Council Agenda Report s13

COUNCIL AGENDA REPORT

City of Anaheim DEPARTMENT OF PUBLIC UTILITIES

DATE: JANUARY 30, 2007 FROM: PUBLIC UTILITIES GENERAL MANAGER SUBJECT: ASSIGNMENT AND ASSUMPTION AGREEMENTS WITH WESTPORT RESEARCH, INC. AND WESTPORT POWER, INC.

ATTACHMENT (Y/N): YES ITEM # 21

RECOMMENDATION:

That the City Council, by Motion:

1. Authorize the Public Utilities General Manager, on behalf of the City, to execute the Assignment and Assumption Agreement with Westport Research, Inc. and Westport Power, Inc. (Agreement) and any other related documents; and take such actions as are necessary to implement the Agreement.

2. Authorize the Public Utilities General Manager, on behalf of the City, to execute the Assignment and Assumption Agreement with Westport Research, Inc. and Westport Power, Inc. for a Third Party Connection Agreement with the City (Connection Agreement) and any other related documents; and take such actions as are necessary to implement the Connection Agreement.

DISCUSSION:

As part of a corporate reorganization, Westport Research, Inc. has sold all of its business and assets to Westport Power, Inc. Both are wholly owned subsidiaries of Westport Innovations, Inc. Included in the sale is an assignment by Westport Research, Inc. to Westport Power, Inc. of the above Agreements and all of Westport Research, Inc.’s rights with respect to the Agreements and an assumption by Westport Power, Inc. of all Westport Research, Inc.’s obligations with respect to the Agreements.

BACKGROUND:

On April 24, 2001, the City Council approved an Agreement with Westport Research, Inc. to test a prototype advanced natural gas/diesel generator system for the purpose of providing power to supplement the Department’s electric grid, without adversely affecting the environment with excessive emissions. Westport Research, Inc.’s technology allowed diesel engines to operate on natural gas, which significantly 201 S. Anaheim Blvd. Suite #1101 reduced their emissions and allowed longer hours of operation, up to 4,000 hours per Anaheim, CA 92805 Tel: (714) 765-5137 www.anaheim.net year by retrofitting diesel generators with a High Pressure Direct Injection (HPDI) system that permitted 90% operation on natural gas and 10% on diesel fuel to maintain an optimum fuel mix. In addition, an Agreement was approved for a Third Party Connection to use Anaheim’s computing resources and interconnecting fiber network and for the purpose of gathering data related to the test of the advanced natural gas/diesel generator system. The 1.5 MW Westport Generator, located at the Convention Center, was to provide local electric power generation available for dispatch by Anaheim’s Public Utilities Department during periods of peak demand and electric power emergencies. During the two year test period, Westport Research, Inc. would produce a commercial HPDI system which Anaheim would be able to purchase at fifty percent (50%) of the market value or would convert the prototype back to a standard diesel engine generator. The conclusion of two year evaluation period has been reached and Westport Research, Inc. will not produce a commercial HDPI system. Their decision not to produce a commercial system was based on the fact that the distributed generation market has not developed to the extent that Westport Research, Inc. anticipated. Therefore, the option to install a commercial HDPI system, part of the original Agreement with Westport Research, Inc., is no longer available.

While the work relating to the demonstration is complete, there are remaining agreement obligations to convert the generator to diesel fuel and a confidentiality clause. The assignment and assumption of the subject Agreements is required to fulfill these obligations.

The original Agreement states that Westport Research, Inc. would reconfigure their advanced natural gas/diesel system to a standard diesel at their cost if we chose not to upgrade to the commercial version at the conclusion of the trial. The diesel will be subject to Air Quality Management District limits of 200 operating hours per year. The Utilities’ obligations will be to oversee the conversion, conduct testing, and apply for the new permit. The Convention Center will then take over responsibilities for operation and maintenance.

IMPACT ON BUDGET:

There is no impact on the General Fund. Funds are budgeted in Fund 537, Program 6269 in FY 2006/07.

Respectfully submitted,

Marcie L. Edwards Public Utilities General Manager

201 S. Anaheim Blvd. Suite #1101 Anaheim, CA 92805 Tel: (714) 765-5137 www.anaheim.net ASSIGNMENT AND ASSUMPTION AGREEMENT WITH WESTPORT RESEARCH, INC. AND WESTPORT POWER, INC. Page 3 of 3

Attachments: 1. Assignment and Assumption Agreement with Westport Research, Inc. and Westport Power, Inc. for demonstration of a prototype high pressure direct injection (HDPI) system and (HDPI) components. 2. Assignment and Assumption Agreement with Westport Research, Inc. and Westport Power, Inc. for a Third Party Connection to use Anaheim’s network and computing resources.