Pdc-El Paso Meriden, Llc v. Alstom Power, Inc., 996016BLS
| Decision Date | 14 June 2004 |
| Docket Number | 996016BLS |
| Citation | 2004 MBAR 285 |
| Parties | PDC-El Paso Meriden, LLC et al.[1] v. Alstom Power, Inc. et al.[2] |
| Court | Massachusetts Superior Court |
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh):van Gestel, J.
This matter comes before the Court on two motions, each seeking summary judgment pursuant to Mass.R.Civ.P. Rule 56 in connection with the second amended complaint (the "complaint"). The first docketed motion is by the defendant Black & Veatch Construction, Inc. ("BVCI") (Paper #190). The second docketed motion is by the defendants Alstom Power, Inc. and Alstom Power N.V. (collectively "Alstom") (Paper #191).
On May 31, 2002, this Court filed a memorandum and order on motions to dismiss by ABB, Ltd. and by Alstom Power, N.V. The motion of ABB, Ltd. was allowed; and the motion of Alstom Power N.V. was denied. [14 Mass. L. Rptr. 643.] Some of what follows in this background section is taken from the earlier memorandum on the motions to dismiss.
The plaintiff PDC-El Paso Meriden, LLC ("PDC-El Paso") is a Connecticut limited liability company with a usual place of business in Boston, Massachusetts. At all times material it was engaged in the business of energy project development, power plant design and construction, and power plant operation. PDC-EL Paso consists of: El Paso Meriden Power I Company, a Delaware corporation with a usual place of business in Houston, Texas; El Paso Meriden Power II Company, also a Delaware corporation with a usual place of business in Houston, Texas; and plaintiff Power Development Company, LLC, a Delaware limited liability company with a usual place of business in Boston, Massachusetts.
The plaintiff El Paso Merchant Energy-Gas Company is a Delaware corporation with its usual place of business in Houston, Texas. Along with El Paso Meriden Power I Company and El Paso Meriden Power II Company, it is engaged, internationally, in the business of providing specialized services in fuel supply, power marketing, energy trading, asset restructuring and energy product development.
In the second amended complaint the plaintiffs are collectively referred to, and will be here, as "Meriden Power."
The defendant Alstom Power, Inc. is a Delaware corporation with its usual place of business in Windsor, Connecticut. It is the successor in interest to ABB Power Generation, Inc., a Delaware corporation with its usual place of business in Midlothian, Virginia. In the second amended complaint, and here, ABB Power Generation, Inc. and Alstom Power, Inc. are referred to collectively as "ABB/Alstom US."
In 1999, ABB, Ltd.ùno longer a defendant hereùtransferred its gas turbine power segment (including ABB/Alstom US) to ABB Alstom Power, N.V. ABB Alstom Power, N.V. was a joint venture corporation organized under the laws of The Netherlands with a principal place of business in Brussels, Belgium. Between mid-1999 and early 2000, ABB Alstom Power, N.V. was controlled and managed jointly by ABB Ltd. and by Alstom, S.A., a French corporation with its principal place of business in Paris, France.
In early 2000, ABB, Ltd. transferred to Alstom, S.A. its one-half interest in ABB Alstom Power, N.V. Alstom Power, N.V. then became the new name for the joint venture previously known as ABB Alstom Power, N.V. In the Alstom Annual Report 1999/2000, the former joint venture is described as "a joint company" in which Alstom became "the sole owner of the power company" nine months later, in March 2000.
Alstom Power, N.V. and the joint venture corporation which previously was called ABB Alstom Power, N.V. are referred to collectively in the second amended complaint as "Alstom Europe." This Court chooses not to do so here.
The defendant BVCI is a Missouri corporation with its usual place of business in Kansas City, Missouri.
The defendant BVCI and ABB/Alstom U.S. are referred to collectively in the second amended complaint, and will be here, as "the Consortium."
In 1998, consistent with other New England states, Connecticut enacted legislation providing for the restructuring of the electric industry. The purpose of the legislation was to encourage and allow for a sufficient number of in-state power generating facilities to ensure a reliable supply of electric power and the development of a competitive electric market for the benefit of the area. This restructuring legislation ushered in a new competitive marketplace for power generation. It provided non-utility power producers with an immediate incentive to construct power plants in the region.
The development of power plants is extremely complex, and it is somewhat uncertain. Once it is decided to build a power plant, the development stage begins. During this stage, the parties begin the process of obtaining some 40 to 50 permits needed to construct the plant. This phase alone is expensive and typically can consume two to three years with no guarantee of success.
If the development phase is successful, an "engineer, procurement and construction" contract ("EPC") is negotiated and executed. These contracts provide for the complex engineering of the plant and its constituent equipment, the procurement of the turbines and related other major pieces of equipment and all aspects of the actual physical construction of the plant and installation and testing of the turbines therein. Two prior EPC contracts involving the parties here are the Agawam EPC Contract and the Milford EPC Contract. Each of these contracts included an agreement with 32 sections, together with 18 exhibits and 10 appendices, all totaling more than 1,000 pages. The EPC Contract price for Agawam was $121,336,000; and for Milford, was $235,803,400. The process of developer, turbine builder/producer and constructor coming together to create the ultimate EPC relationship is lengthy, complex and without guaranty of success.
Construction starts with the developer/owner issuing a Notice to Proceed to the contractor, which typically is after a final closing, once financing is assured. The construction of power plants like the one at issue here takes an additional two to three years after the Notice to Proceed. Delivery of the plant to the owner occurs upon Substantial Completion. A "turnkey power plant," as contemplated here, is one that is fully operational when transferred to the owner.
The relationship between the parties here began in 1995, when they first discussed the development of a power plant in Agawam, Massachusetts, using a single ABB GT-24 gas turbine. During the development of the Agawam project, the parties considered the development of at least three additional projects in Milford and New Milford, Connecticut, and in Westfield, Massachusetts. The proposal for these three projects was reflected in a 32-page Memorandum of Understanding dated February 28, 1997 (the "3 project MOU"). These three projects were to be either single turbine/single train facilities like Agawam or two turbine/dual train facilities, with base prices to be $120,000,000 or $224,000,000 respectively.
The parties agree that the 3 project MOU was not a commitment to build those plants. In fact, only the Milford Project ever resulted in a final EPC contract, financing and actual construction.
By the spring of 1998, Meriden Power was formed and was in the process of developing a 544-megawatt electric generating facility to be located on a 36-acre parcel in Meriden Connecticut (the "Meriden Project").
Between April 1998 and July 1998, the Consortium of ABB/Alstom U.S. and BVCI provided extensive technical assistance to Meriden Power in connection with the Meriden Project. Through their participation in the permitting work, the Consortium knew that the Meriden Project was originally projected to achieve commercial operation as early as June 2001.
After negotiations during June and July 1998, it is alleged in the second amended complaint that the Consortium and Meriden Power "signed an agreement[3] for the Meriden Project in Boston, Massachusetts on July 22, 1998 [the 'July 1998 document'], by which the Consortium agreed to design and build the Meriden Project for Meriden Power at the turnkey price of $217 million (which included two ABB GT-24 turbines), plus site-specific costs and escalation."
The July 1998 document, and the obligations thereunder, play a major role in the motions now before this Court. Because of its significance, the document is quoted here at some length.
1. The Meriden Project and the Consortium agree to craft a Letter of Understanding (LOU), separate from the 3 project MOU, which includes the following provisions:
1.1 The Meriden Project commits to enter into an EPC contract with the Consortium at a price of $217 million and with generally the same terms as the Agawam EPC Contract excluding the operating guarantees (availability, degradation, etc.). The EPC price of $217 million is based on the general scope of supply stated in the Milford Technical Scope Document, Draft 2 dated June 18, 1998 revised as stated in 1.1.1 through 1.1.3 below. The $217 million EPC price will remain in effect until July 1, 1999. Escalation of the EPC price will begin on July 1, 1999 if Notice to Proceed has not been given by that date. The parties agree to negotiate in good faith the specific details of the general scope of supply that is included in the $217 million EPC price. The parties further agree that site specific items are not included in the $217 million EPC price and that the cost of such items will be negotiated in good faith.
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