electrical output and heat rate. Similarly, bonuses could be earned if schedule and perfor-
mance goals were exceeded.
Gas supply agreement
The project executed a 16-year firm gas supply agreement with Ecopetrol, commencing 1
January 1999, for up to 42,000 million Btu per day. Ecopetrol is Colombia’s state-owned
oil and gas company. The project initially paid on an annual take-or-pay basis for 10,000
million Btu per day, which is equal to 25 per cent of the firm quantity available to the pro-
ject. The project has an option to convert all or a portion of the remaining 31,000 million
Btu per day to a take-or-pay basis if, and to the extent that, Ecopetrol provides notice that
a new or existing customer requests a quantity of guaranteed gas that exceeds Ecopetrol’s
available supply.
Gas transportation agreement
The project executed a 10-year natural gas transportation agreement with Ecopetrol, which in
turn had the contractual right to the capacity of the privately owned, project-financed
TransGas pipeline system. The contract provides for the firm transportation and delivery of
up to 42,000 million cubic feet a day to the project. Initially, 10,000 million cubic feet a day
are subject to a fixed charge, regardless of usage. The project has an option to convert all or
a portion of the remaining 31,500 million cubic feet a day to a fixed-charge basis to maintain
a firm capacity if, and to the extent that, Ecopetrol provides notice that a third party seeks that
capacity on a firm basis. The pipeline to supply natural gas to the project is on land adjacent
to the project. It commenced service during the second quarter of 1997. As a backup,
TermoEmcali stores a five-day supply of diesel fuel.
Ecopetrol is the state-owned company engaged in gas supply and transportation, as well
as oil production, refining, distribution and marketing. As of the end of 1995 Ecopetrol had
sales of US$3.4 billion, net income of US$172 billion and assets of US$5.6 billion. It con-
trolled gas reserves of 7,665 billion cubic feet, a 30-year supply.
TermoEmcali and Emcali have agreed to share the cost of any penalties imposed by
Ecopetrol for transportation imbalances on a 50/50 basis, unless wilful gross negligence or
misconduct can be proved by either party.
In the unlikely event of gas service interruption, backup fuel oil is to supplied to operate
the project. Provision for backup fuel has been made through an onsite storage tank equal to
five days of project fuel needs; a requirement under the gas supply contract that Ecopetrol
makes fuel oil available to the project during periods of gas unavailability; and a contract with
Texaco Oil Company to provide a backup oil supply from its nearby oil terminal.
Operations and maintenance contract
Stewart & Stevenson originally operated the facility under a six-year operations and mainte-
nance (O&M) contract that provides for cost reimbursement and a fixed fee with an escala-
tor. Fees are subject to adjustment for shortfalls in availability, heat rate targets and expenses
exceeding the operating budget.
Stewart & Stevenson was then the largest third-party operator of power facilities in the
POWER PLANT