Extraordinary Mandatory Redemption. The Bonds shall be subject to mandatory redemption prior to maturity in whole, and not in part, on the first day of the Month following the Early Termination Payment Date, which redemption date in the case of a Failed Remarketing will be the same day as the current Mandatory Purchase Date, at the following Redemption Prices: (a) in the case of the Series 2022A-1 Bonds, Attachment Staff Report Item 15K
37 the Amortized Value thereof, and (b) in the case of the Series 2022A-2 Bonds and Series 2022A-3 Bonds, 100% of the principal amount thereof, plus, in each case, accrued and unpaid interest to the redemption date. See Appendix H for a schedule showing the Redemption Price (excluding accrued interest) of all of the Bonds upon an extraordinary mandatory redemption following an Early Termination Payment Date that occurs during the Initial Interest Rate Period.
CCCFA shall provide the Trustee with Written Notice of the Early Termination Payment Date (x) on the fifth business day preceding a Mandatory Purchase Date if an amount equal to the Purchase Price of the Bonds that are subject to such Mandatory Purchase Date has not been deposited with the Trustee and (y) in all other cases, not more than five days after such date is determined.
Notice of Redemption. In the case of every redemption of Bonds, the Trustee must give notice, in the name of CCCFA, of the redemption of such Bonds by first-class mail, postage prepaid, to the registered owner of each Bond being redeemed, at its address as it appears on the bond registration books of the Trustee or at such address as such owner may have filed with the Trustee in writing for that purpose, as of the Regular Record Date, not less than 15 days prior to the redemption date in the case of an extraordinary mandatory redemption described above, not less than 30 days prior to the redemption date in the case of mandatory sinking fund redemption or optional redemption of the Series 2022A-1 Bonds, and not less than 15 days prior to the redemption date in the case of mandatory sinking fund redemption or optional redemption of the Series 2022A-2 Bonds and Series 2022A-3 Bonds.
Each notice of redemption must identify the Bonds to be redeemed and must state (i) the redemption date, (ii) the Redemption Price or the manner in which it will be calculated, (iii) that the Bonds called for redemption must be surrendered to collect the Redemption Price, (iv) the address at which the Bonds must be surrendered, and (v) that interest on the Bonds called for redemption ceases to accrue on the redemption date. Failure of the registered owner of any Bonds which are to be redeemed to receive any such notice, or any defect in such notice, shall not affect the validity of the proceedings for the redemption of any Bonds.
In the event that the Bonds may be subject to extraordinary redemption as a result of a Failed Remarketing that could occur if the Trustee has not received the Purchase Price of the Bonds by noon New York City time on the fifth Business Day preceding a Mandatory Purchase Date, a notice of extraordinary redemption of the Bonds may be a conditional notice of redemption, delivered in each case not less than 15 days prior to such Mandatory Purchase Date, stating that: (a) such redemption shall be conditioned upon the Trustee’s failure to receive, by noon New York City time on the fifth Business Day preceding such Mandatory Purchase Date, the Purchase Price of the Bonds required to be purchased on such Mandatory Purchase Date, and (b) if the full amount of the Purchase Price has been received by the Trustee by noon New York City time on the fifth Business Day preceding such Mandatory Purchase Date, the Bonds shall be purchased pursuant to a mandatory tender on such Mandatory Purchase Date rather than redeemed. If the full amount of the Purchase Price has been received by the Trustee by noon New York City time on the fifth Business Day preceding such Mandatory Purchase Date, the Trustee shall withdraw such conditional notice of redemption prior to such Mandatory Purchase Date and the Bonds shall be purchased pursuant to the provisions of the Indenture relating to mandatory tender on such Mandatory Purchase Date rather than redeemed.
With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds will be deemed to have been paid under the Indenture, such notice must state that such redemption will be conditioned upon the receipt by the Trustee on or prior to the date fixed for such Attachment Staff Report Item 15K
38 redemption of money sufficient to pay the Redemption Price of and interest on the Bonds to be redeemed, and that if such money shall not have been so received said notice will be of no force and effect, and CCCFA will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such money is not so received, the redemption will not be made and the Trustee must within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such money was not so received and that such redemption was not made.
Effect of Redemption. On any redemption date, the Redemption Price of each Bond to be redeemed will become due and payable, and from and after such date, notice having been given and moneys available solely for such redemption being on deposit with the Trustee in accordance with the provisions of the Indenture governing redemption of such Bonds, then, notwithstanding that any Bonds called for redemption may not have been surrendered, no further interest will accrue on any of such Bonds. From and after such date of redemption (such notice having been given and moneys available solely for such redemption being on deposit with the Trustee), the Bonds to be redeemed will not be deemed to be Outstanding under the Indenture.
Partial Redemption of Bonds. If less than all of the Bonds of a like series, tenor and maturity are called for redemption, the particular Bonds or portions of Bonds of such series, tenor and maturity to be redeemed must be selected by lot in such manner as the Trustee shall determine, in its sole discretion, from Bonds of such series, tenor and maturity not previously called for redemption; provided, however, that the portion of any Bond of a denomination of more than a minimum Authorized Denomination to be redeemed shall be in the principal amount of such minimum Authorized Denomination or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of a minimum Authorized Denomination which is obtained by dividing by such minimum Authorized Denomination the principal amount of such Bond to be redeemed in part.
Book-Entry System
The Bonds will be initially issued in book-entry only form through the facilities of DTC. The Bonds will be transferable and exchangeable as set forth in the Indenture and, when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, principal of and premium, if any, and interest on the Bonds are payable by wire transfer by the Trustee to Cede & Co., as nominee for DTC, which, in turn, will remit such amounts to DTC participants for subsequent disbursement to the Beneficial Owners. See APPENDIX G — “BOOK-ENTRY SYSTEM”.
DEBT SERVICE REQUIREMENTS
Set forth in the following table are the Debt Service requirements on the Bonds, giving effect to the fixed interest rates payable by CCCFA under the Interest Rate Swap, in each bond year during the Initial Interest Rate Period, excluding the purchase price of the Bonds that mature on [______] 1, 20[__] that is payable on the Mandatory Purchase Date ([______] 1, 20[__]* )
1 .
* Preliminary; subject to change.
Attachment Staff Report Item 15K
39 YEAR ENDING
[_____] 1
PRINCIPAL
AMOUNT INTEREST TOTAL
TOTAL
__________________________________
1. As of the Mandatory Purchase Date, $_____________ principal amount of the Bonds will remain outstanding and the Bonds outstanding are required to be purchased pursuant to mandatory tender.
THE PREPAID ENERGY SALES AGREEMENT
Purchase and Sale
Under the Prepaid Energy Sales Agreement, the Energy Supplier agrees to deliver EPS Compliant Energy in the monthly quantities set forth in the Prepaid Energy Sales Agreement (the “Prepaid Energy”) during the Delivery Period and CCCFA has agreed to make a lump sum advance payment to the Energy Supplier for all of the cost of the Prepaid Energy to be delivered during the Delivery Period. The total quantity of expected Prepaid Energy to be delivered by the Energy Supplier during the initial Delivery Period is approximately [___] million MWh and is subject to change as described below under the heading “Aggregate Quantity”.
For discussion of the Contract Price, see “THE POWER SUPPLY CONTRACT — Pricing Provisions”.
Delivery of Prepaid Energy
Assigned Energy. Assigned Energy delivered under the Prepaid Energy Sales Agreement shall be Scheduled for delivery to and receipt at the delivery point specified in the applicable Assignment Agreement (an “Assigned Delivery Point”). Scheduling and transmission of Assigned Energy shall be in accordance with the applicable Assignment Agreement. At the start of the Delivery Period, the Project Participant will assign the Initially Assigned PPAs, as described under “– Assignment of Power Purchase Agreements” below, for delivery of Assigned Energy equal to the Prepaid Energy required to be delivered by the Energy Supplier during the term of such assignments.
Base Energy. If the Assigned Energy for any month is less than the quantity of Prepaid Energy required to be delivered that month, the Energy Supplier is required to deliver Base Energy for remarketing under the terms of the Prepaid Energy Sales Agreement. Base Energy is not expected to be delivered during the Initial Reset Period.
Title. Title to and risk of loss of the Energy delivered under the Prepaid Energy Sales Agreement shall pass from the Energy Supplier to CCCFA at the applicable Delivery Point. The transfer of title and risk of loss for all Assigned Energy shall be set forth in the applicable Assignment Agreement.
Attachment Staff Report Item 15K
40 Aggregate Quantity. The aggregate quantity of Energy to be delivered during the term of the Delivery Period varies based on the quantities of Prepaid Energy CCCFA has agreed to deliver to the Project Participant under the Power Supply Contract. The aggregate average monthly quantity of Prepaid Energy to be delivered under the Prepaid Energy Sales Agreement during the Initial Reset Period is approximately [______] MWh. The average monthly quantity of electricity is preliminary and subject to adjustment at the time of the sale of the Bonds, based upon the amount of proceeds received by CCCFA.
Assignment of Power Purchase Agreements
The Project Participant has assigned its Initial Assigned Rights and Obligations to the Energy Supplier. The Assigned Energy during the Initial EPS Energy Periods will be delivered from a portfolio of carbon free resources that includes large hydroelectric facilities located in Washington State and Idaho as well as generation from wind farms located in Washington State and Montana. The Initially Assigned PPAs allow for MSCG to add additional carbon free resources, upon written notice to the Project Participant in order to meet the guaranteed minimum delivery obligations thereunder.
Failure to Deliver or Receive Energy
Assigned Quantities. Neither CCCFA nor the Energy Supplier shall have any liability or other obligation to one another for any failure to Schedule, receive, or deliver Assigned Quantities, except as described under the following subheading “— Energy Remarketing.” Base Energy. Because CCCFA will have prepaid for all Energy to be delivered under the Prepaid Energy Sales Agreement, the Energy Supplier will be required to pay CCCFA for all Base Energy that the Energy Supplier fails to deliver or CCCFA fails to receive for any reason, including events of force majeure.
The amount the Energy Supplier is required to pay is equal to the quantity that was not delivered or received multiplied by a price that is determined in a manner depending upon the reason for such failure:
• If the Energy Supplier fails to deliver Base Energy for reasons other than force majeure or action or inaction by CCCFA, such quantity is referred to herein as a “Shortfall Quantity,” and the Energy Supplier is required to pay the higher of (a) the replacement price paid by CCCFA, or (b) the Day-Ahead Market Price applicable to the Hour and the Delivery Point for which the Shortfall Quantity arose, plus in either case an administrative fee of $0.50/MWh. In such event, CCCFA will cause the Project Participant to exercise Commercially Reasonable Efforts to mitigate damages paid by the Energy Supplier under the Prepaid Energy Sales Agreement.
• If CCCFA fails to receive all or any portion of Base Energy for reasons other than force majeure, for which CCCFA has previously issued a Remarketing Notice in accordance with the Prepaid Energy Sales Agreement, CCCFA shall be deemed to have issued a Deemed Remarketing Notice with respect to such portion. • If either the Energy Supplier fails to deliver all or any portion of Base Energy or CCCFA fails to receive all or any portion of Base Energy due to events of force majeure, the Energy Supplier is required to pay the applicable Contract Index Price for such portion of Base Energy.
Attachment Staff Report Item 15K
41 The “Contract Index Price” is the day-ahead market price for the delivery point specified in the Prepaid Energy Sales Agreement. See “THE POWER SUPPLY CONTRACT — Pricing Provisions”. Base Energy is not expected to be delivered during the Initial Reset Period.
Energy Remarketing
In the event Assigned Quantities equivalent to the Prepaid Quantities for any month are not delivered under an Assigned PPA, CCCFA will be deemed to have requested for the Energy Supplier to remarket the portion of the Assigned Quantities not delivered and the Energy Supplier will be obligated to make a payment to CCCFA equal to the quantity of Assigned Energy not delivered multiplied by the applicable index price (or the applicable fixed price with respect to Assigned Energy otherwise intended to be delivered to EBCE during the Initial EPS Energy Period). Any such remarketing will be treated as a purchase by the Energy Supplier for its own account and will constitute a private-business use sale, and the Project Participant is obligated to use Commercially Reasonable Efforts to remediate the proceeds of such sales with other qualifying purchases of Energy. To the extent the Project Participant has not remediated the proceeds of such sales within twelve months, MSES is required to use Commercially Reasonable Efforts to remediate such proceeds through Qualifying Sales to Municipal Utilities.
In the event of any expiration or termination of an Assigned PPA, the Project Participant is required to use Commercially Reasonable Efforts to enter into a new limited assignment agreement relating to one or more additional PPAs, providing for the assignment of its rights to delivery of quantities of EPS Compliant Energy equivalent to the Prepaid Quantities for the term of such assignment. If (i) the Project Participant exercises Commercially Reasonable Efforts to enter into a limited assignment agreement for the redelivery of EPS Compliant Energy under its Power Supply Contract and (ii) the Project Participant is not in default under its Power Supply Contract, then:
• MSES shall be obligated remarket Base Energy and purchase such Base Energy for its own account at the applicable index price;
• the Project Participant shall be obligated to use Commercially Reasonable Efforts to remediate the proceeds of such sales with other qualifying purchases of energy; and • to the extent the Project Participant has not remediated the proceeds of such sales within twelve months, MSES is required to use Commercially Reasonable Efforts to remediate such proceeds through Qualifying Sales to Municipal Utilities.
To the extent that the Project Participant (i) has not exercised commercially reasonable efforts to enter into a limited assignment agreement for the redelivery of EPS Compliant Energy under its Power Supply Contract, (ii) is in default under its Power Supply Contract or (iii) has experienced a loss of Energy load such that it has insufficient demand for Prepaid Quantities, then:
• MSES is required to use Commercially Reasonable Efforts to remarket equivalent quantities of Base Energy to Municipal Utilities for a Qualifying Use at a net price not less than the Contract Price; and
• to the extent MSES cannot remarket such quantities to Municipal Utilities for a Qualifying Use, it is required to purchase such quantities for its own account.
Attachment Staff Report Item 15K
42 Remarketing Non-Default Termination Event
MSES is required to use Commercially Reasonable Efforts to remarket Base Energy first in Qualifying Sales and next in non-private business sales. If MSES is unable to remarket Base Energy required to be remarketed under the Prepaid Energy Sales Agreement in Qualifying Sales or in non-private business sales, it will purchase such Base Energy for its own account.
If after two years there are remaining remarketing proceeds from sales to purchasers other than Municipal Utilities or other qualified users, such balance will count against either a limit equivalent to a quantity of Energy, in MWh, equal to $15 million divided by a fixed price per MWh under the Prepaid Energy Sales Agreement (or such higher amount determined by Bond Counsel) or a limit of 10% of the original quantity of Energy purchased under the Prepaid Energy Sales Agreement (or such higher amount determined by Bond Counsel), depending on the status of the purchaser at the time the proceeds are received by CCCFA. Both limits apply in the aggregate over the term of the Prepaid Energy Sales Agreement. Once either limit has been exceeded, a Remarketing Non-Default Termination Event will be deemed to have occurred and the Prepaid Energy Sales Agreement will terminate automatically on the 90th day after such event unless CCCFA and MSES (a) (i) agree to reduce the daily quantity of energy purchased each month, (ii) take the actions necessary to remediate the necessary amount of the Bonds pursuant to their optional redemption provisions, and (iii) deliver to the Trustee amendments to the Prepaid Energy Sales Agreement, Power Supply Contract and Commodity Swaps reflecting the corresponding reduction in Energy quantities, as well as revisions to certain schedules of the Indenture, an accountant’s verification, a Favorable Opinion of Bond Counsel and a Rating Confirmation, or (b) Bond Counsel otherwise provides an opinion that such event has not affected the tax-exempt status of the interest on the Bonds. The limits described above are mandated by certain tax requirements and are subject to increase based on revised tax requirements as well as any bond remediations undertaken by CCCFA outside of a termination of the Prepaid Energy Sales Agreement.
Payment Provisions
The prepayment from CCCFA to MSES will be due prior to the inception of the term of the Prepaid Energy Sales Agreement. To the extent any other amount becomes due to MSES or CCCFA thereunder (for example, as a result of remarketing or failure to deliver by MSES), such amount will be due to the other party on or before the 25th or 22nd day, respectively, of the month following the month in which such amount accrues.
Force Majeure
Each of CCCFA and MSES are excused from their respective obligations to receive and deliver Energy under the Prepaid Energy Sales Agreement to the extent prevented by force majeure, defined generally as any cause not within the reasonable control of the party claiming an excuse to its obligations and to include any declaration of force majeure by a PPA Seller. Excuses to performance include such events as natural disasters, curtailment of electricity transmission, government actions, and strikes. MSES is required to pay to CCCFA the Day Ahead Index Price (or the Assigned Fixed Price during the Initial EPS Energy Period) with respect to any Prepaid Quantities not delivered due to force majeure.
Attachment Staff Report Item 15K
43 Assignment
Neither party may assign its rights under the Prepaid Energy Sales Agreement without the other party’s consent except:
(a) pursuant to the Indenture, CCCFA may transfer, sell, pledge, encumber or assign the Prepaid Energy Sales Agreement to the Trustee in connection with a financing arrangement; provided that CCCFA may not assign its rights under the Prepaid Energy Sales Agreement unless, contemporaneously with the effectiveness of such assignment, CCCFA also assigns the CCCFA Commodity Swap and CCCFA Custodial Agreement to the same assignee; and (b) MSES may assign the Prepaid Energy Sales Agreement to an affiliate of MSES; provided that (i) the Morgan Stanley Guarantee continues to apply to the obligations of such assignee or (ii) the assignee provides CCCFA with a parent guarantee and a Rating Confirmation, which assignment constitutes a novation; and provided that MSES may not assign its rights under the Prepaid Energy Sales Agreement unless, contemporaneously with the effectiveness of such assignment, MSES also assigns the MSES Commodity Swap and the MSES Custodial Agreement to the same assignee.
CCCFA has certain rights to cause MSES to novate the Prepaid Energy Sales Agreement as of the commencement of a new Reset Period. Upon any such novation, neither MSES nor Morgan Stanley will have any obligations (contingent or otherwise) or be required to make any payment under any of the transaction documents described above, the Morgan Stanley Guarantee or otherwise, other than obligations that would have existed or payments that would have been required (or guaranteed) had the Prepaid Energy Sales Agreement terminated as of the end of the last Reset Period that commenced prior to such novation (the “Assignment Payment”).
Termination
CCCFA will have the right to terminate the Prepaid Energy Sales Agreement prior to the expiration of the term under the following circumstances:
• MSES’s failure to pay when due any amounts owed to CCCFA pursuant to the Prepaid Energy Sales Agreement within two Business Days after receiving notice of a late payment, unless Morgan Stanley has made such payment under the Morgan Stanley Guarantee; • MSES’s insolvency or bankruptcy;
• any representation or warranty made by MSES in the Prepaid Energy Sales Agreement is proven to have been incorrect in any material respect when it was made; • any interpretation, enactment or change or amendment to any governmental approval or law occurring after the effective date of the Prepaid Energy Sales Agreement that results or would result in the performance of any obligation of MSES to deliver energy or CCCFA to receive energy under the Prepaid Energy Sales Agreement being prohibited or unlawful; or
Attachment Staff Report Item 15K
44 • the Interest Rate Swap is terminated by CCCFA.
MSES will have the right to terminate the Prepaid Energy Sales Agreement prior to the expiration of the term under the following circumstances:
• CCCFA’s failure to pay when due any amounts owed to MSES within five Business Days after receiving notice of a late payment;
• CCCFA’s insolvency or bankruptcy;
• any representation or warranty made by CCCFA in the Prepaid Energy Sales Agreement is proven to have been incorrect in any material respect when it was made; • any interpretation, enactment or change or amendment to any governmental approval or law occurring after the effective date of the Prepaid Energy Sales Agreement that results or would result in the performance of any obligation of MSES to deliver energy or CCCFA to receive energy under the Prepaid Energy Sales Agreement being prohibited or unlawful; • if the Project Participant makes a Remarketing Election for a Reset Period; or • if the Power Supply Contract has been terminated or is otherwise no longer in effect.
The Prepaid Energy Sales Agreement will automatically terminate prior to the expiration of the term under the following circumstances:
• the failure to replace, within 120 days, either the CCCFA Commodity Swap or the MSES Commodity Swap if the CCCFA Commodity Swap is terminated for any reason or termination occurs automatically under the CCCFA Commodity Swap as a result of an event of default or a termination event thereunder;
• the failure to replace, within 120 days, the MSES Commodity Swap or the CCCFA Commodity Swap if the MSES Commodity Swap is terminated for any reason or termination occurs automatically under the MSES Commodity Swap as a result of an event of default or a termination event thereunder;
• designation by MSES of an early termination date under the Interest Rate Swap; • a Failed Remarketing has occurred;
• both (a) Morgan Stanley has delivered a termination notice of the Morgan Stanley Guarantee, and (b) no novation of the Prepaid Energy Sales Agreement has been effected (as described under THE PREPAID ENERGY SALES AGREEMENT—Assignment” above) prior to the end of the Initial Reset Period or the then-current Reset Period during which such termination notice was delivered, in which case the Prepaid Energy Sales Agreement will terminate as of the end of the Initial Reset Period or the then-current Reset Period, as applicable;
Attachment Staff Report Item 15K
45 • the Morgan Stanley Guarantee ceases to be in full force or effect or is declared to be null and void or Morgan Stanley contests the validity or enforceability of the Morgan Stanley Guarantee; provided that, for avoidance of doubt, no such event will occur as a consequence of Morgan Stanley becoming subject to a receivership, insolvency, liquidation, resolution or similar proceeding; or
• the occurrence of a Remarketing Non-Default Termination Event (as described under “THE PREPAID ENERGY SALES AGREEMENT—Remarketing Non-Default Termination Event” above) and either (a) CCCFA and MSES fail to take the remedial actions required by the Prepaid Energy Sales Agreement or (b) CCCFA has not received an Opinion of Bond Counsel to the effect that such event has not affected the tax-exempt status of the Bonds, in either case within 90 days after the Remarketing Non-Default Termination Event has occurred.
Termination Payment
If the Prepaid Energy Sales Agreement is terminated before the expiration of its stated term for any reason, MSES will be required to pay a scheduled Termination Payment to CCCFA. The Termination Payment schedule is generally based on the unamortized portion of the prepayment proceeds that were received by MSES. The amount of the Termination Payment, together with the amounts required to be on deposit in certain Funds and Accounts held by the Trustee, has been calculated to provide a sum at least sufficient to pay the Redemption Price of the Bonds, assuming that MSES and [____________], as Investment Agreement Provider, pay and perform their respective contract obligations when due. See APPENDIX I for a schedule showing the Termination Payment due by month during the Initial Interest Rate Period.
Security
MSES’s payment obligations under the Prepaid Energy Sales Agreement are unconditionally guaranteed by Morgan Stanley under the Morgan Stanley Guarantee.
The Morgan Stanley Guarantee will expire or terminate, as applicable, on the earliest of (i) the last day of the Delivery Period under the Prepaid Energy Sales Agreement, (ii) the earlier termination of the Prepaid Energy Sales Agreement, and (iii) the last day of the Initial Reset Period or any Reset Period if Morgan Stanley delivers a termination notice to CCCFA, provided that the Morgan Stanley Guarantee will continue in full force and effect with respect to MSES’s accrued payment obligations under the Prepaid Energy Sales Agreement. An election by Morgan Stanley to terminate the Morgan Stanley Guarantee (without a novation of the Prepaid Energy Sales Agreement and certain other contracts as described under “THE PREPAID ENERGY SALES AGREEMENT—Assignment”) is an automatic termination event under the Prepaid Energy Sales Agreement as of the end of the Initial Reset Period or the then-current Reset Period and will result in the extraordinary mandatory redemption of the Bonds as described under “THE BONDS— Redemption—Extraordinary Mandatory Redemption.”
Receivables Purchase Provisions
General. Pursuant to the Receivables Purchase Provisions of the Prepaid Energy Sales Agreement, MSES has agreed to purchase from CCCFA the rights to payment of net amounts owed by the Project Attachment Staff Report Item 15K
46 Participant under the Power Supply Contract (the “Put Receivables”). CCCFA is required to sell and MSES is required to purchase Put Receivables under the circumstances described below under “Put Receivables.”
Put Receivables. Upon a payment default by any Project Participant under its Power Supply Contract, CCCFA shall put to MSES and MSES shall purchase Put Receivables with a face value equal to the amount of the non-payment by such Project Participant. CCCFA shall exercise its put option by delivering notice (the “Put Option Notice”) to MSES on the 21st day of the Month (or, if the 21st is not a Business Day, then on the next Business Day of the Month) in which the relevant payment default occurs.
The Put Option Notice shall include a description of the Put Receivables (including the relevant Project Participant, aging information and face amount of the Put Receivables) to be sold to MSES (collectively, the “Put Identified Receivables”).
THE INTEREST RATE SWAP
General
With respect to any Index Rate Bonds that are issued, CCCFA will enter into the Interest Rate Swap in order to hedge its exposure to interest rate fluctuations on such Index Rate Bonds and more closely match its payment obligations on such Index Rate Bonds with its expected Revenues from payments under the Power Supply Contract and the CCCFA Commodity Swap. The Interest Rate Swap consists of a 2002 ISDA Master Agreement, a schedule thereto and a confirmation. The term of the Interest Rate Swap will extend for the term of the Initial Interest Rate Period.
Payments Under the Interest Rate Swap
Under the Interest Rate Swap, MSES, as Interest Rate Swap Counterparty, is obligated to pay CCCFA on the Business Day preceding each Interest Payment Date floating amounts equal to the amount of interest due on the Index Rate Bonds on such Interest Payment Date, and CCCFA is obligated to pay the Interest Rate Swap Counterparty fixed amounts calculated using a fixed rate and notional amounts equal to the principal amount of Index Rate Bonds then Outstanding.
Interest Rate Swap Receipts received by CCCFA are deposited directly into the Debt Service Account. Interest Rate Swap Payments owed by CCCFA are payable from amounts on deposit in the Debt Service Account. Neither party will be obligated to make any payment (other than accrued and unpaid amounts) under the Interest Rate Swap upon early termination thereof.
Events of Default and Termination Events under the Interest Rate Swap The Interest Rate Swap contains standard Events of Default and Termination Events set forth in the form of the 2002 ISDA Master Agreement (Multicurrency-Cross Border) published by the International Swap Dealers Association, Inc. (available at www.isda.org), subject to such modifications contained in the Schedule to such ISDA Master Agreement as are generally applied to municipal counterparties.
The Schedule to the ISDA Master Agreement provides that certain of such Events of Default and Termination Events will not apply or provides for a modification to the remedies available upon the occurrence of such an event. The Events of Default not applicable to CCCFA are Section 5(a)(ii)(2) (Repudiation of Agreement), Section 5(a)(iii) (Credit Support Default), Section 5(a)(v) (Default under Attachment Staff Report Item 15K
47 Specified Transaction) and Section 5(a)(vi) (Cross Default), and the Termination Event not applicable to CCCFA is Section 5(b)(ii) (Force Majeure Event). Section 5(a)(ii)(2), Section 5(a)(iii), Section 5(a)(v), Section 5(a)(vi) and Section 5(b)(ii) are also not applicable to the Interest Rate Swap Counterparty. Neither CCCFA nor the Interest Rate Swap Counterparty is required to pay any termination payment or other similar amount upon an early termination of the Interest Rate Swap.
The Interest Rate Swap also contains Additional Termination Events that will occur (a) upon any amendment, supplement or modification to the Indenture that materially adversely affects the priority of or security for the Interest Rate Swap Counterparty’s obligation to make payments hereunder and (b) automatically upon the occurrence of an early termination of the Prepaid Energy Sales Agreement.
THE RE-PRICING AGREEMENT
General
CCCFA and MSES will enter into the Re-Pricing Agreement which provides for determination of Interest Rate Periods for the Bonds subsequent to the Initial Interest Rate Period and the corresponding Reset Periods. The Initial Reset Period under the Prepaid Energy Sales Agreement and the Power Supply Contract begins on [______] 1, 20[__] and ends on the last day of [______] 20[__]* . The Initial Reset
Period under the Prepaid Energy Sales Agreement ends one month before the end of the Initial Interest Rate Period, and each subsequent Reset Period will end one month before the end of the corresponding Interest Rate Period.
The debt service requirements on the Bonds for each Reset Period will not be known until the interest rate on the Bonds has been determined for such Reset Period. The Power Supply Contract includes provisions for the adjustment of the Energy sales price for each Reset Period so as to provide Revenues sufficient to enable CCCFA to meet the debt service requirements on the Bonds during each Reset Period.
Accordingly, the Re-Pricing Agreement further provides for the calculation of the amount of the Available Discount (in US Dollars per MWh) for sales of Energy to the Project Participant under the Power Supply Contract during each Reset Period.
In the event that the Available Discount for any Reset Period is less than the Minimum Discount specified in the Power Supply Contract (which includes both monthly discounts and any annual rebates), the Project Participant may elect not to take its contract quantities of Energy during the Reset Period, and to have such Energy remarketed for the duration of the Reset Period (a “Remarketing Election”) by giving notice of such election to CCCFA. Any Energy that is covered by a Remarketing Election will be remarketed in accordance with the provisions of the Indenture and the Prepaid Energy Sales Agreement.
In the event that the Project Participant makes Remarketing Elections with respect the Energy to be delivered during a Reset Period, MSES will have the right to terminate the Prepaid Energy Sales Agreement by notice to CCCFA. See “THE PREPAID ENERGY SALES AGREEMENT—Energy Remarketing” and “—Termination”.
* Preliminary; subject to change.
Attachment Staff Report Item 15K
48 THE ENERGY SUPPLIER, MSCG AND MORGAN STANLEY
Set forth below is certain information regarding the Energy Supplier, MSCG and Morgan Stanley that has been obtained from such persons and other sources believed to be reliable. CCCFA assumes no responsibility for such information and cannot guarantee the accuracy thereof. Under no circumstance is the Energy Supplier, MSCG or Morgan Stanley obligated to pay any amounts owed in respect of the Bonds.
MSES. The Energy Supplier is an indirect, wholly-owned subsidiary of Morgan Stanley. The FERC has granted the Energy Supplier market-based rate authorization for wholesale sales of electric energy, capacity and ancillary services. The Energy Supplier is not registered with the CFTC in any capacity, does not engage in swap dealing activities, and does not provide advisory or structuring services relating to swaps. The payment obligations of the Energy Supplier under the Prepaid Energy Sales Agreement, the Interest Rate Swap and the MSES Commodity Swap are guaranteed by Morgan Stanley under the Morgan Stanley Guarantees described herein.
MSCG. MSCG is an indirect, wholly-owned subsidiary of Morgan Stanley. MSCG is engaged, among other things, in client facilitation and market-making activities in commodities and commodity derivative contracts. MSCG is provisionally registered as a swap dealer with the CFTC.
Morgan Stanley. Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Morgan Stanley was originally incorporated under the laws of the State of Delaware in 1981, and its predecessor companies date back to 1924. Morgan Stanley is a financial holding company regulated by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. Morgan Stanley conducts its business from its headquarters in and around New York City, its regional offices and branches throughout the U.S., and its principal offices in London, Tokyo, Hong Kong and other world financial centers. Morgan Stanley’s principal executive offices are at 1585 Broadway, New York, New York 10036, and its telephone number is (212) 761-4000.
The senior unsecured long-term debt of Morgan Stanley is rated “A1” by Moody’s, “BBB+” by S&P, and “A” by Fitch.
Morgan Stanley has provided the Morgan Stanley Guarantee to CCCFA pursuant to which it guarantees the Energy Supplier’s payment obligations under the Prepaid Energy Sales Agreement and the Interest Rate Swap. Morgan Stanley has also provided the Morgan Stanley Commodity Swap Guarantee to the Commodity Swap Counterparty pursuant to which it guarantees the Energy Supplier’s payment obligations to the Commodity Swap Counterparty under the MSES Commodity Swap. Under no circumstance is the Energy Supplier or Morgan Stanley obligated to pay any amounts owed in respect of the Bonds.
THE POWER SUPPLY CONTRACT
General
Under the Power Supply Contract, CCCFA has agreed to sell and deliver to the Project Participant, and the Project Participant has agreed to purchase and receive from CCCFA at the delivery point, quantities Attachment Staff Report Item 15K
49 of EPS Compliant Energy, which shall be comprised of Assigned Energy and other EPS Compliant Energy delivered to CCCFA by the Energy Supplier under the Prepaid Energy Sales Agreement.
Each Power Supply Contract will remain in full force and effect for a primary term ending at the end of the Delivery Period under the Prepaid Energy Sales Agreement; provided, however, that if the Prepaid Energy Sales Agreement is terminated, the Power Supply Contract will terminate on the Termination Date.
For information regarding the Project Participant, see APPENDIX A.
Pricing Provisions
Contract Price. For each MWh of Prepaid Energy delivered to a Project Participant, the Project Participant shall pay CCCFA the applicable Contract Price. The Contract Price for Assigned Energy is inclusive of any amounts due in respect of other Assigned Products. The “Initial EPS Energy Period” with respect to a Project Participant is defined in the Prepaid Energy Sales Agreement as the period corresponding the term of the assignment made by such Project Participant under its the Initially Assigned PPA. The “Assigned Fixed Price” during such period is defined as the fixed price payable under the applicable Assigned PPA.
If Base Energy is required to be delivered and remarketed pursuant to the Prepaid Energy Sales Agreement, the Energy Supplier will remarket such Base Energy at a price, inclusive of applicable fees, not less than the Contract Price. See “THE PREPAID ENERGY SALES AGREEMENT — Energy Remarketing”.
Through the Clean Energy Project, the Project Participant anticipates realizing a discount to existing fixed price contract price or to market Energy prices. No assurance can be given as to the total actual discount the Project Participant will realize.
Project Administration Fee
Under the Power Supply Contract, the Project Participant is required to pay to CCCFA annually a Project Administration Fee in an amount equal to its share of the Operating Expenses budgeted by CCCFA for the coming year, and to pay such additional amounts as and when required in the event amounts on deposit in the Administrative Fee Fund are at any time insufficient to Operating Expenses then due or which have accrued and will become payable prior to the next annual payment date of the Project Administration Fee. The Project Administration Fee and such other amounts are payable to the Trustee on behalf of CCCFA and required to be deposited in the Administrative Fee Fund and applied by the Trustee to pay Operating Expenses upon receipt of an invoice therefor from CCCFA.
Assignment of Power Purchase Agreements
General. Concurrently with the execution of its Power Supply Contract, the Project Participant will assign the Initial Assigned Rights and Obligations to the Energy Supplier for delivery under the Prepaid Energy Sales Agreement.
Commencing six months prior to the expiration of any EPS Energy Period, or otherwise immediately upon the early termination or anticipated early termination of an EPS Energy Period, the Attachment Staff Report Item 15K
50 Project Participant shall exercise Commercially Reasonable Efforts to assign the Assigned Rights and Obligations under one or more Assigned PPAs, subject to MSCG’s consent thereto, and MSCG has the right to consent to, pursuant to which the Project Participant is purchasing EPS Compliant Energy and associated attributes, and MSCG will be obligated to sell and deliver Assigned Energy it receives under all Assigned Rights and Obligations to the Energy Supplier pursuant to the Energy Management Agreement, and the Energy Supplier will be obligated to deliver such EPS Compliant Energy and associated attributes to CCCFA pursuant to the Prepaid Energy Sales Agreement. See “THE CLEAN ENERGY PROJECT - Assignment of Power Purchase Agreements by the Project Participant”.
Failure to Obtain EPS Compliant Energy. To the extent an EPS Energy Period terminates or expires and the Project Participant and the Energy Supplier have been unable to obtain EPS Compliant Energy for delivery, then the Energy Supplier shall remarket the Base Energy pursuant to the Prepaid Energy Sales Agreement, the obligations of the Project Participant and the Energy Supplier described under this heading shall continue to apply and the Project Participant may not make any new commitment to purchase Priority Energy during such a remarketing. See “THE PREPAID ENERGY SALES AGREEMENT – Energy Remarketing” and “THE POWER SUPPLY CONTRACT – Remarketing of Energy”.
Billing and Payment
Not later than ten days following the end of the month during the Delivery Period, CCCFA must provide a monthly billing statement of the amount due for Energy. The due date for payment by the Project Participant will be the 20th day of the month following the month of delivery (or if such day is not a Business Day, the preceding Business Day). If the Project Participant disputes the appropriateness of any charge or calculation in any billing statement, the Project Participant, within the time provided for payment, must notify CCCFA of the existence of and basis for such dispute and must pay all amounts billed by CCCFA, including any amounts in dispute. If it is ultimately determined that the Project Participant did not owe the disputed amount, CCCFA must pay the Project Participant the disputed amount plus interest.
Annual Refunds
CCCFA has agreed to provide annual refunds to the Project Participant from amounts available for distribution pursuant to the Indenture. In determining the amount of such refunds, CCCFA may reserve such funds as may be required under the terms of the Indenture or as it deems reasonably necessary and appropriate to cover anticipated costs and expenses to be incurred in the next succeeding bond year, with certain limitations.
Covenants of the Project Participant
Operating Expense. The Project Participant covenants (a) to make the payments on its part due under the Power Supply Contract from the revenues of its electric utility system, and only from such revenues, as an item of operating expenses and a cost of purchase Energy and (b) that in any future bond issue, swap, or other financial transaction undertaken in connection with its electric system, it will not pledge or encumber its revenues through a gross revenue pledge or in any other way which creates a prior or superior obligation to its obligation to make payments under the Power Supply Contract.
Maintenance of Rates and Charges. The Project Participant has covenanted and agreed that it will establish, maintain, and collect rates and charges for its electric utility system so as to provide revenues Attachment Staff Report Item 15K
51 sufficient, together with all available electric system revenues, to enable it to pay to CCCFA all amounts payable under its Power Supply Contract and to maintain required reserves.
Qualifying Use. The Project Participant has agreed that it will (a) provide such information with respect to its electric utility system as may be requested by CCCFA in order to establish the tax-exempt status of the Bonds, and (b) act in accordance with such written instructions as tax counsel to CCCFA may provide from time to time that are reasonably necessary to enable CCCFA to maintain the tax-exempt status of interest on the Bonds. Without limiting the foregoing, the Project Participant has further agreed to sell or otherwise use the Energy purchased under the Power Supply Contract (a) in a “qualifying use” as defined in the applicable U.S. Treasury Regulation, (b) in a manner that will not result in any private business use of that Energy within the meaning of Section 141 of the Code, and (c) consistent with its Federal Tax Certificate (collectively, the “Qualifying Use Requirements”).
In the event that the Project Participant remarkets the Energy it receives under the Power Supply Contract in a manner that does not comply with the Qualifying Use Requirements due to fluctuations in its commodity needs, the Project Participant agrees to exercise Commercially Reasonable Efforts to use the proceeds of such remarketing to purchase Energy (other than Priority Energy, which are described below) for use in compliance with such Qualifying Use Requirements. The Project Participant further agrees to provide monthly reports to CCCFA with respect to the quantity of proceeds from sales of Energy that were sold in a transaction that does not comply with the Qualifying Use Requirements and that have not been remediated by applying such proceeds to purchase Energy that are used in compliance with the Qualifying Use Requirements. The amount of any such unremediated proceeds will be entered on the ledger system maintained by MSES under the Prepaid Energy Sales Agreement.
Priority Energy. The Project Participant agrees to purchase and receive the Base Energy and Assigned Quantities to be delivered under its Power Supply Contract (a) in priority over and in preference to all other Energy available to it that are not Priority Energy; and (b) on at least a pari passu and non-discriminatory basis with other Priority Energy. For purposes of this covenant and during the Delivery Period, “Priority Energy” means (a) Base Energy and Assigned Quantities, and (b) other Energy that the Project Participant is obligated to take under a long-term agreement that is purchased with or generated using capacity that was constructed using the proceeds of tax-exempt bonds, notes, or other obligations.
Delivery Points; Title and Risk of Loss
Assigned Energy. Assigned Energy delivered under the Power Supply Contract shall be Scheduled for delivery to and receipt at the applicable Assigned Delivery Point specified in the applicable Assignment Agreement. All other Assigned Energy will be delivered pursuant to the terms of the applicable Assignment Agreement. Scheduling and transmission of Assigned Energy shall be in accordance with the applicable Assignment Agreement.
Title. Title to and risk of loss of the Prepaid Energy delivered under each Power Supply Contract shall pass from the CCCFA to the Project Participant at the applicable Assigned Delivery Point. The transfer of title and risk of loss for Assigned Energy shall be in accordance with the applicable Assignment Agreement.
Attachment Staff Report Item 15K
52 Failure to Perform
To the extent that quantities of Assigned Energy are not delivered to the Project Participant for reasons other than force majeure, the remarketing provisions of the Prepaid Energy Sales Agreement shall apply. See “THE PREPAID ENERGY SALES AGREEMENT — Energy Remarketing”. Neither the Project Participant nor CCCFA has any liability to one another for any failure to take or deliver Assigned Energy, except as described in this section under “— Assignment of Power Purchase Agreements.” Remarketing of Energy
In the event the Project Participant does not require all or any portion of its contract quantity under its Power Supply Contract as a result of (i) insufficient demand by its retail customers, or (ii) a change in Law, the Project Participant may request that the Energy Supplier sell such portion of Base Energy or Assigned Energy as required under the Prepaid Energy Sales Agreement. Under the Prepaid Energy Sales Agreement, CCCFA arranges for sales through the Energy Supplier in accordance with the remarketing provisions and procedures set forth in that agreement. If the Energy Supplier successfully makes such a sale or sales, CCCFA must credit against the amount owed by the Project Participant to CCCFA the amount received from the Energy Supplier, such credit not to exceed the Contract Price for the Energy so sold. See “THE PREPAID ENERGY SALES AGREEMENT — Energy Remarketing”.
Force Majeure
Except with regard to a party’s obligation to make payments under the Power Supply Contract, neither party shall be liable to the other for failure to perform its obligations under the Power Supply Contract to the extent such failure was caused by an event of “Force Majeure” (as defined in APPENDIX B).
Default
Each of the following is a default under the Power Supply Contract:
(a) Any representation or warranty made by a party in the Power Supply Contract shall prove to have been incorrect in any material respect when made; and (b) A party fails to perform, observe or comply with any covenant, agreement or term contained in the Power Supply Contract, and such failure continues for more than thirty days (in the case of the CCCFA) or more than fifteen days (in the case of the Project Participant) following the receipt of written notice thereof.
In addition, each of the following is a default by the Project Participant under the Power Supply Contract:
(a) Failure by the Project Participant to pay when due any amounts owed to CCCFA under the Power Supply Contract, subject to certain grace periods; and (b) The insolvency or bankruptcy of the Project Participant.
Upon the occurrence of a default by the Project Participant described in (b) above, the Power Supply Contract will automatically terminate and all amounts due to the non-defaulting party will be immediately Attachment Staff Report Item 15K
53 due and payable. Upon the occurrence of the other defaults described above, the non-defaulting party may terminate the Power Supply Contract and/or declare all amounts due to it to be immediately due and payable. During the existence of a default, the non-defaulting party may exercise all other rights and remedies available to it at law or in equity, including without limitation mandamus, injunction and action for specific performance, to enforce any covenant, agreement or term of the Power Supply Contract.
In addition to the remedies described above, during the existence of any default by the Project Participant, CCCFA may suspend its performance under the Power Supply Contract and discontinue the supply of all or any portion of the Energy otherwise to be delivered to the Project Participant under the Power Supply Contract.
If CCCFA exercises its right to discontinue Energy deliveries to the Project Participant, such service may only be reinstated, as determined by CCCFA, upon (a) payment in full by the Project Participant of all amounts then due and payable under its Power Supply Contract and (b) unless otherwise agreed to by CCCFA, payment in advance by the Project Participant at the beginning of each month (for such time period as CCCFA deems appropriate) of amounts estimated by CCCFA to be due from the Project Participant for the future delivery of Energy for such month. If the Project Participant fails to accept the Energy tendered, CCCFA has the right to sell the Energy to third parties.
In the event of any default, the non-defaulting party may bring any suit, action, or proceeding at law or in equity, including without limitation mandamus, injunction, and action for specific performance.
Assignment
The provisions of the Power Supply Contract are binding on the successors and assigns of such contract. Neither party may assign the Power Supply Contract to another party without the prior written consent of the other party, except that CCCFA may assign its interests to secure its obligations under the Indenture. Prior to assigning all or any part of its interest in the Power Supply Contract, the Project Participant is required to deliver to CCCFA a Rating Confirmation from each rating agency then rating the Bonds. Any applicable Assignment Agreement will terminate concurrent with the assignment of the Power Supply Contract.
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
General
CCCFA is a joint powers authority formed pursuant to the Act and the joint powers agreement (“the JPA Agreement”) made among those public agencies which are its members. CCCFA was incorporated and organized in 2021 pursuant to by the members thereof, those being the Project Participant (East Bay Community Energy Authority), Silicon Valley Clean Energy, Marin Clean Energy and Central Coast Community Energy (each, a “Founding Member” and, together with any members which may later be added as parties to the JPA Agreement, a “Member”).
Each Member is a community choice aggregator, and a public agency as defined in the Act, which operates a community choice aggregation program with the authority to group retail electricity customers to solicit bids, broker, and contract for electricity and energy services for those customers, and to enter into Attachment Staff Report Item 15K
54 agreements for services to facilitate the sale and purchase of electricity and other related services, and to study, promote, develop, conduct, operate and manage energy-related programs.
CCCFA was formed for, among other purposes, the purpose of financing energy prepayments which can be financed with tax advantaged bonds for the benefit of its Members.
Powers and Authority
Under the provisions of the Act, CCCFA has all of the powers common to the Members, and any and all power in connection with the financing or refinancing of energy prepayments that can be financed with tax advantaged bonds and other obligations, including: (i) the purchase and sale of electric energy and associated capacity and environmental attributes, (ii) the design, acquisition, maintenance, or operation of any Public Capital Improvement (as defined in the Act) or other facility or improvement, or the leasing thereof, (iii) the provision of working capital, and (iv) any other project, program, public capital improvement or purpose authorized by the Act or other law to be undertaken, financed, or refinanced by CCCFA, in connection with the financing or refinancing of energy prepayments that can be financed with tax advantaged bonds and other obligations (a “Prepayment Project”). CCCFA shall have the power to issue, incur, sell and deliver bonds in accordance with the provisions of the Act and other applicable laws for the purpose of acquiring, undertaking, financing, or refinancing one or more Prepayment Projects.
Under the provisions of the JPA Agreement and the Act, CCCFA has (among others) the following powers:
(a) to acquire, purchase, finance, operate, maintain, utilize and/or dispose of one or more Prepayment Projects and any facilities, programs or other authorized costs relating thereto; (b) to make and enter contracts (including without limitation interest rate, commodity, basis and similar hedging contracts intended to hedge payment, rate, cost or similar exposure); (c) to employ agents and employees;
(d) to acquire, manage, maintain or operate any building, works or improvements; (e) to acquire, hold, lease or dispose of property;
(f) to incur debts (including without limitation through the issuance or incurrence of bonds), liabilities or obligations (which shall not constitute debts, liabilities, or obligations of any of the Members); (g) to sue and be sued in its own name;
(h) to receive gifts, contributions and donations of real or personal property, funds, services and other forms of assistance from any source;
(i) to receive, collect, invest and disburse moneys;
(j) to apply for, accept, and receive all licenses, permits, grants, loans or other aids from any federal, state, or local public agency;
Attachment Staff Report Item 15K
55 (k) to make and enter into service agreements relating to the provision of services necessary to plan, implement, operate and administer energy-related programs; (l) to defend, hold harmless, and indemnify, to the fullest extent permitted by law, each Member from any liability, claims, suits, or other actions; (m) to exercise any other power and take any other action permitted by law to accomplish the purposes of the JPA Agreement.
The JPA Agreement shall continue in full force and effect until terminated as provided in therein; provided, however, the JPA Agreement cannot be terminated while either (a) any bonds of CCCFA, including the Bonds, remain outstanding, or (b) CCCFA is the owner, lessor or lessee of any real or personal property financed from the proceeds of any bonds.
Governance and Management
Board of Directors. CCCF is governed by a Board of Directors (the “Board”) consisting of one director for each Founding Member. The Board shall have the authority to provide for the general management and oversight of the affairs, property and business of CCCFA. The Board may appoint a part-time or full-time General Manager and may appoint one or more part-time or full-time Assistant General Managers. The General Manager would be responsible for the day-to-day operation and management of CCCFA. The names of the current directors of CCCFA are listed on the roster page at the front of this Official Statement.
Management. The Board has not appointed a General Manager or Assistant General Manager.
CCCFA’s current management team consists of Garth Salisbury as Treasurer/Controller and Michael Callahan as General Counsel.
Other CCCFA Projects
[Describe 2021A and 2021B Projects]
CCCFA may issue future bonds to purchase prepaid electricity supplies for sale to participating municipal utilities, with the revenues from such sales pledged to the payment of such bonds. Such revenues will not be pledged, nor may such revenues be used, to pay amounts due with respect to the Bonds.
In furtherance of its corporate and public purposes, CCCFA intends to acquire and finance supplies of electricity on a prepaid basis for sale to other community choice aggregators. CCCFA is currently developing additional Clean Energy Projects under transaction and financing structures that are expected to be generally similar to the structure of the Clean Energy Project. CCCFA can give no assurance as to the timing or terms of these projects or that they will be completed. A range of factors that are outside of the control of CCCFA, including the final negotiation of transaction documents, the approval of commodity supply contracts by the prospective project participants, changes in market prices and rates, the receipt of bond ratings, and other factors could result in these transactions not being completed.
Any additional Clean Energy Projects that may be undertaken by CCCFA will be separate and distinct transactions, and the bonds issued to finance these projects will be payable solely from the Attachment Staff Report Item 15K
56 commodity sales and other revenues pledged for their payment. In no event will the Revenues and Trust Estate pledged to the payment of the Bonds be used to pay any other bonds of CCCFA.
Separate Obligations
THE BONDS, ANY FUTURE BONDS THAT MAY BE ISSUED BY CCCFA AND ANY
FUTURE CONTRACTS THAT CCCFA MAY ENTER INTO TO ACQUIRE ADDITIONAL ENERGY OR ELECTRICITY ARE AND WILL BE SEPARATE AND DISTINCT OBLIGATIONS OF CCCFA.
ANY FUTURE BONDS OR CONTRACTS WILL NOT BE SECURED BY OR PAYABLE FROM THE
REVENUES PLEDGED BY THE INDENTURE TO THE PAYMENT OF THE BONDS, AND THE
BONDS WILL NOT BE SECURED BY OR PAYABLE FROM THE REVENUES DERIVED FROM ANY FUTURE PROJECT, CLEAN ENERGY PROJECT OR CONTRACT OF CCCFA.
Limited Liability
CCCFA DOES NOT HAVE THE POWER TO LEVY AD VALOREM PROPERTY TAXES.
ALL BONDS ISSUED BY CCCFA ARE PAYABLE SOLELY FROM THE REVENUES AND
RECEIPTS DERIVED FROM ITS ACTIVITIES PURSUANT TO ITS STATUTORY PURPOSES AND POWERS AND IN ACCORDANCE WITH THE APPLICABLE FINANCING DOCUMENTS. THE
BONDS ARE PAYABLE SOLELY FROM AND SECURED SOLELY BY THE TRUST ESTATE PLEDGED PURSUANT TO THE INDENTURE.
COMMUNITY CHOICE AGGREGATORS
General
The Project Participant is a “community choice aggregator” pursuant to Section 331.1 of the Public Utilities Code (a “CCA”). See APPENDIX A for information with respect to the Project Participant.
Establishment of Community Choice Aggregators
A CCA may be established by any city, county, or city and county whose governing board elects to combine the loads of its residents, businesses, and municipal facilities in a community-wide Energy buyers’ program, and by any group of cities, counties, or cities and counties whose governing boards have elected to combine the loads of their programs, through the formation of a joint powers agency established under Joint Powers Act, provided in either case that the entity is not within the jurisdiction of a local publicly owned electric utility that provided electrical service as of January 1, 2003. “Local publicly owned electric utility” means a municipality or municipal corporation operating as a “public utility” and certain municipal utility districts, public utility districts, irrigation districts, or joint powers authorities that include one or more of these agencies and that owns generation or transmission facilities or furnishes electric services over its own or its members’ electric distribution systems.
Community Choice Service Model
Once a community forms or joins a CCA, the CCA is the default energy provider in that community. The CCA procures energy for customers in that community, but the investor-owned utility for that community continues to provide transmission, distribution and billing services to customers. Revenues Attachment Staff Report Item 15K
57 from the sale of energy by the CCA are delivered by the investor-owned utility to the CCA as they are received over the course of the billing period.
Service Contract Requirements and Registration with the Public Utilities Commission CCAs are required to have an operating service agreement with the applicable investor-owned utility prior to furnishing electric service to consumers within its jurisdiction. The service agreement must include performance standards that govern the business and operational relationship between the CCA and the investor-owned utility. CCAs are also required to register with the California Public Utilities Commission (the “PUC”), which may require additional information to ensure compliance with basic consumer protection rules and other procedural matters. Once notified of a CCA program, the applicable investor-owned utility is required to transfer all applicable accounts to the CCA within a 30-day period from the date of the close of the utility’s normally scheduled monthly metering and billing process.
Customer Participation and Opt-out Rights
Participation in a CCA is voluntary. Each local government seeking to form or join a CCA must adopt an appropriate authorizing resolution or ordinance. When a community forms or joins a CCA, customers are given advance notice and have the choice to opt-out of the CCA program prior to or after transition to the CCA, and instead receive Energy from the applicable investor-owned utility. Customers that do not opt-out are automatically enrolled in the program.
Regulatory Compliance
CCAs are “load-serving entities” and as such are required to comply with the renewable portfolio standards and reliability standards established by the PUC and the California Energy Commission (the “CEC”) and file integrated resource plans and other periodic reports with the PUC and the California Energy Commission.
Cost Recovery Related to Transfer of Customers to a CCA Although investor-owned utilities do not purchase power for CCA customers, they continue to deliver the power. Investor-owned utilities also have the obligation to provide electric service to customers that opt out of CCA service as the “provider of last resort.” In order to compensate investor-owned utilities for investments in power generation and long-term power purchase contracts associated with the loss of customers to CCAs, the PUC has established a “power charge indifference adjustment” (the “PCIA”) applicable to CCA customers. The PCIA is calculated by taking the difference between (i) the “actual portfolio cost” related to utility’s power procurement (e.g., utility-owned generation and purchased power), and (ii) the “market value of the portfolio,” which is measured by the Market Price Benchmark (the “MPB”) and the megawatt hours of generation.
The MPB is based on a PUC approved methodology for calculating the current market cost of renewables and natural gas-fueled power. If the investor-owned utility’s actual portfolio cost is above-market value, the departing load customers pay their share of the difference in the form of a PCIA based on their power consumption. The amount of the PCIA applicable to a CCA customer depends on when a customer left the investor-owned utility and what the investor-owned utility’s portfolio was at the time.
Each departing load customer pays the assigned “vintage PCIA.” For example, a customer who departed in Attachment Staff Report Item 15K
58 2019 pays the “2019 vintage PCIA” which only includes the above market costs of pre-2020 vintage power procured by the investor-owned utility.
In addition to PCIA charges, CCA customers are required to pay certain other “non-bypassable departing load charges”, including a nuclear decommissioning charge, a public purpose charge and a cost allocation charge to pay for new resources needed for ongoing system reliability.
THE COMMODITY SWAPS
CCCFA Commodity Swap
CCCFA has entered into the CCCFA Commodity Swap under which, over a 30 year term, CCCFA will pay a floating Energy price at a specified pricing point and will receive a fixed Energy price for the notional quantities specified in the CCCFA Commodity Swap for each month of such term.
Under the CCCFA Commodity Swap, for each calendar month that the relevant floating price of Energy is greater than the fixed price specified in a CCCFA Commodity Swap, CCCFA will be obligated to pay to the Commodity Swap Counterparty an amount equal to (x) the difference between the floating price and the fixed price multiplied by (y) a notional quantity equal to the quantity of Prepaid Energy scheduled to be delivered during such month by the Energy Supplier under the Prepaid Energy Sales Agreement. If the fixed price specified in the CCCFA Commodity Swap is greater than the relevant floating price of Prepaid Energy for a month, the Commodity Swap Counterparty will be obligated to pay CCCFA an amount equal to (x) the difference between the fixed price and floating price multiplied by (y) a notional quantity equal to the quantity of Prepaid Energy scheduled to be delivered during such month by the Energy Supplier under the Prepaid Energy Sales Agreement. If the relevant floating price for a calendar month is equal to the specified fixed price, no payment will be owed by either party to the other under the CCCFA Commodity Swap.
MSES Commodity Swap
The Energy Supplier has entered into a comparable MSES Commodity Swap with the same Commodity Swap Counterparty under which the Energy Supplier pays a fixed Energy price and receives a floating Energy price for the same notional quantities at the same pricing points. The Energy Supplier’s payment obligations to the Commodity Swap Counterparty under the MSES Commodity Swap will be guaranteed under the Morgan Stanley Commodity Swap Guarantee.
Form of Commodity Swaps
The Commodity Swaps have been entered into as a confirmation under a 2002 ISDA Master Agreement with certain amendments and elections under the Master Agreement that have been agreed to by the parties.
Payment
For each month of scheduled deliveries and notional amounts, each party with a net obligation under a Commodity Swap (based on the relative values of the fixed price and relevant index prices) will Attachment Staff Report Item 15K
59 pay that net obligation to the other party on the 25th day of the month (or next Business Day) the calendar month following the month to which the applicable day-ahead market prices relate.
Early Termination
General. Each of the Commodity Swaps will be subject to early termination under certain circumstances. This early termination can be triggered automatically or upon the election by the non-defaulting party as described below. No settlement or other termination payment (other than previously accrued amounts) would be due to any party as a result of any early termination of either Commodity Swap, except that MSES agrees to pay a make-whole amount equal to the discounted present value of the fee the Commodity Swap Counterparty would have received for the remainder of the then-current Reset Period if the MSES Commodity Swap is terminated for certain reasons.
Automatic Termination of Both Commodity Swaps. The termination of the Prepaid Energy Sales Agreement for any reason would result in the automatic termination of both the CCCFA Commodity Swap and the MSES Commodity Swap; provided that, in the case of certain termination events for which MSES is the defaulting party under the Prepaid Energy Sales Agreement, MSES, in addition to previously accrued unpaid amounts, shall owe the Commodity Swap Counterparty a make-whole amount equal to the discounted present value of the fee the Commodity Swap Counterparty would have received in the then-current Reset Period (a “Termination Fee”).
Automatic Termination of the CCCFA Commodity Swap. MSES’s delivery of notice designating an early termination date under the MSES Commodity Swap results in the automatic termination of the CCCFA Commodity Swap.
Elective Termination of the CCCFA Commodity Swap. Each of the following events of default and termination events would provide the non-defaulting party or the non-affected party (or, in the case of tax indemnification, the party required to make an additional payment or receive a reduced payment) the right to terminate the CCCFA Commodity Swap if it is not cured within the applicable cure period:
• the affected party’s failure to pay amounts due to the other party under the CCCFA Commodity Swap notwithstanding any payment from the Custodian to CCCFA under the MSES Custodial Agreement following the Commodity Swap Counterparty’s failure to pay any amounts when due; provided, however, a termination event will not occur (a) due to CCCFA’s failure to pay on or before the 120th day after notice of such failure is given to CCCFA (provided, however, if CCCFA did not, for any reason, receive payment for sufficient Put Receivables to avoid such payment failure, then on the third Business Day after notice of such failure is given to CCCFA), or (b) due to the Commodity Swap Counterparty’s failure to pay on or before the third Business Day after notice of such failure is given to the Commodity Swap Counterparty;
• a representation made by the defaulting party proves to have been incorrect or misleading in any material respect;
• if a party becomes subject to certain insolvency events; Attachment Staff Report Item 15K
60 • if the defaulting party or its credit support provider participates in a merger or similar business combination (or, additionally, if such party is CCCFA, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, CCCFA) and (a) the surviving entity does not assume the obligations of such party or its credit support provider under the CCCFA Commodity Swap, (b) the benefits of any credit support document fail to extend (without the consent of the other party) to the performance by such resulting, surviving, transferee or successor entity of its obligations under the CCCFA Commodity Swap, or (c) in the case of CCCFA, the Trust Estate is no longer available for the satisfaction of such surviving entity’s obligations to the Commodity Swap Counterparty under the CCCFA Commodity Swap;
• if performance or receipt of performance of the CCCFA Commodity Swap becomes illegal for either party, such party would have the right to terminate the CCCFA Commodity Swap;
• if a party becomes (or parties become) obligated to pay additional tax indemnification amounts or will receive payments that are lessened by tax indemnification amounts because of changed laws or corporate changes, including by way of merger or similar business combination, to a party, the party or parties impacted by the need for such additional payments or the receipt of reduced payments will have the right to terminate the CCCFA Commodity Swap unless the other party agrees to waive such indemnification requirement for increased payments or indemnifies the party for any reduced payments; • if the affected party participates in a merger or similar business combination and the creditworthiness of the surviving entity is materially weaker than the original party; • (a) any withdrawal of the Commodity Swap Counterparty’s Credit Rating or (b) any reduction in the Commodity Swap Counterparty’s Credit Rating below “Baa3” by Moody’s or below “BBB-” by S&P, where “Commodity Swap Counterparty’s Credit Rating” means the credit rating assigned by the applicable rating agency to the Commodity Swap Counterparty’s senior, unsecured long-term debt obligations (not supported by third party credit enhancements;
• if certain provisions of the Prepaid Energy Sales Agreement related to termination of the Prepaid Energy Sales Agreement or the Receivables Purchase Provisions are modified without the Commodity Swap Counterparty’s consent;
• CCCFA fails to promptly exercise its right to suspend all energy deliveries under a Power Supply Contract to any Project Participant that fails to pay when due any amounts owed to CCCFA thereunder;
• if the Indenture is modified in breach of the Commodity Swap Counterparty’s consent rights under the Indenture and such breach is not cured within 10 days of notice to the Commodity Swap Counterparty; and
Attachment Staff Report Item 15K
61 • upon CCCFA’s receipt of notice from MSES designating an early termination date under the MSES Commodity Swap.
An event of default also exists for a party’s failure to comply with or perform any agreement or obligation under the CCCFA Commodity Swap other than payment obligations, except that such event does not give the non-defaulting party the right to designate an early termination date pursuant to the CCCFA Commodity Swap or to assert a claim for monetary damages as a result of such event of default. Such an event of default permits the non-defaulting party to pursue such equitable remedies, including specific performance, as may be available to it.
Elective Termination of the MSES Commodity Swap. Each of the following events of default or termination events would provide the non-defaulting or non-affected party (or, in the case of tax indemnification, the party required to make an additional payment or receive a reduced payment) the right to terminate the MSES Commodity Swap if it is not cured within the applicable cure period:
• the defaulting party’s failure to pay amounts due to the other party under the MSES Commodity Swap;
• the defaulting party’s failure to comply with or perform any agreement or obligation under the MSES Commodity Swap other than payment obligations; • if MSES, the Commodity Swap Counterparty or Morgan Stanley fails to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with the Credit Support Annex executed as part of the MSES Commodity Swap or the Morgan Stanley Commodity Swap Guarantee, as applicable (each of the Credit Support Annex and Morgan Stanley Commodity Swap Guarantee, a “Credit Support Document”), or the expiration or termination of a Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect (in either case other than in accordance with their terms) prior to the satisfaction of all obligations of such party under the MSES Commodity Swap without the written consent of the other party, or MSES, the Commodity Swap Counterparty or Morgan Stanley disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, any such Credit Support Document;
• a representation made by the defaulting party proves to have been incorrect or misleading in any material respect;
• subject to a threshold, any payment default or default which results in acceleration of indebtedness by the defaulting party any indebtedness but (a) excluding with respect to Commodity Swap Counterparty deposits received in the ordinary course of banking business and (b) including MSES’s obligations under the Receivables Purchase Provisions to purchase Put Receivables;
• if a party becomes subject to certain insolvency events; • if the defaulting party participates in a merger or similar business combination and the surviving entity does not assume the obligations under the MSES Commodity Swap, or the Attachment Staff Report Item 15K
62 benefits of a credit support document fail to extend to the performance of the defaulting party under the MSES Commodity Swap;
• if performance or receipt of performance of the MSES Commodity Swap becomes illegal for either party, such party would have the right to terminate the MSES Commodity Swap; • if a party becomes (or parties become) obligated to pay additional tax indemnification or will receive payments that are lessened by tax indemnification amounts because of changed laws or corporate changes, including by way of merger or similar business combination, to a party, the party or parties impacted by the need for such additional payments or the receipt of reduced payments will have the right to terminate the MSES Commodity Swap unless the other party agrees to waive such indemnification requirement for increased payments or indemnifies the party for any reduced payments;
• if the affected party participates in a merger or similar business combination and the creditworthiness of the surviving entity is materially weaker than the creditworthiness of the original party;
• (a) any withdrawal of the Commodity Swap Counterparty’s Credit Rating or (b) any reduction in the Commodity Swap Counterparty’s Credit Rating below “Baa3” by Moody’s or below “BBB-” by S&P, with “Commodity Swap Counterparty’s Credit Rating” having the meaning described above under “Elective Termination of the CCCFA Commodity Swap”;
• if certain provisions of the Prepaid Energy Sales Agreement related to termination of the Prepaid Energy Sales Agreement or the Receivables Purchase Provisions are modified without the Commodity Swap Counterparty’s consent, provided that, in such case MSES, in addition to previously accrued unpaid amounts, shall owe the Commodity Swap Counterparty a Termination Fee;
• MSES may at its election deliver a notice of termination designating an early termination date under the MSES Commodity Swap, subject to the condition that the CCCFA Commodity Swap must terminate effective as of the same date (provided that, if no other Event of Default or Termination Event has occurred with respect to the Swap Counterparty, then MSES, in addition to previously accrued unpaid amounts, shall owe the Commodity Swap Counterparty a Termination Fee); and
• if the rights and obligations of MSES under the Prepaid Energy Sales Agreement are assigned to another entity and such entity’s obligations under the Prepaid Energy Sales Agreement are not guaranteed by a Morgan Stanley guarantee, unless either (a) the Commodity Swap Counterparty consents to such assignment or (b) all of MSES’s rights and obligations under the MSES Commodity Swap are assigned and novated to another entity pursuant to the MSES Commodity Swap; provided that, in the case of a termination due to an assignment that fails to comply with the foregoing requirements, MSES, in addition to previously accrued unpaid amounts, shall owe the Commodity Swap Counterparty a Termination Fee. See “THE PREPAID ENERGY SALES AGREEMENT— Assignment” above.
Attachment Staff Report Item 15K
63 Custodial Agreements
The Energy Supplier will enter into a Custodial Agreement (the“Energy Supplier Custodial Agreement”), with the Commodity Swap Counterparty and The Bank of New York Mellon Trust Company, N.A., as Trustee and as custodian (in such capacity, the “Custodian”), to administer payments under the MSES Commodity Swaps. CCCFA will enter into a Custodial Agreement, dated as of the initial issue date of the Bonds (the “CCCFA Custodial Agreement,” and together with the Energy Supplier Custodial Agreement, the “Custodial Agreements”), with the Commodity Swap Counterparty and the Custodian, to administer payments under the CCCFA Commodity Swap. The Custodial Agreements contain provisions designed to mitigate risks to CCCFA and Bondholders resulting from a failure of the Commodity Swap Counterparty to make payments to CCCFA under the CCCFA Commodity Swap and mitigate risks to the Energy Supplier resulting from a failure of the Commodity Swap Counterparty to make payments to the Energy Supplier under the MSES Commodity Swap.
Payments made by the Energy Supplier under the MSES Commodity Swap will be made to a custodial account maintained by the Custodian under the Energy Supplier Custodial Agreements. Such amounts will not be released until the Custodian has received confirmation that the amount payable to CCCFA by the Commodity Swap Counterparty under the CCCFA Commodity Swap for such month has been paid. If the Commodity Swap Counterparty does not make a required payment under a CCCFA Commodity Swap and such payment remains unpaid after the expiration of any grace period, the Custodian will pay the amount that the Energy Supplier paid under the MSES Commodity Swap (which such amount is held in custody) to the Trustee for deposit in the Revenue Fund and that payment will be treated as a Commodity Swap Receipt. Additionally, if the MSES Commodity Swap terminates, the Energy Supplier will continue to make payments to the custodial account as if such MSES Commodity Swap were still in effect until the earlier of (i) replacement of the Commodity Swaps in accordance with the requirements of the Prepaid Energy Sales Agreement and (ii) termination of the Prepaid Energy Sales Agreement, and such payments will be used to ensure that CCCFA receives deposits in the Revenue Fund as described in the preceding sentence in the event that the Commodity Swap Counterparty does not make a required payment under the CCCFA Commodity Swap.
Payments made by CCCFA under the CCCFA Commodity Swap will be made to a custodial account maintained by the Custodian under the CCCFA Custodial Agreement. The amount in the custodial account will not be released until the Custodian has received confirmation that the amount payable to the Energy Supplier by the Commodity Swap Counterparty under the MSES Commodity Swap for such month has been paid. If the Commodity Swap Counterparty does not make a required payment under the MSES Commodity Swap and such payment remains unpaid after the expiration of any grace period, the Custodian will pay the amount that CCCFA paid under the CCCFA Commodity Swap (which such amount is held in custody) to the Energy Supplier. Additionally, if a CCCFA Commodity Swap terminates, CCCFA will continue to make payments to the custodial account as if the CCCFA Commodity Swap were still in effect until the earlier of (i) replacement of the Commodity Swaps in accordance with the requirements of the Prepaid Energy Sales Agreement and (ii) termination of the Prepaid Energy Sales Agreement, and such payments will be withdrawn by the Custodian and paid to the Energy Supplier.
THE COMMODITY SWAP COUNTERPARTY
Set forth below is certain information regarding the Commodity Swap Counterparty. CCCFA assumes no responsibility for such information and cannot guarantee the accuracy thereof. Under no Attachment Staff Report Item 15K
64 circumstance is the Commodity Swap Counterparty obligated to pay any amount owed in respect of the Bonds.
[to come]
CONTINUING DISCLOSURE
CCCFA. CCCFA will enter into a Continuing Disclosure Undertaking (the “Undertaking”) for the benefit of the beneficial owners of the Bonds to send certain information annually and to provide notice of certain events to the MSRB’s EMMA system for municipal securities disclosures, pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (“Rule 15c2-12”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
A failure by CCCFA to comply with the Undertaking will not constitute an event of default under the Indenture or the Bonds and Beneficial Owners of the Bonds shall only be entitled to the remedies for any such failure described in the Undertaking. A failure by CCCFA to comply with the Undertaking must be reported in accordance with Rule 15c2-12 and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market.
Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price.
The Undertaking and commitments of CCCFA described under this heading and in APPENDIX D hereto to furnish the above-described documents and information are agreements and commitments solely of CCCFA, and the Underwriter has no responsibility to ensure that CCCFA complies with any such Undertaking or commitment. In addition, the Underwriter makes no representation that any such documents or information will be furnished, or that any such documents or information so furnished will be accurate or complete, or sufficient for the purposes for which they may be used.
CCCFA has previously entered into a continuing disclosure undertaking pursuant to Rule 15c2-12.
CCCFA has adopted a written policy that sets forth procedures for compliance with the federal tax and continuing disclosure requirements applicable to its bonds. The policy includes, among other things, procedures that are intended to promote CCCFA’s compliance with the Undertaking.
During the five-year period preceding the date of this Official Statement, CCCFA has determined that certain financial information relating to the Project Participant for its fiscal year ending June 30, 2021 was filed late. CCCFA subsequently filed such information on the Municipal Securities Rulemaking Board Electronic Municipal Market Access System. CCCFA has engaged BLX Group to assist with its continuing disclosure obligations.
Project Participant. Pursuant to the Power Supply Contract, the Project Participant has agreed to provide to CCCFA certain annual operating and financial information, which information will enable CCCFA to comply with the Undertaking. Failure of the Project Participant to provide such information is not a default under its Power Supply Contract, but any such failure entitles CCCFA to take such actions and to initiate such proceedings as shall be necessary to cause the Project Participant to comply with its undertaking as set forth in its Power Supply Contract.
Attachment Staff Report Item 15K
65 LITIGATION
There are no legal proceedings pending against CCCFA relating to the issuance, sale or delivery of the Bonds which could adversely affect the Clean Energy Project. In addition, there is no litigation pending or, to the knowledge of CCCFA, threatened against or affecting CCCFA or in any way questioning or in any manner affecting the validity or enforceability against CCCFA of the Bonds, the Power Supply Contract, the Prepaid Energy Sales Agreement, the CCCFA Commodity Swap, the Receivables Purchase Provisions, the Investment Agreements, the Custodial Agreements, the Indenture, or the pledge of the Trust Estate under the Indenture.
The Project Participant reports that there is no litigation pending or, to its knowledge, threatened against it questioning or in any manner affecting the validity or enforceability of the Power Supply Contract.
NO FINANCIAL STATEMENTS
CCCFA was formed in 2021, and consequently CCCFA has not yet produced audited financial statements. Pursuant to the Undertaking described under “CONTINUING DISCLOSURE” above, CCCFA has agreed to file its audited financial statements, commencing with its audited financial statements for its fiscal year ended December 31, 2021, on the MSRB’s EMMA system described above.
FINANCIAL ADVISOR
PFM Financial Advisors LLC (the “Financial Advisor”) has served as financial advisor to CCCFA in connection with Clean Energy Project and the Bonds. Among other responsibilities, the Financial Advisor has provided advice and recommendations to CCCFA with respect to the structure, timing, terms of and similar matters relating to the Bonds, bond market conditions, costs of issuance and other matters relating to the Bonds and the Clean Energy Project. The Financial Advisor has also provided advice and recommendations to CCCFA, and has served as CCCFA’s “qualified independent representative,” with respect to the CCCFA Commodity Swap. The Financial Advisor has reviewed this Official Statement, but has not audited, authenticated or otherwise verified the information set forth herein, and makes no guaranty, warranty or representation with respect to the accuracy and completeness of the information contained in this Official Statement. The Financial Advisor’s fees are contingent upon the sale and delivery of the Bonds, and are based, in part, on the proceeds of the Bonds.
UNDERWRITING
Pursuant to the purchase contract relating to the Bonds between CCCFA and Morgan Stanley & Co. LLC, as the underwriter of the Bonds (the “Underwriter”), the Underwriter has agreed, subject to certain conditions to purchase the Bonds from CCCFA at an aggregate purchase price of $____________ (representing the principal amount of the Bonds, plus original issue premium of $____________, less Underwriter’s discount of $__________). The obligation of the Underwriter to purchase the Bonds is subject to certain terms and conditions set forth in the purchase contract. The Underwriter is obligated to purchase all the Bonds if any are purchased. The Bonds may be offered and sold to certain dealers and others at prices lower than the initial offering prices, and such initial offering prices may be changed from time to time by the Underwriter. The Underwriter has no obligations other than those that are set forth in the purchase contract. The payment of the Bonds is not guaranteed by the Underwriter.
Attachment Staff Report Item 15K
66 Morgan Stanley & Co. LLC has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.
Morgan Stanley & Co. LLC (together with its affiliates) is a full service financial institution engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Morgan Stanley & Co. LLC and its affiliates have provided, and may in the future provide, a variety of these services to CCCFA and to persons and entities with relationships with CCCFA, for which they received or will receive customary fees and expenses.
In the ordinary course of its various business activities, the Underwriter and its affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own accounts and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of CCCFA (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with CCCFA. The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
The Underwriter is not acting as financial advisor to CCCFA in connection with the Bonds or the offering or sale of the Bonds.
CERTAIN RELATIONSHIPS
The Energy Supplier, which is also the Receivable Purchaser, the Interest Rate Swap Counterparty and a party to the MSES Commodity Swap is a wholly owned indirect subsidiary of Morgan Stanley. The payment obligations of the Energy Supplier under the Prepaid Energy Sales Agreement, the MSES Commodity Swap and the Interest Rate Swap are unconditionally guaranteed by Morgan Stanley under the Morgan Stanley Guarantees. The Underwriter of the Bonds, Morgan Stanley & Co. LLC, is also a wholly owned subsidiary of Morgan Stanley.
Neither the Energy Supplier nor Morgan Stanley has guaranteed or is responsible for the payment of the Bonds. The obligations of the Energy Supplier and, by virtue of the Morgan Stanley Guarantees, Morgan Stanley are limited to those set forth in the Prepaid Energy Sales Agreement, the MSES Commodity Swap, the Interest Rate Swap and the Debt Service Account Investment Agreement (if the Energy Supplier or an affiliate is the Investment Agreement Provider). Neither the Energy Supplier nor Morgan Stanley takes any responsibility for the information set forth in this Official Statement other than the information relating to the Morgan Stanley Guarantees set forth under the captions “INTRODUCTION—Morgan Stanley Guarantees”, “THE PREPAID ENERGY SALES AGREEMENT—Security”, “THE INTEREST RATE SWAP— Morgan Stanley Guarantee” and “THE COMMODITY SWAPS—The MSES Commodity Swap” and under the heading “THE ENERGY SUPPLIER AND MORGAN STANLEY”.
Attachment Staff Report Item 15K
67 RATING
Moody’s Investors Service, Inc. is expected to assign a municipal bond rating of “___” to the Bonds.
CCCFA has furnished to each rating agency that is expected to rate the Bonds certain information, including information not included in this Official Statement, about CCCFA and the Bonds. Generally, a rating agency bases its ratings on that information and on independent investigations, studies and assumptions made by each rating agency. A securities rating is not a recommendation to buy, sell or hold securities. There is no assurance that a rating, once obtained, will continue for any given period of time or that it will not be revised downward or withdrawn entirely if, in the opinion of the rating agency, circumstances so warrant. Any such downward revision or withdrawal could have an adverse effect on the marketability or market price of the Bonds. CCCFA has not undertaken any responsibility after issuance of the Bonds to assure the maintenance of the ratings applicable thereto or to oppose any revision or withdrawal of such ratings.
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to CCCFA, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth in APPENDIX E hereto.
To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.
Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will Attachment Staff Report Item 15K
68 be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. CCCFA has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income.
Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.
Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.
Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, , as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of CCCFA, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. CCCFA has covenanted, however, to comply with the requirements of the Code.
Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend CCCFA or the Beneficial Owners Attachment Staff Report Item 15K
69 regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than CCCFA and its appointed counsel, such as the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which CCCFA legitimately disagrees may not be practicable.
Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues, may affect the market price for, or the marketability of, the Bonds, and may cause CCCFA or the Beneficial Owners to incur significant expense.
APPROVAL OF LEGAL MATTERS
The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to CCCFA. A complete copy of the proposed form of the opinion of Bond Counsel is contained in APPENDIX E to this Official Statement.
Certain legal matters will be passed upon for CCCFA by Orrick, Herrington & Sutcliffe LLP; for the Project Participant by Chapman and Cutler LLP; for the Energy Supplier by its counsel, Haynes and Boone, LLP; and for the Underwriter by Nixon Peabody LLP.
CCCFA will receive an opinion from counsel to the Project Participant on the date of original delivery of the Bonds, to the effect that the Power Supply Contract of the Project Participant has been duly authorized, executed and delivered by the Project Participant and constitutes the legal, valid and binding obligation of the Project Participant enforceable in accordance with its terms. The enforceability of the Power Supply Contract may be limited by or subject to applicable bankruptcy, insolvency, moratorium, reorganization, other laws affecting creditors’ rights generally and by general principles of equity, public policy and commercial reasonableness.
MISCELLANEOUS
Any statements in this Official Statement involving matters of opinion, estimates or forecasts, whether or not expressly so stated, are intended as such and not as representations of fact. The Appendices attached hereto are an integral part of this Official Statement and must be read in conjunction with the foregoing material. This Official Statement is not to be construed as a contract or agreement between CCCFA and the purchasers or owners of the Bonds.
The delivery of this Official Statement has been duly authorized by the Board of Directors of CCCFA.
CALIFORNIA COMMUNITY CHOICE FINANCING
AUTHORITY
By: ________________________________________
Chair
Attachment Staff Report Item 15K
A-1
APPENDIX A
THE PROJECT PARTICIPANT
Attachment Staff Report Item 15K
B-1
APPENDIX B
DEFINITIONS OF CERTAIN TERMS
“Act” means the Joint Exercise of Powers Act constituting Chapter 5 of Division 7 of Title 1 (commencing with Section 6500), as amended or supplemented from time to time. “Administrative Fee Fund” means the fund of that name created under the Indenture. “Applicable Factor” means (a) with respect to the initial issuance of a Series of Bonds bearing interest at a SOFR Index Rate, the percentage or factor of the SOFR Index determined by the Underwriter and specified in the Index Rate Determination Certificate for such Series of Bonds, or (b) with respect to a Series of Bonds for which the Interest Rate Period is being converted to a SOFR Index Rate Period (including a change in such Interest Rate Period from one SOFR Index Rate Period to another SOFR Index Rate Period), the percentage or factor of the SOFR Index determined by the Remarketing Agent and specified in the applicable Index Rate Determination Certificate or Index Rate Continuation Notice, provided in each case that CCCFA delivers to the Trustee a Favorable Opinion of Bond Counsel addressing the selection of such percentage or factor. The Applicable Factor shall be determined by the Underwriter or the Remarketing Agent, as applicable, in accordance with the Indenture and included in the applicable Index Rate Determination Certificate, and once determined shall remain constant for the duration of the applicable SOFR Index Rate Period.
“Assigned Delivery Point” means the delivery point for Assigned Energy as set forth in the applicable Assignment Agreement.
“Assigned Energy” means EPS Compliant Energy assigned pursuant to an Assignment Agreement. “Assigned Product” means, as applicable, PCC1 Product, Long-Term PCC1 Product, Assigned Energy, Assigned RECs and any other product included in an Assignment Agreement “Assigned RECs” means any RECs to be delivered to MSCG or the Energy Supplier pursuant to any Assigned Rights and Obligations.
“Assigned Rights and Obligations” means a portion of the Project Participant’s rights and obligations under a power purchase agreement assigned pursuant to an Assignment Agreement. “Assignment Agreements” mean the Initial Assignment Agreements and any subsequent assignment agreement entered into consistent with the Assignment Letter Agreements. “Assignment Letter Agreements” means those certain Letter Agreements, dated as of the date of the Prepaid Energy Sales Agreement, by and among MSCG, the Energy Supplier, CCCFA and the Project Participant.
“Assignment Payment” means any payment received from the Energy Supplier in connection with an assignment of the Prepaid Energy Sales Agreement to a replacement energy supplier. “Assignment Payment Fund” means the Assignment Payment Fund established under the Indenture.
“Base Energy” means Firm (LD) Energy to be delivered to an Energy Delivery Point.
Attachment Staff Report Item 15K
B-2
“Bond Counsel” means Orrick, Herrington & Sutcliffe LLP or any other counsel of nationally recognized standing in matters pertaining to the tax exempt status of interest on obligations issued by states and their political subdivisions and instrumentalities, duly admitted to the practice of law before the highest court of any state of the United States, and selected by CCCFA. “Bond Payment Date” means each date on which (a) interest on the Bonds is due and payable, (b) an Interest Rate Swap Payment is due, or (c) principal of the Bonds is payable at maturity or pursuant to Sinking Fund Installments.
“Bond Purchase Fund” means the fund by that name established pursuant to the Indenture, including the Remarketing Proceeds Account and the Issuer Purchase Account. “Bond Registrar” means the Trustee and any other bank or trust company organized under the laws of any state of the United States of America or national banking association appointed by CCCFA to perform the duties of Bond Registrar under the Indenture. “Bondholder” or “Holder” or “Owner” means any Person who shall be the registered owner of any Bond or Bonds.
“Business Day” means any day other than (a) a Saturday or Sunday, (b) a day on which commercial banks in New York, New York, or the cities in which are located the designated corporate trust offices of the Trustee, the Custodian or a Calculation Agent or the operational office of CCCFA are authorized by law or executive order to close, (c) a day on which the New York Stock Exchange, Inc. is closed, (d) a day on which the payment system of the Federal Reserve System is not operational, (e) for purposes of determining the SIFMA Index Rate and the SOFR Index Rate, any day that SIFMA recommends that the fixed income departments of its members be closed for purposes of trading in United States government securities.
“CAISO” means California Independent System Operator or its successor. “Calculation Agent” means The Bank of New York Mellon Trust Company, N.A., as Calculation Agent for the Series 2022A-2 Bonds and the Series 2022A-3 Bonds. “CCCFA Custodial Agreement” means that certain Custodial Agreement, dated as of the date of issuance of the Bonds, by and among the Swap Counterparty, CCCFA, and The Bank of New York Mellon Trust Company, N.A., as Trustee and custodian, as the same may be amended, modified or supplemented from time to time.
“CCCFA Commodity Swap” means (i) the transaction confirmation entered into under the ISDA Master Agreement, dated as of the date hereof, by CCCFA and the Swap Counterparty, and (ii) each replacement CCCFA Swap entered into pursuant to the Prepaid Energy Sales Agreement. “Cede” means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to the Bonds pursuant to Section 3.09.
“Clean Energy Project” means, collectively, CCCFA’s purchase of Energy pursuant to the Prepaid Energy Sales Agreement and related contractual arrangements and agreements, and the purchase of any Energy to replace Energy not delivered as required pursuant to the Prepaid Energy Sales Agreement, and the sale of Energy to the Project Participant pursuant to the Power Supply Contract.
Attachment Staff Report Item 15K
B-3
“Commercial Paper Interest Rate Period” means, with respect to a Series of Bonds, each period comprised of CP Interest Terms for the Bonds of such Series, during which CP Interest Term Rates are in effect for the Bonds of such Series.
“Commercially Reasonable” or “Commercially Reasonable Efforts” means, with respect to any purchase or sale or other action required to be made, attempted or taken by the Project Participant, CCCFA or the Energy Supplier under the Power Supply Contract or the Prepaid Energy Sales Agreement, as applicable, such efforts as a reasonably prudent Person would undertake for the protection of its own interest under the conditions affecting such purchase or sale or other action, including without limitation, the amount of notice of the need to take such action, the duration and type of the purchase or sale or other action, the competitive environment in which such purchase or sale or other action occurs, and the risk to the Party required to take such action.
“Commodity Swap Counterparty” means [___________], a [____________], and any other Person that becomes counterparty to CCCFA under the CCCFA Commodity Swap or to the Energy Supplier under a the Energy Supplier Swap, in each case pursuant to the Prepaid Energy Sales Agreement. “Commodity Swap Payment Fund” means the Commodity Swap Payment Fund established pursuant to the Indenture.
“Commodity Swap Payments” means, as of each scheduled payment date specified in the CCCFA Commodity Swap, the amount, if any, payable to the Commodity Swap Counterparty by CCCFA (including any such amount paid to the Custodian pursuant to the CCCFA Custodial Agreement). “Commodity Swap Receipts” means, as of each scheduled payment date specified in the CCCFA Commodity Swap, the amount, if any, payable to CCCFA by the Commodity Swap Counterparty. “Commodity Swaps” means, collectively, the CCCFA Commodity Swap and the MSES Commodity Swap.
“Contract Price” means, with respect to EBCE, (a) the Day-Ahead Average Price for the Month in which Energy is delivered, minus (b) the Monthly Discount. The Contract Price for Assigned Energy is inclusive of any amounts due in respect of other Assigned Products. “Contract Quantity” means, with respect to each Month during the Delivery Period, (i) the Monthly Quantity of Assigned Energy set forth in the applicable exhibit to the Prepaid Energy Sales Agreement for such Month and (ii) the Hourly Quantity of Base Energy set forth in the applicable exhibit to the Prepaid Energy Sales Agreement for such Month, as such exhibits shall be updated from time to time in accordance with the Prepaid Energy Sales Agreement.
“Cost of Acquisition” means all costs of planning, financing, refinancing, acquiring, transmitting, storing and implementing the Clean Energy Project, including:
(a) the amount of the prepayment required to be made by CCCFA under the Prepaid Energy Sales Agreement;
(b) the amount for deposit into the Capitalized Interest Subaccount of the Debt Service Account for capitalized interest on the Bonds, with such interest being calculated in accordance with the definition of “Debt Service;”
Attachment Staff Report Item 15K
B-4
(c) the costs and expenses incurred in the issuance and sale of the Bonds, including, without limitation, legal, financial advisory, accounting, engineering, consulting, municipal advisory, financing, technical, fiscal agent and underwriting costs, fees and expenses, bond discount, rating agency fees, and all other costs and expenses incurred in connection with the authorization, sale and issuance of the Bonds and preparation of the Indenture; (e) all other costs incurred in connection with and properly chargeable to, the acquisition or implementation of the Clean Energy Project; (f) the allowance for working capital requirements of CCCFA with respect to the Clean Energy Project in such amounts as shall be deemed reasonably necessary by CCCFA; and (g) with respect to any Series of Refunding Bonds, the amounts necessary to purchase, redeem and discharge Bonds being refunded, including the payment of the Purchase Price or the Redemption Price of such Bonds, any necessary deposits to the Debt Service Account, and all other costs and expenses incurred in connection with such Series of Refunding Bonds, including the costs and expenses described in (e) and (f) above.
“CP Interest Term” means, with respect to a Commercial Paper Interest Rate Period for a Series of Bonds, each period established in accordance with the Indenture during which a CP Interest Term Rate is in effect for the Bonds of such Series.
“CP Interest Term Rate” means, with respect to any Bond of a Series of Bonds in the Commercial Paper Interest Rate Period, an interest rate established periodically for each CP Interest Term in accordance with the Indenture.
“Custodial Agreements” means, collectively, the CCCFA Custodial Agreement and the Energy Supplier Custodial Agreement.
“Custodian” means The Bank of New York Mellon Trust Company, N.A., as Custodian under the Custodial Agreements and its successors and assigns.
“Daily Interest Rate” means, with respect to a Series of Bonds, the final daily interest rate for such Bonds determined by the Remarketing Agent by 11:00 a.m. New York City time pursuant to the Indenture. “Daily Interest Rate Period” means, with respect to a Series of Bonds, each period during which a Daily Interest Rate is in effect for such Bonds.
“Day-Ahead Average Price” means, for any Assigned Energy after the Initial EPS Energy Periods, the weighted average Day-Ahead Market Price for each Month during the applicable EPS Energy Period, with such weighted average calculated in accordance with the Prepaid Energy Sales Agreement; provided that in no case shall the Day-Ahead Average Price hereunder be less than $0.00/MWh. “Day-Ahead Market Price” means the Day Ahead Market or Locational Marginal Price for the Energy Delivery Point for each applicable hour as published by CAISO, or as such price may be corrected or revised from time to time by such independent system operator or other entity in accordance with its rules; provided that in no case shall the Day-Ahead Market Price hereunder be less than $0.00/MWh. “Debt Service” means with respect to any Outstanding Bonds, for any particular period of time, an amount equal to the sum of:
Attachment Staff Report Item 15K
B-5
(a) all interest payable during such period on such Bonds, but excluding any interest that is to be paid from Bond proceeds on deposit in the Debt Service Account, plus (b) the Principal Installments payable during such period on such Bonds, calculated on the assumption that, on the day of calculation, such Bonds cease to be Outstanding by reason of, but only by reason of, payment either upon maturity or application of any Sinking Fund Installments required by the Indenture;
provided that (i) the interest on any Bonds with a related Interest Rate Swap shall be calculated on the basis of the fixed interest rate payable by CCCFA under the Interest Rate Swap, and (ii) principal and interest due on the first day of a Fiscal Year shall be deemed to have been payable and paid on the last day of the immediately preceding Fiscal Year.
“Debt Service Account” means the Debt Service Account in the Debt Service Fund established under the Indenture.
“Debt Service Fund” means the Debt Service Fund established in Section 5.02. “Debt Service Fund Agreement” means any debt service fund agreement, that is a Qualified Investment, among the Trustee, CCCFA and a provider, or between CCCFA and a provider and assigned to the Trustee, relating to amounts deposited in the Debt Service Account of the Debt Service Fund. The initial Debt Service Fund Agreement shall be the investment agreement (which may be in the form of an ISDA Master Agreement) with the Investment Agreement Provider with respect to the Debt Service Account, including the Capitalized Interest Subaccount therein, with a a term coterminous with the Initial Interest Rate Period, which is required to meet all of the criteria of a Qualified Investment under the Indenture and is expected to be bid out on the day of Bond pricing to qualified investment providers. “Debt Service Fund Agreement Guaranty” means any unconditional guaranty, in favor of CCCFA and the Trustee, guarantying the obligations of the provider under any Debt Service Fund Agreement. “Defeasance Securities” means (a) Government Obligations and (b) to the extent that such deposits or certificates of deposit are Qualified Investments, deposits in interest‑bearing time deposits or certificates of deposit which shall not be subject to redemption or repayment prior to their maturity or due date other than at the option of the depositor or holder thereof or as to which an irrevocable notice of redemption or repayment, or irrevocable instructions have been given to call for redemption or repayment, of such time deposits or certificates of deposit on a specified redemption or repayment date has been given and such time deposits or certificates of deposit are not otherwise subject to redemption or repayment prior to such specified date other than at the option of the depositor or holder thereof, and which are fully secured by Government Obligations to the extent not insured by the Federal Deposit Insurance Corporation. “Delivery Period” means the period commencing January 1, 2022 and ending December 31, 2051. “Delivery Point” means (i) the applicable Assigned Delivery Point(s) for Assigned Energy and (ii) the applicable Energy Delivery Point for Base Energy, as set forth in the Prepaid Energy Sales Agreement. “Depository” means any bank, trust company, national banking association, savings and loan association, savings bank or other banking association selected by CCCFA as a depository of moneys and securities held under the provisions of this Indenture, and may include the Trustee.
Attachment Staff Report Item 15K
B-6
“Dissemination Agent” means that certain dissemination agent appointed by CCCFA, pursuant to the Continuing Disclosure Undertaking, and any successor Dissemination Agent appointed by CCCFA in accordance with the Continuing Disclosure Undertaking.
“DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.
“Early Termination Date” means a date designated pursuant to the Prepaid Energy Sales Agreement upon which the Delivery Period will end and CCCFA’s and the Energy Supplier’s respective obligations to receive and deliver Energy under the Prepaid Energy Sales Agreement will terminate. “Early Termination Payment Date” means the date payment of a Termination Payment is required to be made by the Energy Supplier under the Prepaid Energy Sales Agreement. “EBCE” means East Bay Community Energy Authority, a joint powers authority organized pursuant to the Act.
“Electronic Means” means the following communication methods: e‑mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by a Responsible Officer of the Trustee as available for use in connection with its services hereunder. “EMMA” means the Electronic Municipal Market Access system, the website currently maintained by the Municipal Securities Rulemaking Board and any successor municipal securities disclosure website approved by the Securities and Exchange Commission.
“Energy” means three-phase, 60-cycle alternating current electric energy, expressed in MWhs. “Energy Delivery Point” means the delivery point for Base Energy specified in the Prepaid Energy Sales Agreement.
“Energy Remarketing Reserve Fund” means the Energy Remarketing Reserve Fund in established under the Indenture.
“Energy Supplier” means Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company.
“Energy Supplier Commodity Swap” means (i) the transaction confirmation entered into under the ISDA Master Agreement, dated as of the date of the Prepaid Energy Sales Agreement, by the Energy Supplier and the Swap Counterparty, and (ii) each replacement the Energy Supplier Swap entered into pursuant to the Prepaid Energy Sales Agreement.
“Energy Supplier Custodial Agreement” means that certain Custodial Agreement, dated as of the date of issuance of the Bonds, by and among the Swap Counterparty, the Energy Supplier and The Bank of New York Mellon Trust Company, N.A, as Trustee and custodian, as the same may be amended, modified or supplemented from time to time.
“Energy Supplier Guaranty” means the Morgan Stanley Guarantee, as defined in the Prepaid Energy Sales Agreement.
Attachment Staff Report Item 15K
B-7
“EPS” means California’s Emissions Performance Standards, as set forth in Sections 8340 and 8341 of the California Public Utilities Code, as implemented and amended from time to time, and any successor Law.
“EPS Compliant Energy” means Energy that the Project Participant can contract for and purchase in compliance with EPS requirements that are applicable to the Project Participant. “EPS Energy Period” means the Initial EPS Energy Periods and any subsequent EPS Energy Periods established by future assignments of power purchase agreements consistent with the Assignment Letter Agreements.
“Extraordinary Expenses” means extraordinary and nonrecurring expenses. Termination payments under the Commodity Swap shall not be considered an Extraordinary Expense. “Failed Remarketing” means, (a) with respect to the Bonds on the Mandatory Purchase Date, a failure to either (i) pay the Purchase Price of the Bonds required to be purchased on such date or (ii) redeem such Bonds in whole on such date (including from any funds required from an Assignment Payment to the Assignment Payment Fund) or (b) with respect to the Bonds (i) if, on the last day of the current Reset Period prior to the Mandatory Purchase Date, CCCFA has not entered into a bond purchase agreement, firm remarketing agreement or similar agreement with respect to the remarketing or refunding of such existing Bonds, or (ii) if the conditions of (b)(i) above are satisfied, but the Purchase Price of the Bonds required to be purchased on the Mandatory Purchase Date is not delivered to the Trustee by noon New York City time on the fifth Business Day preceding such Mandatory Purchase Date. “Favorable Opinion of Bond Counsel” means an Opinion of Bond Counsel to the effect that an action proposed to be taken is not prohibited by the Indenture and will not, in and of itself, cause interest on the applicable Bonds to be included in gross income for purposes of federal income taxation. “Fiduciary” or “Fiduciaries” means the Trustee, the Paying Agents, the Bond Registrar, the Calculation Agents, the Custodian, the tender agent or any or all of them, as may be appropriate. “Firm (LD)” means, with respect to the obligation to deliver Energy, that CCCFA or the Energy Supplier shall be relieved of its obligations to sell and deliver or purchase and receive without liability only to the extent that, and for the period during which, such performance is prevented by Force Majeure. “Fiscal Year” means (a) the twelve-month period beginning on January 1 of each year and ending on and including the next December 31, or (b) such other twelve-month period established by CCCFA from time to time, upon Written Notice to the Trustee, as its fiscal year. “Fitch” means Fitch Ratings, Inc., its successors and assigns, and, if such corporation shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by CCCFA in a Written Notice delivered to the Trustee.
“Force Majeure” means an event or circumstance which prevents the Project Participant, CCCFA or the Energy Supplier from performing its obligations under this Agreement, which event or circumstance was not anticipated as of the Execution Date, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided. Force Majeure shall not be based on (i) the loss of CCCFA’s or the Project Participant’s markets; (ii) CCCFA’s or the Project Participant’s inability economically to use or resell any Energy purchased under the Prepaid Energy Sales Agreement or Power Attachment Staff Report Item 15K
B-8
Supply Contract, respectively; (iii) the loss or failure of the Energy Supplier’s supply except if such loss or failure results from curtailment by a Transmission Provider; or (iv) the Energy Supplier’s ability to sell the Energy at a higher price. No party may raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (a) such party (or an upstream supplier with respect to the Energy Supplier or the Project Participant with respect to CCCFA) has contracted for firm transmission with such Transmission Provider for the Energy to be delivered to or received at the Energy Delivery Point and (b) such curtailment is due to “force majeure” or “uncontrollable force” or a similar term as defined under the Transmission Provider’s tariff; provided, however, that existence of the foregoing factors shall not be sufficient to conclusively or presumptively prove the existence of Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that Force Majeure as defined in the first sentence hereof has occurred. Notwithstanding the foregoing or anything to the contrary herein, (I) to the extent that a PPA Supplier fails to deliver any Assigned Energy and claims force majeure with respect to such failure to deliver, then such event shall be deemed to constitute Force Majeure in respect of the Energy Supplier; and (II) to the extent that an Assignment Agreement is terminated early, such termination shall constitute Force Majeure with respect to the Energy Supplier until the earlier of (A) the commencement of an “Assignment Period” under a replacement Assignment Agreement, (B) the commencement of the delivery of EPS Compliant Energy procured by MSCG consistent with the Assignment Letter Agreement or (C) the end of the second Month following the Month in which such early termination occurs.
“General Reserve Fund” means the General Reserve Fund established in Section 5.02. “Government Agency” means the United States of America, any state thereof, any municipality, or any local jurisdiction, or any political subdivision of any of the foregoing, including, but not limited to, courts, administrative bodies, departments, commissions, boards, bureaus, agencies, or instrumentalities. “Government Obligations” means:
(a) Direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America, obligations unconditionally guaranteed as to principal and interest by the United States of America, and evidences of ownership interests in such direct or unconditionally guaranteed obligations; or (b) Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which: (i) are not callable at the option of the obligor prior to maturity or as to which irrevocable notice has been given by the obligor to call such bonds or obligations on the date specified in the notice; (ii) are rated in the two highest Rating Categories of S&P and Moody’s; and (iii) are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in clause (a) above, which fund may be applied only to the payment of interest when due, principal of and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable notice, as appropriate; or
(c) Any other bonds, notes or obligations of the United States of America or any agency or instrumentality thereof which, if deposited with the Trustee for the purpose described in the Indenture, will result in a rating on the Bonds which are deemed to have been paid pursuant to the Indenture that is in the same Rating Category of the obligations listed in subsection (a) above.
Attachment Staff Report Item 15K
B-9
The determination as to whether any bond, note or other obligation constitutes a Government Obligation shall be made solely at the time of initial investment or purchase; provided that, the Trustee shall have no responsibility for determining whether any bond, note or other obligation is a Government Obligation. “Hour” means each 60-minute period commencing at 00:00 PPT on the first day of the Delivery Period. The term “Hourly” shall be construed accordingly. “Hourly Quantity” means, with respect to each Delivery Hour during a Delivery Period, the quantity (in MWh) of Base Energy set forth in the Prepaid Energy Sales Agreement for the Month in which such Delivery Hour occurs, as updated from time to time in accordance with the Prepaid Energy Sales Agreement.
“Indenture” means this Trust Indenture as from time to time amended or supplemented by Supplemental Indentures in accordance with the terms hereof. “Index” means the SIFMA Index or the SOFR Index, as applicable. “Index Rate” means a SIFMA Index Rate or the SOFR Index Rate, as applicable. “Index Rate Period” means, with respect to a Series of Bonds, an Interest Rate Period during which the Bonds of such Series bear interest at an Index Rate. “Index Rate Reset Date” means, with respect to a Series of Bonds bearing interest at an Index Rate, each date on which the applicable Index Rate is determined by the Calculation Agent based on the change in the applicable Index as of such date, which shall be the date or dates so specified in the applicable Index Rate Determination Certificate with respect to such Index Rate Period (including, by way of example and not limitation, Thursday of each week, the first Business Day of each calendar month or the first Business Day of a calendar quarter).
“Initial Assignment Agreements” means, for the Project Participant, a specific PPA between the Project Participant and MSCG, as seller.
“Initial EPS Energy Periods” means the period during which the Initial Assignment Agreements are in effect, which commence on first day of the initial Delivery Period and end on [_______], 20[__]. “Initial Interest Rate Period” means, with respect to the Series 2022 EBCE Bonds, the period from the date of issuance of the Bonds to and including [______], 20[__]* .
“Initial PPA Supplier” means MSCG.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, including the applicable U.S. Treasury Regulations promulgated thereunder. “Interest Accrual Date” means, with respect to any Bond (a) during any Daily Interest Rate Period or Weekly Interest Rate Period for such Bond, the first day thereof and, thereafter, each Interest Payment Date in respect thereof other than the last such Interest Payment Date during that Daily Interest Rate Period or Weekly Interest Rate Period, as applicable, (b) during any Index Rate Period for such Bond, the first day thereof and, thereafter each Interest Payment Date in respect thereof other than the last such Interest Payment Date during that Index Rate Period, except as otherwise provided in the Supplemental Indenture for such Bond, (c) during any Term Rate Period for such Bond, the first day thereof and, thereafter, each Interest Payment Date in respect thereof other than the last such Interest Payment Date during that Term Attachment Staff Report Item 15K
B-10
Rate Period, and (d) for each CP Interest Term for such Bond within a Commercial Paper Interest Rate Period, the first day thereof.
“Interest Payment Date” means (i) with respect to the Series 2022A-1 Bonds, each [______] 1 and [______] 1, commencing [______] 1, 20[__]*
, and (ii) with respect to the Series 2022A-2 Bonds and Series 2022A-3 Bonds, the first Business Day of each month, commencing with the first Business Day of [______] 20[__]*
.
“Interest Rate Swap Payments” means, as of each scheduled payment date specified in the Interest Rate Swap, the amount, if any, payable to the Interest Rate Swap Counterparty by CCCFA. “Interest Rate Swap Receipts” means, as of each scheduled payment date specified in the Interest Rate Swap, the amount, if any, payable to CCCFA by the Interest Rate Swap Counterparty. “Interest Rate Period” means a Daily Interest Rate Period, a Weekly Interest Rate Period, a Commercial Paper Interest Rate Period, a Term Rate Period or an Index Rate Period, each as defined in the Indenture. All Bonds of a Series shall at all times bear interest in the same Interest Rate Period, and all Interest Rate Periods for all Series of Bonds shall terminate on the first to occur of the day prior to (a) the next occurring Mandatory Purchase Date or (b) the Final Maturity Date. “Interest Rate Swap” means the ISDA Master Agreement, the Schedule thereto and the Confirmation thereunder between the Issuer and the Interest Rate Swap Counterparty, and any replacement interest rate swap agreement permitted by the Indenture. “Interest Rate Swap Counterparty” means MSES.
“Investment Agreement Provider” means ______________.
“Law” means any statute, law, rule or regulation or any judicial or administrative interpretation thereof having the effect of the foregoing enacted, promulgated, or issued by a Government Agency whether in effect as of the execution date of the Prepaid Energy Sales Agreement or at any time in the future. “Long-Term PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1, and the California Long-Term Contracting Requirements, to be delivered to MSCG, the Energy Supplier or any successors thereto pursuant to any Assigned Rights and Obligations.
“Mandatory Purchase Date” means [______] 1, 20[__]*
.
“Maturity Date” means each date upon which principal of the Bonds is due, as set forth in the Indenture.
“Maximum Lawful Rate” means the maximum interest rate permitted by applicable law. “Maximum Rate” means the lesser of 12% per annum and the Maximum Lawful Rate. “Minimum Discount” has the meaning specified in the Power Supply Contract. “Month” means a calendar month. The term “Monthly” shall be construed accordingly.
Attachment Staff Report Item 15K
B-11
“Monthly Quantity” means, with respect to each Month of the Delivery Period, the quantity (in MWh) of Assigned Energy for such Month as set forth in the Prepaid Energy Sales Agreement, as updated from time to time in accordance therewith.
“Moody’s” means Moody’s Investors Service, Inc., its successors and assigns, and, if such corporation shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by CCCFA in a Written Notice delivered to the Trustee.
“Morgan Stanley” means Morgan Stanley, a Delaware corporation. “Morgan Stanley Guarantee” means a guarantee of Morgan Stanley of the Energy Supplier’s payment obligations under this Agreement in the form attached hereto as Exhibit E. “MSCG” means Morgan Stanley Capital Group Inc., a Delaware corporation. “MWh” means a megawatt-hour.
“Net Participant Shortfall Amount” means, for any Month in which the Project Participant fails to pay the full amount due under its Power Supply Contract in time for such amount to be credited to the Revenue Fund for application pursuant to the Indenture and the full amount due by such Project Participant is not otherwise paid by the Energy Supplier pursuant to the Receivables Purchase Provisions, an amount equal to the positive result (if any) of (i) such Project Participant’s Payment Deficiency Index Baseline for such Month minus (ii) the greater of (a) such Project Participant’s Payment Deficiency Fixed Baseline for such Month, and (b) the actual amount paid by such Project Participant for such Month, provided that if the foregoing does not result in a positive number, then no Net Participant Shortfall Amount will exist for such Project Participant for such Month.
“NY Federal Reserve’s Website” means the website of the Federal Reserve Bank of New York currently at http://www.newyorkfed.org, or any successor website of the Federal Reserve Bank of New York.
“Operating Expenses” means, to the extent properly allocable to the Clean Energy Project, (a) CCCFA’s expenses for operation of the Clean Energy Project, including all Rebate Payments, costs, collateral deposits and other amounts (other than Commodity Swap Payments) necessary to maintain any Commodity Swap; and payments required under the Prepaid Energy Sales Agreement (which may, under certain circumstances, include imbalance charges and other miscellaneous payments) or required to be incurred under or in connection with the performance of CCCFA’s obligations under the Power Supply Contract; (b) any other current expenses or obligations required to be paid by CCCFA under the provisions of this Indenture (other than Debt Service on the Bonds and deposits to the General Reserve Fund and the Energy Remarketing Reserve Fund, or any Cost of Acquisition) or by law or required to be incurred under or in connection with the performance of CCCFA’s obligations under the Power Supply Contract; (c) fees payable by CCCFA with respect to any Remarketing Agreement; (d) the fees and expenses of the Fiduciaries; (e) reasonable accounting, legal and other professional fees and expenses, and all other reasonable administrative and operating expenses of CCCFA, which are incurred by CCCFA with respect to the Bonds, this Indenture, or the Clean Energy Project, including but not limited to those relating to the administration of the Trust Estate and compliance by CCCFA with its continuing disclosure obligations, if any, with respect to the Bonds; and (f) the costs of any insurance premiums incurred by CCCFA, including, without limitation, directors and officers liability insurance, allocable to the Clean Energy Project; provided that, for purposes of the transfers from the Revenue Fund described under the heading “Flow of Funds”, Operating Expenses shall not include any of the foregoing administrative expenses, fees or other costs Attachment Staff Report Item 15K
B-12
described in the foregoing clauses (a) through (f) that are paid from funds on deposit in the Administrative Fee Fund Commodity Swap Payments, litigation judgments and settlements and indemnification payments in connection with the payment of any litigation judgment or settlement, and Extraordinary Expenses are not Operating Expenses.
“Operating Fund” means the Operating Fund established pursuant to the Indenture. “Opinion of Bond Counsel” means a written opinion of either Bond Counsel or Special Tax Counsel (or written opinions of both of them) addressed to CCCFA and delivered to the Trustee. “Opinion of Counsel” means an opinion signed by an attorney or firm of attorneys (who may be counsel to CCCFA) selected by CCCFA.
“Outstanding” when used with reference to Bonds, means as of any date, Bonds theretofore or thereupon being authenticated and delivered under this Indenture except:
(a) Bonds cancelled (or portions thereof deemed to have been cancelled) by the Trustee at or prior to such date;
(b) Bonds (or portions of Bonds) for the payment or redemption of which moneys, equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall be held in trust under this Indenture and set aside for such payment or redemption (whether at or prior to the maturity or redemption date), provided that if such Bonds (or portions of Bonds) are to be redeemed, notice of such redemption shall have been given or provision satisfactory to the Trustee shall have been made for the giving of such notice as provided in the Indenture;
(c) Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and delivered pursuant to the Indenture;
(d) Bonds paid or deemed to have been paid as provided in the Indenture; and (e) Bonds (or portions thereof) deemed to have been purchased pursuant to the provisions of any Supplemental Indenture in lieu of which other Bonds have been authenticated and delivered as provided in such Supplemental Indenture. “Paying Agent” means the Trustee, its successors and assigns, and any other bank or trust company organized under the laws of any state of the United States of America or any national banking association designated as paying agent for the Bonds, and its successor or successors hereafter appointed in the manner provided in this Indenture.
“Payment Deficiency Fixed Baseline” means, for any Month and any Project Participant, the amount such Project Participant would have been required to pay for such Month under its Power Supply Contract if the Contract Price for such Month had been determined using an Index Price (as defined under its Power Supply Contract) for such Month equal to the Fixed Price (as defined under the Commodity Swap) for such Month.
“Payment Deficiency Index Baseline” means, for any Month and any Project Participant, the amount required to be paid by such Project Participant for such Month under its Power Supply Contract.
Attachment Staff Report Item 15K
B-13
“PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1 to be delivered to MSCG, the Energy Supplier or any successors thereto pursuant to any Assigned Rights and Obligations.
“Person” means any individual, limited liability company, corporation, partnership, joint venture, trust, unincorporated organization or Government Agency. “Pledged Funds” means (a) the Project Fund, (b) the Revenue Fund, (c) the Debt Service Fund, (d) the General Reserve Fund, (e) the Assignment Payment Fund and (f) the Commodity Swap Payment Fund, in each case including the Accounts in each of such Funds and in the case of the Commodity Swap Payment Fund, subject to the prior pledge thereof in favor of the Commodity Swap Counterparty. “Portfolio Content Category 1” means any Renewable Energy Credit associated with the generation of electricity from an “Eligible Renewable Energy Resource” consisting of the portfolio content set forth in California Public Utilities Code Section 399.16(b)(1), as may be amended from time to time or as further defined or supplemented by Law.
“Power Supply Contract” means (a) the contract for the sale by CCCFA of Energy from or attributable to the Clean Energy Project to the Project Participant, as such contracts may be amended from time to time in accordance with the terms thereof and the Indenture, and (b) any other contract for the sale by CCCFA of Energy from or attributable to the Clean Energy Project entered into by a Person that becomes a Project Participant in accordance with the assignment and novation requirements set forth in the Indenture, as such contract may be amended from time to time in accordance with the terms thereof and the Indenture. “PPA Supplier” means the Initial PPA Supplier and any subsequent supplier who enters into an Assignment Agreement consistent with the Assignment Letter Agreements. “PPT” means Pacific Daylight Time when such time is applicable and otherwise means Pacific Standard Time.
“Prepaid Clean Energy Project Administration Agreement” means the Prepaid Clean Energy Project Administration Agreement by and between CCCFA and the Project Participant, as the same may be amended from time to time.
“Principal Installment” means, as of any date of calculation, (a) the principal amount of Bonds due on a certain future date for which no Sinking Fund Installments have been established, or (b) the unsatisfied balance of any Sinking Fund Installments due on a certain future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments. “Project Administration Fee” means the annual fee payable by the Project Participant under its Power Supply Contract for the payment of Operating Expenses of CCCFA. “Project Fund” means the Project Fund established under the Indenture. “Project Participant” means (a) ECBE and (b) any other Public Agency that enters into a Power Supply Contract with CCCFA in accordance with the assignment and novation requirements set forth in the Indenture.
“PSC Remarketing Election” means, with respect to any Power Supply Contract, that the relevant Project Participant delivered a Remarketing Election Notice (as defined thereunder) for any Reset Period.
Attachment Staff Report Item 15K
B-14
“Public Agency” means a state, a governmental or political subdivision of a state and a corporate instrumentality or public corporation of a state or a subdivision of a state, including without limitation any of their departments or agencies, counties, county boards of education, county superintendents of schools, cities, public corporations, public districts, public commissions or joint powers authorities. “Put Receivable” has the meaning set forth in the Receivables Purchase Provisions. “Qualified Investments” means any of the following investments, if and to the extent that the same are rated (or whose financial obligations to CCCFA receive credit support from an entity rated) at least at the credit rating of the Energy Supplier, or, if the Energy Supplier is not rated, the guarantor of the Energy Supplier (except for (c) below), and are at the time authorized for such purpose by law:
(a) Direct obligations of the United States government or any of its agencies; (b) Obligations guaranteed as to principal and interest by the United States government or any of its agencies;
(c) Certificates of deposit, including those placed by a third party pursuant to an agreement between the Trustee and CCCFA, and other evidences of deposit at state and federally chartered banks, savings and loan institutions or savings banks, including the Trustee or any of its affiliates (each having the highest short term rating by each Rating Agency then rating the Bonds) deposited and collateralized as required by law;
(d) Repurchase agreements entered into with the United States or its agencies or with any bank, broker dealer or other such entity, including the Trustee and its affiliates, so long as the obligation of the obligated party is secured by a perfected pledge of obligations that meet the conditions set forth in the preamble to this definition of Qualified Investments; (e) Guaranteed investment contracts, forward delivery agreements, interest rate exchange agreements or similar agreements providing for a specified rate of return over a specified time period; provided, however, that guaranteed investment contracts, forward delivery agreements or similar agreements shall meet the conditions set forth in the preamble to this definition of Qualified Investments;
(f) Direct general obligations of a state of the United States, or a political subdivision or instrumentality thereof, having general taxing powers; (g) Obligations of any state of the United States or a political subdivision or instrumentality thereof, secured solely by revenues received by or on behalf of the state or political subdivision or instrumentality thereof irrevocably pledged to the payment of principal of and interest on such obligations and that meet the conditions set forth in the preamble to this definition of Qualified Investments;
(h) Money market funds registered under the federal Investment Company Act of 1940, whose shares are registered under the federal Securities Act of 1933, and having a rating in the highest Rating Category by each Rating Agency at the time of investment, including money market funds of the Trustee and funds for which the Trustee or its affiliates (i) provide investment or other management services and (ii) serve as investment manager, administrator, shareholder, servicing agent and/or custodian or sub-custodian, notwithstanding that (A) the Trustee or its affiliate receives or collects fees from such funds for services rendered, and (B) services performed Attachment Staff Report Item 15K
B-15
by the Trustee pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or its affiliate; or
(i) Any other investments permitted by applicable law for the investment of the funds of CCCFA and that meet the conditions set forth in the preamble to this definition of Qualified Investments;
provided, that CCCFA shall monitor, or shall cause to be monitored, ratings and shall determine whether any investment made is or continues to be a Qualified Investment, and the Trustee shall have no responsibility whatsoever for monitoring ratings or determining whether any investment is or continues to be a Qualified Investment.
“Rating Agency” means Fitch, Moody’s or S&P, or any other rating agency so designated in a Supplemental Indenture that, at the time, rates the Bonds. “Rating Category” means one or more of the generic rating categories of a Rating Agency, without regard to any refinement or gradation of such rating category or categories by a numerical modifier, a plus or minus, or otherwise.
“Re-Pricing Agreement” means the Re-Pricing Agreement, dated as of the date of issuance of the Bonds, by and between CCCFA and the Energy Supplier.
“Real-Time Market Price” means The Five Minute Market (FMM) Locational Marginal Price for the Energy Delivery Point for each applicable interval as published by CAISO, or as such price may be corrected or revised from time to time by such independent system operator or other entity in accordance with its rules; provided that in no case shall the Real-Time Market Price hereunder be less than $0.00/MWh. “Redemption Account” means the Redemption Account in the Debt Service Fund established in the Indenture.
“Redemption Price” means, with respect to any Bond, the amount payable upon redemption thereof pursuant to such Bond or this Indenture.
“Renewable Energy Credit” or “REC” has the meaning specified for “Renewable Energy Credit” in California Public Utilities Code Section 399.12(h), as may be amended from time to time or as further defined or supplemented by Law.
“Reset Period” means each “Reset Period” under the Re-Pricing Agreement. “Reset Period” means Initial Reset Period or Reset Period, as the case may be, each as defined in the Re-Pricing Agreement.
“Responsible Officer” means, when used with respect to the Trustee, the Custodian or the Calculation Agent, as applicable, any managing director, president, vice president, senior associate, associate or other officer of the Trustee, the Custodian or the Calculation Agent, respectively, within its designated corporate trust office for delivery of notice specified in Section 12.11 (or any successor corporate trust office) customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at such office because of such person’s knowledge of and familiarity with the particular subject and having direct responsibility for the administration of this Indenture.
Attachment Staff Report Item 15K
B-16
“Revenue Fund” means the Revenue Fund established under the Indenture. “Revenues” means:
(a) all revenues, income, rents, user fees or charges, and receipts derived or to be derived by CCCFA from or attributable or relating to the ownership and operation of the Clean Energy Project, including all revenues attributable or relating to the Clean Energy Project or to the payment of the costs thereof received or to be received by CCCFA under the Power Supply Contract and the Prepaid Energy Sales Agreement or otherwise payable to the Trustee for the account of CCCFA for the sale and/or transmission of Energy or otherwise with respect to the Clean Energy Project;
(b) interest received or to be received on any moneys or securities (other than moneys or securities held in the Project Fund, moneys or securities held in the Redemption Account in the Debt Service Fund or that portion of moneys in the Operating Fund required for Rebate Payments) held pursuant to this Indenture and paid or required to be paid into the Revenue Fund; and (c) any Commodity Swap Receipts received by the Trustee on behalf of CCCFA. provided that, the term “Revenues” shall not include: (u) any Termination Payment pursuant to the Prepaid Clean Energy Sales Agreement; (v) any amounts received from the Energy Supplier that are required to be deposited into the Energy Remarketing Reserve Fund; (w) any amounts paid by the Project Participant under a Prepaid Clean Energy Project Administration Agreement; (x) any Assignment Payment received from the Energy Supplier; (y) Interest Rate Swap Receipts; and (z) amounts paid by the Project Participant in respect of the Project Administration Fee.
“S&P” means S&P Global Ratings, a division of S&P Global Inc., its successors and assigns, and, if such entity shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by CCCFA in a Written Notice delivered to the Trustee.
“Schedule”, “Scheduled” or “Scheduling” means the actions of the Energy Supplier, CCCFA, the Project Participant and/or their designated representatives, including their respective Transmission Providers, if applicable, of notifying, requesting and confirming to each other the quantity of Energy to be delivered during any given portion of the Delivery Period at a specified Delivery Point. “Scheduled Debt Service Deposits” means the required monthly deposits to the Debt Service Account in the Debt Service Fund and the required cumulative deposits to the Debt Service Account in the Debt Service Fund in respect of the Debt Service coming due on the Bonds on each Bond Payment Date. “Securities Depository” means DTC, or its nominee, and its successors and assigns. “Series 2022 EBCE Bonds” means the Clean Energy Project Revenue Bonds, Series 2022A-1, Series 2022A-2 and Series 2022A-3.
“SIFMA Index” means the SIFMA Municipal Swap Index, which, for purposes of an Index Rate Reset Date for a Series of Bonds bearing interest at a SIFMA Index Rate, will be the level of such index which is issued weekly and which is compiled from the weekly interest rate resets of tax exempt variable rate issues included in a database maintained by Refinity which meet specific criteria established from time to time by SIFMA and issued on Wednesday of each week, or if any Wednesday is not a Business Day, the next succeeding Business Day, such date being the same day the SIFMA Swap Index is expected to be Attachment Staff Report Item 15K
B-17
published or otherwise made available to the Calculation Agent. If the SIFMA Index is not available as of any Index Rate Reset Date, the interest rate for such Index Rate Reset Date will be determined using a comparable substitute or replacement index for such Index Rate Reset Date selected and designated by CCCFA in compliance with the Indenture.
“SIFMA Index Rate” means a per annum rate of interest equal to the sum of (a) the SIFMA Index then in effect, plus (b) the Applicable Spread.
“SIFMA Index Rate Period” means, with respect to a Series of Bonds, an Index Rate Period during which such Bonds bear interest at the SIFMA Index Rate. “Sinking Fund Installment” means, for the Series 2022 EBCE Bonds, the amounts so designated in the Indenture.
“SOFR Accrual Period” means the number of actual days from )but not including) (a) the Initial Issue Date or the preceding SOFR Interest Calculation Date, whichever is most recent, to (and including) (b) the next succeeding SOFR Interest Calculation Date, regardless of the actual number of calendar days in any Month.
“SOFR Effective Date” means each Business Day.
“SOFR Effective Period” means the number of actual days from a SOFR Effective Date to the next SOFR Effective Date.
“SOFR” or SOFR Index” means the Secured Overnight Financing Rate reported on the NY Federal Reserve’s Website, or reported by any successor to the Federal Reserve Bank of New York as administrator of such Secured Overnight Financing Rate, as of 3:00 p.m. on each SOFR Publish Date representing SOFR as of the SOFR Lookback Date, which will be used to calculate interest for the SOFR Effective Period beginning on the SOFR Effective Date (for example, for purposes of determining the SOFR Index for a SOFR Effective Date of Thursday, [February 17, 2022], the Calculation Agent uses SOFR published on the SOFR Publish Date of Wednesday, [February 16, 2022], which is the SOFR Index for the SOFR Lookback Date of Monday, [February 14, 2022]). If SOFR is not available as of any Index Rate Reset Date, the interest rate for such Index Rate Reset Date will be determined using a comparable substitute or replacement index for such Index Rate Reset Date designated by CCCFA in writing (with notice to, and which is available to, the Calculation Agent) in compliance with the Indenture. “SOFR Index Rate” means a daily variable interest rate equal to the sum of (1) the product of the SOFR and the Applicable Factor, plus (2) the Applicable Spread on each day of a SOFR Effective Period, not to exceed the Maximum Rate.
“SOFR Index Rate Period” means, with respect to a Series of Bonds, an Index Rate Period during which such Bonds bear interest at the SOFR Index Rate.
“SOFR Interest Calculation Date” means the last Business Day of each Month. “SOFR Lookback Date” means the third Business Day immediately preceding each SOFR Effective Date.
“SOFR Publish Date” means the second Business Day immediately preceding each SOFR Effective Date.
Attachment Staff Report Item 15K
B-18
“Special Tax Counsel” means Orrick, Herrington & Sutcliffe LLP or any other counsel of nationally recognized standing in matters pertaining to the tax exempt status of interest on obligations issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States, and selected by CCCFA. Bond Counsel may serve as Special Tax Counsel. “Specified Discount” means the amount specified in the Prepaid Energy Sales Agreement. “State” means the State of California.
“Supplemental Indenture” means any indenture supplemental to or amendatory of this Indenture executed and delivered by CCCFA and the Trustee in accordance with the Indenture. “Tax Agreement” means the Tax Certificate and Agreement of CCCFA with respect to the Bonds dated as of the initial issue date of the Bonds.
“Termination Payment” means, with respect to any Early Termination Payment Date, the amount specified in the Prepaid Energy Sales Agreement for the calendar month in which such Early Termination Payment Date occurs (as adjusted by any applicable Termination Payment Adjustment Amount) without any set-off or netting of amounts then due from CCCFA.
“Trustee” means The Bank of New York Mellon Trust Company, N.A. and its successor or successors and any other corporation or national banking association which may at any time be substituted in its place pursuant to the Indenture.
“Trust Estate” means (a) the proceeds of the sale of the Bonds, (b) all right, title and interest of CCCFA in, to and under the Power Supply Contract, except for the right to receive the Project Administration Fee, (c) the Revenues, (d) any Termination Payment or the right to receive such Termination Payment (e) all right, title and interest of CCCFA in, to and under the Receivables Purchase Provisions, including payments received from the Energy Supplier pursuant thereto, (f) all right, title and interest of CCCFA in, to and under the Energy Supplier Guaranty, (g) all right, title and interest of CCCFA in, to and under each Interest Rate Swap and the Interest Rate Swap Receipts, (h) all right, title and interest of CCCFA in, to and under any Debt Service Fund Agreement and Debt Service Fund Agreement Guaranty and (i) the Pledged Funds (which does not include the Administrative Fee Fund, the Energy Remarketing Reserve Fund and the Bond Purchase Fund, and excluding Rebate Payments held in any Fund or Account), including the investment income, if any, thereof subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein. “Weekly Interest Rate” means, with respect to a Series of Bonds, a variable interest rate established for such Bonds in accordance with the Indenture.
“Weekly Interest Rate Period” means, with respect to a Series of Bonds, each period during which a Weekly Interest Rate is in effect for such Series of Bonds. “Written Certificate,” “Written Direction,” “Written Instrument,” “Written Notice,” “Written Request” and “Written Statement” of CCCFA means in each case an instrument in writing signed on behalf of CCCFA by an Authorized Officer thereof. Any such instrument and any supporting opinions or certificates may, but need not, be combined in a single instrument with any other instrument, opinion or certificate, and the two or more so combined shall be read and construed so as to form a single instrument.
Any such instrument may be based, insofar as it relates to legal, accounting or engineering matters, upon the opinion or certificate of counsel, consultants, accountants or engineers, unless the Authorized Officer signing such Written Certificate, Direction, Instrument, Notice, Request or Statement knows, or in the Attachment Staff Report Item 15K
B-19
exercise of reasonable care should know, that the opinion or certificate with respect to the matters upon which such Written Certificate, Direction, Instrument, Notice, Request or Statement may be based, as aforesaid, is erroneous. The same Authorized Officer, or the same counsel, consultant, accountant or engineer, as the case may be, need not certify to all of the matters required to be certified under any provision of this Indenture, but different Authorized Officers, counsel, consultants, accountants or engineers may certify to different facts, respectively. Every Written Certificate, Direction, Instrument Notice, Request or Statement of CCCFA, and every certificate or opinion of counsel, consultants, accountants or engineers provided for herein shall include:
(a) a statement that the person making such certificate, direction, instrument, notice, request, statement or opinion has read the pertinent provisions of this Indenture to which such certificate, direction, notice, request, statement or opinion relates; (b) a brief statement as to the nature and scope of the examination or investigation upon which the certificate, direction, instrument, notice, request, statement or opinion is based; (c) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion with respect to the subject matter referred to in the instrument to which his or her signature is affixed; and
(d) with respect to any statement relating to compliance with any provision hereof, a statement whether or not, in the opinion of such person, such provision has been complied with.
Attachment Staff Report Item 15K
C-1
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following is a brief summary of certain provisions of the Indenture pertaining to the Bonds.
Such summary does not purport to be complete and reference is made to the Indenture for full and complete statements of all provisions of the Indenture.
[Orrick to provide prior to posting]
Attachment Staff Report Item 15K
D-1
APPENDIX D
FORM OF CONTINUING DISCLOSURE UNDERTAKING
FOR THE PURPOSE OF PROVIDING
CONTINUING DISCLOSURE INFORMATION
UNDER SECTION (b)(5) OF RULE 15c2-12
[closing date]
This Continuing Disclosure Undertaking (the “Agreement”) is executed and delivered by California Community Choice Financing Authority (“CCCFA”) in connection with the issuance of its $_____________ Clean Energy Project Revenue Bonds Series 2022A-1 (Green Bonds) (Fixed Rate), $_____________ Clean Energy Project Revenue Bonds Series 2022A-2 (Green Bonds) (SIFMA Index Rate), and $_____________ Clean Energy Project Revenue Bonds Series 2022A-3 (Green Bonds) (SOFR Index Rate) (collectively, the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture, dated as of _______ 1, 2022 (the “Indenture”), between CCCFA and U.S. Bank Trust Company, National Association, as trustee.
In consideration of the issuance of the Bonds by CCCFA and the purchase of such Bonds by the beneficial owners thereof, CCCFA covenants and agrees as follows:
1. Purpose of This Agreement. This Agreement is executed and delivered by CCCFA as of the date set forth below, for the benefit of the beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with the requirements of the Rule (as defined below). CCCFA represents that it will be the only “obligated person” within the meaning of the Rule with respect to the Bonds at the time the Bonds are delivered to the Participating Underwriter and that no other person is expected to become so committed at any time after the issuance of the Bonds.
2. Definitions. (a) The terms set forth below shall have the following meanings in this Agreement, unless the context clearly otherwise requires. “Annual Financial Information” means the financial information and operating data described in Exhibit I.
“Annual Financial Information Disclosure” means the dissemination of disclosure concerning Annual Financial Information and the dissemination of the Audited Financial Statements as set forth in Section 4.
“Audited Financial Statements” means the audited financial statements of CCCFA prepared pursuant to the standards and as described in Exhibit I. “Commission” means the Securities and Exchange Commission. “Dissemination Agent” means any agent designated as such in writing by CCCFA and which has filed with CCCFA a written acceptance of such designation, and such agent’s successors and assigns.
Attachment Staff Report Item 15K
D-2
“EMMA” means the MSRB through its Electronic Municipal Market Access system for municipal securities disclosure or through any other electronic format or system prescribed by the MSRB for purposes of the Rule.
“Energy Supplier” means Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company and its successors and permitted assigns.
“Exchange Act” means the Securities Exchange Act of 1934, as amended. “Final Official Statement” means the Final Official Statement dated _______, 2022, relating to the Bonds.
“Financial Obligation” means (a) a debt obligation, (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation, or (c) a guarantee of an obligation or instrument described in clause (a) or (b) of this definition; provided however, the term Financial Obligation does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. “Monthly Ledger Report” means the copies of the ledgers maintained by the Energy Supplier pursuant to Exhibit C of the Prepaid Energy Sales Agreement and delivered each month to CCCFA pursuant to Section 9(b)(i) of such Exhibit.
“MSRB” means the Municipal Securities Rulemaking Board. “Non-Private Business Sales Ledger” and “Private Business Sales Ledger” have the meanings assigned to such terms in Exhibit C to the Prepaid Energy Sales Agreement. “Participating Underwriter” means each broker, dealer or municipal securities dealer acting as an underwriter in the primary offering of the Bonds.
“Prepaid Energy Sales Agreement” means the Prepaid Energy Sales Agreement dated as of ____________, 2022 between the Energy Supplier and CCCFA. “Remarketing Non-Default Termination Event” has the meaning assigned to such term in Exhibit C to the Prepaid Energy Sales Agreement.
“Reportable Event” means the occurrence of any of the Events with respect to the Bonds set forth in Exhibit II.
“Reportable Events Disclosure” means dissemination of a notice of a Reportable Event as set forth in Section 5.
“Rule” means Rule 15c2-12 adopted by the Commission under the Exchange Act, as the same may be amended from time to time.
“Undertaking” means the obligations of CCCFA pursuant to Sections 4 and 5.
Attachment Staff Report Item 15K
D-3
(b) Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Indenture.
3. CUSIP Numbers. The CUSIP Numbers of the Bonds are as follows:
MATURITY
(_________ 1)
AMOUNT CUSIP
NUMBER
CCCFA will include the CUSIP Numbers (or applicable CUSIP Number) in all disclosure described in Sections 4 and 5 of this Agreement.
4. Annual Financial Information Disclosure. Subject to Section 9 of this Agreement, CCCFA hereby covenants that it will disseminate or cause to be disseminated on its behalf its Annual Financial Information and the Audited Financial Statements (in the form and by the dates set forth in Exhibit I) to EMMA in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information and by such time so that such entities receive the information by the dates specified. MSRB Rule G-32 requires all EMMA filings to be in word-searchable PDF format. This requirement extends to all documents to be filed with EMMA, including financial statements and other externally prepared reports.
If any part of the Annual Financial Information can no longer be generated because the operations to which it is related have been materially changed or discontinued, CCCFA will disseminate a statement to such effect as part of the Annual Financial Information for the year in which such event first occurs.
If any amendment or waiver is made to this Agreement, the Annual Financial Information for the year in which such amendment is made (or in any notice or supplement provided to EMMA) shall contain a narrative description of the reasons for such amendment and its impact on the type of information being provided.
5. Reportable Events Disclosure. Subject to Section 8 of this Agreement, CCCFA hereby covenants that it will disseminate in a timely manner (not in excess of ten business days after the occurrence of the Reportable Event) Reportable Events Disclosure to EMMA in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information. References to “material” in Exhibit II refer to materiality as it is interpreted under the Exchange Act. MSRB Rule G-32 requires all EMMA filings to be in word-searchable PDF format. This requirement extends to all documents to be filed with EMMA, including financial statements and other externally prepared reports. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Bonds or defeasance of any Bonds need not be given under this Agreement any earlier than the notice (if any) of such redemption or defeasance is given to the Bondholders pursuant to the Indenture.
Attachment Staff Report Item 15K
D-4
6. Consequences of Failure of CCCFA to Provide Information. CCCFA shall give notice in a timely manner to EMMA of any failure to provide Annual Financial Information Disclosure when the same is due hereunder.
In the event of a failure of CCCFA to comply with any provision of this Agreement, the beneficial owner of any Bond may seek mandamus or specific performance by court order, to cause CCCFA to comply with its obligations under this Agreement. The beneficial owners of 25% or more in principal amount of the Bonds outstanding may challenge the adequacy of the information provided under this Agreement and seek specific performance by court order to cause CCCFA to provide the information as required by this Agreement. A default under this Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Agreement in the event of any failure of CCCFA to comply with this Agreement shall be an action to compel performance.
7. Amendments; Waiver. Notwithstanding any other provision of this Agreement, CCCFA by resolution authorizing such amendment or waiver, may amend this Agreement, and any provision of this Agreement may be waived, if:
(a) (i) The amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, including without limitation pursuant to a “no-action” letter issued by the Commission, change in law, or change in the identity, nature, or status of CCCFA, or type of business conducted; or
(ii) This Agreement, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(b) The amendment or waiver does not materially impair the interests of the beneficial owners of the Bonds, as determined either by parties unaffiliated with CCCFA (such as the Trustee), or by approving vote of Bondholders pursuant to the terms of the Indenture at the time of the amendment.
In the event that the Commission, the MSRB or other regulatory authority shall approve or require Annual Financial Information Disclosure or Reportable Events Disclosure to be made to a central post office, governmental agency or similar entity other than EMMA or in lieu of EMMA, CCCFA shall, if required, make such dissemination to such central post office, governmental agency or similar entity without the necessity of amending this Agreement.
8. Termination of Undertaking. The Undertaking of CCCFA shall be terminated hereunder if CCCFA no longer has any legal liability for any obligation on or relating to repayment of the Bonds under the Indenture. CCCFA shall give notice to EMMA in a timely manner if this Section is applicable.
9. Dissemination Agent. CCCFA may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Agreement, and may discharge any such Dissemination Agent with or without appointing a successor Dissemination Agent.
10. Additional Information. Nothing in this Agreement shall be deemed to prevent CCCFA from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Financial Information Disclosure or notice of occurrence of a Reportable Event, in addition to that which is required by this Agreement. If CCCFA chooses to include any information from any document or notice of occurrence of Attachment Staff Report Item 15K
D-5
a Reportable Event in addition to that which is specifically required by this Agreement, CCCFA shall have no obligation under this Agreement to update such information or include it in any future disclosure or notice of occurrence of a Reportable Event. If the name of CCCFA is changed, CCCFA shall disseminate such information to EMMA.
11. Beneficiaries. This Agreement has been executed in order to assist the Participating Underwriter in complying with the Rule; however, this Agreement shall inure solely to the benefit of CCCFA, the Dissemination Agent, if any, and the beneficial owners of the Bonds, and shall create no rights in any other person or entity.
12. Recordkeeping. CCCFA shall maintain records of all Annual Financial Information Disclosure and Reportable Events Disclosure, including the content of such disclosure, the names of the entities with whom such disclosure was filed and the date of filing such disclosure.
13. Assignment. CCCFA shall not transfer its obligations under the Indenture unless the transferee agrees to assume all obligations of CCCFA under this Agreement or to execute an Undertaking under the Rule.
14. Governing Law. This Agreement shall be governed by the laws of the State of California.
CALIFORNIA COMMUNITY CHOICE FINANCING
AUTHORITY
By _________________________________________
Its
Attachment Staff Report Item 15K
D-I-1
EXHIBIT I
ANNUAL FINANCIAL INFORMATION AND TIMING AND AUDITED
FINANCIAL STATEMENTS
“Annual Financial Information” means financial information and operating data with respect to the Clean Energy Project, including:
(a) with respect to the Project Participant updated information under the headings “Customers – General,” “Customers – Customer Opt-Out Rate and Customer Retention,” “Service Rates – Current and Historical Rate Information,” “Sources of Energy – Energy Purchases,” “Financial Information – Results of Operations,” “Financial Information – Assets, Liabilities, Deferred Inflows or Resources and Net Position” and “Financial Information – Other Liquidity Sources” set forth APPENDIX A to the Official Statement; (b) the quantities of Energy from the Clean Energy Project sold by CCCFA, whether to the Project Participant or others; and
(c) such other information and data as CCCFA may deem necessary in order to comply with the requirements of the Rule.
“Audited Financial Statements” means the audited financial statements of CCCFA, in each case for the most recent fiscal year (commencing with the fiscal year ended December 31, 2021), in each case prepared in accordance with generally accepted accounting principles as promulgated to comply with governmental entities from time to time (or such other accounting principles as may be applicable to CCCFA, as the case may be, in the future pursuant to applicable law).
All or a portion of the Annual Financial Information and the Audited Financial Statements set forth above may be included by reference to other documents which have been submitted to EMMA or filed with the Commission. If the information included by reference is contained in a final official statement, the final official statement must be available on EMMA. The final official statement need not be available from the Commission. CCCFA shall clearly identify each such item of information included by reference.
Annual Financial Information with respect to the Project Participant will be submitted to EMMA by 200 days after end of the Project Participant’s fiscal year (being June 30 for East Bay Community Energy Authority).
Annual Financial Information with respect to CCCFA (i.e., the information described in clauses (b) and (c) of the definition of Annual Financial Information) will be submitted to EMMA by 200 days after end of CCCFA’s fiscal year.
Audited Financial Statements as described above should be filed at the same times as the Annual Financial Information. If Audited Financial Statements are not available when such Annual Financial Information is filed, unaudited financial statements shall be included. Audited Financial Statements will be submitted to EMMA no later than 30 days after availability to CCCFA.
If any change is made to the Annual Financial Information as permitted by Section 4 of the Agreement, CCCFA will disseminate a notice of such change as required by Section 4.
Attachment Staff Report Item 15K
D-II-1
EXHIBIT II
EVENTS WITH RESPECT TO THE BONDS
FOR WHICH REPORTABLE EVENTS DISCLOSURE IS REQUIRED
1. Principal and interest payment delinquencies
2. Non-payment related defaults, if material
3. Unscheduled draws on debt service reserves reflecting financial difficulties
4. Unscheduled draws on credit enhancements reflecting financial difficulties
5. Substitution of credit or liquidity providers, or their failure to perform
6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security
7. Modifications to the rights of security holders, if material
8. Bond calls, if material, and tender offers
9. Defeasances
10. Release, substitution or sale of property securing repayment of the securities, if material
11. Rating changes
12. Bankruptcy, insolvency, receivership or similar event of the obligated person∗
13. The consummation of a merger, consolidation, or acquisition involving the obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material
14. Appointment of a successor or additional trustee or the change of name of a trustee, if material ∗ This event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.
Attachment Staff Report Item 15K
D-II-2
15. Incurrence of a Financial Obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders, if material
16. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties
17. The receipt by CCCFA of a Monthly Ledger Report that includes a credit to any Non-Private Business Sales Ledger or any Private Business Sales Ledger that has not been reversed within twelve months of the date of such credit
18. The receipt by CCCFA of a Monthly Ledger Report that shows that a Remarketing Non-Default Termination Event has occurred
Attachment Staff Report Item 15K
E-1
APPENDIX E
FORM OF OPINION OF BOND COUNSEL
[Orrick to provide prior to posting]
Attachment Staff Report Item 15K
Monica Reid, CEO
[email protected]
+1 541-399-6806
April Strid, Lead ESG Analyst
[email protected]
+1 503-860-1125
Melissa Audrey, ESG Analyst
[email protected]
+1 856-495-5003
Kestrel Verifiers | www.kestrelverifiers.com | +1 541-399-6806 F-1
APPENDIX F
FORM OF SECOND PARTY OPINION REGARDING GREEN BOND DESIGNATION
SECOND PARTY OPINION
EXECUTIVE SUMMARY
ISSUER
California Community Choice Financing Authority
OPINION ON
Clean Energy Project Revenue Bonds Series 2022A-1 (Green Bonds) Clean Energy Project Revenue Bonds Series 2022A-2 (Green Bonds) Clean Energy Project Revenue Bonds Series 2022A-3 (Green Bonds)
GREEN STANDARD AND CATEGORY
Renewable Energy
EVALUATION DATE
[_________], 2022
SUMMARY
Kestrel Verifiers is of the opinion that the Clean Energy Project Revenue Bonds, Series 2022 EBCE Bonds (Green Bonds) conform with the four core components of the Green Bond Principles 2021 as follows:
Use of Proceeds
California Community Choice Financing Authority (the “Issuer” or “CCCFA”) intends to issue Clean Energy Project Revenue Bonds Series 2022A-1 (Green Bonds), Series 2022A-2 (Green Bonds) and Series 2022A-2 (Green Bonds) (“Bonds”) to finance prepayment for 30 years of renewable and carbon-free electricity to benefit East Bay Community Energy (“EBCE”). Proceeds will also finance capitalized interest, and costs of issuance.
Process for Project Evaluation and Selection
CCCFA and EBCE have adopted planning documents and procedures that advance the expansion of renewable and carbon-free energy generation. Decision-making regarding bond-financed activities is overseen by CCCFA’s Board of Directors and the community choice aggregators’ Boards of Directors.
EBCE has adopted Integrated Resource Plans that outline long-term planning priorities and strategies. Management of Proceeds
Bond proceeds shall be fully allocated to prepay contracts for renewable and carbon-free energy. A portion of proceeds will also be used to pay capitalized interest, and pay costs of issuance. Temporary investment of these funds is limited to permittable, conservative investments pursuant to the Indenture with respect to the Bonds.
Reporting
EBCE’s Integrated Resource Plans provide ongoing transparency and updates on the progress of community choice aggregators (“CCAs”) meeting statewide requirements for greenhouse gas emission reduction targets within the electricity sector. As required by the California Public Utilities Commission, CCAs also report annually on the power content and greenhouse gas emissions associated with energy supplied to customers. CCCFA will also post continuing financial disclosures to the Municipal Securities Rulemaking Board (“MSRB”) annually through the Electronic Municipal Market Access (“EMMA”) system.
Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion Executive Summary F-2 Impact and Alignment with United Nation Sustainable Development Goals The Bonds support UN Sustainable Development Goals 7: Affordable and Clean Energy, 9: Industry, Innovation, and Infrastructure, 11: Sustainable Cities and Communities, and 13: Climate Action by financing renewable and carbon -free power purchase agreements as part of the Clean Energy Project.
Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion 3
F-3
Second Party Opinion
Issuer: California Community Choice Financing Authority Issue Description: Clean Energy Project Revenue Bonds Series 2022A-1 (Green Bonds) Clean Energy Project Revenue Bonds Series 2022A-2 (Green Bonds) Clean Energy Project Revenue Bonds Series 2022A-3 (Green Bonds) Project: Clean Energy Project (East Bay Community Energy) Green Standard: Green Bond Principles
Green Category: Renewable Energy
Par: $1,000,000,000*
Evaluation Date: [_________], 2022
*Preliminary, subject to change
GREEN BONDS DESIGNATION
Kestrel Verifiers, an Approved Verifier accredited by the Climate Bonds Initiative, conducted an independent external review of these bonds to evaluate conformance with the Green Bond Principles (June 2021) established by the International Capital Market Association.
This Second Party Opinion reflects our review of the uses and allocation of proceeds and oversight and conformance of the bonds with the Green Bond Principles. In our opinion, the Clean Energy Project Revenue Bonds Series 2022A-1 (Green Bonds), Series 2022A-2 (Green Bonds) and Series 2022A-3 (Green Bonds) (“Bonds”) to be issued by the conduit entity California Community Choice Financing Agency for the benefit of one community choice aggregator, East Bay Community Energy, are aligned with the four core components of the Green Bond Principles and qualify for Green Bonds designation.
ABOUT THE ISSUER
The Issuer, California Community Choice Financing Agency (“CCCFA”), is a joint powers authority established in 2021 and is comprised of community choice aggregators including its founding members:
East Bay Community Energy, Silicon Valley Clean Energy, Marin Clean Energy, and Central Coast Community Energy. CCCFA was incorporated and organized for a variety of purposes, including to issue tax-advantaged bonds to finance energy prepayments of clean energy. This innovative strategy can help community choice aggregators remain cost-competitive with other utilities.
ABOUT THE BORROWER
East Bay Community Energy is the beneficiary of the Bonds issued by CCCFA. It is a community choice aggregator and operates as a joint powers authority and nonprofit public agency. Community choice aggregators are locally controlled not-for-profit energy providers. The primary purpose is to provide communities with more clean energy options, meet climate action goals, ensure local transparency and accountability, and drive economic development. As of 2021, ten states have authorized community choice aggregators.
Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion 4
F-4
East Bay Community Energy
East Bay Community Energy (“EBCE”) was formed in 2016 with the purpose of implementing the region’s community choice aggregation program. EBCE is governed by a Board of Directors with one representative from each participating jurisdiction and includes a non-voting member from the Community Advisory Committee. The Community Advisory Committee serves as a liaison between local community stakeholders and the Board.
The primary objectives of EBCE are to provide lower-cost electric service than PG&E (the region’s primary electricity provider); reduce greenhouse gas emissions (“GHGs”) resulting from electricity use within Alameda and San Joaquin Counties; stimulate local renewable energy development; promote energy efficiency and demand reduction programs; drive greater investments into electrification of transportation and building infrastructure, prioritize equitable energy programs, and sustain long-term rate stability for residents and businesses through local control.
Currently, EBCE provides electricity for approximately 1,700,000 residents and business in 15 communities in the County of Alameda and San Joaquin County. Customers may choose from three service options:
Renewable 100: 100% renewable California solar and wind power Brilliant 100: Carbon-free plan, which is a mix of eligible renewable and hydropower1 Bright Choice: Minimum 41% renewable in 20212
EBCE recently made a commitment to 100% clean energy by 2030, while continuing to emphasize investment in their community and local programs. The first few years of service have significantly reduced electricity bills for customers compared to what they would have paid on bills to PG&E. EBCE budgets annually to support local energy programs and regularly invests in local programs related to STEM, arts, athletics, and community needs.
ALIGNMENT TO GREEN STANDARDS
Green Bonds are any type of bond instrument where the proceeds will be exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible Green Projects and which are aligned with the four core components of the Green Bond Principles (International Capital Market Association definition).
Use of Proceeds
The Bonds will be used to finance prepayment of renewable and carbon-free electricity for the benefit of EBCE (the “CCA”). Proceeds will also finance capitalized interest and costs of issuance. The acquisition for the supply of approximately 30 years of energy for the CCA is referred to as the Clean Energy Project. The Clean Energy Project is an eligible project as defined by the Green Bond Principles in the project category of Renewable Energy.
Transaction Structure
The structure of the transaction allows the CCA to use tax-exempt financing opportunities to reduce the cost of energy procurement for participating customers. The Bonds present a model for the 24 other CCAs in California to follow and to further expand access to low-cost renewables for both residential and commercial customers. Further details on the financing structure are discussed in the Official Statement.
The Clean Energy Project
The Bonds will finance the procurement of long-term electricity supply at competitive prices for EBCE over two time periods: years 1-3 and years 4-30. The anticipated composition of power supplies acquired with proceeds of the Bonds is available in Table 1. Existing or prospective Power Purchase Agreements (“PPAs”) may be assigned to the prepayment and multiple PPAs may fulfill the agreements to supply energy over the defined terms. During the initial 1-3 year period, and at the time of bond pricing, the CCA will have entered into PPAs which will be assigned into the prepayment. In the case of EBCE, the PPA will deliver a fixed 1 All customers will transition off Brilliant 100 service by January 2022. 2 Ramping up to 100% greenhouse gas free by 2030.
Green Standard
Eligible Project Category:
Renewable Energy
Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion 5
F-5
annual quantity of energy supplied by specified wind and/or hydroelectric sources. Under the terms of the PPAs, during the Year 1-3 period, the CCA is procuring annual quantities that are 100% carbon-free (but in neither instance are the CCAs procuring Renewable Energy Credits (RECs)).
Table 1. Anticipated overall power content of PPAs under the Clean Energy Project Bond-Financed
Activity
Type Term
Prepay for East Bay
Community Energy
Wind and/or Hydroelectric 1 – 3
years
Prepay for East Bay
Community Energy
Renewable and/or carbon-free PPAs 4 – 30
years
The CCA has committed to achieving a 100% renewable portfolio in 30 years and the proceeds will be allocated in alignment with these commitments. Both the Series 2022A-1 Bonds, the Series 2022A-2 Bonds and Series 2022A-3 Bonds will finance the Clean Energy Project.
In the event that PPAs are not able to be assigned to the prepayment in the future (during all or part of the Year 4-30 period), the CCA will likely continue to purchase power under their existing procurement arrangement outside of the prepayment transaction) and may continue to receive the benefit of the discount from the prepayment under contractual remediation provisions.
Process for Project Evaluation and Selection
The CCA (EBCE) has adopted planning documents that ensure bond-financed activities align with its mission and guide decisions around PPAs assigned to prepayment contracts for the Bonds. EBCE has adopted Integrated Resource Plans (IRPs) which are primary planning documents that outline long-term priorities and strategies. IRP’s are mandated under SB 350 and are required every two years. IRPs are critical to energy resource selection and are integral to the evaluation and selection of PPAs to be associated with the Bonds. All California Public Utilities Commission jurisdictional load serving entities are required to submit an IRP to the CPUC for approval based on standardized methodologies. IRPs establish policy goals and evaluate resource choices to ensure CCAs are meeting statewide requirements for greenhouse gas emission reduction targets within the power sector and grid reliability mandates. In addition to IRPs, the CCA has additional priorities and processes established to fulfill its respective mission and provide oversight on the activities financed by the Bonds.
East Bay Community Energy
Bond proceeds support East Bay Community Energy’s commitment to innovative renewable energy projects and providing clean energy electricity options to local service areas. As discussed above, EBCE’s Integrated Resource Plan (2020) is the adopted plan that guides EBCE’s process for project selection and evaluation.3 In line with the analysis and results in the Integrated Resource Plan (2020), EBCE’s 15-member Board of Directors committed to a 100% clean, carbon-free energy goal by 2030 and pursue a diverse energy portfolio consisting of solar energy, wind energy, hydropower, and more. EBCE holds regular Community Advisory Committee meetings that are open to the public. The Community Advisory Committee provides input on economic, environmental, and social impacts of EBCE projects on customers and communities. EBCE utilizes an internal scoring rubric, which considers financial risk and energy pricing benefits, project development risk, and local workforce development to guide decision-making around PPA authorization.
EBCE’s Board ultimately approves PPAs.
California Community Choice Financing Authority
As a conduit entity, CCCFA holds the rights over financing and refinancing of the energy prepayment through tax-advantaged bonds and is not responsible for selecting or negotiating PPAs for specific members such as EBCE. CCCFA holds responsibility for this financing through the California Joint Exercise of Powers Act and 3 East Bay Community Energy 2020 Integrated Resource Plan (Public Version), https://res.cloudinary.com/diactiwk7/image/upload/ fl_sanitize,q_auto/r2005003-public-verison-ebce-2020-irp-9-1-2020.pdf Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion 6
F-6
is obligated to confirm eligibility of financed activities with an authorized list which includes purchase of energy with environmental attributes, facility improvements, provisions of working capital, and other renewable programs. Limits to the allowable uses of proceeds provide additional legal assurance that proceeds will be used for activities with positive environmental impacts. CCCFA is governed by a Board of Directors who have expertise in public utilities finance, clean energy policy, and sustainable energy projects, and are primarily responsible for CCCFA’s general management, business affairs, project oversight.
Management of Proceeds
Proceeds from the Bonds will solely be allocated to finance prepayment for renewable energy and carbon-free energy, pay capitalized interest, and pay costs of issuance. Upon closing, CCCFA will immediately acquire a 30-year supply of renewable and carbon-free electricity through the energy supplier, Morgan Stanley Energy Structuring, L.L.C., for the sole benefit of EBCE. While proceeds delivered to Morgan Stanley Energy Structuring, L.L.C. will be comingled with other funds before payment to energy suppliers, the total amount is required to be paid to acquire eligible green energy supplies. In Kestrel’s view, this management of proceeds through a third party retains alignment with market standards and enables the expansion of renewable and carbon-free energy contracts. Ultimately, this transaction structure enables the financing of the acquisition of renewable and carbon-free electricity and is an exemplary, cost-saving model for CCAs to follow.
Reporting
CCCFA will submit annual continuing disclosures to the Municipal Securities Rulemaking Board (“MSRB”) through the Electronic Municipal Market Access (“EMMA”) system so long as the Bonds are outstanding.
The CCAs intend to provide voluntary disclosures on the new and existing PPAs being assigned to the prepayment contracts, and provide information on the associated greenhouse gas emission reductions in accordance with calculation methodologies specified by the California Public Utilities Commission or other regulations.
In California, CCAs such as EBCE, are considered Electric Load-Serving Entities and are therefore subject to specific reporting requirements, renewable portfolio standards, and reliability standards set forth by the California Public Utilities Commission and the California Energy Commission. EBCE regularly submits Integrated Resource Plans to the California Public Utilities Commission, which provide updates on the progress of CCAs toward meeting statewide requirements for greenhouse gas emission reduction targets within the electricity sector. As required by California Public Utilities Commission, the CCAs also report annually on the power content, or power mix, of the energy supplied to customers. Beginning in 2021, power content reporting will also include greenhouse gas emissions. These reports are available on California Energy Commission’s website: https://www.energy.ca.gov/programs-and-topics/programs/power-source-disclosure/power-content-label/annual-power-content-0
IMPACT AND ALIGNMENT WITH UN SDGS
Bond-financed activities support and advance the vision of the UN SDGs. A comprehensive list of targets and background on UN SDGs 7, 9, 11, and 13 are available on the United Nations website:
www.un.org/sustainabledevelopment
The Clean Energy Project financed by the Bonds, including prepayment of clean energy, support Targets
7.1, 7.2, 9.4, and 11.6. The prepayment of renewable electricity for EBCE customers increases renewable energy supply and thus aligns with Targets 7.1, 7.2, and 9.1. The Clean Energy Project features renewable energy alternatives to avoid greenhouse gas emissions, which advances Target 13.2. CCCFA supports Target 9.4 by financing carbon-free energy to reduce greenhouse gas emissions and create clean energy production. The increased use of carbon-free and renewable energy helps improve air quality and thus supports Target 11.6. Target definitions are included in Appendix A.
Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion 7
F-7
Affordable and Clean Energy (Target 7.1, 7.2)
Possible Indicators
Renewable energy share in the total final energy consumption Renewable energy produced
Metric tons of greenhouse gas emissions avoided
Number of people with access to renewable and carbon-free energy services Industry, Innovation, and Infrastructure (Target 9.1, 9.4) Possible Indicators
CO2 emission per unit of value added
Reduction in fossil fuel use as a result of bond projects Total renewable and carbon-free energy produced and distributed Sustainable Cities and Communities (Target 11.6)
Possible Indicators
Annual mean levels of fine particulate matter in cities reduced Metric tons of greenhouse gas emissions avoided
Climate Action (Target 13.2)
Possible Indicators
Metric tons of greenhouse gas emissions avoided
CONCLUSION
Based on our independent external review, the Bonds conform, in all material respects, with the Green Bond Principles (2021) and are in complete alignment with the Renewable Energy eligible project category. The Clean Energy Project is uniquely positioned to expand affordable access to renewable and carbon-free energy through community choice aggregators in California.
© 2021 Kestrel 360, Inc.
ABOUT KESTREL VERIFIERS
For 20 years Kestrel has been a trusted consultant in sustainable finance.
Kestrel Verifiers, a division of Kestrel 360, Inc. is a Climate Bonds Initiative Approved Verifier qualified to verify transactions in all asset classes worldwide. Kestrel is a US-based certified Women’s Business Enterprise.
For more information, visit www.kestrelverifiers.com
DISCLAIMER
This Opinion aims to explain how and why the discussed financing meets the ICMA Green Bond Principles based on the information which was available to us during the time of this engagement (August 2021) only.
By providing this Opinion, Kestrel Verifiers is not certifying the materiality of the projects financed by the Green Bonds. It was beyond Kestrel Verifiers’ scope of work to review for regulatory compliance and no surveys or site visits were conducted. Furthermore, we are not responsible for surveillance on the project or use of proceeds. Kestrel Verifiers relied on information provided by CCCFA and/or the CCAs and publicly available information. The Opinion delivered by Kestrel Verifiers does not address financial performance of the Green Bonds or the effectiveness of allocation of its proceeds. This Opinion does not make any assessment of the creditworthiness of CCCFA and/or the CCAs or the ability to pay principal and interest when due. This is not a recommendation to buy, sell or hold the Bonds. Kestrel Verifiers is not liable for consequences when third parties use this Opinion either to make investment decisions or to undertake any other business transactions. This Opinion may not be altered without the written consent of Kestrel Verifiers.
Attachment Staff Report Item 15K
Kestrel Verifiers | Second Party Opinion 8
F-8
Kestrel Verifiers reserves the right to revoke or withdraw this Opinion at any time. Kestrel Verifiers certifies that there is no affiliation, involvement, financial or non-financial interest in CCCFA, CCAs, or the projects discussed. Language in the offering disclosure supersedes any language included in this Second Party Opinion.
Use of the United Nations Sustainable Development Goal (SDG) logo and icons does not imply United Nations endorsement of the products, services or bond-financed activities. The logo and icons are not being used for promotion or financial gain. Rather, use of the logo and icons is primarily illustrative, to communicate SDG-related activities.
Attachment Staff Report Item 15K
F-9
Appendix A.
UN SDG TARGET DEFINITIONS
Target 7.1
By 2030, ensure universal access to affordable, reliable and modern energy services Target 7.2
By 2030 increase the share of renewable energy in the global energy mix
Target 9.1
Develop quality, reliable, sustainable and resilient infrastructure, including regional and trans-border infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all
Target 9.4
By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities
Target 11.6
By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management Target 13.2
Integrate climate change measures into national policies, strategies and planning Attachment Staff Report Item 15K
G-1
APPENDIX G
BOOK-ENTRY SYSTEM
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity of the Bonds exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such maturity.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.
Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested Attachment Staff Report Item 15K
G-2
by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to CCCFA of securities as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts such Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds and payments of principal and interest on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from CCCFA or the Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, CCCFA or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of redemption proceeds and principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of CCCFA or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to CCCFA or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
Attachment Staff Report Item 15K
G-3
CCCFA may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates are required to be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that CCCFA believes to be reliable, but CCCFA takes no responsibility for the accuracy thereof.
Attachment Staff Report Item 15K
H-1
APPENDIX H
REDEMPTION PRICE OF THE BONDS
The following table sets forth the Redemption Price of the Bonds (being the Amortized Value of the Series 2022A-1 Bonds and 100% of the principal amount of the Index Rate Bonds, but excluding accrued interest which is payable from the amounts required to be on deposit in the Debt Service Account) upon an extraordinary mandatory redemption following an Early Termination Payment Date under the Prepaid Energy Sales Agreement, as of the redemption dates shown below during the Initial Interest Rate Period.
REDEMPTION DATE REDEMPTION PRICE
Attachment Staff Report Item 15K
I-1
APPENDIX I
SCHEDULE OF TERMINATION PAYMENTS
The Termination Payment for any Early Termination Payment Date will be the amount set forth on the attached table in the column corresponding to the month in which the Early Termination Date occurs, plus the product of (a) the Contract Quantity for such Month, minus the quantity of Energy required to have been delivered in such Month prior to the effectiveness of such Early Termination Date, multiplied by (b) the result of (i) the applicable Fixed Price(s) for Energy (as defined in the CCCFA Commodity Swap), minus (ii) the Specified Discount then in effect.
MONTH OF EARLY TERMINATION TERMINATION PAYMENT
Attachment Staff Report Item 15K
J-1
APPENDIX J
ADDITIONAL INFORMATION REGARDING SOFR INDEX RATE BONDS
SECURED OVERNIGHT FINANCING RATE (SOFR) OVERVIEW
According to the NY Federal Reserve’s Website, in 2014, the Federal Reserve convened the Alternative Reference Rates Committee (ARRC) and tasked the group with identifying an alternative to U.S. dollar LIBOR that was a robust, IOSCO compliant, transaction based derived from a deep and liquid market. In 2017, the ARRC fulfilled this mandate by selecting the Secured Overnight Financing Rate, or “SOFR.” SOFR is based on overnight transactions in the U.S. dollar Treasury repo market, the largest rates market at given maturity in the world. National working groups in other jurisdictions have similarly identified overnight nearly risk free rates (RFRs) like SOFR as their preferred alternatives.
SOFR has a number of characteristics that LIBOR and other similar rates based on wholesale term unsecured funding markets do not, including (a) SOFR is a rate produced by the Federal Reserve Bank of New York for the public good, (b) SOFR is derived from an active and well defined market with sufficient depth to make it extraordinarily difficult to ever manipulate or influence, (c) SOFR is produced in a transparent, direct manner and is based on observable transactions, rather than being dependent on estimates, like LIBOR, or derived through models, and (d) SOFR is derived from a market that was able to weather the global financial crisis and that the ARRC credibly believes will remain active enough in order that it can reliability be produced in a wide range of market conditions.
SOFR is published on a daily basis by the Federal Reserve Bank of New York in cooperation with the Office of Financial Research, and reflects the cost of overnight borrowing and lending in the U.S.
Treasury repo market. Borrowing in this market reflects the best measure of the private sector risk free rate, because it is collateralized with U.S. Treasury securities, which the lender returns once the borrower returns the cash borrowed. SOFR is a fully transaction based rate and has the widest coverage of any Treasury repo rate available, incorporating tri party repo data, the Fixed Income Clearing Corporation’s (FICC) GCF Repo data, and the bilateral Treasury repo transactions cleared for FICC. Throughout 2020, the average daily volume of transactions underlying SOFR was close to $1 trillion, representing the largest rates market at any given tenor in the United States.
Because of its range of coverage, SOFR is a good representation of general funding conditions in the overnight Treasury repo market. As such, it reflects an economic cost of lending and borrowing relevant to the wide array of market participants active in these markets, including not only broker dealers, but also money market funds, asset managers, insurance companies, securities lenders, and the range pension funds.
SOFR is calculated as a volume weighted median of transaction level data observed over the course of a business day and is published on the NY Federal Reserve’s Website at approximately 8:00 a.m. ET on the next business day. Looked at another way, SOFR is published on the day that overnight repo transaction is to be repaid, rather than on the day that transaction is entered into. This publication schedule is due to the need to receive and fully vet the large amounts of data underlying SOFR before the rate is published.
SOFR is published for the business days that the Treasury repo market is open on, which are generally U.S. government securities secondary market trading days as determined by SIFMA.
Although SOFR is published at about 8:00 a.m. ET, if any errors are subsequently discovered in the transaction data in the calculation process that underlies it, or if any missing data subsequently became available, then SOFR may be republished on the same day. In such cases, the affected rate may be republished at approximately 2:30 p.m. ET. Rate Revisions will only be affected on the same day as initial publication and will only be republished if the change in the rate exceeds one basis point.
Attachment Staff Report Item 15K
J-2
SOFR EFFECTIVE PERIOD
SOFR may vary each SOFR Effective Date and will be applicable for each SOFR Effective Period.
To illustrate how SOFR would be utilized in a SOFR Effective Period, below is an illustration of a portion of actual January 2022 SOFR rates as published on the NY Federal Reserve’s Website. SOFR is shown as of each SOFR Lookback Date, or three Business Days immediately preceding the SOFR Effective Date, and are the values used to determine the SOFR Index Rate and related interest expense for the SOFR Effective Period beginning with each SOFR Effective Date shown below:
SOFR EFFECTIVE DATE
DAYS IN SOFR
EFFECTIVE PERIOD(1) SOFR LOOKBACK DATE SOFR(2)
Monday, January 3, 2022 1 day Wednesday, December 29, 2021 0.050 Tuesday, January 4, 2022 1 day Thursday, December 30, 2021 0.050 Wednesday, January 5, 2022 1 day Friday, December 31, 2021 0.050 Thursday, January 6, 2022 1 day Monday, January 3, 2022 0.050 Friday, January 7, 2022 3 days Tuesday, January 4, 2022 0.050 Monday, January 10, 2022 1 day Wednesday, January 5, 2022 0.050 [Remainder of SOFR Effective Periods in January 2022 intentionally omitted – see below for more detail] Friday, January 28, 2022 3 days Tuesday, January 25, 2022 0.050 ______________________________
(1) Actual days elapsed from each SOFR Effective Date to the following SOFR Effective Date. (2) Source: https://www.newyorkfed.org/markets/reference-rates/sofr.
SOFR INTEREST CALCULATION
The Calculation Agent will calculate and provide to CCCFA the amount of interest due and payable on each monthly Interest Payment Date for the Series 2022A-3 Bonds on the last Business Day of each Month (the “SOFR Interest Calculation Date”). On each SOFR Interest Calculation Date, the Calculation Agent will determine the amount of interest due over the period from (but not including) the Initial Issue Date or the preceding SOFR Interest Calculation Date to and including such SOFR Interest Calculation Date (the “SOFR Accrual Period”), and payable in arrears on each SOFR Interest Payment Date. With respect to the first SOFR Interest Calculation Date, interest will accrue from and including the Initial Issue Date.
Below is an illustration demonstrating the SOFR Index Rate reset mechanics as well as the mechanics for which interest will be calculated on a SOFR Interest Calculation Date:
SOFR Accrual Period
Number of SOFR Effective Periods
from the preceding SOFR Interest
Calculation Date up to and
including such SOFR Interest
Calculation Date.
SOFR Interest Calculation Date
Calculation Agent determines
monthly interest based on SOFR
Index Rate for each SOFR
Effective Period during the SOFR
Accrual Period, payable in arrears.
SOFR Interest Payment Date
Payment for preceding SOFR
Accrual Period due to bondholders
one Business Day after SOFR
Interest Calculation Date.
Number SOFR Effective Periods during SOFR Accrual Period First Business Day
Month A
Last Business Day
Month A
First Business Day
Month B
[EACH A SOFR
EFFECTIVE
PERIOD]
Attachment Staff Report Item 15K
J-3
Interest on the Series 2022A-3 Bonds will be calculated using simple interest. Simple interest is a long standing convention where the additional amount of interest owed each day is calculated by applying the daily rate of interest to principal borrowed and the payment due at the end of the period is the sum of those amounts. Simple interest does not consider the time value of money. SOFR is a compounded interest rate, however for purposes of determining interest on the Series 2022A-3 Bonds, SOFR will be applied to calculate simple interest on the unpaid principal amount of the Series 2022A-3 Bonds. Specifically, for the Series 2022A-3 Bonds, interest for each SOFR Effective Period (one or more days to include weekends and/or holidays) will be calculated as follows:
Interest SOFR Effective Period = Principal x SOFR Index Rate SOFR Effective Period x Actual Days in SOFR Effective Period On the SOFR Interest Payment Date, the total amount of interest owed is the sum of the amount of interest owed for each SOFR Effective Period during the SOFR Accrual Period. Specifically, each SOFR Accrual Period will be comprised of several SOFR Effective Periods from the first Business Day up to and including the last Business Day of the month. Interest will accrue on the Series 2022A-3 Bonds from (but excluding) the preceding SOFR Interest Calculation Date up to and including the SOFR Interest Calculation Date for which interest is being calculated. Specifically, for the Series 2022A-3 Bonds, interest on each SOFR Interest Calculation Date will be calculated as follows:
Interest SOFR Accrual Period = ∑(Interest First Business Day SOFR Effective Period + Interest n SOFR Effective Periods + Interest Last Business Day SOFR Effective Period) Where n SOFR Effective Periods is the number of SOFR Effective Periods between the first Business Day and last Business day of each month during a SOFR Accrual Period. Interest will be paid to bondholders, in arrears, one Business Day following the SOFR Interest Calculation Date, or the first Business Day of the following month.
Attachment Staff Report Item 15K
J-4
ILLUSTRATIVE JANUARY 2022 SOFR ACCRUAL PERIOD
For informational purposes and to provide validation on calculation methodology being used for the Series 2022A-3 Bonds, a calculation of hypothetical interest that would have been owed on such Series 2022A-3 Bonds during January 2022 utilizing actual SOFR rates from January 2022 is provided below. NOTE THESE ARE HYPOTHETICAL VALUES THAT ARE FOR ILLUSTRATIVE PURPOSES ONLY.
ILLUSTRATIVE JANUARY 2022 SOFR ACCRUAL PERIOD
SOFR
Effective Date
SOFR
Effective
Day
SOFR
Lookback
Date
SOFR
Lookback
Day SOFR(1)
Applicable
Factor
Applicable
Spread SOFR Index
Days in
SOFR
Effective
Period(2)
Actual
Days in
Year
Principal
Outstanding Interest Due
A B C D E=BxC+D F G H E x (F/G) x H
1/3/2022 Mon 12/29/2021 Wed 0.050 1 365
1/4/2022 Tues 12/30/2021 Thurs 0.050 1 365
1/5/2022 Wed 12/31/2021 Fri 0.050 1 365
1/6/2022 Thu 1/3/2022 Mon 0.050 1 365
1/7/2022 Fri 1/4/2022 Tues 0.050 3 365
1/10/2022 Mon 1/5/2022 Wed 0.050 1 365
1/11/2022 Tues 1/6/2022 Thurs 0.050 1 365
1/12/2022 Wed 1/7/2022 Fri 0.050 1 365
1/13/2022 Thu 1/10/2022 Mon 0.050 1 365
1/14/2022 Fri 1/11/2022 Tues 0.050 4 365
1/18/2022 Tues 1/12/2022 Wed 0.050 1 365
1/19/2022 Wed 1/13/2022 Thurs 0.050 1 365
1/20/2022 Thu 1/14/2022 Fri 0.050 1 365
1/21/2022 Fri 1/18/2022 Tues 0.050 1 365
1/24/2022 Mon 1/19/2022 Wed 0.050 3 365
1/25/2022 Tues 1/20/2022 Thurs 0.040 1 365
1/26/2022 Wed 1/21/2022 Fri 0.050 1 365
1/27/2022 Thu 1/24/2022 Mon 0.040 1 365
1/28/2022 Fri 1/25/2022 Tues 0.050 3 365
1/31/2022 Mon 1/26/2022 Wed 0.040 1 365
(1) Source: https://www.newyorkfed.org/markets/reference-rates/sofr (2) Actual days elapsed from the each SOFR Effective Date to the next SOFR Effective Date. (3) The SOFR Interest Calculation Date is the last Business Day of each month (4) Interest payable in arrears on the first Business Day after the SOFR Interest Calculation Date, or the first Business Day of the following month.
Attachment Staff Report Item 15K
MEMORANDUM OF UNDERSTANDING (“MOU”)
Date: April 18, 2022
To: Howard Chang
Chief Operating Officer
East Bay Community Energy Authority
[email protected]
(510) 809-7458
Garth Salisbury
Treasurer/Controller
California Community Choice Financing Authority
[email protected]
(415) 464-6037
From: Morgan Stanley & Co. LLC (“Morgan Stanley”)
Re: California Community Choice Financing Agency Prepay Transaction on behalf of the East Bay Community Energy
Overview
The California Community Choice Financing Agency (“CCCFA” or the “Issuer”) seeks to procure a 30-year supply of energy, through the issuance of Clean Energy Project Revenue Bonds (the "Bonds") issued by CCCFA. The CCCFA will sell all of the Prepaid Energy acquired from this transaction to the East Bay Community Energy Authority (“EBCE” or “Project Participant”).
Rating Agency Fees and Green Bond Opinion Fee
Rating Agency Fees and expenses (“Rating Agency Fees”) are paid from the proceeds of the Bonds, with underwriting fees and expenses calculated as a discount on the par amount of Bonds.
All fees, including Rating Agency Fees, are payable from the Bonds’ proceeds.
In the event that the Bonds are not issued due to market conditions and there remains a Rating Agency Fee payable to the rating agencies, Morgan Stanley and CCCFA agree to split this Rating Agency Fees on an equal basis. If the Bonds are not issued due to the CCCFA or the Project Participant’s unwillingness or inability to proceed, other than due to an inability to hit a minimum established target discount, the Rating Agency Fees will be their sole responsibility. To the extent that CCCFA incurs any Rating Agency Fees if the bonds are not issued, the Project Participant agrees that it will be liable for any costs and make direct payment to Moody’s for such fees.
In the event a Green Bond Second Opinion is obtained and the Bonds are not issued (unless the Bonds are not issued due to the CCCFA or the Project Participant’s unwillingness or inability to proceed, other than due to an inability to hit a minimum established target discount) or the Green Bond Second Opinion is not used, the fee payable to the Second Opinion provider (the “Green Bond Fees”) shall be incurred by Morgan Stanley and in such event, to the extent the Green Bond Fees were already paid by the Project Participant or by CCCFA, Morgan Stanley agrees to reimburse the Project Participant or CCCFA as appropriate.
Morgan Stanley shall have no responsibility for any fees or expenses incurred by CCCFA or the Project Participant, or their agents, employees, advisors or counsel, in connection with the issuance Attachment Staff Report Item 15L
of the Bonds and the purchase of the Prepaid Energy, other than Rating Agency Fees and Green Bond Fees as described in this MOU and as further described in the Bond Purchase Agreement (as defined herein).
Miscellaneous
The CCCFA and Project Participant each acknowledge and agree that: (i) the transaction contemplated by this MOU is, in each case, an arm’s length, commercial transaction between the CCCFA and the Underwriter and the Energy Supplier, as applicable, in which the Underwriter and the Energy Supplier are each acting solely as a principal and not acting as a municipal advisor, financial advisor or fiduciary to the CCCFA or the Project Participant; and (ii) the CCCFA and Project Participant will consult their own legal, accounting, tax, financial and other advisors, as applicable, to the extent each has deemed appropriate.
The CCCFA acknowledges and agrees that Morgan Stanley is not making a commitment to extend credit, make a loan or otherwise fund the Bonds beyond the obligations contained in a mutually satisfactory bond purchase agreement (the “Bond Purchase Agreement”). The CCCFA acknowledges that the services provided under this MOU involve professional judgment on Morgan Stanley’s part and that the results cannot be, and are not, guaranteed.
Nothing contained herein shall preclude the Underwriter from carrying on its customary and usual business activities. The Underwriter specifically reserves the right, but is not obligated, to bid for and maintain secondary markets on any of CCCFA’s outstanding bonds subject to appropriate information barriers. Services provided by the Underwriter in connection with this MOU shall not limit the Underwriter from providing services for the CCCFA or the Project Participant in conjunction with other services requested by the CCCFA or Project Participant except as limited by rule of law or regulation.
In connection with services agreed to herein, it is understood that the Underwriter will render professional services as an independent contractor. Neither the Underwriter nor any of its agents or employees shall be deemed an employee of the CCCFA or the Project Participant for any purpose.
Except as described in this paragraph, this MOU is intended to be, and shall be construed only as, a non-binding MOU, intent on summarizing and evidencing discussions between the CCCFA, the Project Participant, and Morgan Stanley as of the date hereof. Except as described below, any legally binding obligation of the parties with respect to the transaction described herein shall exist only upon the execution and delivery of definitive agreements related thereto, into which this MOU and all prior discussions shall merge. It is expressly understood that this MOU is not a contract to execute any definitive agreements or to otherwise consummate the transactions described herein.
The parties will cooperate in negotiating definitive agreements providing for the transactions contemplated by this MOU, but each party reserves the right of final approval or disapproval, for any reason, of the documentation relating to such agreements. Notwithstanding the foregoing, the provisions above under the headings “Rating Agency Fees and Green Bond Opinion Fee” shall be binding upon the parties.
Attachment Staff Report Item 15L
Sincerely,
___________________________
Grant Fraunfelder, Executive Director
MORGAN STANLEY & CO. LLC
ACCEPTED AND AGREED:
EAST BAY COMMUNITY ENERGY
By:___________________________
Name:________________________
Date:_________________________
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By:___________________________
Name:________________________
Date:_________________________
Attachment Staff Report Item 15L