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contractors were required to make changes in the amount of work
that they had to perform.
Power Purchase Agreement
AWP and CMP entered into the power purchase agreement on
June 25, 1984, and amended it on June 17, 1985 (as so amended,
the power purchase agreement). Pursuant to the power purchase
agreement, CMP agreed to purchase the electrical output of the
hydroelectric facility for 15 years and obtained an option to
purchase such output for an additional 5 years. The power
purchase agreement expressly provided that it would terminate if
CMP did not receive electricity from the hydroelectric facility
by September 1, 1988. The rates provided by the power purchase
agreement were market rates.
THP Acquires AWP and Completes the Hydroelectric Facility
THP was formed in 1985. In June 1985, THP acquired all of
the shares of stock of AWP for $10.5 million. At that time, AWP
had sold no electricity and had no paid employees. AWP assigned
its rights and obligations under the power purchase agreement and
the construction contracts to THP. The power purchase agreement
was not significant to THP’s decision to purchase AWP, since the
power purchase agreement was a market rate contract and there was
a risk that it might expire before construction of the
hydroelectric facility was completed. AWP's FERC license was
transferred to THP. On February 10, 1986, AWP was liquidated and
its assets distributed to THP.
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