19 Aug 2004
Energy Developments (ENE) announces that the Company has today executed an umbrella agreement with DEUTZ AG and associates (DEUTZ) that will govern the basis of the future
relationship between the parties and which addresses the performance of reciprocating engines purchased by the Company from DEUTZ.
The agreement relates to those engines utilised in the Company's wholly owned landfill gas (LFG) power generation businesses in the United States, the United Kingdom and Australia.
The umbrella agreement makes provision for the following:
1. ENE and DEUTZ to enter into ten year exclusive contracts for the purchase of spare parts in each of Australia, the United Kingdom and the United States.
2. DEUTZ to carry out performance tests on all engines to satisfy agreed performance criteria within a year of execution of the spare parts agreements.
3. ENE and DEUTZ to enter into 10 year maintenance contracts on a site by site basis. DEUTZ will guarantee the rated power output and availability of the engines and be subject to a bonus/penalty regime for electricity generation above/below the guaranteed level. ENE will continue to operate the power generation plants and carry out minor maintenance.
4. ENE and DEUTZ to enter into a new Master Agreement for the potential supply of new engines.
5. ENE and DEUTZ to waive all past and future claims against each other arising out of the Master Agreement dated 30 April 1999 entered into by the parties.
Mr. Chris Laurie, Managing Director of ENE, said the new agreement culminated extensive negotiations with DEUTZ and should, when implemented, remove any ongoing concern over
long term engine performance and reliability. He added:
"The agreement will effectively restore and underpin the financial performance of the Company's LFG projects back to original expectations".
Mr. Laurie said "This is particularly important for our US LFG business, where engine performance and reliability has remained well below rated power generation capacity. The new agreement with DEUTZ provides the Company with the mechanism to restore long term US LFG earnings performance back to acceptable levels".
Mr. Laurie added that the Company will now work closely with DEUTZ and its LFG Joint Venture partners in Greece, France and Taiwan with the aim of implementing similar arrangements for the Company's LFG Joint Ventures which also utilise DEUTZ engines.
The Company will release its 2004 financial results on Wednesday, 25 August 2004.
© Copyright Infratil