operational principles (which shall be developed before Commercial Operation) established by the Engineering and Operating Committee;
(c)	the BSP II Manuals;
(d)	the Pre-Commercial Operation Operating Plan & Budget or the applicable Annual Operating Plan & Budget;
(e)	Prudent Utility Practice;
(f)	the requirements, if any, of the insurer insuring BSP II (including BSP II’s share of the Joint Facilities) and the Parties in connection with their BSP II-related activities;
(g)	Manufacturers’ Recommendations;
(h)	the requirements of the Project Documents; and
(i)	any other reasonable request made by Owners.

     4.03 Personnel.

(a) All individuals employed by Operator or its Affiliates to perform the Services shall be qualified to perform the duties to which they are assigned. Such qualifications shall include the possession and maintenance of any individual or personal licenses or permits required by Applicable Law. Operator shall not adversely discriminate against BSP II, in the assignment of BSP Workforce personnel, and Operator shall establish a rotation system to ensure that BSP I, BSP II, and the Joint Facilities receive equitable treatment with respect to the assignment of BSP Workforce personnel.

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(b)	Operator shall have the sole right and responsibility to manage labor relations and determine working hours, employee benefits, rates of compensation and all other personnel-related matters.
(c)	Operator shall only charge Labor Expenses to the Owners, to the extent they represent direct, legitimate and verifiable services for the benefit of BSP II, and Operator shall cause each member of the BSP Workforce and any other applicable personnel to maintain time reports in sufficient detail to verify the actual time worked in connection with BSP II and any applicable Joint Facilities.

     4.04 Plant Manager. Not later than thirty (30) days after the Effective Date, Operator shall appoint an individual as the Plant Manager. Operator’s selection of the initial Plant Manager, and all subsequent Plant Managers, shall be subject to the approval of the Owners, which shall not be unreasonably withheld. The Plant Manager shall (a) be authorized to act for and on behalf of Operator in all matters concerning performance of the Services and (b) direct and manage Operator’s resources in the performance of the Services. Operator shall be bound by the communications, directions, requests and decisions made by the Plant Manager; provided that the Plant Manager shall have no authority to amend or waive any provision of this Agreement. Operator shall also designate at least one alternate to the Plant Manager who shall, at all times, act as the Plant Manager in the unavailability of the Plant Manager. Operator shall deliver to Owners a written Notice of the identity of the Plant Manager and the alternates thereto along with specific instructions as to how each such individual can be reached at all times.

     4.05 Training. Subject to the limitations of the Pre-Commercial Operation Operating Plan & Budget or the applicable Operating Plan & Budget and this Agreement, Operating Expenses shall include costs and expenses incurred by Operator in connection with training the BSP Workforce for their duties in connection with BSP II, including costs of Third-Party Suppliers engaged by Operator in connection with such training programs.

(a)

Initial Training. During the Pre-Commercial Operation Period, Operator shall conduct an initial training program to prepare the BSP Workforce participants for performing the Services in accordance with this Agreement. Wherever reasonably practicable, such initial training program shall be conducted in conjunction with the manufacturer of the major equipment incorporated as part of BSP II.

(b)

Ongoing Training. Following the initial training provided in accordance with Section 4.05(a), Operator shall offer an ongoing training program for the BSP Workforce participants which shall be described in greater detail in the BSP II Manuals. This training program shall include an orientation element and emphasize, among other things, safety, environmental compliance, operation and maintenance skills and the fundamental economics of BSP II.

     4.06 Procurement.

(a) General. All goods and services required for performance of the Services in accordance with this Agreement that the BSP Workforce personnel and other Operator personnel are either unavailable or unqualified to supply directly, shall be procured by Operator in accordance with this Agreement. All such

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procurements shall also be in accordance with and subject to the limitations of the Pre-Commercial Operation Operating Plan & Budget or the applicable Operating Plan & Budget. Operator shall include in the Pre-Commercial Operation Operating Plan & Budget and each Operating Plan & Budget:

(i)	a brief description of all major goods and services to be procured during the period covered by the Pre-Commercial Operation Operating Plan & Budget or the applicable Operating Plan & Budget;
(ii)	a list of previously qualified and pre-approved Third-Party Suppliers; and
(iii)	standard terms and conditions for the procurement of goods and services from Third-Party Suppliers.

	Operator shall prepare and include, as part of each supply agreement, specifications and other terms and conditions, including, if deemed appropriate by Operator, minimum performance and warranty requirements.
(b)	Operator Affiliate Supply Agreements. All goods and services supplied by an Affiliate of Operator shall be supplied in accordance with a written agreement between Operator and the supplier. All such supply agreements shall be subject to the approval of Owners.
(c)	Competitive Bids. Operator shall prepare a written request for bids for each procurement of goods or services with a term greater than one (1) year or an estimated purchase price and contract value in excess of an amount set by the Engineering and Operating Committee from time to time. Such requests shall include:

(i)	the minimum specification requirements;
(ii)	the terms and conditions of the supply agreement;
(iii)	a request for a quotation for providing the requested goods or services; and
(iv)	a request for the Third-Party Supplier’s qualifications and experience.

	Operator shall evaluate all responses and select the successful bidder. Prior to the execution thereof, Operator shall obtain Owners’ approval for each expenditure with a value in excess of Five Hundred Thousand Dollars ($500,000).
	For all expenditures requiring Owners’ prior approval, Operator shall prepare a summary of the responses to Operator’s request for bids and a description of the terms and conditions of the supply agreement to the extent such terms and conditions are materially different than the standard terms and conditions as set forth in this Agreement or contained within the applicable Operating Plan & Budget.
(d)	Supply Agreement Administration. Operator shall administer all agreements for the supply of goods and services procured by Operator in accordance with this Section 4.06, including:

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(i)	scheduling and coordinating the work, including the delivery of goods;
(ii)	inspecting all goods and services for compliance with the supply agreement specifications and other terms and conditions;
(iii)	enforcing material supply agreement terms and conditions, including warranty provisions; and
(iv)	advising Owners of any potential material claims against a Third-Party Supplier for such Third-Party Supplier’s failure to perform in accordance with such supply agreement, and assisting Owners in investigating, pursuing, preserving and litigating or arbitrating, if necessary, such claims.

(e)	Supplier Invoices. Operator shall promptly review and approve invoices from Third-Party Suppliers. Operator shall endeavor to resolve any Third-Party Supplier invoice conflicts or errors as quickly as is reasonably practicable.
(f)	Supplier Insurance. Prior to any Third-Party Supplier beginning work at BSP II, Operator shall obtain certificates that verify the existence of insurance protection required by the applicable supply agreement. Operator shall arrange for transportation insurance to cover the replacement value of any goods damaged or lost during the transportation of such goods to the Site to the extent such insurance protection is not provided by the supplier or shipper of such goods.
(g)	Emergencies. Nothing in this Section 4.06 shall be deemed to limit Operator’s rights or obligations to respond to Emergencies as set forth herein or to restrict Operator’s ability to contract directly, or indirectly as Owners’ agent, for goods or services required for responding to an Emergency.

     4.07 Records and Reports.

(a)

Financial. Operator shall maintain complete and accurate financial records of all costs, including expenses, associated with performing the Services. Operator shall prepare and deliver to Owners detailed financial reports in a form and at intervals requested by Owners. Operator shall keep all such financial records in a safe and secure place until such time as the Owners may determine that such records may be disposed of and shall make such records available to Owners for inspection, audit and copying at reasonable times and as set forth in Section 3.10.

(b)

Performance. Operator shall maintain accurate written (or electronic) records of the performance of BSP II, including records associated with operation and maintenance, environmental compliance and safety incidents as are required by Applicable Law. Operator shall prepare and deliver to Owners performance reports in a form and at reasonable intervals requested by Owners. Operator shall keep all performance-related records in a safe and secure place until such time as the Owners may determine that such records may be disposed of and shall make such records available to Owners for inspection, audit and copying at reasonable times and as set forth in Section 3.10.

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(c) As-Built Plans & Specifications. Operator shall maintain in a safe and secure place BSP II as-built plans and specifications and the plans and specifications for major modifications or additions to the Facilities. The As-Built Plans and Specifications are the property of Owners and shall remain at the Facility upon termination of this Agreement.

     4.08 BSP II Manuals. Operator shall, from time to time, amend the BSP II Manuals to reflect changes to BSP II, Applicable Law and Prudent Utility Practice. The BSP II Manuals, and any amendments or supplements thereto, shall be subject to review, comment and approval by Owners. The BSP II Manuals are the property of Owners and shall remain at BSP II upon termination of this Agreement.

     4.09 Authorizations. Operator shall apply for, obtain and maintain all Authorizations which are required under Applicable Law to be obtained and maintained by Operator, its Affiliates or their respective Representatives in order for Operator to perform the Services. Operator shall, at Owners’ reasonable request, assist Owners in applying for, obtaining and maintaining Authorizations obtained and maintained by Owners in accordance with Section 3.06.

     4.10 Notifications. Operator shall, as soon as is reasonably practicable after obtaining knowledge thereof, notify the Engineering and Operating Committee and thereafter, in accordance with the Notification Matrix, deliver to Owners Notice of the following:

(a)	any litigation, claim, Dispute, action or proceeding by any Person, concerning BSP II, the Joint Facilities, a Party or the Services that is either pending or threatened and material;
(b)	any (i) suspension or revocation, (ii) refusal to grant, renew, or extend, or (iii) pending litigation, claim, Dispute, action or proceeding, in each such case that might, in the reasonable opinion of Operator, result in the suspension or revocation, or affect the granting, renewal or extension of any relevant Authorization;
(c)	any bona fide or material threat of (i) a suspension or revocation, (ii) a refusal to grant, renew, or extend, or (iii) litigation, claim, Dispute, action or proceeding, that, in each case, is likely, in the reasonable opinion of Operator, to result in a suspension or revocation, or affect the granting, renewal or extension, of any Authorization;
(d)	any notice from any Governmental Authority of any alleged violation of Applicable Law or any imposition of any material fine or penalty that is assessed by any Governmental Authority against BSP II, Operator or a Party, its Affiliates or their respective Representatives;
(e)	any Emergency;
(f)	any Force Majeure Event;
(g)	any unscheduled BSP II outage and any acceleration, postponement or extension of a scheduled BSP II outage;

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(h)	any incident of death or serious injury or damage at the Site or that is likely, in the reasonable opinion of Operator, to have a material adverse effect on BSP II, a Party or the performance of the Services in accordance with this Agreement;
(i)	any incident requiring notification of any Governmental Authority in accordance with Applicable Law;
(j)	any notice from any Governmental Authority of any non-routine inspection of BSP II or records related to BSP II;
(k)	any potential shortage of fuel or utilities which Owners are required to make available in accordance with the terms hereof;
(l)	any current or potential non-compliance with the Pre-Commercial Operation Operating Plan & Budget or applicable Operating Plan & Budget;
(m)	any default or potential default under any Project Document or any breach or potential breach of such documents;
(n)	any unauthorized access to the Site or other breach of Site security;
(o)	any actual or threatened labor Dispute relating to the BSP Workforce or BSP I, BSP II, or the Joint Facilities;
(p)	any material violation of any Authorization or Applicable Law;
(q)	any material damage to any component of BSP II; and
(r)	any other event or circumstance occurring at BSP I, BSP II, the Joint Facilities, or elsewhere that could be expected, in the reasonable opinion of Operator, to have a material adverse effect on BSP II, a Party or the performance of the Services.

     4.11 Emergency Actions. In the event of an Emergency, Operator:

(a)	shall take prompt action, in accordance with Applicable Law and Prudent Utility Practice, to attempt to stabilize the situation and avoid or mitigate damage, injury or loss to Persons or equipment;
(b)	notwithstanding any other provision of this Agreement to the contrary, may incur any reasonable expenditure or take any other action as Operator reasonably deems necessary or appropriate as required to achieve the objectives set forth in clause (a) of this Section 4.11, and such expenditures shall be deemed to be Operating Expenses; provided that Operator shall, to the extent practicable in light of the circumstances constituting the Emergency, minimize such expenditures and obtain Owners’ prior approval of such expenditures; and
(c)	shall include within the notification of Owners required by Section 4.10 a description of the Emergency, any response proposed or taken by Operator, any expenditures incurred by Operator, or expected to be incurred by Operator, in connection with such Emergency and any consequences resulting from or expected to result from such Emergency and Operator’s response thereto.

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     4.12 Cooperation in Financing.

(a) Upon the request of an Owner, Operator shall execute and deliver to a Lender the Lenders’ Consent. The Lenders’ Consent shall provide that Operator:

(i)	consents to the grant to the Lender of a security interest in, to and over the applicable Owner’s rights under this Agreement;
(ii)	agrees that prior to any suspension of the Services or termination of this Agreement by Operator, Operator shall notify each Lender of such suspension or termination and give the Lenders a right to cure the cause for such suspension or termination or to take such other actions as may be required by the Lenders to mitigate the consequences from or avoid such suspension or termination; and
(iii)	consents to the exercise by a Lender of Owners’ rights under this Agreement, or the replacement of the applicable Owner there under by the Lender, and to the right of the Lender to assume all the rights and obligations of Owners under this Agreement.

(b) Upon the request of an Owner, Operator shall, at the requesting Owner’s expense:

(i)	execute such documents or instruments as are customarily required to give effect to the Lenders’ Consent;
(ii)	cause counsel acceptable to the Lender to deliver to the Lender a legal opinion concerning this Agreement and the Lenders’ consent, which opinion shall be in a form satisfactory to the Lender; and
(iii)	prepare and provide to the Lender such information in connection with this Agreement or the performance of the Services as may be required by the Lender.

Operator shall cooperate with Owners in good faith in order to satisfy the requirements of Owners’ financing arrangements, including, where appropriate, the making of such amendments to the terms of this Agreement as may be required by any Lender. Nothing in this Section 4.12 shall be deemed to require Operator to agree to any amendments to this Agreement that would adversely affect Operator’s risks, rights or obligations under this Agreement.

     4.13 Cooperation Following Termination. Upon the termination of this Agreement for whatever reason, Operator shall, at Owners’ expense, (i) turn over operation and maintenance of BSP II to the Successor Operator, if any; and (ii) execute and deliver documents and take other actions, in each case as necessary to facilitate the orderly transition of duties from Operator to the Successor Operator, including:

(a) promptly deliver to Owners or the Successor Operator (if so directed by Owners), all work, property and recorded information, which are in Operator’s possession or under its control, including records and reports and the BSP II Manuals prepared in accordance with Sections 4.07 and 4.08, respectively; and

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(b) transfer, or cause the transfer, to Owners or the Successor Operator (if so directed by Owners), all rights and obligations of Operator, its Affiliates and their respective Representatives under all contracts entered into and Authorizations held by such Person in connection with the performance of the Services; provided that Owners shall assume, or shall cause the Successor Operator to assume, all such rights and obligations and provided the Owners obtain the release of Operator from all such obligations pertaining to the BSP Workforce.

Upon the termination of this Agreement, Operator shall, at the request of Owners, at Owners’ expense, and for a period not to exceed sixty (60) days, train the Successor Operator. However, if the termination is a result of an Operator Event of Default, then the costs of complying with this Section 4.13 shall be borne exclusively by Operator.

     4.14 Liens or Encumbrances. Operator shall keep and maintain BSP II free and clear of all liens and encumbrances resulting from performance of the Services to the extent such Services are performed directly by Operator or, to the extent that Owners have deposited funds adequate therefor in the Trust Account, by a Third-Party Supplier in accordance with a subcontract between Operator and such Third-Party Supplier.

     4.15 Authority Limitations. Notwithstanding any provision in this Agreement to the contrary, unless specifically provided for in the Pre-Commercial Operation Operating Plan & Budget or the applicable Operating Plan & Budget, or as otherwise specifically approved or directed by Owners in writing, Operator shall not directly, or as an agent of Owners, and shall ensure that its Affiliates and Representatives do not:

(a)	sell, lease, pledge, mortgage, convey, or make any license, exchange or other transfer or disposition of any property or assets of Owners, its Affiliates or Representatives, including any property or assets purchased by Operator in accordance with this Agreement;
(b)	make, enter into, execute, amend, modify or supplement any contract or agreement (including any labor or collective bargaining agreement) on behalf of or in the name of Owners;
(c)	incur, consent to or agree to any cost or expense directly or as agent of Owners that is to the account of Owners, its Affiliates, or otherwise recoverable from such Person, except for Operating Expenses and cost and expenses otherwise authorized or permitted under this Agreement;
(d)	settle, compromise, assign, pledge, transfer, release or consent to the compromise, assignment, pledge, transfer or release of, any claim, suit, debt, demand or judgment against or due by, Owners or Operator, the cost of which is to the account of Owners, its Affiliates, or otherwise recoverable from such Persons; or submit any such claim, Dispute or controversy to arbitration or judicial process, or stipulate in respect thereof to a judgment, or consent to do the same;
(e)	engage in any other transaction on behalf of or as an agent for Owners except as specifically provided for in this Agreement or as specifically directed by Owners in writing; or

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(f) issue or make any public announcements or statements regarding BSP II, Owners, their Affiliates, the Services or this Agreement, unless, prior thereto, Owners have been furnished with a copy thereof and have approved the same.

ARTICLE V

BUDGET AND OPERATING PLAN PROCEDURES

     5.01 Pre-Commercial Operation.

(a) Proposed Pre-Commercial Operation Operating Plan & Budget. As soon as reasonably practical but in no event later than twelve (12) months prior to the date of Commercial Operation, Operator shall prepare and deliver to Owners the Proposed Pre-Commercial Operation Operating Plan & Budget. The Proposed Pre-Commercial Operation Operating Plan & Budget shall include:

(i)	a staffing plan;
(ii)	a description of the Services to be performed during the Pre-Commercial Operation Period, a schedule for completion of such Services and an estimate, including a reasonable contingency, of the Operating Expenses to be incurred in connection with performing such Services;
(iii)	a description of the Services to be performed by an Affiliate of Operator or Third-Party Supplier on a cost recoverable basis together with an estimate of the cost of such Services;
(iv)	any other information which Owners may reasonably request be included in the Proposed Pre-Commercial Operation Operating Plan & Budget; and
(v)	in preparing the Proposed Pre-Commercial Operation Operating Plan & Budget, Operator shall separately account for capital expenditures and operating expenditures.

(b) Approval. Not later than forty-five (45) days after receiving the Proposed Pre-Commercial Operation Operating Plan & Budget, Owners shall either approve the Proposed Pre-Commercial Operation Operating Plan & Budget or provide Operator with its reasons for withholding approval and the changes to the Proposed Pre-Commercial Operation Operating Plan & Budget required to obtain Owners approval. Any Disputes regarding the Pre-Commercial Operation Operating Plan & Budget not resolved by the Parties within twenty (20) days following Operator’s receipt of Owners’ comments shall be resolved in accordance with Article XI. The Proposed Pre-Commercial Operation Operating Plan & Budget may be approved in whole or in part in order to not unreasonably delay the performance of the Pre-Commercial Operation Period Services. The portions of the Proposed Pre- Commercial Operation Operating Plan & Budget approved by the Parties shall constitute the Pre-Commercial Operation Operating Plan & Budget.

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     5.02 Operations Period.

(a) Proposed Operating Plan & Budget. Not later than forty-five (45) days prior to the date of Commercial Operation and thereafter not later than July 1^st of each year during the Term, Operator shall prepare and deliver to Owners the Proposed Operating Plan & Budget for performing the Services during the period beginning with the date of Commercial Operation and for the remainder of the year in which such date occurs, in the first instance, and during the following year in each subsequent case. The Owners shall provide Operator with the operating schedule estimate for BSP II at least thirty (30) days prior to budget submittal. The operating plan component of the Proposed Operating Plan & Budget shall include:

(i)	any staffing plan revisions;
(ii)	the Notification Matrix;
(iii)	a description of and plan for Non-Recurring Operating Expenses (including (A) Plant betterments and other additions, replacements and alterations, (B) major maintenance repairs and replacements) for the next year and each of the subsequent four (4) years, and (C) spare parts in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000);
(iv)	a description of the Services, and proposed budget, to be performed by an Affiliate of Operator on a cost recoverable basis during the period to which the Proposed Operating Plan & Budget applies;
(v)	a list of the Third-Party Suppliers to be engaged to provide major goods or services valued at over One Hundred Thousand Dollars ($100,000) during the period to which the Proposed Operating Plan & Budget applies;
(vi)	all cost allocations between BSP I and BSP II;
(vii)	any other information which Owners may reasonably request be included in the Proposed Operating Plan & Budget; and
(viii)	in preparing the Proposed Operating Plan & Budget, Operator shall separately account for capital expenditures and operating expenditures.

The budget components of the Proposed Operating Plan & Budget shall be prepared on a cost basis and shall include: (1) an estimate, on a monthly as well as an annual basis, of the Operating Expenses, prepared pursuant to the Federal Energy Regulatory Commission Uniform System of Accounts, to be incurred during the applicable period in connection with performance of the Services; and (2) a reasonable contingency separately identified and quantified.

(b) Operating Plan & Budget Approval.

(i) Not later than thirty (30) days after receiving the Proposed Operating Plan & Budget, Owners shall either approve the Proposed Operating Plan & Budget or provide Operator in writing with its reasons for withholding

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approval and the changes required to obtain Owners’ approval. The Owners, as part of the process of approving the Proposed Operating Plan & Budget, shall set reasonable annual performance standards for the Operator within one or more Key Performance Indicators listed on Schedule 5.02(b)(i). Any Disputes regarding the Proposed Operating Plan & Budget not resolved by the Parties within thirty (30) days following Operator’s receipt of Owners’ comments shall be resolved in accordance with Article XI. The portions of the Proposed Operating Plan & Budget approved by the Parties shall constitute the Operating Plan & Budget respectively for the applicable year.

(ii)

The Parties agree to amend, from time to time, the Operating Plan & Budget as appropriate to reasonably account for, in a timely manner, unanticipated circumstances, including, but not limited to, changes in Applicable Law, Emergencies, and Force Majeure Events.

(c) Default Budget. Beginning with the year following the year in which the date of Commercial Operation occurs, if the Parties have not agreed upon a cost budget to be included in as part of the Operating Plan & Budget by January 1 of the year to which such Operating Plan & Budget applies, then the Default Budget shall be deemed to be the approved budget until such time as the Parties agree on a cost budget for such year or the budget-related Disputes between the Parties have been resolved in accordance with Article XI. The Default Budget shall be prepared by Operator and delivered to Owners not later than seven (7) days prior to the first day of the period to which the Default Budget applies. The Default Budget, which shall be prorated for the year in which this Agreement is terminated, shall be equal to the actual Operating Expenses incurred during the preceding year (annualized in the event such preceding year is less than a full year) increased by the same percent as the percent increase, if any, in the Escalation Factor during the twelve (12) month period ending with the most recent September 30, and adjusted to (i) delete any Non-Recurring Operating Expense incurred during the preceding year, if such non-recurring expense, in the reasonable opinion of Operator, is not expected to be incurred during the applicable year, (ii) add any Non-Recurring Operating Expense scheduled to be incurred during the applicable year as such amount is set forth in the most recent Operating Plan & Budget and (iii) delete (without duplication of the adjustments made in accordance with (i) and (ii) of this Section 5.02(c)) the impact of any Emergency, Force Majeure Event, time that BSP II was not operating, or suspension of Services that occurred during the preceding year. The Operator Incentive component of the Default Budget shall be the same as the Operator Incentive component of the Operating Plan & Budget for the immediately preceding year.

ARTICLE VI

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CONSIDERATION

     6.01 Compensation. For performance of its duties hereunder, Operator shall be entitled to receive payment for all Operating Expenses.

ARTICLE VII

INSURANCE

     7.01 Provided by Owners.

(a) During the Term, Owners shall jointly procure or cause to be procured and maintain in full force and effect insurance protection with coverage no less than the amounts set forth below.

(i)	Builders Risk (including testing) – during all periods of construction on the entire Project on a completed value basis and covering the full insurable replacement cost thereof;
(ii)	Property Damage, including Boiler and Machinery – covering the full insurable replacement cost, but in no case will the limit be less than the maximum foreseeable loss for each occurrence and in the annual aggregate (as determined by an independent consultant);
(iii)	Commercial General Liability – One Million Dollars ($1,000,000) each occurrence and in the annual aggregate;
(iv)	Umbrella and Excess Liability – Fifty Million Dollars ($50,000,000) each occurrence and in the annual aggregate through a combination thereof; and
(v)	Earthquake and flood insurance – as may be determined by the E&O Committee.

(b) The insurance protection provided by Owners in accordance with this Section 7.01 shall also:

(i)	name, as additional insured, Operator, its Affiliates and their respective Representatives as each such Person’s interest may appear, and contain a waiver of subrogation in favor of each such Person;
(ii)	be primary with respect to any other insurance;
(iii)	provide for Operator to be notified in writing at least sixty (60) days prior to any modification, termination or cancellation of insurance coverage; and
(iv)	be subject to a deductible no greater than Two Million Five Hundred Thousand Dollars ($2,500,000), if any.

Owners shall provide Operator with certificates of insurance that verify the full force and effect of coverage required by this Section 7.01.

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Subject to the approval of the E&O Committee, the insurance required by this Section 7.01 shall be procured by Operator for the benefit of the Owners and to the extent possible may be purchased as part of Operator’s overall company insurance program, and/or in conjunction with the insurance covering BSP I. If the Operator procures insurance on behalf of the Owners, the Operator shall provide Owners with certificates of insurance that verify the full force and effect of coverage required by this Section 7.01.

     7.02 Provided by Operator. Without duplication of the insurance protection provided in accordance with Section 7.01, during the Term Operator shall obtain and maintain in full force and effect insurance protection with coverage no less than the amounts set forth below.

(a)	Commercial General Liability, Umbrella and Excess Liability – Ten Million Dollars ($10,000,000) each occurrence and in the annual aggregate, and with deductibles no greater than Two Million Five Hundred Thousand Dollars ($2,500,000);
(b)	Automobile Liability – One Million Dollars ($1,000,000) combined single limit (for owned, if any, hired and non-owned automotive equipment), and with deductibles no greater than Ten Thousand Dollars ($10,000);
(c)	Workers’ Compensation (or the local equivalent) – in such amounts and form as required by Applicable Law; and
(d)	Fiduciary liability – Three Million Dollars ($3,000,000) aggregate liability limit.

The policies obtained and maintained to provide the protection required by this Section 7.02 shall not necessarily be specific to the Project. Operator may satisfy all or any requirement for insurance required by this Section 7.02 through a qualified self-insurance program; provided, however, that Operator must obtain the prior written approval of the Owners if the amount of self-insurance applying to any such requirement, in each instance, exceeds One Million Dollars ($1,000,000), and the Operator shall be liable to the Owners for any amounts due them hereunder as if such self-insurance were an insurance policy purchased from a Third Party. The Owners may require additional coverages, endorsements, minimum limits and deductibles, in their sole discretion, provided such is reasonably available in the insurance market and provided the Owners are responsible for the costs thereof. Operator shall provide Owners with certificates of insurance that verify the full force and effect of the coverage required by this Section 7.02, or for any self-insurance, Operator shall provide Owners such information as Owners shall reasonably request.

     7.03 Premiums & Deductibles. With respect to insurance coverage provided in accordance with Sections 7.01 and 7.02:

(a) insurance policy premiums (including the incremental premiums paid by Operator with respect to its general corporate insurance policies that are specifically attributable to its performance of the Services), self-insured retentions, claims not covered by insurance and insurance policy claim deductible amounts, except as provided for in (b) of this Section 7.03, shall be paid directly by Owners or deemed to be an Operating Expense and paid by Operator with funds withdrawn from the Trust Account; and

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(b) subject to the limitations on the total liability of Operator under this Agreement, Operator shall pay any insurance policy claim deductible amounts to the extent such claim is the result of Operator’s Willful Action and such amount shall not be reimbursed by Owners.

     7.04 Replacement Insurance By Operator. In the event the insurance protection required by Section 7.01 is suspended, terminated or expires and is not promptly renewed, Operator shall have the right, subject to five (5) days advance Notice to Owners, but not the obligation, to acquire replacement insurance substantially in conformance with the requirements of Section 7.01 and all reasonable costs and expenses incurred by Operator in obtaining such replacement insurance shall be deemed to be Operating Expenses provided that such actions are taken only to the extent of and for so long as there is a lapse in the insurance protection required by Section 7.01.

     7.05 Replacement Insurance By Owner. In the event the insurance protection required by Section 7.02 is suspended, terminated or expires and is not promptly renewed, Owner shall have the right, subject to five (5) days advance Notice to Operator, but not the obligation, to acquire replacement insurance substantially in conformance with the requirements of Section 7.02, provided that such actions are taken only to the extent of and for so long as there is a lapse in the insurance protection required by Section 7.02.

ARTICLE VIII

INDEMNIFICATIONS

     8.01 Owners’ Indemnification. With respect to the subject matter of this Agreement, Owners shall protect, defend, indemnify and hold harmless to the extent of the ownership share of each Owner in BSP II, each Operator Indemnitee from and against Losses and Third-Party Losses arising out of, related to, or resulting from the negligence or Willful Action of Owners or their respective Representatives with respect to the subject-matter of this Agreement, or arising out of, related to, or resulting from the performance (or non-performance) of Owners’ obligations under this Agreement by Owners or their Representatives, except to the extent that such Losses or Third-Party Losses arise out of or result from the Willful Action by or of Operator. Operator shall have the right to seek compensation therefor, the amount of which shall not include any insurance proceeds Operator has received therefor; provided, however, that Operator shall have the right to also receive any insurance proceeds Owners may receive in connection with an indemnification claim made by Owners hereunder.

     8.02 Operator Indemnification. Operator shall protect, defend, indemnify and hold harmless each Owner Indemnitee from and against Losses and Third-Party Losses arising out of, related to, or resulting from the Willful Action of Operator. Owners shall have the right to seek compensation therefor, the amount of which shall not include any insurance proceeds Owners have received therefor; provided, however, that Owners shall have the right to also receive any insurance proceeds Operator may receive in connection with an indemnification claim made by Operator hereunder.

     8.03 Comparative Liability. If a Party incurs Losses or is liable for Third-Party Losses due to the joint, concurring, comparative or contributory negligence or Willful Action of

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another Party, the liability for such Losses or Third-Party Losses shall, as applicable, be allocated between Operator and Owners in proportion to their respective degrees of joint, concurring, comparative or contributory negligence or Willful Action contributing to such Losses or Third-Party Losses. If Losses or Third-Party Losses occur due to Willful Action of Operator and Willful Action and/or negligence of Owner, then any indemnification obligations therefor shall be determined pursuant to Sections 8.01 and 8.02 hereof.

     8.04 Notice and Participation.

(a)	If any Indemnified Party intends to seek indemnification under this Article from an Indemnifying Party with respect to any action or claim by a Third Party, the Indemnified Party shall give the Indemnifying Party Notice of such claim or action upon the receipt of actual knowledge or information by the Indemnified Party of a possible claim that the Indemnifying Party reasonably concludes is likely to be made or of the commencement of a claim or action, which Notice shall in no event be delivered later than the first to occur of (i) thirty (30) days prior to the last day for responding to such claim or action or (ii) the expiration of the first half of the period allowed for responding to such claim or action. The Indemnifying Party shall have no liability under this Article for any Third-Party Loss for which such Notice is not provided to the extent that the failure to give such Notice materially prejudices the Indemnifying Party.
(b)	The Indemnifying Party shall have the right to assume the defense of any Third Party claim or action, at its sole cost and expense, with counsel designated by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it which are different from or additional to those available to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel, at the Indemnifying Party’s expense, to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Party.
(c)	Except to the extent expressly provided herein, no Indemnified Party shall settle any claim or action with respect to which it has sought or intends to seek indemnification pursuant to this Agreement without the prior written consent of the Indemnifying Party.
(d)	Should any Indemnified Party be entitled to indemnification under this Article VIII as a result of a claim or action by a Third Party, and should the Indemnifying Party fail to assume the defense of such claim or action, the Indemnified Party may, at the expense of the Indemnifying Party, contest (or, with or without the prior consent of the Indemnifying Party, settle) such claim or action.
(e)	Except to the extent expressly provided herein, no Indemnifying Party shall settle any claim or action with respect to which it may be liable to provide indemnification pursuant to this Agreement without the prior written consent of the Indemnified Party; provided that if the Indemnifying Party has reached a bona

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fide settlement agreement with the plaintiff(s) in any such action and the Indemnified Party does not consent to such settlement agreement, then the amount specified in the settlement agreement, plus the Indemnified Party’s attorney’s fees costs, shall act as an absolute maximum limit on the indemnification obligation of the Indemnifying Party with respect to the claim, or portion thereof, that is the subject of such settlement agreement.

     8.05 Net Amount. In the event that an Indemnifying Party is obligated to indemnify and hold any Indemnified Party harmless under this Article VIII, the amount owing to the Indemnified Party shall be the amount of such Indemnified Party’s actual out-of-pocket cost incurred in connection with the indemnified Losses or Third-Party Losses, net of any insurance or other recovery actually received by the Indemnified Party.

ARTICLE IX

DEFAULTS & REMEDIES

     9.01 Operator Events of Default. The following shall constitute events of default on the part of Operator (each, an “Operator Event of Default”) under this Agreement:

(a)	Operator fails to pay, within five (5) days following the date on which such payment is due, any amount that is due to Owners under this Agreement and has not been disputed in good faith by Operator;
(b)	Willful Action by Operator in connection with the performance of the Services (other than in connection with a default described in Sections 9.01(a) and 9.01(c));
(c)	Operator commits a material breach of its obligations under this Agreement (other than a default described in Section 9.01(a) or (b)) unless not later than five (5) days after the delivery of a Notice from Owners of such breach, Operator commences, and thereafter diligently pursues a cure of such breach and the effects of such breach are cured within thirty (30) days of delivery of such Notice; provided that if (i) such breach is not, by its nature, capable of being cured within such thirty (30) day period, (ii) Operator is diligently and in good faith proceeding to attempt to cure such breach, and (iii) an extension of time to cure such breach would not materially increase the loss or injury suffered by the Owners or BSP II on account of such breach, then Operator shall be allowed such additional time as reasonably may be required to cure such breach which shall in no event exceed one hundred eighty (180) days;
(d)	Operator Bankruptcy which is not stayed, dismissed or terminated within sixty (60) days after commencement, or Operator ceases to carry on its business; and
(e)	an uncured event of default occurs under any Project Documents (other than this Agreement) for which a party thereto (other than an Owner or Operator) may terminate such Project Documents and such event of default is wholly or substantially attributable to any breach of this Agreement by Operator or otherwise to the Willful Action of Operator.

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     9.02 Owners Events of Default. The following shall constitute events of default on the part of Owners (“Owners Events of Default”) under this Agreement:

(a)	Owners fail to pay, pursuant to the requirements of the Participation Agreement, any Progress Payment, as such term is defined in the Participation Agreement, into the Trust Account, or any amount that is due to Operator for (i) Operator Incentives or (ii) Operating Expenses incurred by Operator;
(b)	Owners commit a material breach of their obligations under this Agreement (other than in connection with a default described in Section 9.02(a)) unless not later than five (5) days after the delivery of a Notice from Operator of such breach, Owners commence and thereafter diligently pursues the cure of such breach; and
(c)	Any Owner Bankruptcy which is not stayed, dismissed or terminated within sixty (60) days after commencement, or Owners cease to carry on the business of BSP II.

     9.03 Procedure and Remedies.

(a)	Upon the occurrence and during the continuance of an Operator Event of Default, Owners shall have the right, in their sole and absolute discretion, to do either or both of (i) terminate this Agreement subject to delivery of a Notice to Operator of such termination, and (ii) except as otherwise provided in this Agreement, pursue any and all other remedies available at law, in equity or pursuant to this Agreement.
(b)	Upon the occurrence and during the continuance of an Owners Event of Default, Operator shall have the right, in its sole and absolute discretion, to do either or both of (i) terminate this Agreement subject to delivery of a Notice to Owners and the Lenders of such termination not later than thirty (30) days prior to the effective date of such termination, and (ii) except as other provided in this Agreement, pursue any and all other remedies available at law, in equity or pursuant to this Agreement.
(c)	Notwithstanding any other provision of this Agreement to the contrary, (i) Owners shall not terminate this Agreement following the occurrence of an Operator Event of Default if, prior to Operator receiving the Notice of such termination, and notwithstanding the expiration or unavailability of any cure period provided under this Agreement, Operator shall have cured the Operator Event of Default and (ii) Operator shall not terminate this Agreement following the occurrence of an Owners Event of Default if, prior to Owners receiving the Notice of such termination, and notwithstanding the expiration or unavailability of any cure period provided under this Agreement, Owners shall have cured the Owners Event of Default.

     9.04 Operator Liability Limiting Events. Notwithstanding anything else to the contrary in this Agreement, Operator shall not be in breach of this Agreement and shall have no liability to Owners to the extent that any occurrence, condition, or event that is the result of (each a “Liability Limiting Event”):

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(a)	any act or omission that is committed or omitted, as the case may be, solely at the direction of Owners, provided that Operator timely objected to such act or omission and advised Owners of the probable consequences thereof;
(b)	equipment or system failure or design deficiency, unless such failure or deficiency was caused by the Willful Action of Operator;
(c)	a Force Majeure Event;
(d)	Operator’s suspension of the performance of all or any portion of the Services in accordance with this Agreement; or
(e)	a material breach of this Agreement by Owners;

provided that, in each case, Operator continues to perform the Services in accordance with this Agreement except for modification of the operational standards set forth in Section 4.02 required to reasonably account for the Liability Limiting Event.

     9.05 Remedies Cumulative. Except as specifically limited by this Agreement and subject to Article X, each and every right, power and remedy of a Party, whether specifically stated in this Agreement, or otherwise existing, may be exercised concurrently or separately, from time to time, and so often and in such order as may be deemed expedient by the exercising Party, and the exercise or the beginning of the exercise of any such right, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter, any other right, power or remedy. No delay or omission of a Party in the exercise of any right, power or remedy shall impair or operate as a waiver thereof or of any other right, power or remedy then or thereafter existing.

ARTICLE X

LIABILITY LIMITATIONS

     10.01 No Consequential Damages. Notwithstanding any other provision in this Agreement to the contrary, no Party shall be liable hereunder to any other Party for any consequential or indirect loss or damage, including loss of revenues, loss of profit, cost of capital, loss of goodwill, or any other special, exemplary, collateral, punitive or incidental damages incurred by such other Party, its Affiliates, or their respective Representatives. Each Party further agrees that the waivers and disclaimers of liability, indemnities, releases from liability and limitations on liability expressed in this Agreement shall (a) apply at all times, whether in contract, equity, tort or otherwise, regardless of the fault, negligence (in whole or in part), strict liability, breach of contract or breach of warranty of the Party indemnified, released or whose liabilities are limited and (b) extend to the Affiliates of the other Party and their respective Representatives.

     10.02 No Warranties or Guarantees. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NO PARTY MAKES ANY REPRESENTATIONS, WARRANTIES OR GUARANTEES TO THE OTHER PARTIES, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, AND ALL PARTIES DISCLAIM AND WAIVE ANY IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW, INCLUDING MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

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     10.03 Assertion of Claims. No claims of any kind shall be asserted against any Party, or its Affiliates, whether arising out of contract, tort (including negligence), strict liability, or any other cause or form of action, unless it is filed in a court of competent jurisdiction within the applicable statute of limitations period for such claim.

ARTICLE XI

DISPUTE RESOLUTION

     11.01 Resolution By Coordination Committee. All Disputes arising under this Agreement shall be addressed by the Coordination Committee (as such term is defined in the Participation Agreement). A Party may request that a Dispute be brought before the Coordination Committee by delivering a written request to the Coordination Committee. The Coordination Committee shall meet, negotiate and attempt in good faith to resolve the Dispute quickly, informally and inexpensively. In the event the Coordination Committee cannot resolve the Dispute within thirty (30) days after commencement of negotiations, a Party may seek any and all available legal remedies to resolve the Dispute, whether at law or in equity.

     11.02 Continued Performance. Pending the outcome of a Dispute being resolved in accordance with this Article XI, the Parties shall continue to perform their respective obligations under this Agreement to the extent such obligations and the continued performance thereof are not the subject of such Dispute.

ARTICLE XII

REPRESENTATIONS & WARRANTIES

     12.01 Of Each Party. Each Party represents and warrants to the other Parties that, as of the date hereof:

(a)	it is, as applicable, an agency, cooperative corporation, consumers power district, municipal corporation, political subdivision, or corporation duly organized, validly existing and in good standing under the laws of the state of its formation and authorized to conduct business in South Dakota;
(b)	it has the power and authority to enter into and perform this Agreement and is not prohibited from entering into this Agreement or discharging and performing all covenants and obligations on its part to be performed under and pursuant to this Agreement;
(c)	it has taken all action required by Applicable Law in order to approve, execute and deliver this Agreement;
(d)	the execution and delivery of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of and compliance by such Owner with the provisions of this Agreement will not conflict with or constitute a breach of or a default under or require any consent, license or approval that has not been obtained pursuant to any of the terms, conditions or provisions of any law, rule or regulation, any order, judgment, writ, injunction, decree, determination, award or other instrument or legal requirement of any court or

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	other agency of government, the documents of its formation or any contractual limitation, restriction or outstanding trust indenture, deed of trust, mortgage, loan agreement, lease, other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound and will not result in a breach of or a default under any of the foregoing;
(e)	it has taken all such action as may be necessary or advisable and proper to authorize this Agreement, the execution and delivery hereof, and the consummation of transactions contemplated hereby;
(f)	there are no bankruptcy, insolvency, reorganization or receiverships pending or being contemplated by it, or to its knowledge threatened against it;
(g)	to its knowledge, there are no actions, proceedings, judgments, rulings or orders issued by, or pending before any court or other governmental body that would materially adversely affect its ability to perform its obligations under this Agreement; and
(h)	this Agreement is a legal, valid and binding obligation of such Owner enforceable in accordance with its terms, except as limited by Laws of general applicability limiting the enforcement of creditors’ rights or by the exercise of judicial discretion in accordance with general principles of equity.

ARTICLE XIII

MISCELLANEOUS

     13.01 Access.

(a)	Owners shall grant to Operator full and complete access to BSP II.
(b)	Operator shall grant to Owners, Lenders, Governmental Authorities, visitors accompanied by Owners, visitors authorized by Operator and other unaccompanied visitors upon Notice from Owners, access to BSP II; provided that:

(i)

access by visitors other than Owners shall be (A) subject to reasonable advance written Notice delivered to Operator; (B) terminated or prohibited during Emergencies and (C) limited to normal business hours, except for access by Owners, their authorized Representatives or Governmental Authorities for response to Emergencies or for unannounced inspections or audits, which may, in either case, occur at any time, without advance Notice and, in the case of Governmental Authorities, in accordance with Applicable Law;

(ii)

Owners and such other visitors granted access to BSP II shall comply in all material respects with Operator’s safety and security procedures and other reasonable requirements, and otherwise conduct themselves in a manner that does not materially interfere with the performance of the Services in accordance with this Agreement; and

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(iii) all visitors granted access to BSP II shall at all times be accompanied by an authorized Representative of Owners or Operator.

     13.02 Cooperation of the Parties. Each Party shall cooperate in good faith with the other Parties in its efforts to fulfill its obligations under this Agreement. To that end, (a) except as expressly provided elsewhere in this Agreement, no Party shall unreasonably deny, condition, or withhold or otherwise delay its approval or consent upon the reasonable request for such approval or consent by the other Part(ies) and (b) each Party shall, upon Notice from the any Party, take all actions and sign, execute and deliver all agreements, deeds, documents and other instruments, and shall use its Reasonable Efforts to cause each of its Affiliates, its partners and their respective Representatives to take all actions and sign, execute and deliver all agreements, deeds, documents and other instruments reasonably required of it or them to carry out and give full effect to this Agreement and the rights and obligations of the Parties hereunder.

     13.03 Force Majeure Event. The performance of any obligation required hereunder shall be excused during the continuation of any Force Majeure Event suffered by the Party whose performance is hindered in respect thereof, and the time for performance of any obligation that has been delayed due to the occurrence of a Force Majeure Event. The Party experiencing the delay or hindrance shall use Reasonable Efforts to notify the other Parties in writing of the occurrence of such Force Majeure Event and the anticipated period of delay within ten (10) days after the commencement of the Force Majeure Event, provided that the failure of the Party experiencing the delay or hindrance to notify the other Parties within such ten (10) day period shall not preclude such Party from claiming a Force Majeure Event hereunder. Each Party suffering a Force Majeure Event shall take, or cause to be taken, such action as may be necessary to overcome or otherwise to mitigate, in all material respects, the effects of any Force Majeure Event suffered by any of them and to resume performance hereunder as soon as practicable under the circumstances.

     13.04 Publicity Policy. In recognition of the requirements and desire of the Parties to disclose information regarding their ownership and involvement with BSP II and its activities, a Party may:

(a)	disclose information regarding BSP II as may be required by any Applicable Law;
(b)	provide information regarding BSP II to its Affiliates, employees, agents, consultants, advisors, contractors, accountants and counsel;
(c)	publicize to any Third Party (including, but not limited to, through press releases and other media) information about the general activities of BSP II and any otherwise publicly available information; provide, however, Parties shall seek to avoid publicizing to Third Parties:

(i)	financial information about BSP II, including the economics of the Project, except as requested to obtain financing or to update rating agencies or an Owner’s lender;
(ii)	information regarding other Parties;

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(iii)	information a Party specifically identifies as commercially sensitive (such as information about ongoing Project negotiations); and
(iv)	information respecting the positions of BSP II on federal or state policy matters (unless consistent with the policy goals or a policy initiative of BSP II as generally understood by the Parties).

If a Party desires to release information described in Sections 13.04(c)(i)-(iv), then that Party shall describe the intended release of information to the E&O Committee and the E&O Committee shall respond promptly to the Party with any concerns about such release.

     13.05 Notices. Notices required by this Agreement from a Party hereto shall be addressed to the other Parties, at the addresses noted in Exhibit A, and may be updated from time to time by Notice to all Parties. Any notice, request, consent, or other communication required or authorized under this Agreement to be given by one Party to another Party shall be in writing. It shall either be hand delivered or mailed, postage prepaid, to the Representative of said Party. If mailed, the notice, request, consent or other communication shall be simultaneously sent by facsimile or other electronic means. Any such notice, request, consent, or other communication shall be deemed to have been received by the close of the Business Day on which it was hand delivered or transmitted electronically (unless hand delivered or transmitted after the close of business, in which case it shall be deemed received at the close of the next Business Day). Real-time or routine communications concerning the operation of the Joint Facilities shall be exempt from this Section 13.05.

     13.06 Transfers and Assignments.

(a)

Except as otherwise provided for in this Section 13.06, this Agreement may not be transferred or assigned by any Party without (i) the written consent of the other Parties and (ii) the written agreement of the transferee or assignee whereby such transferee or assignee expressly assumes and agrees to perform each and every obligation of the transferor or assignor under this Agreement. Any transfer or assignment in violation of this Section 13.06 shall be null and void.

(b)

Subject to the delivery of a Notice to Operator at least thirty (30) days prior to the effective date of such assignment, Owners may, without Operator’s consent, assign this Agreement to a Lender or Lenders as security under a financing of BSP II. So long as any such assignment, or any consolidation, modification or extension of any such assignment, shall remain outstanding, the following provisions shall apply:

(i) Operator shall, upon delivery to Owners of any Notice of an Owners Event of Default, also deliver a copy of such Notice to each assignee. No Notice of an Owners Event of Default shall be deemed to have been delivered unless and until a copy thereof shall have also been delivered to each assignee. From and after the date that such Notice has been delivered to an assignee, such assignee shall have the same period for cure or commencing cure of any alleged breach or default as is given to Owners in

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	accordance with this Agreement. Operator shall accept such performance by or on behalf of such assignee as if the same had been done by Owners.
(ii)	The making of such assignment shall not be deemed to constitute an assignment or transfer of this Agreement, nor shall any such assignee be deemed to be an assignee or transferee of this Agreement so as to require such assignee to assume the performance of any of Owners’ obligations under this Agreement, but the purchaser at any sale of this Agreement in any proceedings for the foreclosure of any assignment, or the assignee or transferee of this Agreement under any instrument of assignment or transfer in lieu of the foreclosure of any assignment, shall be deemed to be an assignee or transferee and as such shall be deemed to have agreed to perform all of Owners’ obligations under this Agreement from and after the date of such purchase and assignment.
(iii)	Notwithstanding any other provision of this Agreement, any sale of this Agreement in any proceeding for the foreclosure of any assignment, or the assignment or transfer of this Agreement in lieu of the foreclosure of any assignment shall be deemed to be a permitted sale, transfer or assignment of this Agreement, and this Agreement shall continue in full force and effect following any such sale, transfer or assignment; provided that such transferee demonstrates to Operator’s reasonable satisfaction that it has the capability to fulfill Owners’ obligations under this Agreement.

(c) The Parties further agree that the Party whose consent to a transfer or assignment has been requested shall:

(i)	respond in writing not later than thirty (30) days after receiving the other Party’s request;
(ii)	provide to the other Party, at its own cost and expense, any documentation, including estoppel statements, reasonably requested by such other Party;
(iii)	forego (1) any reimbursement for any cost or expense, including attorney’s fees, that such Party, its Affiliates or its partners incurs directly or indirectly in connection with responding to, granting or denying the other Party’s request and (2) any financial consideration of any kind whatsoever for itself, its Affiliates or its partners as a fee or other compensation for responding to, granting or denying the other Party’s request; and
(iv)	not unreasonably withhold its consent.

     13.07 Late Payments. Any amounts due and payable in accordance with this Agreement by one Party to the other Party and not paid in full on or before the date such payment is due shall accrue interest at the Overdue Payment Rate from and excluding the date such payment is due (including, without limitation, any payments received by Operator that it may be required to repay Owners) to and including the day such unpaid and overdue amount plus accrued interest is paid.

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     13.08 Third-Party Beneficiaries. Except as expressly provided herein, this Agreement is intended to be solely for the benefit of Owners, Operator and their respective successors and permitted assigns, and is not intended to and shall not confer any rights or benefits on any Person not a signatory hereto.

     13.09 Title Passage.

(a)

Title to all materials, equipment, supplies, consumables, spare parts and other items purchased or obtained by Operator and paid for ultimately by Owners in accordance with this Agreement shall pass immediately and automatically to and vest in Owners upon the passage of title from the vendor or supplier thereof; provided that such transfer of title shall in no way affect Operator’s obligations as set forth in the other provisions of this Agreement.

(b)

All documents prepared or developed by Operator, its Affiliates or their respective Representatives in connection with BSP II or the performance of the Services, including all manuals, data, designs, drawings, plans, specifications, records, reports and accounts, shall immediately and automatically become the property of Owners when prepared or developed. All such documents, together with any materials and documents furnished by Owners to Operator, its Affiliates or to their respective Representatives in connection with BSP II or the performance of the Services, shall be delivered to Owners upon the termination of this Agreement.

     13.10 Relationship of Parties. Operator is retained by Owners as an independent contractor to operate and maintain BSP II on behalf of Owners. Owners delegate to Operator the overall responsibility for operating and maintaining BSP II in accordance with this Agreement. Nothing contained in this Agreement shall be construed to create an association, trust, partnership or joint venture between the Parties.

     13.11 Entire Agreement. This Agreement consists of the terms and conditions set forth herein, as well as the Appendices hereto, which are incorporated by reference herein and made a part hereof. This Agreement contains the entire agreement between the Parties with respect to operation and maintenance of BSP II and supersedes all prior negotiations, undertakings, agreements and business term sheets.

     13.12 Amendments. No amendments or modifications of this Agreement shall be valid unless evidenced in writing and signed by duly authorized Representatives of all of the Parties.

     13.13 Governing Law. This Agreement, including its construction, interpretation and effect, shall be governed by the laws of the State of South Dakota without regard to its conflict of laws principles.

     13.14 Consent to Jurisdiction. Each of the Parties hereto hereby irrevocably consents and agrees that any legal action or proceedings with respect to this Agreement may be brought in any of the courts of the United States of America for the District of South Dakota having subject matter jurisdiction and, by execution and delivery of this Agreement and such other documents executed in connection herewith, each Party hereby:

(a) accepts the non-exclusive jurisdiction of the aforesaid courts;

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(b)	irrevocably agrees to be bound by any final judgment (after any and all appeals) of any such court with respect to such documents;
(c)	irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceedings with respect to such documents brought in any such court, and further irrevocably waives, to the fullest extent permitted by law, any claim that any such suit, action or proceedings brought in any such court has been brought in any inconvenient forum;
(d)	agrees that service of process in any such action may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Party at its address set forth below, or at such other address of which the other Parties hereto shall have been notified; and
(e)	agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or limit the right to bring any suit, action or proceeding in any other jurisdiction.

     13.15 Waiver Of Trial By Jury. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

     13.16 Severability. The invalidity, in whole or in part, of any of the Sections or paragraphs of this Agreement will not affect the validity of the remainder of such Sections or paragraphs.

     13.17 Waiver. Failure by either Party to exercise any of its rights under this Agreement shall not constitute a waiver of such rights. No Party shall be deemed to have waived any of its rights under this Agreement unless it has made such waiver specifically in writing.

     13.18 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be deemed one and the same Agreement, and may be executed and delivered by facsimile signature, which shall be considered an original.

     13.19 Captions. The Table of Contents and the titles or captions of Articles, Sections and Appendices contained in this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend, describe or otherwise affect the scope or meaning of this Agreement or the intent of any provision hereof.

[The next page is the signature page.]

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     IN WITNESS WHEREOF, the Parties hereto have caused their names to be hereunto subscribed by their officers, intending thereby that this Agreement shall be effective as of the Effective Date.

OWNERS:

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY		GREAT RIVER ENERGY
By	/s/ Paul I. Leland	By	/s/ David Saggau
Paul Leland		David Saggau
Its President		Its President and Chief Executive Officer
HEARTLAND CONSUMERS POWER DISTRICT		MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc.
By	/s/ Michael McDowell	By	/s/ Bruce T. Imsdahl
Michael McDowell		Bruce T. Imsdahl
Its General Manager		Its President and Chief Executive Officer
OTTER TAIL CORPORATION dba Otter		SOUTHERN MINNESOTA MUNICIPAL POWER
Tail Power Company		AGENCY
By	/s/ Charles S. MacFarlane	By	/s/ Raymond A. Hayward
Charles S. MacFarlane		Raymond A. Hayward
Its President		Its Executive Director and CEO
WESTERN MINNESOTA MUNICIPAL POWER AGENCY
By	/s/ Donald E. Habicht
Donald E. Habicht
Its President
OPERATOR:
OTTER TAIL CORPORATION dba Otter
Tail Power Company
By	/s/ Charles S. MacFarlane
Charles S. MacFarlane
Its President

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EXHIBIT A

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY
459 South Grove Street
Blue Earth, MN 56013
Attn: Donald E. Kom, Executive Director
Telephone: (507) 526-2193
Facsimile: (507) 526-2527
E-mail: donk@utplus.com

GREAT RIVER ENERGY
17845 East Highway 10
Elk River, MN 55330
Attn: David Saggau, President and Chief Executive Officer
Telephone: (763) 241-2286
Facsimile: (763) 241-2366
E-mail: dsaggau@grenergy.com

HEARTLAND CONSUMERS POWER DISTRICT
203 West Center Street
Madison, SD 57042
Attn: Michael McDowell, General Manager
Telephone: (605) 256-6536
Facsimile: (605) 256-2990
E-mail: mmcdow@hcpd.com

MISSOURI RIVER ENERGY SERVICES
3724 West Avera Drive
P.O. Box 88920
Sioux Falls, SD 57109-8920
Attn: Mr. Ray Wahle
Telephone: (605) 338-4042
Facsimile: (605) 978-9360
E-mail: rwahle@mrenergy.com

MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources, Inc.
400 North Fourth Street
Bismarck, ND 58501
Attn: Andrea L. Stomberg, Vice President – Electric Supply
Telephone: (701) 222-7752
Facsimile: (701) 222-7606
E-mail: andrea.stomberg@mdu.com

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OTTER TAIL CORPORATION dba Otter Tail Power Company 215 South Cascade St. P.O. Box 496 Fergus Falls, MN 56538-0496 Attn: Charles MacFarlane Telephone: (218) 739-8353 Facsimile: (218) 739-8218 E-mail: cmacfarlane@otpoc.com
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY 500 First Avenue SW Rochester, MN 55902-3303 Attention: Mr. Peter J. Reinarts, P.E. Manager – Generation, Operations and Marketing Telephone: (507) 292-6452 Facsimile: (507) 292-6414 E-mail: pj.reinarts@smmpa.org
and
SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY 500 First Avenue SW Rochester, MN 55902-3303 Attention: Mr. David P. Geschwind, P.E. Chief Operating Officer Telephone: (507) 292-6460 Facsimile: (507) 292-6414 E-mail: dp.geschwind@smmpa.org
WESTERN MINNESOTA MUNICIPAL POWER AGENCY 25 N.W. 2nd Street, Suite 102 Ortonville, MN 56278-1411 Attention: Mr. Don Habicht Telephone: (320) 839-2549 Facsimile: (320) 839-2540 E-mail: david.fhmab@midconetwork.com

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Big Stone II Power Plant	June 30, 2005

SCHEDULE 1.04

BIG STONE I AND BIG STONE II 2005 JOINT FACILITIES AGREEMENT

Note: This schedule is filed as a separate exhibit (Exhibit 10.3) to Otter Tail Corporation’s Quarterly Report to the Securities and Exchange Commission on Form 10-Q for the quarterly period ended June 30, 2005.

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SCHEDULE 4.01

AGREEMENT OF REPRESENTATION – BSP II

     This Agreement is made and entered into this 30^th day of June, 2005, by and among Central Minnesota Municipal Power Agency, an agency incorporated under the laws of Minnesota, Great River Energy, a cooperative corporation incorporated under the laws of Minnesota, Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law (Chapter 49-35 of the South Dakota Codified Laws), Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a corporation incorporated under the laws of the State of Delaware, Otter Tail Corporation, a corporation incorporated under the laws of Minnesota (“Otter Tail”), Southern Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota, and Western Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota) (each a “BSP II Owner” and collectively, the “BSP II Owners”) and Otter Tail, in its capacity as operator of BSP II (“Operator”).

RECITALS

     WHEREAS, the BSP II Owners entered into that certain Participation Agreement (“BSP II Participation Agreement”) dated as of June 30, 2005, which governs and controls the relationship between the BSP II Owners in connection with their development, ownership and operation of the new, approximately 600 MW coal-fired electric generating plant located in Big Stone City, South Dakota, known as the Big Stone II Power Plant (“BSP II”);

     WHEREAS, BSP II is an Affected Unit at an Affected Source as those terms are defined in Subchapter IV-A (entitled Acid Deposition Control) of the Clean Air Act, 42 U.S.C. § 7401 et seq., as amended (the “Act”);

     WHEREAS, as a result of the Act it is necessary for the BSP II Owners and the Operator to agree on a Designated Representative and an Alternate Designated Representative who will represent the BSP II Owners and Operator in matters pertaining to the Acid Rain Program as such matters affect BSP II;

     WHEREAS, effective June 30, 2005, the BSP II Owners designated Otter Tail as the Operator of BSP II;

     WHEREAS, in accordance with the appointment of Otter Tail to operate BSP II as agent for the BSP II Owners as set forth in the BSP II Participation Agreement, the BSP II Owners herein set forth their agreement upon which certain employees of Otter Tail will serve as agents for the BSP II Owners and Operator as Designated Representative and Alternate Designated Representative under the Act.

     NOW THEREFORE, in consideration of the mutual covenants contained herein the BSP II Owners and Operator agree as follows:

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ARTICLE I. DEFINITIONS

     1.1. “Acid Rain Program” means the sulfur dioxide and nitrogen oxides air pollution control program established pursuant to Subchapter IV-A of the Act in 40 C.F.R. Parts 72-78, as amended.

     1.2. “Administrator” means the Administrator of the United States Environmental Protection Agency or the Administrator’s duly authorized representative.

     1.3. “Affected Source” means a source that includes one or more Affected Units. For the purpose of this Agreement, Affected Source shall mean BSP II.

     1.4. “Affected Unit” means a unit that is subject to any emissions reduction requirements or emissions limitation under the Acid Rain Program. For the purpose of this Agreement, Affected Unit shall mean BSP II. BSP II is an Affected Unit at the Affected Source.

     1.5. “Allowance” means an authorization by the Administrator under the Acid Rain Program, to emit up to one (1) ton of sulfur dioxide during or after a specified calendar year.

     1.6. “Alternate Designated Representative” means the natural person designated in the certificate of representation submitted in accordance with 40 C.F.R. Part 72 to act on behalf of the Designated Representative with regard to all matters within the authority of that Designated Representative under the Acid Rain Program.

     1.7. “Designated Representative” means the natural person designated in the certificate of representation submitted in accordance with 40 C.F.R. Part 72 to represent and legally bind each BSP II Owner and Operator in all matters pertaining to the Acid Rain Program.

     1.8. “Operator” means Otter Tail Corporation dba Otter Tail Power Company, or such other operator of BSP II as may be designated in the future in accordance with the BSP II Participation Agreement.

     1.9. “Permitting Authority” means the Administrator, or the state or local air pollution control agency having an approved permitting program under Subchapter V of the Act and associated regulatory authority over BSP II.

     1.10. “Unit Account” means an allowance tracking system account established by the Administrator for an Affected Unit.

     1.11. All other terms herein shall be interpreted consistent with the Act and the Acid Rain Program.

ARTICLE II. INTRODUCTION

     2.1. The Designated Representative shall represent and legally bind the BSP II Owners and Operator in all matters pertaining to BSP II as an Affected Unit and in all matters pertaining

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to BSP II as an Affected Source. The Designated Representative shall represent the BSP II Owners and Operator in matters pertaining to the Acid Rain Program including, but not limited to (a) BSP II’s submission of and compliance with acid rain permits, permit applications, and compliance plans and (b) the holding, transfer, and disposition of Allowances for BSP II. It is the intention of the BSP II Owners and Operator that this Agreement be interpreted consistent with the Act and the Acid Rain Program.

ARTICLE III. OWNERSHIP AND OPERATOR

     3.1. The ownership interests in, and designation of the Operator of, BSP II are set forth in the BSP II Participation Agreement. These ownership interests and designation of the Operator shall only be subject to change in accordance with the terms of the BSP II Participation Agreement.

ARTICLE IV. DESIGNATED REPRESENTATIVE

     4.1. Whenever a requirement or prohibition of the Acid Rain Program applies to the Affected Source, it shall be deemed to apply to the Designated Representative and each and every BSP II Owner and Operator. Whenever a requirement or prohibition of the Acid Rain Program applies to the Affected Unit, it shall be deemed to apply to the Designated Representative and each and every BSP II Owner and Operator.

     4.2. The Designated Representative shall, as a matter of law, represent and legally bind each BSP II Owner and Operator in all matters pertaining to the Acid Rain Program, including but not limited to the holding, transfer and disposition of Allowances; the submission of and compliance with permits, permit applications, permit revisions, permit renewals, compliance plans, and compliance certifications in accordance with 40 C.F.R. Part 72; and the compliance with excess emissions requirements, payment of penalties, and submission of and compliance with offset plans in accordance with 40 C.F.R. Part 77.

     4.3. The Designated Representative is hereby given all necessary authority to carry out the duties and responsibilities of the Designated Representative on behalf of each BSP II Owner and Operator under the Acid Rain Program.

     4.4. The Designated Representative shall abide by the fiduciary responsibilities imposed in this Agreement and by the Acid Rain Program. For all non-routine matters, the Designated Representative shall act in consultation with the BSP II Engineering and Operating Committee.

     4.5. Vis-à-vis any Permitting Authority, to the extent required under the Act each BSP II Owner and Operator shall be fully bound by and liable for any actions, inactions or submissions by the Designated Representative, and the BSP II Owners and Operator shall be bound by any order issued to the Designated Representative by the Administrator, another Permitting Authority, or a court regarding BSP II.

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ARTICLE V. SELECTING AND CHANGING THE DESIGNATED REPRESENTATIVE

     5.1. As long as Otter Tail is the Operator, Otter Tail, as agent for the BSP II Owners, shall have exclusive control over the selection and nomination of the Designated Representative, including changes in the Designated Representative, subject only to approval by the BSP II Engineering and Operating Committee as provided in the BSP II Participation Agreement, which approval shall not be unreasonably withheld or delayed. The person designated in Attachment A hereto as the BSP II Designated Representative is hereby approved.

     5.2. Should it become necessary to change or select a new Designated Representative, the Designated Representative being replaced shall continue in all respects as the Designated Representative until a superseding certificate of representation is filed with the Administrator pursuant to 40 C.F.R. Part 72.

ARTICLE VI. ALTERNATE DESIGNATED REPRESENTATIVE

     6.1. As long as Otter Tail is the Operator, Otter Tail, as agent for the BSP II Owners, shall have exclusive control over the selection and nomination of the Alternate Designated Representative, including changes in the Alternate Designated Representative, subject only to approval by the BSP II Engineering and Operating Committee as provided in the BSP II Participation Agreement, which approval shall not be unreasonably withheld or delayed. The person designated in Attachment A hereto as the BSP II Alternate Designated Representative is hereby approved.

     6.2. Should it become necessary to change or select a new Alternate Designated Representative, the Alternate Designated Representative being replaced shall continue in all respects as the Alternate Designated Representative until a superseding certificate of representation is filed with the Administrator pursuant to 40 C.F.R. Part 72.

     6.3. The Alternate Designated Representative is hereby authorized to act on behalf of the Designated Representative and the BSP II Owners and Operator in the event the Designated Representative is absent or otherwise not available to perform the actions and duties specified in 40 C.F.R. Parts 72-78.

     6.4. Unless the context clearly dictates otherwise, whenever the term Designated Representative is used in this Agreement, it shall be construed to include the Alternate Designated Representative.

ARTICLE VII. LIABILITY AND INDEMNIFICATION

     7.1. Notwithstanding any other provision in this Agreement or the requirements of the BSP II Participation Agreement, each BSP II Owner, as a matter of law, is liable for the Affected Unit’s, as well as the Affected Source’s, compliance with the requirements and prohibitions of the Acid Rain Program and for any violation of any such requirement or prohibition.

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     7.2. Neither the Designated Representative, the Alternate Designated Representative, nor the Operator (or its directors, officers, or employees) shall be liable to the BSP II Owners for any loss, damage, or costs (including incidental and consequential damages) incurred by the BSP II Owners as the result of any action or failure to act, whether negligent or otherwise, by the Designated Representative or the Alternate Designated Representative in carrying out the provisions of this Agreement, except for (i) any “Willful Action” as that term is defined in the BSP II Participation Agreement and (ii) as to any Operator who is a BSP II Owner, also except for any liability accruing to the Operator as a BSP II Owner.

     7.3. The BSP II Owners shall each be liable for any action, representation or failure to act by the Designated Representative with regard to BSP II. When authorized to act on behalf of the Designated Representative, any action, representation, or failure to act by the Alternate Designated Representative shall be deemed to be an action, representation or failure to act of the Designated Representative.

     7.4. The BSP II Owners agree to indemnify and hold harmless the Designated Representative and the Alternate Designated Representative, when acting on behalf of the Designated Representative, from any civil liabilities or penalties assessed against them personally as the result of any action or failure to act, whether negligent or otherwise, except any “Willful Action” as that term is defined in the BSP II Participation Agreement. Such indemnification shall be in direct proportion to BSP II Plant ownership.

ARTICLE VIII. ACCOUNT REPRESENTATIVE

     8.1. Pursuant to the rules pertaining to the Allowance tracking system established by the Administrator, BSP II will be assigned a Unit Account. The Designated Representative and the Alternate Designated Representative shall serve as the authorized account representative and the alternate authorized account representative, respectively, for the Unit Account assigned to BSP II.

ARTICLE IX. ACCOUNTING

     9.1. The costs incurred (a) by the Operator, (b) by the Designated Representative, (c) on behalf of the Operator, or (d) on behalf of the Designated Representative in compliance with express or implied requirements of the Act shall be shared and paid for pursuant to the terms of the BSP II Participation Agreement.

     9.2. Books of accounts and records concerning details of costs applicable to this Agreement, as well as all records necessary to account for and track Allowances obtained, used or otherwise disposed of in accordance with the Act, shall be kept by Operator in accordance with Operator’s established procedures and methods adopted for accounting for such items and shall be in conformity with accepted accounting practices and the Federal Energy Regulatory Commission’s uniform system of accounts or the system of accounts of any other regulatory body having jurisdiction. These books shall be open to examination at any reasonable time by any of the BSP II Owners. Operator shall furnish each of the BSP II Owners summaries or reports

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relative to Allowances obtained, used or otherwise disposed of and costs incurred applicable to this Agreement as well as details of transactions pertaining to Allowances as are necessary for the BSP II Owners to comply with all applicable regulatory requirements.

     9.3 Allowances obtained by or on behalf of each BSP II Owner pursuant to Article X of this Agreement shall be designated to the individual BSP II Owner’s subaccount within the Unit Account.

     9.4. Prior to the 15th day of each month, the Designated Representative shall provide Allowance-related information as it pertains to BSP II and each respective BSP II Owner’s subaccount for the previous calendar month. Said Allowance information shall include, but not be limited to, the information set forth on Attachment B hereto. The Allowances used by each BSP II Owner shall be determined based on actual emissions of sulfur dioxide, calculated on a pro rata basis as provided in Section 10.1 of this Agreement.

ARTICLE X. ALLOWANCES; CONTINGENCY RESERVE

     10.1. Each BSP II Owner shall acquire and transfer to the BSP II Unit Account Allowances sufficient to cover the estimated sulfur dioxide emissions associated with its capacity share of BSP II in accordance with the BSP II Participation Agreement. At a minimum, each BSP II Owner shall maintain a balance of Allowances which, on the first of each month, is sufficient to cover the year-to-date actual emissions of sulfur dioxide attributed to such Owner, plus the estimated emissions of sulfur dioxide associated with such Owner’s capacity share for a period of thirty (30) days. For any given period of time, the actual sulfur dioxide emissions attributed to a BSP II Owner shall be equivalent to the product of (i) the total amount of energy dispatched from BSP II to such Owner during the relevant time period, divided by the total amount of energy dispatched from BSP II to all BSP II Owners during the same period, and (ii) the total amount of sulfur dioxide actually emitted from BSP II for the relevant time period. Operator shall acquire Allowances on behalf of any BSP II Owner who requests the same, which acquisition shall be at such Owner’s sole cost and expense and under such other terms as such Owner and Operator shall hereafter agree.

     10.2 In addition to the Allowances required under Section 10.1 above, each BSP II Owner shall maintain Allowances equal to or greater than its Allowance contingency reserve. The Allowance contingency reserve for each BSP II Owner shall be the number of Allowances required to cover the estimated sulfur dioxide emissions associated with eighty-five percent (85%) of such Owner’s capacity share of BSP II in accordance with the BSP II Participation Agreement for a period of thirty (30) days. The Allowance contingency reserve for each BSP II Owner may be reduced only in December, on a prorated basis consistent with the number of days remaining in that month. Operator shall calculate the size of the Allowance contingency reserve for each BSP II Owner and shall notify each BSP II Owner and the Designated Representative of that determination. Operator shall not dispatch energy for any BSP II Owner who fails to maintain the balance of Allowances required under Sections 10.1 and 10.2.

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     10.3 If, for any calendar year, a BSP II Owner has failed to maintain a balance of Allowances, inclusive of its Allowance contingency reserve, sufficient to cover the actual sulfur dioxide emissions attributed to such Owner for that calendar year (hereinafter an “Exceedance”), the Designated Representative shall determine the amount of such Exceedance. If by February 10th of the following year, the Owner responsible for such Exceedance has not obtained and transferred to the BSP II Unit Account additional Allowances sufficient to cover the Exceedance, the Designated Representative shall proceed to purchase Allowances to meet the Acid Rain Program compliance requirements in the most economical manner possible and bill the Owner for the cost of the Allowances purchased to satisfy the Owner’s Exceedance. Except for the foregoing, neither Operator nor the Designated Representative shall purchase Allowances on the account of the Owners without their prior consent. Allowances maintained by a BSP II Owner in excess of the Allowances required of that Owner shall not be used to satisfy the Allowance requirements of any other BSP II Owner.

ARTICLE XI. MISCELLANEOUS

     11.1. During any period that a BSP II Owner is in default, in whole or in part, in performing any of its obligations under this Agreement, such BSP II Owner shall be obligated and the default shall be handled in the manner prescribed in the BSP II Participation Agreement. The defaulting BSP II Owner shall not be entitled to energy from BSP II during the period of default, and the non-defaulting BSP II Owners shall be entitled to all of the energy from BSP II. No such default shall affect any BSP II Owner’s ownership interest, or any BSP II Owner’s obligations hereunder, including its obligation to pay money or share expenses.

     11.2. Any waiver at any time by any BSP II Owner of its rights with respect to a default under this Agreement, or with respect to any other matter arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent default or matter. Any delay, short of the statutory period of limitation, in asserting or enforcing any right under this Agreement, shall not be deemed a waiver of such right.

     11.3. This Agreement shall be effective on the date first written above and shall continue in full force and effect as long as BSP II shall be used or useful for the generation of electric power.

     11.4. This Agreement may be amended from time to time or canceled at any time by a written document signed by all BSP II Owners and Operator. It is the intention of the BSP II Owners and Operator that this Agreement be revised and amended as the BSP II Owners and Operator deem necessary.

     11.5. This Agreement shall inure to the benefit of, and be binding on, the successors and assigns of the BSP II Owners, subject to the restrictions on transferability set forth in the BSP II Participation Agreement, and Operator, subject to the restrictions on transferability set forth in the Operation and Maintenance Services Agreement by and among the BSP II Owners and Operator, dated June 30, 2005.

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     11.6. This Agreement shall be construed, interpreted, and controlled by the laws of the State of South Dakota.

     11.7. Separate copies of this Agreement will be executed by the BSP II Owners and Operator with the understanding that when each of the BSP II Owners and Operator has executed a copy, its separately executed copy will be joined together with all similarly executed copies and conformed master copies of said Agreement shall be prepared which shall bind all of the BSP II Owners and Operator to the same extent and purpose as if all of the BSP II Owners and Operator had joined in the execution of said master copies.

     11.8. Any article or provision of this Agreement declared or rendered unlawful by a court of law or regulatory agency with jurisdiction over the BSP II Owners, Operator or the Designated Representative, or deemed unlawful because of a statutory change will not otherwise affect the lawful obligations that arise under this Agreement.

     11.9. In the event a dispute arises out of or relating to this Agreement or in connection with the handling, disposition, accounting, or other treatment of Allowances, such dispute shall be resolved in accordance with the dispute resolution procedures set forth in the BSP II Participation Agreement.

     11.10. The BSP II Owners agree to be bound by all provisions of this Agreement. If there is a conflict in the terms of the BSP II Participation Agreement and the terms of this Agreement relating to the subject of this Agreement, the terms of this Agreement shall control, the BSP II Participation Agreement shall be deemed amended hereby, and in all other respects the BSP II Participation Agreement shall remain in full force and effect.

[The next page is the signature page.]

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     IN WITNESS WHEREOF, each of the BSP II Owners and Operator has caused this Agreement to be duly executed and attested as of date first written above.

OWNERS:

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY	GREAT RIVER ENERGY
By	By
Paul Leland	David Saggau
Its President	Its President and Chief Executive Officer
HEARTLAND CONSUMERS POWER DISTRICT	MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc.
By	By
Michael McDowell	Bruce T. Imsdahl
Its General Manager	Its President and Chief Executive Officer
OTTER TAIL CORPORATION dba Otter	SOUTHERN MINNESOTA MUNICIPAL POWER
Tail Power Company	AGENCY
By	By
Charles S. MacFarlane	Raymond A. Hayward
Its President	Its Executive Director and CEO
WESTERN MINNESOTA MUNICIPAL POWER AGENCY
By
Donald E. Habicht
Its President
OPERATOR:
OTTER TAIL CORPORATION dba Otter
Tail Power Company
By
Charles S. MacFarlane
Its President

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ATTACHMENT A

APPOINTMENT OF

DESIGNATED REPRESENTATIVE

AND ALTERNATE DESIGNATED REPRESENTATIVE

Affected Source: BSP II

Designated Representative: Ward L. Uggerud

Alternate Designated Representative: Terry M. Graumann

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ATTACHMENT B

ACCOUNTING FOR ALLOWANCES

     The Designated Representative shall provide Allowance cost and transaction information for each month to each BSP II Owner by the 15th calendar day of the ensuing month. The Allowance cost and transaction information shall include the following items:

1. Allowance Account Balances

a.	Total Unit Account Balance
b.	BSP II Owner’s Sub Account Balance
c.	Total Future Year Unit Account Balance
d.	BSP II Owner’s Future Year Sub Account Balance

2. Allowances Used (By Month and YTD)

a.	Total Unit Allowances Used
b.	BSP II Owner’s Allowances Used
c.	Serial Numbers of Allowances Designated for Compliance

3. Allowance Transfers (By Month and YTD)

a.	Total Unit Account Transfers
b.	BSP II Owner’s Sub Account Transfers
c.	Total Future Year Unit Account Transfers
d.	BSP II Owner’s Future Year Sub Account Transfers
e.	Serial Numbers of BSP II Owner’s Allowances Transferred

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SCHEDULE 5.02(b)(i)

KEY PERFORMANCE INDICATORS

• OSHA Rate

• Net Generation

• Non-Fuel O&M per MWh

• URGE/Employee

• MWh/Employee

• Job Order Backlog

• Unplanned Overtime (outside of overhauls)

• Urge Rating

• Availability

• Equivalent Availability

• Forced Outage Rate

• Net Plant Heat Rate

• Station Service

• SO₂ Removal Percentage

• SO₂ Credits Available/Purchased

• NO_x Removal Percentage

• NO_x Credits Available/Purchased

• Hg Removal Percentage

• Hg Credits Available/Purchased

• Bottom Ash Sold

• Fly Ash Sold

• Overtime Hours Worked

• Delivered Fuel Cost

• Energy Cost Less Fuel

• Reporting Deadlines

• Capital Budget Variance

• Notices of Violation

(*) Confidential information has been omitted and filed separately with the Commission pursuant to Rule 24b-2.

EX-10.3

Confidential information has been omitted from this Exhibit and filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2.

Exhibit 10.3

Big Stone I and Big Stone II

2005 Joint Facilities
Agreement

By And Among

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY,

GREAT RIVER ENERGY,

HEARTLAND CONSUMERS POWER DISTRICT,

MONTANA-DAKOTA UTILITIES CO., A DIVISION OF MDU

RESOURCES GROUP, INC.,

NORTHWESTERN CORPORATION dba NORTHWESTERN ENERGY,

OTTER TAIL CORPORATION dba OTTER TAIL POWER COMPANY,

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, AND

WESTERN MINNESOTA MUNICIPAL POWER AGENCY

June 30, 2005

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TABLE OF CONTENTS

	Page
ARTICLE I RULES OF CONSTRUCTION AND INTERPRETATION, DEFINED TERMS		2
1.01 Rules of Construction		2
1.02 Termination of 2002 Joint Facilities Agreement		2
1.03 Failure of BSP II Owner to Participate in BSP II Financial Closing.		3
1.04 Defined Terms		3
ARTICLE II JOINT FACILITIES: IDENTIFICATION, OWNERSHIP, ADEQUACY, AND CHANGES		10
2.01 Identification and Common Use of Joint Facilities		10
2.02 Ownership of Joint Facilities		10
2.03 Waiver of Partition Rights		10
2.04 Right of Possession		10
2.05 Adequacy of Property		10
2.06 Changes to Joint Facilities		11
2.07 Construction of New Joint Facilities		13
ARTICLE III TRANSFER OF OWNERSHIP INTERESTS IN AND OF JOINT FACILITIES		14
3.01 Transfers of Ownership Interests in Joint Facilities		14
3.02 Right of First Refusal for Joint Facilities		14
3.03 Decommissioning		15
3.04 Covenants Run With Land		15
ARTICLE IV WATER RESOURCES JOINT FACILITIES		15
4.01 Water Resources Joint Facilities		15
4.02 Water Restrictions Caused By Drought or Other Conditions		15
4.03 New Brine Concentrator		16
4.04 Lake Water Intake and Pipeline Structure		17
4.05 Cooling Water Pond		17
4.06 Water Storage Ponds		17
4.07 BSP II Cooling Tower Blowdown Pond		17
4.08 Demineralizer Trains		18
4.09 Cold Lime Softener		18
ARTICLE V COAL AND ASH JOINT FACILITIES		18
5.01 Coal And Ash Joint Facilities.		18
5.02 Coal Dead Storage Area		18
5.03 BSP II Live Coal Storage		19
5.04 Coal Measuring Procedure		19
5.05 New Coal Yard Shop		19
5.06 Mobile Equipment		19
5.07 Coal Receiving System, Rail Spur and Coal Unloading Facilities		20
5.08 Rail Cars		20

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	Page
5.09 Ash Disposal Area		20
5.10 Relocation of Ash Silo		20
ARTICLE VI ADDITIONAL JOINT FACILITIES		21
6.01 Plant Joint Facilities		21
6.02 Warehouse		21
6.03 Office and Locker Room		21
6.04 Roads and Parking		21
6.05 Control Room		21
6.06 Common Fire System		22
ARTICLE VII ELECTRICAL SUBSTATION		22
7.01 MISO Interconnection Request		22
7.02 Transmission Owners’ Additions and Upgrades		22
7.03 Generation Owners’ Additions and Upgrades		22
7.04 Direct Cost Reimbursements Before Commercial Operation		22
7.05 No Cost Reimbursement After Commercial Operation		23
ARTICLE VIII CONSUMABLES, PRODUCT SALES AND EMISSIONS		23
8.01 Electricity Consumed by the Joint Facilities		23
8.02 Fuel Oil Sales to BSP II		24
8.03 Brine Concentrator Product Water and Steam Sales		24
8.04 Permits		24
8.05 Joint Scrubber		25
ARTICLE IX OPERATION OF JOINT FACILITIES, USAGE FEE AND PAYMENT, SINGLE OPERATOR		25
9.01 Operation of the Joint Facilities		25
9.02 Designated Representatives		25
9.03 Joint Facilities Charges		25
9.04 Netting of Payment		25
9.05 Joint Facilities Fee Formulas		25
9.06 Single Operator		27
9.07 Joint Ownership of Joint Facilities		28
ARTICLE X ACQUISITION OF PROPERTY AND ACCESS; INDEMNIFICATION		28
10.01 Option to Purchase Contract		28
10.02 Easement Agreement		28
10.03 Pre-Construction and Construction of the BSP II Plant		29
10.04 Liability and Indemnification		30
10.05 Compliance with Laws		31
10.06 Environmental Indemnification		31
10.07 Cross-Indemnification		31
10.08 Availability of Insurance Proceeds		31
10.09 Environmental Due Diligence		32
ARTICLE XI CASUALTY LOSS AND INSURANCE		32

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	Page
11.01 Repair or Replacement		32
11.02 Insurance		33
ARTICLE XII LIABILITY		33
12.01 Remedies and Limitation of Damages		33
12.02 Release of Liability and Associated Covenant		33
ARTICLE XIII FORCE MAJEURE		34
ARTICLE XIV DISPUTE RESOLUTION		34
14.01 Joint Meeting of Committees		34
14.02 Continued Performance		34
ARTICLE XV RELATIONSHIP OF PARTIES		34
15.01 Nature of Obligations		34
ARTICLE XVI TERM AND TERMINATION		35
16.01 Term		35
16.02 Automatic Termination		35
ARTICLE XVII REPRESENTATIONS, WARRANTIES		35
ARTICLE XVIII MISCELLANEOUS		36
18.01 Publicity Policy		36
18.02 Successors and Assigns		37
18.03 Notices		37
18.04 Amendments		37
18.05 Waiver		37
18.06 Severability		37
18.07 Governing Law		38
18.08 Consent to Jurisdiction		38
18.09 Waiver of Trial by Jury		38
18.10 No Third-Party Beneficiaries		38
18.11 Cooperation		38
18.12 Consents and Delivery of Documents		39
18.13 Captions		39
18.14 Entire Agreement		39
18.15 Counterparts		39
18.16 No Waiver		39
18.17 Cumulative Rights		39
18.18 Certain Limitations		39
EXHIBIT A		41
SCHEDULE 4.01		43
SCHEDULE 4.04		44
SCHEDULE 4.05		45
SCHEDULE 4.07		46

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	Page
SCHEDULE 5.01		47
SCHEDULE 5.03		48
SCHEDULE 5.06		49
SCHEDULE 5.07		50
SCHEDULE 6.01		54
SCHEDULE 9.05		55
SCHEDULE 10.01(A)		61
SCHEDULE 10.01(B)		69
SCHEDULE 10.02(A)		76
SCHEDULE 10.02(C)		99
SCHEDULE 11.02		102

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Joint Facilities Agreement

     THIS JOINT FACILITIES AGREEMENT (the “Agreement”) is made as of June 30, 2005 (the “Effective Date”), by and among Central Minnesota Municipal Power Agency, an agency incorporated under the laws of Minnesota (“CMMPA”), Great River Energy, a cooperative corporation incorporated under the laws of Minnesota (“GRE”), Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law (Chapter 49-35 of the South Dakota Codified Laws) (“Heartland”), Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a corporation incorporated under the laws of the State of Delaware, (“Montana-Dakota”), NorthWestern Corporation (formerly known as NorthWestern Public Service Company), a corporation incorporated under the laws of the State of Delaware, doing business as NorthWestern Energy (“NorthWestern”), Otter Tail Corporation, a corporation incorporated under the laws of Minnesota, doing business as Otter Tail Power Company (“Otter Tail”), Southern Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“SMMPA”), and Western Minnesota Municipal Power Agency, a municipal corporation and political subdivision of the State of Minnesota (“WMMPA”) (each individually a “Party” or “Owner” and, collectively, the “Parties” or “Owners”).

RECITALS

     WHEREAS, Montana-Dakota, NorthWestern, and Otter Tail, together with such other Persons that from time to time may be Owners of BSP I (as such term is defined below) (collectively, the “BSP I Owners”) as tenants in common, own an undivided interest in one hundred percent (100%) of the existing 450 MW coal-fired electric generating plant located in Grant County, South Dakota, known as the Big Stone Plant (“BSP I”); and

     WHEREAS, CMMPA, GRE, Heartland, Montana-Dakota, Otter Tail, SMMPA and WMMPA, for as long as they remain Owners of BSP II (as such term is defined below), along with such other Persons that from time to time may be Owners of BSP II (collectively, the “BSP II Owners”), are contemporaneously with the execution of this Agreement, entering into that certain BSP II Participation Agreement (as such term is defined below), which sets forth their agreement and the terms under which they will jointly develop, own and operate a new, approximately 600 MW coal-fired electric generating plant to be known as the Big Stone II Power Plant (“BSP II”) to be located adjacent to BSP I; and

     WHEREAS, the BSP I Owners and the BSP II Owners have determined that, when compared to the cost of independent facilities, sharing the use of certain critical facilities will satisfy their respective requirements for operations that are efficient, economical and in accord with Prudent Utility Practice (as such term is defined below); and

     WHEREAS, the BSP I Owners believe that the development of BSP II will yield benefits to them, whether or not they participate in BSP II as an Owner; and

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     WHEREAS, the BSP I Owners and BSP II Owners have determined that certain BSP I assets must be purchased from the BSP I Owners in order to develop and operate BSP II in an efficient manner; and

     WHEREAS, BSP I is currently being operated by Otter Tail, and the BSP II Owners are contemporaneously with the execution of this Agreement entering into the Operation & Maintenance Services Agreement (as such term is defined below) with Otter Tail for the operation by Otter Tail of BSP II and the Parties desire to have the same Operator (as such term is defined below) for both Plants so as to maximize efficiencies and cost savings.

     NOW, THEREFORE, in consideration of the agreements and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound by this Agreement, the Parties covenant and agree as follows:

AGREEMENTS

ARTICLE I
RULES OF CONSTRUCTION AND INTERPRETATION, DEFINED TERMS

     1.01 Rules of Construction. The capitalized terms listed in this Article shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings as commonly used in the English language and, where applicable, in Prudent Utility Practice. Words not otherwise defined herein that have well-known and generally accepted technical or trade meanings are used herein in accordance with such recognized meanings. In addition, the following rules of interpretation shall apply:

(a)	The masculine shall include the feminine and neuter.
(b)	References to “Articles,” “Sections,” “Schedules,” or “Exhibits” shall be to articles, sections, schedules or exhibits of this Agreement. Any references to “Schedules” or “Exhibits” shall be deemed to mean, as applicable, as the same may be amended from time to time, in accordance with the provisions of this Agreement.
(c)	This Agreement was negotiated and prepared by each of the Parties with the advice and participation of its own counsel. The Parties have agreed to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such Party is the author of this Agreement or any part hereof.
(d)	The Parties shall act reasonably and in accordance with the principles of good faith and fair dealing in the performance of this Agreement.

     1.02 Termination of 2002 Joint Facilities Agreement. Upon execution of this Agreement by all Parties, that certain Big Stone I and Big Stone II 2002 Joint Facilities

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Agreement among Otter Tail, Montana-Dakota, and NorthWestern dated October 3, 2002 and all other agreements entered into by Otter Tail, Montana-Dakota, and NorthWestern in connection therewith shall be terminated without further action and without liability to any Party thereto as a result of such termination.

     1.03 Failure of BSP II Owner to Participate in the BSP II Financial Closing. If a BSP II Owner shall fail to participate in the BSP II Financial Closing (as such term is defined below), then it shall automatically cease to be a Party hereunder and shall have no further liabilities or obligations under the Joint Facilities Agreements, except for those liabilities or obligations arising on or before the date such Person shall cease to be a BSP II Owner. If a Third Party (as such term is defined below) replaces a BSP II Owner, such Third Party must agree to become a Party hereto by executing the appropriate joinder agreement to effect the same.

     1.04 Defined Terms. In addition to definitions of other terms appearing elsewhere in this Agreement, the following terms, when used herein, have the meanings specified:

     Additional Joint Facilities: Shall have the meaning given to such term in Section 6.01.

     Affiliate(s): Shall mean, with respect to any Person,

(a)	any Person that directly or indirectly, controls or is controlled by or is under common control with such Person; or
(b)	any Person that beneficially owns or holds fifty percent (50%) or more of any class of voting securities of such Person or owns or holds fifty percent (50%) or more of an ownership interest (on a fully diluted basis) in such Person.

For the purposes of this definition, “control,” “controlled by,” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by contract or otherwise. Notwithstanding the foregoing provisions of this definition, each Operator and Owner (except with regard to Otter Tail) shall not be deemed to be Affiliates of each other and any Person that is otherwise an Affiliate of Operator shall not be deemed to be an Affiliate of Operator for purposes of this Agreement to the extent such Person is acting in its capacity as an Owner or as a Representative of an Owner.

     Agreement: Shall mean this Agreement, as amended from time to time.

     Annual Fixed Charge: Shall have the meaning given to such given to such term in Section 9.05(b).

     Blanket Easement Agreement: Shall mean that certain Blanket Easement Agreement by and among the BSP I Owners and the BSP II Owners, substantially in the form attached hereto as Schedule 10.02(A).

     BSP I: Shall have the meaning given to such term in the recitals to this Agreement.

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     BSP I Joint Facilities: Shall mean those Joint Facilities owned by BSP I Owners and used by both BSP I and BSP II pursuant to the terms of this Agreement.

     BSP I Owners: Shall have the meaning given to such term in the recitals to this Agreement.

     BSP I Ownership Agreement: Shall mean the Big Stone Plant Agreement for Sharing Ownership of Generating Plant by and among Otter Tail Power Company, Montana-Dakota and NorthWestern dated January 7, 1970 and all supplements and amendments thereto.

     BSP I Plant Site: Shall mean the real property on which BSP I is located and any and all easements, leases, licenses, option rights, rights-of-way and other rights used in connection with the BSP I Plant; provided, however, that for purposes of Section 10.06 of this Agreement, it shall only mean the real property located at the BSP I Plant.

     BSP II: Shall have the meaning given to such term in the recitals to this Agreement.

     BSP II Cooling Tower Blowdown Pond: Shall have the meaning given to such term in Section 4.07.

     BSP II Financial Closing: Shall mean the date on which the BSP II Owners shall have delivered and consummated their respective Financing necessary to fund their share of the cost of the BSP II Plant, including, but not limited to, the execution of all documentation required to consummate said Financing.

     BSP II Joint Facilities: Shall mean those Joint Facilities owned by BSP II Owners and used by both BSP I and BSP II pursuant to the terms of this Agreement.

     BSP II Legal Counsel: Shall mean Leonard, Street and Deinard Professional Association, a professional association under the laws of Minnesota, for purposes of Section 10.09 hereof.

     BSP II Owners: Shall have the meaning given to such term in the recitals to this Agreement.

     BSP II Participation Agreement: Shall mean the Big Stone II Participation Agreement entered into by and among CMMPA, GRE, Heartland, Montana-Dakota, Otter Tail, SMMPA, and WMMPA.

     BSP II Plant Site: Shall mean the real property on which BSP II is to be located, including the real property that may be acquired pursuant to the Option to Purchase Contract and any and all easements, leases, licenses, option rights, rights-of-way and any other real property rights used in connection with the BSP II Plant.

     Business Day: Shall mean any day other than Saturday, Sunday or any weekday that is a legal holiday in the State of South Dakota.

     Capacity: Shall mean an electrical rating expressed in megawatts (MW).

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     Change: Shall have the meaning given to such term in Section 2.06(a).

     CMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

     Coal and Ash Joint Facilities: Shall have the meaning given to such term in Section 5.01.

     Commercial Operation: Shall mean that the BSP II Plant is operating and producing Capacity and Energy on a continuous basis, and is delivering such Energy to the BSP II Owners in accordance with Prudent Utility Practice and applicable Law.

     Coordination Committee(s): Shall mean the BSP I or BSP II coordination committees established and maintained pursuant to the respective Participation Agreement.

     Designated Easement Agreement: Shall mean the instrument that amends or restates the Blanket Easement Agreement pursuant to the terms of Section 10.02(b).

     Designated Easement Area: Shall mean the real property designated by the Owners pursuant to Section 10.02(b).

     Designated Representative: Shall have the meaning given to such term in Section 9.02.

     Dispute: Shall have the meaning given to such term in Section 14.01.

     Effective Date: Shall have the meaning given to such term in the preamble to this Agreement.

     Election Period: Shall have the meaning given to such term in Section 3.02(a)(ii).

     Electrical Substation: Shall have the meaning given to such term in Section 7.02.

     Energy: Shall mean energy having characteristics commonly known as three phase alternating current, with a nominal frequency of sixty (60) Hertz, a nominal voltage equivalent to that of Otter Tail’s or its successor’s transmission system, and measured in kilowatt-hours (kWh) or megawatt-hours (MWh).

     Engineering and Operating Committee(s) or E&O Committee(s): Shall mean the BSP I or BSP II engineering and operating committees established and maintained pursuant to the Participation Agreements.

     Environmental Law: Shall mean any Law relating to the environment and/or human health or safety, or governing, regulating or pertaining to the generation, treatment, storage, handling, transportation, use, release or disposal of any Hazardous Substance, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Clean Water Act of 1977, 33 U.S.C. § 1251 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., and the Toxic Substances Control Act, 33 U.S.C. § 2601 et seq., all as amended from time to time.

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     FERC: Shall mean the Federal Energy Regulatory Commission or any Governmental Authority which preceded or hereafter may succeed the Federal Energy Regulatory Commission.

     FERC Accounts: Shall mean the uniform system of accounts established by FERC for public utilities and licensees subject to the provisions of the Federal Power Act, as in effect from time to time.

     Financing: Shall mean the financing undertaken by each of the BSP II Owners to purchase an ownership interest in BSP II.

     Force Majeure Event: Shall mean a cause or event beyond the reasonable control of, and without the fault or negligence of the Party claiming force majeure, including, without limitation, an emergency, acts of God, floods, earthquakes, hurricanes, or tornadoes; sabotage; vandalism beyond that which could reasonably be prevented by a Party; terrorism; war; riots; fire; explosion; blockades; insurrection; strike; slow down or labor disruptions (even if such difficulties could be resolved by conceding to the demands of a labor group); and action or failure to take action by any Governmental Authority after the Effective Date (including the adoption or change in any rule or regulation or environmental constraints lawfully imposed by such Governmental Authority), but only if such requirements, actions, or failures to act prevent or delay performance; and inability, despite due diligence, to obtain any licenses, permits, or approvals required by any Governmental Authority; provided, however, that the following shall not be Force Majeure Events:

(a)	the refusal of the Rural Utilities Service of the United States Department of Agriculture to approve GRE’s participation in BSP II;
(b)	the refusal of the Minnesota Public Utilities Commission to approve Otter Tail’s integrated resource plan with respect to BSP II; or
(c)	any Owner’s failure to perform any obligation under this Agreement due to its inability to obtain an authorization or approval from a Governmental Authority where such Governmental Authority issuing the authorization or approval is also the Owner.

     Governmental Authority: Shall mean any federal, state, local or municipal governmental body; any governmental, quasi-governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power; or any court or governmental tribunal; any independent system operator, regional transmission organization, reliability organization, or other regulatory body; in each case having jurisdiction over a Party, BSP I, BSP II, the BSP I Plant Site, the BSP II Plant Site, or the transmission system to which either Plant is interconnected.

     GRE: Shall have the meaning given to such term in the preamble to this Agreement.

     Group(s): Shall mean either the BSP I Owners, as a group, or the BSP II Owners, as a group, or both, as the case may be, when acting collectively with regard to BSP I or BSP II.

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     Hazardous Substance: Shall mean any pollutant, contaminant, substance, chemical or material known to cause cancer or reproductive toxicity, or listed or identified in, or governed or regulated by, any Environmental Law, and also expressly includes urea formaldehyde, polychlorinated biphenyls, dioxin, radon, lead-based paint, asbestos, asbestos-containing materials, nuclear fuel or waste, radioactive materials, explosives, and petroleum products, including but not limited to crude oil or any fraction thereof, natural gas, natural gas liquids, gasoline and synthetic gas, and coal ash and any other waste material, substance, pollutant or contaminant the presence of which on, in, about or under a site could subject the owner or operator thereof to any damages, penalties, fines or liabilities under any applicable Environmental Law.

     Heartland: Shall have the meaning given to such term in the preamble to this Agreement.

     Indemnified Parties: Shall have the meaning given to such term in Section 10.04.

     Insurance: Shall have the meaning given to such term in Section 9.05(a).

     Joint Facilities: Shall mean the facilities designated as Joint Facilities in this Agreement and any improvements thereto.

     Joint Facilities Agreements: Shall mean this Agreement and the Property Agreements.

     Joint Facilities Fee: Shall have the meaning given to such term in Section 9.03.

     Joint Scrubber: Shall have the meaning given to such term in Section 8.05.

     Law(s): Shall mean any and all federal, state, and local statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, governmental agreements and governmental restrictions of any Governmental Authority, whether now or hereafter in effect.

     Losses: Subject in all respects to Section 12.01 of this Agreement, shall mean any and all costs, expenses, liabilities, damages, injuries or other financial losses of any kind or nature, including fines, penalties, claims, awards, judgments, demands, insurance deductibles, court costs and reasonable attorneys’ fees, incurred by such Person.

     Materials and Supplies: Shall mean materials and supplies obtained for use in the operation, maintenance or repair of the Plants (exclusive of fuel), the cost of which is charged to the applicable FERC Accounts.

     MISO: Shall mean the Midwest Independent Transmission System Operator, Inc. or any other applicable regional transmission organization.

     Montana-Dakota: Shall have the meaning given to such term in the preamble to this Agreement.

     Net Investment: Shall have the meaning given to such term in Section 9.05(b).

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     Non-Transferring Group: Shall have the meaning given to such term in Section 3.02(a).

     NorthWestern: Shall have the meaning given to that term in the preamble to this Agreement.

     O&M Costs: Shall have the meaning given to that term in Section 9.05(a).

     Operation & Maintenance Services Agreement or O&M Agreement: Shall mean that certain Operation & Maintenance Services Agreement entered into by and among the BSP II Owners and Otter Tail, as Operator.

     Operator: Shall mean the operator of each of or both, as the case may be, of the BSP I and BSP II Plants.

     Option to Purchase Contract: Shall mean that certain Option to Purchase Contract by and among the BSP I Owners and Otter Tail, as administrative agent on behalf of itself and the other BSP II Owners, substantially in the form attached hereto as Schedule 10.01(A).

     Otter Tail: Shall have the meaning given to such term in the preamble to this Agreement.

     Owner(s): Shall mean those Persons that from time to time own an Ownership Share in one or both Plants, including, as of the Effective Date, those Parties named in the preamble to this Agreement.

     Owners’ Insurance: Shall have the meaning given to such term in Section 11.02.

     Ownership Share: Shall mean the ownership interest of a particular Owner in a Plant.

     Participation Agreement(s): Shall mean the BSP II Participation Agreement and the BSP I Ownership Agreement.

     Party or Parties: Shall have the meaning given to those terms in the preamble to this Agreement.

     Person: Shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint-stock company, a business trust, consumers powers district, cooperative, unincorporated association, government or any subdivision thereof, or an organized group of individuals (whether incorporated or not), or a receiver, trustee or other liquidating agent of any of the foregoing in his capacity as such.

     Plant(s): Shall mean BSP I or BSP II or both, as the case may be.

     Plant Property: Shall mean property comprising the Plant and all other property (real, personal or fixtures, tangible or intangible), as well as property owned by the Owners for use exclusively in the construction, operation, maintenance or repair of the Plants.

     Property Agreements: Shall mean the Option to Purchase Contract, memorandum thereof, and the Blanket Easement Agreement.

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     Property Taxes: Shall have the meaning given to that term in Section 9.05(a).

     Prudent Utility Practice: Shall mean any of the practices, methods or acts (i) required by applicable Laws, the National Electric Safety Code, MISO, the North American Electric Reliability Council, or the successors of any of them, whether or not a Party is a member thereof, or (ii) otherwise engaged in or approved by a significant portion of the utility electric generation industry during the relevant time period or any of the practices, methods and acts that in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the upper Midwest region.

     Representative: Shall mean, with respect to a Party, any principal, shareholder, director, officer, employee or agent of such Party or its Affiliates, but only to the extent, in each case, such individual is engaged in the fulfillment of an obligation under this Agreement and is fulfilling such obligation in his or her capacity as a principal, shareholder, director, officer, employee or agent of such Party or its Affiliate.

     SMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

     Term: Shall have the meaning given to such term in Section 16.01.

     Third Party(ies): Shall mean any Person other than an Owner or an Affiliate of an Owner.

     Transfer, Transferred or Transferring: Shall mean any actual, attempted, proposed or purported sale, assignment, conveyance, transfer, gift, exchange, mortgage, pledge, encumbrance (including, but not limited to, liens of any kind), hypothecation, grant of a security interest in or other disposition, whether voluntary or involuntary.

     Transferring Group: Shall have the meaning given to such term in Section 3.02(a).

     Use Factor: Shall have the meaning given to such term in Section 9.05(a).

     Water Resources Joint Facilities: Shall have meaning given to such term in Section 4.01.

     Willful Action: Shall mean any act or omission of a Party (including an Owner acting as Operator), done or not done, at the direction of its directors, a corporate officer or other employee having management responsibilities in respect of the matter involved, which:

(a)	is knowingly or intentionally done or not done with conscious indifference to the consequences, or with the expectation that injury or damage to other Owners or any other Person would, or would be reasonably likely to, result therefrom; or
(b)	is determined by final judgment or decree of a court having jurisdiction, to be a material default under this Agreement, and occurs or continues beyond the time

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specified in such judgment or decree for curing such default, or if no time to cure is specified therein, occurs or continues beyond a reasonable time to cure such default.

     WMMPA: Shall have the meaning given to such term in the preamble to this Agreement.

ARTICLE II
JOINT FACILITIES: IDENTIFICATION, OWNERSHIP, ADEQUACY, AND
CHANGES

     2.01 Identification and Common Use of Joint Facilities. The Joint Facilities shall consist of the BSP I Joint Facilities and the BSP II Joint Facilities described in this Agreement and the Schedules and Exhibits attached hereto, including, without limitation, those Joint Facilities specifically described in Article IV, Article V and Article VI of this Agreement. As contemplated by this Agreement, the Option to Purchase Contract (if exercised), and the Blanket Easement Agreement, each Group shall have the right to use and have access to the Joint Facilities.

     2.02 Ownership of Joint Facilities. Each Group shall own, lease, or otherwise provide its respective Joint Facilities hereunder. No instruments by which title or other property interest in any Joint Facilities is acquired by the Owners, or by which the title or other property interest of the Owners in any Joint Facilities is evidenced, shall contain any provisions inconsistent with the provisions or intent of this Agreement.

     2.03 Waiver of Partition Rights. No Owner or Group shall resort to any action at law or in equity to partition any Joint Facility (either by partition in kind or by the sale of the subject property and division of the proceeds), and each Owner and Group hereby expressly waives the benefit of all Laws that may now or hereafter authorize such partition for a term that is coterminous with the Term or for such lesser period as may be required or permitted by applicable Law.

     2.04 Right of Possession. No Owner or Group shall lease or otherwise grant to another Person the right of possession as to any of the Joint Facilities, except as provided under this Agreement.

     2.05 Adequacy of Property. While the real property described in the Property Agreements is intended to include land, easements and other rights adequate for the investigation, design, construction and operation of BSP II and the continuing operation of BSP I, the Groups acknowledge that it is anticipated that either Group may require additional real property in connection therewith. Accordingly, at any time during the Term, if the Groups reasonably determine additional real property or new Joint Facilities or modifications to existing Joint Facilities are necessary or desirable, the Groups agree to negotiate in good faith for the rights to acquire and to acquire any additional real property which may be necessary for the construction and operation of such new Joint Facilities or such modifications to Joint Facilities, including, but not limited to, real property and rights to use real property owned by the other Group.

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     2.06 Changes to Joint Facilities.

(a) A Group shall not make any modification, addition to, or alteration of, any of that Group’s Joint Facilities exceeding (*) (a “Change”) without the prior written consent of the other Group, except in an emergency (as determined in good faith by such Group’s E&O Committee) and consistent with Prudent Utility Practice. For purposes of this Section 2.06(a), the cost of a Change shall be measured on a project work order basis, including, when applicable, the aggregate cost as detailed on a series of related project work orders. One hundred eighty (180) days prior to the planned commencement of work on such Change, the Group desiring to make such a Change shall first give written notice to the other Group, which written notice shall describe in detail the desired Change. Upon receipt of written notice of a desired Change, the other Group shall have ninety (90) days to object in writing that such Change is: (1) likely to prevent or substantially impair the Joint Facility from being useful in the normal operation of the other Group’s Plant, or (2) that the other Group is likely to suffer materially increased expenses for use of the Joint Facility due to the Change and, in either case, that the Change is not necessary to allow the Joint Facility to be used in accordance with Prudent Utility Practice. Any objection shall describe in detail the reasons the objecting Group believes the Change will prevent or substantially impair the useful operation of the Joint Facility or materially increase the expense of using the Joint Facility. If an objection is made, the Groups shall negotiate in good faith to arrive at a mutually acceptable Change, an acceptable alternate Joint Facility Fee, or another mutually acceptable resolution. Specifically, the Groups shall promptly make all reasonable efforts to resolve the dispute about the Change by amicable negotiations involving senior management representatives of the Groups. Each Group agrees to provide the other Group frank, candid and timely disclosure of relevant facts, information and documents to facilitate the negotiations. If investigation or testing by Third Party experts would be of benefit to the Groups in resolving the dispute, the Groups shall cooperate with each other to facilitate such investigation or testing, as well as the allocation of any costs and expenses of Third Party experts.

(i) If the Groups fail to resolve the dispute within thirty (30) days after the delivery of the objecting Group’s written notice, either Group’s sole remedy shall be to refer the dispute to arbitration pursuant to the arbitration rules of the American Arbitration Association then in effect, by delivering to the other Group a written notice containing the following:

(1)	a statement of the issue or issues in dispute; and
(2)	a statement that the dispute is being referred to arbitration.

Any arbitration shall be conducted in Minneapolis, Minnesota, unless the Groups shall mutually agree upon an alternate location.

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(ii) A dispute submitted to arbitration shall be conducted by three arbitrators, selected from a panel of arbitrators provided by the American Arbitration Association as follows:

(1)	each Group shall select one arbitrator; and
(2)	the two arbitrators selected by each Group shall select the third arbitrator.

	All three (3) arbitrators shall be impartial and independent of the Groups and shall have experience and skill in the resolution of commercial disputes in the electric utilities industry. Nothing in this Section 2.06(a) shall preclude the Groups from agreeing to settle a dispute under Section 2.06(a) in another manner or to alter the arbitration provisions, including, without limitation, the number of arbitrators.
(iii)	To the extent possible, all disputes between the Groups pursuant to this Section 2.06(a) will be consolidated and dealt with in a single arbitration proceeding. No arbitration initiated by the Groups shall include, by consolidation, joinder or otherwise, any other Person unless such Person is required in order for complete relief to be accorded in the arbitration.
(iv)	This agreement under Section 2.06(a) to arbitrate under certain circumstances shall be specifically enforceable in any court having jurisdiction thereof. Any decision rendered by the arbitrators pursuant to any arbitration shall be final and binding upon the Groups and judgment may be entered in accordance with applicable Law in any court of competent jurisdiction.
(v)	The arbitrators shall determine whether the Change should not occur, either because (a) the Change will prevent or substantially impair the useful operation of the Joint Facility or (b) because the Change will materially increase the expense of using the Joint Facility and is not necessary to allow the Joint Facility to be used in accordance with Prudent Utility Practice. If the arbitrators determine that either (a) or (b) above applies to the Change, the Change shall not occur. The arbitrators shall have jurisdiction and authority to interpret, apply, or determine compliance with the provisions of this Agreement insofar as shall be necessary to the determination of issues properly before the arbitrators, including the right to order specific performance against either Group. The arbitrators shall not have jurisdiction or authority to alter the provisions of this Agreement. The arbitrators shall apportion between the Groups, all costs, expenses and charges, including reasonable attorneys’ fees and expenses, incurred by the Groups in the conduct of the arbitration.

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(vi) During the continuation of any dispute arising under this Section 2.06(a), the Groups shall continue to perform their respective obligations under this Agreement, including prompt and timely payment of all amounts due hereunder.

(b)

If a Group desires that a capital improvement be made to one or more of the other Group’s Joint Facilities, which the other Group chooses not to make, the Group refusing to make such capital improvement must provide written justification for its refusal in response to a written request (including justification) for such capital improvement. If the Group seeking the capital improvement contends that the justification provided by the Group that opposes the capital improvement is not reasonable, the sole remedy of the Group seeking the capital improvement shall be to pursue dispute resolution as provided in Section 2.06(a) to seek a determination of whether the justification made by the Group that refused to make the capital improvement is reasonable. If the arbitrators’ final determination in such dispute resolution is that the justification for refusal is unreasonable, the refusing Group must make the capital improvement and the cost of the capital improvement shall be split equally between the Groups and only those costs borne by the Group that owns the Joint Facility shall be applied to the Joint Facilities Fee formula or its depreciated book value for purposes of Section 3.03. The Group that desired the capital improvement shall be required to purchase such improved Joint Facility, pursuant to Section 3.03, in the event the other Group is the first of the two Groups to decommission its Plant. If the arbitrators’ final determination is that the justification for refusal is reasonable, the refusing Group need not make the capital improvement, in which case the Group that requested the capital improvement may not again request the same or a similar capital improvement to the same Joint Facility for a period of two (2) years from the date of the arbitrators’ final determination.

(c)

Without the prior written consent of the BSP I Owners, which consent shall not be unreasonably withheld, the BSP II Owners may not, during the construction of BSP II, modify, add to, remove, or alter any BSP I Joint Facility. The BSP II Owners shall provide reasonable written notice to the BSP I Owners prior to making such modification, addition, removal or alteration, and, upon written consent, the BSP II Owners will ensure that such change does not prevent or impair the normal operation of BSP I or increase the BSP I Owners’ expenses for normal operation of the BSP I Joint Facility or of BSP I. In the event such a change prevents or impairs the normal operation of BSP I or increases the BSP I Owners’ expenses for normal operation of the BSP I Joint Facility or of BSP I, the BSP II Owners will be responsible for all reasonable costs causally related to such impairment or expense increases. If the BSP I Owners and the BSP II Owners cannot arrive at a mutually acceptable resolution regarding responsibility for such reasonable costs, the sole remedy for either Group shall be to pursue dispute resolution as provided in Section 2.06(a).

     2.07 Construction of New Joint Facilities. Except for specific Joint Facilities to be constructed pursuant to this Agreement, each Group may construct new facilities on its own

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Plant site without the prior consent of the other Group and without making any such new facility available to the other Group as a Joint Facility. Except as provided in Section 2.06(c), a Group may not construct a facility that, to any extent, is located on or requires the use of the other Group’s Plant site without the prior written consent of the other Group, which prior written consent may be denied in the sole discretion of the other Group. The Groups may, however, choose to cooperate with each other in the construction of new Joint Facilities.

ARTICLE III
TRANSFER OF OWNERSHIP INTERESTS IN AND OF JOINT FACILITIES

     3.01 Transfers of Ownership Interests in Joint Facilities. A Party’s or a Group’s ownership interest in a Joint Facility may only be Transferred as permitted under the Participation Agreement applicable to that Party or Group.

     3.02 Right of First Refusal for Joint Facilities. Beginning on the Effective Date, a Group may not Transfer (including, without limitation, by sale) ownership (whether partial or all) of a Joint Facility, except as provided in Section 3.01, unless it first complies in all respects with the right of first refusal process contained in this Section 3.02.

(a) If a Group (the “Transferring Group”) desires to Transfer ownership of a Joint Facility pursuant to a bona fide written offer from a Third Party, it shall first offer such Joint Facility to the other Group (the “Non-Transferring Group”) according to the following procedure:

(i)	The Transferring Group shall notify the Non-Transferring Group of its intention to Transfer ownership of such Joint Facility and furnish the Non-Transferring Group with a copy of the bona fide written offer signed by the proposed Third Party transferee setting forth, in reasonable detail, the price, terms and conditions (including, without limitation, source and terms of financing) of the proposed Transfer. To be a bona fide written offer, such offer must be for all cash.
(ii)	The Non-Transferring Group shall have ninety (90) days (the “Election Period”) in which to elect in writing to the Transferring Group to purchase the Joint Facility on all of the same terms and conditions as are set forth in the Third Party’s bona fide written offer to the Transferring Group. In this case, the sale and purchase shall be consummated within one hundred eighty (180) days after the end of the Election Period.
(iii)	If, by the end of the Election Period, the Non-Transferring Group has not elected to purchase the Joint Facility, then the Transferring Group shall be entitled, for a period of one hundred eighty (180) days after the end of the Election Period, to sell the Joint Facility to the proposed Third Party, in all respects pursuant to the terms of its bona fide written offer. If the Transfer of the Joint Facility to the Third Party is not completed within said one hundred eighty (180) day period, the Joint Facility shall again become subject to the right of first refusal contained in this Section 3.02.

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     3.03 Decommissioning.

(a)

If a Group decides to decommission any of its Joint Facilities, either separate from, or in conjunction with, the decommissioning of its entire Plant, it shall first offer in writing to sell any such Joint Facilities to the other Group for (*).

(b)

The non-decommissioning Group must accept such offer in writing no later than ninety (90) days from the date of receipt of the written offer to sell. If such offer is not accepted, the offer shall be deemed rejected. For purposes of this Section 3.03, the costs of decommissioning shall include, without limitation, the removal of all improvements to real estate and all personal property, including all materials, supplies, equipment, and waste associated with such Joint Facility, and any reclamation required by applicable Law in connection with such decommissioning. The right of first refusal provisions contained in Section 3.02 shall not apply to any Transfer contemplated in this Section 3.03.

     3.04 Covenants Run With Land. The provisions of this Agreement, including, without limitation, the right of first refusal provisions contained in Section 3.02, shall constitute covenants running with the land as to the interests in real property which are made subject hereto and shall bind each Owner and its successors and assigns.

ARTICLE IV
WATER RESOURCES JOINT FACILITIES

     4.01 Water Resources Joint Facilities. For purposes of this Agreement, the “Water Resources Joint Facilities” are those water resources and related facilities used to transport, store and treat water necessary in the operation of BSP I and BSP II. Water Resources Joint Facilities shall consist of the facilities described in this Article IV and the Water Resources Joint Facilities set forth in Schedule 4.01 attached hereto.

     4.02 Water Restrictions Caused By Drought or Other Conditions.

(a)

The Groups acknowledge that the Water Resources Joint Facilities to be constructed and owned by the BSP II Owners shall be designed to provide a benefit to the BSP I Owners by increasing the water available to operate BSP I and, thereby, increasing the ability of BSP I to operate during drought conditions. If at any time during the Term, either BSP I or BSP II would be required to materially reduce the Energy output of its Plant due to lack of adequate water caused by drought or other causes, the Groups shall meet and negotiate in good faith to find a resolution that minimizes the impact on both Plants and maximizes the collective electrical output of both Plants, including, without limitation, entering into power purchase agreements that would allow both Groups to minimize the reduction of each Plant’s electrical output.

(b)

If the Groups cannot reach a mutually satisfactory resolution, each Plant’s electrical output shall be reduced proportionally, based upon the relative amounts of water used by BSP I and BSP II prior to such condition (i.e., the Plant with the

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greater water consumption shall reduce its electrical output to a greater extent than the Plant with the lesser water consumption), with each Plant’s reduction being in such amount as is required so that, following such reductions, the combined water use of both Plants does not exceed the amount of water projected to be available for at least the next six (6) months. For purposes of determining the relative water use of the Plants as described in this Section 4.02(b), each Plant’s water consumption shall be calculated based upon assumed operation at levels equal to the Plant’s accredited Capacity. However, in the event that BSP II has not yet been accredited for Capacity, said calculation shall be based upon assumed operation at levels equal to the nameplate Capacity of each Plant. The Groups shall share the available water accordingly until such time as sufficient water adequate to operate both Plants at full Capacity shall be available.

     4.03 New Brine Concentrator. The BSP II Owners shall construct, pay for, and own a new brine concentrator which will be a BSP II Joint Facility. The existing BSP I brine concentrator, sludge pond, water and product lines, and brine concentrator control room will be BSP I Joint Facilities. The following provisions shall apply regarding the brine concentrators:

(a)	Size. The new BSP II brine concentrator shall be designed and constructed to have brine processing capacity at least equal to the existing BSP I brine concentrator.
(b)	Water and Product Lines. If the BSP II Owners determine that the existing BSP I brine concentrator water supply and product lines do not have sufficient capacity to support the new brine concentrator, then the BSP II Owners shall construct, pay for, and own new water supply and product lines to supply both the new and existing brine concentrators. The new water supply and product lines shall be BSP II Joint Facilities.
(c)	Sludge Pond. If the BSP II Owners determine that the existing BSP I brine concentrator sludge pond does not have sufficient capacity to support the new BSP II brine concentrator, then the BSP II Owners shall construct, pay for, and own a new sludge pond. The new sludge pond shall be a BSP II Joint Facility.
(d)	Disposal of Brine Concentrator Waste. The costs for disposal of brine concentrator waste, whether from the existing BSP I brine concentrator or the new BSP II brine concentrator, shall be shared equally between the Groups.
(e)	New Brine Concentrator Electrical Substation. The BSP II Owners shall construct, pay for, and own a new electrical substation to provide electric service to the new BSP II brine concentrator. The new BSP II brine concentrator electrical substation shall be a BSP II Joint Facility.
(f)	Property Rights. If the Groups jointly determine it is necessary, the BSP I Owners shall execute and deliver any easements or rights-of-way, or sell any property (at the price set forth in Section 10.01), to the extent that are reasonably necessary to enable the BSP II Owners to construct the new BSP II brine

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	concentrator, new water and product lines, and new BSP II brine concentrator electrical substation.
(g)	Fees and Maintenance. The BSP II Owners shall not charge the BSP I owners a fee for the use of the new BSP II brine concentrator, the new water and product lines, or the new BSP II brine concentrator substation. The Groups shall share the ongoing maintenance costs of the existing BSP I brine concentrator and the new BSP II brine concentrator equally.

     4.04 Lake Water Intake and Pipeline Structure. The lake water intake and pipeline structure, and its various components set forth on Schedule 4.04, and including, without limitation, the water intake building and all associated pumping and operational equipment located on the shore of Big Stone Lake and the forty-eight (48) inch concrete pipeline from the Long Lake building on the shore of Big Stone Lake to the existing discharge structure, which consists of the concrete weir located in the brine concentrator make-up pond and existing on the Effective Date shall be BSP I Joint Facilities. The BSP II Owners shall pay a fee for the use of the lake water intake and pipeline structure as calculated pursuant to Section 9.05.

     4.05 Cooling Water Pond. The three hundred forty (340) acre cooling water pond immediately adjacent to BSP I, used by BSP I, existing as of the Effective Date, and identified on Schedule 4.05, shall be a BSP I Joint Facility. Any makeup water necessary for the operation of the BSP II cooling towers will come from the cooling water pond. Any makeup water necessary for the cooling water pond will come from the BSP I storage ponds, described in Section 4.06 hereof. There will be no fee charged for the use of the cooling water pond and the Groups shall share the ongoing cost of maintenance of the cooling water pond equally.

     4.06 Water Storage Ponds. The approximately one hundred (100) surface acres holding pond closest to Highway 109 and the approximately two hundred (200) surface acre evaporation ponds used by BSP I and existing as of the Effective Date, and identified on Schedule 4.05, shall be BSP I Joint Facilities. As of the date of Commercial Operation, the holding pond and the evaporation pond will be used as water storage ponds for both Plants, but shall remain BSP I Joint Facilities. The BSP II Owners shall construct an additional water storage pond, to be located Southwest of the Plant site, that will be a BSP II Joint Facility. Collectively, the storage ponds will supply makeup water to the cooling water pond. The BSP II Owners shall construct, pay for, and own any pumps and a pipeline necessary to connect the storage ponds to the cooling pond. These pumps and pipeline shall be BSP II Joint Facilities. There will be no Joint Facilities Fees or other fees charged for the use of the storage ponds. BSP II Owners shall be solely responsible for the ongoing cost of maintenance of any pumps and pipeline necessary to connect the storage ponds to the cooling pond.

     4.07 BSP II Cooling Tower Blowdown Pond. The BSP II Owners shall construct, pay for, and own a new cooling tower blowdown pond on the western edge of the BSP II Plant Site, identified on Schedule 4.07 (“BSP II Cooling Tower Blowdown Pond”). The BSP II Cooling Tower Blowdown Pond shall be maintained at the sole cost of the BSP II Owners and will not be a Joint Facility. Notwithstanding the foregoing sentence, the BSP II Cooling Tower Blowdown Pond shall be used to provide water supply to both the existing BSP I brine concentrator and new BSP II brine concentrator. The BSP II Owners shall construct, pay for,

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and own any pumps or pipeline necessary to connect the BSP II Cooling Water Blowdown Pond to the existing and new brine concentrators. No fee shall be charged for the BSP I Owners use of the BSP II Cooling Water Blowdown Pond to provide water supply to the existing brine concentrator. BSP II Owners shall be solely responsible for the ongoing cost of maintenance of any pumps and pipeline necessary to connect the BSP II Cooling Water Blowdown Pond to the existing BSP I brine concentrator and the new BSP II brine concentrator.

     4.08 Demineralizer Trains. The BSP II Owners shall purchase and erect a new demineralizer train at BSP I to supplement the existing system of vessels, piping, valves, and controls for preparing the main boiler supply water on the ground floor of the BSP I main building, between column lines C6 to L and column lines 8 to 9, with all three demineralizer trains operated out of the same location. The two existing demineralizer trains shall be BSP I Joint Facilities and the new demineralizer train shall be a BSP II Joint Facility. There will be no fee charged for the use of the existing or new demineralizer trains and the BSP I Owners and BSP II Owners shall split the ongoing cost of maintenance of the three demineralizer trains between the two Plants in proportion to the demineralized water use of the Plants, measured (and not calculated) in gallons during the previous calendar year.

     4.09 Cold Lime Softener. The BSP II Owners intend to purchase from the BSP I Owners the existing BSP I cold lime softener at depreciated book value and associated real estate identified on Schedule 4.05. If the BSP II Owners exercise their option to purchase the real estate described in the Option to Purchase Contract, they shall purchase the cold lime softener from the BSP I Owners on the date the Option to Purchase Contract is exercised. If this purchase occurs, the cold lime softener shall not be a BSP II Joint Facility. The BSP II Owners shall construct, pay for, and own a new pipeline and any additional facilities necessary to connect the cold lime softener discharge to the BSP II Plant’s circulating water system. The new facilities referred to in the preceding sentence shall not be Joint Facilities. The BSP II Owners shall be solely responsible for the ongoing costs of maintenance for the cold lime softener, if purchased from the BSP I Owners.

ARTICLE V

COAL AND ASH JOINT FACILITIES

     5.01 Coal And Ash Joint Facilities. For purposes of this Agreement, the “Coal and Ash Joint Facilities” are those facilities used to receive and store coal and ash necessary in the operation of, or produced from the operation of, BSP I and BSP II. Coal and Ash Joint Facilities shall consist of the facilities described in this Article V and in the “Coal and Ash Joint Facilities” set forth in Schedule 5.01 attached hereto.

     5.02 Coal Dead Storage Area. The coal dead storage pile area used by BSP I and existing as of the Effective Date shall be a BSP I Joint Facility. Contemporaneously herewith, the Owners have entered into the Option to Purchase Contract, which, among other things, contemplates the purchase by the BSP II Owners of a portion of the existing coal dead storage area. If the BSP II Owners purchase a portion of the existing coal dead storage area, the portion purchased shall be a BSP II Joint Facility. The existing coal dead storage area is adequate for the storage and stockpiling of coal in sufficient quantities for both BSP I and BSP II and both Groups may use the coal dead storage area to store any amount of coal as may be needed for the

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operation of BSP I and BSP II. There will be no Joint Facilities Fees or other fee charged for the use of the coal dead storage areas (other than costs related to the initial development by BSP II of its share of the site (which costs shall be borne exclusively by BSP II)), and the Groups shall share the ongoing cost of maintenance of the coal dead storage areas equally.

     5.03 BSP II Live Coal Storage. The BSP II Owners shall construct, pay for, and own a new conveyor from the head of the #2 conveyor (located in the coal dead storage area) to the new BSP II coal storage silos. The new conveyor shall have a retractable plow suitable for use to provide stack-out to dead storage. A description of the new conveyor system and the stack-out chute is set forth on Schedule 5.03 attached hereto. The new conveyor shall be maintained at the sole cost of the BSP II Owners and will not be a Joint Facility. The new stack-out chute will be a BSP II Joint Facility. There will be no fee charged for the use of the new stack-out chute and the ongoing cost of maintenance of the new stack-out chute shall be shared equally between the Groups.

     5.04 Coal Measuring Procedure. All coal that enters or leaves the coal dead storage pile area shall be measured and accounted for pursuant to procedures to be developed by the Operator. Such procedures shall provide for the accurate and complete measurement of the coal inventory of each Group and the use of such coal and, as appropriate, shall reflect the quality of coal and any shrinkage.

     5.05 New Coal Yard Shop. The BSP II Owners shall construct, pay for, and own a new coal yard shop for storage and maintenance of mobile equipment used in connection with coal and ash handling. The new coal yard shop shall be located on land that the BSP II Owners anticipate purchasing from the BSP I Owners pursuant to the Option to Purchase Contract. The new coal yard shop shall be a BSP II Joint Facility. Although a Joint Facility, no Joint Facilities Fee or other fee shall be charged to the BSP I Owners for use of the new coal yard shop, and the BSP II Owners shall be solely responsible for the cost of maintenance of the new coal yard shop.

     5.06 Mobile Equipment. The BSP I mobile equipment, consisting of the types of mobile equipment listed on Schedule 5.06 hereto, shall be BSP I Joint Facilities. Ninety (90) days before the date of the first coal delivery to BSP II, the BSP II Owners shall purchase one-half of such mobile equipment from the BSP I Owners at its depreciated book value. Any new mobile equipment that the Groups agree is required for joint use by BSP I and BSP II shall be purchased with one-half of the cost borne by the BSP I Owners and one-half borne by the BSP II Owners, so that, to the extent possible, ownership of the mobile equipment is divided equally between the Groups. With respect to the types of mobile equipment required to have certificates of title under applicable Law, the BSP I Owners and BSP II Owners shall each endeavor to purchase individual units of such mobile equipment in order that the value, measured by the purchase price, shall approximate, as much as possible, half of the value of such mobile equipment required to have certificates of title. All new mobile equipment purchased by the BSP I Owners that is intended to be used jointly by the Groups shall be BSP I Joint Facilities. All new mobile equipment purchased by the BSP II Owners that is intended to be used jointly by the Groups shall be BSP II Joint Facilities. Each Group shall split the cost of maintaining all mobile equipment in proportion to the coal consumption at the two Plants; provided, however, that each Group shall pay all costs associated with owning and operating its own motor vehicles. The

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E&O Committees shall, to the extent necessary, develop policies and procedures to implement the mobile equipment ownership arrangement of this Section 5.06.

     5.07 Coal Receiving System, Rail Spur and Coal Unloading Facilities. The coal receiving system, rail spur and fuel unloading facilities used for BSP I and existing on the Effective Date shall be BSP I Joint Facilities. The coal receiving system, rail spur and fuel unloading facilities consist of such facilities as are necessary for transporting, loading and unloading coal and other materials, including but not limited to BSP I’s rail spur, rail car rotary dumper, positioner and #1 and #2 conveyors all as described more fully in Schedule 5.07 attached hereto. The BSP II Owners shall pay a fee for the use of the coal receiving system, rail spur and fuel unloading facilities as calculated pursuant to Section 9.05.

     5.08 Rail Cars. BSP I currently leases rail cars under a fifteen (15) year lease, which lease terminates in 2011, and thereafter shall lease or purchase, as it deems appropriate, its rail cars. BSP II shall purchase or lease rail cars, as it deems appropriate. The BSP I rail cars shall be BSP I Joint Facilities and the BSP II rail cars shall be BSP II Joint Facilities. Each Group’s rail cars shall be used principally for the benefit of the Group that owns or leases the rail cars, but the Operator may use any of the rail cars for both Plants if it determines such use is efficient. For rail cars of one Plant being used by the other, a usage fee for rail cars shall be determined by the Operator at the end of each calendar year based on the actual usage of the rail cars by BSP I and BSP II and the actual costs associated with the same. Each Plant will bear its own costs for leasing, operating or maintaining its rail cars.

     5.09 Ash Disposal Area. The existing BSP I ash disposal site shall be a Big Stone I Joint Facility. Both Groups shall pay for ongoing capital improvements made to the ash disposal site after the date BSP II first achieves Commercial Operation, including but not limited to any reclamation costs and any environmental remediation costs, in proportion to each Plant’s total volume of ash deposited in the site. Other than as specifically included herein, the BSP II Owners shall not pay for any volume of the existing ash disposal site consumed as a result of BSP II Plant ash being deposited. Instead, a calculation will be made of the volume of the existing site consumed by the ash from the BSP II Plant, and when and if it becomes necessary to construct a new ash disposal site, the BSP II Owners shall pay for all costs associated with creation of a new site with a capacity equal to the volume of ash that was disposed by BSP II into the existing ash disposal site. Nothing herein shall prevent the Groups from agreeing to the creation of a new site larger in capacity than that required by the previous sentence, and in such event, the costs of creating such ash disposal site shall be as the Groups may agree. All costs of maintaining a new site shall be shared between the Groups in proportion to the volume of ash deposited by each Plant on an ongoing basis. Each Group will pay its costs associated with delivering its respective ash to the existing ash disposal site and any new ash disposal site.

     5.10 Relocation of Ash Silo. The existing BSP I ash silo, a thirty-five (35) feet by sixty-four (64) feet and three (3) inches steel fly ash bin manufactured by the United Conveyor Corporation, shall be relocated by the BSP II Owners, at their sole expense, to a location at the BSP II Plant Site agreed to by the Groups. The relocated BSP I ash silo shall continue to be owned by BSP I Owners and shall not be a Joint Facility. The BSP I Owners shall not be charged for the use of the BSP II property on which ash silo will be relocated. BSP I Owners shall be responsible for all costs of maintaining the BSP I Ash Silo.

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ARTICLE VI

ADDITIONAL JOINT FACILITIES

     6.01 Plant Joint Facilities. The “Additional Joint Facilities” are those facilities described in this Article VI and in those Additional Joint Facilities set forth in Schedule 6.01 attached hereto.

     6.02 Warehouse. The existing BSP I fifty-eight (58) feet by two hundred and ten (210) feet coal yard shop building adjacent to the existing BSP I cooling pond and north of the existing BSP I pollution control equipment currently being used by BSP I as of the Effective Date will be a BSP I Joint Facility and will become a warehouse for both BSP I and BSP II for storage of Materials and Supplies. Although a Joint Facility, there will be no Joint Facilities Fee or other fee charged for the use of the warehouse and the Groups shall share the ongoing cost of maintenance of the warehouse equally. The BSP II Owners shall construct and pay for all costs associated with converting the existing BSP I coal yard shop into a warehouse, including, without limitation, any upgrades or modifications to the existing computerized tracking system for parts and inventory required to permit tracking of parts and inventory so that if either Plant uses Materials and Supplies owned by the other Plant and which are stored in the warehouse, an accounting of such use shall be possible. Reimbursement for any Materials and Supplies of one Plant used by the other Plant will be at original cost plus twenty percent (20%).

     6.03 Office and Locker Room. The BSP II Owners shall construct, pay for and own additional office and locker room space as needed. Any new office or locker room space constructed by the BSP II Owners will be a BSP II Joint Facility. BSP I Owners shall be allowed to use any office and locker room space built by the BSP II Owners and needed in connection with the operation of BSP I at no charge. The existing office and locker room will be BSP I Joint Facilities. BSP II Owners shall be allowed to use any existing office and locker room space needed in connection with the operation of BSP II at no charge. The Groups shall share the ongoing cost of maintenance of the office and locker rooms equally.

     6.04 Roads and Parking. The BSP II Owners shall construct, pay for and own additional roads and parking as needed. The existing roads and parking will be BSP I Joint Facilities. Any new roads and parking constructed by the BSP II Owners will be BSP II Joint Facilities. The Groups shall share the ongoing cost of maintenance of the roads and parking equally.

     6.05 Control Room. Except for the distributed control systems and all other systems necessary for the operation and control of BSP I, the control room used for the operation and control of BSP I and existing on the Effective Date shall be a BSP I Joint Facility. The BSP II Owners shall construct, pay for and own all distributed control systems and all other systems necessary for the operation and control of BSP II and located in the control room. Any new distributed control systems and all other systems necessary for the operation and control of BSP II and located in the control room and paid for by the BSP II Owners shall not be Joint Facilities. Except for the distributed control systems and all other systems necessary for the operation and control of each Plant which will be separately owned by each Plant, BSP I Owners and BSP II Owners shall share the ongoing cost of maintenance of the control room equally between the two Plants. BSP I Owners and BSP II Owners shall cooperate to direct the Operator on the most

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effective use of the control room to operate both Plants. Nothing herein shall prevent the Owners from establishing a common distributed control system.

     6.06 Common Fire System. The existing fire system, consisting of the electric and diesel fire pumps in the circulating water inlet building and all associated supply piping, valves, hydrants, and hydrant buildings at the BSP I Plant Site and currently used for BSP I and existing on the Effective Date will be a BSP I Joint Facility. The BSP II Owners shall construct and pay for additions and upgrades to the fire system which the Groups agree are needed for the construction and operation of BSP II. Any new additions to the fire system constructed and paid for by the BSP II Owners shall be BSP II Joint Facilities. There will be no Joint Facilities Fees or other fee charged for the use of the existing fire system or any additions or upgrades and the BSP I Owners and BSP II Owners shall share the ongoing cost of maintenance of the common fire system in proportion to the nameplate Capacity of the two Plants.

ARTICLE VII

ELECTRICAL SUBSTATION

     7.01 MISO Interconnection Request. The BSP II Owners have submitted an interconnection request to the MISO and pursuant to MISO’s FERC-filed tariff addressing such interconnection requests, the BSP II Owners anticipate entering into an interconnection agreement with MISO and affected transmission owners. The BSP II Owners shall provide a copy of all interconnection studies done by or with MISO regarding BSP II to the BSP I Owners.

     7.02 Transmission Owners’ Additions and Upgrades. To the extent any additions or upgrades to the BSP I electrical substation (the “Electrical Substation”) are required due to the construction of BSP II, and such additions or upgrades are deemed to be on the transmission owners’ side of the point of interconnection (as defined in the MISO interconnection agreement or pursuant to the BSP II Participation Agreement), then the costs of such additions or upgrades shall be as directed in the MISO interconnection agreement. The BSP II Owners shall reimburse the BSP I Owners for any such costs, but only to the extent any such additions or upgrades are required to be made pursuant to the MISO interconnection agreement.

     7.03 Generation Owners’ Additions and Upgrades. Any additions or upgrades required to be made to the Electrical Substation that are deemed to be on the generators’ side of the point of interconnection (as defined in the MISO interconnection agreement) shall be made by, owned, maintained, and paid for by the BSP II Owners and shall be BSP II Joint Facilities. Those components of the Electrical Substation that do not require additions or upgrades shall continue to be owned by the BSP I Owners and shall be BSP I Joint Facilities. Before making any such additions or upgrades, the BSP II Owners shall provide information regarding the same to the BSP I Owners. This information shall include, but not be limited to, a one-line diagram showing the proposed additions and upgrades to the Electrical Substation. All such additions or upgrades (including, without limitation, the one-line diagram) must be approved by the BSP I Owners, which approval shall not be unreasonably withheld, before the BSP II Owners make any such additions or upgrades.

     7.04 Direct Cost Reimbursements Before Commercial Operation. Prior to the first date of Commercial Operation, no additions or upgrades shall have or cause a material adverse

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impact on BSP I’s reliability or available Capacity or Energy delivery. If there is such a material adverse impact prior to the first date of Commercial Operation caused by such additions or upgrades, then the BSP II Owners shall reimburse the BSP I Owners for lost Capacity or Energy as follows:

(a) if the BSP I Owners’ costs to replace lost Capacity or Energy exceed the BSP I Owners’ costs to produce such Capacity or Energy, then, the Groups shall mutually agree to either:

(i)	require that the BSP II Owners shall acquire such Capacity or Energy for the BSP I Owners and the BSP I Owners shall pay to the BSP II Owners whatever it would have cost the BSP I Owners to produce such Capacity or Energy at the BSP I Plant; or
(ii)	direct the BSP I Owners to acquire such Capacity or Energy and charge the BSP II Owners the difference between whatever it would have cost the BSP I Owners to produce such Capacity or Energy and what the BSP II Owners were required to pay for such Capacity or Energy at the BSP I Plant;

provided, however, that if the market price of such Capacity or Energy is less than what it would have cost the BSP I Owners to produce such Capacity or Energy, then the BSP II Owners shall have no obligations under this Section 7.04.

     7.05 No Cost Reimbursement After Commercial Operation. After the first date of Commercial Operation, each Group shall be responsible for maintaining its own Electrical Substation Joint Facilities and shall be responsible, under applicable Law, for obtaining its own replacement Capacity and Energy in the event of an outage or any other service interruption that is related to the Electrical Substation. Nothing herein shall affect, alter or modify any rights or obligations created by that certain Settlement Agreement entered into on or around March 24, 2005 by and among MISO, Otter Tail, Montana-Dakota, Minnkota Power Cooperative, Inc. as agent for Northern Municipal Power Agency, and NorthWestern.

ARTICLE VIII

CONSUMABLES, PRODUCT SALES AND EMISSIONS

     8.01 Electricity Consumed by the Joint Facilities. The electricity necessary for the operation of the lake water intake and pipeline structure addressed in Section 4.04 hereof and the coal receiving system, rail spur and coal unloading facilities addressed in Section 5.07 hereof shall be provided by the BSP I Owners and the BSP II Owners in proportion to the respective water usage (on a calculated basis) and coal consumption, respectively, of the Plants for the previous calendar year. For all Joint Facilities, other than the lake water intake and pipeline structure and the coal receiving system, rail spur and fuel unloading facilities, the cost of electricity shall be recovered through the particular arrangement for ongoing cost of maintenance for such Joint Facility.

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     8.02 Fuel Oil Sales to BSP II. The BSP I Owners own a five hundred thousand (500,000) gallon fuel oil storage tank, forty-eight (48) feet in diameter and forty (40) feet tall, constructed of carbon steel and designated V60-B, located closest to the existing cooling pond on the BSP I Plant site. The fuel oil storage tank has sufficient capacity to meet the ongoing fuel oil needs of both Plants. The fuel oil storage tank will not be a Joint Facility, but the BSP II Operator shall purchase all of the fuel oil necessary for the operation of BSP II from the BSP I Owners. All fuel oil stored in the fuel oil storage tank shall be No. 2 fuel oil. The purchase price for the fuel oil shall be the BSP I cost of the fuel oil, plus a fee of twenty percent (20%). The BSP II Owners shall construct, pay for, own, and maintain at their expense any new pipeline or other facilities necessary to transport the fuel oil to the BSP II Plant and these facilities will not be Joint Facilities. The BSP I Owners shall keep reasonable fuel oil supplies on hand to meet the fuel oil needs of BSP II.

     8.03 Brine Concentrator Product Water and Steam Sales. Nothing in this Agreement shall alter any existing agreements between the BSP I Owners and Northern Lights Ethanol, LLC for the sale of steam or brine concentrator product water from any BSP I Joint Facilities, nor require the BSP I Owners to compensate the BSP II Owners for the use of a new BSP II brine concentrator contemplated by Section 4.03 hereof in connection with any existing agreement between the BSP I Owners and Northern Lights Ethanol, LLC.

     8.04 Permits.

(a)

As of the Effective Date, it is contemplated that the Operator, on behalf of BSP I and BSP II, shall apply for and obtain a single air emission permit pursuant to Title V of the Clean Air Act with an aggregate limit of SO2 and NOx emissions for both Plants. However, the BSP II Owners shall not be precluded from applying for and obtaining a single air emission permit pursuant to Title V of the Clean Air Act with limits of SO2 and NOx emissions not determined on an aggregate basis. (*) If additional costs are incurred to reduce BSP I’s NOx emissions below the aggregate limit, and such reductions are necessary to comply with the single air emission permit, then the BSP II Owners shall pay all such costs up (*) and the Groups shall negotiate in good faith for the allocation between the two Groups of such costs in excess of (*). After the initial single air emission permit described in this Section 8.04 has been issued, each Group shall be responsible for the respective costs for future renewals of any future permits on a basis proportional to the respective generating capacity of each of the Plants, and shall be responsible for all costs of compliance, including, without limitation, upgrades of all kinds, with respect to its own Plant.

(b)

The Operator, on behalf of BSP I, shall apply for an amendment of the existing water appropriations permit for purposes of supplying water for BSP II and shall apply for an amendment of the existing BSP I solid waste disposal permit to accommodate BSP II’s solid waste disposal needs. The Groups shall cooperate to obtain any other permits that may be required by applicable Law with respect to the Plants.

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     8.05 Joint Scrubber. Notwithstanding the BSP II Owners’ obligation to pay the costs associated with amending or obtaining the initial single air emission permit pursuant to Section 8.04, the BSP I Owners agree it is the intent that a single wet scrubber (“Joint Scrubber”) (*).

(a)	(*)
(b)	(*)
(c)	(*)

ARTICLE IX

OPERATION OF JOINT FACILITIES, USAGE FEE AND
PAYMENT, SINGLE OPERATOR

     9.01 Operation of the Joint Facilities. Except as otherwise provided for in this Agreement, the single Operator contemplated by Section 9.06 shall be responsible for operating the BSP I Joint Facilities and the BSP II Joint Facilities pursuant to separate agreements with each Group for the operation of each Plant and, so long as there is a single Operator, each Group’s Operator shall fairly allocate its time between BSP I and BSP II.

     9.02 Designated Representatives. Each Group shall appoint an individual representative to serve as its official representative (a “Designated Representative”) to communicate the decisions of each Group to the other Group with respect to matters related to each Group’s respective Plant, Joint Facilities, and all other matters contemplated hereunder. Each Group shall be entitled to rely on a communication with respect to a Plant matter, whether written or oral, from a Designated Representative, unless it receives written notice signed by all Owners of a Group (with the exception of the former Designated Representative), as may be required under the applicable Participation Agreement, that the Designated Representative of a Group is no longer the Group’s Designated Representative and naming the Group’s new Designated Representative.

     9.03 Joint Facilities Charges. The BSP II Owners shall pay to the BSP I Owners or, in relevant instances, the BSP I Owners shall pay the BSP II Owners, a monthly amount determined by the application of Joint Facilities Fee formula in Section 9.05 hereof (each, a “Joint Facilities Fee”). All cost allocations contemplated in this Agreement and all payments of any Joint Facilities Fees hereunder shall not commence until the date on which BSP II receives its first shipment of coal, except that the BSP II Owners shall reimburse the BSP I Owners for all costs incurred for filling any of BSP II’s water facilities that occur prior to the aforementioned first shipment.

     9.04 Netting of Payment. There shall be a monthly netting of amounts due between BSP I Owners and BSP II Owners of the Joint Facilities Fees, so that one payment will be made by one Group to the other Group each month. The Operator shall prepare the monthly net invoice.

     9.05 Joint Facilities Fee Formulas. The Joint Facilities Fee formula in this Section

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9.05 shall apply only to lake water intake and pipeline structure Joint Facilities addressed in Section 4.04 and the coal receiving system, rail spur and fuel unloading facilities addressed in Section 5.07. Schedule 9.05 sets forth the Joint Facilities (*). The payment of Joint Facilities Fees will commence on the date BSP II receives its first shipment of coal, except that the BSP II Owners’ reimbursement of the BSP I Owners for costs incurred for filling any of BSP II’s water facilities shall occur upon invoice by BSP I of the BSP II Owners therefor.

(a)	With respect to the lake water intake and pipeline structure addressed in Section 4.04 and the coal receiving system, rail spur and fuel unloading facilities addressed in Section 5.07 existing as of the date of Commercial Operation and until such time that a component of such Joint Facility is replaced, the Joint Facilities Fee shall be calculated annually based upon the following formula:
	(*)
	Terms within the above formula and the formula in Section 9.05(b) are defined as follows:
	O&M Costs: Shall mean the annual direct assigned operating and maintenance costs (including, without limitation, any services provided by Third Parties) of the applicable Joint Facility in this Section 9.05.
	Insurance: Shall mean an annual allocation of the cost of insurance premiums covering the applicable Joint Facility in this Section 9.05. For purposes of this formula, allocation of any premium shall be based upon a ratio of the amount of capital invested in the Joint Facilities relative to total capital invested in all property covered by the relevant insurance policy.
	Property Taxes: Shall mean an annual allocation of the property taxes assessed on the applicable Joint Facility in this Section 9.05. For purposes of this formula, allocation of any taxes shall be based upon a ratio of the amount of capital invested in the Joint Facilities relative to total capital invested in all property included in separately assessed property tax that includes that Joint Facility. In instances where the BSP I Owners have separately booked their proportional share of cost, the total property taxes on BSP I shall be determined by calculating the full cost from Otter Tail’s proportion of cost.
	Use Factor: Shall mean the (*) of a Joint Facility (*) the Joint Facility. With respect to the (*) shall be (*). With respect to the (*).
(b)	With respect to the lake water intake and pipeline structure addressed in Section 4.04 and the coal receiving system, rail spur and fuel unloading facilities addressed in Section 5.07 at and after a replacement of a component of such Joint Facility listed in Schedules 4.04 and 5.07, the Joint Facilities Fee shall be calculated annually based upon the following formula:
	(*)

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The additional terms within the above Formula shall be defined as follows:

Net Investment: Shall mean the (*) of the (*) of the Joint Facility.

     Annual Fixed Charge: For the Joint Facilities identified herein, the Annual Fixed Charge shall be (*).

     9.06 Single Operator.

(a)	The Groups shall endeavor to use the same Operator for both Plants. As of the Effective Date, Otter Tail is the Operator of the BSP I Plant pursuant to the BSP I Ownership Agreement. Also, as of the Effective Date, the BSP II Owners intend to enter into the Operation & Maintenance Services Agreement for the operation of BSP II.
(b)	(*)
(c)	(*)
(d)	(*)
(e)	(*)

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     9.07 Joint Ownership of Joint Facilities. The Groups may jointly own Joint Facilities, provided that all Owners unanimously agree to such joint ownership in writing prior to the transfer of title or acquisition of a jointly-owned Joint Facility.

ARTICLE X

ACQUISITION OF PROPERTY AND ACCESS; INDEMNIFICATION

     10.01 Option to Purchase Contract. Contemporaneously with the execution of this Agreement, the BSP I Owners and Otter Tail, as administrative agent for itself and the other BSP II Owners, shall enter into the Option to Purchase Contract, substantially in the form attached hereto as Schedule 10.01(A). The BSP I Owners and Otter Tail, as administrative agent for itself and the other BSP II Owners, shall also, contemporaneously with the execution of this Agreement, execute and deliver a memorandum of the Option to Purchase Contract, substantially in the form attached hereto as Schedule 10.01(B). Otter Tail and the other BSP II Owners shall have the option to purchase none, some or all of the property that is the subject of the Option to Purchase Contract, based (in the BSP II Owners’ sole discretion) on the results of the environmental due diligence conducted pursuant to Section 10.09 below. Otter Tail, in its capacity as administrative agent for itself and the other BSP II Owners for purposes of the Option to Purchase Contract, shall, with respect thereto, only act or not act, as directed by the BSP II E&O Committee.

     10.02 Easement Agreement.

(a)

Contemporaneously with the execution of this Agreement, the BSP I Owners and the BSP II Owners shall enter into the Blanket Easement Agreement, substantially in the form attached hereto as Schedule 10.02(A).

(b)

Following completion of the environmental due diligence conducted pursuant to Section 10.09 below and the design of the BSP II Plant and the BSP II Joint Facilities, the BSP I Owners and the BSP II Owners (operating through their respective E&O Committees) shall negotiate in good faith to determine the specific location of the areas within the BSP I Plant Site and the BSP II Plant Site that are necessary to be encumbered by the easements granted under the terms of the Blanket Easement Agreement in order to ensure the operation of BSP I and BSP II in a manner that is efficient, economical and in accord with Prudent Utility Practice (collectively, the “Designated Easement Areas”). Upon such determination, the BSP I Owners and the BSP II Owners shall enter into an instrument that either amends or restates the Blanket Easement Agreement (the “Designated Easement Agreement”) in order to specifically delineate the Designated Easement Areas and to subject such Designated Easement Areas to the respective easements granted in the Blanket Easement Agreement and in order to release such other areas of the BSP I Plant Site and the BSP II Plant Site from the terms and conditions of the Blanket Easement Agreement. Based (in the BSP II Owners’ sole discretion) on the results of the environmental due diligence

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conducted pursuant to Section 10.09 below, the BSP II Owners shall not be required to designate any particular portion of the property subject to the Blanket Easement Agreement as a Designated Easement Area. Such areas not designated as Designated Easement Areas in the Designated Easement Agreement shall be released from the Blanket Easement Agreement.

(c)

Prior to the BSP II Financial Closing (as contemplated under the BSP II Participation Agreement), the BSP I Owners shall obtain releases from the liens of any mortgages or deeds of trust (if any) that could affect the BSP II Owners’ rights to use the Designated Easement Areas under the terms and conditions of the Blanket Easement Agreement and the Designated Easement Agreement. The BSP II Owners agree that a release substantially in the form attached hereto as Schedule 10.02(C) shall be sufficient for the purposes of releasing the Designated Easement Areas from the mortgage indentures that encumber Montana-Dakota’s ownership interest in the Designated Easement Areas. With respect to NorthWestern’s mortgage indenture, the Trustee for such mortgage indenture shall provide a certificate evidencing an absence of default under such mortgage indenture from the grant of the easements in the Blanket Easement Agreement.

(d)

As means of explanation, it is the intent of the parties that the indemnifications contained in Sections 10.04 and 10.06 shall apply to all property that is the subject of the Blanket Easement Agreement, except that the indemnifications contained in Section 10.06(i) shall not apply to any property that is subject to the Blanket Easement Agreement unless either (i) fee title to such property is conveyed to the BSP II Owners pursuant to the Option to Purchase Contract; or (ii) such property is designated as a Designated Easement Area.

     10.03 Pre-Construction and Construction of the BSP II Plant. Pursuant to the Blanket Easement Agreement, the BSP I Owners are granting the BSP II Owners and their invitees a temporary, nonexclusive easement over and across the BSP I Plant Site to access the BSP II Plant Site for purposes of investigating, accumulating data, testing and designing BSP II and associated facilities, including BSP II Joint Facilities, BSP II exclusive facilities, utility lines, and access roads. The BSP II Owners agree that they will use their best efforts to avoid causing any damage to, or interference with any improvements or facilities on or under the BSP I Plant Site and will minimize any disruption or inconvenience to the operation of BSP I and associated facilities. During the preparation for construction and construction phases of BSP II, the BSP I Owners, on the basis of the determinations of their Engineering and Operating Committee, pursuant to the Blanket Easement Agreement, are granting a temporary, nonexclusive easement in writing to the BSP II Owners, their contractors, subcontractors, architects, employees and invitees designating specific BSP I Plant Site areas for purposes of BSP II lay down areas, construction material storage, work areas, contractor parking, temporary offices and temporary roadways, to the extent such locations and use do not prevent or impair the normal operation of BSP I or increase the BSP I Owners’ expenses for normal operation of BSP I and associated facilities. Should such use ultimately prevent or impair the normal operation of BSP I and associated facilities or increase the BSP I Owners’ expenses for normal operation of BSP I and associated facilities, the BSP II Owners shall pay the BSP I Owners for all reasonable expenses resulting from such use. Once BSP II construction is completed, the BSP II Owners

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shall remove all equipment and material from the BSP I Plant Site and restore the BSP I Plant Site to the condition existing prior to BSP II activities pursuant to this Section 10.03, normal wear and tear alone excepted.

     10.04 Liability and Indemnification. During any and all activities conducted pursuant to Section 10.03 and for a period of two (2) calendar years after the first date of Commercial Operation, the BSP II Owners, to the fullest extent permitted by Law, shall indemnify and hold harmless the BSP I Owners collectively, each BSP I Owner individually, their directors, officers, employees and invitees from and against all liabilities, obligations, claims, damages, penalties, causes of action, judgments, costs and expenses (including, without limitation, reasonable attorney fees and expenses) arising out of or resulting from the activities under Section 10.03, provided such liabilities, obligations, claims, damages, penalties, causes of action, judgments, costs and expenses are attributable to bodily injury, sickness, disease, or death, or to injury to or destruction of BSP I, the BSP I Plant Site, or BSP I associated facilities, including loss of use thereof, to the extent caused in whole or in part by negligent, tortious, or willful acts or omissions of the BSP II Owners, their contractors, subcontractors, architects, employees, or invitees. With respect to the loss of use, the exclusive remedy available to the BSP I Owners shall be that the BSP II Owners shall reimburse the BSP I Owners for lost Capacity and Energy as follows:

(a) if the BSP I Owners’ costs to replace lost Capacity or Energy exceed the BSP I Owners’ costs to produce such Capacity or Energy, then the Groups shall mutually agree to either:

(i)	require that the BSP II Owners shall acquire such Capacity or Energy for the BSP I Owners and the BSP I Owners shall pay to the BSP II Owners whatever it would have cost the BSP I Owners to produce such Capacity or Energy at the BSP I Plant; or
(ii)	direct the BSP I Owners to acquire such Capacity or Energy and charge the BSP II Owners the difference between whatever it would have cost the BSP I Owners to produce such Capacity or Energy and what the BSP II Owners were required to pay for such Capacity or Energy at the BSP I Plant;

provided, however, that if the market price of such Capacity or Energy is less than what it would have cost the BSP I Owners to produce such Capacity or Energy, then the BSP II Owners shall have no obligations under this Section 10.04.

     The BSP II Owners further shall indemnify and hold harmless the BSP I Owners individually, their Affiliates, directors, officers, employees, agents, contractors, subcontractors, licensees, invitees, and the respective heirs, legal representatives, successors and assigns of all such Person (hereinafter collectively referred to as “Indemnified Parties”) from and against any workers compensation claims, and any mechanic’s or supplier’s claim for lien in connection with work done or materials furnished for BSP II and associated facilities. The BSP II Owners waive all claims against the Indemnified Parties for damage to BSP II materials or property placed

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upon the BSP I Plant Site from any cause except Willful Action arising at any time during the course of activities under Section 10.03.

     10.05 Compliance with Laws. The BSP II Owners covenant that during the activities conducted pursuant to Section 10.03 and their use of the temporary easement rights, the BSP II Owners will, at their own expense, comply with all Laws affecting the activities conducted pursuant to Section 10.03 and will indemnify and hold harmless the BSP I Owners, each BSP I Owner individually, their directors, officers, employees and invitees, BSP I and BSP I Plant Property from the consequences of any violation of any Laws, and against any tax, fee or other charge or penalty imposed or levied on account of any failure to comply with any such Law, and from any liens or other encumbrances that might arise from the activities pursuant to Section 10.03.

     10.06 Environmental Indemnification. The BSP II Owners shall indemnify, defend, and hold harmless the Indemnified Parties from and against any and all Losses, including reasonable attorneys’ fees and consultants’ fees, arising from or relating to: (i) the presence of any Hazardous Substance in, upon, under or over the property purchased pursuant to Section 10.01 or the Designated Easement Areas (upon designation thereof pursuant to the terms of Section 10.02(b)) prior to or following the date of this Agreement (the “Existing Contamination”), and the migration of such Existing Contamination from such property before or after the date of this Agreement, whether or not the BSP I Owners, a BSP I Owner, individually, their Affiliates, directors, officers, employees, agents, contractors, subcontractors, licensees, invitees or anyone else acting for or on behalf of the BSP I Owners placed, located, deposited or released such Existing Contamination, or is otherwise responsible or liable therefor; whether or not the Existing Contamination violated or violates an applicable Environmental Law; whether or not the Existing Contamination is known or unknown, suspected or unsuspected as of the date of this Agreement or thereafter; and whether such liabilities arise in equity or under an Environmental Law; and (ii) the presence of any Hazardous Substance in, upon, under or over the BSP I Plant Site or the Designated Easement Areas (upon designation thereof pursuant to the terms of Section 10.02(b)) following the date of this Agreement arising from acts or omissions of the BSP II Owners, their Affiliates, directors, officers, employees, agents, contractors, subcontractors, licensees, or invitees from and after the date of this Agreement (the “Future Contamination”) and the migration of such Future Contamination from the BSP II Plant Site and the Designated Easement Areas after the date of this Agreement.

     10.07 Cross-Indemnification. Each Group shall indemnify, defend, and hold harmless the other Group for any Losses arising out of or related to:

(a)	Willful Actions under this Agreement;
(b)	a Group’s material breach of this Agreement; and
(c)	a Group’s failure to make a Joint Facility available for use by the other Group.

     10.08 Availability of Insurance Proceeds. The BSP II Owners may choose to maintain insurance against all loss or damage from such hazards and risks for which it provides indemnification pursuant to this Article X and additionally shall require its contractors and

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subcontractors to maintain similar insurance. The provisions of this Article X shall not be construed to relieve any insurer, if any, of its obligation to pay any insurance proceeds in accordance with the terms and conditions of policies of Owners’ Insurance or otherwise.

     10.09 Environmental Due Diligence. The BSP II Owners shall cause the BSP II Legal Counsel to retain a consultant to conduct, on behalf of the BSP II Owners, a Phase I environmental site assessment and any Phase II environmental site assessment or other environmental investigation the steering committee of the BSP II Owners deems necessary or desirable, prior to transfer of any real property or granting easements to the BSP II Owners from BSP I Owners hereunder. The costs of such environmental due diligence shall be paid for by the BSP II Owners. If Hazardous Substances or other environmental conditions are discovered during such environmental due diligence that the BSP II Owners choose not to assume, the BSP II Owner’s sole options shall be to (a) not purchase the objectionable real property from the BSP I Owners under Section 10.01, (b) accept replacement property or easement areas selected pursuant to Section 2.05, or (c) accept remediated property or easement areas as provided in this Section 10.09. Should the environmental due diligence result in environmental remediation requirements by a Governmental Authority, the BSP I Owners, in their sole discretion, may decide to remove the affected real property from the Option to Purchase Contract or Blanket Easement Agreement and propose other property pursuant to Section 2.05 or add the costs of environmental remediation to the purchase price per acre of the affected property to be purchased under the Option to Purchase Contract or to be obtained under the Blanket Easement Agreement. The BSP II Owners may then, in their sole discretion, accept or reject the purchase of, or easements for use upon, such affected property at their option. Any real property sold by the BSP I Owners or easement granted by them shall be “as is, where is” with all faults, including the presence of Hazardous Substances and other environmental conditions. The BSP I Owners shall cooperate fully with such activities, consistent with the cooperation required of the Groups and Parties under Section 18.11 below, and the BSP I Owners hereby grant to the BSP II Owners, the BSP II Legal Counsel, and their consultants, the right to enter the BSP I Plant Site and the BSP II Plant Site and all improvements located thereon, for purposes of conducting such activities.

ARTICLE XI

CASUALTY LOSS AND INSURANCE

     11.01 Repair or Replacement. The BSP I Owners and BSP II Owners shall maintain their respective Joint Facilities in good repair according to Prudent Utility Practice. If, for any reason, a Joint Facility shall be damaged or destroyed, the BSP I Owners or the BSP II Owners as owners of the particular Joint Facility shall, as expeditiously as is possible, cause the damaged or destroyed Joint Facility to be repaired or replaced so as to restore the Joint Facility to substantially the same general character and use as existed immediately prior to such damage or destruction and shall bear all costs associated therewith. If the damage to, or destruction of a Joint Facility, is determined to be the fault of a contractor, subcontractor or other Person acting on behalf of the Group that does not own that Joint Facility, that Group shall be responsible for and reimburse the other Group for the cost of repair or reconstruction of the damaged or destroyed Joint Facility.

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     11.02 Insurance. As soon as reasonably practicable after the Effective Date, the E&O Committees shall jointly develop a plan for purchasing an insurance policy or policies on a joint or several basis as may be agreed upon, which may include, without limitation, those types of insurance policies listed on Schedule 11.02 and any other insurance policies the E&O Committees deem necessary with respect to the Joint Facilities and the operation of the same (such policies, collectively, “Owners’ Insurance”). When developing the plan pursuant to this Section 11.02, the E&O Committees shall endeavor, if possible, to recommend the purchase of a single policy and shall also decide whether to purchase a joint loss endorsement with respect to the Owners’ Insurance; provided, however, that each Group shall maintain insurance against loss or damage from such hazards and risks for which it provides indemnification pursuant to this Agreement with reasonable limits, deductibles, self-insured retentions, and such endorsements that are reasonable under the circumstances. The BSP II Group shall require its contractors and subcontractors to maintain similar insurance. Each Group shall also provide the other Group with reasonable proof of the same upon reasonable request from the other Group.

ARTICLE XII

LIABILITY

     12.01 Remedies and Limitation of Damages. Subject to the express limitations contained in this Agreement, a Group or Party may avail itself of any remedies available to it, either in law or at equity, including, without limitation, specific performance, injunctive relief, and damages for breach of contract; provided, however, except as otherwise specifically provided for in this Agreement, including, but not limited to Section 7.04 and Section 10.04, in no event shall a Group or Party be liable to any Person entitled to damages or indemnification under this Agreement for loss of profits, loss of business, indirect, incidental, consequential (with the sole exception of consequential damages caused by the refusal of one Group to allow the other Group access to and use of a Joint Facility as required hereunder), special, punitive, or exemplary damages of any kind. If a Group does not allow the other Group to use a Joint Facility for any period of time, no matter how short, except for scheduled or unscheduled down time of the Joint Facility that affects the Groups equally, the other Group may seek a court order requiring immediate specific performance or, alternatively, the retention of a Third Party to operate the Joint Facilities at the other Group’s sole cost and expense.

     12.02 Release of Liability and Associated Covenant. With the sole exceptions of Losses for which a Group has obtained a judgment resulting from a Group’s Willful Action, a Group’s material breach of this Agreement, a Group’s failure to make a Joint Facility available for use by the other Group, and matters covered by the indemnification obligations under this Agreement (whether covered by insurance or not), each Group intends to and hereby does release the other Group from any liability associated with any Losses with respect to and under the terms of this Agreement. In furtherance thereof, except as provided for in this Agreement, no Group shall initiate, pursue or otherwise attempt to engage in mediation, arbitration or litigation with respect to any claims other than for those relating to a Group’s Willful Action, a Group’s material breach of this Agreement, a Group’s failure to make a Joint Facility available for use by the other Group, or matters covered by the indemnification obligations under this Agreement.

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ARTICLE XIII

FORCE MAJEURE

     The performance of any obligation required hereunder shall be excused for the duration of any Force Majeure Event suffered by the Group whose performance is hindered in respect thereof, and the time for performance of any obligation that has been delayed due to the occurrence of a Force Majeure Event shall be similarly extended. The Group experiencing the delay or hindrance shall use commercially reasonable efforts to notify the other Group in writing of the occurrence of such Force Majeure Event and the anticipated period of delay as soon as practicable after the commencement of the Force Majeure Event. Each Group suffering a Force Majeure Event shall take, or cause to be taken, such action as may be necessary to overcome or otherwise to mitigate, in all material respects, the effects of any Force Majeure Event suffered by it and to resume performance hereunder as soon as practicable under the circumstances. Notwithstanding anything in this Agreement to the contrary, the occurrence of a Force Majeure Event shall not excuse or relieve a Group or any Owner from any payments obligations under this Agreement.

ARTICLE XIV

DISPUTE RESOLUTION

     14.01 Joint Meeting of Committees. With the sole exception of disputes that may arise under Section 2.06 hereunder, disputes arising under this Agreement (each, “Dispute”) shall first be addressed by a joint meeting of the Engineering and Operating Committees. Any Group may request in writing that a Dispute be brought to a joint meeting of the Engineering and Operating Committees by delivering a written request of a Dispute to the other Group. The Engineering and Operating Committees shall meet, negotiate, and attempt in good faith to resolve the Dispute quickly, informally and inexpensively. In the event the Engineering and Operating Committees cannot resolve the Dispute within ten (10) days after commencement of negotiations, any Group may request that the Dispute be presented to a joint meeting of the Coordination Committees of BSP I and BSP II. No later than ten (10) days after referral from the Engineering and Operating Committees, the Coordination Committees shall meet, negotiate and attempt in good faith to resolve the Dispute quickly, informally and inexpensively. In the event the Coordination Committees cannot resolve the Dispute within ten (10) days after commencement of negotiations, either Group may seek all available legal remedies to resolve the Dispute, whether at law or in equity subject, in all respects, to the terms, limitations and conditions of this Agreement.

     14.02 Continued Performance. Pending the outcome of a Dispute being resolved in accordance with this Article XIV or Section 2.06, the Groups shall continue to perform their respective obligations under this Agreement to the extent such obligations and the continued performance thereof are not the subject of such Dispute.

ARTICLE XV

RELATIONSHIP OF PARTIES

     15.01 Nature of Obligations. Nothing herein, including, without limitation, the use of the defined term “Group,” shall be construed to create an association, joint venture, trust or

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partnership, or to impose a trust or partnership covenant, obligation or liability on or with regard to any one or more of the Parties. No Party or Group shall be under the control of, or shall be deemed to control, any other Party or Group. No Party shall be the agent of or have a right or power to bind any other Party without its express written consent, except as provided in this Agreement, the Operation & Maintenance Services Agreement and the Participation Agreements.

ARTICLE XVI

TERM AND TERMINATION

     16.01 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to the terms hereof, shall continue in effect until either the BSP I Plant or the BSP II Plant shall have been decommissioned (the “Term”); provided, however, that the Owners of the Plant that has been decommissioned must have fully complied with the requirements of Section 3.03 hereof. Additionally, this Agreement shall automatically terminate if there are no longer any Joint Facilities in existence.

     16.02 Automatic Termination. This Agreement shall automatically terminate and be of no further force and effect, except as otherwise provided herein, and no Party shall have any further obligation to another Party hereunder, if the BSP II Financial Closing, as contemplated under the BSP II Participation Agreement, does not occur on or before (*).

ARTICLE XVII

REPRESENTATIONS, WARRANTIES

     Each Owner represents and warrants as follows:

(a)	It is, as applicable, an agency, cooperative corporation, consumers power district, municipal corporation and political subdivision, or corporation duly organized, validly existing and in good standing under the laws of the state of its formation and authorized to conduct business in South Dakota;
(b)	It has the power and authority to enter into and perform this Agreement and is not prohibited for any reason from entering into this Agreement or discharging and performing all covenants and obligations on its part to be performed under and pursuant to this Agreement;
(c)	It has taken all action required by applicable Law in order to approve, execute and deliver this Agreement;
(d)	The execution and delivery of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of and compliance by such Owner with the provisions of this Agreement will not conflict with or constitute a breach of or a default under or require any consent, license or approval that has not been obtained pursuant to any of the terms, conditions or provisions of any law, rule or regulation, any order, judgment, writ, injunction, decree, determination, award or other instrument or legal requirement of any court or

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	other agency of government, the documents of its formation or any contractual limitation, restriction or outstanding trust indenture, deed of trust, mortgage, loan agreement, lease, other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound and will not result in a breach of or a default under any of the foregoing;
(e)	It has taken all such action as may be necessary or advisable and proper to authorize this Agreement, the execution and delivery hereof, and the consummation of transactions contemplated hereby;
(f)	There are no bankruptcy, insolvency, reorganization or receiverships pending or being contemplated by it, or to its knowledge threatened against it;
(g)	To its knowledge, there are no actions, proceedings, judgments, rulings or orders issued by, or pending before any court or other governmental body that would materially adversely affect its ability to perform its obligations under this Agreement; and
(h)	This Agreement is a legal, valid and binding obligation of such Owner enforceable in accordance with its terms, except as limited by laws of general applicability limiting the enforcement of creditors’ rights or by the exercise of judicial discretion in accordance with general principles of equity.

ARTICLE XVIII

MISCELLANEOUS

     18.01 Publicity Policy. In recognition of the requirements and desire of the Parties to disclose information regarding their ownership and involvement with the Plants and its activities, a Party may:

(a)	disclose information regarding BSP I or BSP II as may be required by any applicable Law;
(b)	provide information regarding BSP I or BSP II to its Affiliates, employees, investors, agents, consultants, advisors, contractors, accountants and counsel; and
(c)	after execution of the BSP II Participation Agreement, publicize to any Third Party (including, but not limited to, through press releases and other media) information about the general activities of BSP I or BSP II and any otherwise publicly available information; provided, however, that the Parties shall seek to avoid publicizing to Third Parties:

(i)	financial information about BSP I or BSP II, including the economics of the Plants;
(ii)	information regarding other Parties;

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(iii)	information a Party specifically identifies as commercially sensitive (such as information about ongoing business negotiations); and
(iv)	information respecting the positions of BSP I or BSP II on federal or state policy matters (unless consistent with the policy goals or a policy initiative of BSP I or BSP II as generally understood by the Parties).

If a Party desires to release information described in Sections 18.01(c)(i)-(iv), then that Party shall describe the intended release of information to the Engineering and Operating Committees of BSP I and BSP II and the Engineering and Operating Committees of BSP I and BSP II shall respond promptly to the Party with any concerns about such release.

     18.02 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties hereto, except as such assignment is otherwise explicitly not permitted herein.

     18.03 Notices. Notices required by this Agreement from a Party hereto shall be addressed to the other Parties, at the addresses noted in Exhibit A, and may be updated from time to time by written notice to all Parties. Any notice, request, consent, or other communication required or authorized under this Agreement to be given by one Party to another Party shall be in writing. It shall either be hand delivered or mailed, postage prepaid, to the representative of said Party. If mailed, the notice, request, consent or other communication shall be simultaneously sent by facsimile or other electronic means. Any such notice, request, consent, or other communication shall be deemed to have been received by the close of the Business Day on which it was hand delivered or transmitted electronically (unless hand delivered or transmitted after the close of business, in which case it shall be deemed received at the close of the next Business Day). Real-time or routine communications concerning the operation of the Joint Facilities shall be exempt from this Section 18.03.

     18.04 Amendments. No amendments or modifications of this Agreement, including the Exhibits and Schedules hereto, shall be valid unless evidenced in writing and signed by a Group’s Designated Representative.

     18.05 Waiver. Failure to enforce any right or obligation by any Owner or Group with respect to any matter arising in connection with this Agreement shall not constitute a waiver as to that matter or any other matter. Any waiver by any Owner or Group of its rights with respect to a breach of this Agreement or with respect to any other matters arising in connection with this Agreement must be in writing. Such waiver shall not be deemed a waiver with respect to any subsequent default or other matter.

     18.06 Severability. If any of the terms of this Agreement are determined to be invalid, illegal or void by a court of competent jurisdiction, all other terms of the Agreement shall remain in effect; provided that the Groups shall enter into good faith negotiations concerning the terms affected by such decision for the purpose of achieving conformity with requirements of any applicable Law and the intent of the Parties hereto.

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     18.07 Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of South Dakota without regard to its conflict of laws provisions.

     18.08 Consent to Jurisdiction. Each of the Owners hereby irrevocably consents and agrees that any legal action or proceedings with respect to this Agreement may be brought in any of the courts of the United States of America for the District of South Dakota having subject-matter jurisdiction and, by execution and delivery of this Agreement and such other documents executed in connection herewith, each Owner hereby:

(a)	accepts the non-exclusive jurisdiction of the aforesaid courts;
(b)	irrevocably agrees to be bound by any final judgment (after any and all appeals) of any such court with respect to such documents;
(c)	irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceedings with respect to such documents brought in any such court, and further irrevocably waives, to the fullest extent permitted by Law, any claim that any such suit, action or proceedings brought in any such court has been brought in any inconvenient forum;
(d)	agrees that service of process in any such action may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Owner at its address set forth on Exhibit A hereto, or at such other address of which the other Owners shall have been notified; and
(e)	agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or limit the right to bring any suit, action or proceeding in any other jurisdiction.

     18.09 Waiver of Trial by Jury. EACH OF THE OWNERS HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PARTIES ENTERING INTO THIS AGREEMENT.

     18.10 No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Parties hereto and nothing contained herein shall be construed to create any duty to, or standard of care with reference to, or any liability to, or any benefit for, any Third Party.

     18.11 Cooperation. The Parties hereto acknowledge that they are entering into a long-term arrangement in which the cooperation of all of them will be required. If, during the Term, changes in the operations, facilities or methods of any Group or Party, including, without

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limitation, regarding real property matters, will materially benefit a Group or Party without detriment to the other Group or Parties, the Groups and Parties commit to each other to make reasonable good faith efforts to cooperate and assist each other in making such change.

     18.12 Consents and Delivery of Documents. Each Party shall cooperate in good faith with the other Parties in its efforts to fulfill its obligations under this Agreement. To that end, (a) except as expressly provided elsewhere in this Agreement, no Party shall unreasonably deny, condition, or withhold or otherwise delay its approval or consent upon the reasonable request for such approval or consent by the other Part(ies); and (b) each Party shall, upon written notice from any Party, take all actions and sign, execute and deliver all agreements, deeds, documents and other instruments, and shall use its reasonable efforts to cause each of its Affiliates, its partners and their respective Representatives to take all actions and sign, execute and deliver all agreements, deeds, documents and other instruments reasonably required of it or them to carry out and give full effect to this Agreement and the rights and obligations of the Parties hereunder.

     18.13 Captions. All indexes, titles, subject headings, section titles, and similar items are provided for the purpose of reference and convenience and are not intended to affect the meaning of the content or the scope of this Agreement.

     18.14 Entire Agreement. This Agreement supersedes all other prior and contemporaneous understandings or agreements, both written and oral, among the Parties relating to the subject matter of this Agreement.

     18.15 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument, and may be executed by facsimile signature, which shall be considered as an original.

     18.16 No Waiver. No waiver by a Group of its rights with respect to a material breach of this Agreement shall be deemed a waiver of its rights hereunder with respect to any subsequent default. No delay in asserting or enforcing any right hereunder shall be deemed a waiver of such right.

     18.17 Cumulative Rights. Subject in all respects to the provisions of this Agreement, the rights and remedies provided in this Agreement shall be in addition to any other legal or equitable relief that may be otherwise available.

     18.18 Certain Limitations. Notwithstanding anything to the contrary contained in this Agreement, nothing contained herein and no action to be taken hereunder or pursuant hereto, in each case relating to or affecting an option, an easement, or another interest in the BSP I Plant Site, shall, individually or in the aggregate, materially impair the use of the BSP I Plant Site by any of the BSP I Owners for the purpose for which such BSP I Owner holds its interest in BSP I and/or the BSP I Plant Site.

[The next page is the signature page.]

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     IN WITNESS WHEREOF, the Parties hereto have caused their names to be hereunto subscribed by their officers, intending thereby that this Agreement shall be effective as of the Effective Date.

CENTRAL MINNESOTA MUNICIPAL	GREAT RIVER ENERGY
POWER AGENCY
By /s/ Paul I. Leland	By /s/ David Saggau
Paul Leland	David Saggau
Its President	Its President and Chief Executive Officer
HEARTLAND CONSUMERS POWER	MONTANA-DAKOTA UTILITIES CO., a
DISTRICT	Division of MDU Resources Group, Inc.
By /s/ Michael McDowell	By /s/ Bruce T. Imsdahl
Michael McDowell	Bruce T. Imsdahl
Its General Manager	Its President and Chief Executive Officer
NORTHWESTERN CORPORATION	OTTER TAIL CORPORATION dba Otter Tail
dba NorthWestern Energy	Power Company
By /s/ Michael J. Hanson	By /s/ Charles S. MacFarlane
Michael J. Hanson	Charles S. MacFarlane
Its President and Chief Executive Officer	Its President
SOUTHERN MINNESOTA MUNICIPAL	WESTERN MINNESOTA MUNICIPAL
POWER AGENCY	POWER AGENCY
By /s/ Raymond A. Hayward	By /s/ Donald E. Habicht
Raymond A. Hayward	Donald E. Habicht
Its Executive Director and CEO	Its President

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EXHIBIT A

PARTY

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY
459 South Grove Street
Blue Earth, MN 56013
Attn: Donald E. Kom, Executive Director
Telephone: (507) 526-2193
Facsimile: (507) 526-2527
E-mail: donk@utplus.com

GREAT RIVER ENERGY
17845 East Highway 10
Elk River, MN 55330
Attn: David Saggau, President and Chief Executive Officer
Telephone: (763) 241-2286
Facsimile: (763) 241-2366
E-mail: dsaggau@grenergy.com

HEARTLAND CONSUMERS POWER DISTRICT
203 West Center Street
Madison, SD 57042
Attn: Michael McDowell, General Manager
Telephone: (605) 256-6536
Facsimile: (605) 256-2990
E-mail: mmcdow@hcpd.com

MISSOURI RIVER ENERGY SERVICES
3724 West Avera Drive
P.O. Box 88920
Sioux Falls, SD 57109-8920
Attn: Mr. Ray Wahle
Telephone: (605) 338-4042
Facsimile: (605) 978-9360
E-mail: rwahle@mrenergy.com

MONTANA-DAKOTA UTILITIES CO., a Division of MDU
Resources, Inc.
400 North Fourth Street
Bismarck, ND 58501
Attn: Andrea L. Stomberg, Vice President – Electric Supply
Telephone: (701) 222-7752
Facsimile: (701) 222-7606
E-mail: andrea.stomberg@mdu.com

NORTHWESTERN CORPORATION
dba NorthWestern Energy
600 Market Street West
Huron, SD 57350
Attn: Dennis Wagner
Telephone: (605) 353-7503
Facsimile: (605) 353-7519
E-mail: dennis.wagner@northwestern.com

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OTTER TAIL CORPORATION dba Otter Tail Power Company
215 South Cascade St.
P.O. Box 496
Fergus Falls, MN 56538-0496
Attn: Charles MacFarlane
Telephone: (218) 739-8353
Facsimile: (218) 739-8218
E-mail: cmacfarlane@otpoc.com

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. Peter J. Reinarts, P.E.
Manager – Generation, Operations and Marketing
Telephone: (507) 292-6452
Facsimile: (507) 292-6414
E-mail: pj.reinarts@smmpa.org

and

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY
500 First Avenue SW
Rochester, MN 55902-3303
Attention: Mr. David P. Geschwind, P.E.
Chief Operating Officer
Telephone: (507) 292-6460
Facsimile: (507) 292-6414
E-mail: dp.geschwind@smmpa.org

WESTERN MINNESOTA MUNICIPAL POWER AGENCY
25 N.W. 2^nd Street, Suite 102
Ortonville, MN 56278-1411
Attention: Mr. Don Habicht
Telephone: (320) 839-2549
Facsimile: (320) 839-2540
Email: david.fhmab@midconetwork.com

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SCHEDULE 4.01

Water Resources Joint Facilities

	BSP I or BSP II			Construction/
Description	Joint Facility	Fee or No Fee	Maintenance Costs	Other Costs
New brine concentrator	BSP II	(*)	(*)	BSP II
New water supply and product lines	BSP II	(*)	(*)	BSP II
New sludge pond	BSP II	(*)	(*)	BSP II
New brine concentrator electrical substation	BSP II	(*)	(*)	BSP II
Existing brine concentrator	BSP I	(*)	(*)
Existing sludge pond	BSP I	(*)	(*)
Existing water and product lines	BSP I	(*)	(*)
Existing brine concentrator control room	BSP I	(*)	(*)
Existing lake water intake and pipeline structure	BSP I	(*)	(*)
Existing cooling water pond	BSP I	(*)	(*)
New pumps and pipelines needed to connect storage ponds to the cooling pond	BSP II	(*)	(*)	BSP II
Existing storage ponds	BSP I	(*)	(*)
BSP II Cooling Tower Blowdown Pond (and necessary pumps and pipelines)	Not a Joint Facility	(*)	(*)	BSP II
New demineralizer train	BSP II	(*)	(*)	BSP II
Existing demineralizer trains	BSP I	(*)	(*)
Existing cold lime softener	Not a Joint Facility	(*)	(*)	BSP II (if Option to Purchase Contract exercised)

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June 30, 2005

SCHEDULE 4.04

Lake Water Intake and Pipeline Structure

Otter Tail
Number	Quantity	Description
31356	1 Lot	Lighting
31284	1 Lot	Heating & Ventilation
31373	2,650 SF	Roof
31402	1 Lot	Structure
31403	1 Lot	Make-up Pipe Discharge Structure
31477	7,243 LF	Pond Make-up Pipeline
32595	1 Each	Air Compressor
32596	200 LF	Pipe
32597	2 Each	Pump A & B
32599	1 Each	Pump
32600	2 Each	Pump Motors
32601	1 Each	Pump Motor
32602	2 Each	30" Butterfly Valve
32603	1 Each	16" Butterfly Valve
32604	3 Each	Flow Meters
32605	15,600 LF	Wire
32642	1 Each	Traveling Crane
32726	1 Lot	Switchgear
32727	1 Lot	MCC
33123	1 Each	Heater

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SCHEDULE 4.05

BSP I Cooling Pond

[MAP OF EXISTING BSP I PLANT.]

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June 30, 2005

SCHEDULE 4.07

BSP II Cooling Tower Blowdown Pond

[MAP OF BSP II PLANT SITE]

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June 30, 2005

SCHEDULE 5.01

Coal and Ash Joint Facilities

	BSP I or BSP II			Construction/
Description	Joint Facility	Fee or No Fee	Maintenance Costs	Other Costs
Existing rotary dumper, #1 and #2 conveyors	BSP I	(*)	(*)
1/2 Existing coal dead storage area	BSP I	(*)	(*)
1/2 Existing coal dead storage area	BSP II	(*)	(*)	BSP II will purchase 1/2 from BSP I
New concrete storage silos and conveyor	Not Joint Facilities	(*)	(*)	BSP II
New stack-out chute	BSP II	(*)	(*)	BSP II
New coal yard shop for storage and maintenance of mobile equipment	BSP II	(*)	(*)	BSP II
New coal transfer house	Not a Joint Facility	(*)	(*)	BSP II
Existing mobile yard equipment	BSP I	(*)	(*)	BSP II will purchase 1/2 from BSP I
New mobile yard equipment	BSP II	(*)	(*)	50-50 BSP I and BSP II
Existing rail spur and coal unloading facilities	BSP I	(*)	(*)
Existing rail cars	BSP I	(*)	(*)
BSP II rail cars	BSP II	(*)	(*)
BSP I ash disposal area	BSP I Joint Facility	(*)	(*)
BSP I ash silo	Not a Joint Facility	(*)	(*)	BSP II will pay cost of relocation

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June 30, 2005

SCHEDULE 5.03

New Conveyor System and Stack-Out Chute

     Coal will be received at BSP I and off-loaded into the BSP I rotary dumper. The coal travels on #1 and #2 conveyor belts to the head end of #2 belt. After reaching the end of #2 conveyor, it will then be deposited on #3 conveyor (feeding the existing BSP I live storage building), or is transferred to the first new BSP II conveyor belt. From there, the coal will be transported to the top of the coal stack-out transfer point. The coal stack-out is a large cylindrical structure that the coal falls through and exits the cylindrical structure along various locations over the vertical height of the structure. As the coal exits the stack-out, it falls to the ground and begins to pile around the structure. At the transfer point in the stack-out, it will enter the coal stack-out chute, or the second BSP II conveyor belt. If the coal is directed to the stack-out, it becomes part of the dead storage pile. If the coal is directed to the second BSP II conveyor belt, it will enter the BSP II exterior coal silos. Once the coal is in the BSP I live storage building or the BSP II exterior coal silos, it is unit specific and cannot (under normal operational circumstances) travel to different units, i.e., coal from the existing live storage building will only travel to BSP I and coal from the BSP II exterior silos will only travel to BSP II. Coal can also be reclaimed from the dead storage pile. In this case, coal will be pushed into the rotary car dumper building and fed up #2 conveyor. In the event that there is a problem with the coal conveying system at either Plant, each Plant will have an emergency conveying system that starts near the stack-out chute. Each of these emergency conveyors will end at the respective “transfer/crusher” buildings for each Plant.

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SCHEDULE 5.06

Mobile Equipment

Technicians – ’91 GMC Sierra

Maintenance – 2000 Chevrolet 3500

Maintenance – ’92 Dodge Ram 250

Operators – 2004 Chevrolet 2500 HD 4x4

2002 GMC Safari

Yard Operators – ’95 Dodge 4x4

Maintenance – ’95 Ford F250

Project Director – ’96 Dodge Intrepid

Maintenance – ’98 Dodge Ram 1500

Electricians – 2001 Dodge Ram 4x4

Plant Manager – ’01 Dodge Intrepid

Cat Forklift – Warehouse

Cat Forklift

Terex Crane Hydraulic 94107 Vickers

Bobcat Hyd P6881

John Deere Lawn Tractor

Predator Portable Welder

Marklift

Gator 1

Gator 2

966F Cat Loader

International 400 Dozer

Michigan 380 Dozer

International Dump Truck

S24B Terex Scraper

TS24B Terex Scraper

Push Lawnmower

2 wheel hand cart

Battery charger on wheels

2 Automobile creepers

Rail cart

Floor jack

Engine hoist

15 Mobile tool boxes

8 Four-wheel carts

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SCHEDULE 5.07

Coal Receiving System, Rail Spur and Coal Unloading Facilities

Otter Tail
Number	Quantity	Description
31277	1 Each	Relay room – 3-ton Lennox
31280	1 Lot	Car Dumper Cab – 1-ton Lennox
33103	1 Lot	Dumper dust collector house
50013	32 CY	Dumper dust collector floor
31645	1 Lot	Positioner – carriage guide rails
31646	1 Each	Positioner – truck lock system
31647	1 Each	Positioner – rope haulage system
31648	1 Each	Positioner – carriage and arm
31652	1 Each	Dumper and positioner – motor control center
31654	1 Each	Dumper and positioner – operators cab
31658	4 Each	Rotary Cary dumper – vibratory feeders
31659	4 Each	Rotary Cary dumper – chutes
31684	1 Each	Conveyor No. 1 – drive motor, F-32
31685	1 Each	Conveyor No. 1 – reducer
31686	1 Each	Conveyor No. 1 – high speed coupling
31687	1 Each	Conveyor No. 1 – low speed coupling
31689	1 Each	Conveyor No. 1 – headshaft w/pulleys & pillow blocks
31690	1 Each	Conveyor No. 1 – snubshaft w/pulleys & pillow blocks
31691	1 Each	Conveyor No. 1 – bendshaft w/pulleys & takeup shaft
31692	45 Each	Idlers
31693	2 Each	Conveyor No. 1 – belt cleaners
31694	1 Each	Conveyor No. 1 – discharge hood w/dust curtain, M-15
31695	1 Each	Conveyor No. 1 – discharge chute to conveyor #2
31696	1 Each	Conveyor No. 1 – electrical controls
31697	1 Each	Conveyor No. 1 – steel structure supports
31698	2 Each	Conveyor No. 2 – drive motors
31699	2 Each	Conveyor No. 2 – reducers, m-15
31701	2 Each	Conveyor No. 2 – low speed couplings
31703	1 Each	Conveyor No. 2 – headshaft
31704	1 Each	Conveyor No. 2 – hold back unit
31705	1 Each	Conveyor No. 2 – drive snub shaft
31706	2 Each	Conveyor No. 2 – takeup bend shaft
31707	1 Each	Conveyor No. 2 – auto gravity takeup
31708	2 Each	Conveyor No. 2 – tail snubshafts, m-15
31709	213 Each	Conveyor No. 2 – idlers
31710	1 Each	Conveyor No. 2 – creep drive motor
31711	1 Each	Conveyor No. 2 – creep drive reducer
31712	1 Each	Conveyor No. 2 – creep high speed coupling

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Otter Tail
Number	Quantity	Description
31713	1 Each	Conveyor No. 2 – creep clutch coupling
31714	1 Each	Conveyor No. 2 – electrical switches
31715	1 Each	Conveyor No. 2 – steel structure supports
31716	1 Each	Conveyor No. 2 – stairs & walkways – tail end
31717	2 Each	Conveyor No. 2 – walk through conveyor galleries
31718	1 Each	Conveyor No. 2 – support bent – 36 ft.
31719	1 Each	Conveyor No. 2 – discharge hood
31720	1 Each	Conveyor No. 2 – discharge chute to conv. No. 3
31721	1 Each	Conveyor No. 2 – hinged chute to ground
31722	1 Each	Conveyor No. 2 – instrumentation, M-15
31959	1 Each	Conveyor No. 1 dust collector – Ray Jet collector
31960	1 Each	Conveyor No. 1 dust collector – screw drive damper
31961	1 Lot	Conveyor No. 1 dust collector – C.E. Controls
31962	1 Lot	Conveyor No. 1 dust collector – fans & motors
31963	1 Lot	Conveyor No. 1 dust collector – CO2 system
31964	1 Lot	Conveyor No. 1 Dust Collector – Electrical
31965	1 Lot	Conveyor No. 1 Dust Collector – Ductwork
31966	4 Each	Car Dumper – Ray Jet Collectors
31967	4 Each	Car Dumper – screw drive dampers
31968	1 Lot	Car Dumper – C.E. Controls
31969	4 Each	Car Dumper – Fans and motors
31970	1 Lot	Car Dumper – CO2 System
31971	1 Lot	Car Dumper – Electrical
31972	1 Lot	Car Dumper – Ductwork
31988	71 Ton	Rotary car dumper hopper
31991	1 Each	Galigher coal sampler
32008	43818 SF	Car Dumper – forms
32009	3,151 SF	Fuel System Forms – Train Positioner Building
32010	19,104 SF	Fuel System Forms – Conveyor No. 2
32016	420 Ton	Car Dumper – rebar
32017	69 Ton	Train Positioner building – rebar
32018	95 Ton	Fuel System Rebar, Conveyor No. 2
32024	25873 Lbs	Car Dumper – Embeds
32025	9013 Lbs	Train Positioner Building – embeds
32026	8,322 lbs	Fuel System Embeds – Conveyor No. 2
32032	5154 Cy	Car Dumper – concrete
32033	1800 Cy	Train Positioner – concrete
32034	1,662 CY	Fuel System Concrete, Conveyor No. 2
32038	59 ton	Car Dumper – Steel
32047	45500 Cy	Car Dumper – excavation
32048	2000 Cy	Train Positioner – excavation

Joint Facilities Agreement
Big Stone II Power Plant Page 52
June 30, 2005

Otter Tail
Number	Quantity	Description
32049	24,900 CY	Fuel System Excavation – Conveyor No. 2
32055	35700 Cy	Car Dumper – backfill
32056	1600 Cy	Train Positioner – backfill
32057	25,000 CY	Fuel System Backfill – Conveyor No. 2
32059	1 Lot	Car Dumper – Drains
32069	59 Ton	Car Dumper – Structural Steel
32070	81 Ton	Train Positioner building – Structural Steel
32071	20 Ton	Car Dumper – Misc. Iron and Steel
32072	9 ton	Train Positioner Building – Misc. Iron and Steel
32073	14000 SF	Car Dumper – exterior siding
32074	6 each	Car Dumper – doors
32075	300 SF	Car Dumper – Windows
32076	14900 SF	Train Positioner – exterior siding
32077	3 Each	Train Positioner – doors
32078	900 SF	Train Positioner – Blockwall insulation
32083	8900 SF	Conveyor No. 2 – Exterior Siding
32084	1 Each	Conveyor No. 2 – Doors
32088	668,000 CY	Plant Access Railroad – Earthwork C-L, FSC-26
32089	25,182 LF	Plant Access Railroad – Trackage C-3, FSC-42, 44 & 63
32090	1 Lot	Track Detection Equipment, FSC-64
32091	1 Each	Track Switch Heater
36989	1 Lot	Mtce. Platform under electrical cable junction
37016	1 Each	Car Dumper – Dust collection hood
37025	1 Lot	Car Dumper – Dust collector
37536	1 Lot	Tachometer Loss Circuit for Train Positioner Haulage Controller
48822	2 Each	Rail Flange Lubricators
52299	1 Each	Motor, 30 HP, 1800 RPPM. #1 & #2 Conveyor Area
52300	1 Each	Foundation for Blower and Motor. # 1 & #2 Conveyor Area
52301	1 Each	Rotary Airlock, with 1 HP gearmotor drive. #1 & #2 Conveyor Area
52302	1 Lot	Piping with Hangers and Accessories. #1 & #2 Conveyor Area
52303	1 Each	Cyclone dust collector, Fuller/Draco 1DC12 Mark V. #1 & #2 Conveyor Area
52304	2 Each	Trickle Valve, 7". #1 & #2 Conveyor Area
52305	1 Each	Relay room AC
52306	18 Each	Dumper Dust Collector Building – Translucent corrugated panels
65122	1 Each	Wheel clamp system for dumper
67313	1 Each	Dumper positioner brake
67314	1 Each	Positioner SCR Drive
67315	1 Each	Positioner arm SCR drives
67316	3 Each	Dumper car clamp assemblies
67317	2 Each	Dumper variable speed drives
67318	1 Each	Dumper car clamp hydraulic unit

Joint Facilities Agreement
Big Stone II Power Plant Page 53
June 30, 2005

Otter Tail
Number	Quantity	Description
67319	2 Each	Dumper hydraulic pumps
67320	1 Each	Dumper hydraulic building
67321	4 Each	Dumper trunnion wheels
67322	1 Each	Dumper control computer
67323	1 Each	Dumper PLC
67324	2 Each	Dumper Gearboxes
67325	2 Each	Dumper drive motors
67326	1 Each	Dumper Drive Brakes
67327	1 Each	Dumper stairway to pit
67328	1 Lot	Dumper Exit bridge section
67329	1 Each	Dumper platen and girders
67330	1 Each	Dumper entrance door
70747	1 Each	Positioner drive isolation transformer
32710	1 Each	Car Dumper – Motor control center
32723	1 Each	Car Dumper dust collection – motor control center

Joint Facilities Agreement
Big Stone II Power Plant Page 54
June 30, 2005

SCHEDULE 6.01

Additional Joint Facilities

	BSP I or BSP II			Construction/
Description	Joint Facility	Fee or No Fee	Maintenance Costs	Other Costs
Existing coal yard shop (warehouse)	BSP I	(*)	(*)	The cost of converting the coal yard shop into a warehouse shall be allocated solely to BSP II.
New office and locker room	BSP II	(*)	(*)	BSP II
New roads and parking	BSP II	(*)	(*)	BSP II
Existing roads and parking	BSP I	(*)	(*)
Existing control room	BSP I	(*)	(*)
Distributed control system and all other systems necessary located in the control room	BSP II	(*)	(*)	BSP II
Existing fire system	BSP I	(*)	(*)
Additions/upgrades to fire system	BSP II	(*)	(*)	BSP II

Joint Facilities Agreement	Page 55
Big Stone II Power Plant	June 30, 2005

SCHEDULE 9.05
Joint Facilities Fee Formula

Joint Facilities Components Existing as of the date of Commercial Operation: This Schedule 9.05 provides the (*) of Joint Facilities existing as of the date of Commercial Operation. The sum of the (*) listed herein, when (*) by the (*), as that term is defined in Section 9.05(b), (*) the (*) used in the calculation of the Joint Facilities Fee existing as of the date of Commercial Operation pursuant to Section 9.05(a).

Replaced Joint Facilities Components: At and after the replacement of a component of a Joint Facility existing as of the date of Commercial Operation, the (*) and the (*) of such Joint Facility, as listed in this Schedule 9.05, will be replaced by the (*) (as that term is defined in Section 9.05(b)) amount of that Joint Facility component. Accordingly, pursuant to Section 9.05(b), after the replacement of a component of a Joint Facility, the calculation of the Joint Facilities Fee shall include the (*) existing as of the date of Commercial Operation and the (*) in replaced Joint Facility components (*) by the (*).

Otter
Tail
Number	Quantity	Description	Original Cost	Adjusted Cost
Lake Pumping Related Equipment
31356	1 Lot	Lighting	(*)	(*)
31284	1 Lot	Heating & ventilation	(*)	(*)
31373	2,650 SF	Roof	(*)	(*)
31402	1 Lot	Structure	(*)	(*)
31403	1 Lot	Make-up pipe discharge structure	(*)	(*)
31477	7,243 LF	Pond make-up pipeline	(*)	(*)
32595	1 Each	Air compressor	(*)	(*)
32596	200 LF	Pipe	(*)	(*)
32597	2 Each	Pump A & B	(*)	(*)
32599	1 Each	Pump	(*)	(*)
32600	2 Each	Pump motors	(*)	(*)
32601	1 Each	Pump motor	(*)	(*)
32602	2 Each	30" Butterfly valve	(*)	(*)
32603	1 Each	16" Butterfly valve	(*)	(*)
32604	3 Each	Flow meters	(*)	(*)
32605	15,600 LF	Wire	(*)	(*)
32642	1 Each	Traveling crane	(*)	(*)
32726	1 Lot	Switchgear	(*)	(*)
32727	1 Lot	MCC	(*)	(*)
33123	1 Each	Heater	(*)	(*)
Dumper, Rail, and Conveyor #1& #2 Related Equipment
31277	1 Each	Relay room — 3-ton Lennox	(*)	(*)

Joint Facilities Agreement	Page 56
Big Stone II Power Plant	June 30, 2005

Otter
Tail
Number	Quantity	Description	Original Cost	Adjusted Cost
31280	1 Lot	Car Dumper Cab — 1-ton Lennox	(*)	(*)
33103	1 Lot	Dumper dust collector house	(*)	(*)
50013	32 CY	Dumper dust collector floor	(*)	(*)
31645	1 Lot	Positioner — carriage guide rails	(*)	(*)
31646	1 Each	Positioner — truck lock system	(*)	(*)
31647	1 Each	Positioner — rope haulage system	(*)	(*)
31648	1 Each	Positioner — carriage and arm	(*)	(*)
31652	1 Each	Dumper and positioner — motor control center	(*)	(*)
31654	1 Each	Dumper and positioner — operators cab	(*)	(*)
31658	4 Each	Rotary Cary dumper — vibratory feeders	(*)	(*)
31659	4 Each	Rotary Cary dumper — chutes	(*)	(*)
31684	1 Each	Conv. No. 1 — drive motor, F-32	(*)	(*)
31685	1 Each	Conv. No. 1 — reducer	(*)	(*)
31686	1 Each	Conv. No. 1 — high speed coupling	(*)	(*)
31687	1 Each	Conv. No. 1 — low speed coupling	(*)	(*)
31689	1 Each	Conv. No. 1 — headshaft w/pulleys & pillow blocks	(*)	(*)
31690	1 Each	Conv. No. 1 — snubshaft w/pulleys & pillow blocks	(*)	(*)
31691	1 Each	Conv. No. 1 — bendshaft w/pulleys & takeup shaft	(*)	(*)
31692	45 Each	Idlers	(*)	(*)
31693	2 Each	Conv. No. 1 — belt cleaners	(*)	(*)
31694	1 Each	Conv. No. 1 — discharge hood w/dust curtain, M-15	(*)	(*)
31695	1 Each	Conv. No. 1 — discharge chute to conveyor #2	(*)	(*)
31696	1 Each	Conv. No. 1 — electrical controls	(*)	(*)
31697	1 Each	Conv. No. 1 — steel structure supports	(*)	(*)
31698	2 Each	Conv. No. 2 — drive motors	(*)	(*)
31699	2 Each	Conv. No. 2 — reducers, m-15	(*)	(*)
31701	2 Each	Conv. No. 2 — low speed couplings	(*)	(*)
31703	1 Each	Conv. No. 2 — headshaft	(*)	(*)
31704	1 Each	Conv. No. 2 — hold back unit	(*)	(*)
31705	1 Each	Conv. No. 2 — drive snub shaft	(*)	(*)
31706	2 Each	Conv. No. 2 — takeup bend shaft	(*)	(*)

Joint Facilities Agreement	Page 57
Big Stone II Power Plant	June 30, 2005

Otter
Tail
Number	Quantity	Description	Original Cost	Adjusted Cost
31707	1 Each	Conv. No. 2 — auto gravity takeup	(*)	(*)
31708	2 Each	Conv. No. 2 — tail snub shafts, m-15	(*)	(*)
31709	213 Each	Conv. No. 2 — idlers	(*)	(*)
31710	1 Each	Conv. No. 2 — creep drive motor	(*)	(*)
31711	1 Each	Conv. No. 2 — creep drive reducer	(*)	(*)
31712	1 Each	Conv. No. 2 — creep high speed coupling	(*)	(*)
31713	1 Each	Conv. No. 2 — creep clutch coupling	(*)	(*)
31714	1 Each	Conv. No. 2 — electrical switches	(*)	(*)
31715	1 Each	Conv. No. 2 — steel structure supports	(*)	(*)
31716	1 Each	Conv. No. 2 — stairs & walkways — tail end	(*)	(*)
31717	2 Each	Conv. No. 2 — walk through conveyor galleries	(*)	(*)
31718	1 Each	Conv. No. 2 — support bent — 36 ft.	(*)	(*)
31719	1 Each	Conv. No. 2 — discharge hood	(*)	(*)
31720	1 Each	Conv. No. 2 — discharge chute to Conv. No. 3	(*)	(*)
31721	1 Each	Conv. No. 2 — hinged chute to ground	(*)	(*)
31722	1 Each	Conv. No. 2 — instrumentation, M-15	(*)	(*)
31959	1 Each	Conv. No. 1 Dust Collector — Ray Jet collector	(*)	(*)
31960	1 Each	Conv. No. 1 Dust Collector — screw drive damper	(*)	(*)
31961	1 Lot	Conv. No. 1 Dust Collector — C.E. Controls	(*)	(*)
31962	1 Lot	Conv. No. 1 Dust Collector — fans & motors	(*)	(*)
31963	1 Lot	Conv. No. 1 Dust Collector — CO2 system	(*)	(*)
31964	1 Lot	Conv. No. 1 Dust Collector — electrical	(*)	(*)
31965	1 Lot	Conv. No. 1 Dust Collector — ductwork	(*)	(*)
31966	4 Each	Car Dumper — Ray Jet collectors	(*)	(*)

Joint Facilities Agreement	Page 58
Big Stone II Power Plant	June 30, 2005

Otter
Tail
Number	Quantity	Description	Original Cost	Adjusted Cost
31967	4 Each	Car Dumper — screw drive dampers	(*)	(*)
31968	1 Lot	Car Dumper — C.E. controls	(*)	(*)
31969	4 Each	Car Dumper — fans and motors	(*)	(*)
31970	1 Lot	Car Dumper — CO2 system	(*)	(*)
31971	1 Lot	Car Dumper — electrical	(*)	(*)
31972	1 Lot	Car Dumper — ductwork	(*)	(*)
31988	71 Ton	Rotary car dumper hopper	(*)	(*)
31991	1 Each	Galigher coal sampler	(*)	(*)
32008	43,818 SF	Car Dumper — forms	(*)	(*)
32009	3,151 SF	Fuel System Forms — train positioner bldg.	(*)	(*)
32010	19,104 SF	Fuel System Forms — Conv. No. 2	(*)	(*)
32016	420 Ton	Car Dumper — rebar	(*)	(*)
32017	69 Ton	Train Positioner building — rebar	(*)	(*)
32018	95 Ton	Fuel System Rebar, Conv. No. 2	(*)	(*)
32024	25,873 Lbs	Car Dumper — embeds	(*)	(*)
32025	9,013 Lbs	Train Positioner Building — embeds	(*)	(*)
32026	8,322 Lbs	Fuel System Embeds — Conv. No. 2	(*)	(*)
32032	5154 CY	Car Dumper — concrete	(*)	(*)
32033	1800 CY	Train Positioner — concrete	(*)	(*)
32034	1,662 CY	Fuel System Concrete, Conv. No. 2	(*)	(*)
32038	59 Ton	Car Dumper — steel	(*)	(*)
32047	45,500 CY	Car Dumper — excavation	(*)	(*)
32048	2,000 CY	Train Positioner — excavation	(*)	(*)
32049	24,900 CY	Fuel System Excavation — Conv. No. 2	(*)	(*)
32055	35,700 CY	Car Dumper — backfill	(*)	(*)
32056	1,600 CY	Train Positioner — backfill	(*)	(*)
32057	25,000 CY	Fuel System Backfill — Conv. No. 2	(*)	(*)
32059	1 Lot	Car Dumper — drains	(*)	(*)
32069	59 Ton	Car Dumper — structural steel	(*)	(*)
32070	81 Ton	Train Positioner building - structural steel	(*)	(*)
32071	20 Ton	Car Dumper — misc. iron and steel	(*)	(*)

Joint Facilities Agreement	Page 59
Big Stone II Power Plant	June 30, 2005

Otter
Tail
Number	Quantity	Description	Original Cost	Adjusted Cost
32072	9 Ton	Train Positioner Building — misc. iron and steel	(*)	(*)
32073	14,000 SF	Car Dumper — exterior siding	(*)	(*)
32074	6 Each	Car Dumper — doors	(*)	(*)
32075	300 SF	Car Dumper — windows	(*)	(*)
32076	14,900 SF	Train Positioner — exterior siding	(*)	(*)
32077	3 Each	Train Positioner — doors	(*)	(*)
32078	900 SF	Train Positioner — blockwall insulation	(*)	(*)
32083	8,900 SF	Conveyor No. 2 — exterior siding	(*)	(*)
32084	1 Each	Conveyor No. 2 — doors	(*)	(*)
32088	668,000 CY	Plant Access Railroad — earthwork C-L, FSC-26	(*)	(*)
32089	25,182 LF	Plant Access Railroad — trackage C-3, FSC-42, 44 & 63	(*)	(*)
32090	1 Lot	Track Detection Equipment, FSC-64	(*)	(*)
32091	1 Each	Track switch heater	(*)	(*)
36989	1 Lot	Mtce. platform under electrical cable junction	(*)	(*)
37016	1 Each	Car Dumper — dust collection hood	(*)	(*)
37025	1 Lot	Car Dumper — dust collector	(*)	(*)
37536	1 Lot	Tachometer loss circuit for train positioner haulage controller	(*)	(*)
48822	2 Each	Rail flange lubricators	(*)	(*)
52299	1 Each	Motor, 30 HP, 1800 RPPM. #1 & #2 conveyor area	(*)	(*)
52300	1 Each	Foundation for blower and motor. #1 & #2 Conveyor Area	(*)	(*)
52301	1 Each	Rotary Airlock, with 1 HP gear motor drive. #1 & #2 conveyor area	(*)	(*)
52302	1 Lot	Piping with hangers and accessories. #1 & #2 conveyor area	(*)	(*)
52303	1 Each	Cyclone dust collector, Fuller/Draco 1DC12 Mark V. #1 & #2 conveyor area	(*)	(*)
52304	2 Each	Trickle valve, 7" #1 & #2 conveyor area	(*)	(*)
52305	1 Each	Relay room AC	(*)	(*)

Joint Facilities Agreement	Page 60
Big Stone II Power Plant	June 30, 2005

Otter
Tail
Number	Quantity	Description	Original Cost	Adjusted Cost
52306	18 Each	Dumper dust collector building - translucent corrugated panels	(*)	(*)
65122	1 Each	Wheel clamp system for dumper	(*)	(*)
67313	1 Each	Dumper positioner brake	(*)	(*)
67314	1 Each	Positioner SCR drive	(*)	(*)
67315	1 Each	Positioner arm SCR drives	(*)	(*)
67316	3 Each	Dumper car clamp assemblies	(*)	(*)
67317	2 Each	Dumper variable speed drives	(*)	(*)
67318	1 Each	Dumper car clamp hydraulic unit	(*)	(*)
67319	2 Each	Dumper hydraulic pumps	(*)	(*)
67320	1 Each	Dumper hydraulic building	(*)	(*)
67321	4 Each	Dumper trunnion wheels	(*)	(*)
67322	1 Each	Dumper control computer	(*)	(*)
67323	1 Each	Dumper PLC	(*)	(*)
67324	2 Each	Dumper gearboxes	(*)	(*)
67325	2 Each	Dumper drive motors	(*)	(*)
67326	1 Each	Dumper drive brakes	(*)	(*)
67327	1 Each	Dumper stairway to pit	(*)	(*)
67328	1 Lot	Dumper exit bridge section	(*)	(*)
67329	1 Each	Dumper plate and girders	(*)	(*)
67330	1 Each	Dumper entrance door	(*)	(*)
70747	1 Each	Positioner drive isolation transformer	(*)	(*)
32710	1 Each	Car Dumper — motor control center	(*)	(*)
32723	1 Each	Car Dumper dust collection — motor control center	(*)	(*)
		TOTAL:	(*)	(*)

Joint Facilities Agreement	Page 61
Big Stone II Power Plant	June 30, 2005

SCHEDULE 10.01(A)
Option to Purchase Contract

OPTION TO PURCHASE CONTRACT

     THIS OPTION TO PURCHASE CONTRACT (this “Option Contract”) is made this 30th day of June, 2005, by and between Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a Delaware corporation f/k/a Montana-Dakota Utilities Co., of Bismarck, North Dakota (“Montana-Dakota”), Northwestern Corporation, a Delaware corporation doing business as NorthWestern Energy, of Sioux Falls, South Dakota (“NorthWestern”) and Otter Tail Corporation, a Minnesota corporation, of Fergus Falls, Minnesota (“Otter Tail,” and together with Montana-Dakota and NorthWestern, “Sellers”), and Otter Tail, in its capacity as administrative agent for itself and the other Persons who are, from time to time, the BSP II Owners described in the JFA described below (in such capacity, “Buyer”). Sellers and Buyer are sometimes referred to as the “Parties” and Sellers (collectively) and Buyer are each a “Party.”

     WHEREAS, Sellers are the owners, as tenants in common, of those certain tracts of real property located in Grant County, South Dakota legally described on Exhibit A attached hereto (the “BSP II Plant Site” and, together with such improvements and appurtenances thereto, the “Optioned Premises”); and

     WHEREAS, Sellers have entered into that certain Big Stone I and Big Stone II 2005 Joint Facilities Agreement of even date hereof (the “JFA”) with the BSP II Owners described therein (the “BSP II Owners”) for the purpose of planning the development of the BSP II Plant Site and the cooperative use of certain joint facilities located on the BSP I Plant Site and the BSP II Plant Site; and

     WHEREAS, in connection with the purposes of the JFA, Sellers have agreed to grant Buyer, as administrative agent for the BSP II Owners, an option to purchase the Optioned Premises, pursuant to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants set forth below and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. Grant of Option. Sellers give and grant to Buyer the exclusive option (the “Option”) to purchase the Optioned Premises and do hereby agree to hold the Optioned Premises for sale to Buyer (or to the BSP II Owners as Buyer may direct), until the (*), at 5:00 p.m., local Big Stone City, South Dakota time (the “Option Period”). Buyer shall have the option to purchase none, some or all of the Optioned Premises based (in Buyer’s sole discretion) on the results of the environmental due diligence conducted pursuant to Section 10.09 of the JFA.

2. Purchase Price. The purchase price of the Optioned Premises shall be (*) per acre, which shall be payable in full at Closing. The acreage of the Optioned Premises shall be conclusively determined by the official plats of the tracts constituting the Optioned Premises.

3. Real Estate Taxes. Real estate taxes and installments of special assessments, if any, shall be prorated as of the Date of Closing (as defined below) in accordance with customary

Option to Purchase Contract	Page 62
Big Stone II Power Plant	June 30, 2005

local commercial practice. Sellers and Buyer shall take such appropriate steps as are necessary to cause the Optioned Premises to be taxed and assessed separately and distinctly from the fee parcels that constitute the BSP I Plant Site (as defined in the JFA) after the Date of Closing.

4. Exercise of Option. In the event that Buyer desires to exercise the Option, Buyer shall deliver written notice of its exercise of the Option to Sellers in accordance with the notice provisions of the JFA prior to the date and time of expiration of the Option Period, and such notice shall be sufficient to exercise the Option.

5. Review of Title; Clearance of Title Objections. Buyer has, at its expense, reviewed the state of the title to the Optioned Premises and agrees to take title to the Optioned Premises subject to all easements, liens and encumbrances of record as of the date hereof except for the easements, liens and encumbrances described in Exhibit B (such non-accepted encumbrances being referred to herein as the “Non-Permitted Encumbrances”). Nothing in this Option Contract shall be deemed to excuse Buyer from having to accept title to the Optioned Premises subject to existing and future environmental conditions described under Article X of the JFA. Buyer shall have the right to contract for the issuance of an owner’s title insurance policy and such endorsements thereto as may be desired by Buyer at Buyer’s expense, it being understood and agreed that the terms of such policy and endorsements are strictly between Buyer and the title company and shall not constitute a basis for title objections or a basis for termination of this Option Contract if unavailable.

6. Closing. The “Date of Closing” shall be the date Sellers deliver a warranty deed transferring the Optioned Premises to Buyer (the “Closing”). The Date of Closing shall be within ninety (90) days following receipt by Sellers of the notice of election to exercise this Option, or such other date as may be agreed to by Buyer and Sellers; provided that either Party may extend the Date of Closing for up to an additional thirty (30) days by notice to the other Party stating the reason for such extension, which reason shall be commercially reasonable. At the Closing, Sellers shall execute and deliver to Buyer (A) a warranty deed in favor of Buyer (or the designated BSP II Owners), conveying the Optioned Premises subject to all easements, liens and encumbrances of record as of the date hereof, except for the Non-Permitted Encumbrances; (B) such additional documents as may be necessary to place the warranty deed of record; and (C) such additional customary documents as may be reasonably required by Buyer’s title company in order to issue an owner’s title insurance policy with the following so-called “standard exceptions” deleted: (i) any facts, rights, interests, or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof; (ii) discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records; (iii) any lien, or right to a lien for services, labor or material heretofore or hereafter furnished, imposed by the law and not shown by

Option to Purchase Contract	Page 63
Big Stone II Power Plant	June 30, 2005

the public records; (iv) bankruptcies, defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching prior to the date the Buyer acquires of record fee title estate to the Optioned Premises.

7. Assignment of Option. It is specifically understood and agreed that Buyer may assign its rights under this Option Contract at any time and that any such assignee shall also have the right of assignment; provided that Buyer may only assign its rights under this Option Contract (and any assignee may only further assign its rights under this Option Contract) to a Person who is then a BSP II Owner or in connection with a pledge or the granting of a security interest in, or assigning as collateral, all or any portion of Buyer’s interest in either BSP II or the JFA in connection with Buyer’s financing of the Project.

8. Right of Entry; Inspection of Optioned Premises. Sellers hereby grant to Buyer, and its agents or designees, the right to enter upon the Optioned Premises at any time during the Option Period as more specifically provided for in the JFA for the purposes of surveying and inspecting the Optioned Premises. Acceptance of the warranty deed for the Optioned Premises shall constitute Buyer’s acknowledgment that the Optioned Premises have been conveyed on an “As-Is, Where-Is” basis, but subject to warranties of title as set forth in a Warranty Deed to be delivered pursuant to Section 6. In the event that Buyer’s inspection reveals an environmental hazard, Hazardous Substance or other undesirable condition with respect to the Optioned Premises, Buyer may, at any time prior to Closing (i) accept responsibility for such conditions and proceed to Closing, as provided for in the JFA, (ii) exclude that portion of the Optioned Premises with the environmental hazard, Hazardous Substance or undesirable condition from the terms of the Option (in which case, Sellers shall convey the remaining portion of the Optioned Premises to Buyer upon exercise of the Option), or (iii) elect to terminate this Option Contract at which time the Parties shall have no further responsibilities to each other with respect to this Option Contract.

9. Definitions. Any capitalized term that is not defined in this Option Contract shall have the definition set forth in the JFA.

10. Successors and Assigns. This Option Contract shall inure to the benefit of and bind the respective successors and assigns of the Parties hereto, and references hereby to “Sellers” and “Buyer” shall be deemed to include their respective successors and assigns. Buyer acknowledges and represents to Sellers that it is acting solely as agent for the BSP II Owners.

11. Time Is of the Essence. Time is of the essence to this Option Contract.

12. Recording of Memorandum. The Parties agree that this Option Contract shall not be recorded. The Parties shall enter into a Memorandum of Option Contract and the Memorandum will be recorded in the Office of the Register of Deeds of Grant County, South Dakota as soon as reasonably possible following execution of this Option Contract.

Option to Purchase Contract	Page 64
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13. Sellers’ Representations. Sellers covenant, represent and warrant to Buyer that:

(a)	Sellers have the full power, authority and legal right under all applicable Laws and their respective organizational documents to grant the Option to Buyer and complete the transaction contemplated hereby. The Persons who have executed this Option Contract on behalf of Sellers have the appropriate authority as the owners of the entire interest of Optioned Premises to bind Sellers to the terms of this Option Contract
(b)	The execution, delivery and performance of this Option Contract by Sellers will not result in any breach of any instrument, agreement, contract or other document to which Sellers are a party or by which their properties are bound.
(c)	As of the date hereof, there are no liens or encumbrances against the Optioned Premises other than easements, liens and encumbrances of record. Seller has not permitted or suffered any easements, liens or encumbrances against the Optioned Premises since May 10, 2005.
(d)	From the date hereof until the Date of Closing, Sellers shall not grant, permit or suffer any easements, liens or encumbrances to attach to the Optioned Premises without the prior written consent of Buyer, other than such easements, liens or encumbrances as shall be released prior to Closing.

14. Remedies for Breach. In the event of a material breach of the covenants, terms, conditions, representations, and warranties set forth in this Option Contract, either Party may seek specific performance to enforce the provisions hereof, and/or may seek damages resulting from such breach and/or any other remedy available to such Party under law or equity. The prevailing Party shall be entitled to reasonable attorneys’ fees incurred in enforcing this Option Contract. The remedies set forth herein are cumulative and are in addition to any remedies set forth in the JFA.

15. Governing Law. This Option Contract shall be governed by the law of the state of South Dakota.

16. Counterparts. To facilitate execution, this Option Contract may be executed in as many separate counterparts as may be convenient or required. It shall not be necessary that the signature of each Party, or that the signature of all Persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single instrument.

Option to Purchase Contract	Page 65
Big Stone II Power Plant	June 30, 2005

     IN WITNESS WHEREOF, the Parties have executed this Option Contract as of the day and year first above written.

	SELLERS:
Montana-Dakota:	MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc., a Delaware corporation formerly known as Montana-Dakota Utilities Co.
	By:
	Name:	Bruce T. Imsdahl
	Its:	President and Chief Executive Officer
NorthWestern:	NORTHWESTERN CORPORATION, a Delaware corporation doing business as NorthWestern Energy
	By:
	Name:	Michael J. Hanson
	Its:	President and Chief Executive Officer
Otter Tail:	OTTER TAIL CORPORATION, a Minnesota corporation
	By:
	Name:	Charles S. MacFarlane
	Its:	President
	BUYER:
	OTTER TAIL CORPORATION, a Minnesota corporation, as administrative agent for itself and the other Persons who are, from time to time, the BSP II Owners described in the JFA
	By:
	Name:	Charles S. MacFarlane
	Its:	President

Option to Purchase Contract	Page 66
Big Stone II Power Plant	June 30, 2005

EXHIBIT A
Legal Description of Optioned Premises

Tract A in the E 1/2 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[cooling tower blowdown pond]

Tract B in the SE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[cooling tower]

Tract C in the E 1/2 of Section 11 and W 1/2 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[coal silos]

Tract D in the E 1/2 of Section 11 and the W 1/2 of Section 12 — Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[dead coal storage]

Tract E in the NE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[new yard shop]

Tract F in the NW 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[BSP II cooling water makeup]

Tract G in the W 1/2 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[BSP II coal transfer house]

Tract H in the SW 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[cold lime softener]

Tract I in the SW 1/4 of Section 12 and SE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[BSP II’s power block]

Tract M in the SE 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[brine concentrator addition]

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Tract O in the SE 1/4 of Section 11, , Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota
[scrubber waste storage]

EXHIBIT B
Non-Permitted Encumbrances

Big Stone Plant Agreement for Sharing Ownership of Generating Plant dated as of January 7, 1970, as amended by:

Supplemental Agreement No. 1 to Big Stone Plant Agreement for Sharing Ownership of Generating Plant dated as of July 1, 1983

Supplemental Agreement No. 2 to Big Stone Plant Agreement for Sharing Ownership of Generating Plant dated as of March 1, 1985

Supplemental Agreement No. 3 to Big Stone Plant Agreement for Sharing Ownership of Generating Plant dated March 31, 1986

Supplemental Agreement No. 4 to Big Stone Plant Agreement for Sharing Ownership of Generating Plant dated April 24, 2003, recorded July 7, 2003 in Misc. Record 227, Page 998.

Easement Agreement dated February 1, 1974 in favor of Grant County, South Dakota, recorded February 6, 1974 in Misc. Record 159, page 169.

Memorandum of Option to Lease Land dated October 3, 2002, recorded October 10, 2002 in Misc. Record 227, Page 480

All mortgage indentures affecting the Optioned Premises.

All matters placed of record after May 10, 2005.

Joint Facilities Agreement	Page 69
Big Stone II Power Plant	June 30, 2005

SCHEDULE 10.01(B)
Memorandum of Option to Purchase Contract

MEMORANDUM OF OPTION TO PURCHASE CONTRACT

This instrument memorializes the fact that Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a Delaware corporation f/k/a Montana-Dakota Utilities Co., of Bismarck, North Dakota (“Montana-Dakota”), Northwestern Corporation, a Delaware corporation doing business as NorthWestern Energy, of Sioux Falls, South Dakota (“NorthWestern”) and Otter Tail Corporation, a Minnesota corporation, of Fergus Falls, Minnesota (“Otter Tail,” and together with Montana-Dakota and NorthWestern, “Sellers”), and Otter Tail, in its capacity as administrative agent for itself and the other Persons who are, from time to time, the BSP II Owners described in the Option to Purchase Contract described below (in such capacity, “Buyer”), have entered into that certain Option to Purchase Contract dated June 30, 2005 (the “Option Contract”) concerning the real property in Grant County, South Dakota described in Exhibit A attached hereto (the “Optioned Premises”).

Under the terms of the Option Contract, which is in full force and effect, Buyer has the exclusive option to purchase the Optioned Premises from Sellers for the price specified therein. The Sellers shall also provide easements for access to the Optioned Premises pursuant to the terms of the Option Contract. The Option expires no later than (*) although the closing of the purchase of the Option Contract may occur up to ninety (90) days after such date.

To facilitate execution, this Memorandum Agreement may be executed in as many separate counterparts as may be convenient or required. It shall not be necessary that the signature of each Party, or that the signature of all persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single instrument.

[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the Sellers and Buyer have caused this Memorandum of Option to Purchase Contract to be executed effective as of June 30, 2005.

	SELLERS:
Montana-Dakota:	MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc., a Delaware corporation formerly known as Montana-Dakota Utilities Co.
	By:
	Name: Bruce T. Imsdahl
	Its: President and Chief Executive Officer

STATE OF South Dakota
	}	ss.
COUNTY OF Grant

On this the 30th day of June, 2005, before me, Dennis Mears, the undersigned officer, personally appeared Bruce T. Imsdahl, who acknowledged himself to be the President and Chief Executive Officer of MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc., a Delaware corporation, and that he, as such President and Chief Executive Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President and Chief Executive Officer.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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NorthWestern:	NORTHWESTERN CORPORATION, a Delaware corporation doing business as NorthWestern Energy
	By:
	Name: Michael J. Hanson
	Its: President and Chief Executive Officer

STATE OF SOUTH DAKOTA
	}	ss.
COUNTY OF MINNEHAHA

On this the 27th day of June, 2005, before me, Alan Dietrich, the undersigned officer, personally appeared Michael J. Hanson, who acknowledged himself to be the President and Chief Executive Officer of NORTHWESTERN CORPORATION, a Delaware corporation, and that he, as such President and Chief Executive Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President and Chief Executive Officer.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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Otter Tail:	OTTER TAIL CORPORATION, a Minnesota corporation
	By:
	Name: Charles S. MacFarlane
	Its: President

STATE OF MINNESOTA
	}	ss.
COUNTY OF HENNEPIN

On this the 22^nd day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Charles S. MacFarlane, who acknowledged himself to be the President of OTTER TAIL CORPORATION, a Minnesota corporation, and that he, as such President being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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BUYER:

OTTER TAIL CORPORATION, a Minnesota corporation, as administrative agent for itself and the other Persons who are, from time to time, the BSP II Owners described in the Option to Purchase Contract

By:

Name: Charles S. MacFarlane

Its: President

STATE OF MINNESOTA
	}	ss.
COUNTY OF HENNEPIN

On this the 22^nd day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Charles S. MacFarlane, who acknowledged himself to be the President of OTTER TAIL CORPORATION, a Minnesota corporation, and that he, as such President being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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This Instrument Drafted By:

Leonard, Street and Deinard P.A. (RLS)
150 South Fifth Street, Suite 2300
Minneapolis, MN 55402

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EXHIBIT A
TO
MEMORANDUM OF OPTION TO PURCHASE CONTRACT

Tract A in the E 1/2 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract B in the SE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract C in the E 1/2 of Section 11 and W 1/2 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract D in the E 1/2 of Section 11 and the W 1/2 of Section 12 — Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract E in the NE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract F in the NW 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract G in the W 1/2 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract H in the SW 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract I in the SW 1/4 of Section 12 and SE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract M in the SE 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract O in the SE 1/4 of Section 11, , Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

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SCHEDULE 10.02(A)
Blanket Easement Agreement

(space above reserved for recording information)

BLANKET EASEMENT AGREEMENT

     THIS BLANKET EASEMENT AGREEMENT (this “Agreement”) is made and entered into as of the 30th day of June, 2005, by and among Otter Tail Corporation, a Minnesota corporation, doing business as Otter Tail Power Company (“Otter Tail”), NorthWestern Corporation, a Delaware corporation, doing business as NorthWestern Energy (“NorthWestern”), and Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a Delaware corporation formerly known as Montana-Dakota Utilities Co. (“Montana-Dakota”), and Central Minnesota Municipal Power Agency, an agency incorporated under Minnesota law (“CMMPA”), Great River Energy, a Minnesota cooperative (“GRE”), Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law, Chapter 49-35 of the South Dakota Codified Laws (“Heartland”), Southern Minnesota Municipal Power Agency, a Minnesota municipal corporation and political subdivision (“SMMPA”), and Western Minnesota Municipal Power Agency, a Minnesota municipal corporation and political subdivision (“WMMPA”). Otter Tail, NorthWestern, and Montana-Dakota, together with such other Persons that from time to time may be Owners of BSP I (as such term is defined below) are collectively referred to herein as the “BSP I Owners.” CMMPA, GRE, Heartland, SMMPA, WMMPA, Montana-Dakota, and Otter Tail, together with such other Persons that from time to time may become Owners of BSP II (as such term is defined below), are collectively referred to herein as the “BSP II Owners.”

WITNESSETH

     A. The BSP I Owners, as tenants in common, own an undivided interest in one hundred percent (100%) of the existing 450 MW coal-fired electric generating plant located in Grant County, South Dakota, known as the Big Stone Plant (“BSP I”) and in one hundred percent (100%) of the real property legally described on Exhibit A (the “Project Premises”). The Project Premises are primarily held by the BSP I Owners for the purpose of the operation of BSP I.

     B. The BSP II Owners plan to jointly develop, own and operate a new, approximately 600 MW coal-fired electric generating plant to be known as the Big Stone II Power Plant (“BSP II”) to be located on property adjacent to BSP I.

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     C. The BSP I Owners and BSP II Owners have entered into a Big Stone I and Big Stone II 2005 Joint Facilities Agreement dated of even date hereof (the “Joint Facilities Agreement”) regarding the joint use of certain facilities by the BSP I Owners and BSP II Owners in the operation of BSP I and BSP II; and

     D. In connection with the development of BSP II, the BSP I Owners and Otter Tail, as agent for the BSP II Owners, have entered into that certain Option to Purchase Contract dated of even date hereof (the “Option Contract”) which grants an option to the BSP II Owners to purchase that portion of the Project Premises legally described on Exhibit B (the “BSP II Plant Site”). BSP II and the BSP II Joint Facilities are to be constructed upon the BSP II Plant Site. The remaining portion of the Project Premises (upon which BSP I and the BSP I Joint Facilities are constructed) is referred to herein as the “BSP I Plant Site.”

     E. Under the Joint Facilities Agreement, the BSP I and BSP II Owners will develop and operate their respective Plant Sites and Joint Facilities in conjunction with each other as integral parts of a single complex, but not a planned or common interest development community, and to effectuate the common use and operation of their respective Plant Sites and Joint Facilities, the BSP I and BSP II Owners desire to enter into this Agreement;

     NOW, THEREFORE, in consideration of the premises, the BSP I and BSP II Owners agree as follows:

ARTICLE I — DEFINITIONS

     The terms used herein, unless otherwise specifically defined herein, will have the same meanings as set forth in the Joint Facilities Agreement.

ARTICLE II -EASEMENTS FOR CONSTRUCTION

     2.1 Pre-Construction and Construction Easements

     (A) The BSP I Owners hereby grant the BSP II Owners and their invitees a temporary, nonexclusive easement over and across the Project Premises to access the proposed BSP II Plant Site for purposes of investigating, accumulating data, testing and designing BSP II and associated facilities including, but not limited to, BSP II Joint Facilities, BSP II exclusive facilities, utility lines, and access roads, subject to the terms and conditions of Section 10.03 of the Joint Facilities Agreement.

     (B) The BSP I Owners hereby grant a temporary, nonexclusive easement to the BSP II Owners, their contractors, subcontractors, architects, employees and invitees across the area legally described in Exhibit C for the purposes of lay down areas, construction and material storage, work areas, contractor parking, temporary offices and temporary roadways in connection with the construction of BSP II and the BSP II Joint Facilities (the “Construction Easement”), subject to the terms and conditions of Section 10.03 of the Joint Facilities Agreement.

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ARTICLE III — CONSTRUCTION INDEMNIFICATION REQUIREMENTS,
RESTRICTIONS; AND FACILITY EASEMENTS

     3.1 Indemnification Requirements

     The BSP II Owners covenant that during the activities conducted pursuant to Article II and their use of the temporary easement rights thereunder, the BSP II Owners shall indemnify the BSP I Owners as provided in Section 10.04 of the Joint Facilities Agreement.

     3.2 Joint and Exclusive Facilities

     (A) Any BSP II Joint Facilities and exclusive facilities shall be constructed as shown on the Site Plan attached as Exhibit D hereto.

     (B) Any BSP II utility lines that are placed underground shall be at depths designated by BSP II consultants and subject to approval by the BSP I Engineering and Operating Committee.

     3.3 Location of Facilities

     Any BSP II Joint Facilities and exclusive facilities shall only be located as designated on the Site Plan. While it is acknowledged and agreed that the BSP II Owners have no obligation to commence construction of any Joint Facility or exclusive facility, the BSP II Owners agree that once construction of a Joint Facility or exclusive facility has commenced, such activity will be completed within a reasonable time.

     3.4 Liens

     If any mechanic’s lien is recorded against BSP I or the BSP I Plant Site as a result of services performed or materials furnished for the use of the BSP II Owners, the BSP II Owners agree to cause such lien to be discharged within fifteen (15) days after the entry of a final judgment (after all appeals) for the foreclosure of such mechanic’s lien. Notwithstanding the foregoing, upon request of the BSP I Owners, the BSP II Owners agree to promptly cause such lien to be released and discharged of record, either by paying the indebtedness which gave rise to such mechanic’s lien or by posting bond or other security as required by law to obtain such release and discharge. Nothing herein shall prevent the BSP II Owners from contesting the validity thereof in any manner they choose so long as such contest is pursued with reasonable diligence. If such contest is determined adversely (allowing for appeal to the highest appellate court), the BSP II Owners shall promptly pay in full the required amount, together with interest, penalties, costs, or other charges necessary to release such mechanic’s lien of record. The BSP II Owners agree to defend, protect, indemnify and hold harmless the BSP I Owners, BSP I, and the BSP I Plant Site from and against all claims and demands, including any action or proceeding brought thereon, and all Losses arising out of or resulting from such mechanic’s lien.

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     3.5 Facility Easement

     As a condition to, and in conjunction with the process of, the exercise of the Option, the BSP I Owners shall grant to the BSP II Owners a nonexclusive easement (the “Facility Easement”) in designated specific areas for purposes of the installation, operation and maintenance of (a) necessary utility lines serving the BSP II Plant Site and (b) other facilities reasonably necessary for the operation of BSP II and the BSP II Joint Facilities (including but not limited to water lines, steam lines, pipe lines, conveyors, roadways and similar facilities). Concurrently with their acquisition of the BSP II Plant Site, the BSP I Owners shall grant the Facility Easement pursuant to a written agreement to be recorded along with the Warranty Deed to the BSP II Plant Site. The Groups shall negotiate, in good faith (through their respective Engineering and Operating Committees) the specific terms and location of the Facility Easement. The BSP II Owners shall pay the reasonable expenses of the BSP I Owners that directly relate to the grant of the Facility Easement.

ARTICLE IV -POST-CONSTRUCTION EASEMENTS

     4.1 Post-Construction Easements

     Following the construction of BSP II, the BSP II Joint Facilities, and BSP II exclusive facilities and during the term of the Joint Facilities Agreement, the BSP I Owners and the BSP II Owners shall grant and convey to the other, their employees and invitees, in common with others entitled to the same use, a non-exclusive cross-easement over and across each Group’s Plant Site in order to facilitate the operation and maintenance of each Group’s Joint Facilities and exclusive facilities in accordance with the Joint Facilities Agreement. A Group that benefits from any such cross-easement shall pay the reasonable expenses of the other (i.e., the granting) Group directly related to the grant of such cross-easement by such granting Group.

     4.2 Ingress, Egress and Parking

     During the term of the Joint Facilities Agreement, each Group hereby grants and conveys to the other Group for its use and for the use of its employees and invitees, in common with others entitled to use the same, a non-exclusive easement for the passage and parking of vehicles over and across the parking and driveway areas of each Group’s Plant Site, as the same may from time to time be constructed and maintained for such use, and for the passage and accommodation of pedestrians over and across the parking, roadways, driveways and sidewalk areas of the Group’s Plant Site, as the same may from time to time be constructed and maintained for such use. The easements established pursuant to Section 4.1 and this Section 4.2 shall be appurtenant to and for the benefit of each Group’s Plant Site and shall be binding on, enforceable against, and burden each Group’s Plant Site for the Term of this Agreement. Such easement rights shall be subject to the following reservations as well as the other applicable provisions contained in this Agreement:

1. Each Group reserves the right to close-off any portion of its Plant Site for such reasonable period of time as may be legally necessary, in the opinion of such Group’s counsel, to prevent the acquisition of prescriptive rights by anyone;

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	provided, however, that prior to closing off any portion of its Plant Site, such Group shall give written notice to the other Group of its intention to do so, and shall attempt to coordinate such closing-off with the other Group so that no unreasonable interference with the passage of pedestrians or vehicles shall occur;
2.	Each Group reserves the right at any time and from time to time to exclude or restrain any person who is not an invitee of either Group from using its Plant Site; and
3.	Each Group reserves the right to temporarily erect or place barriers in and around areas on its Plant Site which are being constructed and/or repaired in order to ensure either safety of persons or protection of property.

     4.3 Additional Instruments.

     Pursuant to the terms of the Joint Facilities Agreement, the Owners shall enter into an instrument that designates more specific locations of the property that will be subject to the terms of the easements granted herein. Upon such designation, the Owners shall release all other portions of the Project Premises from the terms and conditions of this Agreement. In addition, each Owner shall, at the request of any other Owner, execute such additional instruments as may be reasonably requested in order to memorialize the particular terms (e.g., location, conditions for use, etc.) of any easement granted pursuant to this Article IV. All such instruments shall be in a form appropriate for recording.

ARTICLE V — OTHER CONSTRUCTION AND MAINTENANCE ACTIVITIES

     If, following initial construction of BSP II and the BSP II Joint Facilities and other associated facilities, it becomes necessary for either Group to construct, maintain or reconstruct any of its Joint Facilities, exclusive facilities, or new facilities or improvements, or if the specified easements provided to the BSP II Owners hereunder are found to be inaccurate or not sufficient for its facilities during initial construction, the Engineering and Operating Committees of each Group shall meet and amended easements shall, in good faith, be negotiated that will enable the Group doing the construction, maintenance or reconstruction to complete its needed work. In no event shall a Group be required to grant an amended easement if it will materially impair the operation of its Plant, Joint Facilities, exclusive facilities or improvements on its respective Plant Site.

ARTICLE VI — ENVIRONMENTAL INDEMNIFICATION

     The BSP II Owners shall indemnify, defend, and hold harmless the BSP I Owners for environmental conditions and operational activities hereunder as provided in Section 10.06 of the Joint Facilities Agreement.

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ARTICLE VII — TERM

     The term of this Agreement shall be perpetual; provided that this Agreement shall automatically terminate and be of no further force and effect and no Owner shall have any further obligation to another Owner hereunder, if the BSP II Financial Closing, as contemplated under the BSP II Participation Agreement, does not occur on or before (*). Upon the determination of the location of the Facilities Easement, the designation of the Defined Easement Areas, and the execution of the Designated Easement Agreement, all as contemplated by Sections 3.5 and 4.3 of this Agreement and Section 10.02(b) of the Joint Facilities Agreement, the parties shall release such other areas of the BSP I Plant Site and the BSP II Plant Site from the terms and conditions of this Agreement, whereupon this Agreement shall have no further force or effect with respect to such released areas of the BSP I Plant Site and the BSP II Plant Site.

ARTICLE VIII -MISCELLANEOUS

     8.1 Default

     (A) The failure by a Group to observe or perform any of the covenants, conditions or obligations of this Agreement, within sixty (60) days after the issuance of a notice by the other Group (the “Non-Defaulting Group”) specifying the nature of the default claimed, shall constitute a material default (a “Default”) and breach of this Agreement by the non-performing Group (the “Defaulting Group”).

     (B) Notwithstanding Section 8.1(A), the intentional refusal by a member of a Group to allow the other Group access to and use of a Joint Facility as required under the Joint Facilities Agreement shall constitute an immediate Default not requiring a cure period and, notwithstanding anything to the contrary the Defaulting Group shall be liable to the Non-Defaulting Group for all damages (including but not limited to loss of profits, lost of business, and consequential damages) that the Non-Defaulting Group incurs as a result of such Default following notice to the Defaulting Group of such Default.

     (C) Subject to the express limitations contained in Article XII of the Joint Facilities Agreement and Section 8.1(B) of this Agreement, a Non-Defaulting Group may avail itself of any remedies available to it, either in law or at equity, including, without limitation, specific performance, injunctive relief, and damages for breach of contract; provided, however, that in no event shall any Group be liable to the other Group for loss of profits, loss of business, indirect, incidental, consequential, special, punitive, or exemplary damages of any kind.

     8.2 Estoppel Certificate

     Each Owner agrees that upon written request (which shall not be more frequent than one (1) time during any calendar year) of any other Owner or Operator, it will issue within thirty (30) days after receipt of such request to such Owner, or its prospective mortgagee or successor, an estoppel certificate stating to the best of the issuer’s knowledge as of such date:

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(A)	whether it knows of any default under this Agreement by the requesting Owner, and if there are known defaults, specifying the nature thereof in reasonable detail;
(B)	whether this Agreement has been assigned, modified or amended in any way by it and if so, then stating the nature thereof in reasonable detail; and
(C)	whether this Agreement is in full force and effect.

     8.3 Limited Warranty of Title

     Each of the BSP I Owners represents and warrants to the BSP II Owners that: (a) as of the date hereof, there are no liens or encumbrances against the Project Premises other than easements, liens and encumbrances of record; and that (b) such Owner has not permitted or suffered any easements, liens or encumbrances to be placed of record against the Project Premises since May 10, 2005.

     8.4 Notices

     All notices, demands and requests required or permitted to be given under this Agreement shall be given in the manner set forth in the Joint Facilities Agreement.

     8.5 Ownership; Transfers.

     Each Owner shall be liable for the performance of all covenants, obligations and undertakings that accrue while it has an Ownership Share in a Plant Site. Any Owner may assign its rights under this Agreement at any time in connection with a pledge or the granting of a security interest in, or assigning as collateral, all or any portion of the Owner’s interest in the Project.

     8.6 Binding Effect

     The terms of this Agreement and all easements granted hereunder shall constitute covenants running with the land and shall bind the Plant Sites described herein and inure to the benefit of and be binding upon each Owner.

     8.7 Construction and Interpretation

     (A) This Agreement, the Exhibits hereto, and the Joint Facilities Agreement contain all the representations and the entire agreement between the Owners with respect to the subject matter hereof. Any prior negotiations, correspondence, memoranda or agreements are superseded in total by this Agreement, the Exhibits attached hereto and the Joint Facilities Agreement.

     (B) This Agreement has been fully negotiated at arms length between the signatories hereto, and after advice by counsel and other Representatives chosen by such Owners, and such Owners are fully informed with respect thereto; no such Owner shall be deemed the scrivener of this Agreement; and, based on the foregoing, the provisions of this Agreement and the Exhibits

Blanket Easement Agreement	Page 83
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hereto shall be construed as a whole according to their common meaning and not strictly for or against any Owner.

     (C) Invalidation of any of the provisions contained in this Agreement, or of the application thereof to any Person by judgment or court order, shall in no way affect any of the other provisions hereof or the application thereof to any other Person and the same shall remain in full force and effect.

     (D) This Agreement may be executed in several counterparts, each of which shall be deemed an original. The signatures to this Agreement may be executed and notarized on separate pages, and when attached to this Agreement shall constitute one (1) complete document.

     8.8 Negation of Partnership

     None of the terms or provisions of this Agreement shall be deemed to create a partnership between or among the Groups in their respective businesses or otherwise. Each Group shall be considered a separate owner, and no Group shall have the right to act as an agent for the other Group, unless expressly authorized to do so herein or by separate written instrument signed by the Owners in the Group to be charged.

     8.9 Mitigation of Damages

     In all situations arising out of this Agreement, each Group (and the Operator, if any) shall attempt to avoid and mitigate the damages resulting from the conduct of the other Group. Each Owner shall take all reasonable measures to effectuate the provisions of this Agreement.

     8.10 Agreement Shall Continue Notwithstanding Breach

     It is expressly agreed that no breach of this Agreement shall (i) entitle any Owner to cancel, rescind, or otherwise terminate this Agreement, or (ii) defeat or render invalid the lien of any mortgage or trust deed made in good faith and for value as to any part of the Project Premises. However, such limitation shall not affect in any manner any other rights or remedies which any Group or Owner may have hereunder by reason of any such breach.

     8.11 Grant Shall Not Interfere With Use of BSP I

     Notwithstanding anything to the contrary contained in this Agreement, no grant by the BSP I Owners contained herein, nor the exercise of any right by any BSP II Owner pursuant to, by reason of, or in connection with a grant hereunder or pursuant hereto, nor any easement granted hereunder or pursuant hereto, shall individually or in the aggregate, materially impair the use of the Project Premises by any of the BSP I Owners for the purpose for which such BSP I Owner holds its interest in BSP I and/or the Project Premises.

     8.12 Time

     Time is of the essence of this Agreement.

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     8.13 No Waiver

     The failure of either Group to insist upon strict performance of any of the terms, covenants or conditions hereof shall not be deemed a waiver of any rights or remedies which that Group may have hereunder, at law or in equity, and shall not be deemed a waiver of any subsequent breach or default in any of such terms, covenants or conditions. No waiver by any Group of any default under this Agreement shall be effective or binding on such Group unless made in writing by such Group and no such waiver shall be implied from any omission by any Group to take action in respect to such default. No express written waiver of any default shall affect any other default or cover any other period of time other than any default and/or period of time specified in such express waiver. One (1) or more written waivers of any default under any provision of this Agreement shall not be deemed to be a waiver of any subsequent default in the performance of the same provision or any other term or provision contained in this Agreement.

     8.14 Governing Law

     This Agreement shall be governed by the laws of the state of South Dakota.

     8.15 Counterparts

     To facilitate execution, this Agreement may be executed in as many separate counterparts as may be convenient or required. It shall not be necessary that the signature of each Party, or that the signature of all persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single instrument.

[Remainder of page intentionally left blank. Signature pages follow.]

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     IN WITNESS WHEREOF, the BSP I Owners and BSP II Owners have caused this Blanket Easement Agreement to be executed effective as of the day and year first above written.

OTTER TAIL:

OTTER TAIL CORPORATION, a Minnesota
corporation

By:

Name: Charles S. MacFarlane

Its: President

STATE OF MINNESOTA
	}	ss.
COUNTY OF HENNEPIN

On this the 22^nd day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Charles S. MacFarlane, who acknowledged himself to be the President of OTTER TAIL CORPORATION, a Minnesota corporation, and that he, as such President being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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NORTHWESTERN:

NORTHWESTERN CORPORATION, a Delaware
corporation doing business as NorthWestern
Energy

By:

Name: Michael J. Hanson

Its: President and Chief Executive Officer

STATE OF SOUTH DAKOTA
	}	ss.
COUNTY OF MINNEHAHA

On this the 27^th day of June, 2005, before me, Alan Dietrich, the undersigned officer, personally appeared Michael J. Hanson, who acknowledged himself to be the President and Chief Executive Officer of NORTHWESTERN CORPORATION, a Delaware corporation, and that he, as such President and Chief Executive Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President and Chief Executive Officer.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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MONTANA-DAKOTA:

MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc., a Delaware corporation

By:

Name: Bruce T. Imsdahl

Its: President and Chief Executive Officer

STATE OF South Dakota
	}	ss.
COUNTY OF Grant

On this the 30th day of June, 2005, before me, Dennis Mears, the undersigned officer, personally appeared Bruce T. Imsdahl, who acknowledged himself to be the President and Chief Executive Officer of MONTANA-DAKOTA UTILITIES CO., a Division of MDU Resources Group, Inc., a Delaware corporation, and that he, as such President and Chief Executive Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President and Chief Executive Officer.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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CMMPA:

CENTRAL MINNESOTA MUNICIPAL POWER AGENCY, an
agency incorporated under Minnesota law

By:

Name: Paul Leland

Its: President

STATE OF MINNESOTA
	}	ss.
COUNTY OF FARIBAULT

On this the 24^th day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Paul Leland, who acknowledged himself to be the President of CENTRAL MINNESOTA MUNICIPAL POWER AGENCY, a municipal corporation and political subdivision of the state of Minnesota, and that he, as such President being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the municipal corporation by himself as President.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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GRE:

GREAT RIVER ENERGY, a Minnesota cooperative

By:

Name: David Saggau

Its: President and Chief Executive Officer

STATE OF MINNESOTA
	}	ss.
COUNTY OF HENNEPIN

On this the 22^nd day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared David Saggau, who acknowledged himself to be the President and Chief Executive Officer of GREAT RIVER ENERGY, a Minnesota cooperative, and that he, as such President and Chief Executive Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the cooperative by himself as President and Chief Executive Officer.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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HEARTLAND:

HEARTLAND CONSUMERS POWER DISTRICT, a consumers power district formed and organized under the South Dakota Consumers Power District Law, Chapter 49-35 of the South Dakota Codified Laws

By:

Name: Michael McDowell

Its: General Manager

STATE OF MINNESOTA
	}	ss.
COUNTY OF HENNEPIN

On this the 22^nd day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Michael McDowell, who acknowledged himself to be the General Manager of HEARTLAND CONSUMERS POWER DISTRICT, a consumers power district formed and organized under the South Dakota Consumers Power District Law, Chapter 49-35 of the South Dakota Codified Laws, and acknowledged that he executed the same in the capacity therein stated and for the purposes therein contained.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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SMMPA:

SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, a Minnesota municipal corporation and political subdivision

By:

Name: Raymond A. Hayward

Its: Executive Director and CEO

STATE OF MINNESOTA
	}	ss.
COUNTY OF OLMSTED

On this the 24^thday of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Raymond A. Hayward, who acknowledged himself to be the Executive Director and CEO of SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, a municipal corporation and political subdivision of the state of Minnesota, and that he, as such Executive Director and CEO being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the municipal corporation by himself as Executive Director and CEO.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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WMMPA:

WESTERN MINNESOTA MUNICIPAL POWER AGENCY, a Minnesota municipal corporation and political subdivision

By:

Name: Donald E. Habicht

Its: President

STATE OF MINNESOTA
	}	ss.
COUNTY OF NOBLES

On this the 23^rd day of June, 2005, before me, Thomas A. Jensen, the undersigned officer, personally appeared Donald E. Habicht, who acknowledged himself to be the President of WESTERN MINNESOTA MUNICIPAL POWER AGENCY, a Minnesota municipal corporation and political subdivision, and that he, as such President being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the municipal corporation by himself as President.

In witness whereof I hereunto set my hand and official seal.

Notary Public 

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This document drafted by:
Leonard, Street and Deinard P.A. (RLS)
150 South Fifth Street, Suite 2300
Minneapolis, MN 55402
612.335.1500

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EXHIBIT A
Legal Description of Project Premises

In Section 11, Township 121 North, Range 45 West:

The East Half (E1/2), except the Northwest Quarter of the Northeast Quarter (NW1/4NE1/4) thereof, and except Parcel B in the Southeast Quarter (SE1/4), of Section 11, Township 121 North, Range 47 West of the 5^th P.M., Grant County, South Dakota.

In Section 12, Township 121 North, Range 45 West:

All of Section 12, except Parcel A in the Southwest Quarter (SW1/4), Township 121 North, Range 47 West of the 5^th P.M., Grant County, South Dakota.

In Section 13, Township 121 North, Range 45 West^*:

The North One-Half (N1/2) of Section 13, Township 121 North, Range 47 West of the 5th P.M., Grant County, South Dakota, except that part lying South of Whetstone Creek.

In Section 14, Township 121 North, Range 45 West^*:

The East Half of the Northeast Quarter (E1/2 NE1/4) of Section 14, Township 121 North of Range 47 West of the Fifth P.M.

In Section 5, Township 121 North, Range 46 West:

Outlot 68-A, except the East 225 feet thereof; and Outlot B, Big Stone City, Grant County, South Dakota.

In Section 7, Township 121 North, Range 46 West:

All of Section 7, Township 121 North, Range 46 West of the 5^th P.M., Grant County, South Dakota, except approximately 6 acres in the northeast corner of the SE1/4 thereof deed to the Big Stone Cemetery Association by deed recorded in Deed Record 126, Page 544, and except Lots H-4 and H-5 in SE1/4, and except Lots H-2, H-3, and H-4 in N1/2NE/14, and except Lots H-2 and H-3 in S1/2NE1/4.

In Section 8, Township 121 North, Range 46 West:

The South 150 Feet of Government Lot 1, except Lots H-2 and H-3; and the North 150 Feet of the South 300 Feet of Government Lot 1, except the West 700 Feet and except platted Lake Street right of way; and the North 150 Feet except Lots H-2 and H-3 of the Southwest Quarter of the Northwest Quarter (SW1/4 NW1/4); and all of Outlot 67 in the Northeast Corner of SW1/4

^* Subject to revision upon receipt of title commitment for this property.

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NW1/4; all in Section 8, Township 121 North of Range 46 West of the Fifth P.M., now in the City of Big Stone, Grant County, South Dakota.

In Section 18, Township 121 North, Range 46 West:

Parcel 1: The Southeast Quarter of the Southwest Quarter (SE1/4SW1/4), except Burlington Northern Santa Fe railroad right of way; and the West Half of the Southeast Quarter (W1/2SE1/4) lying northerly of the present right-of-way of Chicago, Milwaukee, St. Paul and Pacific Railway Company as now located; and that part of Outlot 47 (which is also described as the NE1/4SE1/4, except Outlot 48), and including the abandoned right-of-way of the Chicago, Milwaukee, St. Paul and Pacifica Railroad Company, all in Section 18, Township 121 North, Range 46 West of the 5^th P.M., Grant County, South Dakota.

Parcel 2: The South Half of the Northwest Quarter (S1/2NW1/4), except the East 66 feet of the North 40 rods of the Southeast Quarter of the Northwest Quarter (SE1/4NW1/4) for road purposes, and except the East 140 feet of the South 403 feet of the North 2351 feet of the Southeast Quarter of the Northwest Quarter (SE1/4NW1/4) deeded to St. Charles Catholic Church of Big Stone City at Deed Record 109, Page 359; and the North Half of the Southwest Quarter (N1/2SW1/4) except railroad right-of-way, and except Hay-s Outlot located in the Northwest Quarter of the Southwest Quarter (NW1/4SW1/4) and the Southwest Quarter of the Northwest Quarter (SW1/4NW1/4), and except a metes and bounds tract of land described as follows: commencing at the southwest corner of the Northwest Quarter of the Southwest Quarter (NW1/4SW1/4), thence North 45 rods, thence East 16 rods, thence South 45 rods, thence West 16 rods to the place of beginning (now known as Lots 1, 2, and 3, Replat of Lot C in NW1/4SW1/4 of 18-121-46), all in Section 18, Township 121 North, Range 46 West of the 5^th P.M., Grant County, South Dakota.

Parcel 3: The North Half of the Northwest Quarter (N1/2NW1/4), except the East 66 feet of the Northeast Quarter of the Northwest Quarter (NE1/4NW1/4) deed for road purposes at Deed Record 58, Page 561 in Section 18, Township 121 North, Range 46 West of the 5^th P.M., Grant County, South Dakota.

Parcel 4: The West 1613 feet of that part of the Northeast Quarter (NE1/4) lying South of the highway (vacated portion and unvacated portion) known as the Yellowstone Trail, passing in an easterly direction through said quarter section, except the West 500 feet of the South 403 feet of the North 2351 feet of the Southwest Quarter of the Northeast Quarter (SW1/4NE1/4) deeded to St. Charles Catholic Church in Deed Record 109, Page 359, and excepting that part previously deeded for cemetery purposes to St. Charles catholic Church of Big Stone City, recorded in volume 6, Page 230, but including the abandoned right-of-way of the Chicago, Milwaukee, St. Paul and Pacific Railroad Co., all in Section 18, Township 121 North, Range 46 West of the 5^th P.M., Grant County, South Dakota.

Parcel 5: The Northeast Quarter (NE1/4) lying North of vacated and unvacated portions of highway known as the Yellowstone Trail, except the Cheese Company Outlot sold on Contract for Deed, in Section 18, Township 121 North, Range 46 West of the 5^th P.M., Grant County, South Dakota.

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EXHIBIT B
Legal Description of BSP II Plant Site

Tract A in the E 1/2 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract B in the SE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract C in the E 1/2 of Section 11 and W 1/2 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract D in the E 1/2 of Section 11 and the W 1/2 of Section 12 — Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract E in the NE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract F in the NW 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract G in the W 1/2 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract H in the SW 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract I in the SW 1/4 of Section 12 and SE 1/4 of Section 11, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract M in the SE 1/4 of Section 12, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract O in the SE 1/4 of Section 11, , Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

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EXHIBIT C
Construction Easement Area

Tracts J and L in the SW 1/4 of Section 12 — Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Tract N in the NW 1/4 of Section 13, Township 121 North — Range 47 West of the 5th P.M., Grant County, South Dakota

Blanket Easement Agreement	Page 98
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EXHIBIT D
Site Plan

Joint Facilities Agreement	Page 99
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SCHEDULE 10.02(C)
Form of Release

PARTIAL RELEASE

[_-R-_]

INDENTURE DATED AS OF DECEMBER 15, 2003
By and Between
MDU RESOURCES GROUP, INC.
AND
THE BANK OF NEW YORK, TRUSTEE

     KNOW ALL MEN BY THESE PRESENTS THAT:

     WHEREAS, MDU Resources Group, Inc., a Delaware corporation, has heretofore made, executed, acknowledged and delivered to The Bank of New York, of New York, New York, as Trustee, an Indenture dated as of December 15, 2003 (hereinafter called the “Indenture”); and

     WHEREAS, the easements, licenses and other rights and interests hereinafter described, now or formerly owned by MDU Resources Group, Inc., are or may be subject to the lien of the Indenture; and

     WHEREAS, said Indenture was filed and recorded as a real estate mortgage and/or filed as chattel mortgage or security interest in the [office of the Secretary of State of Delaware] [the office of the register of deeds of Grant County, South Dakota], and said Indenture was filed in the office of the Secretary of State of South Dakota], as follows:

[LIST RECORDING INFORMATION]

and

     WHEREAS, Section 1808 of said Indenture provides that MDU Resources Group, Inc. may obtain the release of and the Trustee shall release from the lien of the Indenture any part of the mortgaged properties upon compliance with the requirements of the Indenture; and

     WHEREAS, it has been certified to the Trustee that no Event of Default has occurred and is continuing; and

     WHEREAS, said MDU Resources Group, Inc. has requested the release of the easements, licenses and other rights and interests hereinafter described from the lien of said Indenture and has furnished to the Trustee the documents necessary to authorize the Trustee to grant such release;

     NOW, THEREFORE, The Bank of New York, in consideration of the premises and the recitals herein, does by these presents release and forever discharge from the lien of the above-described Indenture the easements, licenses and other rights and interests affecting property situated in the County of Grant, State of South Dakota, described as follows:

Joint Facilities Agreement	Page 100
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All of the easements, licenses and other rights and interests granted, transferred, or conveyed by MDU Resources Group, Inc. to Otter Tail Power Company, Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc., a Delaware corporation, Central Minnesota Municipal Power Agency, an agency incorporated under Minnesota law, Great River Energy, a Minnesota cooperative, Heartland Consumers Power District, a consumers power district formed and organized under the South Dakota Consumers Power District Law, Chapter 49-35 of the South Dakota Codified Laws, Southern Minnesota Municipal Power Agency, a Minnesota municipal corporation and political subdivision, and Western Minnesota Municipal Power Agency, a Minnesota municipal corporation and political subdivision, as described in the Blanket Easement Agreement dated as of June 30, 2005 and recorded in the register of deeds of Grant County, South Dakota [insert relevant recording information], as [amended and/or restated] in that certain [Designated Easement Agreement] attached hereto as Exhibit A.

     PROVIDED, HOWEVER, that except as to the easements, licenses and other rights and interests hereby specifically released, said Indenture shall remain in full force and effect, and nothing herein contained shall operate to release the lien thereof.

     The preambles and recitals contained in this instrument are made solely upon the representations of said MDU Resources Group, Inc., and The Bank of New York assumes no responsibilities therefor. This instrument is executed by The Bank of New York without covenant or warranty on its part, express or implied, and without recourse against it in any event.

     IN WITNESS, WHEREOF, on this ___day of ___, 20___, The Bank of New York has caused this instrument to be executed by its proper officers thereunto duly authorized and its corporate seal to be hereto duly affixed.

THE BANK OF NEW YORK

By:

Its:

AND

By:

Its:

Executed by The Bank of New York in the Presence of:

(SEAL)

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STATE OF NEW YORK		)
	ss)
COUNTY OF NEW YORK		)

On this ___day of ___, 20___, before me, a Notary Public in and for said County, personally appeared ___and ___, to me personally known to be respectively ___and ___of The Bank of New York, the corporation which executed the within instrument and who, being each by me duly sworn, did say that they are respectively ___and ___of The Bank of New York, the corporation named in the foregoing instrument; that the seal affixed to said instrument bearing the name of said corporation is the corporate seal of said corporation; that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors and said ___and ___acknowledged to me said instrument to be the free act and deed of said corporation, and that said corporation executed the same.

Notary Public, State of New York

My commission expires                     

THIS DOCUMENT WAS PREPARED BY:

[Drafter’s name, address and telephone]

Joint Facilities Agreement	Page 102
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SCHEDULE 11.02
Insurance Policies

Mandatory

(i)	Builders Risk (including testing) during all periods of construction on the entire Project on a completed value basis and covering the full insurable replacement cost thereof (BSP II Owners only);
(ii)	Property Damage, including Boiler and Machinery, covering the full insurable replacement cost thereof. The E&O Committee may consider a limit no less than the maximum foreseeable loss of each occurrence and in the annual aggregate as determined from time to time by an independent consultant in lieu of full insurable replacement cost;
(iii)	Commercial General and Automobile Liability in the amount of $1,000,000 each occurrence and in the annual aggregate;
(iv)	Umbrella and Excess Liability in the amount of $50,000,000 each occurrence and in the annual aggregate through a combination thereof.

Optional

Pollution (BSP II Owners only)
Professional Liability
Business Interruption, Extra Expense and Delay in Start Up
Replacement Power
Earthquake and Flood Insurance

(*) Confidential information has been omitted and filed separately with the Commission pursuant to Rule 24b-2.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     I, John D. Erickson, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Otter Tail Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2005

/s/ John D. Erickson     
John D. Erickson
President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

     I, Kevin G. Moug, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Otter Tail Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2005

/s/ Kevin G. Moug     
Kevin G. Moug
Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Otter Tail Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John D. Erickson, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John D. Erickson  

John D. Erickson 

President and Chief Executive Officer
August 9, 2005 

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Otter Tail Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin G. Moug, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin G. Moug  

Kevin G. Moug 

Chief Financial Officer and Treasurer
August 9, 2005