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August 17, 1998 <br /> <br /> United Power Association <br />P.O. Box 800 o Elk River, MN 55330-0800 · (612) 441-3121 <br /> <br />Bryan C. Adams, P.E. <br />General Manager <br />Elk River Municipal Utilities <br />322 King Avenue <br />Elk River, MN 55330 <br /> <br />Subject: Letter on Intent for Peaking Facility <br /> <br />Dear Mr. Adams: <br /> <br />This is intended to serve as a non-binding letter of intent between Elk River <br />Municipal Utilities (City) and United Power Association (UPA) outlining our <br />general agreement to jointly develop and operate a combustion turbine for <br />peaking and reliability purposes within the City of Elk River. <br /> <br />For agreement purposes, we are assuming that one gas turbine would be <br />constructed which would have a firm capacity of approximately 35 to 45 <br />megawatts. The estimated total construction cost is roughly $15 million. It is <br />understood that the precise capacity, design and cost would be determined <br />through the design development phase. The City has identified a site that it <br />owns adjacent to the Elk River Municipal Substation near Proctor Road for <br />location of this peaking plant. <br /> <br />Based on these assumptions, the following outlines the key elements of the <br />agreement: <br /> <br />The City would be responsible for financing, owning and insuring the <br />turbines and other related facilities. <br /> <br />UPA would agree to enter into a guaranteed capacity purchase <br />agreement based on annual payments as set forth in Exhibit A. The <br />annual capacity purchase payments shall be made in equal monthly <br />installments with the first payment due 30 days following successful <br />acceptance testing of the unit. <br /> <br />The City and UPA would jointly develop the design and specifications for <br />the turbine facility and related elements, with each party having the right <br />to review and approve the final plans. <br /> <br />A Touchstone EnergyTM Partner <br /> <br /> <br />