MEMORANDUM OF UNDERSTANDING REGARDING JOINT DEVELOPMENT OF SOUTH ANCHORAGE POWER PROJECT. -(t

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2 MEMORANDUM OF UNDERSTANDING REGARDING JOINT DEVELOPMENT OF SOUTH ANCHORAGE POWER PROJECT. -(t This memorandum of understanding ("MOU") is entered into as ofthed- day of February, 2008, between Anchorage Municipal Light & Power ("ML&P"), 1200 E. First Avenue, Anchorage, Alaska and, Chugach Electric Association, Inc. ("Chugach") an Alaska Electric Cooperative, whose address is P.O. Box , Anchorage, Alaska, Recitals ML&P is a municipally-owned utility engaged in the business of providing electric power and energy to ratepayers in the Municipality of Anchorage. Chugach is a not-for-profit cooperative engaged in the business of providing electric power and energy at wholesale and retail to its member-owners in the Anchorage, Matanuska Valley and on the Kenai Peninsula areas. Chugach and ML&P have discussed a plan involving the construction of a generation plant and associated transmission facilities in the south Anchorage area. ML&P intends "to acquire significant additional power supply resources to meet its power requirements. Chugach is in the process of developing a gas-fired generation plant in the south Anchorage area and has offered ML&P the opportunity to participate in the proj ect in order to partially satisfy its power requirements. NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the parties agree as follows: 1. Project Agreement. ML&P and Chugach will negotiate in good faith in an effort to develop and execute an agreement providing for the joint development of the south Anchorage generation project. 2. Non-exclusivity. Neither party is precluded from proceeding to develop other power supply alternatives. Until a project agreement is executed, Chugach will have no obligation to plan for a project that would include ML&P. Memorandum of Understanding Page 1 of3

3 3. Governance. The project agreement will address governance issues. Each party, as an equity owner in the project, will have meaningful governance rights and duties. 4. Timing. Time is of the essence. The parties pledge to work toward a completed project agreement, ready for presentation to their respective boards on or before the regularly scheduled April board meetings. 5. Confidentiality. The parties will enter into a confidentiality agreement in order to encourage the free and open exchange of information necessary to allow each party to make the necessary business judgments required to evaluate the project. 6. Title to Studies. If a party actively participates in the preparation of a study performed hereunder, the party shall have title as co-owner to the study and all information developed in accordance therewith, and shall have the right to make whatever use of the study or information the party detennines in its own discretion. 7. Notice. Any notice or demand, including invoices, which, under the terms of this MOD, mayor must be given or made by a party hereto must be in writing and may be given or made by mailing the same by regular mail, addressed to the other party at the address hereinabove mentioned; or subject to written agreement of the parties sent by facsimile transmission to the telephone number provided by the party or by any other electronic method. Either party may, however, designate, in writing, such other address to which such notice or demand shall thereafter be so given, made, mailed or sent. Any notice or demand given hereunder by mail shall be deemed delivered when deposited in the United States general or branch post office, enclosed in prepaid wrapper addressed as hereinbefore provided. 8. Integration. This MOU sets out the entire agreement between the parties, and all representations made by or on behalf of either party are void unless contained in this MOU. The provisions ofthis MOD shall inure to the benefit of and be binding upon the parties to this MOU and their respective successors and assigns. Although the parties intend to pursue the courses of action as set forth in the Memorandum of Understanding Page 2 of3

4 recital to this MOU, neither party shall be contractually obligated to the other, except as and to the extent the obligation is evidenced by a written agreement. 9. Assignment. Neither party shall assign this MOU without the written agreement of the other. Any assignment in violation of this provision shall be void. 10. Applicable Law. This MOU shall be governed by and construed in accordance with the laws of the State of Alaska. IN WITNESS WHEREOF, the parties hereto have caused this MOU to be duly executed as of the date first set forth above. CHUGACH ELECTRIC ASSOCIATION, INC. Memorandum of Understanding \1 2/27/2008 I I :20 AM Page 3 of3

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6 C.,). ::.t'_~.' H'; U' / S:, ';I!.~~"",,',-... ~ RESOLUTION Participation and Operation and Maintenance Agreements - South Central Alaska Power Project WHEREAS, Chugach Electric Association, Inc. (Chugach) has a need for new electric generation to replace its less efficient, aging generation and has detennined that, when compared with the costs to design, construct and operate a small, separate plant to satisfy its respective new electric generation requirements, economies-of-scale can be achieved' through the joint construction and operation of a larger single plant capable of producing the new generation. Accordingly, Chugach and the Municipality of Anchorage d/b/a Municipal Light & Power (ML&P) have decided to proceed with the joint development, construction and operation of South Central Alaska Power Project (SCAPP), to be operated for their mutual benefit; and WHEREAS, Chugach desires to build the SCAPP as a combined cycle natural gas burning generation facility at a size that meets Chugach's and ML&P's collective needs for electric energy and new capacity; and WHEREAS, the new generating facility will be located a.djacent to Chugach's existing International Station at 5601 Electron Drive in Anchorage, Alaska; and WHEREAS, Chugach intends to rely on the capacity and electric energy generated by SCAPP as part of its system planning and reliability needs and to serve the needs of its current and future members; and WHEREAS, the cost to develop, build and operate SCAPP makes it advisable that Chugach and ML&P share the related financial and operational costs associated with such a project, and WHEREAS, Chugach has determined that the sharing and allocation of such costs and SCAPP's generating capacity can best be accomplished by acquiring, owning and managing the related property rights necessary to build, own and operate SCAPP as tenants in common; and WHEREAS, Chugach desires that SCAPP be operated in a cost-effective manner; and WHEREAS, Chugach and ML&P have prepared a Participation Agreement and an Operation and Maintenance Agreement to provide for their respective ownership of the SCAPP as tenants in common and also sets forth certain responsibilities and mechanisms for the design, construction, ownership, operation, maintenance and repair of the SCAPP; and WHEREAS, many of the provisions in the Participation Agreement were modeled after the Bra4ley Lake and Eklutna Agreements; and

7 WHEREAS, the Participation Agreement provides for an Operation and Maintenance Agreement as well as a Land Lease and defines the management of the SCAPP, which is composed of a Participation Committee, with Chugach as the Managing Participant of the SCAPP, an Operating Committee, with Chugach as the Operator of the SCAPP; and WHEREAS, the term of the Participation Agreement is 30 years with a 5-year notice to terminate in year 25 or later; and WHEREAS, Chugach and ML&P will each provide its own financing and supply its own natural gas in proportion to their ownership shares in the SCAPP, which are approximately 70% for Chugach and 30% for ML&P; and WHEREAS, the Participation Agreement also provides provisions for withdrawal, transfer or ownership and right of first refusal of a Participant along with other defining articles; and WHEREAS, on the effective date of the Participation Agreement, Chugach will have a financial obligation to proceed with the SCAPP including the procurement of the gas turbines for the SCAPP; and WHEREAS, Chugach's estimated share of the gas turbine costs will be between $45 to $58 million over a ~o year time frame with an expected down payment of 10% ($4.5 to $5.8 million) due when the order is placed; and WHEREAS, Chugach has included the SCAPP in its Capital hnprovement Plan; and WHEREAS, Chugach's overall cost for its participation in the SCAPP from 2008 through 2013 is estimated to be $256 million. NOW, THEREFORE, BE IT RESOLVED that the Board of Directors of Chugach Electric Association, Inc., authorizes Chugach's Chief Executive Officer (CEO) to sign the Participation Agreement and the Operation and Maintenance Agreement. It further authorizes the CEO to proceed to procure the gas turbines for the SCAPP with a cost to Chugach of $45 to $58 million. I, Alex Gimarc, do hereby certify that I am the Secretary of Chugach Electric Association, Inc., an electric non-profit cooperative membership corporation organized and existing under the laws of the State of Alaska: that the foregoing is a complete and correct copy of a resolution adopted at a meeting of the Board of Directors of this corporation, duly and properly called and held on the 30 th day of ~, 2008; that a quorum was present at the meeting; that the resolution is set forth in the minutes of the meeting and has not been rescinded or modified. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of this corporation the ~ day of July, Secretary

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9 Ordinance No. AO , an ordinance authorizing the Municipality to execute a Participation Agreement, an Operation and Maintenance Agreement and a Lease Agreement between Chugach Electric Association (CEA) and Municipal Light & Power (ML&P) for the joint development, construction, operation, and ownership of the South Central Alaska Power Project Generation Facility; authorizing ML&P to expend up to $3,000,000 to fund its share of the project's 2008 capital expenditures; and authorizijng ML&P to proceed, with CEA, to procure turbines for the project, Municipal Light & Power.

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11 Submitted by: Chair of the Assembly at the Request of the Mayor Prepared by: Municipal Light & Power For reading: July 29, 2008 ANCHORAGE,ALASKA AO No AN ORDINANCE AUTHORIZING THE MUNICIPALITY TO EXECUTE A 2 PARTICIPATION AGREEMENT, AN OPERATION AND MAINTENANCE 3 AGREEMENT AND A LEASE AGREEMENT BETWEEN CHUGACH ELECTRIC 4 ASSOCIATION (CEA) AND MUNICIPAL LIGHT & POWER (ML&P) FOR THE 5 JOINT DEVELOPMENT, CONSTRUCTION, OPERATION, AND OWNERSIDP OF 6 THE GENERATION FACILITY; 7 AUTHORIZING ML&P TO EXPEND UP TO $3,000,000 TO FUND ITS SHARE OF 8. THE PROJECT'S 2008 CAPITAL EXPENDITURES; AND AUTHORIZING ML&P 9 TO PROCEED, WITH CEA, TO PROCURE THE TURBINES FOR THE PROJECT WHEREAS, ML&P and CEA need new electric generation to replace part of their less 13 efficient, aging generation and determined economies-of-scale can be achieved through the 14 joint construction and operation of a larger single plant capable of producing new generation; 15 as a result, ML&P and CEA decided to proceed with the joint development, construction and 16 operation of the South Central Alaska Power Project (SCAPP) to be operated for their mutual 1 7 benefit; and WHEREAS, -ML&P desires to build the SCAPP as a combined cycle natural gas burning 20 generation facility at a size meeting ML&P's and CEA's needs for electric energy and new 21 capacity; and WHEREAS, the new generating facility is to be located adjacent to CEA's existing 24 International Generation Terminal at 5601 Electron Drive in Anchorage, Alaska; and WHEREAS, ML&P intends to rely on the capacity and electric energy generated by the 27 SCAPP as part of its system planning and reliability needs and to serve the needs of its current 28 and future customers; and WHEREAS, the cost to develop, build and operate the SCAPP makes it advisable for ML&P 31 and CEA to share the related financial and operational costs associated with such a project, and WHEREAS, ML&P and CEA determined the sharing and allocation of such costs and the 34 SCAPP's generating capacity can best be accomplished by acquiring, owning and managing 35 the related property rights necessary to build, own and operate the SCAPP as tenants in 36 common; and WHEREAS, ML&P desires for the SCAPP be operated in a cost-effective manner; and 39 AM

12 AO authorizing Participation Agreement, O&M, Lease ML&P and Chugach Electric: South Central Alaska Power Project 2of3 1 WHEREAS, :ML&P and CEA prepared a Participation Agreement and an Operation and 2 Maintenance Agreement to provide fqr their respecti ve ownership of the S CAPP as tenants in 3 common and also to set forth certain responsibilities and mechanisms for the design, 4 construction, ownership, operation, maintenance and repair of the SCAPP; and 5 6 WHEREAS, the Participation Agreement provides for an Operation and Maintenance 7 Agreement as well as a Lease Agreement, and defines the management of the SCAPP, 8 composed of a Participation Committee, with CEA as the Managing Participant of the SCAPP, 9 an Operating Committee, with CEA as the Operator of the SCAPP; and WHEREAS, the term of the Participation Agreement is 30 years, with automatic extensions at 12 the end of the 30-year period, but providing the Municipality an option to terminate, 13 commencing in the 25 th year, with five years notice; and WHEREAS, ML&P and CEA each provide for its own financing in proportion to its 16 ownership shares in the SCAPP, approximately 70% for CEA and 30% for ML&P; and WHEREAS, on the effective date of the Participation Agreement, :ML&P and CEA each have 19 a financial obligation to proceed with the SCAPP, including the procurement of the gas 20 turbines for the SCAPP; and WHEREAS, ML&P' s estimated share of the gas turbine costs is between $19 to $25 million 23 over a t~o year time frame with an expected down payment of 10% ($1.9 to $2.5 million) due 24 when the order is placed, to be paid from retained earnings; and WHEREAS, ML&P included new generation in its Capital Improvement Plan, 27 with $3,000,000 appropriated in its budget for new generation in 2008; and WHEREAS, ML&P' s overall cost for its participation in the SCAPP from 2008 through is estimated to be approximately $110,561,000; now therefore, THE ANCHORAGE ASSEMBLY ORDAINS: Section 1. The Municipality is authorized to execute the Participation Agreement, 35 Operation and Maintenance Agreement, and Lease Agreement between ML&P and CEA, in a 36 form substantially as presented to the Assembly Section 2. ML&P is authorized to proceed, with CEA as procurer, using its competitive 39 bid process to acquire the turbines for the Project Section 3. ML&P is authorized to expend up to $3,000,000 to fund its share of the 42 Project's 2008 expenses Section 4. This resolution shall take effect immediately upon passage and approval by the 45 Anchorage Assembly

13 AO authorizing Participation Agreement, O&M, Lease ML&P and Chugach Electric: South Central Alaska Power Project 30f3 1 PASSED AND APPROVED by the Anchorage Assembly this _ day of August, Chair of the Assembly 8 9 ATTEST: Municipal Clerk

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15 MUNICIPALITY OF ANCHORAGE Summary of Economic Effects -- Utilities AO Number: Title: AN ORDINANCE AUTHORIZING THE MUNICIPALITY TO EXECUTE A PARTICIPATION AGREEMENT, AN OPERATION AND MAINTENANCE AGREEMENT AND A LEASE AGREEMENT BETWENN CHUGACH ELECTRIC ASSOCIATION (CEA) AND MUNICIPAL LIGHT & POWER (ML&P) FOR THE JOINT DEVELOPMENT, CONSTRUCTION, OPERATION, AND OWNERSHIP OF THE GENERATION FACILITY; AUTHORIZING ML&P TO EXPEND UP TO $3,000,000 TO FUND ITS SHARE OF THE PROJECT'S 2008 CAPITAL EXPENDITURES; AND AUTHORIZING ML&P TO Sponsor: Preparing Agency: Others Impacted: MAYOR ML&P Chugach Electric Association CHANGES IN EXPENSES AND REVENUES: (In Thousands of Dollars) Operating Expenditures: 1000 Personal Services 2000 Supplies 3000 Other Services 4000 Debt Services 5000 Capital Outlay TOTAL DIRECT COSTS: FY08 o FY09 FY10 FY11 FY12 o o o 60001GC'S FUNCTION COST: REVENUES: -- o o o o CAPITAL: $2,580 $11,910 $36,240 $31,841 $27,990 POSITIONS: FT/PT AND Temp PUBLIC SECTOR ECONOMIC EFFECTS: o o PRIVATE SECTOR ECONOMIC EFFECTS: Prepared by: Telephone: Daniel B. Helmick, Manager, Regulatory Affairs, ML&P Approved by: ~...",..----,,.---..,...,,...,,---,.~_,.,_--- James M. Posey, General Manager, ML&P Date:

16 MUNICIPALITY OF ANCHORAGE Summary of Economic Effects -- Utilities AO Number: 2004 Title: Sponsor: Preparing Agency: Others Impacted: CHANGES IN REVENUES AND EXPENSES: (In Thousands of Dollars) FY04 FY05 FY06 FY07 FY08 Operating Revenues: TOTAL OPERATING REVENUES $ Operating Expenses: $ $ $ $ TOTAL OPERATING EXPENSES $ Non-Operating Revenues: $ $ $ $ TOTAL NON OPERATING REVENUES $ $ $ $ $ Non-Operating Expenses: TOTAL NON-OPERATING EXPENSES $ $ $ $ $ NET INCOME (REGULATED) POSITIONS: FT/PT and Temp PUBLIC SECTOR ECONOMIC EFFECTS:

17 SUMMARY OF ECONOMIC EFFECTS Page 2 PRIVATE SECTOR ECONOMIC EFFECTS: Prepared by: Telephone: Validated by OMS: Date: Approved by: (Director, Preparing Agency) Date: Concurred by: (Director, Impacted Agency) Date: Approved by: (Municipal Manager) Date:

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19 MUNICIPALITY OF ANCHORAGE ASSEMBLY MEMORANDUM No. AM Meeting Date: July 29, From: MAYOR 2 3 Subject: AN ORDINANCE AUTHORIZING THE MUNICIPALITY TO 4 EXECUTE A PARTICIPATION AGREEMENT, AN OPERATION 5 AND MAINTENANCE AGREEMENT AND A LEASE AGREEMENT 6 BETWENN CHUGACH ELECTRIC ASSOCIATION (CEA) AND 7 MUNICIPAL LIGHT & POWER (ML&P) FOR THE JOINT 8 DEVELOPMENT, CONSTRUCTION, OPERATION, AND 9 OWNERSHIP OF THE SOUTH CENTRAL ALASKA POWER 10 PROJECT GENERATION FACILITY; AUTHORIZING ML&P TO 11 EXPEND UP TO $3,000,000 TO FUND ITS SHARE OF THE 12 PROJECT'S 2008 CAPITAL EXPENDITURES; AND 13 AUTHORIZING ML&P TO PROCEED, WITH CEA, TO PROCURE 14 THE TURBINES FOR THE PROJECT Having a need to replace aging generation assets with new, more efficient generation units, 1 7 ML&P and CEA have since April, 2008 been negotiating the terms of Agreements to 18 provide for the joint development, construction, operation, and ownership of the South 19 Central Alaska Power Project (SCAPP). The Project consists of a MW gas fired 20 plant to be located next to CEA's current International Generation Terminal at Electron Drive, and is expected to cost approximately $368,537,000, including interest 22. during construction. ML&P's 30 percent share of the project will provide MW of 23 new generation and ML&P's share of Project costs is expected to be approximately 24 $110,561,000. The Project is anticipated to enter commercial operation in the final quarter 25 of Among other things, the Agreements (1) define the Project; (2) establish ownership shares, 28 rights and obligations: (3) provide for CEA management of Project construction and 2 9 operation; (4) require each party to develop and deliver a plan for financing the costs of its 30 share; (5) define defaults and remedies, as well as dispute resolution procedures; (6) 31 establish a management committee for governance; (7) allocate duties to CEA as the 32 operator; (8) define the operators' general and specific duties; (9) allocate responsibility for 33 budgeting, accounting, maintenance of records and the conduct of audits; (10) establish 34 policies for insurance and indemnification; (11) provide for interconnection protocol; and 35 (12) establish the land lease rate ($l/year) and lease term (upon termination of Participation 36 Agreement) Significant Project milestones include the following events: A

20 AM supporting Participation and other agreements ML&P - CEA: South Central Alaska Power Project Page 2 of Execution of Three Agreements Review of Gas Turbine RFPs Award Gas Turbine Contract Preliminary Engineering & Permitting Construction Contract Awarded Site Preparation Begins Construction Begins Commercial Operation Begins August 13, 2008 April 22 - August 20, 2008 August 21, 2008 April 1, December 31, 2009 April 1, 2009 October 2, 2009 January 1, 2010 Final quarter ML&P intends to fund its proportionate share of the SCAPP costs through establishment of 12 a Commercial Paper program in an amount up to $100 million and through the use of 13 retained earnings up to $10 million. The Commercial Paper program requires ML&P to 14 obtain a letter of credit from a fmancial institution. The Commercial Paper program is 15 expected to be maintained for a three to five year period. ML&P expects to refinance the 16 commercial paper with long term senior lien revenue bonds within the next five years. No 1 7 general obligation debt is required to finance the project. The Commercial Paper program is 18 utilized for monthly progress payments draws to CEA, as construction manager, for 1 9 ML&P's share of Project costs Currently, budgeted cash flow for ML&P' s share of the Project is as follows: $2,580,000 11,910,000 36,240,000 31,841,000 27,990,000 $110,561, ML&P's Assembly approved Capital Improvement Budget (Crn) appropriated 31 $3,000,000 for new generation for 2008 and approved $77,000,000 for new generation for , subject to appropriation of funds (November, 2008), in accordance with Charter 33 Sections and Further, ML&P's six year crn budgets $100,000,000 and 34 $70,000,000 for 2010 and 2011, respectively for new generation. Thus, ML&P has 35 $250,000,000 budgeted for new generation between 2008 and 2014 in its six year crn On the effective date (August 13, 2008) of the Participation Agreement, ML&P has a 38 financial obligation to proceed with the SCAPP and the purchase of gas turbines for the 39 SCAPP; the gas turbine proposals are valid through August 21,2008. ML&P's estimated 40 share of the gas turbine costs is between $19 to $25 million over a two year time frame with 41 a required down payment of 10% ($1.9 to $2.5 million). As with the procurement process 42 for the gas turbines, major resources required for the project (e.g. engineering, construction) 43 are to be competitively bid by CEA. ML&P plans to assist CEA with Request for Proposal 44 (RFP) preparation, as well as participate in the RFP response review and selection The net present value total costs associated with participation in the SCAPP project for 47 ML&P over the next twenty years are actually less than a "base case" of maintaining 48 ML&P's older, relatively inefficient gas turbines. That is, introduction of the SCAPP 49 project into ML&P's portfolio of generation assets reduces twenty year base case

21 AM supporting Participation and other. agreements ML&P - CEA: South Central Alaska Power Project Page 3 of 3 1 expenditure requirements for fuel, variable and fixed operation and maintenance expense, 2 capital costs, etc. from $847.7 million to $780.8 million, for a net present value savings of 3 $66.9 million. Over the next twenty years, the Project reduces ML&P's fuel consumption 4 by billion cubic feet of natural gas As the Mayor discussed at the Assembly work session on July 11, the Municipality and 7 CEA are moving forward with plans to create a Municipal Generation and Transmission 8 (G&T) utility and a separate member owned Distribution Cooperative. Once these 9 proposals are approved by the CEA Board of Directors, the Anchorage Assembly and all 10 regulatory agencies, including the RCA, the Municipality plans to acquire CEA's 70% 11 interest in this project. At that time, the financing plan changes. The specifics of how it the 12 plan changes depends upon the timing of the acquisition, the relationship between short- 13 term and long-term market rates, the then-estimated cost of the project and other factors Once those factors are known and the terms of the acquisition are known, the 16 Administration will present a new resolution to the Assembly for approval of the acquisition 1 7 and new financing plan. This may be either a separate resolution or it may be part of the 18 request to approve creation of the G&T and Distribution Cooperative THE ADMINISTRATION RECOMMENDS APPROVAL OF AN ORDINANCE 21 AUTHORIZING THE MUNICIPALITY TO EXECUTE A PARTICIPATION 22 AGREEMENT, AN OPERATION AND MAINTENANCE AGREEMENT AND A 23 LEASE AGREEMENT BETWENN CHUGACH ELECTRIC ASSOCIATION (CEA) 24 AND MUNICIPAL LIGHT & POWER (ML&P) FOR THE JOINT 25 DEVELOPMENT, CONSTRUCTION, OPERATION, AND OWNERSHIP OF THE 26 GENERATION FACILITY; 27 AUTHORIZING ML&P TO EXPEND UP TO $3,000,000 TO FUND ITS SHARE OF 28 THE PROJECT'S 2008 CAPITAL EXPENDITURES; AND AUTHORIZING 29 ML&P TO PROCEED, WITH CEA, TO PROCURE THE TURBINES FOR THE 30 PROJECT Prepared by: 33 Approved by: Fund certification: Concur: 39 Concur: 4 0 Respectfully submitted, 41 Municipal Light & Power James M. Posey, General Manager Municipal Light & Power Sharon Weddleton, CFO 530~M8040~1071~M3018 BP 2008 $3,000,000 Capital Funds James N. Reeves, Municipal Attorney Michael K. Abbott, Municipal Manager Mark Begich, Mayor

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23 PARTICIPATION AGREEMENT By AND BETWEEN CHUGACH ELECTRIC ASSOCIATION, INC., AND MUNICIPAL LIGHT & POWER As OWNERS v22(FINAL)

24 PARTICIPATION AGREEMENT PAGEi AUGUST 28,2008 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS, RULES OF CONSTRUCTION... 2 Page RULES OF CONSTRUCTION DEFINED TERMS... 2 ARTICLE 2 THE PROJECT DEVELOPMENT PHASES OWNERS' COMMITMENT RATIFICATION AND ACCEPTANCE OF PHASE I ACTIVITIES ARTICLE 3 DEVELOPMENT AN'D FINAN'CING DEVELOPMENT PHASES FINANCING PLAN FINANCING OBLIGATIONS ARTICLE 4 OWNERSHIP PROJECT PROPERTY...; TITLE WAIVER OF PARTITION RIGHTS RIGHT OF POSSESSION TRANSFER OF TITLE ARTICLE 5 GENERAL PROHIBITION ON WITHDRAWAL; DISPOSITION OF OWNERSHIP INTERESTS GENERAL PROHffiITION ON WITHDRAWAL P'ERMITTED WITHDRAWAL ONLY WITH CONSENT GENERAL OBLIGATIONS OF A WITHDRAWING OWNER GENERAL PROHffiITION ON TRANSFERS OF OWNERSHIP INTERESTS ACTS OR CIRCUMSTANCE NOT DEEMED TRANSFERS RIGHT OF FIRST REFUSAL COVENANTS RUN WITH LAND ARTICLE 6 PROJECT MANAGEMENT MANAGEMENT BY COMMITTEE COMPOSITION OF COMMITTEES AUTHORITY OF REPRESENTATIVES TO ACT ON BEHALF OF OWNER COMMITTEE OPERATIONAL PROCEDURES PARTICIPANTS COMMITTEE ACTIONS REQUIRING PARTICIPANTS COMMITTEE AFPROV AL OPERATING COMMITTEE MANAGING PARTICIPANT ARTICLE 7 CONTRIBUTIONS; EXPENDITURES OBLIGATION TO PAY PROJECT COSTS v22

25 PARTICIPATION AGREEMENT PAGEii AUGUST 28, PAYMENT PROCEDURES RESERVATION OF RIGHT TO DISPUTE PAYMENTS; RIGHT TO AUDIT REQUISITIONED FUNDS SERVICES AND PROPERTY CONTRIBUTED BY OWNERS EMERGENCY SERVICES TAXES FUEL STATION POWER INSURANCE ASSURANCES OF CREDITWORTHINESS RIGHT TO OBTAIN FINANCING ARTICLE 8 CASUALTY LOSS; CONDEMNATION REPAIR OR REPLACEMENT EMINENT DOMAIN ARTICLE 9 LIABILITY LIMITATION AND RELEASE OF LIABILITY OF MANAGING PARTICIPANT AND OPERATOR LIMITATION AND RELEASE OF LIABILITY OF THE OTHER OWNER No CONSEQUENTIAL OR OTHER SPECIAL DAMAGES ASSIGNMENT OF RIGHTS SHARED LIABILITY TO THIRD PARTIES AVAILABILITY OF INSURANCE PROCEEDS ARTICLE 10 INTERCONNECTION; ENTITLEMENT TO ENERGY AND CAPACITY INTERCONNECTION GENERATION ENTITLEMENT ARTICLE 11 DEFAULTS AND REMEDIES EVENT OF DEFAULT NON-DEFAULTING OWNERS RIGHT TO REpURCHASE DISPUTED EVENT OF DEFAULT No WAIVER CUMULATIVE RIGHTS ARTICLE 12 RELATIONSHIP OF PARTIES NATURE OF OBLIGATIONS TAX STATUS ARTICLE 13 DISPUTE RESOLUTION; FAIR VALUE DISPUTE RESOLUTION FAIR VALUE ARTICLE 14 TERM TERM v22

26 PARTICIPATION AGREEMENT PAGE iii WINDUP EVENTS TERMINATION BY AGREEMENT ARTICLE 15 REPRESENTATIONS, WARRANTIES REPRESENTATIONS AND WARRANTIES ARTICLE 16 MISCELLANEOUS DUTY OF CONFIDENTIALITY SUCCESSORS AND ASSIGNS; ASSIGNMENT NOTICES FORCE MAJEURE NOTICE OBLIGATIONS WAIVER SURVIVAL SEVERABILITY GOVERNING LAW No THIRD-PARTY BENEFICIARIES COOPERATION CAPTIONS ENTIRE AGREEMENT COUNTERPARTS FURTHER ASSURANCES EXHIBIT A NOTICE ADDRESSES EXHIBIT B PERCENTAGE OF OWNERSHIP EXHIBIT C GUIDING PRINCIPLES EXHIBIT D LINE-SIDE BUS CONNECTIONS EXHIBIT E FORM OF LEASE AGREEMENT EXHIBIT F FORM OF O&M AGREEMENT SCHEDULE 3.02(a) OWNER FINANCING PLANS SCHEDULE 3.03(a) PROPERTY INTENDED TO BE PROJECT PROPERTY/PROJECT COSTS INCURRED PRIOR TO EFFECTIVE DATE v22

27 PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT (the "Agreement") is made as of August 28, 2008 (the "Effective Date"), by and between Chugach Electric Association, Inc., an electric cooperative organized under the laws of the State of Alaska ("Chugach"), and the Municipality of Anchorage d/b/a Municipal Light & Power, a municipal electric utility organized under the laws of the State of Alaska ("ML&P") (each individually a "Party" and, collectively, the "Parties"). RECITALS WHEREAS, each of the Parties has its own need for new electric generation and has determined that, when compared with the costs to design, construct and operate separate plants to satisfy their respective new electric generation requirements, economies of scale can be achieved through the joint construction and operation of a single plant capable of producing the new generation the Parties collectively require. Accordingly, the Parties have determined to proceed with the joint development, construction and operation of South Central Alaska Power Project (as such term is defined below), to be operated for their mutual benefit; and WHEREAS, each Party desires to build the South Central Alaska Power Project as a combined cycle natural gas burning generation facility at a size that meets the Parties' collective needs for electric energy and new capacity; and WHEREAS, the magnitude of the cost to develop, build and operate South Central Alaska Power Project 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 South Central Alaska Power Project's generating capacity can best be accomplished by acquiring, owning and managing the related property rights necessary to build, own and operate South Central Alaska Power Project as tenants in common; and WHEREAS, each Party desires that South Central Alaska Power Project be operated in a cost-effective manner, such that, other than as required hereunder and as contemplated by the Financing (as such term is defined below), no Party shall be required to contribute any capital or property in connection with the construction of South Central Alaska Power Project beyond its share ofthe Project; and WHEREAS, each Party intends to rely on the capacity and electric energy generated by South Central Alaska Power Project 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 South Central Alaska Power Project, and sets forth certain responsibilities and mechanisms for the design, construction, ownership, operation, maintenance and repair of South Central Alaska Power Project v22(FINAL)

28 PARTICIPATION AGREEMENT PAGE 2 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 1 DEFINITIONS, RULES OF CONSTRUCTION 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 construction and provisions 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. (e) References to Chugach and ML&P shall, if applicable, refer to the permitted successors, assigns and transferees of the foregoing Defined Terms. In addition to definitions appearing elsewhere in this Agreement, the following terms have the following meanings: (a) (b) AAA: Shall have the meaning given to such term in Section 13.01(b). Affiliate(s): Shall mean with respect to any Person: (i) any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person; or (ii) 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 v22

29 PARTICIPATION AGREEMENT PAGE 3 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 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. ( c) Agreement: Shall mean this Agreement, as amended from time to time. (d) Applicable Law: Shall mean: (i) 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; (ii) any and all orders, judgments, writs, decrees, injunctions, Governmental Approvals or other decisions of a Governmental Authority; and (iii) any and all legally binding announcements, directives or published practices or interpretations, regarding any of the foregoing in (i) or (ii) of this definition, enacted, issued or promulgated by a Governmental Authority; to the extent, for each of the foregoing in (i), (ii) and (iii) of this definition, applicable to or binding upon (a) South Central Alaska Power Project; (b) a Party, its Affiliates, its owners or their respective representatives, to the extent any such Person is engaged in activities related to South Central Alaska Power Project; or (c) the property of a Party, its Affiliates, its owners or their respective representatives, to the extent such property is used in connection with South Central Alaska Power Project or an activity related to South Central Alaska Power Project. (MW). (e) Capacity: Shall mean an electrical power rating expressed in megawatts (f) Chugach: Shall have the meaning given to such term in the preamble of this Agreement. (g) Commercial Operation: Shall mean that the Project is operating and producing Capacity and Energy on a continuous basis, and is delivering such Energy to the Owners at the mterconnection Point in accordance with Prudent Utility Practice and Applicable Law. (h) Commercial Operation Readiness: Shall mean such time as the Project has been completed in accordance with the Plans and Specifications, has successfully v22

30 PARTICIPATION AGREEMENT PAGE 4 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 Practice and Applicable Law. (i) Committee: Shall mean any committee established pursuant to this Agreement. (j) Construction Contracts: Shall mean the contracts and agreements for the construction of the Project that are duly authorized and executed, as provided herein, which may take the primary form of an engineering, procurement and construction agreement, a design bid build agreement, or as otherwise determined pursuant to the terms hereof. (k) Deadlock: Shall mean any failure of the Participants Committee to approve any matter required of it hereunder when one Participants Committee member gives notice that the item is in deadlock to the other member within thirty (30) days of the vote by the Participants Committee, which notice shall constitute the referral of such matter for resolution as a Dispute under Article 13. (1) Dispute: Shall have the meaning given to such term in Article 13. (m) Effective Date: Shall have the meaning given to such term in the preamble of this Agreement. (n} 5.06(b). Election Period: Shall have the meaning given to such term in Section (0) 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 Chugach's Transmission System as of the Effective Date, and measured in kilowatt-hours (kwh) or megawatt-hours (MWh) (P) Event of Default: Shall have the meaning given to such term in Section (q) Fair Value: Shall have the meaning given to such term in Section (r) Financing: Shall have the meaning given to such term in Section (s) 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 South Central Alaska Power Project, including any credit enhancement, credit support, swaps, caps, floors, collars, hedging agreements, working capital financing, or refinancing documents, and any and all amendments, modifications, v22

31 PARTICIPATION AGREEMENT PAGES 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 South Central Alaska Power Project. (t) 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, volcanic eruption, 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 occurrence of a Force Majeure Event shall not excuse or relieve a Party from any payment obligations hereunder. (u) Fuel: Shall mean the natural gas used in the operation of the Project's turbines and boilers, measured in British Thermal Units (BTUs). (v) Governmental Approvals: Shall mean any material authorizations or permissions issued or granted by any Governmental Authority to South Central Alaska Power Project, the Owners and their Affiliates in connection with any activity related to South Central Alaska Power Project. (w) 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 reliability organization, or other regulatory body; including those having jurisdiction over an Owner, the Project, South Central Alaska Power Project, the Project Site, or the Transmission System to which the Project is interconnected. (x) International Substation: Shall have the meaning given to such term in Section 10.01(a). (y) 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. (z) Lease Agreement: Shall mean that certain Lease Agreement dated August 28, 2008, by and among the Parties, pursuant to which ML&P will lease the Project Site from Chugach, the form of which is attached hereto as Exhibit E v22

32 P ARTICIP ATION AGREEMENT PAGE 6 AUGUST 28,2008 (aa) Managing Participant: Shall have the meaning given to such term in Section (bb) Materials and Supplies: Shall mean materials and supplies obtained for use in the operation, maintenance or repair of the Project (exclusive of Fuel). (cc) Section Minimum Credit Rating: Shall have the meaning given to such term in (dd) Minimum Net Generation: Shall mean the lowest net load at which the Project can reliably generate Energy on a continuous basis as determined by the Operator in conformance with manufacturers' warranties, Applicable Laws, 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. (ee) Agreement. ML&P: Shall have the meaning given to such term in the preamble of this (ff) ML&P Interconnection Point: Shall have the meaning given to such term in Section 1O.01(c). (gg) Net Effective Generating Capacity: Shall mean the maximum continuous ability of the Project to produce power (net of amounts needed for station use) as determined by the Operator, in accordance with instructions of the Operating Committee, which level of power shall be the level above which the Project should not be operated, except during emergencies. (bb) Net Energy Generation: Shall mean the Energy generated by the Project that is available to the Owners at the Points of Interconnection. (ii) Section Non-Transferring Owner: Shall have the meaning given to such term in OJ) O&M Agreement: Shall mean the Operation and Maintenance Agreement related to the operation and maintenance of the Project, the form of which is attached hereto as Exhibit F. (kk) Operating Capacity: Shall mean the maximum ability of the Project 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 Operating Committee. (11) 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. (mm) Operating Committee: maintained pursuant to Section Shall mean the Committee established and v22

33 PARTICIPATION AGREEMENT PAGE 7 (nn) Operating Plan and Budget: Shall mean the annual operating plan and operating budget for Phase III developed by the Managing Participant. (00) Operator: Shall mean the operator of the Project pursuant to the O&M Agreement. (Pp) Owner Financing Plan: Shall have the meaning given to such term in Section 3.02(a). (qq) Owners: Shall mean the Parties to this Agreement and, thereafter, any permitted successors and assigns to the Parties' right, title and interest in the Project Property (rr) Owners Insurance: Shall have the meaning given to such term in Section (ss) Ownership Share: Shall mean the undivided percentage ownership interest of a particular Owner in Project Property as set forth on Exhibit B, as the same may be changed pursuant to this Agreement. (tt) Participants Committee: Shall mean the Committee established and maintained pursuant to Section (uu) Party(ies): Shall have the meaning given to such term in the preamble to this Agreement. (vv) Performance Testing: Shall mean the acceptance tests, demonstration tests and/or performance tests set forth in the Construction Contracts or otherwise required or recommended by the Managing Participant, to demonstrate that the Project has been constructed in accordance with the Plans and Specifications and consistent with Prudent Utility Practice. (ww) 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. (xx) Phase I: Shall mean the first phase of development of South Central Alaska Power Project as defined in Section 3.01(a). (yy) Phase II: Shall mean the second phase of development of South Central Alaska Power Project as defined in Section 3.01(b). (zz) Phase III: Shall mean the third phase of development of South Central Alaska Power Project as defined in Section 3.01(c) v22

34 PARTICIPATION AGREEMENT PAGE 8 (aaa) Plans and Specifications: Shall mean the plans and specifications for the construction and design of the Project, 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 Managing Participant, as directed by the Operating Committee. (bbb) Points of Interconnection: Shall have the meaning given to such term in Section (ccc) Position(s): Shall have the meaning given to such term in Section 10.01(b). (ddd) Progress Payment: Shall mean Project Costs in the aggregate amount of approximately $1.2 million (and such additional amounts as determined by the Managing Participant), which un-reimbursed amounts have been previously expended by Chugach to complete Phase I (up to August 28, 2008), 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 Managing Participant, and which amount shall be deposited in the Project Account to pay Project Costs. (eee) Project: Shall mean the South Central Alaska Power Project. (fff) Project Account: Shall mean the bank account maintained by the Managing Participant on behalf of the Owners for the contributions of the Project Costs by the Owners and for the payment of Project Costs by the Managing Participant on behalf of the Owners and the Project. (ggg) Project Agreements: Shall mean this Agreement, the Construction Contracts, the O&M Agreement, the Lease, the Turbine Purchase Agreement, equipment purchase agreements and every other contract or agreement relating to the development, construction, operation, maintenance or repair of the Project. (hhh) Project Budget: Shall mean the budget setting forth the Project Costs to be incurred for the Project during Phases II and III, as developed by the Managing Participant. (iii) 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 capital, costs and expenses for the acquisition of Project Property, costs of transmission delivery and interconnection studies performed by Chugach, transmission interconnection costs assigned to or otherwise borne by the Project as set forth in Section 10.01, the construction of the Project, and the mobilization, operation, maintenance and repair of the Project, including all reasonable administration and general expenses and costs, and other Project Property, including, without limitation, v22

35 PARTICIPATION AGREEMENT PAGE 9 renewals, replacements, additions and retirements in respect thereof. Except as provided in this Agreement, expenses incurred by an Owner on account of its Ownership Share in Project 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. Gjj) Project Financing Plan: Shall have the meaning given to such term in Section 3.02(b) (kkk) Project Property: Shall have the meaning given to such term in Section (111) Project Site: Shall mean the real property on which the Project is to be located, including any and all easements, leases, licenses, option rights, rights-of-way and other rights used in connection with the Project, which the Owners will lease pursuant to the Lease Agreement (mmm)proposed Purchaser: Shall have the meaning given to such term in Section (nnn) Prudent Utility Practice: Shall mean any of the practices, methods or acts required by Applicable Law, the National Electric Safety Code, 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 State of Alaska. (000) Qualified Third Party: Shall mean an Owner, a Person that is an industrial retail end user with a load in excess of thirty (30) MW and maintains a Minimum Credit Rating, or a Person that is not an exempt wholesale generator within the meaning of 18 C.F.R and maintains a Minimum Credit Rating. (Ppp) SEC: Shall mean the United States Securities and Exchange Commission. (qqq) South Central Alaska Power Project: Shall mean the new, approximately 200 MW combined cycle natural gas-fired electric generating plant to be located at a leased site immediately adjacent to or within the existing International Generation Terminal facility at Chugach's headquarters in Anchorage, Alaska, and owned jointly by the Parties as tenants in common v22

36 PARTICIPATION AGREEMENT PAGE 10 (rrr) Spinning Reserves: Shall mean the operating, unloaded portion of the Net Effective Generating Capacity. (sss) Substation O&M Expenses: Shall have the meaning given to such term in Section 10.01(a). (ttt) Term: Shall have the meaning given to such term in Section (uuu) Termination Date: Shall have the meaning given to such term in Section (vvv) 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. (www) Transferring Owner: Section Shall have the meaning given to such term III (xxx) Transferred Share: Shall have the meaning given to such term in Section (yyy) Transmission System: Shall mean the facilities that are used to provide transmission service necessary for any of the Owners to transmit Energy from the Point of Interconnection. (zzz) Turbine Purchase Agreement: Shall mean the agreement, pursuant to which the Owners will jointly purchase undivided ownership interests in natural gas combustion turbines. (aaaa) Willful Action: Shall mean any act or omission of an Owner (including an Owner acting as Operator or Managing Participant) or on its behalf, at the Owner's direction, in respect of the matter involved, which: (i) 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 (ii) is determined by final judgment or decree of a court or arbitration panel 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 v22

37 PARTICIPATION AGREEMENT PAGE 11 ARTICLE 2 THE PROJECT Development Phases. The Project shall consist of the following activities to be conducted during Phases I, II and III of the development of the Project, as more fully described in Article 3: (a) the lease of the Project Site pursuant to the Lease Agreement, including, without limitation, the acquisition of all properties, easements, rights and public and private pennits, licenses, orders and other authorizations necessary or desirable, as applicable, to provide access to the Project Site, to provide communications and other necessary utility services to the Project Site, and to enable in all other respects the construction, operation, maintenance and repair ofthe Project and other Project Property; (b) the design, construction, equipping and testing of the Project on the Project Site in preparation for Commercial Operation Readiness at a planned Capacity of approximately 200 MW, including the interconnection of the Project to the Transmission System, including all related interconnection and transmission upgrades; (c) the arrangements for the delivery of Fuel supplied by Owners to the Project and to ensure operation of the Project at Net Effective Generating Capacity as scheduled by the Owners during the Term; (d) completion of the applicable mobilization tasks as required by the O&M Agreement, which shall include, but are not limited to: (i) selection, hiring and training of the initial staff needed to test and operate the Proj ect; (ii) 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 Project; and ( e) all matters incidental to the foregoing, which, consistent with Prudent Utility Practice and as required by the O&M Agreement, should be done to prepare the Project for Commercial Operation 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 Project to be operated for the benefit of the Owners 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 I v22

38 PARTICIPATION AGREEMENT PAGE 12 ARTICLE 3 DEVELOPMENT AND FINANCING Development Phases. The Owners, pursuant to the Project Agreements, shall develop the Project in three (3) phases, as follows: (a) "Phase J" shall consist of all development activities undertaken by the Owners, individually or collectively, relating to the Project prior to the Effective Date, and the execution of the Lease Agreement, design and engineering work, negotiation of the Construction Contracts and, as applicable, the other Project Agreements and other necessary activities occurring before the start of construction. During Phase I, to the extent not completed as of the Effective Date, the Managing Participant, acting on behalf, and for the use and benefit of the Owners, pursuant to the authority delegated to it by the Owners hereunder, shall develop all plans and preparations necessary for development and financing of the Project, including, but not limited to (i) the preparation of a development plan, Project Financing Plan, construction schedule and Project Budget, (ii) the preparation and negotiation of the Project Agreements, and (iii) the preparation of a plan to apply for, and acquire, such permits and other Governmental Approvals as are necessary for the development and construction of the Project. (b) "Phase II" shall consist of the construction, Performance Testing and startup of the Project. Phase II shall commence on the Effective Date,and shall end one (1) day prior to the date the Project commences Commercial Operation. However, there may be some activities from Phase II that continue past the Commercial Operation Date such as punch list items and documentation of procedures. During Phase II, to the extent not completed as of the Effective Date, the Managing Participant, acting on behalf, and for the use and benefit of the Owners, pursuant to the authority delegated to it by the Owners hereunder, 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, Project Financing Plan, construction schedule and Project Budget, (ii) the preparation and negotiation of the Project Agreements, and (iii) the application for, and acquisition of, such permits and other Governmental Approvals as are necessary for the development and construction of the Project. In addition, the Owners shall execute Construction Contracts (if not previously executed), and the Managing Participant, acting on behalf, and for the use and benefit of the Owners, pursuant to the authority delegated to it by the Owners hereunder, shall cause construction, Performance Testing and the Operator, acting on behalf, and for the use and benefit of the Owners, shall cause start-up of the Project to occur, prepare for commencement of Commercial Operation, as required by the mobilization tasks contemplated by the O&M Agreement (including the training and hiring of necessary operating staft) and obtain any permits or Governmental Approvals not previously obtained that are required for the operation of the Project v22

39 PARTICIPATION AGREEMENT PAGE 13 ( c) "Phase III" shall consist of the Commercial Operation of the Project, which phase shall commence on the date the Project commences Commercial Operation and end on the Termination Date. During Phase III, the Managing Participant and Operator, acting on behalf, and for the use and benefit, of the Owners pursuant to the authority delegated to it by the Owners hereunder and under the O&M Agreement, as applicable, shall operate and maintain the Project in accordance with Prudent Utility Practice and the Project Agreements. The obligations of the Owners during Phase III shall be carried out by the Managing Participant and, as applicable, the Operator in accordance with, and to the extent set forth in, the O&M Agreement Financing Plan. (a) On or before the Effective Date, each Owner shall have confirmed that it has delivered to each of the other Owners a plan detailing how it will obtain all financing needed to own its undivided interest in the Project, including, without limitation, a narrative of its plan, a schedule of expected financings and identification of its sources of funds and lenders (each such plan, an "Owner Financing Plan"). A copy of each Owner Financing Plan is attached hereto as Schedule 3.02(a). Each Owner shall have delivered to the other Owners any materials reasonably requested to facilitate the other Owners' assessment of such Owner's Owner Financing Plan. Execution of this Agreement obligates all Owners to proceed with the Project as provided by this Agreement, including, without limitation, the obligation to pay Project Costs for Phases I, II, and III, as applical?le. (b) The Owners shall, after the Effective Date, together develop a final plan for procedures for the Owners to coordinate the financing of the Project (the "Project Financing Plan"), taking into account the Owner Financing Plans. 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 to be provided to the Owners' lenders from time to time Financing Obligations. (a) Attached hereto as Schedule 3.03(a) each Owner has described, if any, and to the extent applicable: (i) all property held by such Owner as of the Effective Date that is intended to be Project Property, including, but not limited to, the work product resulting from development activities undertaken during Phase I relating to the Project, and (ii) all Project Costs incurred by such Owner prior to the Effective Date, including, but not limited to, the costs to acquire the 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 Iv22

40 PARTICIPATION AGREEMENT PAGE 14 proportion to their respective Ownership Shares, to the extent not previously reimbursed; (ii) title to each Owner's property that is intended to be Project Property shall be transferred to and vest in the Owners as tenants in common in proportion to their respective Ownership Shares; and (iii) each Owner shall pay into the Project Account its proportionate share, based on Ownership Share, of the Progress Payment. (c) To the extent not otherwise specifically provided in any Project Agreement or other written agreement among the Owners: (i) any additional personal property or interests therein acquired after the Effective Date intended to be Project Property shall be acquired by the Owners, acting through the 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. ARTICLE 4 OWNERSHIP Project Property. Project property shall consist of the leasehold interest in the real estate on which the Project is to be constructed and all other property (personal or fixtures; tangible and intangible), including that property 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 Project ("Project Property"), including, but not limited to, the following: (a) the leasehold interest in 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 any aspect of the Project, as from time to time located or contemplated; (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 Project or other Project Property; (c) all materials, parts and component equipment acquired for incorporation or installation in the Project or other Project 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 Project or other v22

41 PARTICIPATION AGREEMENT PAGE 15 Project Property, except that the International Substation shall remain owned solely by Chugach; (d) all products and byproducts produced from Project Property; (e) all equipment, vehicles, tools, office and other equipment and furnishings, spare parts, other Materials and Supplies, whether to be located in the Project or on the Project Site or off-site, which are intended for exclusive use in connection with the construction, operation, maintenance or repair of the Project or other Project Property; and (f) all contracts regarding the Project and all options and contract rights to acquire any of the foregoing Project Property Title. The Owners shall own all Project 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 Project Property is acquired by the Owners, or by which the title or other property interest of the Owners in any Project Property is evidenced, shall contain any provisions inconsistent with the intent of the preceding sentence Waiver of Partition Rights. No Owner shall resort to any action at law or in equity to partition the Project, the Project Site, the Project 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 Right of Possession. No Owner shall lease or otherwise grant to another Person the right of possession as to any of the Project Property, separate and apart from ownership of title to such property, without the prior written consent of all the other Owners Transfer of Title. As soon as practicable, but no later than thirty (30) days after the Effective Date, 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 Project Property and take all steps to put all Owners in actual possession and control of all the property intended to be Project Property. From time to time following the Effective Date, each Owner shall execute, deliver, record and 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 Project Property, and, in the case of licenses, certificates, approvals, authorizations, agreements, contracts, leases, easements and other commitments included in the Project Property: (a) which cannot be transferred or assigned effectively without the consent of third parties which consent has not been obtained prior to the Effective Date, 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 v22

42 PARTICIPATION AGREEMENT PAGE 16 otherwise not transferable or assignable, to use its best efforts with all Owners to secure to all Owners the benefits thereof in some other manner. This provision shall survive the termination or expiration of this Agreement. ARTICLES GENERAL PROHIBITION ON WITHDRAWAL; DISPOSITION OF OWNERSHIP INTERESTS General Prohibition on Withdrawal. Except as specifically permitted hereby, an Owner may not terminate its participation in or withdraw from the Project Permitted Withdrawal Only With Consent. If an Owner desires to terminate its participation in or withdraw from the Project, such termination or withdrawal may only be accomplished via: (a) the sale of its Ownership Share pursuant to the right of first refusal provisions of Section 5.06 or (b) the prior written consent of the other Owner. Any attempted termination or withdrawal other than in accordance with the terms and conditions of this Agreement shall be, and is hereby declared, null and void ab initio General Obligations of a Withdrawing Owner. In the event any Owner withdraws and terminates its participation in the Project as permitted under this Agreement, the withdrawing Owner shall immediately: (a) Agreements; transfer to the remaining Owner all rights it has under the Project (b) - transfer to the remaining Owner all rights it has to Project Property, including, but not limited to, any amounts on deposit in the Project Account and any previously paid Progress Payments; (c) transfer to the remaining Owner any and all other rights, interests or property, whether real, personal, tangible or intangible or otherwise, relating in any way to the Project, the Project 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. 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 the remaining Owner its true and lawful agent and attorney-in-fact to effect any of the foregoing obligations of this Section 5.03(a)-(e) and otherwise with respect to the v22

43 PARTICIPATION AGREEMENT PAGEl7 withdrawing Owner's obligations under any of the Project Agreements or any other obligation thereof with respect to the Project, the Project Site or otherwise General Prohibition on Transfers of Ownership Interests. A Party's Ownership Share in this Agreement and Project Property may only be Transferred to another Person as permitted under this Agreement. Any Party acquiring an ownership interest in this Agreement or Project 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 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 Acts or Circumstance Not Deemed Transfers. The following shall not, under any circumstances, be deemed Transfers, as such term is defined herein, and is not subject to the general prohibition on Transfers of Section 5.04 and, accordingly, is 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 of its Ownership Share of the Project 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 of all of its Ownership Share of the Project Pr()perty 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; (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 Project, liens in connection with construction improvements in compliance with any Project Agreements 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 Project 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 v22

44 PARTICIPATION AGREEMENT PAGE 18 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 Project Property to an Affiliate; provided, however, that any such Affiliate must satisfy the creditworthiness assurances set forth in Section 7.10; and (g) the transfer by either Owner of all of its Ownership Share to a Person owned and operated by a Governmental Authority, including without limitation, the Municipality of Anchorage, a public corporate authority of the Municipality of Anchorage, a public corporation and/or instrumentality of the State of Alaska, including but not limited to a public corporation and/or instrumentality with a separate and independent legal existence and or a political subdivision within a department of the State of Alaska, a public corporation or authority owned or operated by a Governmental Authority, a department of a Governmental Authority, a joint action agency or an electric cooperative organized to own and operate generation assets; it being agreed and acknowledged by the Parties that, as of the Effective Date, one or both Parties is considering Transferring its Ownership Share to one of the foregoing (and, if the Owner transferring title as permitted under this Subsection 5.05(g) is Chugach, notwithstanding anything in this Agreement to the contrary, all references to Chugach as Owner, Managing Participant and Operator herein shall be deemed to refer to the transferee of Chugach's Ownership Share under this Subsection 5.05(g)) Right of First Refusal. An Owner may Transfer all, but not less than all, of its Ownership Share but only to a Qualified Third Party, and provided that such Owner and the Qualified Third Party comply in all respects with the right of first refusal process contained in this Section 5.06 and that an Owner Transfers all of its Ownership Share as part of any such Transfer. If any Owner (the "Transferring Owner") desires to Transfer all of its Ownership Share pursuant to a bona fide written offer from a Qualified Third Party (the "Proposed Purchaser"), the Transferring Owner shall first offer all of its Ownership Share that it desires to Transfer (the "Transferred Share") to the other Owner (the "Non-Transferring Owner") according to the following procedure: (a) The Transferring Owner shall notify the Non-Transferring Owner of its intention to Transfer the Transferred Share and furnish the Non-Transferring Owner 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 (b). 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 Owner with a v22

45 PARTICIPATION AGREEMENT PAGE 19 copy of the bona fide written offer pursuant to Section 5.06(a) (the "Election Period"). The right of first refusal process shall be administered by or at the direction of the Managing Participant, 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. If the Non-Transferring Owner elects to purchase the Transferred Share it 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 5.06, the Non-Transferring Owner must purchase the entire Transferred Share in order to validly exercise the right of first refusal. (c) If the Non-Transferring Owner has 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 Owners are parties. (d) 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 (e) If the Non-Transferring Owner has elected to purchase the entire Transferred Share, the Transferring Owner shall be entitled, for a period of ninety (90) days after Jhe end of the Election Period, to complete the Transfer of the Transferred Share to the Non-Transferring Owner, in all respects pursuant to the terms of its bona fide written offer Covenants Run With Land. To the extent permitted under Applicable Law, the provisions of this Agreement, including, without limitation, the right of first refusal provisions contained in Section 5.06, shall constitute covenants running with the land as to the interests in real property which are made subject hereto pursuant to the Lease Agreement and shall bind each Owner and its successors and assigns. ARTICLE 6 PROJECT MANAGEMENT Management by Committee. The Owners' rights and obligations with respect to the Project and Project Property shall be managed by the Owners acting through a Participants Committee and an Operating Committee established and maintained during the Term in accordance with this Article 6. The Participants Committee and the 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 Composition of Committees. Each Owner shall have one natural Person designated to act as its primary representative on the Participants Committee and one natural Person v22

46 PARTICIPATION AGREEMENT PAGE 20 designated as an alternate who will act as its representative when the primary representative is unavailable. Each Owner shall have one natural Person designated to act as its primary representative on the Operating Committee and one 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 representatives and alternate representatives, 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 Participants Committee and the Operating Committee. Each Owner may change its primary representative and alternative representative by providing written notice of such change to the other Owner 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 any 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. (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) 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 expressly prohibited hereunder 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 v22

47 PARTICIPATION AGREEMENT PAGE 21 which such rules or procedures conflict with this Agreement, the provisions of this Agreement shall control. (b) Each Committee shall have a chairperson, who initially shall be appointed by Chugach and who shall serve for a term of one year from the date of his or her appointment. Thereafter, each Owner shall, on a rotating basis appoint a chairperson to serve a term of one (1) year. The chairperson 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 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) Except when impracticable because of emergency conditions or except as to representatives who waive (in advance in writing) this requirement, the representative of each Owner shall be consulted to provide written approval or disapproval of any action proposed by the Operating Committee. (e) The Participants Committee may act by unanimous written consent of the members of the Participants Committee. (f) Any Committee member 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 or she is a Committee member Participants Committee. (a) Each Owner shall designate a member to the Participants Committee who is a natural Person who has the appropriate level of authority to act on the Owner's behalf on all matters required to be acted upon by a member of the Participants Committee under this Agreement v22

48 PARTICIPATION AGREEMENT PAGE 22 (b) In addition to any purposes, responsibilities and authority specified elsewhere herein, the Participants 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 or Project 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 or Project Property which are not by this Agreement or by action of the Participants Committee delegated to another Committee; (iii) to take responsibility, or delegate such responsibility to another Committee including the responsibility for taking, all actions necessary or deemed advisable in connection with the Project or the ownership, operation, maintenance or repair of the Project or other Project Property which has not been provided for in this Agreement or other contract heretofore or hereafter made by the Owners; and (iv) to take action on all matters which are referred to it by the Operating Committee or another Committee. (c) To the extent necessary, Participants Committee members shall execute all documents required to effectuate a particular duly authorized and approved act of the Participants Committee, regardless of whether a particular Participants Committee member acted to approve such act. (d) In the event of conflict between the actions or decisions of the Participants Committee and any other Committee, then the act or decision, as the case may be, of the Participants Committee shall govern in all respects. (e) The unanimous approval of its Committee members shall constitute an act of the Participants Committee. (f) as necessary. The Participants Committee shall meet no less than annually and as often (g) The Participants Committee's decision on any item referred to it by the Operating Committee shall be final with respect thereto, unless there is a Deadlock, which shall be subject to the provisions of Article Actions Requiring Participants Committee Approval. Notwithstanding anything contained herein to the contrary, only the Participants Committee may take the following actions: (a) approving the plan for development of the Project, construction schedule, Project Budget, Operating Plan and Budget or other budgets presented by the Operating Committee; v22

49 PAR TICIP A TION AGREEMENT PAGE 23 (b) awarding any agreement, including any Construction Contract, the amount of which in the aggregate equals or exceeds Five Hundred Thousand Dollars ($500,000.00); (c) deciding any matter referred to the Participants Committee by the Operating Committee; (d) awarding any material contracts or arrangements with any Owner or Affiliate of any Owner; (e) removing the Operator but only in the event of an uncured default by the Operator under the O&M Agreement, in which case if one of the Owners is the Operator, the remaining Owners shall have the authority to make the decision without the Operator having a right to vote on the issue due to the uncured default; (f) (g) changing the size of the Project; and sale ofthe Project Operating Committee. (a) In addition to any purposes, responsibilities and authority specified elsewhere herein, the Operating Committee shall have as its purposes, responsibilities and authority to, or to delegate the following to the Managing Participant to: (i) 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 Project and Project Property and generally to supervise, and delegate to, the Managing Participant and 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 Project and Project Property; (ii) develop, along with the Managing Participant, a plan for development of the Project, construction schedule, Project Budget, Operating Plan and Budget and any material changes or amendments thereto; (iii) advise and direct Managing Participant and 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 Managing Participant and the Operator for review and approval of the Operating Committee in respect to the construction, operation, maintenance and repair of the Project and Project Property; (iv) approve the form and substance, and authorize the execution, of the other Project Agreements, if any, not executed as of the Effective Date; v22

50 PARTICIPATION AGREEMENT PAGE 24 (v) review and approve the procedures developed by the Operator for determining the Net Effective Generating Capacity, Minimum Net Generation and Net Energy Generation; (vi) take all actions necessary in connection with the Project within the scope of its powers and responsibilities hereunder; (vii) authorize and direct the Managing Participant to approve mechanical completion, substantial completion and final completion of the Project pursuant to the Construction Contracts and to accept the results of the Performance Testing, and contest, settle, off-set or waive liquidated damages that may become due and payable pursuant to the terms of the Construction Contracts; (viii) determine when the Project 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, determine when Project Property should be retired and authorize disposition by the Operator of such Project Property no longer needed for the operation, maintenance or repair of the Project or other Project Property; (x) act upon all matters referred to it by the Participants Committee and upon all matters relating to the Project or the operation, maintenance and rep_air of the Project or other Project Property referred to it by any other Committee; (xi) take all action necessary or deemed advisable in connection with the Project or the operation, maintenance and repair of the Project or other Project Property for which provision has not otherwise been made by or on behalf of the Owners; (xii) develop and approve the Fuel supply, scheduling and dispatch procedures for the Project, Fuel procurement policies, Fuel cost allocation adjustment factor, station power procedures and other procedures necessary for this Agreement and the O&M Agreement; (xiii) approve any contract less than Five Hundred Thousand Dollars ($500,000.00) if such contract is not provided for in the most recent South Central Alaska Power Project's annual budget; and (xiv) determine if it is appropriate that the Managing Participant requisition funds to pay Project Costs more frequently than monthly. (b) The approval of Chugach's Committee member shall constitute an act of the Operating Committee. The ML&P member of the Operating Committee may suspend such action by referring to the Participants Committee for resolution any item properly presented to the Operating Committee that was approved by Chugach's I v22

51 PARTICIPATION AGREEMENT PAGE 25 AUGUST 28,2008 Committee member by providing notice to Chugach within three (3) business days of the Operating Committee approval. In addition, the ML&P member of the Operating Committee may refer to the Participants Committee for resolution any item properly presented to the Operating Committee that was not approved by Chugach's Committee member by providing notice to Chugach within three (3) business days of the Operating Committee's failure to approve. The Participants Committee's decision on any such referred item shall be final with respect thereto, unless there is a Deadlock subject to the provisions of Article 13. ( c) The Operating Committee shall meet no less than monthly, unless the Operating Committee otherwise desires to meet more or less frequently Managing Participant. (a) Chugach shall serve as the Project's managing participant and shall act under the direction, control and authority of the Participants Committee or Operating Committee, respectively, as provided in Sections 6.05, 6.06 and 6.07, at all times ("Managing Participant"). In addition to performing the Services (as such term is defined in the O&M Agreement) in its capacity as the Operator, the Managing Participant shall, in its capacity as the Managing Participant, have as its purposes and delegated responsibilities, the day-to-day oversight and day-to-day managerial control over all aspects of equipment acquisition, construction, accounting, financial oversight, purchasing and procurement, generation engineering, human resource matters, and contract management and to take all other actions necessary in connection with the Project within the scope of its powers and responsibilities hereunder. (b) The Managing Participant shall provide regular written reports, no less frequently than on a monthly basis, to the Participants Committee and the Operating Committee, which reports shall cover the plan for development of the Project, construction schedule, Project Budget, Operating Plan and Budget or other reports as directed by the Operating Committee. (c) Notwithstanding anything else in this Agreement to the contrary, the Managing Participant may only be removed or replaced if the Managing Participant has materially failed to perform the services required of it in its capacity as an Owner or the Managing Participant and has not cured such material failure within thirty (30) days from the date the Managing Participant has received written notice of such material failure from the other Owner. If such material failure has not been cured within such period, the other Owner shall appoint a new Managing Participant and the Managing Participant shall not be entitled to vote with respect to such appointment. For the avoidance of doubt, any Dispute as to whether the Managing Participant has materially failed to perform the services required of it in its capacity as the Managing Participant or cure such failure within the required time period shall be resolved through the dispute resolution procedures of this Agreement and the Managing Participant shall remain in such capacity pending completion of the dispute resolution procedures v22

52 PARTICIPATION AGREEMENT PAGE 26 (d) An Owner shall have the right, but not the obligation, to audit the books and records of the Managing Participant solely with respect to its obligations and activities in its capacity as the Managing Participant or Operator of the Project; provided, however, that: (i) an Owner may conduct only one such audit during any twelve (12) month period, (ii) any such audit shall be at such Owner's own expense, (iii) such Owner must provide thirty (30) days' prior written notice to Managing Participant, and (iv) it must conduct the audit during regular business hours Obligation to Pay Project Costs. ARTICLE 7 CONTRIBUTIONS; EXPENDITURES (a) Except as otherwise provided in this Agreement, each Owner shall be liable for Project Costs in proportion to its Ownership Share and each Owner shall deposit monies in the Project Account as required to pay for its proportion of the Project Costs. Funds deposited into the Project Account are Project 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 Project or other Project Property, and no Owner shall have any right, title or ownership interest in the Project Account other than a beneficial interest, in proportion to its Ownership Share, nor right to withdraw or direct application of such funds, nor otherwise exercise control over such Project. Account, except as provided for in this Agreement. (b)_ Managing Participant, on behalf of the Owners, has caused the Project Account to be established. Each Owner hereby acknowledges that any such funds contributed by it for deposit in the Project Account constitute a prepayment of its obligation to pay Project Costs. Each Owner further acknowledges that its interest in funds in the Project Account are subject to applicable rights of set off, recoupment, and such other legal or equitable defenses as may be available to the Managing Participant and other Owners under Applicable Law Payment Procedures. (a) follows: Funds to pay for Project Costs shall be requisitioned from the Owners as (i) After the Effective Date, the Managing Participant shall issue a written notice to ML&P, which written notice shall state the amount required to be paid to reimburse Chugach for the Project Costs that have been expended prior to the Effective Date in connection with Phase I activities but not yet reimbursed by them. ML&P shall pay such amounts to Chugach, within thirty (30) days of the receipt of written notice, via wire transfer of immediately available funds. (ii) After the Effective Date, funds shall be requisitioned from the Owners monthly by the Managing Participant, and the Managing Participant shall issue a requisition notice to the Owners each month no later than the 15th of each v22

53 PARTICIPATION AGREEMENT PAGE 27 month, which notice shall state amounts required to be deposited into the Project Account by each Owner on the last business day of such 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 materials. The Owners shall promptly pay such amounts by electronic funds transfer of immediately available funds into the Project Account on the last business day of such month. (iii) To the extent funds are available in the Project Account, the Managing Participant shall pay all invoices for Project Costs. 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 Operating Comniittee as Project Costs or required to be expended in response to an emergency. With respect to Project Costs that are general and administrative expenses that may be incurred by the Managing Participant during Phase II, the guiding principles on Exhibit C shall be used as guidelines in the allocation of such Project Costs. (iv) The Managing Participant shall prepare and deliver to the other Owner, not later than sixty (60) days following the end of each calendar year during the Term and not later than ninety (90) days following the date on which this Agreement is terminated, a cash-based reconciliation of Project 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 such analysis as the Operating Committee may request Reservation of Right to Dispute Payments; Right to Audit Requisitioned Funds. If an Owner shall dispute any portion of the amount of funds requisitioned by the Managing Participant for the Project, 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 13. Each Owner shall have, at its own sole expense, the right to audit the books and records of the Managing Participant with respect to the Project, during regular business hours, no more than once every twelve (12) month period 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 except in the case of emergency situations, services or property for the Project Or for the operation, maintenance or repair of the Project or other Project Property shall be supplied by an Owner on a cost-reimbursement basis and only pursuant to authorization, and upon terms approved, by the Managing Participant. 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 Project or other Project Property supplied by the Owner v22

54 PARTICIPATION AGREEMENT PAGE Emergency Services. In the event of an emergency situation, Managing Participant may supply services or property without prior authorization by the other Owner when obtaining such authorization is impracticable in the reasonable judgment of the Managing Participant to obtain such advance authorization, in which event the terms for such supply shall be as approved after the event on a basis consistent with the cost-reimbursement principles expressed in Section Taxes. The Owners shall use their best efforts to have each taxing authority which imposes taxes or assessments upon Project 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 Project 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 Project 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 payment of such taxes shall be considered Project Costs Fuel. Each Owner shall provide Fuel as required by its use of the Project, pursuant to the Fuel supply, scheduling and dispatch procedures to be determined by the Operating Committee. The Operating Committee shall establish practices and procedures for determining the Fuel requirements of the Project taking into account the following principles: (a) For maintenance, testing, blackstart, station power and other Fuel needs for the Project that do not involve the Owners dispatching all or a part of their Ownership Share of Net Effective Generating Capacity, the Owners shall provide Fuel according to their Ownership Share; (b) For dispatching of the Project, each Owner shall provide Fuel consistent with its dispatch of its Ownership Share of Net Effective Generating Capacity, provided that any Owner taking less than its Ownership Share of Net Effective Generating Capacity shall provide Fuel, in proportion to all of the Owners taking less than their full share, to compensate for any heat rate degradation resulting from operating at less than full Net Effective Generating Capacity Station Power. Each Owner shall supply station power pursuant to the station power procedures to be determined by the Operating Committee Insurance. The Owners shall jointly obtain a single policy or policies insuring Project Property and the operations of the Project ("Owners Insurance") 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 Operating Committee consistent with Section 11 of the O&M Agreement and in accordance with the following principles: (a) During Phases I, II and III, in accordance with and under the direction and specifications formulated by the Operating Committee, the Owners shall jointly procure or cause to be procured, and maintain in force, the types and levels of insurance the v22

55 P ARTICIP ATION AGREEMENT PAGE 29 Owners deem necessary and appropriate for the Project, including, where applicable, insurance at levels normally carried by utilities constructing and operating projects such as the Project. (b) The insurable values, limits, deductib1es, retentions and other special terms of the Owners Insurance shall be determined by the Operating Committee prior to the placement of such Owners Insurance. (c) Each Owner shall be given a copy of the insurance policies forms together with a line sheet therefor naming the insurers and underwriters and the extent of their participation. (d) Each Owner shall have the right, by written notice to the Managing Participant 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. (e) Insurance policies procured pursuant to this Section 7.09 shall be primary insurance for all purposes and shall be so endorsed. (f) All insurance required under this Agreement shall be issued by insurance companies authorized to do business in the State of Alaska and rated A-NIl or better in the most recent edition of Best's Insurance Reports. (g) 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 Assurances of Creditworthiness. Throughout the Term, each Owner shall maintain a level of creditworthiness of at least the average of its two lowest bond ratings equal to Standard & Poor's "BBB+" issuer credit rating or an equivalent rating of a nationally recognized statistical rating organization recognized by the SEC ("Minimum Credit Rating"). (a) After the Effective Date, in order to demonstrate its ability to fulfill its ongoing obligations under this Agreement, each Owner shall submit to the Participants Committee on the schedule determined by the 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 each has a credit rating of at least the Minimum Credit Rating; and v22

56 P ARTICIP A TION AGREEMENT PAGE 30 AUGUST 28,2008 (iii) such other financial information as may reasonably be requested by the Participants Committee. (b) If, after review of such financial information, the Participants Committee determines that an Owner does not have a credit rating of at least the Minimum Credit 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 Participants Committee in its sole discretion) into the Project Account until such Owner again achieves a credit rating of at least the Minimum Credit Rating Right to Obtain Financing. Each Owner shall have the right to obtain financing to purchase its Ownership Share in the Project (and to pay 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 the other Owner, or on other terms acceptable to the other Owner, 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 other Owner's lender; (ii) each Owner shall cooperate in good faith with the other Owner so as to satisfy the requirements of the other 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 to the other Owner intended by 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 Owner's lender. 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 8 CASUALTY LOSS; CONDEMNATION Repair or Replacement. If, due to any cause, the Project or any other Project Property shall be damaged or destroyed, the Managing Participant shall within thirty (30) days thereafter estimate whether the cost of repair or replacement is less than, or equal to or more than, One Million Dollars ($1,000,000.00), excluding any insurance proceeds. If such cost of repair or replacement shall be estimated by the Managing Participant to be less than One Million Dollars ($1,000,000.00), excluding any insurance proceeds, the Operating Committee shall direct the Operator to cause, as expeditiously as is possible, the damage to be repaired or replaced so as to restore the Project (or other Project 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 Managing Participant to be One Million Dollars ($1,000,000.00) or more, excluding any insurance proceeds, the same shall be repaired or replaced in the manner to be then decided by the Participants Committee, but if the Participants Committee shall be unable to agree, within forty-five (45) days after such damage has occurred, upon the manner of such repair or replacement, or upon any alternative disposition of the matter, then the Operator shall cause the v22

57 P ARTICIP A TION AGREEMENT PAGE 31 damage to be repaired or replaced so as to restore the Project (or other Project Property) to substantially the same general character and use as existed immediately prior to such damage and the cost thereof shall constitute Project Costs Eminent Domain. If a part of the Project Property is taken from the Owners by the exercise of the power of eminent domain (or by voluntary conveyance in lieu thereof), the Managing Participant at the direction of the Operating Committee, within thirty (30) days after such taking, shall determine whether the part taken can be replaced andlor whether the remainder of the Project Property can be restored in such a way that the Project and other Project 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 One Million Dollars ($1,000,000.00). (a) If all of the Project 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 Project Property is thus taken and the Managing Participant determines, pursuant to this Section 8:02, that the part taken cannot be replaced and/or the remainder of the Project Property cannot be restored in such a way that the Project and other Project 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 and wound up by the Owners pursuant to Section 14.02, upon request by any Owner. (b).. If a part of the Project 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 Managing Participant 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 Project and other Project 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 Managing Participant to be less than One Million Dollars ($1,000,000.00), the Operating Committee shall direct the Operator to cause, as expeditiously as possible, such replacement and/or restoration to be accomplished so as to restore the Project and other Project 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 andlor restoration is estimated by the Managing Participant to be One Million Dollars ($1,000,000.00) or more, the Operating Committee shall direct the Operator to cause such replacement andlor restoration to be accomplished in the manner agreed upon by the Owners, but if the Participants Committee shall be unable to agree, within forty-five (45) days after the taking has occurred, upon the manner of such replacement andlor v22

58 PARTICIPATION AGREEMENT PAGE 32 restoration or upon any alternative disposition of the matter, then the Operating Committee shall direct the Operator to cause such replacement and/or restoration to be accomplished so as to restore the Project and other Project 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 9 LIABILITY Limitation and Release of Liability of Managing Participant and Operator. (a) Because an Owner that serves as the Managing Participant and/or the Operator will do so strictly on a cost reimbursement basis, any Owner, in its capacity, as applicable, as Managing Participant and/or Operator, shall only be liable and responsible to the other Owner for direct damages resulting from: (1) the Willful Action of such Managing Participant and/or Operator and the directors, officers, employees, and Affiliates of each, or (2) the material breach of the Managing Participant or Operator of any Project Agreement; provided, however, that the amount of any such direct damages shall be reduced by the amount of insurance proceeds, if any, actually received to cover any such direct damages. (b) Except for the liability set forth in Section 9.01(a) above, any Owner acting as Managing Participant and/or the Operator is hereby released by the other Owner from any other liability of any kind to the other Owner. For the avoidance of doubt, any Owner which may, from time to time, serve as the Managing Participant and/or the Operator, shall have no liability to the other Owner as a result of the negligence of its directors, officers, Affiliates, employees or agents Limitation and Release of Liability of the Other Owner. (a) Each Owner in its capacity as Owner (and not as Managing Participant and/or the Operator) shall only be liable and responsible to the other Owner for direct damages resulting from: (1) the Willful Action of such Owner and the directors, officers, owners, employees, and Affiliates and Committee members (acting in such capacity in good faith) of such Owner, (2) the material breach by an Owner of any Project Agreement, or (3) 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 of the Project or Project Property; provided, however, that the amount of any such direct damages shall be reduced by the amount of insurance proceeds, if any, actually received to cover any such direct damages. (b) Except for the liability set forth in Section 9.02(a) above, any Owner in its capacity as Owner (and not as Managing Participant and/or the Operator) is hereby released by the other Owner from any other liability of any kind to the other Owner v22

59 PARTICIPATION AGREEMENT PAGE 33 AUGUST 28, No Consequential or Other Special Damages. No Owner, nor any of its Affiliates, contractors, consultants, professional advisors, officers, directors, owners 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 and any other Project Agreement or any of its obligations herein or therein, whether based on contract, tort (including, without limitation, negligence), strict liability, warranty, indemnity or otherwise Assignment of Rights. In the event any insurer refuses to pay any judgment obtained by an Owner against the other Owner on account of liability covered by such insurance, the Owner against which the judgment is obtained, at the request of the other Owner which obtained such judgment and in consideration for the release granted in Section 9.01 or 9.02, as applicable, shall execute such documents as may be necessary to effect an assignment of its contractual rights against the non-paying insurer to the prevailing Owner and thereby give the prevailing Owner which obtained the judgment the right to enforce its judgment directly against such insurer Shared Liability to Third Parties. Liability of one or both 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 Person other than an 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 Project or other Project 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 whose Willful Action resulted in the loss, damage, claim, charge or expense shall be liable pursuant to Section Availability of Insurance Proceeds. The provisions of this Article 9 shall not be construed to relieve any insurer of its obligation to pay any insurance proceeds in accordance with the terms and conditions of policies of insurance maintained in force by the Owners, or either of them. ARTICLE 10 INTERCONNECTION; ENTITLEMENT TO ENERGY AND CAPACITY Interconnection. (a) As part of its plans to construct a new 138kV substation to replace its existing International Substation to accommodate its own transmission needs, Chugach shall provide the Project access to the transmission system by expanding the design of this substation to accommodate the Project's interconnection requirements and ML&P's proposed transmission line (the new substation hereafter referred to as the "International Substation"), in exchange for the payments by ML&P, as Owner, and also as an interconnecting transmission utility, as provided in this Article 10. Chugach will design the International Substation with a "breaker-and-a-half' scheme, with six (6) bays, eleven (11) line-side bus connections (each line-side bus connection, a "Position," and all collectively, the "Positions"), and seventeen (17) v22

60 PARTICIPATION AGREEMENT PAGE 34 breakers, as shown in Exhibit D. Chugach will dedicate four (4) of the Positions to the Project, one (1) PQsition for interconnection ofml&p's new transmission line serving its 115 kv Transmission System and the remaining six (6) Positions to serving Chugach's existing transmission system. (b) The Project will deliver its power to the International Substation at the four (4) Positions dedicated to the Project, as shown in Exhibit D, which shall be the Project's Points of Interconnection. ( c) The ML&P transmission interconnection point ("ML&P Interconnection Point") is ML&P's transmission line connection to the International Substation, as shown in Exhibit D. ML&P shall take its Operating Capacity Entitlement and its Ownership Share of Net Energy Generation produced by the Project into its Transmission System through the ML&P Interconnection Point. (d) Chugach's transmission interconnection points are the various Chugach transmission line connections to the six (6) Positions not dedicated to the project or the ML&P Interconnection Point, as shown in Exhibit D. Chugach shall take its Operating Capacity Entitlements and its Ownership Share of Net Energy Generation produced by the Project into Chugach Transmission System through the Chugach transmission line connections. ( e) Chugach and ML&P will be adding a transmission line between International Substation and ML&P's 115kV transmission system to provide access to Project power and enhance the transmission system. Chugach and ML&P will be sharing these costs under a separate agreement. Since ML&P is interconnecting at the International Substation, ML&P shall not incur wheeling charges for the transmission of power through the International Substation. (t) Chugach shall complete construction of the International Substation no later than the Commercial Operation Date for the Project. (g) On a schedule established by Chugach and using the ratio of the dedicated Positions to the total Positions, the Project and ML&P shall reimburse Chugach a portion of the total capital costs incurred to construct the International Substation as follows: four-elevenths (4/11) for the Project, and one-eleventh (1111) for ML&P. For capital costs needed to repair the International Substation or otherwise continue service through the International Substation after the completion of construction, the Project and ML&P shall reimburse Chugach for the portion of such total capital costs by applying the ratios in this Section 10.01(g) to Chugach's normal depreciation for such capital costs. Such reimbursement shall occur as part of the Substation O&M Expenses recovery procedure in Section 10.01(h). (h) In addition to reimbursing the capital costs set forth in Section 10.01(g), after completion of the construction of the Substation, the Project and ML&P shall reimburse Chugach in the same ratios, four-elevenths (4/11) and one-eleventh (1/11), respectively, of Chugach's actual expenses, including direct and indirect reasonable, v22

61 PARTICIPATION AGREEMENT PAGE 35 general and administrative expenses, associated with operating, maintaining and repairing the Substation ("Substation O&M Expenses"). Chugach shall bill ML&P for the Substation O&M Expenses, and any depreciation from Section (g), on a monthly basis. Prior to the beginning of each year, Chugach shall provide to the Operating Committee a copy of Chugach's annual schedule and budget of its proposed operation, maintenance and repair expenses. (i) Chugach shall provide the Project and ML&P service through the five (5) Positions dedicated to the Project and ML&P's Interconnection Point for the term of this Agreement. G) Chugach shall be responsible for all costs to construct, operate, maintain and repair the six (6) Positions not dedicated to the Project or ML&P's Interconnection Point. (k) Chugach shall in good faith and at all times operate, maintain and repair the International Substation used to perform the services under this Article lousing Prudent Utility Practices in a manner consistent with Chugach's obligations under this Agreement. (1) The International Substation is subject to forced and scheduled outages. In the case of a forced outage, Chugach shall use its best efforts to restore service through the International Substation consistent with Prudent Utility Practice. However, Chugach shall determine, in its sole discretion, how to restore service to its Transmission System, including how and when it restores service through the International Substation. Chugach shall schedule outages for maintenance of the Substation in consultation with the Operating Committee Generation Entitlement. Each Owner shall have entitlement to the Project's electrical generation as follows, subject to this Article 10: (a) Initial Production. During Phase II, 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 or through Project start-up procedures. Each Owner shall take delivery of such Capacity and Energy at its Points of Interconnection. The Owners shall cause the Operator to provide the Owners with a schedule of when the Project 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. 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 IiI, each Owner shall own its Operating Capacity Entitlement and its Ownership Share of Net Energy Generation produced by the Project as scheduled and dispatched for Energy or Spinning Reserves by v22

62 PARTICIPATION AGREEMENT PAGE 36 Owner pursuant to the requirements established by the Operating Committee. Each Owner shall take delivery of such Capacity and Energy at its Point of Interconnection. (c) Disposition of Project Output. It is the intent of the Owners that the Project will be operated as a high availability, base load facility within the parameters of Prudent Utility Practice in order to maximize the life of the Project and to avoid high maintenance costs that may be incurred due to operation of the Project above its Net Effective Generating Capacity. ARTICLE 11 DEFAULTS AND REMEDIES 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 Project Account, upon requisition by the Operator on or before the date due, (ii) to provide the further reasonable assurances specified by the Participants Committee at the times and in the amounts specified by the Participants Committee in its notice to the Owners, or (iii) to pay funds to the Project 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 nondefaulting Owner or as otherwise required by this Agreement; (b) the uncured failure of any Owner to perform or observe any of the other material c()venants and conditions of this Agreement to be performed or observed by it, or the uncured failure of any Owner to perform or observe any of the material 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 Project or other Project Property, which continues for a period of five (5) days after notice of such failure is given to it by the other Owner (unless a different notice period is otherwise expressly provided for in this Agreement, in which case the other notice period shall control); or (c) any Owner may declare that an Event of Default shall have occurred by providing written notice thereof to the other Owner; provided, however, that an Owner must have a good faith basis for declaring an Event of Default Non-Defaulting Owners Right to Repurchase. 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 nondefaulting Owner shall have the right, but not the obligation, to remedy the same (if capable of remedy) by commencing and continuously pursuing such remedy until completed, either by paying the necessary funds and/or rendering the necessary performance, with the 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 Owner. No such payment or performance by the non-defaulting contributing Owner shall be construed as an undertaking of v22

63 PARTICIPATION AGREEMENT PAGE 37 the non-defaulting contributing Owner 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. If, after the expiration of the cure period in Section 11.02(b), the defaulting Owner has not cured such Event of Default, then the non-defaulting Owner shall have the right, but not the obligation, to purchase its ratable share, based on Ownership Share of the defaulting Owner's Ownership Shares for the lesser of Fair Value or depreciated book value. (a) Upon any such payment or performance by the non-defaulting contributing Owner, the defaulting Owner's entitlement to Capacity and Energy generated by the Project, including the defaulting Owner's Operating Capacity Entitlement, any receivables and all related rights set forth in Article 10 or otherwise in this Agreement, including, without limitation, the right to vote its Ownership Share, shall be deemed transferred to such non-defaulting contributing Owner in proportion to its Ownership Share (based on the ratio that the non-defaulting Owner's Ownership Share bears to the total Ownership Shares of the non-defaulting Owner) 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 non-defaulting contributing Owner the total amount of money (and/or the reasonable equivalent in money for services or property provided) paid by the 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 Owner 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 Owner. 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 Owner shall have the right to continue to exercise their rights under this Section 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 Owner. In the event it is determined, pursuant to the dispute resolution procedures herein, 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 Owner 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 No Waiver. No waiver by an Owner of its rights with respect to an Event of Default under this Agreement shall be effective unless the non-defaulting Owner waives its v22

64 PARTICIPATION AGREEMENT PAGE 38 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 Cumulative Rights. The rights and remedies provided in this Article 11 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. ARTICLE 12 RELATIONSHIP OF PARTIES 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 anyone 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 the other Owner or the Owners as a group. No Owner shall be the agent of or have a right or power to bind the other Owner without its express written consent, except as provided in this Agreement or in any other Project Agreements Tax Status. Given the provisions of Section 12.01, 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, as amended, 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, or any portion or portions of future Applicable Laws regarding partnership taxation that may be applicable to the Owners under this Agreement. ARTICLE 13 DISPUTE RESOLUTION; FAIR VALUE Dispute Resolution. The methods for resolving any and all disputes, including any Deadlock, arising under or related to this Agreement (a "Dispute") shall be as follows. (a) In the event of Deadlock, and while the resolution of such Deadlock is pending, notwithstanding anything else in this Agreement to the contrary, the Managing Participant shall be entitled to, but need not, proceed with the proposal that is the subject of the Deadlock and any funds expended by the Managing Participant in doing so shall be Project Costs and the other Owner shall be liable for such Project Costs in proportion to its Ownership Share until such time as the Deadlock is resolved and the liability is changed, if at all, according to such resolution, whether through arbitration or litigation. (b) Any Dispute hereunder may, upon written consent of all of the Owners, be submitted to binding arbitration within twenty (20) days. Any such arbitration shall be conducted in accordance with the rules of the American Arbitration Association ("AAA") for large, complex commercial disputes then in effect by one arbitrator, who must have experience in the development or operation of power projects but has never worked as an v22

65 PARTICIPATION AGREEMENT PAGE 39 employee or consultant for any Owner (and is not at that time, and never has been, an Affiliate of any Owner), unless all of the Owners agree otherwise in writing, appointed in accordance with the following process. The AAA shall provide a list of eleven (11) arbitrators from its national roster who have the required experience. Within fifteen (15) days of transmittal by the AAA, each Owner that is a party to the dispute resolution shall have the right to strike three (3) names from the list and rank the remaining names from most to least acceptable. If any such Owner does not return the list within the time specified, all persons named therein shall be deemed acceptable. From among the persons who have been approved on both lists, and in accordance with the designated order of mutual preference, the AAA shall invite the acceptance of an arbitrator to serve. If acceptable arbitrators are unable to act, or if for any other reason the appointment cannot be made from the submitted lists, the AAA administrator shall submit another list of eleven (11) arbitrators and repeat the process until a qualified and acceptable arbitrator is found and able to serve. The arbitration shall be held in Anchorage, Alaska. The decision of the arbitrator shall be final and binding upon the Owners, except as provided by A.S et seq., and judgment may be entered thereon in accordance with Applicable Law in any court of competent jurisdiction. The arbitrator shall award to the prevailing Owner or Owners, if any, reimbursement of the cost of the arbitration, which shall mean only the fees charged by the arbitrator, including travel and expenses. The Owners shall bear their own costs and attorneys' fees regardless of which prevails. Notwithstanding the pendency of such arbitration, the Owners shall continue to proceed in good faith to continue to comply with all provisions and objectives of this Agreement. ( c) An Owner or Owners having a Dispute hereunder may also seek resolution -of the Dispute by filing in a court of competent jurisdiction over the matter in Anchorage, Alaska. The prevailing Owner or Owners would be entitled to attorneys' fees as provided by Rule 82 of the Alaska Rules of Civil Procedure. 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 ON AN ALLEGED BREACH OF, OR ALLEGED FAILURE TO PERFORM UNDER, THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE OWNERS ENTERING INTO THIS AGREEMENT. (d) In the case where the Dispute involves a Deadlock, the arbitrator or court shall resolve the Dispute considering (i) the availability, reliability, safety and required regulatory or other governmental compliance of the Project as a whole, (ii) sound economics for the Project based on weighting each Owner's economic analysis of capital, fuel and O&M costs on their respective shares in the Project, and (iii) national standards for the industry Fair Value. The "Fair Value" of the Ownership Share for the purposes of this Agreement shall be determined by a qualified independent appraiser chosen by the Participants Committee within sixty (60) days from the date that the need for a valuation determination was brought before the Participants Committee. The qualified independent appraiser shall determine the Fair Value of the Ownership Share as of the date that the valuation request was brought before the Participants Committee on the following assumptions and bases: v22

66 P ARTICIP A TION AGREEMENT PAGE 40 (a) valuing the net assets of the Project (excluding goodwill and all other intangible assets) as if the sale were an arm's-length sale between a willing seller and a willing buyer, but taking into account the location of the Project and its interconnection to the Transmission System; (b) concern; if the Project is operational, valuing the Project and its assets as a going ( c) excluding any allowance or provision for deferred taxation; and (d) any other factors which the qualified independent appraiser reasonably believes should be taken into account. If any difficulty arises in applying any of these assumptions or bases, then the qualified independent appraiser shall resolve that difficulty in such manner as it shall in its absolute discretion deem appropriate. The qualified independent appraiser shall determine Fair Value within thirty (30) days of its appointment and shall notify the Owners of its determination and shall furnish a written report to the Owners describing the qualified independent appraiser's valuation methodology. The fees and expenses of the qualified independent appraiser shall be borne by the Owners ratably in proportion to their Ownership Shares. The qualified independent appraiser shall act as an expert and not as an arbitrator and its determination shall be final and binding on the Owners (in the absence of fraud or manifest error). The qualified independent appraiser shall have access to all accounting records and all other relevant documents of the Project and the Owners, s~bject only to any applicable confidentiality provisions. ARTICLE 14 TERM Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to other sections of this Agreement, shall continue in effect through the thirtieth (30th) anniversary of the date of Commercial Operation ("Initial Term"). This Agreement shall continue indefinitely past the Initial Term unless an Owner provides written notice to the other Owner of its intent to terminate this Agreement effective as of the last date of the Initial Term and such notice is provided on or before the twenty-fifth (25th) anniversary of the date of Commercial Operation. In addition, at any time after the twenty-fifth (25th) anniversary of the date of Commercial Operation, an Owner may give written notice to the other Owner to terminate this Agreement effective at a time at least five (5) years from the date of such notice. Whenever an Owner provides a termination notice that complies with this Section, the five (5) or more year period pending the effective date of termination in such notice shall constitute the "Termination Notice Period." Notwithstanding anything else in this Agreement to the contrary, if an Owner gives a termination notice, the remaining Owner shall be entitled to, but shall not have the obligation to, purchase the Ownership Share of the Owner that gave a termination notice for the lesser of Fair Value or depreciated book value for such Ownership Share; provided, however, that if the Owner does not desire to purchase such Ownership Share, then the Participants Committee shall, within ninety (90) days after the date of the termination notice, determine whether to pursue a sale of the Project as a going concern on a date as near as v22

67 PARTICIPATION AGREEMENT PAGE 41 possible to the end of the Termination Notice Period andlor to decommission the Project so that it ceases Commercial Operation at the end of the Termination Notice Period. If the Participants Committee approves pursuit of the sale of the Project or its decommissioning, the Project shall be sold or decommissioned consistent with the process established by the Participants Committee. The date that all actions necessary to complete the windup of the Project 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." 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 Managing Participant 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) otherwise; the timely return of all Project Property by sale, auction, partition or and (c) the return of any remaining funds in the Project Account to the Owners; (d) any other steps necessary for the winding-up of the Project, including the disbursement to the Owners proportionately based on Ownership Shares of any balance remaining in the Project Account after the payment of all obligations related in any way to the Project or other Project Property 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. ARTICLE 15 REPRESENTATIONS, WARRANTIES Representations and Warranties. Each Owner represents and warrants to the other Owner 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 Alaska and authorized to conduct business there. (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; Iv22

68 P ARTICIP A TION AGREEMENT PAGE 42 (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; (t) 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 16 MISCELLANEOUS Duty of Confidentiality. In recognition ofthe confidential nature of the business information regarding the Project and the desire of the Owners to not disclose such confidential information regarding their ownership and involvement with the South Central Alaska Power Project and its activities, no Owner may disclose to a Person who is not an Owner any confidential information in any form or medium, including, but not limited to, communications and data, business information, bidding information, studies, reports, proposals, technical information and data, business or financial proposals and projections, sketches, models, samples, computer programs and documentation, business models, drawings and specifications of a confidential nature about the Project, including without limitation, regarding the economics of the Project, the Owners, any information an Owner specifically identifies as commercially sensitive and information respecting the positions of South Central Alaska Power Project on federal or state policy matters. Prior approval of the Participants Committee must be obtained if any Owner desires to disclose any confidential information regarding the Project and the v22

69 PARTICIPATION AGREEMENT PAGE 43 Participants Committee shall timely respond to any such requests. Notwithstanding the foregoing, any Owner may disclose confidential information about the Project without the prior approval of the Participants Committee: (a) as may be required to be disclosed pursuant to the requirements of any law, rule, or regulation or any order, decree, subpoena or ruling or other similar process of any court, governmental agency or governmental or regulatory authority. Prior to making or permitting any of its representatives to make such disclosure, however, the disclosing party shall provide the other party with prompt written notice of any such requirement so that the other party may seek a protective order or other appropriate remedy if necessary; (b) as is required to obtain financing, to comply with any financing or lending requirements or documents, or if required to be filed with applicable agencies, entities or organizations; (c) information regarding South Central Alaska Power Project to its Affiliates, members, officers, directors, employees, agents, lenders, investors, consultants, advisors, contractors, accountants, auditors, or counsel; and (d) publicize to any third-party (including, but not limited to, through press releases and other media) information about the general activities of South Central Alaska Power Project and any otherwise publicly available information that has not entered the public domain through the breach of the confidentiality provisions of this Agreement Successors and Assigns; Assignment. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the Owners hereto, except as otherwise explicitly not permitted herein. No Owner may assign any or all of its rights or obligations hereunder without the prior written consent of the Participants Committee Notices. Notices required by this Agreement from an Owner hereto shall be addressed to the other Owner, at the addresses noted in Exhibit A, and may be updated from time to time by written notice to the other Owner. Any notice, request, consent, or other communication required or authorized under this Agreement to be given by one Owner to the other Owner shall be in writing. It shall either be hand delivered or mailed, postage prepaid, to the representative of said Owner. 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 Project shall be exempt from this Section Force Majeure Notice Obligations. 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 v22

70 PARTICIPATION AGREEMENT PAGE 44 obligation that has been delayed due to the occurrence of a Force Majeure Event shall be similarly extended. To be eligible for an extension of time for completion of performance, the Owner experiencing the Force Majeure Event must provide written notice to the other Owner within twenty-four (24) hours of its knowledge of the Force Majeure Event. The notice shall include the nature ofthe delay and its expected duration. 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 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 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 Survival. Notwithstanding any provlslons 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 hereto that either terminate or transfer their interest in this Agreement even after such termination or transfer Severability. If any of the terms ofthis 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 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 hereto Governing Law. This Agreement shall be interpreted and enforced in accordance with the Laws of the State of Alaska without regard to its conflict oflaws provisions No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the Owners 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 Cooperation. The Owners 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 will materially benefit an Owner without detriment to the other Owners, the Owners commit to each other to make reasonable efforts to cooperate and assist each other in making such change 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 v22

71 PARTICIPATION AGREEMENT PAGE Entire Agreement. This Agreement shall supersede all other prior and contemporaneous understandings or agreements, both written and oral, among the Owners relating to the subject matter of this Agreement 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 ex~cuted by facsimile signature or electronic signature, which shall be considered as an original Further Assurances. Upon the receipt of a written request from an Owner, the other Owner 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 that either transfer or terminate their interest in this Agreement even after the termination or transfer. No Owner shall unreasonably withhold, condition or delay its compliance with any reasonable request made pursuant to this Section 16.14; and if the Ownership Share of an Owner shall be changed or transferred in accordance with this Agreement, the other Owner or its successors and permitted assigns shall execute appropriate amendments of this Agreement recognizing the changes in ownership and the addition or substitution of any new party as an Owner under this Agreement. [The next page is the signature page.] v22

72 P ARTICIPA TION AGREEMENT PAGE 46 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: CHUGACH ELECTRIC ASSOCIATION, MUNICIPALITY OF ANCHORAGE d/b/a INC. MUNICIP AL LIGHT & POWER By~~~~~~~~~ Bradley W. Ev s Its Chief Executive Date:_t)_-_L_~_-O_9 BY4be~~ Its Municipal Manager Date:----""- --->o,;... cq.-...,&'''----=-o --=--~ v22

73 PARTICIPATION AGREEMENT PAGE 47 EXHIBIT A PARTY CHUGACH ELECTRIC ASSOCIATION, INC. Bradley W. Evans Chief Executive Officer Chugach Electric Association, Inc Electron Drive PO Box Anchorage, AK Phone: (907) Fax: (907) Brad_Evans@chugachelectric.com Michael K. Abbott Municipal Manager Municipal Light & Power 1120 E. 1st Ave. Anchorage, AK Phone: (907) Fax: (907) PoseyJM@muni.org MUNICIPAL LIGHT & POWER v22

74 PARTICIPATION AGREEMENT PAGE 48 EXHIBITB OWNER Chugach ML&P OWNERSHIP SHARE IN PERCENTAGES (percentages control) 70% -- (approximately 140 Megawatts) 30% -- (approximately 60 Megawatts) Total: 100% -- (approximately 200 Megawatts) v22

75 PARTICIPATION AGREEMENT PAGE 49 EXHIBITC GUIDING PRINCIPLES Direct Charge - During the construction phase period, a majority of the costs associated with the Project will be the result of direct charges. Departments and or areas that will be involved with direct charging include the following; Production - Staff time including managers and analysts overseeing the Project, as well as professional services, and related materials. Accounting - Project resource staff directly assigned to the Project. Purchasing - Staff involved with procurement directly related to the Project. Information Services - Staff time directly involved with reports and or technical assistance associated with the Project. Office Services - Staff labor and or materials/equipment involved in large scale copying or document handling. Other Departments - Staff involvement requiring periods of time directly related or attributable to the Project. Indirect Charge - Several areas identified below will have costs associated with the Project although they may be too general in nature or difficult to directly assign to the Project. In such cases, these costs will be allocated indirectly to the Project. Some of those costs are noted below: Information Services - Network & Technical services and help desklpc support are standard information services functions that support the entire company. These costs will be allocated to the Project each month on a proportionate basis of the labor directly assigned to the Project divided by total company labor multiplied by the labor specific to Network & Technical services and help desklpc support. Production - Senior level management that do not charge directly to the Project and are one level removed from day to day operations of the Project may charge a portion of their labor to the capital production overhead pool. The allocation will be the result of direct production capital Project labor each month to total capital production monthly labor multiplied by total monthly senior level management charged to capital production accounts. Production Warehouse/Garage - A decision will be made at a later date based upon the extent to which these areas support the overall Project v22

76 PARTICIPATION AGREEMENT PAGE 50 EXHIBITD LINE-SIDE BUS CONNECTIONS EXHIBIT 0 South Central Alaska Power Plant (SCAPP) Une-Side Bus Connections (111u st rat iv e) International 138kV Substation Breaker and 1/2 Scheme 6 Bays 11 Positions 17 Breakers 3x1 Project Configuration Pt. Woronzof#1 ~ , r ~ International 35kV #1 I I Pt. Woronzof#2 ~ , I'" ~ International 35kV #2 I I Retherford ~ , I 1"' ~ I Project , I 1"' ~ I University ML&P Project 2 ~ , I I I"' ~ Project 4 Project 3 ~ , v22

77 PARTICIPATION AGREEMENT PAGE 51 EXHIBITE FORM OF LEASE AGREEMENT v22

78 P ARTICIP A TION AGREEMENT PAGE 52 EXHIBITF FORM OF O&M AGREEMENT I v22

79 PARTICIPATION AGREEMENT PAGE 53 SCHEDULE 3.02(a) OWNER FINANCING PLANS v22

80 PARTICIPATION AGREEMENT PAGE 54 Chugach Electric Association, Inc. South Central Alaska Power Project (SCAPP) Financing Plan June 2, 2008 Chugach Electric Association, Inc. (Chugach) intends to fund its proportionate share of the costs of the South Central Alaska Power Project (SCAPP), through establishment of a highly liquid Commercial Paper (CP) program in the amount up to $300 million. The facility will be backstopped by a combined senior unsecured credit facility from National Rural Utilities Cooperative Finance Corporation in the amount of $100 million and KeyBank in the amount of $200 million. The facility will be in place for three to five years as required by Chugach. This program was presented to the Chugach Finance Committee on June 11, From that meeting a recommendation to establish the program was made to the Chugach Board of Directors. The Chugach Board of Directors approved the establishment of this financing instrument at their June 25, 2008 meeting. Letters of Commitment from the combined lenders who will backstop the program will be provided after Chugach Board approval. Chugach intends on accessing the public debt markets in 2010, 2011 and 2012 to convert outstanding CP balances into long term debt and the refinance the 2011 Series A and 2012 Series A maturing long term bonds. Chugach maintains credit ratings from Moody's of A2, Standard and Poor's of A- and Fitch Rating Services of A-. These ratings will insure Chugach access to capital as needed v22

81 PARTICIPATION AGREEMENT PAGE 55 Municipal Light & Power South Central Alaska Power Project ("SCAPP") June 18, 2008 Municipal Light & Power ("ML&P") intends to fund its proportionate share of the costs of the South Central Alaska Power Project ("SCAPP") through establishment of a commercial paper ("CP") program in an amount up to $90 million and through the use of retained earnings up to $10 million. The facility will be backstopped by a senior credit facility in the amount of $90 million. The facility will be in place for three to five years, as required by ML&P. This program will be presented to the Municipal Assembly on July 29, 2008 and August 12, 2008, with approval from the Municipal Assembly expected to be gained at the August 12,2008 meeting. Letters of Commitment from the lender who will backstop the program will be provided prior to ML&P's first draw on the CP program. ML&P intends on accessing the public debt markets in 2010 and 2012 to convert outstanding CP balances into long-term debt. Moody's Investors Service on September 28, 2005 assigned an "AI" rating to the Utility's Senior Lien Electric Revenue Refunding Bonds, and upgraded to "AI" from "A3" its ratings on approximately $88 million of other outstanding parity obligations, affecting approximately $195 million in debt, including the 2005 refunding offering. Moody's Investors Service also assigned an "A2" rating to approximately $25.7 million in subordinated taxable refunding revenue bonds. Standard & Poors Rating Services on September 25,2005 raised its rating to "A+" from "A" on all of the Utility's $70.1 million outstanding parity bonds, and assigned its "A+" rating to the Utility's $107.1 million Senior Lien Electric Revenue Refunding Bonds Series 2005A and $25.9 million Junior Lien Electric Revenue Refunding Bonds Series 2005B (taxable). In December 2007, Standard & Poors Rating Services affirmed its "A+" underlying rating on all the Utility's outstanding senior- and junior-lien revenue bonds. Fitch Ratings on July 28, 2006 assigned a rating of "A+" from "A" to the Utility's Senior Lien Electric Revenue Bonds and Junior Lien Electric Revenue Bonds v22

82 SCHEDULE 3.03(a) PROPERTY INTENDED TO BE PROJECT PROPERTY/PROJECT COSTS INCURRED PRIOR TO EFFECTIVE DATE v22

83 South Central Alaska Power Plant - Total Actual and Estimated Costs As of July 8, 2008 Labor Total Labor costs include costs for Chugach's Corporate PI annin g, Ge neration Techn ical Services, Enviro nmental Engineering, Land Services and Transmission Services Departments. ML&P is only expected to share in the Environmental En costs. Total Labor 133, ,219 Materials & Supply The majority of the Materials & Supply costs are associated with emission test 805 Total Materials & Su ,197 Transporation Transportation costs include travel to SGT sites and travel related to emission testing. ML&P is only expect to share in the 084 tion Total ,564 Professional Services The majority of Professional Services costs are associated with engineering, emissions, permitting, legal services and economic studies. ML&P is only expected to pay for costs that directly benefit the project and not Chugach specific Total Professional Services 914 Other Majority of Other costs are for expenses related to the Participation meetings and meetings with the gas turbine vendors. Total Other 1,974 1, Actual and Estimated Costs 1,066, , , v22

84 STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this J.~'"' day of.,wg()~,2008, before me the undersigned, a Notary Public in and for Alaska, personally appeared A\"""1lU -f.~ me known and know to me to be MvN/~/eAL ~fi( - MoIr., and he acknowledged to me that he had in his official capacity aforesaid executed the foregoing instrument as the free act and deed of the said corporation for the uses and purposes therein stated.

85 STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ~ day of IrtJ~v.s;;:r, 2008, before me the undersigned, a Notary Public in and for Alaska, personally ~ppeared N fputi Ai. ~VAN$ to me known and know to me to be ('/)io- (!.fiogac*! flemr({!'-as9j and he acknowledged to me that he had in his official capacity aforesaid executed the foregoing instrument as the free act and deed of the said corporation for the uses and purposes therein stated.

86

87 August 28, 2008 AGREEMENT TO IMPLEMENT AO This Agreement between Municipal Light & Power and Chugach Electric Association is made and entered into between the Parties for the purpose of implementing Assembly Ordinance as amended by the Anchorage Assembly. Now therefore the parties agree as follows: 1. Prior to October 1, 2008, the parties will jointly retain an expert in utilization of waste heat for the purpose of evaluating and developing economically viable options to use waste heat at the South Central Alaska Power Project (SCAPP). Chugach shall pay 70% of the costs and ML&P shall pay 30% of the cost. Chugach shall manage the contract and procure the contractor in accordance with Chugach's standard contracting procedures. The cost of the contract shall not exceed $75, Appendix A describes a transmission line that is required to connect the SCAPP plant to the ML&P transmission and distribution system. The Parties agree that the cost of this line will not exceed $ 5.0 million. The Parties further agree that Chugach shall pay 50 % of the total cost of this line and ML&P shall pay 50%. Construction of the transmission shall be managed by Chugach and the construction contract shall be procured in accordance with Chugach normal contracting procedures. 3. The Parties have previously advised Matanuska Electric Association of their willingness to allow MEA to participate in the SCAPP. The Parties agree that they will continue to work cooperatively with each other and with MEA to facilitate MEA's evaluation of the SCAPP so that MEA may make a timely decision whether to participate in the SCAPP. Municipal Manager CHUGACH ELECTRIC ASSOCIATION, INC.

88 STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ~ -; day of Avt2aUSI, 2008, before me the undersigned, a Notary Public in and for Alaska, personally appeared MICJ+f1'r6/." '/!:...M6:rrr-to me known and know to me to be (rlun{c,{p/t(' 4M~f( - MIJir,and he acknowledged to me that he had in his official capacity aforesaid executed the foregoing instrument as the free act and deed of the said corporation for the uses and purposes therein stated. IN WITNESS ~~ all~reto M set my hand seal. ~+I().. h.p~ ~ ~ ~OTAbj~'~~ ".. " 'Tor -... "- 10,- :,ousl\c : ~ :::. '.,.:..,,: ~ NOTARY PUBLIC IN AND FO~AL SKA %.:~~.~~.., ~j MYCOMMISSIONEXPIRES:S~6/~D/O ///.1 * \\' :I)}}})}]I})".

89 STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ~ day of ~tlst, 2008, before me the undersigned, a Notary Public in and for Alaska, personally jippeared 8ItA"1:x.ey t.u. GV.ANS to me known and know to me to be aeo -affu~1i&f t?te(kr~/a,.a41j, and he acknowledged to me that he had in his official capacity aforesaid executed the foregoing instrument as the free act and deed of the said corporation for the uses and purposes therein stated. r\~llit(i/ IN WITNESS W!\{B~,Jt_{(~~to set my hand seal. ~ +t;.... ~..:~ ; ~(,~ L ~... ~OTA~ ~ J. ~. --.)..',:: ~ := : ~8L1C : ~ ---..,..L--'r ~.. ~~ --.,,:' ~ NOT AiPfi>LIC IN AND FOR ALASKA % ".,Of.~,!:, \\~. MY COMMISSION EXPIRES: S~/tI.()1O ;...'././,.. ", :I)ll)})} }I\\'

90 ~ 80 ~ 11 ~HULUH.A' 13 auto-transformer 138kV III connected circuit breaker, disconnects, instrument transformers, controls and transformer are UHJl"",",'" not to ex<:eeu Last printed 9/9/ AM

91

92 OPERATION AND MAINTENANCE AGREEMENT BvANDAMONG CHUGACH ELECTRIC ASSOCIATION, INC., AND MUNICIPAL LIGHT & POWER As OWNERS AND CHUGACH ELECTRIC ASSOCIATION, INC., As OPERATOR v9(FINAL)

93 OPERA non AND MAINTENANCE AGREEMENT PAGEi TABLE OF CONTENTS 1. CONSTRUCTION AND DEFINITIONS TERM OF AGREEMENT OPERATOR'S GENERAL DUTIES AND RIGHT TO SUBCONTRACT OPERATOR'S SPECIFIC DUTIES ACCOUNTS, RECORDS AND AUDITS BUDGET EXTRAORDINARY COSTS EMERGENCY EXPENDITURES DISBURSEMENT OF FUNDS ACCESS TO OPERATOR'S FACILITIES INSURANCE AND INDEMNITY DISPUTE RESOLUTION... 1a 13. NOTICES. TIME AND HOLIDAYS COMPUTATION. DESIGNATED REPRESENTATIVES REMEDIES CUMULATIVE AVAILABILITY OF INFORMATION EFFECT OF TERMINATION FORCE MAJEURE NOTICE OBLIGATION THIRD PARTY BENEFICIARIES ASSIGNMENT OF AGREEMENT EXHIBITS MULTIPLE COPIES AMENDMENT v9(FUN1\L)

94 OPERATION AND MAINTENANCE AGREEMENT PAGEii 23. WAIVER NOT CONTINUING SEVERABILITY CONDUCT IN ACCORD WITH APPLICABLE LA W SECTION HEADINGS Exhibit A - Exhibit B - Project Facility Description Typical Mobilization Duties and Activities v9(FINAL)

95 OPERATION AND MAINTENANCE AGREEMENT PAGE 1 OPERATION AND MAINTENANCE AGREEMENT FOR THIS OPERATION AND MAINTENANCE AGREEMENT FOR SOUTH CENTRAL ALASKA POWER PROJECT ("Agreement") dated as of August 28, 2008, is entered into by and among CHUGACH ELECTRIC ASSOCIATION, INC., an electric cooperative organized under the laws of the State of Alaska, and MUNICIPALITY OF ANCHORAGE d/b/a MUNICIP AL LIGHT & POWER, a municipal electric utility organized under the laws of the State of Alaska, as OWNERS (each individually an "Owner," and collectively, the "Owners") and the Operator (as such term is defined below). WITNESSETH WHEREAS, the Owners are jointly developing the South Central Alaska Power Project ("Project") to generate Electric Power (as such term is defined below); and WHEREAS, the Operator has been identified in the South Central Alaska Power Project Participation Agreement ("Participation Agreement") made as of August 28, 2008, by the Owners as an appropriate entity to operate and maintain the Project; and WHEREAS, the Owners intend to enter an engineering, procurement and construction contract or other contractual arrangement with a third party to build the Project; and WHEREAS, the Operator has agreed to provide services for the Project with respect to its Mobilization (as such term is defined below) and, after the Project reaches Commercial Operation (as such term is defined in the Participation Agreement), operate and maintain the Project, all in accordance with the terms and conditions of this Agreement. 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: 1. Construction and Definitions. (a) Rules of Construction. This Agreement is executed in accordance with the terms of the Participation Agreement. Nothing in this Agreement is intended to alter the rights and obligations of the Owners under the Participation Agreement. In the event of a conflict between a term or provision in this Agreement and the Participation Agreement, the term or provision in the Participation Agreement shall control. In the event of a conflict between any provision in the body of this Agreement and any provision contained in an exhibit hereto, the former shall control. (b) For purposes of this Agreement, the following definitions apply: v9

96 OPERATION AND MAINTENANCE AGREEMENT PAGE 2 (i) "Agreement" means this Operation and Maintenance Agreement for the South Central Alaska Power Project. (ii) "Automated Maintenance Management System" means an automated system with a database that stores equipment maintenance records, work perfonned, work orders, identification of equipment, equipment maintenance activities, and may also be used for inventory control, scheduling, equipment tag-out and lock out processes, man-hour control and other human resource type activity if so desired. (iii) "Dispute" shall have the meaning given to such tenn in Article 13 of the Participation Agreement. (iv) "Effective Date" means August 28, (v) "Emergency" means an event as declared by the Operator resulting from an unforeseen combination of circumstances or the resulting state that requires immediate action to protect or preserve the Project (or its operations), Project personnel, or public health and safety. (vi) "Extraordinary Costs" means costs for operations, maintenance, repair or equipment replacement which were not anticipated to materialize in any calendar year, and not provided for in the Operating Plan and Budget. (vii) "Mobilization" means those O&M activities and duties typically required before Commercial Operation, including without limitation those listed on Exhibit B attached hereto. (viii) "O&M" means Mobilization, operation and maintenance of the Project and includes the duties set forth in this Agreement. (ix) "OC" shall have the meaning given to the tenn Operating Committee in the Participation Agreement, but shall also include actions of the PC to the extent that such actions modify or supersede an action of the OC relating to this Agreement. (x) "Operating Plan and Budget" means the budget for the Mobilization, operation and maintenance cost portion of annual Project Costs as adopted and amended by the oc. (xi) "Operation and Maintenance Standards" means the Project operation and maintenance manual, and equipment installation, operation, and maintenance manuals and other procedures adopted by the OC, OEM instructions, pennit requirements and electric utility engineering standards. (xii) "Operator" means Chugach Electric Association, Inc. or its authorized assignee and the employees, agents, and contractors who are directly responsible, respectively, to either v9

97 OPERATION AND MAINTENANCE AGREEMENT PAGE 3 (xiii) 11 (a)(i). (xiv) preamble. "Operator's Insurance" shall have the meaning set forth in Section "Owner" shall have the meanmg given to that term in the (xv) "Ownership Share" shall have the meaning given to that term in the Participation Agreement. (xvi) "Party" or "Parties" means each or all the signatories to this Agreement or a Party's authorized assignee. (xvii) "Power" or "Electric Power" means electric energy or electric capacity, or both, except where the context requires a distinction, in which case electric energy is expressed in kilowatt hours, and electric capacity is expressed in kilowatts. (xviii) "Project" means the South Central Alaska Power Project electric generation facility and the associated transmission and substation facilities described in Exhibit A. (xix) "Project Capital Budget" means the budget for the capital portion of annual Project Costs as adopted and amended by the OC. (xx) "Project Costs" shall have the meaning given to that term in the Participation Agreement. (xxi) "Prudent Utility Practice" shall have the meaning given to that term in the Participation Agreement. (xxii) "South Central Alaska Power Project Participants Committee" or "PC" shall have the meaning given to the term Participants Committee in the Participation Agreement. (xxiii) "Willful Action" shall have the meaning given to that term in the Participation Agreement. 2. Term of Agreement. (a) This Agreement shall take effect as of the Effective Date, subject to execution by the authorized representatives of the Parties. (b) The term of this Agreement shall be the same as the term of the Participation Agreement, unless modified by written agreement of all of the Owners. (c) In the event the PC reasonably determines that the Operator's performance of its obligations under this Agreement, without immediate remedial actions, could cause substantial damage to the Project or endanger public health or safety, the PC shall v9

98 OPERATION AND MAINTENANCE AGREEMENT PAGE 4 promptly notify the Operator and shall identify the areas where performance must be remedied. The Operator shall submit to the PC a written plan for remedial action to correct its performance within twenty-four (24) hours of such notice. Ifthe Operator fails or refuses to timely submit to a remedial action plan that is reasonably satisfactory to the PC, the PC or its designee shall have the right to temporarily take over the duties of the Operator until a remedial action plan reasonably satisfactory to the PC is agreed to by the Operator. If the Parties fail to agree to a remedial action plan within thirty (30) days of the date of notice provided by the OC, the PC may immediately terminate this Agreement. 3. Operator's General Duties and Right to Subcontract. To the extent authorized by the Project Capital Budget and Operating Plan and Budget, or as otherwise funded in accordance with this Agreement, the Operator shall: (a) Mobilize, operate and maintain the Project so as to make Power available to the Owners in an amount equal to the amount the Owners may schedule from the Project, within the limitations imposed by available Project capability and the scheduling procedures adopted by the OC; (b) Subcontract work in connection with the operation or maintenance of the Project or Project related facilities to the extent authorized in the Operating Plan and Budget or with the written approval of the OC, which shall not be unreasonably withheld. Each subcontract will contain a specific clause providing that it is subject to the provisions of this Agreement. ( c) In performing its duties hereunder, Operator, or any subcontractor, IS performing solely as an independent contractor. (d) Secure and possess all Project equipment, including office and administrative equipment, Project phone and network systems. Operator will develop an identification system for all Project property and maintain inventory records. 4. Operator's Specific Duties. To the extent authorized by the Project Capital Budget and Operating Plan and Budget, or as otherwise funded in accordance with this Agreement, the Operator shall, with respect to the Project: (a) Coordinate Mobilization, operation, maintenance, repair and other work schedules with the Owners in accordance with procedures developed by Operator and approved by the OC; (b) Operate, maintain, and repair the Project in accordance with the Operation and Maintenance Standards. In addition, the Operator shall use and update the Automated Maintenance Management System or such equivalent system as the OC may direct. The Operation and Maintenance Standards shall be maintained at the Project site. Any revisions to the Operation and Maintenance Standards shall be effective within a period of time after notice having due regard to the nature of the revisions requested and necessary Operating Plan and Budget revisions; v9

99 OPERATION AND MAINTENANCE AGREEMENT PAGES (c) Provide all material, labor, engineering and other technical support, subcontract management, and training to mobilize, operate, maintain, and repair the Project, and all tools, equipment, spare parts, materials, and supplies needed to perform work under this Agreement in accordance with the Operation and Maintenance Standards and written directives by the OC; (d) Comply with all applicable federal, state, and local government laws, regulations and permits. If the Operator elects to contest an order issued by a local government, state or federal agency, the Operator shall promptly notify the ~C; (e) Provide security and access to the Project in accordance with an OC approved plan; (f) Read, maintain, and operate all Project metering devices, record such readings, and maintain or forward data, forms, relevant graphs, and/or magnetic tapes as required by the ~C; (g) Make annual recommendations to the OC for: (i) Mobilization, operation, maintenance, repair, replacement, and modification of Project facilities; (ii) installation of additional protective relaying, instrumentation, control systems, or other apparatus as necessary to maintain or improve the Project and interconnected system reliability, integrity, efficiency, and safety; (iii) a five (5) year schedule of estimated equipment modifications, replacements, additions, and disposals; (h) Prepare monthly and year-end operating and financial statements, in a form acceptable to the OC relating to the performance of its obligations under this Agreement; (i) Provide qualified personnel with the ability to perform the duties assigned to the Operator under this Agreement; G) Prepare and conduct an annual training program that meets the minimum training standards established by the ~C. The OC may require the Operator to undertake additional training which the OC deems necessary, however, funding for such additional training is the responsibility of the Owners; (k) Following a protective relay or alarm action, and upon observation or notification, interpret the cause, identify corrective measures, and take corrective action as the situation warrants. The Operator shall document any such actions utilizing an incident report type document and submit copies with the monthly report. Any incident that results in loss of Power shall be reported to the OC in writing within five (5) days; v9

100 OPERATION AND MAINTENANCE AGREEMENT PAGE 6 (1) Take prudent measures to protect Project equipment, Project personnel, and the general public from hazards arising from Project equipment failure such as electrical faults, vandalism, and mechanical failure and repair and report damaged facilities to the OC, as soon as possible following each occurrence; (m) Record the operating characteristics of the Project's equipment and machinery as required; (n) Update, keep and make available to the OC or any Owner, the required Project documents, as-built drawings, and other records, including records required by any Project-related insurance agreements; (0) Arrange for and administer contracts, subcontracts, or agreements related to the O&M of the Project; provided, however, that Operator agrees to comply with any written procedures adopted by the OC concerning the review and approval of any such contracts, subcontracts, or agreements; (P) Support the Project by coordinating related technical and operating activities with the Owners; and (q) Perform such other additional duties related to the Mobilization, operation, maintenance and repair of the Project as may be included in the Operating Plan and Budget. 5. Accounts, Records and Audits. In keeping records for work performed under the Agreement, the Operator shall utilize the accounting system required of public utilities by the Federal Energy Regulatory Commission for electric plants. The Operator shall make such records of work performed under this Agreement with respect to the Project available for inspection at reasonable times and upon advance written notice, as herein provided. The Operator shall retain copies of all invoices, payroll records, and other supporting documents for work performed under this Agreement on the Project sufficient for an audit of all expenditures, for three (3) years following the close of each fiscal year, which shall be the same as a calendar year. The Operator will furnish the OC with operating and financial statements related to work performed under the Agreement as may be reasonably requested by the Oc. 6. Budget. (a) In accordance with schedules provided by the OC, the Operator shall prepare and submit each year to the OC a draft Project Capital Budget, draft five year capital plan and a draft Operating Plan and Budget for the Project for the following calendar year. (b) The draft Project Capital Budget and draft Operating Plan and Budget shall be based upon prudent estimates and anticipated capital and O&M requirements and expenditures, and reflect appropriate accounting and budgetary principles for utilities v9

101 OPERATION AND MAINTENANCE AGREEMENT PAGE 7 The draft Project Capital Budget shall be prepared in a format and schedule provided by the OC. (c) Not less than ninety (90) days prior to the beginning of a calendar year, the Project Capital Budget and the Operating Plan and Budget shall be adopted for the calendar year by the OC. (d) The Operator shall perform its duties in a manner consistent with the Project Capital Budget and Operating Plan and Budget except as provided in Sections 7 and 8 below. If the Operator makes a determination during any calendar year that it cannot perform its obligations under this Agreement without an increase in the expenditures authorized under the Operating Plan and Budget, the Operator shall report such finding to the OC and shall submit a revised budget for the OC's review and approval. 7. Extraordinary Costs. (a) If the Operator learns of an event or other contingency which involves Extraordinary Costs, the Operator shall promptly notify the OC of the circumstances and request authorization to make such expenditures. (b) After notice is given as provided for in Section 7(a), and if required by the OC, the Operator shall develop a scope, schedule, budget and proposed plan of work and deliver the same with a request to proceed as soon as practicable. The OC shall respond in writing to the Operator's request as soon as practicable after the receipt of the plan. Upon written approval by the OC, the Operator shall perform such work consistent with the plan. The Operator shall not incur any Extraordinary Costs without the written approval obtained from the OC, except as provided in Section 8 below. 8. Emergency Expenditures. The Operator shall take such actions as it reasonably believes are necessary in an Emergency, including incurring unbudgeted costs. If, in the reasonable judgment of the Operator, the Emergency requires the Operator to incur costs prior to obtaining written approval from the OC, the Operator shall notify each member of the OC of the Emergency as promptly as practicable with due regard to the Emergency. 9. Disbursement of Funds. (a) The normal and routine costs of performing its obligations under this Agreement shall be paid by the Operator out of the Project Account (defmed in and established by the Participation Agreement) after the Owners deposit their respective amounts into the Project Account pursuant to Section 7.01 of the Participation Agreement. Operator shall have no obligation to advance any funds on behalf of any Owner. (b) The Operator shall request payments of funds as required by Article 7 of the Participation Agreement v9

102 OPERATION AND MAINTENANCE AGREEMENT PAGE 8 (c) The Owners, through the OC, shall expeditiously arrange for payment of all invoices, including invoices for Emergency expenditures, and shall work with the Operator to promptly resolve any disputed billings as provided in the Participation Agreement. All such invoices shall be subject to audit and approval under Sections 6.08(d) and 7.03 of Participation Agreement. 10. Access to Operator's Facilities. Owner personnel or agents shall be granted reasonable access to the Project and the Project-owned equipment and facilities on the Operator's premises upon reasonable notice and subject to the security measures contemplated by Section 4( e) of this Agreement, for the purpose of inspection and testing, provided that such inspection and testing does not interfere with normal operations and maintenance of the Project and complies with all requirements adopted by the OC. 11. Insurance and Indemnity. ( a) General. (i) During the term of this Agreement, and in accordance with and under the direction and specifications formulated by the OC, the Operator shall use its best efforts to procure or cause to be procured, and maintain in force, the types and levels of insurance the Owners deem necessary and appropriate for the Project with respect to the Operator and its duties under this Agreement at levels normally carried by utilities providing O&M services for projects such as the Project, including without limitation, maintaining insurance satisfactory to the OC coyering injury to persons or property suffered by any Party or a third party, as a result of errors, omissions, or operations which arise both out of and during the course of this Agreement by the Operator or by any of its contractors (the "Operator's Insurance"). (ii) The Operator's Insurance shall be the primary coverage for the exposures delineated in subsection (a)(i) above with respect to each of the Owners, its officers, agents, and employees, the OC, its officers, agents, and employees, and the Operator, its officers, agents, and employees, as named insureds. Any additional insurance or self-insurance separately maintained by the Owners shall be in excess of the Operator's Insurance and shall not contribute to it. (iii) The cost of the required insurance shall be paid by the Operator and included in the Operating Plan and Budget as an operating cost. (iv) Policies maintained under this Agreement must provide that any cancellation, non-renewal or material change be upon thirty (30) days written notice to all named insureds. Insurance Companies shown on the certificate of insurance must be acceptable to the OC. The OC shall not unreasonably withhold approval of such Insurance Company v9

103 OPERATION AND MAINTENANCE AGREEMENT PAGE 9 AUGUST 28,2008 (v) The Operator shall, at least thirty (30) days prior to cancellation, non-renewal, or material change, provide the OC with written evidence of insurance which replaces or reinstates the required insurance coverage. (vi) A copy of the insurance policies required of the Operator will be furnished to the OC prior to beginning work under this Agreement. Prior to February 1 of each year thereafter, evidence of insurance shall be provided by the Operator. (vii) The Operator's obligation to obtain and maintain insurance coverage pursuant to this section shall be subject to the general availability of such coverage under reasonable terms and conditions. If one or more of the required insurance coverages is not available under reasonable terms and conditions, the Operator shall, under the guidance and direction of the OC, use its best efforts to obtain substantively equivalent insurance coverage acceptable to theoc. (viii) If, after utilizing its best efforts, the Operator is unable to obtain the required insurance coverage under reasonable terms and conditions, as reasonably determined by the OC, the Operator shall request a waiver of the relevant insurance requirement. The request shall outline steps taken by the Operator to obtain such insurance and shall disclose quotations received for coverage. To the extent the waiver will not materially affect the safe and prudent operation of the Project, the OC will not unreasonably withhold approval of the requested waiver. (ix) The OC shall maintain a policy or policies of property damage insurance insuring the Project against loss resulting from fire, explosion, accident, or equipment breakdown for the probable maximum loss of the Project, with deductible amounts as established after consultation with the Oc. The policy or policies shall contain a waiver of subrogation with respect to the Operator and the OC and list the Operator as an additional named insured to the extent of its interests. The OC shall annually, prior to February 1 st each year, furnish evidence of insurance to the Operator. (x) All insurance required under this Agreement shall be issued by insurance companies authorized to do business in the State of Alaska and rated A Nil or better in the most recent edition of Best's Insurance Reports. (b) Workers' Compensation Insurance and Employers' Liability Insurance. (i) The Operator shall provide and maintain, for all employees engaged in work under this Agreement, workers' compensation insurance and employers' liability coverage as required by AS and by the laws of all applicable states, and any other coverages that may apply where the work under this Agreement is performed, covering all employees engaged in the performance of the work under this Agreement v9

104 OPERATION AND MAINTENANCE AGREEMENT PAGE 10 (ii) The Operator is responsible for requiring that workers' compensation insurance is carried as required by applicable statute for any of its subcontractors who directly or indirectly provide services under this Agreement. (c) Commercial General Liability Insurance. The Operator shall maintain commercial general liability insurance in accordance with and under the direction and specifications formulated by the OC from time to time. The Operator shall secure insurance as required to meet its obligations under this subsection. The Owners and the OC shall be included as additional insureds as respects insurance required in this subsection and shall not, by their inclusion, be responsible to the insurance carrier for payment of the premium. These insurance policies must also contain a provision providing for cross liability or severability of interest. (d) Contractor's Insurance. Any contract entered into with a subcontractor, other than an Owner, by the Operator to perform part of its obligations hereunder shall require the same insurance provisions stated in paragraphs (b) and ( c) of this Section 11. The Operator may request a waiver of part or all of such provisions where such waiver will not materially affect the Project and the Operator determines the waiver is necessary to its performance of this Agreement. The OC will not unreasonably withhold approval of such waiver. ( e) Indemnity. The Operator shall indemnify, defend, and hold the Owners harmless from and against any claim of, or liability for, the Operator's Willful Actions. The Operator is not required to indemnify, defend, or hold harmless an Owner for a claim of, or liability for, the ip.dependent negligent acts, errors, and omissions of an Owner. If there is a claim of, or liability for, a joint Willful Action of the Operator and an Owner, the indemnification, defense, and hold harmless obligation of this provision shall be apportioned on a comparative fault basis. (f) Uninsured Loss. The costs of any loss or damage to or arising out of the Project not covered by insurance, including uninsured deductibles and indemnity (including the Operator's indemnity under Section lice), above), shall be included in the Operating Plan and Budget as an operating cost unless and to the extent caused by the Willful Action of the Operator. The Operator shall be responsible for paying any such costs if and to the extent the loss or damage is determined to be caused by or arises out of the Operator's Willful Action. For the avoidance of doubt, the Operator acknowledges its responsibility, as an Owner, to pay its percentage share of annual Project Costs, including its Ownership Share of all amounts included in the Project Budget. (g) The Operator shall not be responsible for loss or damage to or arising out of the Project under any circumstances except for its Willful Actions. 12. Dispute Resolution. (a) Pending resolution of a disputed matter, the Operator and Owners will continue performance of their respective obligations pursuant to this Agreement. If the Operator and PC cannot reach timely mutual agreement on any matter in the v9

105 OPERA non AND MAINTENANCE AGREEMENT PAGE 11 administration of this Agreement, the Operator shall, to the extent necessary for its continued performance, make a determination of such matter without prejudice to the rights of the other parties. Such determination shall not constitute a waiver of any other remedy belonging to the Operator or any Owner. (b) All Disputes shall be resolved according to the provisions in Article 13 of the Participation Agreement. 13. Notices. Time and Holidays Computation. Designated Representatives. (a) Any notice or demand involving a claim of default, breach of the Agreement, or notice of a Dispute shall be sent to the appropriate Party by registered or certified mail. (b) Any notice required to be given to any Party by this Agreement shall be effective when it is received by such Party. In computing any period of time from such notice, the period shall commence at 12:01 p.m. on the date of receipt of such notice. Notice to Operator required by this Agreement shall be in writing directed to the Chief Executive Officer of Chugach Electric Association, Inc., at its address set forth in the Participation Agreement. Notice to the OC required by this Agreement shall be in writing addressed to each member of the OC at the address of the respective Owners set forth in the Participation Agreement. (c) If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday, payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed. 14. Remedies Cumulative. No remedy conferred upon or reserved to the Parties under this Agreement is intended to be exclusive of any other remedy or remedies existing at law or equity. 15. Availability of Information. The Parties shall make available to each other, for inspection and copying during business hours, all books, records, plans and other information relating to any calculations or determination to be made under this Agreement. 16. Effect of Termination. (a) Not less than seventy-five (75) days prior to the date of any scheduled termination of this Agreement, the Parties shall meet for the purpose of discussing arrangements necessary for the orderly takeover of the duties of the Operator by the OC. At or before the meeting the Operator shall submit to the OC a takeover plan which sets forth the actions which, in the opinion of the Operator, are reasonably required to accomplish the takeover, and any budget amendments necessary to accomplish the plan. The OC shall review and either approve or modify the plan and budget. The Operator shall perform in accordance with the approved plan, subject to any budgetary constraints v9

106 OPERATION AND MAINTENANCE AGREEMENT PAGE 12 The OC shall secure funding for and pay any Extraordinary Costs reasonably incurred by the Operator in performing its duties hereunder, including close-out and demobilization costs. (b) Following termination of this Agreement for any reason, the OC shall have the right and a reasonable amount of time, not to exceed six (6) months, to arrange disposition of Project-owned equipment on the Operator's premises or elsewhere. 17. Force Majeure Notice Obligation. (a) No Party shall be liable to other Parties for, or be considered to be in breach of or default under this Agreement on account of, any delay in performance or any delay or failure to deliver, receive or accept delivery of energy due to any of the following events: (i) A cause or event beyond the reasonable control of, and without the fault or negligence of, a Party (force majeure), including, without limitation, acts of God (flood, volcanic eruption, 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 perjormance, and the inability, despite due diligence, to obtain any licenses, permits or approvals required by any Governmental Authority. (ii) Any action taken by such Party which is reasonably necessary or prudent to protect the operation, performance, integrity, reliability or stability of the Project or of such Party's electric system or any electric system with which such Party's electric system is interconnected, whether such actions occur automatically or manually. (b) In the event of any delay excused under this Section 17, the time for performance thereby delayed shall be extended by a period of time reasonably necessary to compensate for such delay. No cost adjustment will be allowed, only time extensions as appropriate. To be eligible for an extension of time for completion of performance, the Party experiencing the force majeure event must provide written notice to the other parties within 24 hours of its knowledge of the force majeure event. The notice shall include the nature of the delay and its expected duration. Nothing contained in this paragraph shall require any Party to settle any strike, lockout or other labor dispute. Each Party shall give the other Parties prompt written notice of any delay which the Party giving notice considers to be an excusable delay of its performance. 18. Third Party Beneficiaries. The OC, as representative of the Owners, is a third party beneficiary of this Agreement, with the legal right to enforce the provisions hereof. In any action by the Owners or OC for damages, the Operator shall have the right to assert against the v9

107 OPERATION AND MAINTENANCE AGREEMENT PAGE 13 Owners any defense which it could have asserted against the OC. The raising of any such defense by the Operator shall not affect any right of the Owners under the Participation Agreement. 19. Assignment of Agreement. This Agreement shall be binding upon and inure to the benefit of the successors, legal representatives or assigns of the Parties. However, the Operator may not assign the Agreement or any part thereof without the prior written consent of all of the other Parties. No such assignment shall operate to relieve the Operator of its obligations under this Agreement. 20. Exhibits. The provisions of the following exhibits attached hereto are incorporated by reference herein: Exhibit A - Exhibit B - Project Facility Description; and Typical Mobilization Duties and Activities. 21. Multiple Copies. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 22. Amendment. Any amendment or modification to this Agreement must be in writing and signed by all Parties. 23. Waiver Not Continuing. Any waiver at any time by any Party of its rights with respect to any default of the other Parties hereto, or with respect to any other matter arising in connection with the Agreement, shall not be considered a waiver with respect to any subsequent default, right or matter. Any delay short of the statutory period of limitations in asserting or enforcing any right shall not be deemed a waiver of such right. 24. Severability. In the event that any provision of the Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement shall be unaffected by such adjudication and all the remaining provisions of the Agreement shall remain in full force and effect as if such provision so adjudicated to be invalid had not been included herein. 25. Conduct in Accord with Applicable Law. The Parties agree that at all times during the term of the Agreement, they shall conduct themselves in accord with all applicable laws and permits, and they will undertake no action contrary to such laws or permits. Moreover, the Parties specifically acknowledge that the Agreement is subject to all applicable provisions of state and federal law concerning equal employment opportunity as well as all applicable provisions of state and federal law concerning work hours and safety standards. The interpretation and application of the Agreement and the actions of the parties hereunder shall be governed by the laws of the State of Alaska. 26. Section Headings. The section headings of the Agreement are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain v9

108 OPERATION AND MAINTENANCE AGREEMENT PAGE 14 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written. OWNERS: CHUGACH ELECTRIC ASSOCIATION, INC. BY~~~ Bradley W.. an Chief Executive fficer MUNICIPALITY OF ANCHORAGE d/b/a :TIPALLI~ ~~ Municipal Manager OPERATOR: CHUGACH ELECTRIC ASSOCIATION, INC. BY~~~ Bradley v Chief Executive cer v9

109 OPERATION AND MAINTENANCE AGREEMENT PAGElS 1. PROJECT DESCRIPTION EXHIBIT A PROJECT FACILITY DESCRIPTION The South Central Alaska Power Project will be located on approximately 10 acres of land at 5601 Electron Drive, Anchorage, Alaska adjacent to Chugach's existing International Generation Station (IGT). The proposed project will be a new gas-fired, combined cycle combustion turbine generator plant with a capacity of approximately 200 megawatts. The combined cycle facility will be powered by multiple, efficient gas turbines incorporating the required air emission control technology. The gas turbines exhaust to a Heat Recovery Steam Generator (HRSG), which in tum provides steam to a single condensing steam turbine. The steam turbine generates electrical energy in addition to the energy generated by the gas turbines. The exhaust from the steam turbine will go through a conventional steam surface condenser that is cooled by a closed loop, air-cooled glycol/water heat exchanger. There will be a small steam/condensate exhaust plume from the Project with this type of cooling system. The Project will be equipped with a selective catalytic reduction (SCR) system for the reduction of NOx emissions and a CO oxidation catalyst for reduction of CO emissions. The natural gas required for the Project will be supplied by ENSTAR Natural Gas Company from an adjacent facility. The city water system, through Anchorage Water and Wastewater Utility (A WWU) will be utilized to supply potable, service, cooling and fire extinguishing system water. The Project will remove any industrial contaminants from wastewater through a separation/filtration system prior to being dumped into the city sewer system. Energy produced by the Project will be generated at 13.8 kilovolts and stepped up to the transmission level voltage of 138 kilovolts. Energy will be distributed to the Owners to the transmission grid through the Chugach International 138 kilovolts substation v9 A-IS

110 OPERATION AND MAINTENANCE AGREEMENT PAGE 16 EXHIBITB TYPICAL MOBILIZATION DUTIES AND ACTIVITIES Activities generally required to bring the Project to Commercial Operation. These are not requirements unless adopted by the OC. Budgets o Develop Mobilization Budget with payment milestones. o Develop first year Commercial Operation budget ninety (90) days prior to Commercial Operation. Schedules o Develop initial ten (10) year maintenance schedule. o Develop Year One maintenance schedule. Staffmg o Develop staffing plan. o Preparation of job descriptions. o Recruitment of site staff. o Organization of personnel training to include facility orientation, Project equipment operation and maintenance, review of and coordination ofepe and OEM training, and supplemental system/equipment training as needed. o Provide qualified personnel for Commercial Operation. Procurement o Procurement of tooling, office and computer equipment, Project network, Project phone system and other required site equipment not provided under construction contracts. o Recommendation to owner of initial spare parts requirements and procurement of materials and services to be required for support of commissioning and commencement of commercial operation of the facility. o Maintenance Management System or some type of work order control system. Procedures and Documentation o Preparation of Project standard operating procedures, maintenance, and administration procedures to include maintenance management, work order, inventory, procurement, accounting, security, administration, and emergency response. o Prepare reporting structures and procedures including monthly progress reports during Mobilization and monthly operational reports during the Commercial Operation Period (as such term is defined in the Participation Agreement) o Prepare procedures for receipt of fuel, water, chemicals, lubricants, station service and other utilities and materials. o Incident Reports. o Tag Out or Lock Out procedures. o Implementation of an agreed system of Project equipment identification and numbering v9 c-16

111 OPERA non AND MAINTENANCE AGREEMENT PAGE 17 o Cross-filing system and procedures for Project as built drawings, manuals, vendor instructions, etc. Commissioning o Provide design and construction review and advise owner as to recommendations of facility fitness and capability to meet owner's stated requirements. o Review EPC training program and O&M manuals and advise owner as to recommendations to meet owner's stated requirements contained within the EPC IConstruction and other applicable contracts. o Provide personnel to assist contractor's commissioning personnel in system and facility commissioning activities. o Assist Owner and EPC contractor with the development, review, and evaluation of construction and startup punchlists. o Assist Owner with administration of Project warranties. Environmental and Safety Develop and train Project personnel: Project safety manual, Emergency Response Plan, Hazardous Waste Spill Prevention Plan, Other plans as required by Federal, State and Municipal regulations, and Lock Out Procedures. Other o Other duties and tasks as required to bring the Project into Commercial Operation (as such term is defined in the Participation Agreement) according to the O&M Agreement, Prudent Engineering and Prudent Utility Practices v9 c.17

112 STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this J~ day of AO:;V~T, 2008, before me the undersigned, a Notary Public in and for Alaska, personally appeared ffvc.hai!e'- K. ~ to me known and know to me to be MbNrelfA<..-- MJt#Gl;JZ- MoA, and he acknowledged to me that he had in his official capacity aforesaid executed the foregoing instrument as the free act and deed of the said corporation for the uses and purposes therein stated.

113 STATE OF ALASKA ) ) ss. THIRD mdicial DISTRICT ) THIS IS TO CERTIFY that on this ~ day of A:OG()~,2008, before me the undersigned, a Notary Public in and for Alaska, personally appeared ~fki IN. ~VA.NS to me known and know to me to be Ofjb.,. 4+/v6ftl!H and he acknowledged to me that he had in his official capacity aforesaid executed the foregoing instrument as the free act and deed of the said corporation for the uses and purposes therein stated. IN WITNESS W~RBOlhr) hereto set my hand seal. \\ ~ c:.,n R A (1",.-: ~,\.y; ~..".'.*.. :!,,(f~ 'v.;-;" ~~ ~ ~,' OTAb'::~-::' '-..:.li...' "'r,'" ~. ~ ~ ~ PuI;I\.\C ~ ~ NOT~INANDFORAL~SKA ~ "'~... ~I:' ~ MY COMMISSION EXPIRES: ~6{() ~ ',OF~,' :\' ~ '".. ' \' /.1.1 * \\ J}})1JJJl})\'

114

115 Exhibit E LEASE AGREEMENT THIS LEASE is entered into as of the 28th day of August, 2008 (the "Effective Date"), by and between Chugach Electric Association, Inc. an electric cooperative organized under the laws of the State of Alaska, acting in its capacity as fee simple owner of the real property demised herein, and hereinafter referred to in such capacity as "LESSOR" and the South Central Alaska Power Project (the "Project") Owners (the "Owners") as tenants in common ("LESSEES"). The LESSOR and LESSEES are collectively referred to in this Lease as "Parties" and individually as "Party." The Owners are, as defined in that certain South Central Alaska Power Project Participation Agreement by and among the Owners made as of the Effective Date (the "Participation Agreement"), as follows: Chugach Electric Association, Inc., an electric cooperative organized under the laws of the State of Alaska, and the Municipality of Anchorage d/b/a Municipal Light & Power, a municipal electric utility organized under the laws of the State of Alaska ("ML&P"). The term "LESSEES" as used herein refers to the Owners collectively and the term "LESSEE" refers to an Owner individually. The Parties hereto mutually covenant and agree that the terms and conditions of this lease agreement ("Lease") shall be as follows: 1. TERM OF LEASE. The term of the Lease shall begin on the Effective Date and shall automatically terminate upon the termination of the Participation Agreement, unless otherwise forfeited or terminated prior to such time. 2. LEASE AREA. (a) LESSOR hereby leases to LESSEES, as tenants in common, for the Project, all that lot, piece, or parcel of land, and improvements or fixtures thereon (the "Premises"), generally described as follows: A parcel of property located within Tract 2, International Industrial Center Subdivision, according to plat 69-17, on file in the office of the District Recorder, Anchorage Recording District, Seward Meridian, Alaska, said parcel will be a maximum size of Four Hundred Feet (400') by One Thousand Feet (1,000'), located near the southern end of said Tract 2, as shown in Chugach drawing IS S-OOOI Rev 13 dated 7/10/08 as shown in Exhibit A, with the actual project lease area to be as built within six (6) months of completion of the power plant construction and to be included as an addendum to this agreement. It being agreed, understood and acknowledged by LESSOR and LESSEES that the foregoing description of the Premises shall be updated to provide more specificity with respect to the dimensions of the Premises as soon as such information is provided by LESSOR to LESSEES. (b) LESSOR reserves an easement to operate, repair and maintain its and other existing facilities and equipment and remove existing inventory located on the Premises or LESSOR's land adjacent to the Premises, which includes but is not limited to the facilities shown in Chugach drawing IS-S-OOOI REV13 dated 7/10/2008 as shown in Exhibit A. LESSOR shall remove any of its equipment and facilities located on the vlO(F~AJL) 1

116 Exhibit E premises as of the Effective Date of this Lease necessary for the LESSEES to study, design, construct, operate and maintain the Project. LESSOR shall pay all costs of said removal. LESSOR may leave its equipment and facilities on the Premises until such time as the Premises are needed for use for the Project as described above or the LESSEES/OWNERS determine another site will be used for the Project. The LESSEES shall have access to the Premises commencing on the Effective Date, subject to coordination with and reasonable notice to the LESSOR, prior to the date of removal of LESSOR's equipment and facilities. The LESSEES acknowledge that the removal may not occur for up to one and one half years. 3. CONSIDERATION. LESSEES shall pay to LESSOR One Dollar as rental, which sum shall be due on the Effective Date. 4. USE OF PREMISES. The Premises shall be used and occupied exclusively to construct, operate and maintain as a facility for the production and transmission of electrical power and steam, and any activities reasonably related thereto (the "Project"). If the Premises or any part thereof are used for other activities, or are not being used in a lawful and reasonable manner, LESSOR may give LESSEES written notice requiring LESSEES to terminate such improper use within thirty (30) days. Failure of LESSEES to comply with such request shall constitute a breach of the Lease 5. IMPROVEMENTS BY LESSEES. For each year of the Lease, LESSEES shall provide to LESSOR on or before March 31 of that year, a list of all major improvements scheduled for construction during such year. 6. REP AIRS. LESSEES shall make all repairs and perform such other maintenance services as may be required to keep the Premises in good condition. 7. QUIET ENJOYMENT. LESSOR warrants that LESSOR is seized of the Premises in fee simple and has full right to make and enter into this Lease and covenants and agrees that so long as LESSEES pay the rent due under the Lease and performs all of LESSEES' other obligations hereunder, LESSEES shall peaceably and quietly have, hold and enjoy the Premises during the term of this Lease. 8. EASEMENTS. LESSOR expressly reserves the right to grant easements or rights-of-way across the Premises so long as the use of said easements or rights-of-way does not materially interfere with the rights granted to LESSEES hereunder. LESSOR shall compensate LESSEES for loss or damage to any improvement resulting from use of such easements or rights-of-way. LESSOR shall hold LESSEES harmless for any claim, loss, injury or damage to LESSOR or any other, resulting from use of such easements or rights-of-way, unless the claim, loss, injury or damage resulted from wrongful acts or omissions of the LESSEES. 9. MINERALS AND MATERIAL EXCEPTIONS. All minerals on or under the Premises, including but not limited to coal, oil, gas, sand, gravel, and stone, valuable for extraction and utilization, and all timber and peat moss are owned by LESSOR and are excepted from the operation of the Lease as provided in this Section 9. LESSEES shall not utilize, sell or vIO(FINAL) 2

117 Exhibit E remove for use elsewhere any such minerals, deposits, timber, peat moss or any other material valuable for building or commercial purposes located on or under the Premises without the prior written consent of LESSOR. Notwithstanding anything herein to the contrary, LESSEES shall have the right to use onsite the soil, sand, gravel and stone on or under the Premises for the construction or operation of the Project, provided that such onsite use shall not impact or interfere with LESSOR'S adjacent property. 10. LESSEES' AGENTS. The terms and conditions of the Lease shall apply with equal force to any agent, employee, independent contractor or subcontractor of LESSEES. LESSEES shall be strictly liable for any noncompliance with the terms of this Lease caused by LESSEES or any agent, employee, contractor or subcontractor of LESSEES. 11. ACCESS BY LESSOR. LESSEES shall allow LESSOR or its agents to enter upon the Premises at any reasonable time, upon twenty-four (24) advance hours notice, for the purpose of making an inspection thereof, showing the Premises to prospective purchasers or lessees, to make such repairs, alteration, improvements or additions as LESSOR deems necessary and which the LESSOR shall have the right or duty to make (in which case one (1) month's written notice shall be required) or for any other purpose which does not materially interfere with the use ofthe Premises by LESSEES. 12. REMOVAL OF LESSEES' IMPROVEMENTS. Within sixty (60) days after termination of the Lease, LESSEES shall submit a plan to LESSOR for complete removal of all improvements or other property owned by LESSEES and located on the Premises. Such improvements shall be removed within one (1) year from the date of termination of the Lease. Such removal shall not cause injury or damage to the Premises. LESSOR may, in its sole discretion, extend the time for removing such property. If any such improvements or other property are not removed by LESSEES within the time allowed, such property shall revert to and absolute title shall vest in LESSOR. In the event LESSEES fail to timely remove said improvements or other property or causes damage or injury to the Premises by such removal, LESSOR may remove the improvements and property and repair such damage, and LESSEES shall be liable for all of LESSEES' costs for such repair andlor removal as well as any diminution in the value of the Premises caused by such failure andlor damage. 13. RESTORATION OF PREMISES. Upon termination of the Lease, LESSEES shall, at its own cost, restore the Premises to a permanently safe and acceptable condition. 14. NONLIABILITY AND INDEMNIFICATION. LESSOR shall not be liable to LESSEES for any injury or damage to LESSEES or any other person or for any damage to, or loss (by theft or otherwise) of any property of LESSEES or of any other person, irrespective of the cause of such injury, damage or loss, and irrespective of whether the claim arises in tort, in negligence, by operation of statute, or otherwise, except where caused by LESSOR's willful default under the Lease. LESSEES shall indemnify LESSOR and hold LESSOR harmless with respect to any such claim or liabilities. 15. INSURANCE. Beginning on the Effective Date of the Lease and until the Premises are entered upon by LESSEES, their respective agents, consultants, employees, and vlO(FINAL) 3

118 Exhibit E others for the purposes of performing any work related to the Project, including but not limited to the study, design, or installation of equipment, facilities or the performance of other work or placement of any materials for the Project (the "Project Work"), LESSOR shall continue to insure and maintain insurance coverage on the Premises of the same types and amounts Premises as exists on the Effective Date. On or before commencement of any Project Work, LESSEES shall obtain insurance for the Premises covering all known risks associated with the Premises as determined by the LESSEES through the Project's operating committee. Thirty (30) days prior to each anniversary date of the commencement of Project work, LESSEES shall provide to LESSOR either a certificate of insurance or certified copies of all such insurance policies covering the Premises. LESSOR shall be named insured in all such policies. Either a certificate of insurance or certified copies of the policies must be approved in writing by LESSOR prior to LESSEES exercising any rights or privileges granted hereunder. LESSEES shall require all contractors and subcontractors to maintain insurance with the commercially reasonable coverage limits with LESSOR as a named insured. 16. SUSPENSION. If LESSEES fail to comply with any of the provisions of the Lease, LESSOR may give written notice to LESSEES specifying the breach. In the event LESSEES fail to remedy the breach within thirty (30) days of receipt of written notice of the default from LESSOR, or, if the default is of such nature that it cannot be cured with thirty (30) days and LESSEE fails to commence to cure the default within the thirty (30) day period or fails thereafter to proceed to the curing of the default with all possible diligence, LESSOR may, in its sole discretion, terminate the Lease or take such corrective action as it deems appropriate, and any costs or expenses incurred by LESSOR as a result thereof, plus interest, shall be paid or reimbursed to LESSOR by LESSEES. Any corrective action taken by LESSOR hereunder shall not constitute a waiver of any default or violation of the Lease by LESSEES which gave rise to such a corrective action. 17. BREACH BY LESSOR. In the event LESSOR fails to comply with any of the provisions of the Lease, LESSEES may give LESSOR written notice of the breach. If the breach is not remedied within thirty (30) days of receipt of notice specifying the breach, LESSEES may, without limitation to its other remedies, remedy the breach itself at LESSOR's expense, or terminate the Lease. 18. TERMINATION. The Lease shall automatically terminate on the Termination Date, as defined in the Participation Agreement, or earlier upon mutual agreement in writing by both parties, or as otherwise provided in this Lease. The Lease may be terminated thirty (30) days after written notice on non-payment of rent is received by LESSEES and LESSEES fail to satisfy payment requirements during that thirty (30) day period. 20. NONWAIVER. The failure by LESSOR to insist in any instance upon the strict performance or observance of any obligation of LESSEES under the Lease, or to exercise any election herein contained, shall not be construed as a waiver or relinquishment of the future performance of any such obligation or the right to exercise such election, but the same shall continue and remain in full force and effect with respect to any subsequent breach, act or omission vlO(FINAL) 4