Water Rights Concession for St. Gallisch-Appenzellische Kraftwerke AG

1. This concession replaces the two concessions granted to Elektrizitätswerk Kubel AG, Herisau, on November 17, 1896/July 20, 1897, and February 23/27, 1899, transferred to SAK on February 8, 1915, and extended until December 1, 1964, for the utilization of the water powers of the Urnäsch and the Sitter. It retroactively enters into force on December 1, 1964, and is granted for a duration of 70 years, i.e., until December 1, 2034.

2. All relevant existing and future federal and cantonal laws and regulations remain reserved. This particularly concerns the use of waters, hydraulic engineering, water protection, and fishing.

1. The defense supervisor must be obligated by the concessionaire to constantly keep the installed pipe for the water dosing free from leaves and debris. If necessary, the opening must be re-constructed at a lower level.

1. The following are considered existing facilities: a concrete dam with a tunnel intake equipped with screens and control gates on the Urnäsch River, approximately 100 meters downstream of the Hundwilertobel Bridge; a concrete dam with a tunnel intake and control gates on the Sitter River in List; and an access tunnel leading to Tobel with a connection between the two tunnels through a siphon pipeline. From there, two parallel tunnels extend to the Gübsensee, which is flanked by earthen dams on the west and north sides and a retaining wall on the east side. Through this wall, two pressure pipelines, each 160 cm in diameter, emerge and convey water to the Kubel power station, where hydraulic energy is harnessed by six machine units (turbines and generators) to produce electricity. The water is returned via two tailrace channels, each serving three machine units. In the power station, there are two turbines with maximum outputs of 4,000, 2,500, and 1,200 horsepower, totaling 15,400 horsepower installed. An auxiliary facility with three diesel engines, each producing 7,400 horsepower, is associated with the hydraulic power station serving as an emergency power unit and for additional electricity generation when needed.

2. Within the territory of the Canton of Appenzell Ausserrhoden, the only facilities located are the entire Urnäsch dam, including the tunnel intake, half of the concrete dam in the Sitter, the control gates, the screens, and the tunnel intake, the two intake tunnels to the Gübsensee except for the last approximately 100 meters, and the connection between the two tunnels at Tobel.

1. The provisional opening for the compensating water at the Urnäsch Weir is to be extended by a pipeline beyond the concrete slab located in front of the weir to the natural riverbed.

1. The mean water level of the body of water during extraction is assumed for the Urnäsch at an elevation of 685.819 (crest height of the weir) and for the Sitter at an elevation of 686.815 (crest height of the weir). The mean water level of the body of water at the concession boundary (confluence of Urnäsch and Sitter) is assumed to be at an elevation of 590.000 (water release), that at the confluence of the Rotbach into the Sitter at an elevation of 632.00, and that at the confluence of the Wattbach at an elevation of 598.00.

1. The concession is granted based on the current extent of the plant facilities with a gross head of 95.819 meters for the Urnäsch and 96.815 meters for the Sitter, and with a construction water volume intake of 3.80 m³/sec for the Urnäsch and 5.20 m³/sec for the Sitter, resulting in average usable water volumes of 2.280 m³/sec for the Urnäsch and 3.250 m³/sec for the Sitter. From the aforementioned calculated water volumes, those must be deducted which, pursuant to Article 7, must be continuously released into the riverbed during times when the construction water volume is not met. For the Sitter, the share of raw water power for the Ausserrhoden sections of the following river sections amounts to only half

a) Weir List (elevation 686.815) to the confluence of Rotbach (elevation approx. 632.00); drop 54.815 m;

b) Confluence of Wattbach (elevation approx. 598.00) to the confluence of Urnäsch/Sitter (elevation approx. 590.00); drop 8.00 m.

1. The annual water fee amounts to Fr. 80.- per kilowatt from May 1, 1997. (4127.5 kW at Fr. 80.- = Fr. 330,200.-)

1. Concession Fee: The SAK are also required to pay a one-time concession fee, which is calculated based on the gross output liable for water charges, as determined in Art. 5, and a rate of 20 Swiss Francs per gross horsepower.

1. For the preservation of the landscape appearance, for reasons of water protection, i.e., with regard to maintaining a sufficient outflow for sewage disposal as well as to the greatest possible preservation of the fish population in the riverbeds of the Urnäsch and the Sitter, the concessionaire is obliged to ensure the continuous discharge of a minimum water flow of 50 liters per second for the Urnäsch and 80 liters per second for the Sitter at both river weirs.

2. Until further notice, the water discharge is ensured by keeping open the pipes installed in both river weirs, at a height of 2.2 meters below the weir crest at the Urnäsch and 3 meters below the weir crest at the Sitter, with internal diameters of 10 cm and 13 cm, respectively. The government council is authorized to order an increase in the discharge amounts to the values specified in paragraph 1 at any time.

1. The concessionaire is required to provide an annual lump sum of CHF 500 to the cantonal fishery supervision for the impairment of fishing in the Urnäsch and the Sitter. This amount is to be used for the deployment of fish fry in the affected water sections. The government council is authorized to adjust the lump sum to changed circumstances every 5 years.

1. The Assignee is obligated to deliver plans corresponding to current standards for the existing facilities, including a general overview, longitudinal profiles of the utilized watercourse sections from the intake to the return, longitudinal profiles of the utilization facility, cadastral plans with property boundaries, plot numbers and locations of the power plant components and buildings, as well as the essential detailed plans, to the cantonal building administration.

1. The concessionaire is obliged to maintain the sections of water granted to her, from the weirs at the Hundwilertobel Bridge and in List, up to the confluence of the Urnäsch and Sitter rivers. This maintenance obligation also extends to the sections of water located above the weirs, insofar as the water level is influenced by the damming.

1. The Department of Construction and Environment as well as the cantonal fisheries inspector must be informed in advance of all extraordinary operational measures, particularly concerning the flushing of reservoirs. If prior notification proves impossible, both entities must be informed as swiftly as possible. The issuance of additional regulations to ensure the safety of bathing operations in the Urnäsch and the Sitter is reserved.

1. The cantons of Appenzell Innerrhoden and Appenzell Ausserrhoden have the right to exploit the gravel deposited in the List Reservoir. Transfer to third parties is only permissible with the consent of both the Department of Construction and the Environment. If the two cantons do not claim the gravel, it is the responsibility of the licensee to clear the reservoir. The flushing of sediment into the downstream area may only occur with the approval of both the Department of Construction and the Environment.

2. With respect to the reservoir of the Urnäsch Dam in the Hundwilertobel, the canton of Appenzell Ausserrhoden, or its Department of Construction and the Environment, is solely authorized and competent.

**1. The electrical energy generated by the granted water power shall serve the supply of the SAK distribution network. This excludes the direct electricity consumption (approximately 14 GWh annually) for hydrogen production at the Kubel site.**

**2. Any expansion or cessation of local hydrogen production (approximately 250 tons of H2 annually) must be communicated in advance to the affected cantons of Appenzell Ausserrhoden, Appenzell Innerrhoden, and St. Gallen.**

**3. The commissioning of the hydrogen production facility must be reported in writing to the competent authority of the canton of Appenzell Ausserrhoden. Additionally, the quantities of hydrogen produced and electricity fed into the distribution network during the previous calendar year must be reported annually.**

1. If the work is discontinued before the end of the grant period, the grant shall lapse. The Cantonal Council reserves the right to declare the grant forfeited if the work is not operated at all or only in a very limited manner for a period of three years.

1. According to Article 5 of the Agreement dated August 28/29, 1914, between the Cantons of St. Gallen and Appenzell A.Rh. concerning the establishment of St. Gallisch-Appenzellische Kraftwerke AG (SAK), the Canton is obligated to reissue the concession upon its expiration. Should SAK renounce exploitation at that time or earlier, or if the concession is declared lapsed in accordance with Article 14, then all facilities of the concessionaire located within the Canton territory of Appenzell A.Rh. will, pursuant to Articles 67 and 68 of the Federal Act on the Utilization of Hydropower, revert to the State of Appenzell A.Rh.