EBCE is committed to protecting our environment and is proud to be a Certified California Green Business
Finance, Administration and Procurement Subcommittee
Meeting
Wednesday, July 12, 2023
1:00 pm
In Person
Conference Room One
East Bay Community Energy
1999 Harrison Street, Suite 800
Oakland, CA 94612
Or from the following location:
• 1755 Harvest Landing Lane, Tracy, CA 95376
Via Zoom:
https://ebce-org.zoom.us/j/83599993289
Dial(for higher quality, dial a number based on your current location): US: +1 669 900 6833 or +1 346 248 7799 or +1 253 215 8782 or +1 929 205 6099 or +1 301 715 8592 or 888 475 4499 (Toll Free) or 877 853 5257 (Toll Free)
Webinar ID: 835 9999 3289
Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least 2 working days before the meeting at (510) 906-0491 or [email protected].
If you have anything that you wish to be distributed to the Finance, Administration and Procurement Subcommittee, please email it to the clerk by 5:00 pm the day prior to the meeting.
1. Welcome & Roll Call
2. Public Comment
This item is reserved for persons wishing to address the Board on any EBCE-related matters that are not otherwise on this meeting agenda. Public comments on matters listed on the agenda shall be heard at the time the matter is called. As with all public comment, members of the public who wish to address the Board are customarily limited to three minutes per speaker. The Board Chair may increase or decrease the time allotted to each speaker.
3. Approval of Minutes from November 4, 2022
East Bay Community Energy
Board of Directors Page | 2
4. 2023 FAP Agenda Items (Informational Item)
A preview of the 2023 meeting schedule and currently identified items for discussion
5. Overview: 2023 Long-Term Resource RFO (Informational Item) Overview of EBCE-SJCE 2023 RFO
6. Energy Prepay #3 Approval (Informational Item)
Support approval of a third energy prepayment transaction and to bring it to the regular board meeting
7. Committee Member and Staff Announcements including requests to place items on future Board Agendas
8. Adjourn to date: TBD
EBCE is committed to protecting our environment and is proud to be a Certified California Green Business
Finance, Administration and Procurement Subcommittee
Meeting
Draft Minutes
Friday, November 4, 2022
10:00am
Please click the link below to join the webinar:
https://us02web.zoom.us/j/81690389009
Or join by phone by dialing: +1 669 900 6833
Webinar ID: 816 9038 9009
Consistent with the provisions of Assembly Bill 361, the East Bay Community Energy Board of Directors and standing committee meetings will be held via teleconference/videoconference during the current State of Emergency. Any interested member of the public can participate via Zoom by utilizing the link listed above or telephonically by utilizing the dial-in information listed on this agenda.
Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact the Clerk of the Board at least 2 working days before the meeting at (510) 906-0491 or [email protected].
If you have anything that you wish to be distributed to the Financial, Administrative and Procurement Subcommittee, please email it to the clerk by 5:00 pm the day prior to the meeting.
1. Welcome & Roll Call
Present: Directors Marquez (Hayward), Cavenaugh (Piedmont), Narum (Pleasanton) and Chair Hannon (Newark)
Excused: Director Valle (Alameda County)
2. Public Comment
This item is reserved for persons wishing to address the Financial, Administrative and Procurement Subcommittee on any EBCE-related matters that are not otherwise on this meeting agenda. Public comment on matters listed on the agenda shall be heard at the time the matter is called. As with all public comment, members of the public who wish to address the Financial, Administrative and Procurement Subcommittee are customarily limited to three minutes per speaker. The Chair may increase or decrease the time allotted to each speaker.
East Bay Community Energy
Finance, Administration, Procurement Subcommittee Page | 2 There were no speakers for public comment.
3. Approval of Minutes from September 16, 2022
Director Cavenaugh (Piedmont) motioned to approve the minutes. Director Narum (Pleasanton) seconded the motion, which passed 4/0).
Excused: Director Valle (Alameda County).
4. Budget to Actuals (Informational Item)
Review Budget performance to Actual expenses in FY 2022 The Committee Discussed:
• (6:48) Noting that expenditures were 9.7% under budget ($3.6MM), due to lower costs in expected personnel expenses and functional areas (slide 3), Chair Hannon (Newark) asked for the number of vacancies in headcount that currently exist in the organization.
• (9:47) Noting that the Local Development Fund 2021/22 YTD Actual was $17,767, 656 vs the Budgeted $10,457,835 (slide 6), Member Narum (Pleasanton) asked why the Actual amount was so high.
• (11:15) Noting that $20MM had already been budgeted for Local Development, Member Narum (Pleasanton) asked how the agency plans to draw down on $37MM ($20MM + $17MM) over the course of the year.
• (13:24) In order to show the progress in drawing down this large amount, Member Narum (Pleasanton) suggested that staff should create another line item in the budget showing the accruals of what is committed from the Local Development Fund.
• (15:09) Member Marquez (Hayward) asked how the agency is doing with employee retention.
• (17:02) Member Marquez (Hayward) asked for staff to describe the process by which the agency would seek approval to add additional headcount over the 68 currently budgeted positions.
• (18:08) Member Marquez (Hayward) asked how the agency can more accurately capture anticipated expenses related to energy costs.
• (20:07) In response to Howard Chang’s answer to the previous question, in which he described EBCE’s long-term hedging strategy, Member Marquez (Hayward) asked how often these hedges are employed.
• (20:45) Member Marquez (Hayward) noted her support for Member Narum’s (Pleasanton) suggestion to create a Local Development Fund accruals line item. • (21:42) Chair Hannon (Newark) suggested that staff create a footnote that lists the dollars committed in the Local Development Fund. Chair Hannon suggested this footnote so that the Board will see that Local Developments funds are not $37MM, but rather, they are X dollars, but Y dollars are committed to projects. • (22:09) Noting the recent increase in interest rates, Chair Hannon (Newark) asked if cash could be shifted around to maximize returns.
There were no speakers for public comment.
East Bay Community Energy
Finance, Administration, Procurement Subcommittee Page | 3
5. Reserve Contribution (Informational Item)
Review proposed contribution to reserve funds
The Committee Discussed:
• (27:11) Chair Hannon (Newark) requested for staff to confirm that this item is informational, and that the subcommittee is not being asked to recommend or affirm any additional dollars to the reserve fund.
• (28:01) Member Narum (Pleasanton) spoke in approval of allocating all working capital adjusted funds available for reserves (see slide 3) to the reserves.
Member Narum also stated that the subcommittee should recommend to the full board that all the funds be allocated to the reserves. Member Narum stated that the priority of the Board should be to raise the reserves up to at least a 50% target.
• (29:03) Member Marquez (Hayward) asked if the 50% reserve funding goal is common with other Community Choice Aggregators (CCAs).
• (29:41) Following Jason Bartlett’s explanation that EBCE’s current reserve policy was created after an extensive survey of other CCAs, Member Marquez (Hayward) asked for staff to describe the previous reserve policy. • (30:19) Member Marquez (Hayward) requested an explanation for why the reserve target is so high, given her statement that the reserve target for municipalities is typically in the 20% range.
• (34:39) Chair Hannon (Newark) agreed with Member Narum’s suggestion that the subcommittee recommend allocating all working capital adjusted funds to the reserves. Chair Hannon also asked staff to describe what would happen if the board or the agency needed to dip into the reserves – if, for example, the board would receive information back about the expenditure on a monthly basis. • (36:10) Chair Hannon (Newark) also asked for staff to comment on the impact of the agency’s liquidity on the interest rates on lines of credit that the agency has taken out in the previous year.
• (36:48) Chair Hannon (Newark) asked the committee to allow staff to indicate to the full board that the subcommittee had agreed to support the increase in the reserve, and that this policy should be adopted by the board. This request was received without objection.
• (37:34) In response to Howard Chang’s inquiry about whether future budget items should be brought to the subcommittee as information or action items, Chair Hannon (Newark) requested that items be brought to the subcommittee as action items so that full board would know that subcommittee actively discussed, examined and supports its recommendation.
There were no speakers for public comment.
6. Credit Card Policy Amendment (Informational Item)
Review proposed changes to EBCE’s credit card policy
East Bay Community Energy
Finance, Administration, Procurement Subcommittee Page | 4 The Committee Discussed:
• (46:17) Member Kavanaugh (Piedmont) asked for staff to confirm that, in the new policy, regular staff expenses are incurred on personal credit cards only as a last resort.
• (47:09) Member Kavanaugh (Piedmont) followed-up her previous question by asking for staff to discuss the financial burden placed on staff to carry expenses that might be incurred months in advance to actual use (for example, flight reservations), and funds are reimbursed back to the employee. • (49:05) Member Narum (Pleasanton) asked if the updated policy has been reviewed by an auditor.
• (53:05) In response to staff’s recommendation to increase the card limit from $10,000 to $20,000 per card (with the issuance of a third card for a $60,000 account limit), Chair Hannon (Newark) asked for staff to provide data that would justify the recommendation.
• (56:52) Chair Hannon (Newark) asked if the updated policy indicated that the use of the agency credit card should be considered only as a last resort, and that payments should processed primarily via invoicing. Chair Hannon also asked for staff to confirm that a mechanism exists for employees to submit an itinerary of expenses for payment by the agency without the employee having to pay for expenses first with a personal credit card.
• (58:58) Chair Hannon (Newark) asked who independently investigates the CEO and the COO to ensure compliance with the policy.
• (1:02:29) Chair Hannon (Newark) asked if there are any residual benefits to having a credit line this large in terms of benefits that come back to the agency. • (1:03:28) Chair Hannon (Newark) indicated his support for the staff’s recommendation.
There were no speakers for public comment.
7. Committee Member and Staff Announcements including requests to place items on future Board Agendas
There were no committee member or staff announcements.
8. Adjournment to date: TBD
Minutes written by Adrian Bankhead.
2023 FAP
Schedule &
Upcoming Items
JULY 2023
Current 2023 Schedule
2 All meetings are scheduled at 1pm every other month on the either the first or second Wednesday (Note: September is currently being rescheduled)
July 12
September 6-ish
November 8
July 12, 2023
3 Items included in this meeting are:
1. Current calendar year items and schedule
2. Review Prepay #3 Approval
3. 2023 RFO Overview
4 Additional Meetings & Expected Finance Items
September Meeting:
1. Audit progress report
2. Treasury Management
selection
3. Arrearage
Management/Collections
/Write-offs
November Meeting:
1. FY 2023-2024 Q1
Financial Statements
2. FY 2022-2023 Surplus
Waterfall Report
3. Mid-Year Budget Outlook
Thank You!
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2023 Long-Term
Resource RFO:
Overview and
Update
JULY, 2023
• Solicitation Overview
• Participation
• Evaluation Process
• Challenges in Marketplace
• Next Steps
• Reminder: Portfolio Summary
2 Agenda
Goals & Objectives
• Secure a portfolio of contracts to
provide EBCE customers with
affordable renewable and clean
energy sources;
• Meet IRP Near- and Mid-Term
Resource Adequacy Reliability
Procurement mandates;
• Meet current and future CPUC
compliance obligations;
• Create new renewable energy
projects to deliver PCC1 RECs
• Contract low-cost energy hedges to
compliment existing portfolio
• Partner with SJCE for efficiency,
to minimize expenses, and lead
the market in contract terms.
Actions
• Issued a broad, open, competitive
solicitation to ensure wide array of
opportunities considered;
• Evaluated combinations of projects
to achieve desired volume targets;
• Typically prioritize project risk,
location, workforce development,
economics, and other
characteristics; limited ability to do
so in this RFO due to limited offers
in earlier years;
• Encouraged RFO participants to be
creative and provide proposal
variations on individual projects and
include battery storage.
3 Project Characteristics
Facilities:
• Location: Projects may be within or outside
of California. All energy must be deliverable
to CAISO & must provide RA
• Construction Status: Energy and related
products may come from new resources or
add incremental capacity to existing
resources.
Capacity:
• Minimum Contract Capacity: 5 MW
• Maximum Contract Capacity: none
Delivery Date:
• Energy and RPS attribute delivery must be
within calendar years 2024 through 2030
with a preference for projects that begin
delivery earlier within this window.
Contract Duration:
• 10-20 year durations
Technology:
• Renewables, Large Hydro
• Storage – short or long duration; any
technology
Solicitation Overview
4 Solicitation Overview – Eligible Products
Product
#
Product Name Description Example
Product 1 As-Available RPS
Product
New or incremental capacity to an existing
stand-alone PCC1-eligible generating
resource
solar, wind, geothermal,
small hydro or ocean
(thermal, wave, or current)
Product 2 As-Available RPS plus
Energy Storage
New or incremental capacity to an existing
stand-alone PCC1-eligible generating
resource with co-located energy storage
Same as above plus storage
with 2-hr, 4-hr, or 4-hr+
duration capability
Product 3 Firm or Shaped RPS
Product
New PCC1-eligible generating resources;
likely paired with energy storage
Energy delivered during
specific hours
Product 4 Stand-Alone Energy
Storage Toll or RA-Only offer
Energy storage may offer a full product
“tolling” structure contract. RA-only offers
not accepted in this RFO
Any storage technology
with 2-hr, 4-hr, or 4-hr+
duration capability
5 Participation
More robust project offering than 2022 RFO, comparable to 2020 RFO. 72 unique project sites; 195 project variations (as compared to 44 sites; 185 variations in 2022 RFO)
All 4 products that were solicited were offered
Offers included solar, wind, and battery storage
Projects based in 6 different states (CA, AZ, ID, NM, NV, WY); predominantly CA *Only 2 projects in EBCE service territory.
Evaluation Process
• Evaluation Rubric scored 3 areas:
• Counterparty Execution, Offer Competitiveness, and Project Development Status • Multiple items under each area
• Two reviewers were assigned to each project.
• Staff reviewed all submitted information and provided scores for all categories and NPV. • Each item has 100 point max. at its own weighting.
• Term Sheet Markups were scored by one assigned reviewer. • NPV scores were directly incorporated into overall project score with a weighting of 55%. • The Net Present Value was calculated based on simulations on 6 different forward curves • For each forward curve we took a weighted average of the P5 (50%), P50 (30%), and P95 (20%); and then took a simple average across the 6 curves
• We normalized this number on a $/MW basis and the projects were then assigned a 0-55 score based on the NPV distribution • Other factors considered in qualitative evaluation were Counterparty Execution Risk (20 points), Development Status Risk (20 points) and Local Business Enterprise (4 points) and Small Business Enterprise (1 point) • Scoring and rubric were similar to the selection process for previous RFOs • Previous RFOs used 3 forward curves, this RFO featured 6 curves each representing a unique scenario • Minor changes were made to weighting of local projects, including addition of points for small businesses 6 Challenges in the Marketplace
• Ongoing supply chain disruption & delays
• Uncertainty related to future tariffs for core components • Result: suppliers of core components pricing using Index structure; many Project Developers unwilling to take on price risk thus requiring pricing using index also or extreme mark-ups in price to cover risk • General: prices for generation and storage resources have increased 30- 40% since ~2020.
7 Next Steps
• Complete negotiations of projects under consideration. Anticipate presentations to Board beginning in September and continuing through winter
• Assess projects as they hit key milestones and mature further. • Update filing to CPUC on status of 2021-2023 and 2023-2026 Electric Reliability Requirements due August 1, 2023.
• CPUC’s 2024 IRP cycle provides formal opportunity for portfolio review and analysis of open position, cost and risk. Further engagement with board and community as part of IRP process.
8 Portfolio Summary
9 Project Name1 Project Name2 Devloper Type
Nameplate
Capacity COD
Term
(Years) Technology County State
Altamont SHWEC Greenbacker RPS 57.5 7/2/2021 20 Wind Alameda CA Rosamond Central Golden Fields Clearway RPS 112 12/22/2020 15 Solar Kern CA Pattern Tecolote Pattern RPS, no RA 100 12/20/2021 10 Wind Guadalupe & Torrance
NM
Luciana Tulare Idemitsu RPS 55.83 4/30/2022 15 Solar Tulare CA Edwards Solar II Edwards Terra Gen RPS 100 Q2 2024 15 Solar Kern CA Fervo Corsac Station Fervo RPS 40 2/1/2030 15 Geothermal Churchill NV Daggett South Daggett Clearway RPS+Storage 482 7/1/2023 15 Solar + Storage San Bernadino CA RE Scarlet Sonrisa EDPR RPS+Storage 100 12/15/2023 20 Solar+Storage Fresno CA Oberon Oberon Intersect RPS+Storage 125 1/1/2024 15 Solar Riverside CA Henrietta D Henrietta Convergent Storage 10 12/2/2021 15 Storage Kings CA Tumbleweed Tumbleweed REV Renewables Storage 50 6/1/2024 15 Storage Kern CA Kola Kola NextEra Storage 125 4/1/2025 20 Storage San Joaquin CA Sanborn Sanborn Terra Gen Storage 47 Q2 2024 12 Storage Kern CA Staff Report Item 6
Staff Report Item 6
TO: East Bay Community Energy FAP Subcommittee
FROM: Howard Chang, Chief Operating Officer
SUBJECT: Review Energy Prepay Transaction #3
DATE: July 12, 2023
________________________________________________________________________ Recommendation
Review details of a proposed Energy Prepay transaction #3 in preparation to adopt a Resolution authorizing the execution of a Power Supply Contract and certain other documents to enable EBCE to enter into its third energy prepayment transaction in the July Regular Board Meeting.
Background and Discussion
EBCE is preparing to execute a third energy prepay transaction. EBCE has a sizeable energy procurement portfolio needed to serve our load and expects to execute multiple prepay transactions over the next several years to realize procurement savings by utilizing its tax-exempt status. This third transaction is largely a replication of the prior two transactions but with some added settlement efficiencies, moving from monthly settlements to an annual settlement process. With this unique change, EBCE will continue to settle on a monthly basis and realize monthly savings, but will have an annual true-up mechanism. This better aligns with the variable as delivered nature of our renewable energy PPAs. EBCE plans to have documentation prepared for the July Regular Board meeting to seek board approval to move forward and go to market soon after. The actual issuance of bonds and closing of the transaction will be dependent on market conditions and the necessary interest rate spreads.
Previous Energy Prepay Transactions:
EBCE executed two energy prepay transactions in 2021 and 2022, issuing through CA Community Choice Financing Authority (CCCFA), the JPA in which EBCE is a member. The annual savings from these first two energy prepay transactions totals nearly $7 Million at the outset.
EBCE and Silicon Valley Clean Energy (SVCE) jointly executed the first energy prepay transaction by a CCA on September 23, 2021, with a notional size of $1.48BN. For this first transaction, EBCE and SVCE jointly performed due diligence and negotiated the initial transaction over a 1.5yr period and issued a number of solicitations to select a number of counterparties and advisors. Included was a solicitation in November 2019 to identify potential Prepay Suppliers, through which Morgan Stanley (MS) was selected. MS is one of a small number of large financial institutions that is experienced in executing on the bond Staff Report Item 6
underwriting and prepay structuring aspects of this transaction. Additionally, the CCAs jointly issued a solicitation in June 2020, for the counsel roles, through which Orrick, Herrington & Sutcliffe and Chapman & Cutler LLP were selected. Both firms have significant experience representing parties on prepay transactions since the market inception in the 1990s, and both firms are industry leaders in serving the roles for which they’ve been selected. The CCAs also jointly issued a solicitation in September 2020, to identify municipal financial advisors. Given the niche market for prepayments, there are very few firms who provide this type of advisory service and experience. EBCE and SVCE reviewed and scored the respondents, ultimately selecting PFM Financial Advisors, LLC & PFM Swap Advisors LLC (PFM). Moody’s Investor Service Inc. was selected due to their unique experience in rating prepayment type transactions and alternative rating agencies are not as suitable to complete such work.
Due to the nature of the repeat work of these transactions, EBCE has been successful in reducing the costs of working with these various parties, saving over $150,000 compared to initial contract costs. Additionally, the execution and transaction closing process has seen considerable efficiencies.
Prepay Parties:
The prepay transaction requires the selection and involvement of multiple parties. Names and functions are as follows:
Prepay Buyer: East Bay Community Energy
• Role: Provide energy contracts to flow through prepay Prepay Supplier and Bond Underwriter: Morgan Stanley
• Role: Structure transaction, underwrite bonds, and pay contract price to PPA provider • Selection Process: via solicitation issued by EBCE in November 2019 Municipal Advisor: PFM
• Role: Advise Prepay Buyer in negotiations; required by Municipal Securities Rulemaking Board (MSRB)
• Selection Process: via solicitation issued by EBCE in September 2020 Bond Counsel: Orrick, Herrington & Sutcliffe
• Role: Represent bondholders
• Selection Process: via solicitation issued by EBCE in June 2020 Tax Counsel: Orrick, Herrington & Sutcliffe
• Role: Provide tax opinion on transaction
• Selection Process: via solicitation issued by EBCE in June 2020 Issuer’s Counsel (also known as Prepay Counsel or Prepaid Counsel): Chapman & Cutler LLP • Role: Represent issuer’s interests, supporting drafting and negotiating terms of prepay agreement and associated energy supply agreements
• Selection Process: via solicitation issued by EBCE in June 2020 Disclosure Counsel: Chapman & Cutler LLP
• Role: Prepare Official Statement / Prospectus
• Selection Process: via solicitation issued by EBCE in June 2020 Bond Issuer: California Community Choice Financing Authority (CCCFA) • Role: Issue municipal bonds for prepay
• Note: EBCE is a JPA member to this agency, which was formed in 2021 Custodian: Bank of New York
• Role: Manage the various Payment Accounts
• Selection Process: via solicitation issued in July 2021 Staff Report Item 6
Commodity Swap Counterparty: Natixis
• Role: Provide commodity swap for any periods with floating/indexed power prices • Selection Process: via competitive bid for each prepay transaction. The swap counterparty is the one role that has been served by different providers.
Credit Rating Agency: Moody’s
• Role: Rate the bonds
• Selection Process: based on an evaluation of the limited providers in the market and chosen due to accepted market standards
Prepay Documents:
The prepay transaction requires the preparation of numerous documents. Below are the key documents (all included as attachments to this item):
Power Supply Contract
• Function: Sets forth terms for which CCA receives energy for 30-year term • Signed by: EBCE and Issuer (CCCFA)
Prepaid Agreement
• Function: Details the flow of power and payments between the Prepay Supplier and the Issuer
• Signed by: Issuer (CCCFA) and Prepay Supplier (Morgan Stanley) Letter Agreement Regarding PPA Assignments
• Function: Details the terms of the limited assignment of PPAs between EBCE and third-party energy sellers • Signed by: EBCE and Prepay Supplier (Morgan Stanley)
Form of Limited Assignment
• Function: Signed for each PPA assigned into prepay; Exhibit to “Letter Agreement Regarding PPA Assignments”
• Signed by: EBCE, Original PPA Counterparty, and Prepay Supplier (Morgan Stanley) Project Administration Agreement
• Function: Sets out terms for CCA to act on behalf of the Issuer • Signed by: EBCE and Issuer (CCCFA)
PPA Payments Custodial Agreement
• Function: Details cash flows between PPA Buyer (CCA), Prepay Supplier, and Custodian • Signed by: EBCE, Prepay Supplier (Morgan Stanley), and custodian Trust Indenture
• Function: Sets forth terms of bond issuance and rights of bondholders • Signed by: Issuer (CCCFA) and trustee (BONY)
Re-pricing Agreement
• Function: Sets forth terms for remarketing and repricing for future bond repricing periods
• Signed by: Issuer (CCCFA) and Prepay Supplier (Morgan Stanley) Preliminary Offering Statement (POS)
Staff Report Item 6
• Function: Details parties (including appendix of info on CCA operational history), transaction size and key terms; used to market the bonds • Signed by: Not a signed document
Cost Share Memorandum of Understanding (MOU)
• Function: Details the cost share arrangement with MS to cover rating agency and green bond designation fees and EBCE responsibility to cover costs in place of CCCFA Prepay Structure Overview:
An energy prepayment – or ‘prepay’ – is a long-term financial transaction available to municipal utilities and tax-exempt entities such as CCAs that enables a meaningful power procurement cost savings opportunity. Utilizing the municipal bond market, a tax-exempt Load Serving Entity (LSE, also called “Prepay Buyer”) and a taxable financial counterparty (bank, called “Prepay Supplier") enter into a 30-year agreement through which the LSE assigns existing power supply contracts to the Prepay Supplier. The Prepay Supplier pays the contract price to the PPA provider, while the LSE pays the Prepay Supplier at a discounted rate. The discounted rate is agreed upon in the prepay documents for the initial term of the bond and is based in part on the spread between the taxable and tax-exempt bond interest rates. The market availability of this interest rate spread is critical to the savings opportunity available to an LSE through a prepay. At future bond repricing periods, this discount rate will be reset, with a negotiated minimum discount rate.
Tax-exempt bonds are issued by a third-party conduit to raise funds for the prepay transaction, which flow to the Prepay Supplier. The LSE does a limited assignment of the PPA to the Prepay Supplier. The LSE is required to continue to perform under the contract, while maintaining rights to the electricity and attributes under the PPA. The Prepay Supplier utilizes the bond funds and provides a discount on the PPA to the LSE based on the spread between the taxable and tax-exempt rates. The discount is estimated at 8-12% but is subject to change based on market conditions. For this prepay, the initial discount target is 10% and the minimum discount will likely be set around 6-7%. The typical bond tenors are in the 7-10 year range, so there will be a reissuance and reset of the discount several times throughout the life of the 30-year prepay. There is a negotiated minimum discount over the life of the transaction that, if not met by the Prepay Supplier, allows the LSE a walkaway right.
The total combined present notional value of the assigned contracts flowing through the prepay over the 30 years is anticipated to be in the range of $500MM-1BN; these contracts can be long-term renewables PPAs or short-term commodity supply contracts. While the contracts are assigned to the Prepay Supplier, the LSE continues to ultimately take and pay for all the energy and attributes delivered through the contract; all other terms of the PPA remain unchanged. If the prepay program terminates early for any reason – either the Prepay Supplier or the LSE fail to perform – the LSE forgoes future savings and the assigned PPA is put back completely to the LSE.
Two key features of the municipal bonds utilized in a prepay greatly reduce risk to the LSE.
First, the bonds are non-recourse to the LSE, meaning they are neither secured nor guaranteed by the LSE and EBCE will at no point be responsible for repaying the bonds.
Secondly, prepays are off-balance sheet for the LSE as the bonds are issued by a third-party conduit.
Staff Report Item 6
Ultimately, prepays are employed to save ratepayers money while maintaining both (a) the economics for the PPA provider and (b) the terms of the energy supply contract. They have been used for natural gas transactions in the US since the early 1990s, with over 90 transactions completed nationwide ($50+ Billion) and 15 transactions completed in California.
The same tax law1 and similar transaction structure that enables the natural gas prepays enables the program for electricity, and specifically renewables contracts, creating an opportunity for CCAs to provide renewable energy at a lower cost than the IOU competition.
Financial Impacts
The purpose of pursuing the prepay transaction is to achieve meaningful energy procurement cost savings. This transaction is targeting a 10% discount at the outset, which translates to $2- 3MM of annual savings.
The majority of fees paid to various parties involved in the prepay will be payable from the proceeds of the prepay bonds. That is to say, there is limited out-of-pocket cost to EBCE; the cost will be paid out of the savings realized from the prepay transaction. With that said there are a portion of fees, such as certain counsel fees, rating agency fees, and green bond designation fees that are not contingent. We have negotiated to have MS split these costs with EBCE if the deal does not close. Additionally, we will only move forward in authorizing these fees when necessary.
Additionally, it is important to note that the prepay is non-recourse to EBCE. The ultimate counterparty with the Prepay Supplier is the CCCFA JPA, so CCCFA is therefore the counterparty to all the underlying agreements. CCCFA is a public entity separate and apart from the parties to the JPA Agreement, and the debts, liabilities and obligations of the CCCFA will not constitute debts, liabilities or obligations of EBCE or any representative of EBCE serving on the governing body of EBCE.
Details of Requested Board Approval
Adopt the Resolution which authorizes EBCE to sign:
• Power Supply Contract with CCCFA (Issuer)
• Letter Agreement Regarding PPA Assignments with Morgan Stanley (Prepay Supplier) • Limited Assignment Agreements with Morgan Stanley (Prepay Supplier) and future PPA sellers
• Project Administration Agreement with CCCFA (Issuer)
• PPA Payments Custodial Agreement with Morgan Stanley and BONY The approvals provided shall be subject to the following parameters:
(a) the Bonds will not be obligations of EBCE, but will be limited obligations of the Issuer payable solely from the revenues and other amounts pledged therefor under the Indenture, including amounts payable by EBCE under the Power Supply Contract; (b) the aggregate principal amount of the Bonds shall not exceed $1,000,000,000 (c) the annual energy savings to EBCE under the Power Supply Contract shall be at least $[4.50] per MWh
1 Codified in US Tax Law. Since first prepayments of natural gas were done in the early 1990s, the IRS issued rules allowing tax-exempt prepayments and Congress enacted legislation specifically allowing the transactions (National Energy Policy Act of 2005; Section 1327).
Staff Report Item 6
Attachments
A. Presentation
B. Prepaid Agreement
C. Re-pricing Agreement
D. Power Supply Contract
E. Letter Agreement Regarding PPA Assignments
F. PPA Payments Custodial Agreement
G. Cost Share Memorandum of Understanding (MOU)
H. Preliminary Offering Statement (POS)
I. Trust Indenture
Energy Prepay
Transaction
Overview for FAP
JULY 13, 2023
Attachment Staff Report Item 6A
• An energy prepayment is a long-term non-recourse financial transaction between a tax-exempt Load Serving Entity (LSE) and a taxable financial counterparty (bank, called “Prepay Supplier") utilizing the municipal bond market.
o Typically 30-year term, LSE committing ~$500MM-$1BN of energy supply contracts (combined notional values) o LSE utilizes in order to lower customer energy costs
• Prepay Supplier is assigned an existing energy supply contract, pays the contract price to PPA Seller and immediately transfers all electricity and attributes to LSE. LSE pays the Prepay Supplier at a discounted rate. • Municipal utilities (and tax-exempt entities such as CCAs) in the US can prepay for a supply of electricity or natural gas from a taxable entity and fund that prepayment with tax-exempt municipal bonds. The LSE must sell the commodity to their retail end-users residing within their traditional service area. o This structure is well known and regularly used for gas and is now being applied towards renewables PPAs o Codified in US Tax Law. Since first prepayments of natural gas were done in the early 1990’s, the IRS issued rules allowing tax-exempt prepayments and Congress enacted legislation specifically allowing the transactions (National Energy Policy Act of 2005; Section 1327)
2 Attachment Staff Report Item 6A
Energy Prepay Overview
● EBCE executed two energy prepay transactions in 2021 and 2022, issuing through CA Community Choice Financing Authority (CCCFA), the JPA in which EBCE is a member ● Annual savings from these first two energy prepay transactions totals nearly $7 Million at the outset
● Energy Prepay transactions are off balance sheet structures that allow EBCE to utilize its tax-exempt status to lower its energy procurement costs ● The discount that is applied to energy costs is based on the differential between taxable and tax-exempt dept spreads. These spreads are historically volatile and therefore optimal prepay timing is difficult to predict
● EBCE is preparing a third energy prepay transaction and will seek approval from the board on moving forward with the transaction in the July 19 2023 board meeting 3 Attachment Staff Report Item 6A
Current Market Conditions
● Conditions are suitable for
prepays when the taxable and
tax-exempt spreads are wide
● Spreads have been volatile in
recent years and conditions have
been suitable for the year
somewhat regularly
● There are a total of 6 outstanding
energy prepay deals across 4
CCAs with 2 additional prepays
preparing to go out to market –
one by EBCE and one by CCCE
4 Attachment Staff Report Item 6A
Existing Energy Prepay Transaction Summary
EBCE First Transaction – Jointly executed with SVCE
● First Energy prepay closed by a CCA
● Closed: Sept. 23, 2021
● Total Bond Proceeds: $1.48 Billion ("Green Bond” Certified) ● Initial Power Supply: 59 MW Around-the-Clock Carbon-Free Energy starting Jan 1, 2022 ● Initial Bond Tenor Savings: 10 years
EBCE Second Transaction - Standalone prepay
● Third Energy prepay closed by a CCA
● Closed: July 12, 2022
● Total Bond Proceeds: $939 Million ("Green Bond” Certified) ● Initial Power Supply: 75 MW Around-the-Clock Carbon-Free Energy starting April 1, 2023 ● Initial Bond Tenor: 6 years
5 Attachment Staff Report Item 6A
Prepay Parties
6 Attachment Staff Report Item 6A
Documents Overview: EBCE Signs
7 – Sets forth terms for which CCA receives energy for 30-year term – Signed by EBCE and CCCFA
– Details the terms of the limited assignment of PPAs between EBCE and 3rd party energy sellers – Signed by EBCE and Morgan Stanley (Prepay Supplier)
– Details the terms of the limited assignment of each energy PPA EBCE assigns into prepay – Signed by EBCE, the original PPA counterparty, and Morgan Stanley (Prepay Supplier) – Sets out terms for CCA to act on behalf of the Issuer – Signed by EBCE and CCCFA
– Details cash flows between PPA Buyer (CCA), Prepay Supplier, and Custodian – Signed by EBCE, Morgan Stanley, and BONY
– Details the cost share arrangement with MS to cover rating agency and green bond designation fees and EBCE responsibility to cover costs in place of CCCFA
Attachment Staff Report Item 6A
Documents Overview: CCCFA Signs
8 – Details the flow of power and payments between the Prepay Supplier and the Issuer (CCCFA) – Terms are largely mirrored in the Power Supply Contract – Sets forth terms for remarketing and repricing for future bond repricing periods – Sets forth terms of bond issuance and rights of bondholders – Details that all revenues relevant to transaction flow to and through conduit issuer (CCCFA) – Docs pursuant to which the commodity price is hedged with a 3rd-party swap counterparty (to insulate transaction from market variations) – Guarantee of “due and punctual payment” from Prepay Supplier to conduit issuer (CCCFA) – Flows in favor of conduit issuer and swap counterparty, respectively – Outlines payment flows through the transaction, signed by CCCFA, Custodian, and Bond Trustee – Also a Back-End Custodial Agreement which is signed by Morgan Stanley, Custodian, and Bond Trustee Attachment Staff Report Item 6A
Documents Overview: Other
9 – Official offering document used to market the bonds – Details parties (including appendix of info on EBCEs operational history), transaction size and key terms – Not a signed document
Attachment Staff Report Item 6A
Details of Pending Board Approval Request
10 Attachment Staff Report Item 6A
Appendix
Attachment Staff Report Item 6A
12 Prepay Supplier Municipal
Conduit LSE/CCA
Existing PPA to
be Assigned
Non-Recourse
Tax-Exempt
Bonds
Existing PPA
Counterparty
Contract Price
Prepayment $$
Contract Price
Less Discount
MWhs + RECs MWhs + RECs
+ Debt Service
MWhs + RECs
Debt
Service
Bond
Proceeds
Attachment Staff Report Item 6A
Market Statistics
13 – $50+ Billion combined notional contract value
– $5.7 Billion combined notional contract value
– All investment grade rated financial institutions
– Majority of transactions to date have been exclusively for natural gas, remainder including an electricity ‘switch’ at a certain year.
– The same tax law and similar transaction structure enables the program for electricity from renewables contracts, as well. The market is seeing activity and preparation for these transactions, particularly from CCAs.
Attachment Staff Report Item 6A
Power Contract Assignment:
• Existing renewable PPAs are assigned to the taxable Prepay Supplier. The LSE continues to take and pay for energy and attributes delivered through the contract.
• All other terms of the PPA are unchanged
• If the prepay program terminates early, prepaid supplier fails to perform, or LSE fails to perform, the LSE forgoes the future savings and the assigned PPA contract is put back to the original LSE • Active Suppliers: Goldman Sachs, Morgan Stanley, JP Morgan Royal Bank of Canada, Citi, Bank of America are all investment grade rated financial institutions
Debt:
• Non-Recourse: Prepays utilize non-recourse municipal bonds and are not secured or guaranteed by the referenced entity (i.e. the CCA). Rather the debt is recourse to the Prepay Supplier (i.e. the bank receiving the prepayment). This significantly protects the CCA and mitigates risk related to the payment of power contracts novated through the prepay. • Off Balance sheet for LSE: Bonds are issued by a municipal bond conduit and arranged by the Prepay Supplier 14 Attachment Staff Report Item 6A
Prepay Sizing and Discount
15 – EBCE will seek the maximum bond raise while maintaining optimal bond rates – The amount represents the present value of the PPA cashflows over the 30-year life of the transaction – The transaction assumes an increase in the cashflows running through the prepay over the 30-year life. – As the transaction moves forward, the arbitrage value goes down since the present value benefits reduce with a shorter remaining tenor.
The future discount rates will be reset every 5-10 years based on bond tenors and be dependent on future bond market conditions, but this puts downward pressure on the future discounts.
– There is a negotiated minimum discount that, if not met by the Prepay Supplier, allows the LSE not to move forward in the repricing.
Attachment Staff Report Item 6A
Key Risks
16 ‒ Consultants are primarily contingent on successful deal, with the exception of certain rating agency and green bond designation fees
‒ Consultants are primarily paid from deal proceeds vs. EBCE directly ‒ To the extent that MS does not provide the minimum discount EBCE will have a right not to proceed in future repricing periods. Minimum discount will likely be set at around 6-7%. Target initial discount is 10%. ‒ EBCE also has a right to shop the prepay provider if we view that the offered discounts are not at market ‒ Note that costs would not increase above contractual levels Attachment Staff Report Item 6A
SM Draft 19 May 2023
PREPAID ENERGY SALES AGREEMENT
between
MORGAN STANLEY ENERGY STRUCTURING, L.L.C.
and
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
Dated as of [____], 2023
Attachment Staff Report Item 6B
TABLE OF CONTENTS
Page
-i-Article I. Definitions..................................................................................................................... 1 Section 1.1 Defined Terms...................................................................................... 1 Section 1.2 Definitions; Interpretation.................................................................. 10 Article II. Execution Date and Delivery Period ...................................................................... 10 Section 2.1 Execution Date; Delivery Period ....................................................... 10 Section 2.2 Termination by Seller Prior to Prepayment ....................................... 10 Article III. Sale And Purchase .................................................................................................. 11 Section 3.1 Sale and Purchase of Energy.............................................................. 11 Section 3.2 Prepayment......................................................................................... 11 Section 3.3 Other Amounts Payable with Respect to Assigned Products............ 11 Section 3.4 No Obligation to Take Base Energy .................................................. 12 Section 3.5 Reduction of Contract Quantity......................................................... 12 Article IV. Failure to Deliver or Take Energy ........................................................................ 12 Section 4.1 Assigned Product ............................................................................... 12 Section 4.2 Failure to Deliver or Take Due to Force Majeure.............................. 12 Article V. Transmission and Delivery; Communications ...................................................... 13 Section 5.1 Delivery of Energy............................................................................. 13 Section 5.2 Scheduling.......................................................................................... 13 Section 5.3 Title and Risk of Loss........................................................................ 14 Section 5.4 PCC1 Product and Long-Term PCC1 Product .................................. 14 Section 5.5 Deliveries within CAISO or Another Balancing Authority............... 16 Section 5.6 Assigned Products.............................................................................. 16 Article VI. Partial Assignments of PPAs ................................................................................. 16 Section 6.1 Future PPA Assignments................................................................... 16 Section 6.2 Updates to Exhibits A-1 and A-2....................................................... 17 Article VII. Energy Remarketing ............................................................................................. 17 Article VIII. Representations and Warranties........................................................................ 17 Section 8.1 Representations and Warranties......................................................... 17 Section 8.2 Additional Representations and Warranties of Buyer ....................... 18 Section 8.3 Warranty of Title................................................................................ 20 Article IX. Taxes ........................................................................................................................ 20 Attachment Staff Report Item 6B
TABLE OF CONTENTS
(continued)
Page
-ii-Article X. Dispute Resolution.................................................................................................... 20 Section 10.1 Arbitration.......................................................................................... 20 Section 10.2 Dispute Resolution............................................................................. 21 Article XI. Force Majeure ......................................................................................................... 23 Section 11.1 Applicability of Force Majeure.......................................................... 23 Section 11.2 Settlement of Labor Disputes............................................................. 23 Article XII. Governmental Rules and Regulations................................................................. 23 Section 12.1 Compliance with Laws....................................................................... 23 Section 12.2 Contests.............................................................................................. 23 Section 12.3 Defense of Agreement ....................................................................... 23 Article XIII. Assignment ........................................................................................................... 23 Article XIV. Payments............................................................................................................... 24 Section 14.1 Monthly Statements........................................................................... 24 Section 14.2 Payment.............................................................................................. 25 Section 14.3 Payment of Disputed Amounts.......................................................... 26 Section 14.4 Late Payment...................................................................................... 26 Section 14.5 Audit; Adjustments............................................................................ 26 Section 14.6 Netting................................................................................................ 26 Article XV. Receivables Purchases........................................................................................... 27 Article XVI. Notices................................................................................................................... 27 Article XVII. Default; Remedies; Termination....................................................................... 27 Section 17.1 Seller Default ..................................................................................... 27 Section 17.2 Buyer Default..................................................................................... 28 Section 17.3 Non-Default Termination Events....................................................... 28 Section 17.4 Remedies and Termination ................................................................ 30 Section 17.5 Replacement of Swaps....................................................................... 32 Section 17.6 Limitation on Damages...................................................................... 33 Section 17.7 Option to Purchase Bonds.................................................................. 34 Section 17.8 Termination Payment Adjustment Schedule ..................................... 34 Article XVIII. Miscellaneous .................................................................................................... 34 Section 18.1 Indemnification Procedure................................................................. 34 Attachment Staff Report Item 6B
TABLE OF CONTENTS
(continued)
Page
-iii-Section 18.2 Deliveries........................................................................................... 35 Section 18.3 Entirety; Amendments....................................................................... 35 Section 18.4 Governing Law .................................................................................. 36 Section 18.5 Non-Waiver........................................................................................ 36 Section 18.6 Severability ........................................................................................ 37 Section 18.7 Exhibits.............................................................................................. 37 Section 18.8 Winding Up Arrangements................................................................ 37 Section 18.9 Relationships of Parties...................................................................... 37 Section 18.10 Immunity............................................................................................ 37 Section 18.11 Rates and Indices............................................................................... 37 Section 18.12 Limitation of Liability........................................................................ 38 Section 18.13 Counterparts....................................................................................... 39 Section 18.14 Rights of Trustee................................................................................ 39 Section 18.15 Waiver of Defenses............................................................................ 39 Section 18.16 U.S. Resolution Stay.......................................................................... 39 Section 18.17 Rate Changes...................................................................................... 40 Exhibit A-1 - Base Energy Hourly Quantities
Exhibit A-2 - EPS Energy Period Annual Quantity and Monthly Projected Quantity Exhibit B - Notices
Exhibit C - Energy Remarketing
Exhibit D - Termination Payment Schedule
Exhibit D-1 - Termination Payment Adjustment Schedule
Exhibit E - Form of Morgan Stanley Guarantee
Exhibit F - Pricing and Other Terms
Exhibit G - Receivables Purchases
Attachment Staff Report Item 6B
1 PREPAID ENERGY SALES AGREEMENT
This Prepaid Energy Sales Agreement (hereinafter “Agreement”) is made and entered into as of [____], 2023 (the “Execution Date”), by and between Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company (“Seller”), and California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended) (“Buyer”).
W I T N E S S E T H:
WHEREAS, Seller desires to sell electricity to Buyer, and Buyer desires to purchase electricity from Seller, upon the terms and conditions hereinafter set forth; and WHEREAS, concurrently with Buyer’s execution of the Power Supply Contract (as defined below), the Project Participant (as defined below) under such Power Supply Contract will assign to Seller certain Assigned Rights and Obligations, including the right to receive Assigned Product, which Assigned Product will be resold to Buyer hereunder and then resold to the Project Participant under the Power Supply Contract.
NOW, THEREFORE, in consideration of the premises above and the mutual covenants and agreements herein set forth, Buyer and Seller (the “Parties” hereto; each is a “Party”) agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Defined Terms. The following terms, when used in this Agreement and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Affiliate” means, with respect to either Party, any entity which is a direct or indirect parent or subsidiary of such Party or which directly or indirectly (i) owns or controls such Party, (ii) is owned or controlled by such Party, or (iii) is under common ownership or control with such Party. For purposes of this definition, “control” of an entity means the power, directly or indirectly, either to (a) vote 50% or more of the securities having ordinary voting power for the election of directors or Persons performing similar functions or (b) direct or cause the direction of the management and policies, whether by contract or otherwise. “Agreement” has the meaning specified in the preamble and shall include exhibits, recitals and attachments referenced herein and attached hereto and all amendments, supplements and modifications hereto and thereto.
“Annual Quantity” means, with respect to each Contract Year of the Delivery Period, the quantity (in MWh) of Assigned Product for such Contract Year as set forth on Exhibit A-2 (as such Exhibit A-2 may be updated from time to time in accordance with Section 6.2); provided that the Annual Quantity for any Contract Yearshall be reduced by the aggregate amount Attachment Staff Report Item 6B
2 of any Base Quantities required to be remarketed under this Agreement for any given Contract Year.
“Assigned Delivery Point” has the meaning specified in the applicable Assignment Agreement.
“Assigned Energy” has the meaning specified in the applicable Assignment Agreement; provided that any Assigned Energy shall be EPS Compliant Energy as set forth in the Assignment Letter Agreement.
“Assigned Paygo Quantity” means any Assigned Products delivered under this Agreement in excess of the Annual Quantity for any Contract Year. “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 Seller 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 Agreement” means the Initial Assignment Agreement and any subsequent assignment agreement entered into consistent with the Assignment Letter Agreement. “Assignment Letter Agreement” means that certain Letter Agreement, dated as of the date hereof, by and among MSCG, Seller, Buyer and Project Participant. “Automatic Non-Default Termination Event” has the meaning specified in Section
17.3(b).
“Available Discount” has the meaning specified in the Re-Pricing Agreement. “Balancing Authority” has the meaning specified in the CAISO Tariff. “Base Energy” means Firm (LD) Energy to be delivered to an Energy Delivery Point.
“Billing Statement” has the meaning specified in Section 14.1(b). “Bond Closing Date” means the first date on which the Bonds are issued pursuant to the Bond Indenture.
“Bond Documents” means this Agreement, the Power Supply Contract, the Bond Indenture and all other documents, agreements and instruments entered into or delivered by Buyer in connection with any of the foregoing or the transactions thereunder.
Attachment Staff Report Item 6B
3 “Bond Indenture” means (i) the Trust Indenture to be entered into prior to the commencement of the Delivery Period between Buyer and the Trustee, as supplemented and amended from time to time in accordance with its terms, and (ii) any trust indenture entered into in connection with the commencement of any Interest Rate Period after the initial Interest Rate Period between Buyer and the Trustee containing substantially the same terms as the indenture described in clause (i) and which is intended to replace the indenture described in clause (i) as of the commencement of such Interest Rate Period.
“Bonds” means the bonds issued pursuant to the Bond Indenture. “Business Day” means any day other than (i) a Saturday or Sunday, (ii) a Federal Reserve Bank Holiday, (iii) any other day on which commercial banks in either New York, New York or the State of California are authorized or required by Law to close, or (iv) any other day excluded pursuant to the Bond Indenture.
“Buyer” has the meaning specified in the preamble.
“Buyer Custodial Agreement” means that certain Custodial Agreement, dated as of the Bond Closing Date, by and among the Swap Counterparty, Buyer, the Trustee and The Bank of New York Mellon Trust Company, N.A., as custodian, as the same may be amended, modified or supplemented from time to time.
“Buyer Default” has the meaning specified in Section 17.2. “Buyer Swap” means (i) the transaction confirmation entered into under the ISDA Master Agreement, dated as of the date hereof, by Buyer and the Swap Counterparty, and (ii) each replacement Buyer Swap entered into pursuant to Section 17.5. “Buyer’s Statement” has the meaning specified in Section 14.1(a). “CAISO” means California Independent System Operator or its successor. “CAISO Tariff” means CAISO’s FERC-approved tariff, as modified, amended or supplemented from time to time
“California Long-Term Contracting Requirements” means the long-term contracting requirement set forth in the Clean Energy and Pollution Reduction Act of 2015 (SB 350), California Public Utilities Code section 399.13(b), and CPUC Decision 17-06-026 and CPUC Decision 18-05-026, as may be modified by subsequent decision of the California Public Utilities Commission or by other Law.
“Call Option Notice” has the meaning specified in Exhibit G. “Claiming Party” has the meaning specified in Section 11.1. “Claims” means all claims or actions, threatened or filed, that directly or indirectly relate to the indemnities provided herein, and the resulting losses, damages, expenses, attorneys’ fees, experts’ fees, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.
Attachment Staff Report Item 6B
4 “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 a Party under this Agreement, 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. “Contract Index Price” means the index price specified on Exhibit A-1 with respect to the Hourly Quantity of Energy (which index prices may be Day-Ahead Market Price or Real-Time Market Price). “Contract Quantity” means (i) with respect to Assigned Energy, the Annual Quantity of Assigned Energy set forth in Exhibit A-2 for each Contract Year of the Delivery Period; and (ii) with respect to Base Energy, the Hourly Quantity of Base Energy set forth in Exhibit A-1 for any Month, as such Exhibits A-1 and A-2 shall be updated from time to time in accordance with Section 6.2.
“Contract Year” means each period of 12 Months from [____] until [____] during the Delivery Period.
“Custodial Agreements” means the Buyer Custodial Agreement and the Seller Custodial Agreement.
“Daily Basis Differential” has the meaning specified in Section 18.11(a)(ii). “Daily Commodity Reference Price” means (A) the Day-Ahead Market Price, (B) the Day-Ahead Average Price or (C) the Real-Time Market Price. “Daily Replacement Index” has the meaning specified in Section 18.11(a)(ii). “Day-Ahead Average Price” means, for any Assigned Energy after the Initial EPS Energy Period, (x) the sum of the Day-Ahead Market Prices for each Pricing Interval in a Month divided by (y) the number of Pricing Intervals in such Month. As used in this definition, “Pricing Interval” means the unit of time for which CAISO establishes a separate price. “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.
“Default Rate” means, as of any date of determination, the lesser of (a) the sum of (i) the rate of interest per annum quoted in The Wall Street Journal (Eastern Edition) under the “Money Rates” section as the “Prime Rate” for such date of determination, plus (ii) one percent per annum, or (b) if a lower maximum rate is imposed by applicable Law, such maximum lawful rate.
“Delivery Hours” means each Hour commencing at 00:00 (PPT) on the first day of the Delivery Period, and each Hour thereafter during the Delivery Period.
Attachment Staff Report Item 6B
5 “Delivery Period” has the meaning specified in Exhibit F. “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 Exhibits A-1 and A-2). “Early Termination Date” means a date designated pursuant to Section 17.4(a) or Section 17.4(b) upon which the Delivery Period will end and Buyer’s and Seller’s respective obligations to receive and deliver Energy under this Agreement will terminate. “Early Termination Payment Date” has the meaning specified in Section 17.4(d). “Energy” means three-phase, 60-cycle alternating current electric energy, expressed in MWhs.
“Energy Delivery Point” has the meaning specified in Exhibit A-1. “Energy Project” has the meaning specified in the Bond Indenture. “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 such Project Participant.
“EPS Energy Period” means the Initial EPS Energy Period and any subsequent EPS Energy Period established by future assignments of power purchase agreements consistent with the Assignment Letter Agreement.
“Execution Date” has the meaning specified in the preamble. “Failed Remarketing” has the meaning specified in the Bond Indenture. “FERC” means the Federal Energy Regulatory Commission and any successor thereto.
“Firm (LD)” means, with respect to the obligation to deliver Energy, that either Party 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. In the absence of Force Majeure, the Party to which performance is owed shall be entitled to receive from the Party which failed to deliver/receive an amount determined pursuant to Article IV.
“Force Majeure” means an event or circumstance which prevents one Party 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 Attachment Staff Report Item 6B
6 loss of Buyer’s markets; (ii) Buyer’s inability economically to use or resell any Energy purchased hereunder; (iii) the loss or failure of Seller’s supply except if such loss or failure results from curtailment by a Transmission Provider; or (iv) Seller’s ability to sell the Energy at a higher price.
Neither 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 Seller or the Project Participant with respect to Buyer) 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 (x) a PPA Supplier fails to deliver any Assigned Energy and claims force majeure with respect to such failure to deliver or (y) a PPA Supplier otherwise is unable to deliver any portion of the Annual Quantity due to an event that would be considered Force Majeure under this Agreement if it affected Seller directly, then such event shall be deemed to constitute Force Majeure in respect of Seller hereunder; and (II) to the extent that an Assignment Agreement is terminated early, such termination shall constitute Force Majeure with respect to Seller 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.
“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.
“Governmental Approval” means any authorization, consent, approval, license, ruling, permit, exemption, variance, order, judgment, decree, or similar action by any Government Agency relating to the execution, delivery or performance of this Agreement as any of the foregoing are in effect as of the Execution Date.
“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 the Delivery Period, the quantity (in MWh) of Base Energy set forth on Exhibit A-1 for the Month in which such Delivery Hour occurs (as such Exhibit A-1 may be updated from time to time in accordance with Section 6.2).
“Initial Assignment Agreement” means that certain Limited Assignment Agreement, dated as of the date hereof, by and among the Project Participant, MSCG, Seller and Buyer.
“Initial EPS Energy Period” means the “Assignment Period” as defined in the Initial Assignment Agreement.
Attachment Staff Report Item 6B
7 “Initial PPA Supplier” means MSCG.
“Interest Rate Period” has the meaning specified in the Bond Indenture, provided that if the Bonds are outstanding in two or more series with separate, concurrent and co-terminus Interest Rate Periods, “Interest Rate Period” shall mean all such Interest Rate Periods collectively. “Interest Rate Swap” has the meaning specified in the Bond Indenture. “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 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, Seller or any successors thereto pursuant to any Assigned Rights and Obligations.
“Mandatory Purchase Date” has the meaning specified in the Bond Indenture. “Minimum Discount” has the meaning specified in the Power Supply Contract. “Month” means a calendar month. The term “Monthly” shall be construed accordingly.
“Monthly Excess Quantity” means, for any Month, the amount, if any, by which the total quantity (in MWh) of Assigned Product delivered hereunder in such Month exceeds the Monthly Projected Quantity for such Month.
“Monthly Projected Quantity” means, with respect to each Month of the Delivery Period, the quantity (in MWh) of Assigned Product for such Month as set forth on Exhibit A-2 (as such Exhibit A-2 may be updated from time to time in accordance with Section 6.2). “Morgan Stanley” means Morgan Stanley, a Delaware corporation. “Morgan Stanley Guarantee” means a guarantee of Morgan Stanley of Seller’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 megawatt-hour.
“Optional Non-Default Termination Event” has the meaning specified in Section
17.3(a).
“Participant Custodial Agreement” means that certain Custodial Agreement, dated as of [____], by and among the Project Participant, Buyer, Seller, MSCG and the Participant Custodian.
“Participant Custodian” means The Bank of New York Mellon Trust Company, N.A., a national banking association.
Attachment Staff Report Item 6B
8 “Party” has the meaning specified in the recitals.
“PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1 to be delivered to MSCG, Seller 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. “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” has the meaning specified in the Bond Indenture. “PPA Supplier” means the Initial PPA Supplier and any subsequent supplier who enters into an Assignment Agreement consistent with the Assignment Letter Agreement. “PPT” means Pacific Prevailing Time.
“Prepayment” means the amount specified in Exhibit F.
“Prepayment Outside Date” means the date specified in Exhibit F. “Project Participant” means East Bay Community Energy Authority, a joint powers authority organized pursuant to the provisions of Title 1, Division 7, Chapter 5, Article 1 (Section 6500 et seq.) of the California Government Code.
“Provisional Payment” has the meaning specified in the Exhibit C. “PSC Remarketing Election” means, with respect to the Power Supply Contract, that the Project Participant delivered a Remarketing Election Notice (as defined thereunder) for any Reset Period.
“Put Option Notice” has the meaning specified in Exhibit G. “Re-Pricing Agreement” means the Re-Pricing Agreement, dated as of the Bond Closing Date, by and between Buyer and Seller.
“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.
“Remarketing Non-Default Termination Event” has the meaning specified in Exhibit C.
“Remarketing Notice” has the meaning specified in Exhibit C.
Attachment Staff Report Item 6B
9 “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. “Repurchase Offer” has the meaning specified in Exhibit G. “Reset Period” means each “Reset Period” under the Re-Pricing Agreement. “Schedule”, “Scheduled” or “Scheduling” means the actions of Seller, Buyer and/or their designated representatives, including each Party’s 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. “Seller” has the meaning specified in the preamble.
“Seller Custodial Agreement” means that certain Custodial Agreement, dated as of the Bond Closing Date, by and among the Swap Counterparty, Seller, the Trustee and The Bank of New York Mellon Trust Company, N.A., as custodian, as the same may be amended, modified or supplemented from time to time.
“Seller Default” has the meaning specified in Section 17.1. “Seller Specified Termination” has the meaning specified in Section 17.5. “Seller Swap” means (i) the transaction confirmation entered into under the ISDA Master Agreement, dated as of the date hereof, by Seller and the Swap Counterparty, and (ii) each replacement Seller Swap entered into pursuant to Section 17.5. “Specified Discount” means the amount specified in Exhibit F. “Specified Fixed Price” means the amount specified in Exhibit F. “Specified Investment Agreement” means a guaranteed investment contract between the Trustee and a provider concerning the investment of funds in the Debt Service Account (as defined in the Bond Indenture).
“Swap Counterparty” means [____], a [____], and any other Person that becomes counterparty to Buyer under a Buyer Swap or to Seller under a Seller Swap, in each case pursuant to Section 17.5.
“Swap Replacement Period” has the meaning specified in Section 17.5(a). “Terminating Party” means any Party that has the right to terminate this Agreement pursuant to Article XVII.
“Termination Payment” means, with respect to any Early Termination Payment Date, the amount specified on Exhibit D 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 Buyer.
Attachment Staff Report Item 6B
10 “Termination Payment Adjustment Amount” means, with respect to any Early Termination Payment Date, the amount specified on Exhibit D-1 for the calendar month in which such Early Termination Payment Date occurs. For the avoidance of doubt, the Termination Payment Adjustment Amount for the period commencing on the Execution Date is zero (0). “Termination Payment Adjustment Schedule” means the schedule of Termination Payment Adjustment Amounts set forth in Exhibit D-1, as such exhibit may be populated and amended from time to time in accordance with Section 17.8. “Transaction Documents” has the meaning specified in Article XIII. “Transmission Provider(s)” means any entity or entities transmitting or transporting Energy on behalf of Seller or Buyer to or from an Energy Delivery Point. “Trustee” means The Bank of New York Mellon Trust Company, N.A., and its successors as Trustee under the Bond Indenture.
“WREGIS” means the Western Renewable Energy Generation Information System or its successor.
Section 1.2 Definitions; Interpretation. References to “Articles,” “Sections,” “Schedules” and “Exhibits” shall be to Articles, Sections, Schedules and Exhibits, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or mattersthat fall within the scope of such general statement, term or matter. Any reference herein to any agreement or document includes all amendments, supplements or restatements to and of such agreement or document as may occur from time to time, and any reference to a party to any such agreement includes all successors and assigns of such party thereunder permitted by the terms hereof and thereof.
ARTICLE II.
EXECUTION DATE AND DELIVERY PERIOD
Section 2.1 Execution Date; Delivery Period. This Agreement shall become effective upon the Execution Date and, unless this Agreement is terminated early pursuant to Section 2.2, all of Seller’s and Buyer’s obligations under this Agreement shall be deemed to have been incurred upon the Execution Date. Unless this Agreement is terminated pursuant to Section
2.2, then, upon receipt of the Prepayment, the delivery of Energy under this Agreement shall commence and continue for the Delivery Period, unless an Early Termination Date occurs.
Section 2.2 Termination by Seller Prior to Prepayment. Seller shall have no obligation to perform under this Agreement unless and until it has received the Prepayment from Attachment Staff Report Item 6B
11 Buyer pursuant to Section 3.2. In the event Seller has not received the Prepayment prior to noon local time in New York, New York on the Prepayment Outside Date, Seller shall have the right, until such Prepayment has been paid, to terminate this Agreement without any further obligation or liability of either Party; provided that, for the avoidance of doubt, in the event Seller so terminates, such termination shall be effective upon the Prepayment Outside Date regardless of whether Buyer tenders the Prepayment after Seller’s notice of termination but prior to the Prepayment Outside Date. For the avoidance of doubt, no Termination Payment shall be payable by Seller under any circumstances if this Agreement terminates pursuant to this Section 2.2.
ARTICLE III.
SALE AND PURCHASE
Section 3.1 Sale and Purchase of Energy.
(a) Seller agrees to sell and deliver or cause to be delivered to Buyer, and Buyer agrees to take or cause to be taken from Seller, in each case, on a Firm (LD) basis, the Contract Quantity pursuant to the terms and conditions set forth in this Agreement. Energy delivered to Buyer under this Agreement shall be re-delivered to the Project Participant on a floating price basis throughout the Delivery Period. The Parties acknowledge and agree that Seller’s delivery obligation for (i) Assigned Products will be measured on an annual basis and (ii) Base Energy will be measured on an Hourly basis, as reflected in the definition of Contract Quantity and further set forth in the terms of this Agreement.
(b) In recognition that Seller will have increased floating price payment obligations to the Swap Counterparty under the Seller Swap with respect to negatively priced Energy and the Swap Counterparty will have increased floating price payment obligations to Buyer under the Buyer Swap with respect to negatively priced Energy, the Parties acknowledge and agree that Seller shall have no payment obligations to Buyer with respect to negatively priced Energy.
Furthermore, with respect to any negatively priced Energy remarketed pursuant to this Agreement, Seller’s payment obligations under Exhibit C shall be reduced to the extent that such Energy is negatively priced.
Section 3.2 Prepayment. Prior to the commencement of the Delivery Period, Buyer shall pay Seller for all Energy to be delivered during the Delivery Period in an amount equal to the Prepayment, and Seller shall accept the Prepayment as payment in full for all Energy to be delivered hereunder. Buyer shall pay the Prepayment in a single lump sum payment by wire transfer of immediately available funds to an account designated by Seller. In no event shall Buyer be entitled to any rebate or refund of the Prepayment, but nothing in this Section 3.2 shall limit Buyer’s rights under (i) Article IV for Seller’s failure to deliver Energy (whether or not excused), (ii) Article XVII upon early termination of this Agreement or (iii) Exhibit C with respect to remarketing of Energy in accordance therewith. In no event shall Buyer be required to pay the Prepayment unless and until the Bonds are issued in exchange for a purchase price sufficient to pay costs of issuance, to fund required reserves under the Bond Indenture (or purchase surety bonds or enter into any similar arrangements in lieu of funding such reserves), and to pay the Prepayment.
Section 3.3 Other Amounts Payable with Respect to Assigned Products.
Attachment Staff Report Item 6B
12 (a) With respect to Monthly Excess Quantities and Assigned Paygo Quantities delivered hereunder, Buyer shall pay Seller an amount equal to the quantity of such Monthly Excess Quantities and Assigned Paygo Quantities, as applicable, multiplied by the price specified for Assigned Product under the applicable Assignment Agreement; provided that the Parties acknowledge and agree that the portion of any Monthly Gross Payment (as defined in the Participant Custodial Agreement) paid by the Project Participant pursuant to the Participant Custodial Agreement and attributable to any such Monthly Excess Quantities and Assigned Paygo Quantities, as applicable, shall be deemed to satisfy Buyer’s payment obligation hereunder with respect thereto. To the extent the Project Participant fails to pay any amounts when due with respect to Monthly Excess Quantities or Assigned Paygo Quantities, Buyer shall promptly transfer the resulting Excess Receivables (as defined in Exhibit G) to Seller, and the transfer of such Excess Receivables shall satisfy Buyer’s payment obligation with respect thereto. (b) After the Annual Quantity has been delivered for any Contract Year, Seller shall pay Buyer (i) the Day-Ahead Market Price with respect to any remaining Monthly Projected Quantities for any such Contract Year during the Initial EPS Energy Period and (ii) the Day-Ahead Average Price with respect to any remaining Monthly Projected Quantities for any such Contract Year during any other EPS Energy Period.
Section 3.4 No Obligation to Take Base Energy. Notwithstanding anything to the contrary in this Agreement, Buyer shall not be required to purchase and receive any Base Energy hereunder, and Seller shall remarket any portion of the Contract Quantity that is Base Energy pursuant to the provisions of Exhibit C.
Section 3.5 Reduction of Contract Quantity. The Parties recognize and agree that the Contract Quantity may be reduced in a Reset Period pursuant to the re-pricing methodology described in the Re-Pricing Agreement if necessary to achieve a successful remarketing of the Bonds. The Parties agree further that if, pursuant to the Re-Pricing Agreement, Buyer and the Calculation Agent (as defined in the Bond Indenture) determine in connection with the establishment of any new Reset Period that: (i) such Reset Period will be the final Reset Period and (ii) such Reset Period will end prior to the end of the original Delivery Period, then (A) the Delivery Period will be deemed to be modified so that it ends at the end of such Reset Period, and (B) the Contract Quantity for the last Month in such Reset Period may be reduced as provided in the Re-Pricing Agreement.
ARTICLE IV.
FAILURE TO DELIVER OR TAKE ENERGY
Section 4.1 Assigned Product. Notwithstanding anything herein to the contrary, neither Seller nor Buyer shall have any liability or other obligation to one another under this Agreement for any failure to Schedule, take, or deliver Assigned Product other than as set forth in Section 5(a) of Exhibit C for any failure to Schedule, take or deliver.
Section 4.2 Failure to Deliver or Take Due to Force Majeure. If with respect to all or any portion of the Contract Quantity of Base Energy:
(a) Buyer fails to take or Seller fails to deliver all or any portion of the Contract Quantity at any Delivery Point pursuant to the terms of this Agreement; and Attachment Staff Report Item 6B
13 (b) such failure is due to Force Majeure claimed by either Party, then Seller shall pay to Buyer the result determined by the following formula with respect to each such Delivery Point:
P = Q x IP
Where:
P = The amount payable by Seller under this Section 4.2; Q = The quantity of Energy described in the lead-in to this Section 4.2; and
IP = (i) With respect to Base Energy, the Contract Index Price applicable to such Delivery Hour and Energy Delivery Point for Base Energy; and (ii) with respect to Assigned Energy, (A) the Day-Ahead Market Price during the Initial EPS Energy Period, and (B) the Day-Ahead Average Price with respect to any other EPS Energy Period.
The Parties acknowledge and agree that any failure to deliver the Annual Quantity of Assigned Energy, whether or not due to Force Majeure, is subject to the terms of Section 5(a) of Exhibit C.
ARTICLE V.
TRANSMISSION AND DELIVERY; COMMUNICATIONS
Section 5.1 Delivery of Energy.
(a) Assigned Product. All Assigned Energy delivered under this Agreement shall be Scheduled at the applicable Assigned Delivery Point and in accordance with the terms of the applicable Assignment Agreement. All other Assigned Product shall be delivered consistent with the terms of the applicable Assignment Agreement. Except as set forth in the two foregoing sentences, Buyer and Seller shall have no liability or obligations under this Article V with respect to Assigned Product.
(b) Updates to Exhibits. Buyer and Seller may, upon mutual agreement, update Exhibit A-1 to modify the Delivery Points thereunder, provided that the Parties shall promptly notify any Swap Counterparty of any such updates and furthermore shall update the corresponding exhibits to any Buyer Swap and any Seller Swap in accordance with the terms thereof.
Furthermore, following the Initial EPS Energy Period and thereafter in connection with the establishment, expiration or termination of any subsequent EPS Energy Period, the Parties shall update (i) the exhibits hereto in accordance with Section 6.2 and (ii) the exhibits to any Buyer Swap and any Seller Swap in accordance with the terms thereof. For the avoidance doubt, such updates will reflect that deliveries will be made to (A) the Energy Delivery Point at the Day-Ahead Market Price for any Base Energy and (B) an Assigned Delivery Point at the Day-Ahead Average Price for any Assigned Energy.
Section 5.2 Scheduling. Scheduling of Assigned Energy shall be in accordance with the applicable Assignment Schedule.
Attachment Staff Report Item 6B
14 Section 5.3 Title and Risk of Loss. The transfer of title and risk of loss for all Assigned Product other than Assigned Energy shall be in accordance with the applicable Assignment Agreement; provided that all Assignment Agreements shall provide for the transfer of Renewable Energy Credits in accordance with WREGIS.
Section 5.4 PCC1 Product and Long-Term PCC1 Product. To the extent that any Assigned Product is PCC1 Product or Long-Term PCC1 Product, the following provisions apply:
(a) Eligibility. Seller, and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement that: (i) the Project qualifies and is certified by the CEC as an Eligible Renewable Energy Resource (“ERR”) as such term is defined in Public Utilities Code Section 399.12 or Section 399.16; and (ii) the Project’s output delivered to Buyer qualifies under the requirements of the California Renewables Portfolio Standard. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law. [STC 6, Non-Modifiable. (Source: D.07-11-025, Attachment A.) D.08-04-009]. As used above, any capitalized terms not otherwise defined herein shall have the meaning specified in the Assigned Agreement. (b) Transfer of Renewable Energy Credits. Seller and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement the renewable energy credits transferred to Buyer conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law. [STC REC-1, Non-modifiable. D.11-01- 025]. As used above, any capitalized terms not otherwise defined herein shall have the meaning specified in the Assigned Agreement.
(c) Tracking of RECs in WREGIS. Seller warrants that all necessary steps to allow the Renewable Energy Credits transferred to Buyer to be tracked in the Western Renewable Energy Generation Information System will be taken prior to the first delivery under the contract. [STC REC-2, Non-modifiable. D.11-01-025]. As used above, any capitalized terms not otherwise defined herein shall have the meaning specified in the Assigned Agreement. (d) Governing Law. This Agreement and the rights and duties of the Parties hereunder shall be governed by and construed, enforced and performed in accordance with the laws of the state of California, without regard to principles of conflicts of law. To the extent enforceable at such time, each Party waives its respective right to any jury trial with respect to any litigation arising under or in connection with this Agreement. [STC 17, Non-Modifiable. (Source:
D.07-11-025, Attachment A) D.08-04-009]
(e) Seller Representations and Warranties.
Seller represents and warrants:
Attachment Staff Report Item 6B
15 (i) Seller has the right to sell the Assigned Product from the Applicable Project;
(ii) Seller has not sold the Assigned Product or any REC or other attributes of the Assigned Product to be transferred to Buyer to any other person or entity;
(iii) the Energy component of the Assigned Product produced by the Applicable Project and purchased by Seller for resale to Buyer hereunder is not being sold by Seller back to the Applicable Project or PPA Supplier;
(iv) Assigned Energy and Assigned RECs to be purchased and sold pursuant to this Agreement are not committed to another party; (v) The Assigned Product is free and clear of all liens or other encumbrances;
(vi) Seller will deliver to Buyer all Assigned Energy and associated RECs generated by the Applicable Project for Long-Term PCC1 Product in compliance with the California Long-Term Contracting Requirements, if applicable
(vii) The Assigned Product supplied to Buyer under this Agreement that is Long-Term PCC1 Product will be sourced solely from Applicable Projects that have an Assignment Period of ten years or more in length, or otherwise in compliance with the California Long Term Contracting Requirements; and
(viii) Seller will cooperate and work with Buyer, the CEC, and/or the CPUC to provide any documentation required by the CPUC or CEC to support the Product’s classification as a Portfolio Content Category 1 Product as set forth in California Public Utilities Code Section 399.16(b)(1) or, if applicable, or compliance with the California Long-Term Contracting Requirements.
Seller further represents and warrants to Buyer that, to the extent that the Product sold by Seller is a resale of part or all of a contract between Seller and one or more third parties, Seller represents, warrants and covenants that the resale complies with the following conditions in (i) through (iv) below during the Assignment Period and throughout the generation period:
(i) The original upstream third-party contract(s) meets the criteria of California Public Utilities Code Section 399.16(b)(1);
(ii) This Agreement transfers only electricity and RECs that have not yet been generated prior to the Assignment Period;
(iii) The electricity transferred by this Agreement is transferred to Buyer in real time; and
(iv) If the Applicable Project has an agreement to dynamically transfer electricity to a California balancing authority, the transactions implemented under this Agreement are not contrary to any condition Attachment Staff Report Item 6B
16 imposed by a balancing authority participating in the dynamic transfer arrangement.
(f) Subsequent Changes in Law. In the event that the qualifications or requirements of the RPS program, PCC1 Product or the California Long-Term Contracting Requirements change, Seller shall take commercially reasonable actions to meet the amended qualifications or requirements of the RPS Law, PCC1 Product or the California Long-Term Contracting Requirements but will not be required to incur any unreimbursed costs to comply with the RPS Law, PCC1 or the California Long- Term Contracting Requirements, collectively. (g) Limitations. Notwithstanding anything to the contrary in this Agreement, the Parties acknowledge and agree as follows:
(i) Seller has relied exclusively upon the representations and warranties of each respective seller set forth in the Assigned Agreements in making the representations and warranties set forth in this Section
5.4 and has not performed any independent investigation with respect thereto;
(ii) Seller agrees that it will terminate or cause MSCG to terminate the applicable Assignment Period in the event that any representation or warranty in this Section 5.4 proves to be incorrect in any respect; (iii) Buyer agrees that its sole recourse for any breach of the provisions of this Section 5.4 shall be the termination of the applicable Assignment Period and Buyer shall have no other recourse against Seller or remedies under this Agreement; and
(iv) Section 5.4(d) shall only apply to the provisions of this Section 5.4 and all other provisions of this Agreement shall remain subject to and interpreted in accordance with Section 18.4.
Section 5.5 Deliveries within CAISO or Another Balancing Authority. The Parties acknowledge that Energy delivered by Seller at a Delivery Point within CAISO or another Balancing Authority will be delivered in accordance with the CAISO Tariff and rules of the Balancing Authority as applicable. Scheduling such Energy in accordance with the requirements of the applicable Balancing Authority shall constitute delivery of such Energy to Buyer, provided that any Assigned Products associated with the Energy are also delivered to Buyer hereunder.
Section 5.6 Assigned Products. Notwithstanding anything to the contrary herein, the Parties shall have no liability under this Article V with respect to any Assigned Products.
ARTICLE VI.
PARTIAL ASSIGNMENTS OF PPAS
Section 6.1 Future PPA Assignments. Subsequent to the Initial EPS Energy Period, the Project Participant, Seller, Buyer and MSCG shall cooperate to obtain EPS Compliant Energy for delivery hereunder in accordance with the Assignment Letter Agreement.
Attachment Staff Report Item 6B
17 Section 6.2 Updates to Exhibits A-1 and A-2.
(a) To the extent that an EPS Energy Period terminates or expires and Assigned Energy is not available for delivery immediately following (i) the end of the period for which Force Majeure is deemed to occur in the event of an early termination or (ii) the expiration of an EPS Energy Period, the Parties shall update (i) Exhibit A-1 to reflect an increase in the Hourly Quantities of Base Energy and (ii) Exhibit A-2 to reflect a decrease in the Monthly Quantities of Assigned Energy thereunder, in each case, in an amount equal to the Assigned Energy associated with the EPS Energy Period that terminated or expired.
(b) In connection with the execution of any subsequent Assignment Agreement, the Parties shall update Exhibits A-1 and A-2 to reflect (i) appropriate decreases in the Hourly Quantities of Base Energy and increases in the Monthly Quantities of Assigned Energy and (ii) any other changes in connection therewith.
ARTICLE VII.
ENERGY REMARKETING
If (a) the Project Participant is in default under the Power Supply Contract or does not require or is unable to receive all or any portion of the Energy purchased by Buyer under this Agreement as a result of (i) the Project Participant’s decreased Energy requirements, (ii) decreased demand by the Project Participant’s retail customers and its request that such Energy be remarketed or (iii) EPS Compliant Energy not being available for delivery hereunder; or (b) a quantity of Assigned Energy less than the Annual Quantity is delivered hereunder in any Contract Year for any reason, then Buyer shall request (and pursuant to Exhibit C may be deemed to request) remarketing services from Seller pursuant to the provisions of Exhibit C.
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties. As a material inducement to entering into this Agreement, each Party, with respect to itself, hereby represents and warrants to the other Party as of the Execution Date as follows:
(a) it is duly organized and validly existing under the Laws of the state in which it is organized;
(b) it has all requisite power and authority to conduct its business, to own its properties and to execute, deliver and perform its obligations under this Agreement; (c) there is no litigation, action, suit, proceeding or investigation pending or, to the best of such Party’s knowledge, threatened, before or by any Government Agency, which could reasonably be expected to materially and adversely affect the performance by such Party of its obligations under this Agreement or that questions the validity, binding effect or enforceability hereof, any action taken or to be taken by such Party pursuant hereto, or any of the transactions contemplated hereby;
(d) the execution, delivery and performance of this Agreement by such Party has been duly authorized by all necessary action on the part of such Party and does not require any Attachment Staff Report Item 6B
18 approval or consent of any security holder of such Party or any holder (or any trustee for any holder) of any indebtedness or other obligation of such Party; (e) this Agreement has been duly executed and delivered on behalf of such Party by an appropriate officer or authorized Person of such Party and constitutes the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights generally and by general principles of equity; (f) the execution, delivery and performance of this Agreement by such Party shall not violate any provision of any Law, decree or other legal or regulatory determination applicable to it;
(g) the execution, delivery and performance by such Party of this Agreement, and the consummation of the transactions contemplated hereby, including the incurrence by such Party of its financial obligations under this Agreement, shall not result in any violation of any term of any material contract or agreement applicable to it, or any of its charter or bylaws or of any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, Law or ordinance applicable to it or any of its properties or to any obligations incurred by it or by which it or any of its properties or obligations are bound or affected, or of any determination or award of any arbitrator applicable to it, and shall not conflict with, or cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets, except with respect to Buyer, the lien of the Bond Indenture;
(h) to the best of the knowledge and belief of such Party, no consent, approval, order or authorization of, or registration, declaration or filing with, or giving of notice to, obtaining of any license or permit from, or taking of any other action with respect to, any Government Agency is required in connection with the valid authorization, execution, delivery and performance by such Party of this Agreement or the consummation of any of the transactions contemplated hereby other than those that have been obtained; and
(i) it enters this Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by both Parties, considers this Agreement a legally enforceable contract.
Section 8.2 Additional Representations and Warranties of Buyer. As a material inducement to entering into this Agreement, Buyer hereby represents and warrants to Seller as of the Execution Date as follows:
(a) Buyer is entering into this Agreement for the purpose of acquiring Energy for sale to its Project Participant pursuant to the Power Supply Contract; (b) any amounts payable by Buyer under this Agreement shall (i) other than the Prepayment, be payable as an item of Operating Expense under (and as defined in) the Bond Indenture, and (ii) not constitute an indebtedness or liability of Buyer within the meaning of any constitutional or statutory limitation or restriction applicable to Buyer; Attachment Staff Report Item 6B
19 (c) Buyer will promptly alert Seller of any notice received by Buyer alleging a breach under the Bond Indenture or of any covenant of Buyer in the agreements entered into by Buyer in connection with the Energy Project;
(d) Buyer shall not (i) enter into any Bond Documents (excluding any contracts applicable to Energy being resold by Buyer or the Project Participant (or a related joint powers authority selling Energy to the Project Participant)), (ii) consent to, waive or agree to or permit any material amendment to or rescission of any such Bond Documents or (iii) consent to, waive or agree to permit any amendment (whether or not material) to or rescission of the Bond Indenture, in each case, without the prior written consent of Seller; (e) Buyer shall collect and forthwith cause to be deposited in the relevant funds pursuant to the Bond Indenture all amounts payable to it pursuant to the Power Supply Contract. Buyer shall enforce the provisions of the Power Supply Contract, as well as any other contract or contracts entered into relating to the Energy Project, and duly perform its covenants and agreements thereunder. Buyer shall not consent or agree to or permit any termination or rescission of or amendment to or otherwise take any action under or in connection with the Power Supply Contract which will impair the ability of Buyer to pay all of its debts and obligations as they come due; provided that this provision shall not prevent Buyer from otherwise taking any action under or in connection with the Power Supply Contract which is expressly permitted pursuant to the provisions thereof. A copy of the Power Supply Contract and any amendment thereto certified by an authorized officer of Buyer shall be provided to Seller. Buyer shall not enter into any new Power Supply Contract following the Bond Closing Date without the prior written consent of Seller;
(f) Buyer shall keep or cause to be kept with respect to the Energy Project proper books of record and account (separate from all other records and accounts) in accordance with generally accepted accounting principles, as such may be modified by the provisions of the Bond Indenture, in which complete and correct entries shall be made of its transactions relating to the Energy Project, the amount of revenues and the application thereof and each fund and account established under the Bond Indenture and relating to its costs and charges under the Power Supply Contract and any other contracts for the sale or purchase of Energy, and which, together with all contracts and all other books and papers of Buyer relating to the Energy Project, shall, subject to the terms thereof, at all times during regular business hours be subject to the inspection of Seller;
(g) Buyer shall from time to time duly pay and discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges, or required payments in lieu thereof, lawfully imposed upon the properties of Buyer or upon the rights, revenues, income, receipts, and other moneys, securities and funds of Buyer when the same shall become due, and all lawful claims for labor and material and supplies, except those taxes, assessments, charges or claims which Buyer shall in good faith contest by proper legal proceedings if Buyer shall in all such cases have set aside on its books reserves deemed adequate by Buyer with respect thereto; (h) Buyer shall at all times maintain its existence and shall do and perform or cause to be done and performed all acts and things required to maintain its existence; and (i) Buyer shall not consolidate or amalgamate with, or merge with or into, or transfer all or substantially all its assets to, or reorganize, reincorporate or reconstitute into or as, Attachment Staff Report Item 6B
20 another entity unless (i) prior to such event, Buyer receives confirmation from Seller that such event does not trigger a termination event under this Agreement or the Buyer Swap and (ii) at the time of such consolidation, amalgamation, merger, transfer, reorganization, reincorporation or reconstitution, the resulting, surviving or transferee entity assumes all the obligations of Buyer under this Agreement and the Buyer Swap.
Section 8.3 Warranty of Title. Seller warrants that it will have the right to convey and will transfer good and merchantable title to all Energy sold under this Agreement and delivered by it to Buyer, free and clear of all liens, encumbrances, and claims. EXCEPT FOR
THE WARRANTIES EXPRESSLY MADE BY SELLER IN THIS ARTICLE VIII, SELLER
HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE IX.
TAXES
Seller shall (i) be responsible for all ad valorem, excise and other taxes assessed with respect to Energy delivered pursuant to this Agreement upstream of the Delivery Points, and (ii) indemnify Buyer and its Affiliates for any such taxes paid by Buyer or its Affiliates. Buyer shall (i) be responsible for all such taxes assessed at or downstream of the Delivery Points, and (ii) indemnify Seller and its Affiliates for any such taxes paid by Seller or its Affiliates.
ARTICLE X.
DISPUTE RESOLUTION
Section 10.1 Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope of this agreement to arbitrate, shall be determined by final, non-appealable binding arbitration in San Francisco, California before three (3) arbitrators. The arbitration shall be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures. Within 15 days after the commencement of arbitration, each of the Parties shall select one person to act as arbitrator, and the two so-selected arbitrators shall select a third arbitrator (the “chairperson”) within 30 days of the commencement of the arbitration. If either Party is unable or fails to select one person to act as arbitrator, such arbitrator shall be appointed by JAMS. If the Party-selected arbitrators are unable or fail to agree upon a chairperson, the chairperson shall be appointed by JAMS. The chairperson shall be a person who has experience in renewable energy-related transactions, and none of the arbitrators shall have been previously employed by either Party or have any direct pecuniary interest in either Party or the subject matter of the arbitration, unless such conflict is expressly acknowledged and waived in writing by each of the Parties. The Parties shall maintain the confidential nature of the arbitration proceeding and any award, including any hearing(s), except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under Attachment Staff Report Item 6B
21 any law or right, with the Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing Party, if any, the costs and attorneys’ fees reasonably incurred in seeking to enforce the application of this Section 10.1 and by the prevailing party in connection with the arbitration. Notwithstanding the foregoing provisions of this Section 10.1, any costs incurred by a Party in seeking judicial enforcement of any written decision of the arbitrators shall be chargeable to and borne exclusively by the Party against whom such court order is obtained.
The award shall be final and binding on the Parties and judgment upon any award may be entered in any court of competent jurisdiction.
Section 10.2 Dispute Resolution.
(a) Judicial Reference. Without limiting the provisions in Section 10.1, if Section 10.1 is ineffective or unenforceable, any dispute between the Parties arising out of or in connection with this Agreement or its performance, breach, or termination (including the existence, validity and interpretation of this Agreement and the applicability of any statute of limitation period) (each, a “Dispute”) shall be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections (a “Reference Proceeding”), which shall constitute the exclusive remedy for the resolution of any Dispute. As a condition precedent to initiating a Reference Proceeding with respect to any Dispute, the Parties shall comply with the provisions of Section 10.2(b).
(b) Notice of Dispute. Prior to initiating the Reference Proceeding, a Party (the “Disputing Party”) shall provide the other Party (the “Responding Party”) with a written notice of each issue in dispute, a proposed means for resolving each such issue, and support for such position (the “Notice of Dispute”). Within 10 days after receiving the Notice of Dispute, the Responding Party shall provide the Disputing Party with a written Notice of each additional issue (if any) with respect to the dispute raised by the Notice of Dispute, a proposed means for resolving every issue in dispute, and support for such position (the “Dispute Response”). Thereafter, the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute.
If the Parties do not resolve the dispute by mutual agreement within 60 days after receipt of the Dispute Response, (the “Negotiation Period”), then either Party may provide to the other Party written notice of intent for judicial reference (the “Impasse Notice”) in accordance with the further provisions of this Section 10.2.
(c) Applicability; Selection of Referees.
(i) The Party that provides the Impasse Notice shall nominate one referee at the same time it provides the Impasse Notice. The other Party shall nominate one referee within 10 days of receiving the Impasse Notice. The two referees (the “Party-Appointed Referees”) shall appoint a third referee (the “Third Referee”, together with the Party-Appointed Referees, the “Referees”). The Party-Appointed Referees shall be competent and experienced in matters involving the electric energy business in the United States, with at least 10 years of electric industry experience as a practicing attorney. The Third Referee shall be an active or retired California state or federal judge. Each of the Party-Appointed Referees and the Third Referee shall be impartial and independent of either Party and of the other referees and not employed by any of the Parties in any prior matter.
Attachment Staff Report Item 6B
22 (ii) If the Party-Appointed Referees are unable to agree on the Third Referee within 45 days from delivery of the Impasse Notice, then the Third Referee shall be appointed pursuant to CCP Section 640(b) in an action filed in the Superior Court of California, County of San Francisco (the “Court”), and with due regard given to the selection criteria above. A request for appointment of a referee may be heard on an ex parte or expedited basis, and the Parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP Section 170.6, each Party shall have one (1) peremptory challenge to the referee selected by the Court. (d) Discovery; Proceedings.
(i) The Parties agree that time is of the essence in conducting the Reference Proceeding. Accordingly, the referees shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within 20 days after the date of selection of the Third Referee, (ii) if practicable, try all issues of law or fact within 180 days after the date of the conference, and (iii) report a statement of decision within 20 days after the matter has been submitted for decision.
(ii) Discovery and other pre-hearing procedures shall be conducted as agreed to by the Parties, or if they cannot agree, as determined by the Third Referee after discussion with the Parties regarding the need for discovery and other pre-hearing procedures.
(iii) Except as expressly set forth herein, the Third Referee shall determine the manner in which the Reference Proceeding is conducted, including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the Reference Proceeding. The Reference Proceeding, including the trial, shall be conducted at a neutral location selected by the Parties, or if not agreed by the Parties, by the Third Referee, in San Francisco, California. (iv) All proceedings and hearings conducted before the referees, except for trial, shall be conducted without a court reporter, except that when any Party so requests, a court reporter will be used at any hearing conducted before the referees, and the referees will be provided a courtesy copy of the transcript. The Party making such a request shall have the obligation to arrange for and pay the court reporter. (e) Decision. The referees shall render a written statement of decision setting forth findings of fact and conclusions of law. The decision shall be entered as a judgment in the court in accordance with the provisions of CCP Sections 644 and 645. The decision shall be appealable to the same extent and in the same manner that such decision would be appealable if rendered by a judge of the Court. The Parties intend this general reference agreement to be specifically enforceable in accordance with the CCP.
(f) Expenses. Each Party shall bear the compensation and expenses of its respective Party-Appointed Referee, own counsel, witnesses, consultants and employees. All other expenses of judicial reference shall be split equally between the Parties.
Attachment Staff Report Item 6B
23 ARTICLE XI.
FORCE MAJEURE
Section 11.1 Applicability of Force Majeure. To the extent either Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under this Agreement and such Party (the “Claiming Party”) gives notice and details of the Force Majeure to the other Party as soon as practicable, then the Claiming Party shall be excused from the performance of its obligations with respect to this Agreement (other than the obligation to make payments then due or becoming due with respect to performance prior to the Force Majeure). The Claiming Party shall mitigate the Force Majeure with all reasonable dispatch. For the duration of the Claiming Party’s non-performance (and only for such period), the non-Claiming Party shall not be required to perform or resume performance of its obligations to the Claiming Party corresponding to the obligations of the Claiming Party excused by Force Majeure.
Section 11.2 Settlement of Labor Disputes. Notwithstanding anything to the contrary herein, the Parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the Party experiencing such disturbance, and the failure of a Party to settle such strikes, lockouts or other industrial disturbances shall not prevent the existence of Force Majeure or of reasonable dispatch to remedy the same.
ARTICLE XII.
GOVERNMENTAL RULES AND REGULATIONS
Section 12.1 Compliance with Laws. This Agreement shall be subject to all present and future Laws of any Government Agency having jurisdiction, and neither Party has knowingly undertaken or will knowingly undertake or knowingly cause to be undertaken any activity that would conflict with such Laws; provided, however, that nothing herein shall be construed to restrict or limit either Party’s right to object to or contest any such Law, or its application to this Agreement or the transactions undertaken hereunder, and neither acquiescence therein or compliance therewith for any period of time shall be construed as a waiver of such right.
Section 12.2 Contests. Excluding all matters involving a contractual dispute between the Parties, no Party shall contest, cause to be contested or in any way actively support the contest of the equity, fairness, reasonableness or lawfulness of any terms or conditions set forth or established pursuant to this Agreement, as those terms or conditions may be at issue before any Government Agency in any proceeding, if the successful result of such contest would be to preclude or excuse the performance of this Agreement by either Party.
Section 12.3 Defense of Agreement. Excluding all matters involving a contractual dispute between the Parties, each Party shall hereafter defend and support this Agreement before any Government Agency in any proceeding, if the substance, validity or enforceability of all or any part of this Agreement is hereafter directly challenged or if any proposed changes in regulatory practices or procedures would have the effect of making this Agreement invalid or unenforceable or would otherwise materially affect the rights or obligations of the Parties under this Agreement.
ARTICLE XIII.
ASSIGNMENT
Attachment Staff Report Item 6B
24 Neither Party shall assign this Agreement or any of its rights or obligations under this Agreement without the prior written consent of the other Party; provided, however, that:
(a) pursuant to the Bond Indenture, Buyer may, without the consent of Seller, transfer, sell, pledge, encumber or assign this Agreement to the Trustee in connection with any financing or other financial arrangements; provided that Buyer shall not assign this Agreement unless, contemporaneously with the effectiveness of such assignment, Buyer also assigns the Buyer Swap (and the Buyer Custodial Agreement) to the same assignee; (b) With the prior written consent of Buyer, not to be unreasonably withheld, Seller may assign this Agreement to an Affiliate of Seller, provided that the Morgan Stanley Guarantee continues to apply to the obligations of such assignee hereunder or the assignee provides to Buyer a parent guarantee and a Rating Confirmation (as defined in the Bond Indenture), which assignment shall constitute a novation; provided that, Seller shall not assign this Agreement unless, contemporaneously with the effectiveness of such assignment, Seller also assigns the Seller Swap (and the Seller Custodial Agreement) to the same assignee; and (c) if either (A) Seller notifies Buyer that the Morgan Stanley Guarantee will be terminated as of the end of any Interest Rate Period; (B) Seller is unable to provide, under the Re-Pricing Agreement, an estimated Available Discount (as defined in the Re-Pricing Agreement) that is equal to or greater than the Minimum Discount under the Power Supply Contract; or (C) the circumstances set forth in Section 5(b)(iii) of the Re-Pricing Agreement regarding replacement of Seller with an Alternative Supplier (as defined in the Re-Pricing Agreement) apply, Seller will reasonably cooperate with Buyer to cause Seller’s (or Seller’s Affiliate’s, if applicable) right, title and interest in this Agreement, the Re-Pricing Agreement, the Seller Swap, the Seller Custodial Agreement, the Interest Rate Swap and any Specified Investment Agreement with a term that extends past the then-current Interest Rate Period to which Seller or any Affiliate is a party and all agreements related to any of the foregoing (the “Transaction Documents”) to be novated to a replacement seller; provided that (x) a Rating Confirmation (as defined in the Bond Indenture) is obtained for any Bonds required to be redeemed on the first Mandatory Purchase Date following the effective date of such novation, (y) the Swap Counterparty shall have provided its prior written consent to such assignment in accordance with the terms of the Seller Swap, and (z) after giving effect to such novation, neither Seller nor Morgan Stanley will have any obligations (contingent or otherwise, including any obligation to make or repeat any representations or warranties other than basic representations on authority and the right to transfer its rights, title and interests under this Agreement without encumbrances) or be required to make any payment under any Transaction Document, the Morgan Stanley Guarantee or otherwise in connection with or following such novation other than any obligations that would have existed or payments that would have been required (or guaranteed) had this Agreement terminated as of the end of the last Reset Period that commenced prior to such novation.
ARTICLE XIV.
PAYMENTS
Section 14.1 Monthly Statements.
(a) No later than the 5th day of each Month during the Delivery Period (excluding the first Month of the Delivery Period) and the first Month following the end of the Attachment Staff Report Item 6B
25 Delivery Period, Buyer shall deliver to Seller a statement (a “Buyer’s Statement”) listing any other amounts due to Buyer in connection with this Agreement with respect to the prior Month(s). (b) No later than the [10th day] of each Month during the Delivery Period (excluding the first Month of the Delivery Period) and the first Month following the end of the Delivery Period (the “Billing Date”), Seller shall deliver a statement (a “Billing Statement”) to Buyer and each of the other Parties to the Participant Custodial Agreement indicating (i) the total amount due to Buyer, if any, under Article IV, Article V, Article VII and Exhibit C with respect to the prior Month(s), (ii) any amounts due to Seller in connection with this Agreement with respect to the prior Month(s), and (iii) the net amount due to Buyer or Seller; provided that invoicing for Monthly Excess Quantities and Assigned Paygo Quantities shall occur under the Participant Custodial Agreement. If a Participant Monthly Statement (as defined in the Participant Custodial Agreement) for an Assigned PPA (as defined in the Participant Custodial Agreement) has not been delivered by the [___] day of the Month following deliveries, Seller shall provisionally prepare or cause to be prepared a Billing Statement for this Agreement that assumes all of the Monthly Projected Quantities were delivered under the applicable Assigned PPA for such Month, and any subsequent resettlements required with respect thereto shall occur under the Participant Custodial Agreement. As set forth in Section 5(a) of Exhibit C, in any Billing Statement that Seller delivers that reflects a Provisional Payment due, Seller shall indicate (x) the total amount of any Provisional Payment due for such Month and (y) the portion of such Provisional Payment that reflects the Net Participant Price that would otherwise be payable with respect thereto. [NOTE: Parties to discuss whether the above invoice timeline is practicable with invoice timing under EBCE’s renewables PPAs – and whether different invoicing mechanics may be needed to accommodate settlement of those PPAs when assigned in the future]. (c) Upon request by either Party, the other Party shall deliver such supporting documentation of the foregoing as such requesting Party may reasonably request.
Section 14.2 Payment.
(a) If the Billing Statement indicates an amount due from Buyer, then Buyer shall remit such amount to Seller by wire transfer (pursuant to Seller’s instructions), in immediately available funds, on or before the later of (i) the 25th day of the Month following the most recent Month to which such Billing Statement relates, or (ii) the 10th day following Buyer’s receipt of Seller’s Billing Statement, or if either such day is not a Business Day, the following Business Day. If the Billing Statement indicates an amount due from Seller, then Seller shall remit such amount to Buyer by wire transfer (pursuant to the Trustee’s instructions for payments due under this Agreement, provided that amounts due from Seller under Section 5(a) of Exhibit C shall be paid to the Provisional Payments Account under and as defined in the Participant Custodial Agreement), in immediately available funds, on or before the later of (i) the 22nd day of the Month following the most recent Month to which such Billing Statement relates, or (ii) the 10th day following Seller’s receipt of Buyer’s Statement, or if either such day is not a Business Day, the preceding Business Day.
(b) If Buyer fails to issue a Buyer’s Statement with respect to any Month, Seller shall not be required to estimate any amounts due to Buyer for such Month, provided that Buyer may include any such amount on subsequent Buyer’s Statements issued within the next sixty (60) days. The sixty (60)-day deadline in this subsection (b) replaces the two (2)-year deadline in Attachment Staff Report Item 6B
26 Section 14.5 with respect to any claim by any non-delivering Party of inaccuracy in any estimated invoice issued or payment made pursuant to this subsection (b).
Section 14.3 Payment of Disputed Amounts. If Seller disputes any amounts included in the Buyer’s Statement, Seller shall (a) (except in the case of manifest error) nonetheless calculate the Billing Statement based on the amounts included in Buyer’s Statement and (b) pay any amount required by the Billing Statement in accordance with Section 14.2 without regard to any right of set-off, counterclaim, recoupment or other defenses to payment that Seller may have; provided, however, that Seller shall have the right, after payment, to dispute any amounts included in a Buyer’s Statement or otherwise used to calculate payments due under this Agreement pursuant to Section 14.5(b). If Buyer disputes any amounts included in the Billing Statement, Buyer may withhold payment to the extent of the disputed amount; provided, however, that interest shall be due at the Default Rate for any withheld amount later found to have been properly due.
Section 14.4 Late Payment. If a Party owing a net payment under Section 14.2 fails to remit the full amount payable when due, interest on the unpaid portion shall accrue from the date due until the date of payment at the Default Rate.
Section 14.5 Audit; Adjustments.
(a) A Party shall have the right, at its own expense, upon reasonable notice to the other Party and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the books, records, and telephone recordings of the other Party to the extent reasonably necessary, but only to such extent, to verify the accuracy of any statement, charge, payment, or computation made under this Agreement. This right to examine, audit, and obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Agreement.
(b) Each Buyer’s Statement and each Billing Statement shall be conclusively presumed final and accurate and all associated claims for under- or overpayments shall be deemed waived unless such Buyer’s Statement or Billing Statement is objected to in writing, with adequate explanation and/or documentation, within two (2) years after the applicable Month of Energy delivery.
(c) All retroactive adjustments shall be paid in full by the Party owing payment within 30 days of notice and substantiation of such inaccuracy. If the Parties are unable to agree upon any retroactive adjustments requested by either Party within the time period specified in Section 14.5(b), then either Party may pursue any remedies available with respect to such adjustments at law or in equity. Retroactive adjustments for payments made based on incorrect Buyer’s Statements or Billing Statements shall bear interest at the Default Rate from the date such payment was made. Buyer shall cause the Project Participant to comply with the provisions of Section 14.5(a) to the extent necessary to allow Seller to verify any amounts due under this Agreement.
Section 14.6 Netting. The Parties shall net all amounts due and owing, including any past due amounts (which, for the avoidance of doubt, shall include any accrued interest), arising under this Agreement such that the Party owing the greater amount shall make a single payment of the net amount to the other Party in accordance with this Article XIV. Notwithstanding the foregoing, Seller shall not be entitled to net (i) any amounts that are in dispute or (ii) any Attachment Staff Report Item 6B
27 payments due to Seller against (A) the Termination Payment if it becomes due, or (B) any payments due from Seller pursuant to Article IV, Article V or Exhibit C.
ARTICLE XV.
RECEIVABLES PURCHASES
In accordance with the provisions of Exhibit G, Buyer shall put and Seller shall purchase certain Put Receivables (as defined in Exhibit G) from Buyer relating to payment defaults by the Specified Project Participant (as defined in Exhibit G).
ARTICLE XVI.
NOTICES
Any notice, demand, or request required or authorized by this Agreement to be given by one Party to another Party shall be in writing and shall either be sent by electronic means, courier, or personally delivered (including overnight delivery service) to each of the notice recipients and addresses specified in Exhibit B for the receiving Party. Any such notice, demand, or request shall be deemed to be given (i) on the date it is delivered by electronic means, or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service). Each Party shall have the right, upon 10 days’ prior written notice to the other Party, to change its list of notice recipients and addresses in Exhibit B. The Parties may mutually agree in writing at any time to deliver notices, demands or requests through alternate or additional methods.
Notwithstanding the foregoing, a Party may at any time notify the other Party that any notice, demand, statement or request to it must be provided by email transmission for a specified period of time or until further notice, and any communications delivered by means other than email transmission during the specified period of time shall be ineffective.
ARTICLE XVII.
DEFAULT; REMEDIES; TERMINATION
Section 17.1 Seller Default. Each of the following events shall constitute a “Seller Default” under this Agreement:
(a) Seller fails to pay when due any amounts owed to Buyer pursuant to this Agreement and such failure continues for two Business Days after receipt by Seller of notice thereof, unless Morgan Stanley has made such payment under the Morgan Stanley Guarantee; (b) Seller: (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency Law or other similar Law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days of the institution or presentation thereof; (v) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, Attachment Staff Report Item 6B
28 amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets; (vii) has a secured party take possession of all or substantially all of its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all of its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days thereafter; (viii) causes or is subject to any event with respect to it which, under the applicable Laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) through (vii); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (c) any representation or warranty made by Seller in this Agreement proves to have been incorrect in any material respect when made.
Section 17.2 Buyer Default. Each of the following events shall constitute a “Buyer Default” under this Agreement:
(a) Buyer fails to pay when due any amounts owed to Seller pursuant to this Agreement and such failure continues for five Business Days after receipt by Buyer of notice thereof;
(b) Buyer (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency Law or other similar Law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained, in each case within 30 days of the institution or presentation thereof; (v) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets; (vii) has a secured party take possession of all or substantially all of its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all of its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (viii) causes or is subject to any event with respect to it which, under the applicable Laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) through (vii); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (c) any representation or warranty made by Buyer in this Agreement proves to have been incorrect in any material respect when made.
Section 17.3 Non-Default Termination Events.
Attachment Staff Report Item 6B
29 (a) Each of the following events shall constitute an “Optional Non-Default Termination Event” under this Agreement:
Termination
Related to:
Optional Non-Default
Termination Event:
Potential
Terminating
Party:
Performance
Prohibited by Law
Any interpretation, enactment or change or
amendment to any Governmental Approval or
Law occurring after the Execution Date that
results or would result in the performance of any
obligation of Seller to deliver Energy or of Buyer
to receive Energy under this Agreement being
prohibited or unlawful.
Each of Buyer or
Seller
Termination of
Interest Rate Swap
by Buyer Where
Seller is the
Defaulting Party
Buyer designates an Early Termination Date (as
defined in the Interest Rate Swap) pursuant to the
terms of such Interest Rate Swap based on an
Event of Default (as defined in such Interest Rate
Swap) where Seller is the Defaulting Party.
Buyer
Termination of
Interest Rate Swap
by Buyer
Buyer designates an Early Termination Date (as
defined in the Interest Rate Swap) pursuant to such
Interest Rate Swap for any reason other than that
specified in the immediately preceding Optional
Non-Default Termination Event.
Buyer
PSC Remarketing
Election
If the Project Participant makes a PSC
Remarketing Elections for any Reset Period.
Seller
Termination of
Power Supply
Contract
If the Power Supply Contract has been terminated
or are otherwise no longer in effect as of the end
of a Reset Period.
Seller
(b) Each of the following events shall constitute an “Automatic Non-Default Termination Event” under this Agreement:
Termination
Related to:
Automatic Non-Default
Termination Event:
Termination of a Buyer
Swap
Both (A) an Early Termination Date (as defined in the Buyer Swap) is designated pursuant to the terms of the Buyer Swap for any reason or occurs automatically pursuant to the terms of the Buyer Swap based on an Event of Default or Termination Event (as each term is defined in the Buyer Swap), and (B) either the Seller Swap or the Buyer Swap is not replaced within the Swap Replacement Period.
Attachment Staff Report Item 6B
30 Termination
Related to:
Automatic Non-Default
Termination Event:
Termination of a Seller
Swap for Seller Defaults
and Termination Events
Both (A) an Early Termination Date (as defined in the Seller Swap) is designated by the Swap Counterparty pursuant to the terms of the Seller Swap or occurs automatically pursuant to the terms of the Seller Swap based on an Event of Default where Seller is the Defaulting Party or a Termination Event where Seller is the sole Affected Party (as each term is defined in the Seller Swap), but excluding any termination as a result of the termination of this Agreement based on (i) a Buyer Default under Section 17.2 or (ii) an Optional Non-Default Termination Event under Section 17.3(a) where Seller is the Terminating Party and (B) except in the case of a Seller Specified Termination (as defined in Section 17.5(a) hereof), either such Seller Swap or the Buyer Swap is not replaced within the Swap Replacement Period.
Termination of a Seller
Swap for any Other
Reason
Both (A) an Early Termination Date is designated pursuant to the terms of the Seller Swap for any reason other than as specified in the immediately preceding Automatic Non-Default Termination Event and (B) either such Seller Swap or the Buyer Swap is not replaced within the Swap Replacement Period.
Termination of Interest
Rate Swap by Seller
Seller designates an Early Termination Date (as defined in the Interest Rate Swap) for any reason under the Interest Rate Swap.
Failed Remarketing A Failed Remarketing has occurred.
Termination of Morgan
Stanley Guarantee
Both (A) Morgan Stanley has delivered a termination notice of the Morgan Stanley Guarantee pursuant to the terms thereof, and (B) no assignment has been effected pursuant to clause (c) of Article XIII prior to the end of the Reset Period during which such termination notice was delivered.
Morgan Stanley
Guarantee Ceases to be
in Full Force and Effect
The Morgan Stanley Guarantee ceases to be in full force and 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.
Remarketing
Non-Default
Termination Event
The occurrence of a Remarketing Non-Default Termination Event if, by the 90th day after such event, neither (i) Buyer and Seller have taken the actions described in Section 18.3(b), nor (ii) Buyer has otherwise received an Opinion of Bond Counsel (as defined in the Bond Indenture) that such event has not affected the tax-exempt status of the Bonds.
Section 17.4 Remedies and Termination.
Attachment Staff Report Item 6B
31 (a) Default and Optional Non-Default Termination. If at any time a Seller Default or a Buyer Default has occurred and is continuing or an Optional Non-Default Termination Event has occurred and is continuing, then the Terminating Party, by notice to the other Party specifying the relevant Seller Default, Buyer Default or Optional Non-Default Termination Event, may designate a day not earlier than the day such notice is deemed given under Article XVI as the Early Termination Date; provided, however, that:
(i) an Early Termination Date shall occur as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence of a Seller Default specified in Section 17.1(b)(iv) or, to the extent analogous thereto, Section 17.1(b)(viii);
(ii) with respect to an Optional Non-Default Termination Event related to the Buyer Swap, the Terminating Party may, at any time after the commencement of the Swap Replacement Period, conditionally designate an Early Termination Date, with such designation being conditioned upon (A) the termination and failure to replace either the Seller Swap or the Buyer Swap and (B) the Early Termination Date occurring no earlier than the end of such Swap Replacement Period; and
(iii) with respect to an Optional Non-Default Termination Event related to the termination of the Power Supply Contract, if Seller exercises its termination right, the resulting Early Termination Date shall occur as of the end of the then-current Reset Period.
(b) Automatic Non-Default Termination. The Early Termination Date shall occur automatically upon the occurrence of any Automatic Non-Default Termination Event; provided, however, in the case of an Automatic Non-Default Termination Event resulting from a termination of the Morgan Stanley Guarantee, the Early Termination Date will occur as of the end of the last day in the then-current Reset Period.
(c) Effect of Early Termination. As of the Early Termination Date, (i) the Delivery Period shall end, (ii) the obligation of Seller to make any further deliveries of Energy to Buyer under this Agreement shall terminate, and (iii) the obligation of Buyer to receive deliveries of Energy from Seller under this Agreement will terminate. (d) Early Termination Payment Date. (i) In the case of a Failed Remarketing, the last Business Day of the then-current Interest Rate Period, and (ii) in each other case, on the last Business Day of the first Month that commences after the Early Termination Date (the “Early Termination Payment Date”), Seller shall pay the Termination Payment to the Trustee pursuant to payment instructions issued by Buyer or, in the absence of such instructions, by wire transfer.
Such amounts shall be paid together with interest thereon (before as well as after judgment) from (and including) the Early Termination Payment Date to (but excluding) the date such amount is paid, at the Default Rate. The Parties acknowledge that it is impractical and difficult to assess actual damages as a result of a termination of this Agreement, and the Parties therefore agree that the payment of the Termination Payment is a fair and reasonable pre-estimate of the actual damages that would be incurred by Buyer as a result of termination of this Agreement for any reason and is not a penalty. The obligation of Seller to pay the Termination Payment on the Early Termination Payment Date is unconditional, irrespective of the validity or enforceability of this Agreement or any other agreement contemplated hereby, any waiver or consent by Buyer or any Attachment Staff Report Item 6B
32 other circumstances that might otherwise constitute a legal or equitable discharge of Seller or a defense of Seller to pay the Termination Payment. Seller waives all rights to set-off, counterclaim, recoupment and any other defenses that might otherwise be available to Seller with regard to Seller’s obligation to pay the Termination Payment on the Early Termination Payment Date. (e) Exclusive Termination Rights. Neither this Agreement nor the Delivery Period may be terminated for any reason except as specified in this Article XVII and in Section
2.2. Except with respect to amounts due for periods prior to termination, the payment of the Termination Payment shall be the sole and exclusive remedy for each Party upon the termination of the Delivery Period and this Agreement for any reason, including as a result of rejection of this Agreement by either Party in any bankruptcy proceedings.
Section 17.5 Replacement of Swaps.
(a) In the event that (i) any Buyer Swap or any Seller Swap terminates, (ii) any notice of termination is delivered by any party to a Buyer Swap or a Seller Swap, or (iii) any Buyer Swap or Seller Swap is otherwise reasonably anticipated to become subject to immediate termination, in each case for any reason other than a Seller Specified Termination or insolvency of either Buyer or Seller, then each Party whose swap is affected shall notify the other Party and the Parties shall cooperate in good faith for a period of 120 days (commencing no later than the date on which any notice of termination (or anticipated termination) is delivered by any party to a Buyer Swap or a Seller Swap) (such period, the “Swap Replacement Period”) to (x) cause the same Swap Counterparty whose Buyer Swap or Seller Swap has been terminated (or is anticipated to terminate) to terminate its unaffected Seller Swap or Buyer Swap, as applicable, and (y) locate replacement agreements with an alternate Swap Counterparty, to be mutually agreed upon by Buyer and Seller, to replace both the affected swap and the unaffected swap; provided, however, that neither Party shall be required to breach any obligation under the unaffected swap or to expend any amounts to cause the unaffected swap to be replaced or to cause an alternate counterparty to replace both swaps. Neither Party shall terminate this Agreement as a result of the termination of any Seller Swap or any Buyer Swap without first complying with this Section 17.5.
As used in this Section 17.5, the term “Seller Specified Termination” means a termination or potential termination of the Seller Swap due to (i) an Event of Default (as such term is defined in the Seller Swap) with respect to Seller pursuant to Section 5(a)(i) or 5(a)(iii) of the Seller Swap, in either case other than where (A) any such failure to pay or transfer was caused solely by error or omission of an administrative or operational nature; (B) funds were available to enable Seller to make such payment or transfer when due; and (C) such payment or transfer is made within two (2) Business Days of Seller’s receipt of written notice of its failure to pay or transfer, or (ii) an Event of Default (as such term is defined in the Seller Swap) with respect to Seller under Section 5(a)(viii) of the Seller Swap.
(b) In the event of a termination (or anticipated termination) of the Seller Swap, if Seller (i) presents to Buyer a proposed alternate Swap Counterparty, (ii) requests in writing that Buyer enter into a replacement swap with such alternate Swap Counterparty, and (iii) agrees to pay Buyer’s reasonable expenses in connection therewith, Buyer shall (y) enter into a master agreement with such alternate Swap Counterparty and (z) either (A) terminate the Buyer Swap when permitted thereby and enter into a replacement transaction under such new master agreement to the same effect as the terminated Buyer Swap or (B) cause such Buyer Swap to be novated to such replacement Swap Counterparty, provided that, in each instance, such replacement Swap Attachment Staff Report Item 6B
33 Counterparty, replacement master agreement and replacement transaction meet the requirements specified for such under the Bond Indenture. Buyer shall not replace a Buyer Swap without Seller’s consent.
(c) Each of Buyer and Seller agree that it will not enter into a replacement Buyer Swap or Seller Swap, as applicable, unless the other Party is replacing its Buyer Swap or Seller Swap, as applicable, with the same replacement Swap Counterparty. (d) In the event that the Seller Swap terminates or is no longer in effect and the MSES Payments Period (as defined in the Seller Custodial Agreement) is in effect, then, during such Prepaid Seller Payments Period, Seller shall comply with the terms of the Seller Custodial Agreement and make all payments as and when required under Section 3(e) of the Seller Custodial Agreement. In the event that the Buyer Swap terminates or is no longer in effect and the Issuer Payments Period (as defined in the Buyer Custodial Agreement) is in effect, then, during such Issuer Payments Period, Buyer shall comply with the terms of the Buyer Custodial Agreement and make all payments as and when required under Section 3(e) of the Buyer Custodial Agreement.
The Parties agree that during any MSES Payments Period (as defined in the Seller Custodial Agreement) and during any Issuer Payments Period (as defined in the Buyer Custodial Agreement), Seller shall act as calculation agent under the Seller Custodial Agreement or the Buyer Custodial Agreement, as applicable. Seller agrees not to permit any amendment or other modification to the Seller Custodial Agreement that could adversely affect the right of Buyer to receive payments pursuant to Section 3(e) of the Seller Custodial Agreement. Buyer agrees not to permit any amendment or other modification to the Buyer Custodial Agreement that could adversely affect the right of Seller to receive payments pursuant to Section 3(e) of the Buyer Custodial Agreement.
Section 17.6 Limitation on Damages. THE PARTIES CONFIRM THAT THE
EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY
PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS
HEREIN PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. NEITHER PARTY SHALL BE
LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT
DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION, OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN
IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD
TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING WITHOUT LIMITATION
THE NEGLIGENCE OF EITHER PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES
REQUIRED TO BE PAID UNDER THIS AGREEMENT ARE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT,
AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. IN DETERMINING THE APPROPRIATE MEASURE OF
DAMAGES THAT WOULD MAKE THE PARTIES WHOLE, THE PARTIES HAVE
THOROUGHLY CONSIDERED, INTER ALIA, THE UNCERTAINTY OF FLUCTUATIONS Attachment Staff Report Item 6B
34 IN COMMODITY PRICES, THE ABILITY AND INTENTION OF THE PARTIES TO HEDGE
SUCH FLUCTUATIONS, THE BARGAINED-FOR ALLOCATION OF RISK, THE
KNOWLEDGE, SOPHISTICATION AND EQUAL BARGAINING POWER OF THE
PARTIES, THE ARMS-LENGTH NATURE OF THE NEGOTIATIONS, THE SPECIAL
CIRCUMSTANCES OF THIS TRANSACTION, THE ACCOUNTING AND TAX
TREATMENT OF THE TRANSACTION BY THE PARTIES, AND THE ENTERING INTO OF
OTHER TRANSACTIONS IN RELIANCE ON THE ENFORCEABILITY OF THE LIQUIDATED DAMAGES PROVISIONS CONTAINED HEREIN. THE PARTIES ACKNOWLEDGE THAT THIS IS A SALE OF GOODS SUBJECT TO ARTICLE 2 OF THE NEW YORK UNIFORM COMMERCIAL CODE, INCLUDING WITHOUT LIMITATION, §§ 2-706(6), 2-711, 2-718, AND 2-719.
Section 17.7 Option to Purchase Bonds. In connection with any new Interest Rate Period established under the Bond Indenture after the initial Interest Rate Period, Seller shall have the option to purchase Bonds to be remarketed on the relevant Mandatory Purchase Date by delivering notice to Buyer and the Trustee no later than the last Business Day of the Reset Period that Seller will purchase a quantity of Bonds necessary to avoid the occurrence of a Failed Remarketing. In the event that Seller exercises such option, (x) Seller will be obligated to pay the purchase price of such Bonds in immediately available funds on the Mandatory Purchase Date, and (y) to the extent a PSC Remarketing Election is in effect with respect to the Reset Period commencing immediately prior to such Interest Rate Period, then Seller shall be required to remarket the Contract Quantities associated with the PSC Remarketing Election, provided that:
(a) Seller shall be entitled to purchase such Energy for its own account, (b) for all such Energy, regardless of how it is remarketed, Seller will pay Buyer the amount determined pursuant to Section 5(b)(v) of Exhibit C, and (c) to the extent that it is determined that interest on the Bonds purchased by Seller is not excluded from gross income for federal income tax purposes, Section 7 through Section 9 of Exhibit C shall not apply to any such remarketing.
Section 17.8 Termination Payment Adjustment Schedule. Seller shall prepare revisions to the then-current Exhibit D-1 (Termination Payment Adjustment Schedule) in connection with each successive Interest Rate Period pursuant to the terms of the Re-Pricing Agreement by delivering a revised Exhibit D-1 to Buyer no later than the last day of the applicable Reset Period, in which case such amendments will be effective as of the first day of the next Interest Rate Period.
ARTICLE XVIII.
MISCELLANEOUS
Section 18.1 Indemnification Procedure. With respect to each indemnification included in this Agreement, the indemnity is given to the fullest extent permitted by applicable Law and the following provisions shall be applicable. The indemnified Party shall promptly notify the indemnifying Party in writing of any Claim and the indemnifying Party shall have the right to assume its investigation and defense, including employment of counsel, and shall be obligated to pay related court costs, attorneys’ fees and experts’ fees and to post any appeals bonds; provided, however, that the indemnified Party shall have the right to employ at its expense separate counsel Attachment Staff Report Item 6B
35 and participate in the defense of any Claim. The indemnifying Party shall not be liable for any settlement of a Claim without its express written consent thereto. In order to prevent double recovery, the indemnified Party shall reimburse the indemnifying Party for payments or costs incurred in respect of an indemnity with the proceeds of any judgment, insurance, bond, surety or other recovery made by the indemnified Party with respect to a covered event.
Section 18.2 Deliveries. No later than delivery of the Prepayment, Buyer will deliver to Seller a copy of the Bond Indenture. The following documents shall be delivered by the Parties contemporaneously with this Agreement (unless otherwise specified):
(a) by Seller no later than the date of issuance of the Bonds, a Morgan Stanley Guarantee to Buyer guaranteeing Seller’s payment obligations under this Agreement to Buyer; (b) by Buyer, a certificate of the Secretary or Assistant Secretary of Buyer setting forth (i) the resolutions of its governing body with respect to the authorization of Buyer to execute and deliver this Agreement, the Bond Indenture and the Power Supply Contract, (ii) the appropriate individuals who are authorized to sign such agreements, (iii) specimen signatures of such authorized individuals, and (iv) the organization documents of Buyer, certified as being true and complete;
(c) by Seller, evidence reasonably satisfactory to Buyer of (i) Seller’s authority to execute and deliver this Agreement and (ii) the appropriate individuals who are authorized to sign this Agreement; and
(d) at Seller’s request at any time, Buyer shall provide Seller with a valid sales tax exemption certificate and any other required exemption or resale certificate in jurisdictions where sales of Energy occur under this Agreement to the extent such a certificate can be obtained and is necessary for exemption from any relevant state taxes that may be levied against the Parties in relation to the transactions under, or pursuant, to this Agreement.
Section 18.3 Entirety; Amendments.
(a) This Agreement and the Re-Pricing Agreement, including the exhibits and attachments hereto and thereto, constitute the entire agreement between the Parties and supersedes all prior discussions and agreements between the Parties with respect to the subject matter hereof and thereof. There are no prior or contemporaneous agreements or representations affecting the same subject matter other than those expressed herein and in the Re-Pricing Agreement. Except for any matters that, in accordance with the express provisions of this Agreement, may be resolved by oral agreement between the Parties, no amendment, modification or change herein shall be enforceable unless reduced to writing and executed by both Parties. (b) If a Remarketing Non-Default Termination Event occurs, then Buyer and Seller may, upon mutual agreement in each Party’s sole discretion, amend this Agreement to reduce the Contract Quantity for one or more subsequent Months and to obligate Seller to pay the Trustee for the account of Buyer, an amount sufficient, together with other funds available under the terms of the Bond Indenture for such purpose, to pay the redemption price of the Bonds to be redeemed on such redemption date and any settlement payable by Buyer due to the corresponding amendment to the Buyer Swap and the Interest Rate Swap, and Buyer and Seller may Attachment Staff Report Item 6B
36 simultaneously amend Exhibit D to reduce the Termination Payment for one or more such Months, but in each case only if Buyer and Seller have delivered to the Trustee:
(i) An executed counterpart of such amendment;
(ii) An executed counterpart of an amendment to the Power Supply Contract reducing the Contract Quantity to be sold and delivered thereunder in the same Months by the same quantities;
(iii) An executed counterpart of an amendment to the Buyer Swap reducing the notional amounts thereunder for the same Months by the same quantities; (iv) An executed counterpart of an amendment to the Interest Rate Swap reducing the notional amounts thereunder in each subsequent Month by the amount by which the principal amount of the Bonds of the related series scheduled to remain outstanding in such Month will be reduced as a result of such redemption; (v) The revised schedules and notices required by Section 2.01(c) of the Bond Indenture in connection with any related partial redemption; (vi) An Accountant’s Certificate (as defined in the Bond Indenture) to the effect that each of (A) the scheduled Termination Payments for this Agreement for each Month thereafter is equal to or exceeds the aggregate principal amount of and interest on the Bonds scheduled to remain outstanding at the beginning of such Month, assuming that the Bonds are redeemed in accordance with the Bond Indenture, less the scheduled balance of the Debt Service Fund (as defined in the Bond Indenture) at the end of such Month and (B) the expected cashflow to the Trust Estate (as defined in the Bond Indenture) is sufficient to meet the ongoing debt service for the Bonds scheduled to remain outstanding; (vii) The accompanying Opinion of Bond Counsel (as defined in the Bond Indenture) required by Section 2.03(c) of the Bond Indenture for such redemption; and
(viii) A Rating Confirmation (as defined in the Bond Indenture) in respect of such amendments and redemption.
Section 18.4 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
DUTIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLE THAT WOULD DIRECT THE APPLICATION OF ANOTHER JURISDICTION’S LAW; PROVIDED, HOWEVER, THAT THE AUTHORITY OF BUYER TO ENTER INTO
AND PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
Section 18.5 Non-Waiver. No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is in writing and signed by the Party granting such waiver. No waiver of any breach shall be deemed a waiver of any other subsequent breach.
Attachment Staff Report Item 6B
37 Section 18.6 Severability. If any provision of this Agreement, or the application thereof, shall for any reason be invalid or unenforceable, then to the extent of such invalidity or unenforceability, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby, but rather shall be enforced to the maximum extent permissible under applicable Law, so long as the economic and legal substance of the transactions contemplated hereby is not affected in any materially adverse manner as to either Party.
Section 18.7 Exhibits. Any and all Exhibits referenced in this Agreement are hereby incorporated herein by reference and shall be deemed to be an integral part hereof.
Section 18.8 Winding Up Arrangements. All indemnity and confidentiality obligations, audit rights, and other provisions specifically providing for survival shall survive the expiration or termination of this Agreement. The expiration or termination of this Agreement shall not relieve either Party of (a) any unfulfilled obligation or undischarged liability of such Party on the date of such termination or (b) the consequences of any breach or default of any warranty or covenant contained in this Agreement. All obligations and liabilities described in the preceding sentence of this Section 18.8, and applicable provisions of this Agreement creating or relating to such obligations and liabilities, shall survive such expiration or termination.
Section 18.9 Relationships of Parties. The Parties shall not be deemed to be in a relationship of partners or joint venturers by virtue of this Agreement, nor shall either Party be an agent, representative, trustee or fiduciary of the other, except that Seller shall act on behalf of Buyer in remarketing Energy pursuant to Exhibit C. Neither Party shall have any authority to bind the other to any agreement. This Agreement is intended to secure and provide for the services of each Party as an independent contractor.
Section 18.10 Immunity. Buyer represents and covenants to and agrees with Seller that it is not entitled to and shall not assert the defense of sovereign immunity with respect to its obligations or any Claims under this Agreement.
Section 18.11 Rates and Indices.
(a) Commodity Reference Prices.
(i) Price Replacement Process for Energy. If a Daily Commodity Reference Price for Energy is not available for any Hour but such Daily Commodity Reference Price has not permanently ceased to be published, then the Parties shall promptly endeavor to agree on an alternative source for determination of such Daily Commodity Reference Price for the applicable Hours. If such agreement is not reached by the Parties within three (3) Business Days, the Parties shall request quotations for the applicable Daily Commodity Reference Price from four (4) recognized dealers in the applicable commodity (two (2) selected by each Party) for the period that such Daily Commodity Reference Price is expected to be unavailable. If four (4) quotations are provided as requested, the applicable Daily Commodity Reference Price for the applicable Hours shall be the arithmetic mean of the quotations provided by each recognized dealer after disregarding the quotations having the highest and lowest values; provided that, if more than one (1) quotation has the same value, then one (1) of such quotations shall be disregarded. If exactly three (3) quotations are provided, the applicable Daily Commodity Reference Price Attachment Staff Report Item 6B
38 for the applicable Hours shall be the quotation provided by the relevant dealer that remains after disregarding the quotations having the highest and lowest values; provided that, if more than one (1) quotation has the same value, then the value of the two (2) quotations with the same value shall control. If fewer than three (3) quotations are provided, the Parties shall seek additional quotations until at least three (3) have been received. (ii) Price Replacement Process for Non-Published Index. If a Daily Commodity Reference Price is not available because it has permanently ceased to be published, then the Parties shall promptly endeavor to agree on an alternative source for determination of such Daily Commodity Reference Price, which may include agreeing upon a published index or a basket of published indices (“Daily Replacement Index”) from which to seek quotes for basis differentials as the replacement for the applicable Daily Commodity Reference Price. If such agreement is not reached by the Parties within three (3) Business Days, then the Daily Replacement Index shall be selected by Seller, acting reasonably. The Parties shall request quotations from four (4) recognized dealers in the applicable commodity (two (2) selected by each Party) for a basis differential (“Daily Basis Differential”) between the Daily Replacement Index and physical prices at the relevant Delivery Point for the remaining term of this Agreement. If four (4) quotations are provided as requested, the Daily Basis Differential will be the arithmetic mean of the quotations provided by each recognized dealer, after disregarding the quotations having the highest and lowest values; provided that, if more than one (1) quotation has the same value, then one (1) of such quotations shall be disregarded. If exactly three (3) quotations are provided, the Daily Basis Differential shall be the quotation provided by the relevant dealer that remains after disregarding the quotations having the highest and lowest values; provided that, if more than one (1) quotation has the same value, then the value of the two (2) quotations with the same value shall control. If fewer than three (3) quotations are provided, the Parties shall seek additional quotations until at least three (3) have been received. The applicable Daily Commodity Reference Price shall be the Daily Replacement Index plus the Daily Basis Differential calculated in accordance with the provisions of this clause (iii).
(b) Corrections. If a value published for any rate or index used or to be used in this Agreement is subsequently corrected and the correction is published or announced by the Person responsible for that publication or announcement within thirty (30) days after the original publication or announcement, either Party may notify the other Party of (i) that correction and (ii) the amount (if any) that is payable as a result of that correction. If, not later than thirty (30) days after publication or announcement of that correction, a Party gives notice that an amount is so payable, the Party that originally either received or retained such amount shall, not later than three (3) Business Days after the effectiveness of that notice, pay, subject to any other applicable provisions of this Agreement, to the other Party that amount, together with interest on that amount at the Default Rate for the period from and including the day on which a payment originally was (or was not) made to but excluding the day of payment of the refund or payment resulting from that correction.
Section 18.12 Limitation of Liability. Notwithstanding anything to the contrary herein, all obligations of Buyer under this Agreement, including without limitation all obligations to make payments of any kind whatsoever, are special, limited obligations of Buyer payable solely from Trust Estate (as such term is defined in the Bond Indenture) as and to the extent provided in the Bond Indenture, including with respect to Operating Expenses (as such term is defined in the Attachment Staff Report Item 6B
39 Bond Indenture). Buyer shall not be required to advance any moneys derived from any source other than the Revenues (as such term is defined in the Bond Indenture) and other assets pledged under the Bond Indenture for any of the purposes in this Agreement mentioned. Neither the faith and credit of Buyer nor the taxing power of the State of California or any political subdivision thereof is pledged to payments pursuant to this Agreement. Buyer shall not be directly, indirectly, contingently or otherwise liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reasons of or in connection with this Agreement, except solely to the extent Revenues (as such term is defined in the Bond Indenture) are received for the payment thereof and may be applied therefor pursuant to the terms of the Bond Indenture.
Section 18.13 Counterparts. This Agreement may be executed and acknowledged in multiple counterparts and by the Parties in separate counterparts, each of which shall be an original and all of which shall be and constitute one and the same instrument.
Section 18.14 Rights of Trustee. Pursuant to the terms of the Bond Indenture, Buyer has irrevocably appointed the Trustee as its agent to issue notices (including Remarketing Notices, Call Option Notices, Put Option Notices and Repurchase Offers) and, as directed under the Bond Indenture, to take any other actions that Buyer is required or permitted to take under this Agreement. Seller may rely on notices or other actions taken by Buyer or the Trustee and Seller has the right to exclusively rely on any notices delivered by the Trustee that the Trustee is authorized to deliver under the Bond Indenture, regardless of any conflicting notices that it may receive from Buyer.
Section 18.15 Waiver of Defenses. Seller waives all rights to set-off, counterclaim, recoupment and any other defenses that might otherwise be available to Seller with regard to Seller’s obligations pursuant to the terms of this Agreement.
Section 18.16 U.S. Resolution Stay. The Parties agree that (i) to the extent that prior to the date hereof the Parties hereto have adhered to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of this Agreement, and for such purposes this Agreement shall be deemed a Protocol Covered Agreement and each Party shall be deemed to have the same status as Regulated Entity or Adhering Party as applicable to it under the Protocol; (ii) to the extent that prior to the date hereof the Parties have executed a separate agreement the effect of which is to amend the qualified financial contracts between them to conform with the requirements of the QFC Stay Rules (the “Bilateral Agreement”), the terms of the Bilateral Agreement are incorporated into and form a part of this Agreement and for such purposes each Party shall be deemed to have the same status as “Covered Entity”, “Counterparty Entity” or “Client Entity” (or other similar term) as applicable to it under the Bilateral Agreement; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups)” or the “Agency Version of Omnibus Agreement (for use with U.S. G-SIBs)”, as applicable, published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org), the effect of which is to amend the qualified financial contracts between the Parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of this Agreement, and for such purposes this Agreement shall be deemed a “Covered Agreement,” Seller shall be deemed a “Covered Entity” and Buyer shall be deemed a “Counterparty Entity” (or “Client Entity” for the Agency version, as applicable). In the Attachment Staff Report Item 6B
40 event that, after the date of this Agreement, the Parties hereto become adhering Parties to the Protocol, the terms of the Protocol will replace the terms of this section. In the event of any inconsistencies between this Agreement and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the QFC Stay Terms will govern.
Terms used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph, references to “this Agreement” include any related credit enhancements entered into between the Parties, directly or indirectly through an agent, or provided by one to the other. In addition, the Parties agree that the terms of this paragraph shall be incorporated into any related covered affiliate credit enhancements, as applicable, with all references to Seller replaced by references to the covered affiliate support provider. “QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1- 7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any covered affiliate credit enhancements.
Section 18.17 Rate Changes.
(a) Absent the agreement of the Parties to the proposed change, the standard of review for changes to any rate, charge, classification, term or condition of this Agreement, whether proposed by a Party (to the extent that any waiver in Section 18.17(b) below is unenforceable or ineffective as to such Party), a non-party or FERC acting sua sponte, shall solely be the “public interest” application of the “just and reasonable” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v.
Sierra Pacific Power Co., 350 U.S. 348 (1956) and clarified by Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish, 554 U.S. 527 (2008). (b) In addition, and notwithstanding Section 18.17(a), to the fullest extent permitted by applicable Law, each Party, for itself and its successors and assigns, hereby expressly and irrevocably waives any rights it can or may have, now or in the future, whether under Section 205 and/or 206 of the Federal Power Act or otherwise, to seek to obtain from FERC by any means, directly or indirectly (through complaint, investigation or otherwise), and each hereby covenants and agrees not at any time to seek to so obtain, an order from FERC changing any section of this Agreement specifying the rate, charge, classification, or other term or condition agreed to by the Parties, it being the express intent of the Parties that, to the fullest extent permitted by applicable Law, neither Party shall unilaterally seek to obtain from FERC any relief changing the rate, charge, classification, or other term or condition of this Agreement, notwithstanding any subsequent changes in applicable Law or market conditions that may occur. In the event it were to be determined that applicable Law precludes the Parties from waiving their rights to seek changes from FERC to their market-based power sales contracts (including entering into covenants not to do so) then this Section 18.17(b) shall not apply, provided that, consistent with Section 18.17(a), neither Party shall seek any such changes except solely under the “public interest” application of the “just and reasonable” standard of review and otherwise as set forth in Section 18.17(a).
Attachment Staff Report Item 6B
41 IN WITNESS WHEREOF, the Parties have caused this Prepaid Energy Sales Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
[Separate Signature Page(s) Attached]
Attachment Staff Report Item 6B
Signature Page to Prepaid Agreement
MORGAN STANLEY ENERGY STRUCTURING, L.L.C.
By: _____________________________
Name: _____________________________
Title: _____________________________
Attachment Staff Report Item 6B
Signature Page to Prepaid Agreement
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: _____________________________
Name: _____________________________
Title: _____________________________
Attachment Staff Report Item 6B
A-1
EXHIBIT A-1
BASE ENERGY HOURLY QUANTITIES
[To come.]
Attachment Staff Report Item 6B
A-2
EXHIBIT A-2
EPS ENERGY PERIOD ANNUAL QUANTITY AND MONTHLY PROJECTED
QUANTITY
[To come.]
Attachment Staff Report Item 6B
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Attachment Staff Report Item 6B
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EXHIBIT B
NOTICES
IF TO SELLER: Morgan Stanley Energy Structuring, L.L.C. 1585 Broadway
New York, NY 10036-8293
Contract and Legal
Notices:
Attn: Prepay Contacts
24 Hour Line: (914) 225-1500
Email: [email protected];
[email protected]
Scheduling: Attn: Scheduling Team
24 Hour Line: (914) 225-1500
Email: [email protected]; [_____]
Attn: Scheduling Team
Payments/Invoicing/
Statements:
Attn: Manager, Energy Settlements
Phone: (212) 762-3723
Fax: (914) 750-1434
Email: [email protected]
IF TO BUYER:
General Notices: California Community Choice Financing Authority 1125 Tamalpais Avenue
San Rafael, CA 94901
Email: [____]
Invoicing/Payments: [____]
Attachment Staff Report Item 6B
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EXHIBIT C
COMMODITY REMARKETING
Section 1. Defined Terms. Capitalized terms used but not otherwise defined in this Exhibit shall have the meanings given to such terms in this Agreement, unless otherwise indicated.
The following terms, when used in this Exhibit C and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Code” means the Internal Revenue Code of 1986, as amended. “Energy Remarketing Reserve Fund” means an account established under the Bond Indenture into which Buyer shall deposit the amounts specified in Section 5(b) of this Exhibit C. “Expired Non-Private Business Sales Ledger” has the meaning specified in Section 9(a) of this Exhibit C.
“Expired Private Business Sales Ledger” has the meaning specified in Section 9(a) of this Exhibit C.
“Ledger Entry” has the meaning specified in Section 7(d) of this Exhibit C. “Minimum Remarketing Sales Price” is an amount determined for Energy by the following formula:
MRSP = RRPP - (RRPP x (RRF/CLB))
Where:
MRSP = The Minimum Remarketing Sales Price for one MWh
RRPP = The Remediation Remarketing Purchase Price for one MWh RRF = The balance of the Energy Remarketing Reserve Fund CLB = The combined cash balance of the Non-Private Business Sales Ledger and the Private Business Sales Ledger
“Monthly Discount” has the meaning specified in the Power Supply Contract. “Monthly Remarketing Notice” has the meaning specified in Section 3(b) of this Exhibit C. “Municipal Utility” means any Person that (a) (i) is a “governmental person” as defined in Treasury Regulation Section 1.141-1(b) and (ii) owns an electric distribution utility (or provides Energy at wholesale to entities described in clause (i) that own such utilities) or (b) is a community choice aggregator organized under the Laws of the State of California. Buyer may from time to time revise the definition of “Municipal Utility” to conform to the applicable provisions of the Code or Treasury Regulations by delivery of written notice to Seller setting forth the revised definition together with a Tax Opinion.
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“Net Participant Price” means, with respect to the Project Participant, the Contract Index Price less the Monthly Discount.
“Non-Private Business Remarketing Proceeds” means all proceeds received by Buyer under Section 5 of this Exhibit C from Seller’s remarketing of Energy in any Non-Private Business Sale.
“Non-Private Business Sale” means a sale (other than a Qualified Sale) of Energy to a “governmental person” as defined in Treasury Regulation Section 1.141-1(b) that in each case agrees in writing to not use any part of such Energy for a Private Business Use. “Non-Private Business Sales Ledger” has the meaning specified in Section 7(a) of this Exhibit C.
“Non-Qualifying Remarketing Limit” means a quantity of Energy, in MWhs, equal to 10% of the total quantity of Energy, in MWhs, to be delivered hereunder, as such Non-Qualifying Remarketing Limit may be increased from time to time upon receipt by Buyer and Seller of a Tax Opinion setting forth a higher Non-Qualifying Remarketing Limit “Private Business Remarketing Limit” means a quantity of Energy in MWhs equal to (a) $15,000,000, divided by (b) the Specified Fixed Price, as such Private Business Remarketing Limit may be increased from time to time upon receipt by Buyer and Seller of a Tax Opinion setting forth a higher Private Business Remarketing Limit.
“Private Business Remarketing Proceeds” means all proceeds received by Buyer under Section 5 of this Exhibit C from Seller’s remarketing of Energy in any Private Business Sale (including the purchase of such Energy by Seller for its own account). “Private Business Sale” means any sale of Energy other than in a Non-Private Business Sale or a Qualified Sale.
“Private Business Sales Ledger” has the meaning specified in Section 7(b) of this Exhibit C.
“Private Business Use” has the meaning ascribed to such term in Section 141 of the Code. “Provisional Payment” has the meaning specified in Section 5(a) of this Exhibit C. “Qualified Sale” means the sale of Energy to a Municipal Utility that agrees in writing (i) to use all of such Energy for a Qualifying Use that is not a Private Business Use and (ii) not to count any purchase of such Energy towards any remediation obligations such Municipal Utility may have with respect to proceeds received from the sale of property purchased with tax-exempt financing proceeds.
“Qualifying Use” with respect to Energy has the meaning ascribed to such term in Treasury Regulations Section 1.148-1(e)(2)(iii)(A)(2) or (B)(2), as applicable. “Remarketing Fee” means the amount specified in Exhibit F of this Agreement.
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“Remarketing Non-Default Termination Event” has the meaning specified in Section 9(c) of this Exhibit C.
“Remarketing Notice” means a Monthly Remarketing Notice. “Remediation Remarketing” means the remarketing of Energy in Qualified Sales by Seller pursuant to Section 8 of this Exhibit C in an effort to reduce to zero (0) any Ledger Entry balances in either the Non-Private Business Sales Ledger or the Private Business Sales Ledger. “Remediation Remarketing Purchase Price” has the meaning specified in Section 8(b)(ii) of this Exhibit C.
“Tax Opinion” means an Opinion of Bond Counsel (as defined in the Bond Indenture) to the effect that an action proposed to be taken is not prohibited by the Bond Indenture or the Laws of the United States and will not adversely affect the exclusion from gross income for U.S. federal income tax purposes of interest on any Bonds the interest on which is intended to be excluded from such gross income under Section 103(a) of the Code.
“Treasury Regulations” means the U.S. Treasury Regulations under the Code.
Section 2. Buyer’s Right and Obligation to Request Remarketing. Buyer may, and, if required to do so under the Bond Indenture or the terms of this Agreement shall, request Seller to remarket, pursuant to this Exhibit C, all or a specified part of the Contract Quantities for any Delivery Point.
Section 3. Remarketing Notice.
(a) Generally. To request remarketing under this Exhibit C, Buyer must issue a Remarketing Notice, which Remarketing Notice must state as applicable (i) the portion of the Contract Quantity to be remarketed from each relevant Delivery Point, and (ii) the Delivery Hours in which such portion of the Contract Quantity is to be remarketed. (b) Monthly Remarketing Notice. Buyer may designate a Remarketing Notice as a “Monthly Remarketing Notice” if the Remarketing Notice is delivered to Seller not later than three (3) Business Days prior to the start of the first Month in which it applies and applies to a period of one (1) Month or more; provided furthermore that, in the event Seller is obligated to remarket Base Quantities under Section 3.4 of the Agreement, Buyer shall be deemed to have delivered a Monthly Remarketing Notice with respect thereto. (c) Reserved.
Section 4. Seller’s Remarketing Obligations Generally.
(a) All Energy remarketed by Seller pursuant to this Exhibit C shall be for the benefit of Buyer, meaning all remarketed Energy shall first be sold by Seller to Buyer and then resold by or for the account of Buyer pursuant to the terms and provisions of this Exhibit C. (b) Seller may act directly as principal to the remarketing buyer or may cause a supplier to Seller to act directly as principal to the remarketing buyer. Neither Seller nor any Person acting on Seller’s behalf shall owe any fiduciary duties to Buyer with respect to the Attachment Staff Report Item 6B
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remarketing of any Energy. Buyer acknowledges and agrees that Seller or a Person acting on Seller’s behalf in remarketing Energy may have other supplies of Energy available to sell to potential remarketing buyers, and Energy designated for remarketing shall not be entitled to any preference over any such other supplies of Energy.
(c) Seller shall prepare, maintain and provide Monthly to Buyer accurate and complete records showing (i) the identity of each purchaser in a Qualified Sale, a Non-Private Business Sale, or a Private Business Sale undertaken by Seller on Buyer’s behalf, (ii) the aggregate amount of Energy remarketed under this Agreement in Qualified Sales, (iii) the aggregate amount of Energy remarketed under this Agreement in Non-Private Business Sales, and (iv) the aggregate amount of Energy remarketed under this Agreement in Private Business Sales. (d) Any amounts due to Buyer for Energy remarketed by Seller or purchased by Seller under this Exhibit C shall be remitted to Buyer pursuant to Section 14.2 of this Agreement in the Month following the Month in which such Energy is remarketed or purchased, as applicable.
Additionally, the Parties acknowledge and agree that Seller’s payment obligations under this Exhibit C shall be reduced to the extent that any Energy remarketed hereunder is negatively priced.
Section 5. Remarketing.
(a) Provisional Payments for and Remarketing of Assigned Product.
Notwithstanding anything to the contrary herein, the following terms shall apply to under-deliveries of Assigned Product. (i) To the extent that (A) the Annual Quantity has not been delivered for the then-current Contract Year and (B) the quantity of Assigned Product delivered in any Month is less than the Monthly Projected Quantity, then Seller shall pay Buyer for any such Month the product of (I) the Monthly Projected Quantity, minus the quantity of Assigned Product actually delivered, multiplied by (II) (1) the Day-Ahead Market Price during the Initial EPS Energy Period and (2) the Day-Ahead Average Price during any EPS Energy Period subsequent to the Initial EPS Energy Period (any such payment, a “Provisional Payment”). Any Provisional Payments due from Seller to Buyer under this Section 5(a)(i) shall be paid to the Provisional Payments Account established under and defined in the Participant Custodial Agreement, and Seller shall have fully satisfied any Provisional Payment obligation upon payment of such amount in accordance with the Participant Custodial Agreement, regardless of whether the Participant Custodian complies with its obligations thereunder. In any Billing Statement that Seller delivers under Section
14.2(b) that reflects a Provisional Payment due, Seller shall indicate (x) the total amount of any Provisional Payment due for such Month and (y) the portion of such Provisional Payment that reflects the Net Participant Price that would otherwise be payable with respect thereto.
(ii) To the extent that a quantity of Assigned Product equal to or greater than the Annual Quantity are delivered for any Contract Year, any Provisional Payments made during such Contract Year shall not result in Ledger Entries under this Exhibit C. (iii) To the extent that less than the Annual Quantity of Assigned Product is delivered for any Contract Year, then (I) Buyer shall be deemed to have requested for Seller to remarket a quantity of Assigned Product equal to the Annual Quantity minus the Attachment Staff Report Item 6B
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quantity of Assigned Product actually delivered during such Contract Year (such quantities, the “Remarketed Quantities”), provided that (x) the Remarketed Quantities shall be reduced by any Assigned Product not delivered due to Force Majeure and (y) any Provisional Payment attributable to Assigned Product not delivered due to Force Majeure shall be excluded from the calculations described below, and (II) Seller be deemed to have purchased such Remarketed Quantities for its own account at a price equal to the Average Provisional Price (as defined in Section 5(a)(v) below). Any purchase by Seller of the Remarketed Quantities for its own account pursuant to this Section 5(a) shall constitute a Private Business Sale and shall be reflected on the Private Business Sales Ledger effective as of the first day of the Ledger Month (as defined below). Buyer shall notify Seller if and to the extent the proceeds from any such Private Business Sales are applied to amounts owed by the Project Participant pursuant to [Section 7.5 of the Power Supply Contract], and, to the extent so applied, such proceeds shall remediate such Private Business Sales and be entered as debits on the Private Business Sales Ledger. (iv) The following terms have the meaning specified below for the purpose of this Section 5(a).
“Average Provisional Price” means the sum of all Provisional Payment Allocation Amounts for such Contract Year.
“Ledger Month” means, for any Contract Year, the Month
immediately following the last Month for which the Pro-Rated Monthly Quantity was fully delivered for such Contract Year. For example, if (x) a Contract Year is from January 1 to December 31, (y) the Annual Quantity is 120 MWhs and (z) 110 MWhs are delivered in a given Contract Year, then the resulting Ledger Entries would be entered on December 1 for such Contract Year. For another example, if (x) a Contract Year is from January 1 to December 31, (y) the Annual Quantity is 120 MWhs and (z) 85 MWhs are delivered in a given Contract Year, then the resulting Ledger Entries would be entered on September 1 for such Contract Year. “Pro-Rated Monthly Quantity” means, for each Contract Year, the quantity attributable to each Month of such Contract Year if the Annual Quantity is divided into twelfths. For example, if the Annual Quantity is 120 MWhs, the Pro-Rated Monthly Quantity for each Month in a Contract Year is 10 MWhs – and, in such case, if (x) 110 MWhs are delivered in a given Contract Year, the Pro-Rated Monthly Quantity would be fully delivered for 11 of the 12 Months in such Contract Year; and (y) if 85 MWhs are delivered in a given Contract Year, the Pro-Rate Monthly Quantity would be fully delivered for 8 of the 12 Months in such Contract Year.
“Provisional Payment Allocation Amount” means, for each Provisional Payment in a Contract Year, an amount (in $/MWh) determined by multiplying the Weight for such Provisional Payment by the price used to calculate such Provisional Payment.
Attachment Staff Report Item 6B
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“Weight” means an amount (in $/MWh) determined for each Provisional Payment in a Contract Year by dividing the sum of all Provisional Payments for such Contract Year by the amount of each such Provisional Payment.
(b) Remarketing of Base Energy. The following provisions shall apply to the remarketing of Base Energy by Seller:
(i) Seller shall use Commercially Reasonable Efforts to remarket or cause to be remarketed all Base Energy specified for remarketing. In exercising such Commercially Reasonable Efforts, Seller shall first attempt to remarket or cause to be remarketed all Energy specified in a Remarketing Notice in Qualified Sales and then, if Seller is unable to so remarket all of such Energy for such purposes, in Non-Private Business Sales. If Seller is unable to remarket all or any portion of the Energy designated in a Remarketing Notice, then Seller shall purchase such Energy for its own account at the prices set forth in Section 5(b)(v) of this Exhibit C as if such Energy had been remarketed to it.
(ii) Seller shall not be required to remarket any Base Energy at a net price to Seller (after deducting all transportation and transmission costs and all other costs) that is anticipated to be less than the Day-Ahead Market Price applicable to such Energy in the case of a Monthly Remarketing Notice.
(iii) Notwithstanding the foregoing or anything to the contrary herein, provided that (A) the Project Participant is not in default under its Power Supply Contract, (B) such Project Participant has exercised Commercially Reasonable Efforts (as determined by Special Tax Counsel (as defined in the Bond Indenture)) to obtain EPS Compliant Energy for delivery hereunder consistent with the Assignment Letter Agreement and (C) Seller is remarketing such Project Participant’s portion of the Contract Quantity because an EPS Energy Period is not in effect, then:
A. Seller shall purchase Energy for its own account and shall pay Buyer the product of (A) the quantity of such Energy purchased for its own account and (B) the Day-Ahead Market Price;
B. Proceeds received by Buyer under this Section 5(b)(iii) that exceed the amount Buyer would have received for the same quantity of Energy at the Net Participant Price shall be deposited in the Participant Rebate Account (as defined in the Bond Indenture) of the Energy Remarketing Reserve Fund; C. the Project Participant shall be required under Section 7.5 of the Power Supply Contract to exercise Commercially Reasonable Efforts to purchase Energy for a Qualifying Use to remediate any Ledger Entry resulting from Seller’s purchase of Energy; and
D. if any Ledger Entry has not been reversed within twelve Months of the date of any such Ledger Entry, Seller thereafter shall exercise Commercially Reasonable Efforts to remediate any such Ledger Entry by making a Qualified Sale to the Project Participant or any other Municipal Utility; Attachment Staff Report Item 6B
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provided that, to the extent Special Tax Counsel (as defined in the Bond Indenture) determines at any time the Project Participant has failed to exercise Commercially Reasonable Efforts to obtain EPS Compliant Energy for delivery hereunder consistent with the applicable Assignment Letter Agreement, the provisions of this Section 5(b)(iii) shall not apply and any Ledger Entries resulting from Seller’s remarketing of Base Energy in such case may not be remediated by Project Participant.
(iv) Proceeds from Qualified Sales and Non-Private Business Sales.
A. For any Energy specified in a Monthly Remarketing Notice that Seller remarkets in a Qualified Sale or Non-Private Business Sale, Seller shall deliver to Buyer the actual proceeds less the Remarketing Fee per MWh sold, provided that the aggregate amount delivered by Seller under this clause (A) for any Month shall not be less than the aggregate quantity so remarketed during such Month multiplied by the Net Participant Price.
B. Reserved.
C. In the event the payment due date under a Qualified Sale or Non-Private Business Sale has not yet occurred prior to the date upon which payment is due under this Agreement for the applicable Month, the Parties shall nonetheless issue statements as if the full amount from such Qualified Sale or Non-Private Business Sale had been paid and, if such full payment is not received prior to the next Monthly due date under this Agreement, the Parties shall issue the appropriate statements to reflect the actual proceeds received and true-up any difference.
(v) Proceeds from Private Business Sales.
A. For any Energy specified in a Monthly Remarketing Notice that is not remarketed in a Qualified Sale or Non-Private Business Sale, Seller shall pay to Buyer the positive result determined by the following formula with respect to each Delivery Point to which such Monthly Remarketing Notice applied, provided that the aggregate amount delivered by Seller under this clause (A) for any Month shall not be less than the aggregate quantity so remarketed during such Month multiplied by the Net Participant Price:
P = Q x (IP - RF)
Where:
P = The amount payable by Seller under this Section 5(b)(v)(A) Q = The quantity of such Energy remarketed with respect to such Delivery Point
IP = The Contract Index Price for such Delivery Point
Attachment Staff Report Item 6B
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RF = The Remarketing Fee
B. Reserved.
(vi) Energy Remarketing Reserve Fund. Any proceeds received by Buyer under this Section 5 for Energy remarketed in sales other than Qualified Sales that exceed the amount Buyer would have received for the same quantity of Energy at the Net Participant Price shall be deposited in the Energy Remarketing Reserve Fund.
Section 6. Reserved.
Section 7. Tracking Remarketing Proceeds. Seller shall maintain four (4) separate ledgers related to remarketing proceeds as described below:
(a) One (1) ledger (the “Non-Private Business Sales Ledger”) shall include, (A) as dollar credits, the Non-Private Business Remarketing Proceeds, and (B) as a MWh credit, the MWhs corresponding to such Non-Private Business Remarketing Proceeds. (b) Another ledger (the “Private Business Sales Ledger”) shall include, (A) as dollar credits, Private Business Remarketing Proceeds, and (B) as a MWh credit, the MWhs corresponding to such Private Business Remarketing Proceeds. (c) The other two (2) ledgers shall be maintained as described in Section 9(a) of this Exhibit C.
(d) The credits to be recorded in the ledgers described in Section 7(a) and (b) of this Exhibit C (collectively, the “Ledger Entries”) shall be dated as of the first day of the Month prior to the Month in which Buyer or Project Participant receives the proceeds corresponding to such Ledger Entries.
(e) The four (4) ledgers described in this Section 7 of this Exhibit C and all debits and credits to such ledgers shall be kept on an aggregate basis for purposes of this Exhibit C.
Section 8. Remediation Remarketing and Bond Redemptions. At any time that the net Ledger Entry balance of either the Non-Private Business Sales Ledger or the Private Business Sales Ledger is greater than zero (0):
(a) Buyer shall exercise Commercially Reasonable Efforts to utilize the proceeds represented by the dollar balances of such Ledger Entries to purchase Energy for resale in Qualified Sales and shall promptly notify Seller following such purchase and sale. (b) Seller shall exercise Commercially Reasonable Efforts to locate opportunities for Buyer to purchase Energy to sell in Qualified Sales to remediate the proceeds represented by the dollar balances of the Ledger Entries. In this regard, if Seller locates a Remediation Remarketing opportunity, then
(i) Seller shall notify Buyer of such opportunity;
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(ii) Buyer shall, upon receipt of such notice, purchase Energy from Seller at a price determined by Seller in a Commercially Reasonable manner based upon applicable market prices at the location where the remarketing opportunity sale will occur (the “Remediation Remarketing Purchase Price”);
(iii) Seller shall remarket such Energy on Buyer’s behalf in a Qualified Sale;
(iv) Seller shall remit to Buyer the proceeds collected from such Qualified Sale, but in no event shall Seller remit less than the Minimum Remarketing Sales Price for the remarketing transaction; provided, however, that to the extent Seller does not receive the Remediation Remarketing Purchase Price from Buyer prior to the Remediation Remarketing described herein, Seller shall credit the proceeds collected from such remarketing sale against the Remediation Remarketing Purchase Price owed to Seller, and Seller shall be reimbursed from the Energy Remarketing Reserve Fund to the extent necessary to make Seller whole for such Qualified Sale; and (v) Seller shall issue to Buyer a confirmation notice (including the dollar price and MWhs) of each purchase of Energy by or on behalf of Buyer, and each sale of Energy on Buyer’s behalf, under this Section 8, and amounts due from or to Buyer shall be separately stated on the Billing Statement for the Month in which such remarketing transactions occur.
For the avoidance of doubt, Seller shall not sell, nor be required to sell, Energy to Buyer for a Remediation Remarketing if such Energy is to be remarketed by Seller on behalf of Buyer for less than the Minimum Remarketing Sales Price.
(c) Unless the terms of a Remediation Remarketing undertaken by Seller on Buyer’s behalf are specifically assumed by Buyer, Seller shall indemnify Buyer for any costs or liabilities associated with such Remediation Remarketing (other than costs related to the price at which such Energy is sold and the risk of collecting the sale proceeds from the remarketing buyer), including, without limitation, any cover or replacement costs; termination payments; fees, penalties, costs or charges (in cash or in kind) assessed by any Transmission Provider for failure to satisfy its balance or nomination requirements; Claims for breach of warranty; taxes, fees, levies, penalties, licenses or charges imposed by any Government Agency; and Claims from personal injury or property damages.
(d) The total purchase price of any Energy purchased by Buyer or Seller pursuant to Section 8(b) of this Exhibit C will be entered by Seller as a dollar debit on (i) first, the Private Business Sales Ledger, if and to the extent such ledger has a positive balance and such Energy is remarketed in a Qualified Sale and (ii) second, on the Non-Private Business Sales Ledger, if and to the extent such ledger has a positive balance, the Private Business Sales Ledger has a zero (0) balance, and such Energy is remarketed in a Qualified Sale, with such debit in the case of (i) or (ii) dated as of the last day of the Month in which such Energy was purchased. Each dollar debit shall offset and reverse an equal amount of the dollar credits to such ledger (that have not previously been transferred to the Expired Non-Private Business Sales Ledger or the Expired Private Business Sales Ledger) in the order in which they were made (beginning with the oldest credit not previously offset and reversed by any prior debit). Whenever a debit is made to the dollar balance of the Ledger Entries of either such ledger, Seller shall also debit the Energy balance Attachment Staff Report Item 6B
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of the Ledger Entries of such ledger based on (i) such dollar debit divided by (ii) an average Energy price calculated from the net Ledger Entry then present on the relevant ledger being debited. For the avoidance of doubt, neither the Non-Private Business Sales Ledger nor the Private Business Sales Ledger shall ever have a negative balance, and the same purchase transaction shall not result in a debit to more than one ledger except to the extent that a debit for the transaction causes one (1) ledger to have a zero (0) balance and the remaining portion of the permitted debit is made to the other ledger.
(e) In addition to the ability of Seller or Buyer to engage in Remediation Remarketing to reduce the balances of any Ledger Entries through Qualified Sales of Energy, the proceeds represented by the dollar balances of such Ledger Entries may also be remediated through the purchase of natural gasthat will be remarketed in Qualified Sales. For the purposes of entering MMBtu debits for natural gas to the Ledger Entries in accordance with Section 8(d) of this Exhibit C for any Remediation Remarketing of natural gas, a quantity of MWhs will be debited based on (i) the total proceeds paid for such natural gas divided by (ii) an average Energy price calculated from the net Ledger Entry then present on the relevant ledger being debited.
Section 9. Remarketing Non-Default Termination Event.
(a) In addition to the Non-Private Business Sales Ledger and the Private Business Sales Ledger described in Section 7(a) and (b) of this Exhibit C, above, Seller shall also maintain an “Expired Non-Private Business Sales Ledger” and an “Expired Private Business Sales Ledger.” Whenever a credit to the dollar balance of the Ledger Entries of the Non-Private Business Sales Ledger has not been reversed in full within two (2) years of such credit by an offsetting dollar debit in accordance with Section 8(d) or (e) of this Exhibit C, then Seller shall (i) debit the remaining portion of such dollar credit and the MWh balance of the Ledger Entries in the manner described in the penultimate sentence of Section 8(d) and (ii) record such debits as credits to the Expired Non-Private Business Sales Ledger. Similarly, whenever a credit to the dollar balance of the Ledger Entries of the Private Business Sales Ledger has not been reversed in full within two (2) years of such credit by an offsetting dollar debit in accordance with Section 8(d) or (e) of this Exhibit C, then Seller shall (i) debit the remaining portion of such dollar credit and the MWh balance of the Ledger Entries in the manner described in the penultimate sentence of Section 8(d) and (ii) record such debits as credits to the Expired Private Business Sales Ledger. Pursuant to Section 18.3(b) of this Agreement, upon any partial redemption of Bonds in accordance with the Bond Indenture, the dollar credits made to either the Expired Non-Private Business Sales Ledger or the Expired Private Business Sales Ledger shall be reduced (in the order of entry) by an aggregate amount corresponding to the principal amount of Bonds so redeemed, and the MWh credits to such ledgers shall be reduced by the contemporaneous MWh credits corresponding to the dollar credits so reduced.
(b) No later than the tenth (10th) day of each Month, Seller shall provide to Buyer copies of the Non-Private Business Sales Ledger, the Private Business Sales Ledger, the Expired Non-Private Business Sales Ledger and the Expired Private Business Sales Ledger showing all credits and debits to each such ledger since the Execution Date. (c) A “Remarketing Non-Default Termination Event” shall occur if, upon delivery of a ledger statement under Section 9(b) above, either (i) (A) the sum of all Btu credits on the Expired Non-Private Business Sales Ledger and the Expired Private Business Sales Ledger Attachment Staff Report Item 6B
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exceeds (B) the Non-Qualifying Remarketing Limit, or (ii) (A) the sum of all Btu credits on the Expired Private Business Sales Ledger exceeds (B) the Private Business Remarketing Limit. (d) The occurrence of a Remarketing Non-Default Termination Event and any remedies associated therewith in Article XVII of this Agreement shall be Buyer’s sole and exclusive remedies with respect to any inability by Seller to purchase and remarket Energy for Buyer pursuant to, or any breach by Seller of its obligations under, this Exhibit C.
Section 10. Buyer Right to Request to Purchase Remarketed Energy. Notwithstanding any other provision of this Exhibit C, Buyer may request in a Remarketing Notice delivered to Seller that Buyer be the remarketing buyer of the quantities of Energy described in such Remarketing Notice, in which case Seller will sell such remarketed Energy to Buyer at a price, at Delivery Point(s) and on date(s) to be mutually agreed (but the price, with respect to Energy remarketed pursuant to a Monthly Remarketing Notice,shall in no event be less than the Contract Index Price less the Monthly Discount) by the Parties, provided that Seller shall be obligated to remarket such Energy to Buyer only if all of the following conditions are satisfied:
(a) Buyer is not in default under any Transaction Document; (b) Buyer has certified to Seller in the Remarketing Notice that the condition in (a) above is true;
(c) Buyer has provided such adequate assurances of Buyer’s performance, if any, as may have been reasonably requested by Seller;
(d) there is a master agreement in effect between Buyer and Seller that will govern the remarketing transaction between Buyer and Seller; and (e) Buyer covenants to resell the Energy only in Qualified Sales.
Attachment Staff Report Item 6B
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EXHIBIT D
TERMINATION PAYMENT SCHEDULE
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 Monthly Projected Quantity for such Month, minus the quantity of Energy delivered in such Month prior to the effectiveness of such Early Termination Date, multiplied by (b) the result of (i) the applicable Fixed Price for Energy (as defined in the Buyer Swap), minus (ii) the Specified Discount then in effect. [To be attached.]
Attachment Staff Report Item 6B
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EXHIBIT D-1
TERMINATION PAYMENT ADJUSTMENT SCHEDULE
(To be attached pursuant to Section 17.8 as required.)
Attachment Staff Report Item 6B
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EXHIBIT E
FORM OF MORGAN STANLEY GUARANTEE
1585 BROADWAY
NEW YORK, NY 10036-8293
[DATE]
To: California Community Choice Financing Authority
1125 Tamalpais Avenue
San Rafael, CA 94901
Ladies and Gentlemen:
In consideration of California Community Choice Financing Authority (hereinafter “Counterparty”) having entered into or entering into (i) that certain Prepaid Energy Sales Agreement, dated as of [____], 2023, with Morgan Stanley Energy Structuring, L.L.C. (hereinafter “Obligor”) (the “Prepaid Agreement”) and (ii) that ISDA Master Agreement, dated as of [____], 2023, the Schedule, dated as of [____], 2023, and Confirmation, dated as of [____], 2023, with Obligor (together with the Prepaid Agreement, the “Agreements”), Morgan Stanley, a Delaware corporation (hereinafter “Guarantor”), hereby irrevocably and unconditionally guarantees to Counterparty, with effect from the date of the Agreements, the due and punctual payment of all amounts payable by Obligor under the Agreements when the same shall become due and payable, whether on scheduled payment dates, upon demand, upon declaration of termination or otherwise, in accordance with, and subject to, the terms of the Agreements and giving effect to any applicable grace period. Upon failure of Obligor punctually to pay any such amounts, and upon written demand by Counterparty to Guarantor at its address set forth in the signature block of this guarantee (the “Guarantee”) (or to such other address as Guarantor may specify in writing), Guarantor agrees to pay or cause to be paid such amounts owed by Obligor; provided that delay by Counterparty in giving such demand shall in no event affect Guarantor's obligations under this Guarantee; provided further that any payment made by Guarantor hereunder will be made directly to The Bank of New York Mellon Trust Company, N.A., as trustee under the Bond Indenture (as defined in the Prepaid Agreement), or to any successor trustee under the Bond Indenture and that such payment shall be deemed to be a payment to Counterparty hereunder. This Guarantee is of payment and not of collection.
Guarantor hereby agrees that its obligations hereunder shall be continuing and unconditional and will not be discharged except by complete payment of the amounts payable under the Agreements, irrespective of (1) any claim as to the Agreements’ validity, regularity or enforceability or the lack of authority of Obligor to execute or deliver the Agreements; or (2) any change in or amendment to the Agreements; or (3) any waiver or consent by Counterparty with respect to any provisions thereof; or (4) the absence or existence of any action to enforce the Agreements, or the recovery Attachment Staff Report Item 6B
E-1-2
of any judgment against Obligor or of any action to enforce a judgment against Obligor under the Agreements; or (5) the dissolution, winding up, liquidation or insolvency of Obligor, including any discharge of obligations therefrom; or (6) any similar circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor generally.
Guarantor hereby waives diligence, presentment, demand on Obligor for payment or otherwise (except as provided hereinabove), filing of claims, requirement of a prior proceeding against Obligor and protest or notice, except as provided for in the Agreements with respect to amounts payable by Obligor. If at any time payment under the Agreements is rescinded or must be otherwise restored or returned by Counterparty upon the insolvency, bankruptcy or reorganization of Obligor or Guarantor or otherwise, Guarantor's obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by Counterparty.
Guarantor represents to Counterparty, as of the date hereof, that:
1. it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guarantee and to perform the provisions of this Guarantee on its part to be performed;
2. its execution, delivery and performance of this Guarantee has been and remains duly authorized by all necessary corporate action and does not contravene any provision of its certificate of incorporation or by-laws or any law, regulation or contractual restriction binding on it or its assets;
3. all consents, authorizations, approvals and clearances (including, without limitation, any necessary exchange control approval) and notifications, reports and registrations requisite for its due execution, delivery and performance of this Guarantee have been obtained from or, as the case may be, filed with the relevant governmental authorities having jurisdiction and remain in full force and effect and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance; and
4. this Guarantee is its legal, valid and binding obligation enforceable against it in accordance with its terms except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' right or by general equity principles.
Each of the provisions contained in this Guarantee shall be severable and distinct from one another and if one or more of such provisions are now or hereafter becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Guarantee shall not in any way be affected, prejudiced or impaired thereby.
By accepting this Guarantee and executing the Agreements, Counterparty agrees that Guarantor shall be subrogated to all rights of Counterparty against Obligor in respect of any amounts paid by Guarantor pursuant to this Guarantee, provided that Guarantor shall be entitled to enforce or to receive any payment arising out of or based upon such right of subrogation only to the extent that it has paid all amounts payable by Obligor under the Agreements.
Attachment Staff Report Item 6B
E-1-3
This Guarantee shall expire or terminate, as applicable, on the earliest of (i) March 31, 2053 (ii) the earlier termination of the Prepaid Agreement and (iii) the last day of any Reset Period (as defined in the Prepaid Agreement) if Guarantor (A) has delivered to Counterparty a termination notice of this Guarantee, and (B) no assignment has been effected pursuant to clause (c) of Article XIII of the Prepaid Agreement prior to the end of the Reset Period during which such termination notice was delivered. Such expiration or termination shall not, however, affect or reduce Guarantor's obligation hereunder for any liability of Obligor with respect to obligations and liabilities incurred prior to such expiration or termination.
This Guarantee shall be governed by and construed in accordance with the laws of the State of New York, without reference to its choice of law doctrine. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Agreements.
MORGAN STANLEY
By:
Name:
Title:
Address: 1585 Broadway
New York, NY 10036
Attn: Treasurer
Fax No.: 212-762-0337
Phone: 212-761-4000
Attachment Staff Report Item 6B
F-1
EXHIBIT F
PRICING AND OTHER TERMS
Delivery Period: The period beginning on [____] and ending on [____] or earlier upon the Early Termination Date
Minimum Discount: $[____]/MWh for the Initial Reset Period (as defined in the Re-Pricing Agreement), and thereafter an amount no less than $[____]/MWh
Monthly Discount: $[____]/MWh during the Initial Reset Period (as defined in the Re-Pricing Agreement), and for each Month of a Reset Period thereafter, the Monthly Discount portion of the Available Discount for such Reset Period determined by the Calculation Agent (as defined in the Bond Indenture) pursuant to the Re-Pricing Agreement
Prepayment: $[____]
Prepayment Outside Date: [____], 2023
Remarketing Fee: $0.50/MWh for any Energy remarketed pursuant to a Monthly Remarketing Notice
Specified Fixed Price: $[____]/MWh
Specified Discount: For Energy delivered [____] – [____]: $[____]/MWh For Energy delivered [____] – [____]: to be the Available Discount (as defined in the Re-Pricing Agreement) for such Reset Period
ESR Fee: $[____]/MWh
Swap Fee: $0.[____]/MWh
Attachment Staff Report Item 6B
EXHIBIT G
RECEIVABLES PURCHASES
[To be attached.]
Attachment Staff Report Item 6B
SM Draft 26 April 2023
RE-PRICING AGREEMENT
This RE-PRICING AGREEMENT, dated as of [____], 2023 (this “Agreement”), is entered into by and between Morgan Stanley Energy Structuring, L.L.C. (“MSES”) and California Community Choice Financing Authority (“Issuer”). MSES and Issuer are sometimes referred to herein individually as a “Party” and collectively as the “Parties.” Capitalized terms used herein shall have the meanings set forth in Section 1.
WHEREAS, Issuer is issuing the [Series 2023] Bonds pursuant to the Indenture in order to provide funds to acquire the Energy Supply from MSES pursuant to the Prepaid Agreement; and WHEREAS, in connection with its acquisition of the Energy Supply, Issuer has entered into the Power Supply Contract with the Project Participant providing for the sale of the Energy Supply by Issuer to the Project Participant; and
WHEREAS, the price payable by the Project Participant for the Energy Supply includes a discount to the index price set forth in the applicable Power Supply Contract, which discount has been established for the Initial Reset Period therein and will be re-established for each subsequent Reset Period under the terms and conditions set forth herein; and WHEREAS, under the terms of the Power Supply Contract, prior to each Reset Period after the Initial Reset Period, the Project Participant may elect to have its Energy Supply remarketed if the Available Discount established for such Reset Period is less than the Minimum Discount specified in the Power Supply Contract;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
Section 1. Definitions. When used herein, the following capitalized terms shall have the following meanings:
“Additional Reduction Amount” has the meaning set forth in Appendix A. “Alternative Supplier” means any Person that (i) has a Credit Rating equal to or better than Morgan Stanley’s Credit Rating and (ii) agrees that, if the Prepaid Agreement and other related agreements entered into by Prepaid Supplier (the “Prepaid Supplier Documents”) are novated to it, it will deliver an opinion or opinions of counsel in a form acceptable to Issuer, Bond Counsel (as defined in the Bond Indenture) and Swap Counterparty (as defined in the Prepaid Contract) that each of the Prepaid Supplier Documents are duly authorized by and enforceable against it. “Available Discount” has the meaning specified in the Power Supply Contract and also means, for each Reset Period, the final amount determined by MSES as of the applicable Bond Pricing Date pursuant to Appendix A, expressed in cents per MWh (rounded down to the nearest one-half cent).
“Bond Closing Date” means the date on which the Bonds are issued pursuant to the Indenture.
Attachment Staff Report Item 6C
2 “Bond Pricing Date” means, for any Reset Period, the date upon which the interest rate and yield on the Bonds is established pursuant to the applicable bond remarketing agreement or bond purchase agreement.
“Bonds” has the meaning set forth in the Indenture.
“Business Day” has the meaning set forth in the Indenture. “Contract Quantity” has the meaning set forth in the Prepaid Agreement. “Credit Rating” means the credit rating assigned by of Moody’s Investors Service, Inc. and Fitch Ratings, Inc. (and any successors thereto) to a Person’s senior, unsecured long-term debt obligations (not supported by third party credit enhancements). “Delivery Period” has the meaning set forth in the Prepaid Agreement. “Delivery Period Implied Rate” has the meaning set forth in Appendix A. “Determination Month” has the meaning set forth in Appendix A. “Energy” has the meaning set forth in the Prepaid Agreement. “Energy Supply” means with respect to the Prepaid Agreement, the aggregate Contract Quantities of Energy to be delivered by MSES under the Prepaid Agreement. “Estimated Available Discount” has the meaning set forth in Section 5(a). “Excess Amount” is the positive difference, if any, of the Prior Remaining Energy Value less the New Remaining Delivery Cost.
“Fixed Price” means $[____]/MWh.
“Fixed Rate” has the meaning set forth in Appendix A.
“Guarantor” means Morgan Stanley, a Delaware corporation, in its capacity as the guarantor of MSES’s payment obligations under the Prepaid Agreement. “Indenture” means the Trust Indenture, dated as of the first day of the month of the Bond Closing Date, between Issuer and the Trustee, as the same may be amended or supplemented from time to time pursuant to one or more Supplemental Indentures, or any other trust indenture under which refunding bonds are issued and secured.
“Initial Reset Period” means the period from [____] until [____]. “Interest Rate Period” has themeaning set forth in the Indenture, provided that if the Bonds are Outstanding in two or more Series with separate, concurrent and co-terminus Interest Rate Periods, “Interest Rate Period” shall mean all such Interest Rate Periods collectively. “Mandatory Purchase Date” has the meaning set forth in the Indenture.
Attachment Staff Report Item 6C
3 “Minimum Discount” has the meaning set forth in the Power Supply Contract. “Monthly Contract Quantity” means, for any month, the aggregate Contract Quantities scheduled to be delivered by MSES to Issuer under the Prepaid Agreement for such month. “Monthly Discount” has the meaning set forth in Section 6(b). “Morgan Stanley Guarantee” has the meaning set forth in the Prepaid Agreement. “MSES” has the meaning set forth in the preamble.
“MWh” means megawatt-hour.
“New Remaining Delivery Cost” has the meaning set forth in Appendix A. “New Reset Period” has the meaning set forth in Appendix A. “Old Reset Period” has the meaning set forth in Appendix A. “Outstanding” has the meaning set forth in the Indenture. “Participant Notification Deadline Day” means, with respect to each Reset Period, the last day on which Issuer is permitted to provide a notice of the Estimated Available Discount to the Project Participant under the Power Supply Contract.
“Person” means any individual, corporation, partnership, joint venture, trust, unincorporated organization, or government agency.
“Prepaid Agreement” means the Prepaid Energy Sales Agreement, dated as of [____], 2023, between MSES and Issuer, as the same may be amended or supplemented in accordance with its terms.
“Prepaid Supplier Documents” has the meaning specified in the definition of Alternative Supplier.
“Prior Remaining Energy Value” has the meaning set forth in Appendix A. “Project Participant” has the meaning set forth in the Indenture. “Power Supply Contract” means, individually or collectively, any or all of the separate Energy Supply Agreements, relating to the Energy Project as defined in the Indenture, between Issuer and the Project Participant, as each may be amended from time to time. “Re-pricing Date” means, for any Reset Period, any Business Day not earlier than ninety (90) days prior to the earlier of (i) the date on which the Bonds then Outstanding may be called for optional redemption in accordance with the Indenture and (ii) the day following the last day of the Reset Period then in effect.
“Remaining Delivery Cost” has the meaning set forth in Appendix A.
Attachment Staff Report Item 6C
4 “Remaining Energy Value” has the meaning set forth in Appendix A. “Reset Period” means the Initial Reset Period and each period determined pursuant to Section 3.
“Reset Period Implied Rate” has the meaning set forth in Appendix A. “Series” means Bonds designated as a Series and authorized to be issued by Issuer pursuant to Section 2.01 of the Indenture.
[“Series 2023 Bonds” has the meaning set forth in the Indenture.] “SOFR” means the Secured Overnight Financing Rate administered by the Federal Reserve Bank of New York (or a successor administrator) and provided on the New York Fed’s Website. “Supplemental Indenture” means any indenture supplemental to or amendatory of the Indenture executed and delivered by Issuer and the Trustee in accordance with Article X of the Indenture.
“Termination Payment” has the meaning set forth in the Prepaid Agreement. “Termination Payment Adjustment Schedule” has the meaning set forth in the Prepaid Agreement.
“Trustee” means the trustee under the Indenture and its successors and assigns.
Section 2. Purpose of Agreement and Intention of Parties. The Parties are entering into this Agreement in connection with the execution and delivery of the Indenture, the Prepaid Agreement and the other transaction documents for the purpose of establishing the methodology for determining the Available Discount for each Reset Period following the Initial Reset Period.
Section 3. Reset Periods. Each Reset Period shall commence on the next day that followsthe last day of the Initial Reset Period or, subsequently, the immediately prior Reset Period.
The length of each Reset Period shall be the remaining term of the Delivery Period unless MSES elects, in its sole discretion following consultation with Issuer, a shorter period, which period may not be shorter than the lesser of (a) three (3) years or (b) the remaining term of the Delivery Period without Issuer’s consent; provided further that:
(i) The Initial Reset Period and each subsequent Reset Period (other than the final Reset Period) shall end the last day of the month preceding the end of the applicable Interest Rate Period. For example, if the Interest Rate Period ends October 31, the last day of the Reset Period would end September 30, and (ii) the final Reset Period shall end on the last day of the Delivery Period.
Section 4. Morgan Stanley Guarantee. The Morgan Stanley Guarantee terminates on the earliest of (i) the end of the Delivery Period; (ii) the earlier termination of the Prepaid Agreement (including through the date of any Termination Payment thereunder); and (iii) the last day of any Reset Period, if the Guarantor provides written notice of termination of the Morgan Stanley Guarantee. Unless the Morgan Stanley Guarantee is terminated, the Morgan Stanley Attachment Staff Report Item 6C
5 Guarantee shall remain in effect for the next Reset Period at the time of, or prior to, the delivery of any refunding or remarketing bonds.
Section 5. Estimated Available Discount; Alternative Suppliers. (a) Initial Estimated Available Discount.
(i) Initial Estimate by MSES. Not later than (A) eight months prior to a Mandatory Purchase Date that occurs in in February, May, August or November and (B) seven months prior a Mandatory Purchase Date that occurs in any other month, MSES will provide an estimate of the length of such Reset Period, the Reset Period Implied Rate, the difference between the Reset Period Implied Rate and SOFR for such period and the Available Discount (the “Estimated Available Discount”) that are anticipated to apply to such Reset Period. In determining the Estimated Available Discount, MSES shall utilize the methodology set forth in Appendix A. After providing an initial estimate, MSES may provide updated estimates on its own initiative or upon a subsequent request from Issuer.
(ii) Cooperation by MSES. MSES acknowledges that Issuer will consult with its financial advisor in connection with the establishment of each Reset Period, and MSES agrees that it will reasonably cooperate with Issuer and its financial advisor in connection therewith consistent with the manner in which it has cooperated with Issuer and its financial advisor in connection with the establishment of the pricing for the Initial Reset Period.
(b) Alternative Estimated Available Discounts; Achievement of Bond Pricing Date. (i) Estimates from Alternative Suppliers. Only after having received the Estimated Available Discount from MSES, Issuer may at its discretion solicit Alternative Suppliers to provide Estimated Available Discounts for such Reset Period. Not later than (A) 165 days prior to a Mandatory Purchase Date that occurs in in February, May, August or November and (B) 135 days prior to a Mandatory Purchase Date that occurs in any other month, Issuer may notify MSES that an Alternative Supplier has provided an Estimated Available Discount that materially exceeds MSES’s previously provided Estimated Discount Rate (an “Alternative Estimated Available Discount”), which notice must include (1) the identity of the Alternative Supplier, (2) the Alternative Estimated Available Discount, and (3) certification by Issuer’s financial advisor of a reasonable expectation of the Alternative Supplier’s ability to deliver such a proposed Estimated Alternative Discount based on then-current market conditions and to achieve a successful Bond closing for such upcoming Reset Period.
(ii) MSES Option to Match Alternative Estimated Available Discount. Within 15 days of receiving notice of an Alternative Estimated Available Discount meeting the foregoing requirements, MSES will notify Issuer if Guarantor could, based on then-current market conditions, match the Alternative Estimated Available Discount. If MSES so notifies Issuer, MSES will thereafter exercise commercially reasonable efforts to meet or exceed the Alternative Estimated Alternative Discount as of the Bond Pricing Date for the next Reset Period and Issuer will reasonably cooperate Attachment Staff Report Item 6C
6 with MSES in connection therewith; provided that Issuer acknowledges the actual Available Discount will be determined on such Bond Pricing Date based on then-current market conditions but will remain subject to the Minimum Discount requirements.
(iii) Conditional Novation to Alternative Supplier. If MSES does not provide a notice of Guarantor’s ability to meet the Estimated Available Discount in accordance with the foregoing, then MSES shall cooperate with Issuer and the Alternative Supplier to cause the Prepaid Supplier Documents to be novated to the Alternative Supplier as of the first day of the next Reset Period, which novation must be conditionally binding not later than two months prior to the Mandatory Purchase Date, subject only to successful closing of the new Bonds. Following the execution of such novation documents, MSES and Guarantor will have no obligations under any transaction documents for the next Reset Period other than those obligations that would have existed had the Prepaid Agreement terminated at the end of the then-current Reset Period. In the event of a Failed Remarketing (as defined in the Indenture) by the Alternative Supplier, MSES, may at its option and if all parties are in agreement, elect to attempt to remarket the transaction if MSES deems there is sufficient time to do so prior to the Mandatory Purchase Date. (c) Notices to Project Participant. Issuer shall notify the Project Participant of the Estimated Available Discount and any updates thereto under the relevant provisions of the Power Supply Contract. Unless MSES and Issuer otherwise agree, in any notice of Estimated Available Discount provided to a Project Participant prior to the Participant Notification Deadline Day, Issuer shall clearly indicate in such notice that the notice is provisional and is not intended to, and does not, trigger a Project Participant’s right to provide a Remarketing Notice (as defined in the Power Supply Contract).
Section 6. Determination of Available Discount and Monthly Discount. (a) MSES shall determine on the Bond Pricing Date the Available Discount for such Reset Period (expressed in cents per MWh and rounded down to the nearest one-half cent) in accordance with the methodology set forth in Appendix A. (b) For each Reset Period after the Initial Reset Period, MSES shall determine the monthly discount portion of the Available Discount for such Reset Period (the “Monthly Discount”). Issuer and MSES then shall mutually agree upon the projected Annual Refund (as defined in the Power Supply Contract) for such Reset Period, which shall be determined consistent with Section 3.2(c) of the Power Supply Contract and shall be the remaining portion of the Available Discount. MSES and Issuer acknowledge that the purpose of retaining a portion of the Available Discount for distribution in the Annual Refund is to mitigate the risk to bondholders of reduced or lost investment income on any investments held under the Indenture.
Section 7. Termination Payment Adjustment Schedule; Monthly Quantity Changes. (a) For any Reset Period, MSES may modify the Termination Payment Adjustment Schedule to reflect changes in the Remaining Energy Values set forth on Attachment 1 to Appendix A and otherwise, provided that such modifications are sufficient to meet the redemption requirements of the Bonds to be sold for such Reset Period.
Attachment Staff Report Item 6C
7 (b) Issuer and MSES agree that the Prepaid Agreement will be amended to reflect any reductions to Monthly Contract Quantities determined pursuant to Appendix A.
Section 8. Timing. The dates and time intervals stated in this Agreement may be waived or altered by the mutual agreement of the Parties.
Section 9. Termination. This Agreement shall terminate automatically upon termination of the Prepaid Agreement for any reason, including but not limited to election by the Guarantor to terminate the Morgan Stanley Guarantee pursuant to its terms. For the avoidance of doubt, nothing in this Agreement or any other agreement restricts the ability of Guarantor to terminate the Morgan Stanley Guarantee as set forth in the Morgan Stanley Guarantee, effective as of the end of a Reset Period, which election to terminate may be made by Guarantor in its sole and absolute discretion. Any such termination shall not be considered a failure by MSES to act in good faith hereunder, regardless of whether the Parties have previously discussed pricing that may apply to any Reset Period or otherwise taken the steps required under this Agreement. MSES shall not be required to provide estimates hereunder or otherwise take or continue the steps toward determining pricing hereunder for any Reset Period if the Guarantor exercises its right to terminate the Morgan Stanley Guarantee.
Section 10. Communications.
(a) All notices, requests and other communications shall be in writing (including facsimile, electronic mail or other electronic means) provided to the address and/or electronic mail address set forth below:
MSES: As provided in the Prepaid Agreement
Issuer: As provided in the Prepaid Agreement
(b) Each Party may change the address for communications to it pursuant to the terms of the referenced agreement, which notice shall be effective when delivered at the address specified herein.
Section 11. Miscellaneous.
(a) Miscellaneous. Article X [Dispute Resolution] and Sections 18.3 [Entirety; Amendments], 18.4 [Governing Law], 18.5 [Non-Waiver], 18.6 [Severability], 18.7 [Exhibits],
18.9 [Relationship of Parties], 18.12 [Limitation of Liability] and 18.13 [Counterparts] of the Prepaid Agreement are incorporated by reference into this Agreement, mutatis mutandis, as if fully set forth herein.
(b) Amendments to Power Supply Contract and Indenture. Issuer shall not agree to or consent to any modification, supplement, amendment or waiver of any provision of the Power Supply Contract or the Indenture that affects the meaning of any defined term herein or the operation of any provision hereof.
(c) Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned Attachment Staff Report Item 6C
8 by either Party hereto without the prior written consent of the other Party; provided that each Party acknowledges and agrees that the other Party shall assign all of its right, title and interest in, to and under this Agreement in connection with any assignment by either Party of its right, title and interest in, to and under the Prepaid Agreement to the assignee thereof, which assignment shall constitute a novation.
[Separate Signature Page(s) Attached]
Attachment Staff Report Item 6C
Signature Page to Re-Pricing Agreement
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
MORGAN STANLEY ENERGY
STRUCTURING, L.L.C.
By:____________________________
Name:_________________________
Title:__________________________
CALIFORNIA COMMUNITY CHOICE
FINANCING AUTHORITY
By:____________________________
Name:_________________________
Title:__________________________
Attachment Staff Report Item 6C
Appendix A – Page 1
Appendix A
MSES will undertake the following steps in determining the Available Discount for any Reset Period (each, a “New Reset Period”):
• Step 1: Determine the “Prior Remaining Energy Value”
o MSES will determine the Remaining Energy Value for the last month of the current Reset Period (the “Old Reset Period”) based on Attachment 1 hereto, as such Attachment initially existed or was last updated at the beginning of the prior Reset Period (the “Prior Remaining Energy Value”). o “Remaining Energy Value” means, for any month, the amount set forth on Attachment 1 of Appendix A as the “Remaining Energy Value” for such month, as Attachment 1 may be updated pursuant to this Appendix A in connection with the establishment of any new Reset Period. • Step 2: MSES will specify the length of the New Reset Period pursuant to Section 3 of the Agreement
• Step 3: MSES will specify a Reset Period Implied Rate for the New Reset Period and a Delivery Period Implied Rate
o “Reset Period Implied Rate” means, for any Reset Period other than the Initial Reset Period, a fixed rate offered by MSES in its sole and absolute discretion as of the Bond Pricing Date for such Reset Period at which MSES or Guarantor determines (in its sole discretion) that it would be able to acquire, as of the date of determination, funding from other sources comparable to the funding provided by the Prepaid Agreement as of the date of determination. In determining such a rate, the Guarantor and MSES may consider all relevant factors, including (x) the nature of the source of funding provided by the Prepaid Agreement, including any applicable regulatory or capital charges, (y) the tenor and possibility of early termination of the Prepaid Agreement, and (z) any other unique attributes of the Prepaid Agreement funding relative to other sources available to the Guarantor.
o “Delivery Period Implied Rate” means, for any remaining portion of the Delivery Period that is not covered by a Reset Period, a fixed rate determined by MSES in its sole and absolute discretion as of the Bond Pricing Date for such Reset Period which MSES or Guarantor determines (in its sole discretion) represents an appropriate taxable market discount rate as of the Bond Pricing Date.
• Step 4: Determine the “New Remaining Delivery Cost”
o MSES will determine the “Remaining Delivery Cost” for each month of the Delivery Period after the Old Reset Period. The Remaining Delivery Cost for the first month of the New Reset Period is the “New Remaining Delivery Cost”.
o “Remaining Delivery Cost” means, for the first month of any New Reset Period (the “Determination Month”), an amount calculated by MSES equal to Attachment Staff Report Item 6C
Appendix A – Page 2
the net present value of a stream of monthly payments equal to the Monthly Contract Quantities multiplied by the Fixed Price for the remainder of the Delivery Period (including such Determination Month), discounted at the Reset Period Implied Rate for the New Reset Period and the Delivery Period Implied Rate for the remainder of the Delivery Period after the New Reset Period.
• Step 5: Additional Reduction Amount or changing Monthly Contract Quantities o If the Prior Remaining Energy Value is less than the New Remaining Delivery Cost:
▪ If the Reset Period will go to the end of the Delivery Period, MSES will reduce the Monthly Contract Quantities to zero in as many months as necessary at the end of the Delivery Period (and, to the extent necessary, reduce the Monthly Contract Quantities in the last remaining month of the Reset Period to a quantity greater than zero) such that the Prior Remaining Energy Value is equal to the New Remaining Delivery Cost.
▪ If the Reset Period will end prior to the end of the Delivery Period, MSES in its sole discretion may reduce the Monthly Contract Quantities as provided above.
o If the Prior Remaining Energy Value is greater than the New Remaining Delivery Cost:
▪ Subject to the following bullet, MSES will pay to Issuer the amount, if any, by which (A) the Prior Remaining Energy Value exceeds (B) the New Remaining Delivery Cost (the “Additional Reduction Amount”) on the first day of the contemplated Interest Rate Period, which payment shall be applied by Issuer to the retirement of Bonds. ▪ Notwithstanding the immediately prior bullet, MSES may elect to retain a portion of the Excess Amount if (i) the Reset Period will end prior to the end of the Delivery Period, (ii) such retention does not reduce the Available Discount, and (iii) doing so is consistent with the amortization requirement of the Bonds. If MSES elects to retain a portion of such Excess Amount pursuant to the foregoing proviso, the Additional Reduction Amount shall be the portion of such Excess Amount that MSES elects to pay.
o Any Additional Reduction Amount or changes in Monthly Contract Quantities will then be included in calculating the New Remaining Delivery Cost. An Additional Reduction Amount will reduce the Prior Remaining Energy Value for this purpose.
o Once the New Reset Period goes into effect, Attachment 1 hereto will be amended such that the Remaining Energy Value for each month in the New Reset Period and the remainder of the Delivery Period is equal to the Remaining Delivery Cost for such month as determined under Step 4 and updated under this Step 5.
Attachment Staff Report Item 6C
Appendix A – Page 3
• Step 6: Determine the Fixed Rate for the Bonds for the term of such contemplated Interest Rate Period
o The remarketing agent or underwriter of the Bonds for such contemplated Interest Rate Period will specify the Fixed Rate.
o “Fixed Rate” means, for any New Reset Period, the fixed rate or rates of interest payable by Issuer with respect to a Series of Bonds or, in the case of a Series of Variable Rate Bonds (as defined in the Indenture), the fixed rate payable by Issuer under the related fixed rate swap transaction, which Fixed Rates will be determined on the Bond Pricing Date at a rate sufficient to enable all the Bonds to be sold or remarketed on such Bond Pricing Date in accordance with the Indenture (which sale price may include a premium or discount to par), as determined based on market information then available. • Step 7: Determine Monthly Discount Portion of Available Discount o MSES will determine the Monthly Discount portion of the Available Discount for the Reset Period based on the expected differences between monthly revenues and monthly debt service and other obligations of the Energy Project (as defined in the Indenture).
• Step 8: Determine Annual Refund Portion of Available Discount o MSES and Issuer shall mutually agree upon the projected Annual Refund (as defined in the Power Supply Contract) for the Reset Period, which shall be determined consistent with Section 3.2 of the Power Supply Contract and shall be the remaining portion of the Available Discount.
Attachment Staff Report Item 6C
Attachment 1 to Appendix A
Attachment 1 to Appendix A
REMAINING ENERGY VALUES
[To be attached.]
Attachment Staff Report Item 6C
SM Draft 19 May 2023
POWER SUPPLY CONTRACT
between
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
and
EAST BAY COMMUNITY ENERGY AUTHORITY
Dated as of [____], 2023
Attachment Staff Report Item 6D
TABLE OF CONTENTS
Page
-i-Article I Definitions...................................................................................................................... 2 Section 1.1 Defined Terms...................................................................................... 2 Section 1.2 Definitions; Interpretation.................................................................. 10 Article II Execution Date and Delivery Period; Nature of Energy Project.......................... 10 Section 2.1 Execution Date; Delivery Period ....................................................... 10 Section 2.2 Termination Due to Failure to Issue Bonds or Provide Minimum Discount ............................................................................ 10 Section 2.3 Nature of Energy Project.................................................................... 11 Section 2.4 Pledge of this Agreement................................................................... 11 Article III Sale and Purchase .................................................................................................... 11 Section 3.1 Sale and Purchase of Energy.............................................................. 11 Section 3.2 Pricing ................................................................................................ 11 Section 3.3 No Obligation to Take Base Energy .................................................. 12 Section 3.4 Reset Period Remarketing.................................................................. 12 Article IV Failure to Deliver or Take Energy ......................................................................... 13 Article V Transmission and Delivery; Communications ....................................................... 13 Section 5.1 Delivery of Energy............................................................................. 13 Section 5.2 Scheduling.......................................................................................... 14 Section 5.3 Title and Risk of Loss........................................................................ 14 Section 5.4 PCC1 Product and Long-Term PCC1 Product .................................. 14 Section 5.5 Deliveries within CAISO or Another Balancing Authority............... 16 Section 5.6 Assigned Products.............................................................................. 16 Article VI Partial Assignments of PPAs .................................................................................. 16 Section 6.1 Future PPA Assignments................................................................... 16 Section 6.2 Updates to Exhibits A-1 and A-2....................................................... 17 Article VII Use of Energy.......................................................................................................... 17 Section 7.1 Tax Exempt Status of the Bonds........................................................ 17 Section 7.2 Priority Energy ................................................................................... 17 Section 7.3 Remarketing Sales.............................................................................. 17 Section 7.4 Qualifying Use ................................................................................... 18 Section 7.5 Remediation ....................................................................................... 18 Article VIII Representations and Warranties; Additional Covenants ................................. 19 Attachment Staff Report Item 6D
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-ii-Section 8.1 Representations and Warranties of the Parties................................... 19 Section 8.2 Warranty of Title................................................................................ 20 Section 8.3 Disclaimer of Warranties................................................................... 20 Section 8.4 Continuing Disclosure ....................................................................... 20 Article IX Taxes ......................................................................................................................... 21 Article X Dispute Resolution..................................................................................................... 21 Section 10.1 Arbitration.......................................................................................... 21 Section 10.2 Judicial Reference.............................................................................. 21 Article XI Force Majeure .......................................................................................................... 23 Section 11.1 Applicability of Force Majeure.......................................................... 23 Section 11.2 Settlement of Labor Disputes............................................................. 24 Article XII Governmental Rules and Regulations.................................................................. 24 Section 12.1 Compliance with Laws....................................................................... 24 Section 12.2 Contests.............................................................................................. 24 Section 12.3 Defense of Agreement ....................................................................... 24 Article XIII Assignment ............................................................................................................ 24 Article XIV Payments................................................................................................................ 25 Section 14.1 Monthly Statements........................................................................... 25 Section 14.2 Payment.............................................................................................. 25 Section 14.3 Payment of Disputed Amounts; Correction of Index Price ............... 26 Section 14.4 Late Payment...................................................................................... 26 Section 14.5 Audit; Adjustments............................................................................ 26 Section 14.6 Netting; No Set-Off............................................................................ 27 Section 14.7 Source of Purchaser’s Payments........................................................ 27 Section 14.8 Rate Covenant.................................................................................... 27 Section 14.9 Pledge of CCA Revenues................................................................... 27 Section 14.10 Financial Responsibility..................................................................... 27 Article XV [Reserved]................................................................................................................ 28 Article XVI Notices.................................................................................................................... 28 Article XVII Default; Remedies; Termination........................................................................ 28 Section 17.1 Issuer Default..................................................................................... 28 Section 17.2 Purchaser Default............................................................................... 29 Attachment Staff Report Item 6D
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-iii-Section 17.3 Remedies Upon Default..................................................................... 29 Section 17.4 Termination of Prepaid Agreement.................................................... 30 Section 17.5 Limitation on Damages...................................................................... 31 Article XVIII Miscellaneous ..................................................................................................... 31 Section 18.1 Indemnification Procedure................................................................. 31 Section 18.2 Deliveries........................................................................................... 32 Section 18.3 Entirety; Amendments....................................................................... 32 Section 18.4 Governing Law .................................................................................. 32 Section 18.5 Non-Waiver........................................................................................ 32 Section 18.6 Severability ........................................................................................ 32 Section 18.7 Exhibits.............................................................................................. 32 Section 18.8 Winding Up Arrangements................................................................ 33 Section 18.9 Relationships of Parties...................................................................... 33 Section 18.10 Immunity............................................................................................ 33 Section 18.11 Rates and Indices............................................................................... 33 Section 18.12 Limitation of Liability........................................................................ 33 Section 18.13 Counterparts....................................................................................... 33 Section 18.14 Third Party Beneficiaries; Rights of Trustee ..................................... 34 Section 18.15 Waiver of Defenses............................................................................ 34 Exhibits
Exhibit A-1 - Base Energy Hourly Quantities
Exhibit A-2 - EPS Energy Period Annual Quantity and Monthly Projected Quantity Exhibit B - Notices
Exhibit C - Form of Remarketing Election Notice
Exhibit D - Form of Federal Tax Certificate
Exhibit E - Form of Opinion of Counsel to Purchaser
Exhibit F - Monthly Discount
Exhibit G - Form of Closing Certificate
Exhibit H - Form of Remediation Certificate
Attachment Staff Report Item 6D
1 POWER SUPPLY CONTRACT
This Power Supply Contract (hereinafter “Agreement”) is made and entered into as of [____], 2023 (the “Execution Date”), by and between California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended) (“Issuer”) and East Bay Community Energy Authority, a joint powers authority and a community choice aggregator organized under the Laws of the State of California (“Purchaser”).
W I T N E S S E T H:
WHEREAS, Issuer has planned and developed a project to acquire long-term Energy supplies from Morgan Stanley Energy Structuring, L.L.C.(“MSES”) pursuant to a Prepaid Energy Sales Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Prepaid Agreement”) to meet a portion of the Energy supply requirements of Purchaser through an energy prepayment project (the “Energy Project”); and WHEREAS, Issuer will finance the prepayment under the Prepaid Agreement, and the other costs of, the Energy Project by issuing the Bonds; and WHEREAS, Purchaser is a joint powers authority organized pursuant to the provisions of Title 1, Division 7, Chapter 5, Article 1 (Section 6500 et seq.) of the California Government Code and a community choice aggregator pursuant to the provisions of Section 366.2 of the California Public Utilities Code with authority to sell electricity to retail electric consumers within its service area; and
WHEREAS, Purchaser is agreeable to purchasing a portion of its Energy requirements from Issuer under the terms and conditions set forth in this Agreement and Issuer is agreeable to selling to Purchaser such supplies of Energy under the terms and conditions set forth in this Agreement; and
WHEREAS, concurrently with the execution of this Agreement, Purchaser has assigned to MSES certain Assigned Rights and Obligations, including the right to receive Assigned Product, which Assigned Product will be delivered to Issuer under the Prepaid Agreement and then resold by Issuer hereunder; and
WHEREAS, as a condition precedent to the effectiveness of the Parties’ obligations under this Agreement, Issuer shall have entered into the Prepaid Agreement and shall have issued the Bonds.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Issuer and Purchaser (the “Parties” hereto; each is a “Party”) agree as follows:
Attachment Staff Report Item 6D
2 ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. The following terms, when used in this Agreement and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Affiliate” means, with respect to either Party, any entity which is a direct or indirect parent or subsidiary of such Party or which directly or indirectly (i) owns or controls such Party, (ii) is owned or controlled by such Party, or (iii) is under common ownership or control with such Party. For purposes of this definition, “control” of an entity means the power, directly or indirectly, either to (a) vote 50% or more of the securities having ordinary voting power for the election of directors or Persons performing similar functions or (b) direct or cause the direction of the management and policies, whether by contract or otherwise. “Agreement” has the meaning specified in the preamble and shall include exhibits, recitals and attachments referenced herein and attached hereto and all amendments, supplements and modifications hereto and thereto.
“Annual Quantity” means, with respect to each Contract Year of the Delivery Period, the quantity (in MWh) of Assigned Product for such Contract Year as set forth on Exhibit A-2 (as such Exhibit A-2 may be updated from time to time in accordance with Error! Reference source not found.); provided that the Annual Quantity for any Contract Year shall be reduced by the aggregate amount of any Base Quantities required to be remarketed under this Agreement for any given Contract Year.
“Annual Refund” means the annual refund, if any, provided to Purchaser and calculated pursuant to the procedures specified in Section 3.2(c). “Applicable Rating Agencies” means, at any given time, each Rating Agency then rating the Bonds.
“Assigned Delivery Point” has the meaning specified in the applicable Assignment Agreement.
“Assigned Energy” has the meaning specified in the applicable Assignment Agreement; provided that any Assigned Energy shall be EPS Compliant Energy as set forth in the Assignment Letter Agreement.
“Assigned Paygo Quantity” means any Assigned Products delivered under this Agreement in excess of the Annual Quantity for any Contract Year. “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 RECsto be delivered to MSCG or MSES pursuant to any Assigned Rights and Obligations.
Attachment Staff Report Item 6D
3 “Assigned Rights and Obligations” means a portion of Purchaser’s rights and obligations under a power purchase agreement assigned pursuant to an Assignment Agreement. “Assignment Agreement” means the Initial Assignment Agreement and any subsequent assignment agreement entered into consistent with the Assignment Letter Agreement. “Assignment Letter Agreement” means that certain Letter Agreement, dated as of the date hereof, by and among MSCG, MSES, Issuer and Purchaser. “Available Discount” means, for each Reset Period, the amount, expressed in cents per MWh (rounded down to the nearest one-half cent), determined by the Calculation Agent pursuant to the Re-Pricing Agreement for such Reset Period. The Available Discount shall equal the sum of the Monthly Discount and any anticipated Annual Refunds for the applicable Reset Period.
“Balancing Authority” has the meaning specified in the CAISO Tariff. “Base Energy” means Firm (LD) Energy.
“Billing Date” has the meaning specified in Section 14.1(b). “Billing Statement” has the meaning specified in Section 14.1(b). “Bond Closing Date” means the first date on which the Bonds are issued pursuant to the Bond Indenture.
“Bond Indenture” means (i) the Trust Indenture to be entered into prior to the commencement of the Delivery Period between Issuer and the Trustee, as supplemented and amended from time to time in accordance with its terms, and (ii) any trust indenture entered into in connection with the commencement of any Interest Rate Period after the initial Interest Rate Period between Issuer and the Trustee containing substantially the same terms as the indenture described in clause (i) and which is intended to replace the indenture described in clause (i) as of the commencement of such Interest Rate Period.
“Bonds” means the bonds issued pursuant to the Bond Indenture. “Business Day” means any day other than (i) a Saturday or Sunday, (ii) a Federal Reserve Bank Holiday, (iii) any other day on which commercial banks in either New York, New York or the State of California are authorized or required by Law to close, or (iv) any other day excluded pursuant to the Bond Indenture.
“CAISO” means California Independent System Operator or its successor. “CAISO Tariff” means CAISO’s FERC-approved tariff, as modified, amended or supplemented from time to time.
“Calculation Agent” has the meaning specified in the Re-Pricing Agreement. “California Long-Term Contracting Requirements” means the long-term contracting requirement set forth in the Clean Energy and Pollution Reduction Act of 2015 (SB Attachment Staff Report Item 6D
4 350), California Public Utilities Code section 399.13(b), and CPUC Decision 17-06-026 and CPUC Decision 18-05-026, as may be modified by subsequent decision of the California Public Utilities Commission or by other Law.
“CCA Revenues” means all charges received for, and all other income and receipts derived by Purchaser from, the operation of its CCA System, including income derived from the sale of electric energy by its CCA System.
“CCA System” means Purchaser’s community choice aggregation program that provides electric energy supply service to retail customers located with its service area. “Claiming Party” has the meaning specified in Section 11.1. “Claims” means all claims or actions, threatened or filed, that directly or indirectly relate to the indemnities provided herein, and the resulting losses, damages, expenses, attorneys’ fees, experts’ fees, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. “Code” means the Internal Revenue Code of 1986, as amended. “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 a Party under this Agreement, 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. “Contract Price” means (i) with respect to Monthly Projected Quantities, (A) the Day-Ahead Market Price during the Initial EPS Energy Period and the Day-Ahead Ahead Average Price during any other EPS Energy Period, minus in each case (B) the Monthly Discount; and (ii) with respect to Monthly Excess Quantities and Assigned Paygo Quantities, the Day-Ahead Market Price during the Initial EPS Energy Period and the Day-Ahead Ahead Average Price during any other EPS Energy Period.
“Contract Quantity” means (i) with respect to Assigned Energy, the Annual Quantity of Assigned Energy set forth in Exhibit A-2 for each Contract Year of the Delivery Period; and (ii) with respect to Base Energy, the Hourly Quantity of Base Energy set forth in Exhibit A-1 for any Month, as such Exhibits A-1 and A-2 shall be updated from time to time in accordance with Error! Reference source not found..
“Contract Year” means each period of 12 Months from [____] until [____] during the Delivery Period.
“Day-Ahead Average Price” means, for any Assigned Energy after the Initial EPS Energy Period, (x) the sum of the Day-Ahead Market Prices for each Pricing Interval in a Month divided by (y) the number of Pricing Intervals in such Month. As used in this definition, “Pricing Interval” means the unit of time for which CAISO establishes a separate price.
Attachment Staff Report Item 6D
5 “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.
“Default Rate” means, as of any date of determination, the lesser of (a) the sum of (i) the rate of interest per annum quoted in The Wall Street Journal (Eastern Edition) under the “Money Rates” section as the “Prime Rate” for such date of determination, plus (ii) one percent per annum, or (b) if a lower maximum rate is imposed by applicable Law, such maximum lawful rate.
“Delivery Hours” means each Hour commencing at 00:00 (PPT) on the first day of the Delivery Period, and each Hour thereafter during the Delivery Period. “Delivery Period” means the period beginning on April 1, 2023 and ending on March 31, 2053; provided that the Delivery Period shall end immediately upon the effective termination date of the Prepaid Agreement or early termination of this Agreement pursuant to Article XVII hereof.
“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 Exhibits A-1 and A-2). “Energy” means three-phase, 60-cycle alternating current electric energy, expressed in MWhs.
“Energy Delivery Point” has the meaning specified in Exhibit A-1. “Energy Project” has the meaning specified in the recitals. “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 Purchaser can contract for and purchase in compliance with EPS requirements that are applicable to Purchaser. “EPS Energy Period” means the Initial EPS Energy Period and any subsequent EPS Energy Period established by a future assignment of a power purchase agreement consistent with the Assignment Letter Agreement.
“Execution Date” has the meaning specified in the preamble. “Federal Tax Certificate” means the executed Federal Tax Certificate delivered by Purchaser in the form attached as Exhibit D.
“FERC” means the Federal Energy Regulatory Commission and any successor thereto.
Attachment Staff Report Item 6D
6 “Firm (LD)” means, with respect to the obligation to deliver Energy, that either Party 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.
“Force Majeure” means an event or circumstance which prevents one Party 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 Purchaser’s markets; (ii) Purchaser’s inability economically to use or resell the Energy purchased hereunder; (iii) the loss or failure of Issuer’s supply except if such loss or failure results from curtailment by a Transmission Provider; or (iv) Issuer’s ability to sell the Energy at a higher price. Neither Party may raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (a) such Party has contracted for firm transmission with such Transmission Provider for the Energy to be delivered to or received at the 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) any invocation of Force Majeure by MSES under the Prepaid Agreement shall constitute Force Majeure in respect of Issuer hereunder; (II) to the extent that (x) a PPA Supplier fails to deliver any Assigned Energy and claims force majeure with respect to such failure to deliver or (y) a PPA Supplier otherwise is unable to deliver any portion of the Annual Quantity due to an event that would be considered Force Majeure under this Agreement if it affected Issuer directly, then such event shall be deemed to constitute Force Majeure in respect of Issuer hereunder; and (III) to the extent that an Assignment Agreement is terminated early, such termination shall constitute Force Majeure with respect to Issuer 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.
“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.
“Hour” means each 60-minute period commencing at 00:00 PPT during the Delivery Period. The term “Hourly” shall be construed accordingly. “Hourly Quantity” means, with respect to each Delivery Hour during the Delivery Period, the quantity (in MWh) of Base Energy set forth on Exhibit A-1 for the Month in which such Delivery Hour occurs (as such Exhibit A-1 may be updated from time to time in accordance with Section 6.2).
Attachment Staff Report Item 6D
7 “Initial Assigned PPA” means that certain Master Power Purchase and Sale Agreement dated February 12, 2018 and the Confirmation thereunder dated as of the date hereof between the Initial PPA Supplier and Purchaser.
“Initial Assignment Agreement” means that certain Limited Assignment Agreement, dated as of the date hereof, by and among Purchaser, MSES and the Initial PPA Supplier.
“Initial EPS Energy Period” means the “Assignment Period” as defined in the Initial Assignment Agreement.
“Initial PPA Supplier” means MSCG.
“Initial Reset Period” means the period beginning on April 1, 2023 and ending on June 30, 2028.
“Interest Rate Period” has the meaning specified in the Bond Indenture. “Issuer” has the meaning specified in the preamble.
“Issuer Default” has the meaning specified in Section 17.1. “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 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, MSES or any successors thereto pursuant to any Assigned Rights and Obligations.
“Minimum Discount” means $4.50 per MWh for the Initial Rate Period and thereafter no less than $3.50 per MWh. Both amounts are inclusive of any projected Annual Refund.
“Month” means, during the Delivery Period, a calendar month. The term “Monthly” shall be construed accordingly.
“Monthly Discount” means (i) for the Initial Reset Period, an amount (when taken together with any Annual Refund) that is not less than the Minimum Discount and is specified in Exhibit F, which Exhibit F shall be provided by Issuer to Purchaser on the Bond Closing Date, and (ii) for each subsequent Reset Period, a portion of the Available Discount for such Reset Period determined by the Calculation Agent pursuant to the Re-Pricing Agreement and set forth in an updated Exhibit F provided by Issuer after such determination. “Monthly Excess Quantity” means, for any Month, the amount, if any, by which the total quantity (in MWh) of Assigned Product delivered hereunder in such Month exceeds the Monthly Projected Quantity for such Month.
Attachment Staff Report Item 6D
8 “Monthly Projected Quantity” means, with respect to each Month of the Delivery Period, the quantity (in MWh) of Assigned Product for such Month as set forth on Exhibit A-2 (as such Exhibit A-2 may be updated from time to time in accordance with Error! Reference source not found.).
“MSCG” means Morgan Stanley Capital Group Inc., a Delaware corporation. “MSES” has the meaning specified in the recitals.
“Municipal Utility” means any Person that (a)(i) is a “governmental person” as defined in the implementing regulations under Section 141 of the Code and any successor provision and owns a natural gas or electric distribution utility (or provides Energy at wholesale to, or that is sold to entities that provide natural gas or Energy at wholesale to, governmental Persons that own such utilities) or (ii) is a community choice aggregator organized under the Laws of the State of California, and (b) agrees in writing to use the Energy purchased by it (or cause such as to be used) for a qualifying use as defined in U.S. Treas. Reg. § 1.148-1(e)(2)(iii). “MWh” means megawatt-hour.
“Non-Priority Energy” means Energy that is not Priority Energy. “Participant Custodial Agreement” means that certain Custodial Agreement, dated as of [____], by and among Purchaser, Issuer, MSES, MSCG and the Participant Custodian. “Participant Custodian” means The Bank of New York Mellon Trust Company, N.A., a national banking association.
“Party” has the meaning specified in the recitals.
“PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1 to be delivered to MSCG, MSES 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. “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. “Potential Remarketing Event” has the meaning specified in Section 3.4(b). “PPA Supplier” means the Initial PPA Supplier and any subsequent supplier who enters into an Assignment Agreement consistent with the terms of the Assignment Letter Agreement.
“PPT” means Pacific Prevailing Time.
“Prepaid Agreement” has the meaning specified in the recitals.
Attachment Staff Report Item 6D
9 “Priority Energy” means the Contract Quantity to be purchased by Purchaser under this Agreement, together with Energy that Purchaser is obligated to take under a long-term agreement, which Energy either (i) has been purchased by Purchaser or a joint action agency in a prepayment transaction using the proceeds of bonds, notes, or other obligations, the interest on which is excluded from gross income for federal income tax purposes, or (ii) is generated using capacity that was constructed using the proceeds of bonds, notes, or other obligations, the interest on which is excluded from gross income for federal income tax purposes (provided that, with respect to clause (ii), Priority Energy shall not include Energy that is generated using capacity that was wholly or partially financed through the monetization of renewable tax credits, whether such monetization is accomplished through a tax equity investment or otherwise, or that is generated from federally owned and operated hydroelectric facilities, including through the United States Army Corps of Engineers and the United States Bureau of Reclamation, and marketed by the Bonneville Power Administration or the Western Area Power Administration). “Project Administration Fee” means the annual fee payable by Purchaser as described in Section 3.2(b).
“Project Participant” has the meaning specified in the Bond Indenture. “Purchaser” has the meaning specified in the preamble.
“Purchaser Default” has the meaning specified in Section 17.2. “Purchaser’s Statement” has the meaning specified in Section 14.1(a). “Qualifying Use Requirements” means, with respect to any Energy delivered under this Agreement, such Energy is used (i) for a “qualifying use” as defined in U.S. Treas. Reg. §
1.148-1(e)(2)(iii), (ii) in a manner that will not result in any “private business use” within the meaning of Section 141 of the Code, and (iii) in a manner that is consistent with the Federal Tax Certificate attached as Exhibit D.
“Rating Agency” has the meaning specified in the Bond Indenture. “Re-Pricing Agreement” means the Re-Pricing Agreement, dated as of the Bond Closing Date, by and between Issuer and MSES.
“Remarketing Election Deadline” means, for any Reset Period, the last date and time by which the Purchaser may provide a Remarketing Election Notice, which shall be 4:00 p.m.
PPT on the 10th day of the Month (or, if such day is not a Business Day, the next succeeding Business Day) prior to the first delivery Month of a Reset Period with respect to which a Potential Remarketing Event has occurred.
“Remarketing Election Notice” has the meaning specified in Section 3.4(b). “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.
Attachment Staff Report Item 6D
10 “Reset Period Notice” has the meaning specified in Section 3.4(a). “Schedule”, “Scheduled” or “Scheduling” means the actions of Issuer, Purchaser and/or their designated representatives, including each Party’s 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. “Transmission Provider(s)” means any entity or entities transmitting or transporting Energy on behalf of Issuer or Purchaser to or from the Delivery Point. “Trustee” means The Bank of New York Mellon Trust Company, N.A., and its successors as Trustee under the Bond Indenture.
“Voided Remarketing Election Notice” has the meaning specified in Section 3.4(b). “WREGIS” means the Western Renewable Energy Generation Information System or its successor.
Section 1.2 Definitions; Interpretation. References to “Articles,” “Sections,” “Schedules” and “Exhibits” shall be to Articles, Sections, Schedules and Exhibits, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the scope of such general statement, term or matter. Any reference herein to any agreement or document includes all amendments, supplements or restatements to and of such agreement or document as may occur from time to time, and any reference to a party to any such agreement includes all successors and assigns of such party thereunder permitted by the terms hereof and thereof.
ARTICLE II
EXECUTION DATE AND DELIVERY PERIOD; NATURE OF ENERGY PROJECT Section 2.1 Execution Date; Delivery Period. Unless this Agreement is terminated pursuant to Article XVII, delivery of Energy under this Agreement shall commence and continue for the Delivery Period.
Section 2.2 Termination Due to Failure to Issue Bonds or Provide Minimum Discount.
Each Party shall have a right to terminate this Agreement with the effect that this Agreement shall be of no further force or effect and the Parties shall have no rights or obligations hereunder if (a) the Bonds are not issued on or before [____], 2023, or (b) Issuer notifies Purchaser that the expected Available Discount for the Initial Reset Period is less than the Minimum Discount.
Attachment Staff Report Item 6D
11 Section 2.3 Nature of Energy Project. Purchaser acknowledges and agrees that Issuer will meet its obligations to provide Energy to Purchaser under this Agreement exclusively through its purchase of long-term supplies of Energy from MSES pursuant to the Energy Project and that Issuer is financing its purchase of such long-term supplies through the issuance of the Bonds. As provided in 0 below, Purchaser shall pay a fixed price for Energy during the Initial EPS Energy Period and thereafter shall pay a floating price, less the Monthly Discount in each case.
Section 2.4 Pledge of this Agreement. Purchaser acknowledges and agrees that Issuer will pledge its right, title, and interest under this Agreement and the revenues to be received under this Agreement (other than revenues attributable to the Project Administration Fee) to secure Issuer’s obligations under the Bond Indenture.
ARTICLE III
SALE AND PURCHASE
Section 3.1 Sale and Purchase of Energy. Issuer agrees to sell and deliver or cause to be delivered to Purchaser, and Purchaser agrees to purchase and take or cause to be taken from Issuer, in each case, on a Firm (LD) basis, the Contract Quantity of Energy pursuant to the terms and conditions set forth in this Agreement. The Parties acknowledge and agree that Issuer’s delivery obligation for (i) Assigned Products will be measured on an annual basis and (ii) Base Energy will be measured on an Hourly basis, as reflected in the definition of Contract Quantity and further set forth in the terms of this Agreement.
Section 3.2 Payments.
(a) For each MWh of Assigned Product delivered to Purchaser, Purchaser shall pay Issuer the applicable Contract Price, provided that (x) Issuer shall owe a payment to Purchaser to the extent that the Contract Price for Energy delivered is negative and (y) Purchaser’s payment of the Retained Payment Amount (as defined in the Participant Custodial Agreement) to the Participant Custodian consistent with the terms of the Participant Custodial Agreement shall satisfy Purchaser’s obligations hereunder with respect to Monthly Excess Quantities and Assigned Paygo Quantities, as applicable.
(b) Issuer shall bill and Purchaser shall pay in January of each year during the Delivery Period a “Project Administration Fee” equal to the result of $[80,000.00] minus the balance of the Administrative Fee Fund (as defined in the Bond Indenture) as of January 1 of such year.
(c) During the term of this Agreement, promptly following completion of the annual audit of Issuer’s financial statements at the end of each fiscal year (currently the twelve-month period ending December 31), Issuer shall compare its revenues (as determined in accordance with the Bond Indenture) and expenses under the Energy Project for that fiscal year.
If this annual comparison demonstrates that such revenues exceeded such expenses during the applicable fiscal year and there are amounts on deposit in the fund established by the Bond Indenture available for such purpose, then Issuer shall make refunds to the Project Participant in the amount available after making allowances for any necessary and appropriate reserves and contingencies (including but not limited to amounts deemed reasonably necessary by Issuer to fund any working capital reserve and to reserve or account for unfunded liabilities, including future Attachment Staff Report Item 6D
12 sinking fund or other principal amortization of the Bonds. As of the Execution Date, the projected Annual Refund for the Initial Rate Period is $0.50 per MWh.
Section 3.3 No Obligation to Take Base Energy. Notwithstanding anything to the contrary in this Agreement, Purchaser shall not be required to purchase and receive any Base Energy hereunder, and Issuer shall cause MSES to remarket any portion of the Contract Quantity that is Base Energy pursuant to the provisions of Exhibit C to the Prepaid Agreement.
Section 3.4 Reset Period Remarketing.
(a) Reset Period Notice. For each Reset Period, Issuer shall provide to Purchaser, at least ten (10) days prior to the Remarketing Election Deadline, formal written notice setting forth (i) the duration of such Reset Period, (ii) the Estimated Available Discount (as defined in the Re-Pricing Agreement) for such Reset Period, and (iii) the applicable Remarketing Election Deadline (a “Reset Period Notice”). Issuer may thereafter update such notice at any time prior to the Remarketing Election Deadline and may extend the Remarketing Election Deadline in its sole discretion in any such update.
(b) Remarketing Election. If the Reset Period Notice (or any update thereto) indicates that the Available Discount in such notice is not at least equal to the Minimum Discount for that Reset Period, then: (i) a “Potential Remarketing Event” shall be deemed to exist, and (ii) Purchaser may, not later than the Remarketing Election Deadline, issue a written notice in the form attached hereto as Exhibit C (a “Remarketing Election Notice”) to Issuer, MSES and the Trustee electing for all of Purchaser’s Energy that would otherwise be delivered hereunder to be remarketed during the applicable Reset Period; provided, however, if the actual Available Discount, as finally determined under the Re-Pricing Agreement, is equal to or greater than the Minimum Discount, then Issuer may, in its sole discretion, elect by written notice to Purchaser to treat such Remarketing Election Notice as void (a “Voided Remarketing Election Notice”). For the avoidance of doubt, in the event that Purchaser issues a Remarketing Election Notice (other than a Voided Remarketing Notice), any rights and obligations assigned to MSCG under the Initial Assigned PPA or a subsequent Assignment Agreement including, without limitation, the right to receive Assigned Energy, shall revert to Purchaser as of the end of the Initial Reset Period or the then-current Reset Period, as applicable.
(c) Final Determination of Available Discount. The Parties acknowledge and agree that the final Available Discount for any Reset Period following the Initial Reset Period will be determined on the applicable Re-Pricing Date (as defined in the Re-Pricing Agreement), and that such Available Discount may differ from the estimate or estimates of such Available Discount provided to Purchaser prior to the applicable Remarketing Election Deadline. Accordingly, the Parties agree that:
(i) the Available Discount for any Reset Period will not be less than the Minimum Discount applicable to such Reset Period, unless Issuer has provided notice of a Potential Remarketing Event to Purchaser in accordance with Section 3.4(b); and (ii) if Purchaser receives notice of a Potential Remarketing Event and has not provided a Remarketing Election Notice prior to the applicable Remarketing Election Deadline, Purchaser shall be deemed to have elected to continue to purchase and receive its Contract Quantity at a Contract Price that reflects the Monthly Discount portion Attachment Staff Report Item 6D
13 of the Available Discount as finally determined on the applicable Re-Pricing Date, plus Purchaser’s right to its share of Annual Refunds, if any, and all delivery and purchase obligations under this Agreement shall continue in full force and effect for the applicable Reset Period.
(d) Resumption of Deliveries. Notwithstanding the issuance of any Remarketing Election Notice for a Reset Period, Purchaser will (i) remain obligated to purchase the Contract Quantities hereunder for each subsequent Reset Period, unless Purchaser issues a new valid Remarketing Election Notice (other than a Voided Remarketing Election Notice) for any such Reset Period in accordance with Section 3.4(b) and (ii) not make any new commitment to purchase Priority Energy during such Reset Period to the extent any such commitment could reasonably be expected to cause, during any portion of the Delivery Period after such Reset Period, Purchaser’s aggregate obligations to purchase Priority Energy (including its obligation to purchase Priority Energy hereunder) to exceed Purchaser’s expected aggregate requirements for Energy that will be used (A) for a “qualifying use” as defined in U.S. Treas. Reg. § 1.148-1(e)(2)(iii) and (B) in a manner that will not result in any “private business use” within the meaning of Section 141 of the Code.
(e) Reduction of Contract Quantity. The Parties recognize and agree that the Contract Quantity may be reduced in a Reset Period pursuant to the re-pricing methodology described in the Re-Pricing Agreement if necessary to achieve a successful remarketing of the Bonds. The Parties agree further that if, pursuant to the Re-Pricing Agreement, Issuer and the Calculation Agent determine in connection with the establishment of any new Reset Period that:
(i) such Reset Period will be the final Reset Period and (ii) such Reset Period will end prior to the end of the original Delivery Period, then (A) Issuer will notify Purchaser, (B) the Delivery Period will be deemed to be modified so that it ends at the end of such Reset Period, and (C) the Contract Quantity for the last Month in such Reset Period may be reduced as provided in the Re-Pricing Agreement.
ARTICLE IV
FAILURE TO DELIVER OR TAKE ENERGY
Notwithstanding anything herein to the contrary, neither Purchaser nor Issuer shall have any liability or other obligation to one another for any failure to Schedule, take, or deliver Assigned Product.
ARTICLE V
TRANSMISSION AND DELIVERY; COMMUNICATIONS
Section 5.1 Delivery of Energy. All Assigned Energy delivered under this Agreement shall be Scheduled at the applicable Assigned Delivery Point and in accordance with the terms of the applicable Assignment Agreement. All other Assigned Product shall be delivered consistent with the terms of the applicable Assignment Agreement. Except as set forth in the two foregoing sentences, Purchaser and Issuer shall have no liability or obligations under this Article V with respect to Assigned Product.
Attachment Staff Report Item 6D
14 Section 5.2 Scheduling. Scheduling of Assigned Energy shall be in accordance with the applicable Assignment Agreement.
Section 5.3 Title and Risk of Loss. Title to the Energy delivered under this Agreement and risk of loss shall pass from Issuer to Purchaser at the Assigned Delivery Point. The transfer of title and risk of loss for all Assigned Product other than Assigned Energy shall be in accordance with the applicable Assignment Agreement; provided that all Assignment Agreements shall provide for the transfer of Renewable Energy Credits in accordance with WREGIS.
Section 5.4 PCC1 Product and Long-Term PCC1 Product. To the extent that any Assigned Product is PCC1 Product or Long-Term PCC1 Product, the following provisions apply:
(a) Eligibility. Seller, and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement that: (i) the Project qualifies and is certified by the CEC as an Eligible Renewable Energy Resource (“ERR”) as such term is defined in Public Utilities Code Section 399.12 or Section 399.16; and (ii) the Project’s output delivered to Buyer qualifies under the requirements of the California Renewables Portfolio Standard. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law. [STC 6, Non-Modifiable. (Source: D.07-11-025, Attachment A.) D.08-04-009]. As used above, “Seller” means “Issuer”, Buyer means “Purchaser”, and any other capitalized terms not otherwise defined herein shall have the meaning specified in the Assigned Agreement.
(b) Transfer of Renewable Energy Credits. Seller and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement the renewable energy credits transferred to Buyer conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law. [STC REC-1, Non-modifiable. D.11-01- 025]. As used above, “Seller” means “Issuer”, Buyer means “Purchaser”, and any other capitalized terms not otherwise defined herein shall have the meaning specified in the Assigned Agreement. (c) Tracking of RECs in WREGIS. Seller warrants that all necessary steps to allow the Renewable Energy Credits transferred to Buyer to be tracked in the Western Renewable Energy Generation Information System will be taken prior to the first delivery under the contract. [STC REC-2, Non-modifiable. D.11-01-025]. As used above, “Seller” means “Issuer”, Buyer means “Purchaser”, and any other capitalized terms not otherwise defined herein shall have the meaning specified in the Assigned Agreement.
(d) Governing Law. This Agreement and the rights and duties of the Parties hereunder shall be governed by and construed, enforced and performed in accordance with the laws of the state of California, without regard to principles of conflicts of law. To the extent enforceable at such time, each Party waives its respective right to any jury trial with respect to any litigation arising under or in connection with this Agreement. [STC 17, Non-Modifiable. (Source:
D.07-11-025, Attachment A) D.08-04-009]
Attachment Staff Report Item 6D
15 (e) Issuer Representations and Warranties.
Issuer represents and warrants:
(i) Issuer has the right to sell the Assigned Product from the Applicable Project;
(ii) Issuer has not sold the Assigned Product or any REC or other attributes of the Assigned Product to be transferred to Purchaser to any other person or entity;
(iii) the Energy component of the Assigned Product produced by the Applicable Project and purchased by Issuer for resale to Purchaser hereunder is not being sold by Issuer back to the Applicable Project or PPA Supplier;
(iv) Assigned Energy and Assigned RECs to be purchased and sold pursuant to this Agreement are not committed to another party; (v) The Assigned Product is free and clear of all liens or other encumbrances;
(vi) Issuer will deliver to Purchaser all Assigned Energy and associated RECs generated by the Applicable Project for Long-Term PCC1 Product in compliance with the California Long-Term Contracting Requirements, if applicable
(vii) The Assigned Product supplied to Purchaser under this Agreement that is Long-Term PCC1 Product will be sourced solely from Applicable Projects that have an Assignment Period of ten years or more in length, or otherwise in compliance with the California Long Term Contracting Requirements; and
(viii) Issuer will cooperate and work with Purchaser, the CEC, and/or the CPUC to provide any documentation required by the CPUC or CEC to support the Product’s classification as a Portfolio Content Category 1 Product as set forth in California Public Utilities Code Section 399.16(b)(1) or, if applicable, or compliance with the California Long-Term Contracting Requirements.
Issuer further represents and warrants to Purchaser that, to the extent that the Product sold by Issuer is a resale of part or all of a contract between Issuer and one or more third parties, Issuer represents, warrants and covenants that the resale complies with the following conditions in (i) through (iv) below during the Assignment Period and throughout the generation period:
(i) The original upstream third-party contract(s) meets the criteria of California Public Utilities Code Section 399.16(b)(1);
(ii) This Agreement transfers only electricity and RECs that have not yet been generated prior to the Assignment Period;
(iii) The electricity transferred by this Agreement is transferred to Purchaser in real time; and
Attachment Staff Report Item 6D
16 (iv) If the Applicable Project has an agreement to dynamically transfer electricity to a California balancing authority, the transactions implemented under this Agreement are not contrary to any condition imposed by a balancing authority participating in the dynamic transfer arrangement.
(f) Subsequent Changes in Law. In the event that the qualifications or requirements of the RPS program, PCC1 Product or the California Long-Term Contracting Requirements change, Issuer shall take commercially reasonable actions to meet the amended qualifications or requirements of the RPS Law, PCC1 Product or the California Long-Term Contracting Requirements but will not be required to incur any unreimbursed costs to comply with the RPS Law, PCC1 or the California Long- Term Contracting Requirements, collectively. (g) Limitations. Notwithstanding anything to the contrary in this Agreement, the Parties acknowledge and agree as follows:
(i) Issuer has relied exclusively upon the representations and warranties of each respective seller set forth in the Assigned Agreements in making the representations and warranties set forth in this Section
5.4 and has not performed any independent investigation with respect thereto;
(ii) MSES has agreed under the Prepaid Agreement to terminate or cause MSCG to terminate the applicable Assignment Period in the event that any representation or warranty in this Section 5.4 proves to be incorrect in any respect; and
(iii) Purchaser agrees that its sole recourse for any breach of the provisions of this Section 5.4 shall be the termination of the applicable Assignment Period and Purchaser shall have no other recourse against Issuer or remedies under this Agreement.
Section 5.5 Deliveries within CAISO or Another Balancing Authority. The Parties acknowledge that Energy delivered by Issuer at a Delivery Point within CAISO or another Balancing Authority will be delivered in accordance with the CAISO Tariff and rules of the Balancing Authority as applicable. Scheduling such Energy in accordance with the requirements of the applicable Energy into the applicable Balancing Authority shall constitute delivery of such Energy to Purchaser hereunder.
Section 5.6 Assigned Products. Notwithstanding anything to the contrary herein, the Parties shall have no liability under this Article V with respect to any Assigned Products.
ARTICLE VI
PARTIAL ASSIGNMENTS OF PPAS
Section 6.1 Future PPA Assignments. In connection with the expiration or termination of an EPS Energy Period, each of the Parties agrees to satisfy its obligations under the Assignment Letter Agreement, including but not limited to (a) Purchaser’s obligation to exercise Commercially Reasonable Efforts to assign a portion of Purchaser’s rights and obligations under Attachment Staff Report Item 6D
17 a power purchase agreement under which Project Participant is purchasing EPS Compliant Energy to MSCG or MSES pursuant to an Assignment Agreement and (b) the Parties’ obligations to cooperate in good faith with MSCG and MSES with respect to any proposed assignments.
Section 6.2 Updates to Exhibits A-1 and A-2.
(a) To the extent that an EPS Energy Period terminates or expires and Assigned Energy is not available for delivery immediately following (i) the end of the period for which Force Majeure is deemed to occur in the event of an early termination or (ii) the expiration of an EPS Energy Period, the Parties shall update (i) Exhibit A-1 to reflect an increase in the Hourly Quantities and (ii) Exhibit A-2 to reflect a decrease in the Monthly Quantities thereunder, in each case, in an amount equal to the Assigned Energy associated with the EPS Energy Period that terminated or expired.
(b) In connection with the execution of any subsequent Assignment Agreement, the Parties shall update Exhibits A-1 and A-2 to reflect any changes in the Hourly Quantities of Base Energy and Monthly Quantities of Assigned Energy and any other changes in connection therewith.
ARTICLE VII
USE OF ENERGY
Section 7.1 Tax Exempt Status of the Bonds. Purchaser acknowledges that the Bonds will be issued with the intention that the interest thereon will be exempt from federal taxes under Section 103 of the Code. Accordingly, Purchaser agrees that it will (a) provide such information with respect to its CCA System as may be requested by Issuer in order to establish the tax-exempt status of the Bonds, and (b) act in accordance with such written instructions as Issuer may provide from time to time in order to maintain the tax-exempt status of the Bonds. Purchaser further agrees that it will not at any time take any action, or fail to take any action, that would adversely affect the tax-exempt status of the Bonds.
Section 7.2 Priority Energy. Subject to Section 7.5(a), Purchaser agrees to take the Contract Quantities to be delivered under this Agreement (a) in priority over and in preference to all Non-Priority Energy; and (b) on at least a pari passu and non-discriminatory basis with other Priority Energy.
Section 7.3 Remarketing Sales .
(a) Remarketing of Assigned Product. If notwithstanding Purchaser’s compliance with Section 7.1, a quantity of Assigned Product less than the Annual Quantity is delivered hereunder in any Contract Year for any reason other than Force Majeuere, then MSCG shall be deemed to remarket such undelivered quantity of Assigned Product [consistent with Section 5(a) of the Prepaid Agreement]. For the avoidance of doubt, Purchaser will not have any payment obligation with respect to Assigned Energy that is remarketed pursuant to the foregoing sentence.
(b) Remarketing of Base Energy. Consistent with Section 3.3, to the extent any portion of the Contract Quantity is Base Energy, Issuer shall cause MSES to remarket or purchase such Energy for the account of MSES under the remarketing provisions of the Prepaid Agreement, Attachment Staff Report Item 6D
18 and Issuer shall credit against the amount owed by Purchaser for such Contract Quantities the amounts received from MSES for such remarketing services, less all directly incurred costs or expenses, including but not limited to remarketing administrative charges paid to MSES under the Prepaid Agreement, but in no event shall the amount of such credit be more than the Contract Price. For the avoidance of doubt, Purchaser will not have any payment obligation with respect to Base Energy that is remarketed pursuant to the foregoing sentence. (c) MSES Remarketing Fees. Purchaser shall not in any case have an obligation to make a payment to Issuer with respect to any Remarketing Fee (as defined in the Prepaid Agreement) charged by MSES under the Prepaid Agreement Section 7.4 Qualifying Use. Subject to Section 7.5, Purchaser agrees that, without limiting Purchaser’s other obligations under this Article VII, it will use all of the Energy purchased under this Agreement in compliance with the Qualifying Use Requirements. Purchaser agrees that it will provide such additional information, records and certificates as Issuer may reasonably request to confirm Purchaser’s compliance with this Section 7.4.
Section 7.5 Remediation. To the extent that (a) all or a portion of the Contract Quantity is remarketed under Section 7.3(a) or Section 7.3(b), (b) Purchaser has exercised Commercially Reasonable Efforts (as determined by Special Tax Counsel (as defined in the Bond Indenture)) to obtain EPS Compliant Energy for delivery hereunder consistent with the Assignment Letter Agreement and (c) Purchaser is not otherwise in default under this Agreement, then:
(a) MSES shall be obligated under the remarketing provisions of the Prepaid Agreement to purchase the remarketed Energy for its own account at the Day-Ahead Market Price (the proceeds of any such purchases, “Disqualified Remarketing Proceeds”), which Disqualified Remarketing Proceeds are for the benefit of Purchaser in that such proceeds reduce its payment obligations hereunder;
(b) Purchaser shall (i) exercise Commercially Reasonable Efforts to use an amount equivalent to such Disqualified Remarketing Proceeds to purchase Non-Priority Energy and use such Non-Priority Energy in compliance with the Qualifying Use Requirements in order to remediate such Disqualified Remarketing Proceeds and (ii) apply its purchases of Non-Priority Energy to remediate Disqualified Remarketing Proceeds under this Agreement prior to remediating such proceeds under any other contract that provides for the purchase of Priority Energy;
(c) in order to track compliance with Purchaser’s obligations under Section
7.5(b) above, Purchaser shall deliver a Remediation Certificate in the form of Exhibit H hereto to Issuer and MSES by the tenth day of the Month subsequent to any relevant Non-Priority Energy purchases (which may include purchases of Energy from CAISO to the extent such Energy is used in compliance with the Qualifying Use Requirements);
(d) for Disqualified Remarketing Proceeds remediated under this Section 7.5, Issuer shall pay Purchaser the Monthly Discount associated with such Disqualified Remarketing Proceeds on the last Business Day of the Month following the Month in which Purchaser provides a certificate under clause (c) evidencing such remediation; and Attachment Staff Report Item 6D
19 (e) to the extent any Disqualified Remarketing Proceeds are not remediated within twelve Months of the date on which such proceeds were received by Issuer, then MSES shall be obligated under the Prepaid Agreement to exercise Commercially Reasonable Efforts to remediate such Disqualified Remarketing Proceeds under the Prepaid Agreement and Purchaser’s ability to remediate such remarketing proceeds shall be subject to MSES’s successful remediation of such proceeds through sales to other purchaser(s);
provided that, for the avoidance of doubt, to the extent Special Tax Counsel (as defined in the Bond Indenture) determines at any time that Purchaser has failed to exercise Commercially Reasonable Efforts to obtain EPS Compliant Energy for delivery hereunder consistent with the Assignment Letter Agreement, then Purchaser shall not be entitled to remediate any Disqualified Remarketing Proceeds related to the resulting remarketing of Base Energy by MSES.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES; ADDITIONAL COVENANTS
Section 8.1 Representations and Warranties of the Parties. As a material inducement to entering into this Agreement, each Party, with respect to itself, hereby represents and warrants to the other Party as of the Execution Date as follows:
(a) For Issuer as the representing Party, Issuer is a is a joint powers authority organized pursuant to the provisions of Title 1, Division 7, Chapter 5, Article 1 (Section 6500 et seq.) of the California Government Code;
(b) For Purchaser as the representing Party, Purchaser is a joint powers authority organized pursuant to the provisions of Title 1, Division 7, Chapter 5, Article 1 (Section 6500 et seq.) of the California Government Code and a community choice aggregator pursuant to the provisions of Section 366.2 of the California Public Utilities Code, duly organized and validly existing under the Laws of the State of California;
(c) it has all requisite power and authority to conduct its business, to own its properties and to execute, deliver and perform its obligations under this Agreement; (d) there is no litigation, action, suit, proceeding or investigation pending or, to the best of such Party’s knowledge, threatened, before or by any Government Agency, which could reasonably be expected to materially and adversely affect the performance by such Party of its obligations under this Agreement or that questions the validity, binding effect or enforceability hereof, any action taken or to be taken by such Party pursuant hereto, or any of the transactions contemplated hereby;
(e) the execution, delivery and performance of this Agreement by such Party has been duly authorized by all necessary action on the part of such Party and does not require any approval or consent of any security holder of such Party or any holder (or any trustee for any holder) of any indebtedness or other obligation of such Party; (f) this Agreement has been duly executed and delivered on behalf of such Party by an appropriate officer or authorized Person of such Party and constitutes the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms, as such Attachment Staff Report Item 6D
20 enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights generally and by general principles of equity; (g) the execution, delivery and performance of this Agreement by such Party shall not violate any provision of any Law, decree or other legal or regulatory determination applicable to it;
(h) the execution, delivery and performance by such Party of this Agreement, and the consummation of the transactions contemplated hereby, including the incurrence by such Party of its financial obligations under this Agreement, shall not result in any violation of any term of any material contract or agreement applicable to it, or any of its charter or bylaws or of any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, Law or ordinance applicable to it or any of its properties or to any obligations incurred by it or by which it or any of its properties or obligations are bound or affected, or of any determination or award of any arbitrator applicable to it, and shall not conflict with, or cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets, except with respect to Issuer, the lien of the Bond Indenture;
(i) to the best of the knowledge and belief of such Party, no consent, approval, order or authorization of, or registration, declaration or filing with, or giving of notice to, obtaining of any license or permit from, or taking of any other action with respect to, any Government Agency is required in connection with the valid authorization, execution, delivery and performance by such Party of this Agreement or the consummation of any of the transactions contemplated hereby other than those that have been obtained; and
(j) it enters this Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by both Parties, considers this Agreement a legally enforceable contract.
Section 8.2 Warranty of Title. Issuer warrants that it will have the right to convey and will transfer good and merchantable title to all Energy sold under this Agreement and delivered by it to Purchaser, free and clear of all liens, encumbrances, and claims.
Section 8.3 Disclaimer of Warranties. EXCEPT FOR THE WARRANTIES EXPRESSLY MADE BY ISSUER IN THIS Article VIII, ISSUER HEREBY DISCLAIMSALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 8.4 Continuing Disclosure. Purchaser agrees to provide to Issuer: (a) such financial and operating information as may be requested by Issuer including its most recent audited financial statements for use in Issuer’s offering documents for the Bonds; and (b) annual updates to such information and statements to enable Issuer to comply with its continuing disclosure undertakings under Rule 15(c)2-12 of the United States Securities and Exchange Commission. Failure by Purchaser to comply with its agreement to provide such annual updates shall not be a default under this Agreement, but any such failure shall entitle Issuer or an owner of the Bonds to take such actions and to initiate such proceedings as may be necessary and appropriate to cause Purchaser to comply with such agreement, including without limitation the remedies of mandamus and specific performance.
Attachment Staff Report Item 6D
21 ARTICLE IX
TAXES
Issuer shall (i) be responsible for all ad valorem, excise and other taxes assessed with respect to Energy delivered pursuant to this Agreement upstream of the Delivery Point, and (ii) indemnify Purchaser and its Affiliates for any such taxes paid by Purchaser or its Affiliates.
Purchaser shall (i) be responsible for all such taxes assessed at or downstream of the Delivery Point, and (ii) indemnify Issuer and its Affiliates for any such taxes paid by Issuer or its Affiliates.
ARTICLE X
DISPUTE RESOLUTION
Section 10.1 Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope of this agreement to arbitrate, shall be determined by final, non-appealable binding arbitration in San Francisco, California before three arbitrators. The arbitration shall be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures. Within 15 days after the commencement of arbitration, each of the Parties shall select one person to act as arbitrator, and the two so-selected arbitrators shall select a third arbitrator (the “chairperson”) within 30 days of the commencement of the arbitration. If either Party is unable or fails to select one person to act as arbitrator, such arbitrator shall be appointed by JAMS. If the Party-selected arbitrators are unable or fail to agree upon a chairperson, the chairperson shall be appointed by JAMS. The chairperson shall be a person who has experience in renewable energy-related transactions, and none of the arbitrators shall have been previously employed by either Party or have any direct pecuniary interest in either Party or the subject matter of the arbitration, unless such conflict is expressly acknowledged and waived in writing by each of the Parties. The Parties shall maintain the confidential nature of the arbitration proceeding and any award, including any hearing(s), except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision.
Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under any law or right, with the Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing Party, if any, the costs and attorneys’ fees reasonably incurred in seeking to enforce the application of this Section 10.1 and by the prevailing party in connection with the arbitration. Notwithstanding the foregoing provisions of this Section 10.1, any costs incurred by a Party in seeking judicial enforcement of any written decision of the arbitrators shall be chargeable to and borne exclusively by the Party against whom such court order is obtained. The award shall be final and binding on the Parties and judgment upon any award may be entered in any court of competent jurisdiction.
Section 10.2 Judicial Reference.
(a) Judicial Reference. Without limiting the provisions in Section 10.1, if Section 10.1 is ineffective or unenforceable, any dispute between the Parties arising out of or in Attachment Staff Report Item 6D
22 connection with this Agreement or its performance, breach, or termination (including the existence, validity and interpretation of this Agreement and the applicability of any statute of limitation period) (each, a “Dispute”) shall be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections (a “Reference Proceeding”), which shall constitute the exclusive remedy for the resolution of any Dispute. As a condition precedent to initiating a Reference Proceeding with respect to any Dispute, the Parties shall comply with the provisions of Section 10.2(b).
(b) Notice of Dispute. Prior to initiating the Reference Proceeding, a Party (the “Disputing Party”) shall provide the other Party (the “Responding Party”) with a written notice of each issue in dispute, a proposed means for resolving each such issue, and support for such position (the “Notice of Dispute”). Within 10 days after receiving the Notice of Dispute, the Responding Party shall provide the Disputing Party with a written Notice of each additional issue (if any) with respect to the dispute raised by the Notice of Dispute, a proposed means for resolving every issue in dispute, and support for such position (the “Dispute Response”). Thereafter, the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute.
If the Parties do not resolve the dispute by mutual agreement within 60 days after receipt of the Dispute Response, (the “Negotiation Period”), then either Party may provide to the other Party written notice of intent for judicial reference (the “Impasse Notice”) in accordance with the further provisions of this Section 10.2.
(c) Applicability; Selection of Referees.
(i) The Party that provides the Impasse Notice shall nominate one (1) referee at the same time it provides the Impasse Notice. The other Party shall nominate one referee within 10 days of receiving the Impasse Notice. The two (2) referees (the “Party-Appointed Referees”) shall appoint a third referee (the “Third Referee”, together with the Party-Appointed Referees, the “Referees”). The Party-Appointed Referees shall be competent and experienced in matters involving the electric energy business in the United States, with at least 10 years of electric industry experience as a practicing attorney.
The Third Referee shall be an active or retired California state or federal judge. Each of the Party-Appointed Referees and the Third Referee shall be impartial and independent of either Party and of the other referees and not employed by any of the Parties in any prior matter.
(ii) If the Party-Appointed Referees are unable to agree on the Third Referee within 45 days from delivery of the Impasse Notice, then the Third Referee shall be appointed pursuant to CCP Section 640(b) in an action filed in the Superior Court of California, County of San Francisco (the “Court”), and with due regard given to the selection criteria above. A request for appointment of a referee may be heard on an ex parte or expedited basis, and the Parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP Section 170.6, each Party shall have one (1) peremptory challenge to the referee selected by the Court. (d) Discovery; Proceedings.
(i) The Parties agree that time is of the essence in conducting the Reference Proceeding. Accordingly, the referees shall be requested, subject to change in Attachment Staff Report Item 6D
23 the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within 20 days after the date of selection of the Third Referee, (ii) if practicable, try all issues of law or fact within 180 days after the date of the conference, and (iii) report a statement of decision within 20 days after the matter has been submitted for decision.
(ii) Discovery and other pre-hearing procedures shall be conducted as agreed to by the Parties, or if they cannot agree, as determined by the Third Referee after discussion with the Parties regarding the need for discovery and other pre-hearing procedures.
(iii) Any matter before the Referees shall be governed by the substantive law of California, its Code of Civil Procedure, Rules of Court, and Evidence Code, except as otherwise specifically agreed by the Parties and approved by the Referees. Except as expressly set forth herein, the Third Referee shall determine the manner in which the Reference Proceeding is conducted, including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the Reference Proceeding. The Reference Proceeding, including the trial, shall be conducted at a neutral location selected by the Parties, or if not agreed by the Parties, by the Third Referee, in San Francisco, California.
(iv) All proceedings and hearings conducted before the referees, except for trial, shall be conducted without a court reporter, except that when any Party so requests, a court reporter will be used at any hearing conducted before the referees, and the referees will be provided a courtesy copy of the transcript. The Party making such a request shall have the obligation to arrange for and pay the court reporter. (e) Decision. The referees shall render a written statement of decision setting forth findings of fact and conclusions of law. The decision shall be entered as a judgment in the court in accordance with the provisions of CCP Sections 644 and 645. The decision shall be appealable to the same extent and in the same manner that such decision would be appealable if rendered by a judge of the Court. The Parties intend this general reference agreement to be specifically enforceable in accordance with the CCP.
(f) Expenses. Each Party shall bear the compensation and expenses of its respective Party-Appointed Referee, own counsel, witnesses, consultants and employees. All other expenses of judicial reference shall be split equally between the Parties.
ARTICLE XI
FORCE MAJEURE
Section 11.1 Applicability of Force Majeure. To the extent either Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under this Agreement and such Party (the “Claiming Party”) gives notice and details of the Force Majeure to the other Party as soon as practicable, then the Claiming Party shall be excused from the performance of its obligations with respect to this Agreement (other than the obligation to make payments then due or becoming due with respect to performance prior to the Force Majeure). The Claiming Party shall mitigate the Force Majeure with all reasonable dispatch. For the duration of the Claiming Party’s non-performance (and only for such period), the non-Claiming Party shall not be required Attachment Staff Report Item 6D
24 to perform or resume performance of its obligations to the Claiming Party corresponding to the obligations of the Claiming Party excused by Force Majeure.
Section 11.2 Settlement of Labor Disputes. Notwithstanding anything to the contrary herein, the Parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the Party experiencing such disturbance, and the failure of a Party to settle such strikes, lockouts or other industrial disturbances shall not prevent the existence of Force Majeure or of reasonable dispatch to remedy the same.
ARTICLE XII
GOVERNMENTAL RULES AND REGULATIONS
Section 12.1 Compliance with Laws. This Agreement shall be subject to all present and future Laws of any Government Agency having jurisdiction, and neither Party has knowingly undertaken or will knowingly undertake or knowingly cause to be undertaken any activity that would conflict with such Laws; provided, however, that nothing herein shall be construed to restrict or limit either Party’s right to object to or contest any such Law, or its application to this Agreement or the transactions undertaken hereunder, and neither acquiescence therein or compliance therewith for any period of time shall be construed as a waiver of such right.
Section 12.2 Contests. Excluding all matters involving a contractual dispute between the Parties, no Party shall contest, cause to be contested or in any way actively support the contest of the equity, fairness, reasonableness or lawfulness of any terms or conditions set forth or established pursuant to this Agreement, as those terms or conditions may be at issue before any Government Agency in any proceeding, if the successful result of such contest would be to preclude or excuse the performance of this Agreement by either Party.
Section 12.3 Defense of Agreement. Excluding all matters involving a contractual dispute between the Parties, each Party shall hereafter defend and support this Agreement before any Government Agency in any proceeding, if the substance, validity or enforceability of all or any part of this Agreement is hereafter directly challenged or if any proposed changes in regulatory practices or procedures would have the effect of making this Agreement invalid or unenforceable or would otherwise materially affect the rights or obligations of the Parties under this Agreement.
ARTICLE XIII
ASSIGNMENT
The terms and provisions of this Agreement shall extend to and be binding upon the Parties and their respective successors, assigns, and legal representatives; provided, however, that, subject to Section 18.14, neither Party may assign this Agreement or its rights and interests, in whole or in part, under this Agreement without the prior written consent of the other Party. Prior to assigning this Agreement, Purchaser shall deliver to Issuer (i) written confirmation from each of the Applicable Rating Agencies, provided that such agency has rated and continues to rate the Bonds, that the assignment will not result in a reduction, qualification, or withdrawal of the then-current ratings assigned by the Applicable Rating Agencies to the Bonds; or (ii) written confirmation from each of the Applicable Rating Agencies, that the assignee has an outstanding long-term senior, unsecured, unenhanced debt rating equivalent to or higher than the ratings assigned by the Applicable Rating Agencies to the Bonds. Whenever an assignment or a transfer Attachment Staff Report Item 6D
25 of a Party’s interest in this Agreement is requested to be made with the written consent of the other Party, the assigning or transferring Party’s assignee or transferee shall expressly agree to assume, in writing, the duties and obligations under this Agreement of the assigning or transferring Party.
Upon the agreement of a Party to any such assignment or transfer, the assigning or transferring Party shall furnish or cause to be furnished to the other Party a true and correct copy of such assignment or transfer and assumption of duties and obligations.
ARTICLE XIV
PAYMENTS
Section 14.1 Monthly Statements.
(a) No later than the 5th day of each Month during the Delivery Period (excluding the first Month of the Delivery Period) and the first Month following the end of the Delivery Period, Purchaser shall deliver to Issuer a statement (a “Purchaser’s Statement”) listing any other amounts due to Purchaser in connection with this Agreement with respect to the prior Month(s).
(b) No later than the [10th] day of each Month during the Delivery Period (excluding the first Month of the Delivery Period) and the first Month following the end of the Delivery Period (the “Billing Date”), Issuer shall deliver a statement (a “Billing Statement”) to Purchaser indicating (i) the total amount due to Issuer for Energy delivered in the prior Month, (ii) any other amounts due to Issuer or Purchaser in connection with this Agreement with respect to the prior Month(s), and (iii) the net amount due to Issuer or Purchaser; provided that invoicing for Monthly Excess Quantities and Assigned Paygo Quantities shall occur under the Participant Custodial Agreement. Additionally, if a Participant Monthly Statement (as defined in the Participant Custodial Agreement) for an Assigned PPA (as defined in the Participant Custodial Agreement) has not been delivered by the [___] day of the Month following deliveries, Issuer shall provisionally prepare or cause to be prepared a Billing Statement for this Agreement that assumes all of the Monthly Projected Quantities were delivered under the applicable Assigned PPA for such Month, and any subsequent resettlements required with respect thereto shall occur under the Participant Custodial Agreement. [NOTE: Parties to discuss whether the above invoice timeline is practicable with invoice timing under EBCE’s renewables PPAs – and whether different invoicing mechanics may be needed to accommodate settlement of those PPAs when assigned in the future].
(c) Upon request by either Party, the other Party shall deliver such supporting documentation of the foregoing as such requesting Party may reasonably request.
Section 14.2 Payment.
(a) If the Billing Statement indicates an amount due from Purchaser, then Purchaser shall remit such amount to the Trustee for the benefit of the Issuer by wire transfer (pursuant to the Trustee’s instructions for amounts due under this Agreement, provided that amounts due from Purchaser with respect to Monthly Excess Quantities and Assigned Paygo Quantities, as applicable, shall be paid pursuant to the terms of the Participant Custodial Agreement), in immediately available funds, on or before the 20th day of the Month following the most recent Month to which such Billing Statement relates, or if such day is not a Business Day, the preceding Business Day. If the Billing Statement indicates an amount due from Issuer, then Attachment Staff Report Item 6D
26 Issuer shall remit such amount to Purchaser by wire transfer (pursuant to Purchaser’s instructions), in immediately available funds, on or before the 28th day of the Month following the most recent Month to which such Billing Statement relates, or if such day is not a Business Day, the following Business Day.
(b) If Purchaser fails to issue a Purchaser’s Statement with respect to any Month, Issuer shall not be required to estimate any amounts due to Purchaser for such Month, provided that Purchaser may include any such amount on subsequent Purchaser’s Statements issued within the next sixty (60) days. The sixty (60) day deadline in this subsection (b) replaces the two (2) year deadline in Section 14.5(b) with respect to any claim by any non-delivering Party of inaccuracy in any estimated invoice issued or payment made pursuant to this subsection (b).
Section 14.3 Payment of Disputed Amounts; Correction of Index Price. (a) If Purchaser disputes any amounts included in the Issuer’s Billing Statement, Purchaser shall (except in the case of manifest error) nonetheless pay any amount required by the Billing Statement in accordance with Section 14.2 without regard to any right of set-off, counterclaim, recoupment or other defenses to payment that Purchaser may have; provided, however, that Purchaser shall have the right, after payment, to dispute any amounts included in a Billing Statement or otherwise used to calculate payments due under this Agreement pursuant to Section 14.5. If Issuer disputes any amounts included in the Purchaser’s Statement, Issuer may withhold payment to the extent of the disputed amount; provided, however, that interest shall be due at the Default Rate for any withheld amount later found to have been properly due. (b) If a value published for any rate or index used or to be used in this Agreement is subsequently corrected and the correction is published or announced by the Person responsible for that publication or announcement within 30 days after the original publication or announcement, either Party may notify the other Party of (i) that correction and (ii) the amount (if any) that is payable as a result of that correction. If, not later than 30 days after publication or announcement of that correction, a Party gives notice that an amount is so payable, the Party that originally either received or retained such amount shall, not later than three Business Days after the effectiveness of that notice, pay, subject to any other applicable provisions of this Agreement, to the other Party that amount, together with interest on that amount at the Default Rate for the period from and including the day on which a payment originally was (or was not) made to but excluding the day of payment of the refund or payment resulting from that correction.
Section 14.4 Late Payment. If Purchaser fails to remit the full amount payable within one Business Day of when due, interest on the unpaid portion shall accrue from the date due until the date of payment at the Default Rate.
Section 14.5 Audit; Adjustments.
(a) A Party shall have the right, at its own expense, upon reasonable notice to the other Party and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the books, records, and telephone recordings of the other Party to the extent reasonably necessary, but only to such extent, to verify the accuracy of any statement, charge, payment, or computation made under this Agreement. This right to examine, audit, and obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Agreement.
Attachment Staff Report Item 6D
27 (b) Each Purchaser’s Statement and each Billing Statement shall be conclusively presumed final and accurate and all associated claims for under- or overpayments shall be deemed waived unless such Purchaser’s Statement or Billing Statement is objected to in writing, with adequate explanation and/or documentation, within two (2) years after the applicable Month of Energy delivery.
(c) All retroactive adjustments shall be paid in full by the Party owing payment within thirty (30) days of notice and substantiation of such inaccuracy. If the Parties are unable to agree upon any retroactive adjustments requested by either Party within the time period specified in Section 14.5(b), then either Party may pursue any remedies available with respect to such adjustments at law or in equity. Retroactive adjustments for payments made based on an incorrect Billing Statement shall bear interest at the Default Rate from the date such payment was made.
Section 14.6 Netting; No Set-Off. The Parties shall net all amounts due and owing, including any past due amounts (which, for the avoidance of doubt, shall include any accrued interest), arising under this Agreement such that the Party owing the greater amount shall make a single payment of the net amount to the other Party in accordance with this Article XIV.
Notwithstanding the foregoing, payment for all amounts set forth in a Billing Statement provided to Purchaser shall be made without set-off or counterclaim of any kind.
Section 14.7 Source of Purchaser’s Payments. Purchaser covenants and agrees to make payments due hereunder from CCA Revenues, and only from such CCA Revenues, as an operating expense of its CCA System; provided, however, that Purchaser may apply any legally available monies to the payment of amounts due hereunder.
Section 14.8 Rate Covenant. Purchaser hereby covenants and agrees that it will establish, fix, prescribe, maintain, and collect rates, fees, and charges from the customers of its CCA System so as to provide CCA Revenues sufficient to enable Purchaser to pay any other amounts legally payable from CCA Revenues, and to maintain any required reserves for Purchaser’s CCA System.
Purchaser further covenants and agrees that it shall not furnish or supply Energy services free of charge to any Person, except any such service free of charge that Purchaser is supplying on the date hereof as has been specifically identified by Purchaser to Issuer in writing, and it shall promptly enforce the payment of any and all accounts owing to Purchaser for the sale of Energy to its customers. Notwithstanding anything herein to the contrary, Purchaser shall not be obligated to make any payments hereunder except from CCA Revenues.
Section 14.9 Pledge of CCA Revenues. Purchaser shall not grant any lien on or security interest in, or otherwise pledge or encumber, the CCA Revenues if the terms or effect of such lien, pledge or other encumbrance results in such lien, pledge or other encumbrance having priority over the obligations of Purchaser to pay the Contract Price, which obligations constitute operating expenses of Purchaser.
Section 14.10Financial Responsibility. When reasonable grounds for insecurity of payments due under this Agreement arise, Issuer may demand, and Purchaser shall provide within 48 Hours but at least one Business Day if demanded, adequate assurance of performance.
Reasonable grounds include but are not limited to the occurrence of an insolvency or liquidation proceeding with respect to Purchaser or the downgrading of Purchaser’s credit rating, if any, to a level below investment grade, or such facts and circumstances which would constitute reasonable grounds for insecurity under applicable Law. Adequate assurance shall mean sufficient security Attachment Staff Report Item 6D
28 in the form and for a term reasonably specified by Issuer, including but not limited to a standby irrevocable letter of credit, a prepayment, a deposit to an escrow account, or a performance bond or guaranty by a creditworthy entity. In the event Issuer is entitled to demand adequate assurance of performance under this Section 14.10, Issuer may demand at a minimum a prepayment by Purchaser of an amount equal to (a) the amount owed by Purchaser with respect to all Energy delivered by Issuer to Purchaser as of the date of the demand for Adequate assurance of performance, plus (b) the amount, as determined and adjusted from time to time by Issuer (with the input of MSES pursuant to the Receivables Purchase Provisions (as defined in the Bond Indenture)) in a Commercially Reasonable manner, expected to be owed by Purchaser with respect to the Energy to be delivered by Issuer to Purchaser during the remainder of the then-current Month and the following Month. The Parties agree that in the event Purchaser fails to provide such adequate assurance as demanded, Issuer shall have the right to suspend its performance under this Agreement, including the making of deliveries of Energy to Purchaser, immediately upon written notice and shall not be obligated to restore such performance until the later of (i) the first day of the Month after such demand has been satisfied, and (ii) the completion of the term of deliveries to any replacement sales customer to which MSES has remarketed the Energy on behalf of Issuer.
ARTICLE XV
[RESERVED]
ARTICLE XVI
NOTICES
Any notice, demand, or request required or authorized by this Agreement to be given by one Party to the other Party (or to a third party) shall be in writing and shall either be sent by electronic means, courier, or personally delivered (including overnight delivery service) to each of the notice recipients and addresses specified in Exhibit B for the receiving Party. Any such notice, demand, or request shall be deemed to be given (i) on the date it is delivered by electronic means or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service). Each Party shall have the right, upon 10 days’ prior written notice to the other Party, to change its list of notice recipients and addresses in Exhibit B. The Parties may mutually agree in writing at any time to deliver notices, demands or requests through alternate or additional methods. Notwithstanding the foregoing, a Party may at any time notify the other Party that any notice, demand, statement or request to it must be provided by email transmission for a specified period of time or until further notice, and any communications delivered by means other than email transmission during the specified period of time shall be ineffective.
ARTICLE XVII
DEFAULT; REMEDIES; TERMINATION
Section 17.1 Issuer Default. Each of the following events shall constitute an “Issuer Default” under this Agreement:
(a) any representation or warranty made by Issuer in this Agreement proves to have been incorrect in any material respect when made; or (b) Issuer fails to perform, observe or comply with any covenant, agreement or term contained in this Agreement, and such failure continues for more than thirty (30) days Attachment Staff Report Item 6D
29 following the earlier of (i) receipt by Issuer of notice thereof or (ii) an officer of Issuer obtaining actual knowledge of such default.
Section 17.2 Purchaser Default. Each of the following events shall constitute a “Purchaser Default” under this Agreement:
(a) Purchaser fails to pay when due any amounts owed to Issuer pursuant to this Agreement and such failure continues for one (1) Business Day following the earlier of (i) receipt by Purchaser of notice thereof or (ii) an officer of Purchaser becoming aware of such default; (b) Purchaser (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency Law or other similar Law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days of the institution or presentation thereof; (v) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets; (vii) has a secured party take possession of all or substantially all of its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its of assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days thereafter; (viii) causes or is subject to any event with respect to it which, under the applicable Laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) through (vii); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; (c) any representation or warranty made by Purchaser in this Agreement proves to have been incorrect in any material respect when made; or (d) Purchaser fails to perform, observe or comply with any covenant, agreement or term contained in this Agreement, and such failure continues for more than fifteen (15) days following the earlier of (i) receipt by Purchaser of notice thereof or (ii) an officer of Purchaser becoming aware of such default.
Section 17.3 Remedies Upon Default.
(a) Termination. If at any time an Issuer Default or a Purchaser Default has occurred and is continuing, then the non-defaulting Party may do any or all of the following (i) by notice to the defaulting Party specifying the relevant Issuer Default or Purchaser Default, as applicable, terminate this Agreement effective as of a day not earlier than the day such notice is deemed given under Article XVI and/or (ii) declare all amounts due to the non-defaulting Party under this Agreement or any part thereof immediately due and payable, and the same shall Attachment Staff Report Item 6D
30 thereupon become immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of intent to demand, protest or other formalities of any kind, all of which are hereby expressly waived by the defaulting Party; provided, however, this Agreement shall automatically terminate and all amounts due to the non-defaulting Party hereunder shall immediately become due and payable as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition that upon the occurrence of a Purchaser Default specified in Section 17.2(b)(iv) or, to the extent analogous thereto, Section
17.2(b)(viii). In addition, during the existence of an Issuer Default or a Purchaser Default, as applicable, 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 this Agreement. (b) Additional Remedies. In addition to the remedies set forth in Section
17.3(a) (and without limiting any other provisions of this Agreement), during the existence of any Purchaser Default, Issuer may suspend its performance hereunder and discontinue the supply of all or any portion of the Energy otherwise to be delivered to Purchaser by it under this Agreement.
If Issuer exercises its right to suspend performance under this Section 17.3(b), Purchaser shall remain fully liable for payment of all amounts in default and shall not be relieved of any of its payment obligations under this Agreement. Deliveries of Energy may only be reinstated, at a time to be determined by Issuer, upon (i) payment in full by Purchaser of all amounts then due and payable under this Agreement and (ii) payment in advance by Purchaser at the beginning of each Month of amounts estimated by Issuer to be due to Issuer for the future delivery of Energy under this Agreement for such Month. Issuer may continue to require payment in advance from Purchaser after the reinstatement of Issuer’s supply services under this Agreement for such period of time as Issuer in its sole discretion may determine is appropriate. In addition, and without limiting any other provisions of or remedies available under this Agreement, if Purchaser fails to accept from Issuer any Energy tendered for delivery under this Agreement, Issuer shall have the right to sell such Energy to third parties on any terms that Issuer, in its sole discretion, determines are appropriate.
(c) Effect of Early Termination. As of the effectiveness of any termination date in accordance with clause (i) of Section 17.3(a), (i) the Delivery Period shall end, (ii) the obligation of Issuer to make any further deliveries of Energy to Purchaser under this Agreement shall terminate, and (iii) the obligation of Purchaser to receive deliveries of Energy from Issuer under this Agreement will terminate. Neither this Agreement nor the Delivery Period may be terminated for any reason except as specified in this Article XVII. Without prejudice to any payment obligation in respect of periods prior to termination, no payments will be due from either Party in respect of periods occurring after the effective termination date of this Agreement.
Section 17.4 Termination of Prepaid Agreement. Purchaser acknowledges and agrees that (i) in the event the Prepaid Agreement terminates for any reason prior to the end of the Delivery Period, this Agreement shall terminate on the effective date of early termination of the Prepaid Agreement (which date shall be the last date upon which deliveries are required thereunder, subject to all winding up arrangements) and (ii) Issuer’s obligation to deliver Energy under this Agreement shall terminate upon the termination of deliveries of Energy to Issuer under the Prepaid Agreement. Issuer shall provide notice to Purchaser of any early termination date of the Prepaid Agreement. The Parties recognize and agree that, in the event that the Prepaid Agreement terminates because of a Failed Remarketing (as defined in the Bond Indenture) of the Bonds that occurs in the first Month of a Reset Period, Issuer shall deliver Energy under this Attachment Staff Report Item 6D
31 Agreement for the remainder of such first Month, and, notwithstanding anything in this Agreement to the contrary, no Monthly Discount or Annual Refunds shall be associated with such deliveries and the Contract Price shall be adjusted accordingly.
Section 17.5 Limitation on Damages. THE PARTIES CONFIRM THAT THE
EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY
PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS
HEREIN PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. NEITHER PARTY SHALL BE
LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION, OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES
BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING
WITHOUT LIMITATION THE NEGLIGENCE OF EITHER PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE
EXTENT ANY DAMAGES REQUIRED TO BE PAID UNDER THIS AGREEMENT ARE
LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT
OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY
IS INCONVENIENT, AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. IN DETERMINING THE
APPROPRIATE MEASURE OF DAMAGES THAT WOULD MAKE THE PARTIES WHOLE,
THE PARTIES HAVE THOROUGHLY CONSIDERED, INTER ALIA, THE UNCERTAINTY
OF FLUCTUATIONS IN COMMODITY PRICES, THE ABILITY AND INTENTION OF THE
PARTIES TO HEDGE SUCH FLUCTUATIONS, THE BARGAINED-FOR ALLOCATION OF
RISK, THE KNOWLEDGE, SOPHISTICATION AND EQUAL BARGAINING POWER OF
THE PARTIES, THE ARMS-LENGTH NATURE OF THE NEGOTIATIONS, THE SPECIAL
CIRCUMSTANCES OF THIS TRANSACTION, THE ACCOUNTING AND TAX
TREATMENT OF THE TRANSACTION BY THE PARTIES, AND THE ENTERING INTO
OF OTHER TRANSACTIONS IN RELIANCE ON THE ENFORCEABILITY OF THE LIQUIDATED DAMAGES PROVISIONS CONTAINED HEREIN.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 Indemnification Procedure. With respect to each indemnification included in this Agreement, the indemnity is given to the fullest extent permitted by applicable Law and the following provisions shall be applicable. The indemnified Party shall promptly notify the indemnifying Party in writing of any Claim and the indemnifying Party shall have the right to assume its investigation and defense, including employment of counsel, and shall be obligated to pay related court costs, attorneys’ fees and experts’ fees and to post any appeals bonds; provided, however, that the indemnified Party shall have the right to employ at its expense separate counsel and participate in the defense of any Claim. The indemnifying Party shall not be liable for any settlement of a Claim without its express written consent thereto. In order to prevent double recovery, the indemnified Party shall reimburse the indemnifying Party for payments or costs Attachment Staff Report Item 6D
32 incurred in respect of an indemnity with the proceeds of any judgment, insurance, bond, surety or other recovery made by the indemnified Party with respect to a covered event.
Section 18.2 Deliveries. Contemporaneously with this Agreement (unless otherwise specified): Each Party shall deliver to the other Party evidence reasonably satisfactory to it of (i) such Party’s authority to execute, deliver and perform its obligations under this Agreement and (ii) the appropriate individuals who are authorized to sign this Agreement on behalf of such Party;
(a) as of the date hereof, Purchaser shall deliver to Issuer a fully executed Federal Tax Certificate in the form attached hereto as Exhibit D; (b) on the Bond Closing Date, Purchaser shall deliver to Issuer an opinion of counsel to Purchaser in the form attached hereto as Exhibit E; (c) on the Bond Closing Date, Purchaser shall deliver to Issuer a Closing Certificate in substantially the form set forth hereto as Exhibit G.
Section 18.3 Entirety; Amendments. This Agreement, including the exhibits and attachments hereto, constitutes the entire agreement between the Parties and supersedes all prior discussions and agreements between the Parties with respect to the subject matter hereof. There are no prior or contemporaneous agreements or representations affecting the same subject matter other than those expressed herein. Except for any matters that, in accordance with the express provisions of this Agreement, may be resolved by oral agreement between the Parties, no amendment, modification, supplement or change hereto shall be enforceable unless reduced to writing and executed by both Parties.
Section 18.4 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA, WITHOUT REGARD TO ANY CONFLICTS OF LAW
PRINCIPLE THAT WOULD DIRECT THE APPLICATION OF ANOTHER
JURISDICTION’S LAW.
Section 18.5 Non-Waiver. No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is in writing and signed by the Party against whom such waiver is claimed. No waiver of any breach shall be deemed a waiver of any other subsequent breach.
Section 18.6 Severability. If any provision of this Agreement, or the application thereof, shall for any reason be invalid or unenforceable, then to the extent of such invalidity or unenforceability, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby, but rather shall be enforced to the maximum extent permissible under applicable Law, so long as the economic and legal substance of the transactions contemplated hereby is not affected in any materially adverse manner as to either Party.
Section 18.7 Exhibits. Any and all Exhibits referenced in this Agreement are hereby incorporated herein by reference and shall be deemed to be an integral part hereof.
Attachment Staff Report Item 6D
33 Section 18.8 Winding Up Arrangements. All indemnity and confidentiality obligations, audit rights, and other provisions specifically providing for survival shall survive the expiration or termination of this Agreement. The expiration or termination of this Agreement shall not relieve either Party of (a) any unfulfilled obligation or undischarged liability of such Party on the date of such termination or (b) the consequences of any breach or default of any warranty or covenant contained in this Agreement. All obligations and liabilities described in the preceding sentence of this Section 18.8, and applicable provisions of this Agreement creating or relating to such obligations and liabilities, shall survive such expiration or termination.
Section 18.9 Relationships of Parties. The Parties shall not be deemed to be in a relationship of partners or joint venturers by virtue of this Agreement, nor shall either Party be an agent, representative, trustee or fiduciary of the other. Neither Party shall have any authority to bind the other to any agreement. This Agreement is intended to secure and provide for the services of each Party as an independent contractor.
Section 18.10 Immunity. Each Party represents and covenants to and agrees with the other Party that it is not entitled to and shall not assert the defense of sovereign immunity or governmental immunity with respect to its obligations or any Claims under this Agreement, and each hereby waives any such defense of sovereign or governmental immunity to the full extent permitted by Law.
Section 18.11Rates and Indices. If the source of any publication used to determine the index or other price used in the Contract Price should cease to publish the relevant prices or should cease to be published entirely, an alternative index or other price will be used based on the determinations made by Issuer and MSES under Section 18.11 of the Prepaid Agreement. Issuer shall provide Purchaser the opportunity to provide its recommendations and other input to Issuer for Issuer’s use in the process for selecting such alternative index or other price under Section
18.11 of the Prepaid Agreement.
Section 18.12Limitation of Liability. Notwithstanding anything to the contrary herein, all obligations of Issuer under this Agreement, including without limitation all obligations to make payments of any kind whatsoever, are special, limited obligations of Issuer, payable solely from the Trust Estate (as such term is defined in the Bond Indenture) as and to the extent provided in the Bond Indenture, including with respect to Operating Expenses (as such term is defined in the Bond Indenture). Issuer shall not be required to advance any moneys derived from any source other than the Revenues (as such term is defined in the Bond Indenture) and other assets pledged under the Bond Indenture for any of the purposes in this Agreement mentioned. Neither the faith and credit of Issuer nor the taxing power of the State of California or any political subdivision thereof is pledged to payments pursuant to this Agreement. Issuer shall not be directly, indirectly, contingently or otherwise liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reasons of or in connection with this Agreement, except solely to the extent Revenues (as such term is defined in the Bond Indenture) are received for the payment thereof and may be applied therefor pursuant to the terms of the Bond Indenture.
Section 18.13Counterparts. This Agreement may be executed and acknowledged in multiple counterparts and by the Parties in separate counterparts, each of which shall be an original and all of which shall be and constitute one and the same instrument.
Attachment Staff Report Item 6D
34 Section 18.14Third Party Beneficiaries; Rights of Trustee. Purchaser acknowledges and agrees that (a) Issuer will pledge and assign its rights, title and interest in this Agreement and the amounts payable by Purchaser under this Agreement (other than amounts payable in respect of the Project Administration Fee) to secure Issuer’s obligations under the Bond Indenture, (b) the Trustee shall be a third-party beneficiary of this Agreement with the right to enforce Purchaser’s obligations under this Agreement, (c) the Trustee or any receiver appointed under the Bond Indenture shall have the right to perform all obligations of Issuer under this Agreement, and (d) in the event of any Purchaser Defaults under Section 17.2(a), (i) MSES may, to the extent provided for in, and in accordance with, the Receivables Purchase Provisions (as defined in the Bond Indenture), take assignment from Issuer of receivables owed by Purchaser to Issuer under this Agreement, and shall thereafter have all rights of collection with respect to such receivables, and (ii) if such receivables are not so assigned, the Commodity Swap Counterparty (as defined in the Bond Indenture) shall have the right to pursue collection of such receivables to the extent of any non-payment by Issuer to the Commodity Swap Counterparty that was caused by Purchaser’s payment default. Pursuant to the terms of the Bond Indenture, Issuer has irrevocably appointed the Trustee as its agent to issue notices and as directed under the Bond Indenture, to take any other actions that Issuer is required or permitted to take under this Agreement. Purchaser may rely on notices or other actions taken by Issuer or the Trustee and Purchaser has the right to exclusively rely on any notices delivered by the Trustee, regardless of any conflicting notices that it may receive from Issuer.
Section 18.15Waiver of Defenses. Purchaser waives all rights to set-off, counterclaim, recoupment and any other defenses that might otherwise be available to Purchaser with regard to Purchaser’s obligations pursuant to the terms of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Power Supply Contract to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
[Separate Signature Page(s) Attached]
Attachment Staff Report Item 6D
Signature Page to Power Supply Contract
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: _____________________________
Name: _____________________________
Title: _____________________________
Attachment Staff Report Item 6D
Signature Page to Power Supply Contract
EAST BAY COMMUNITY ENERGY AUTHORITY
By: _____________________________
Name: _____________________________
Title: _____________________________
Attachment Staff Report Item 6D
A-1
EXHIBIT A-1
BASE ENERGY HOURLY QUANTITIES
[To come.]
Attachment Staff Report Item 6D
A-2
EXHIBIT A-2
EPS ENERGY PERIOD MONTHLY QUANTITY
[To come.]
Attachment Staff Report Item 6D
B-1
EXHIBIT B
NOTICES
IF TO ISSUER: California Community Choice Financing Authority 1125 Tamalpais Avenue
San Rafael, CA 94901
Email: [____]
Invoicing/Payments: [____]
IF TO PURCHASER: East Bay Community Energy Authority
1999 Harrison Street, Suite 800
Oakland, CA 94612
Email: [email protected]
Energy Related: [email protected]
Invoicing/Payments: [email protected]; [email protected] Attachment Staff Report Item 6D
C-1
EXHIBIT C
FORM OF REMARKETING ELECTION NOTICE
[_____]
Morgan Stanley Energy Structuring, L.L.C.
1585 Broadway
New York, NY 10036-8293
The Bank of New York Mellon Trust Company, N.A.
4655 Salisbury Road, Suite 300
Jacksonville, Florida 32256
To the Addressees:
The undersigned, duly authorized representative of East Bay Community Energy Authority (the "Purchaser"), is providing this notice (the “Remarketing Election Notice”) pursuant to the Power Supply Contract, dated as of [____], 2023 (the “Supply Contract”), between California Community Choice Financing Authority and Purchaser. Capitalized terms used herein shall have the meanings set forth in the Supply Contract.
Pursuant to Section 3.4(b) of the Supply Contract, the Purchaser has elected to have its Contract Quantity for the applicable Reset Period remarketed beginning as of the commencement of such Reset Period. The resumption of deliveries in any future Reset Period shall be in accordance with Section 3.4(d) of the Supply Contract.
Given this [___] day of [_________], 20[__].
East Bay Community Energy Authority
By: _____________________
Printed Name:
Title:
Attachment Staff Report Item 6D
D-1
EXHIBIT D
FORM OF FEDERAL TAX CERTIFICATE
This Federal Tax Certificate is executed in connection with the Power Supply Contract dated as of [____], 2023 (the “Supply Contract”), by and between California Community Choice Financing Authority (“Issuer”) and East Bay Community Energy Authority (“Purchaser”).
Capitalized terms used and not otherwise defined herein shall have the meanings given to them in the Supply Contract or in the Bond Indenture.
WHEREAS Purchaser acknowledges that Issuer is issuing the Bonds to fund the prepayment price under the Prepaid Agreement; and
WHEREAS the Bonds are intended to qualify for tax exemption under Section 103 of the Internal Revenue Code of 1986, as amended; and
WHEREAS Purchaser’s use of Energy acquired pursuant to the Supply Contract and certain funds and accounts of Purchaser will affect the Bonds’ qualification for such tax exemption.
NOW, THEREFORE, PURCHASER HEREBY CERTIFIES AS FOLLOWS:
1. Purchaser is a community choice aggregator organized as a joint powers authority under the laws of the State of California. As a community choice aggregator, the Purchaser is a load - serving entity providing electricity to customers within the boundaries of cities and/or counties that have elected to participate in Purchaser’s community choice aggregation program. For purposes of this Certificate, the term “service area” of the Purchaser means the boundaries of the cities and/or counties that have elected to participate in the Purchaser’s community choice aggregation program, as well as any other area recognized as the service area of the Purchaser under state or federal law.
2. Purchaser will resell all of the Energy acquired pursuant to the Supply Contract to its retail Energy customers within its service area, with retail sales in all cases being made pursuant to regularly established and generally applicable tariffs or under authorized requirements contracts.
3. From [___, __] to [____, 2022] the annual average amount of Energy purchased (other than for resale) by customers of Purchaser who are located within the service area of Purchaser is [________] MWh. Over the term of the Supply Contract, the Purchaser expects the annual average amount of Energy purchased (other than for resale) by customers of the Purchaser who are located within the service area of the Purchaser to be at least [_____] MWh. The maximum annual amount of Energy in any year being acquired pursuant to the Supply Contract is [_______] MWh. The annual average amount of Energy which Purchaser otherwise has a right to acquire as of the Closing Date (including rights to capacity to generate electricity, whether owned, leased or otherwise contracted for) is [________] MWh. The sum of (a) the maximum amount of Energy in any year being acquired pursuant to the Supply Contract, and (b) the amount of Energy that Purchaser otherwise has a right to acquire (including rights to capacity to generate electricity, whether owned, leased or otherwise contracted for) in the year described in the foregoing clause (a), is [________] MWh. Accordingly, the amount of Energy to be acquired under the Supply Attachment Staff Report Item 6D
D-2
Contract by Purchaser, supplemented by the amount of Energy otherwise available to Purchaser as of the Closing Date, during any year does not exceed [___]% of the expected annual average amount of Energy to be purchased (other than for resale) by customers of Purchaser who are located within the service area of Purchaser.
3. In the event of the expiration or termination of an EPS Energy Period, Purchaser agrees to comply with its obligations under the Assignment Letter Agreement, including but not limited to its obligations to (a) exercise Commercially Reasonable Efforts to assign a portion of Purchaser’s rights and obligations under a power purchase agreement under which Purchaser is purchasing EPS Compliant Energy to MSCG or MSES pursuant to an Assignment Agreement and (b) cooperate in good faith with Issuer, MSCG and MSES with respect to any proposed assignments.
4. Purchaser expects to pay for Energy acquired pursuant to the Supply Contract solely from funds derived from its operations as a community choice aggregator. Purchaser expects to use current CCA Revenues of its CCA System to pay for current Energy acquisitions. Neither the Purchaser nor any person who is a related party to the Purchaser will hold any funds or accounts in which monies are set aside and invested and which are reasonably expected to be used to pay for Energy more than one year after such monies are set aside. No portion of the proceeds of the Bonds will be used directly or indirectly to replace funds of Purchaser or any persons who are related Persons to Purchaser that are or were intended to be used for the purpose for which the Bonds were issued.
_______________, 2022
By: ________________________________
[Name]
[Title]
Attachment Staff Report Item 6D
E-1
EXHIBIT E
FORM OF OPINION OF COUNSEL TO PURCHASER
California Community Choice Financing Authority
San Rafael, CA
Morgan Stanley Energy Structuring, L.L.C.
New York, NY
Morgan Stanley
New York, NY
The Bank of New York Mellon Trust Company, N.A., as trustee Jacksonville, FL
Natixis
New York, New York
Re: Power Supply Contract between East Bay Community
Energy Authority and California Community Choice
Financing Authority dated as of [____], 2023
Ladies and Gentlemen:
We are Counsel to East Bay Community Energy Authority (“Purchaser”). Purchaser is a Purchaser in the Energy Project undertaken by California Community Choice Financing Authority (“Issuer”). We are furnishing this opinion to you in connection with the Power Supply Contract between Issuer and Purchaser dated as of [____], 2023 (the “Supply Contract”).
Unless otherwise specified herein, all terms used but not defined in this opinion shall have the same meaning as is ascribed to them in the Supply Contract.
In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the following:
(a) The Constitution and laws of the State of California (the “State”) including, as applicable, acts, ordinances, certificates, articles, charters, bylaws, and agreements pursuant to which Purchaser was created and by which it is governed; (b) Resolution No. [__], duly adopted by Purchaser on [___________] (the “Resolution”) and certified as true and correct by certificate and seal, authorizing Purchaser to execute and deliver the Supply Contract;
(c) A copy of the Supply Contract executed by Purchaser; and (d) All outstanding instruments relating to bonds, notes, or other indebtedness of or relating to Purchaser and Purchaser's CCA System (as defined in the Supply Contract).
Attachment Staff Report Item 6D
E-2
We have also examined and relied upon originals or copies, certified or otherwise authenticated to our satisfaction, of such records, documents, certificates, and other instruments, and made such investigations of law, as in our judgment we have deemed necessary or appropriate to enable us to render the opinions expressed below.
Based upon the foregoing, we are of the opinion that:
1. Purchaser is a joint powers authority of the State, duly organized and validly existing as a community choice aggregator under the laws of the State, and has the power and authority to own its properties, to carry on its business as now being conducted, and to enter into and to perform its obligations under the Agreement.
2. The execution, delivery, and performance by Purchaser of the Supply Contract have been duly authorized by the governing body of Purchaser and do not and will not require, subsequent to the execution of the Supply Contract by Purchaser, any consent or approval of the governing body or any officers of Purchaser.
3. The Supply Contract is the legal, valid, and binding obligation of Purchaser, enforceable in accordance with its terms, except as such enforceability may be subject to (i) the exercise of judicial discretion in accordance with general principles of equity and (ii) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights heretofore or hereafter enacted, to the extent constitutionally applicable.
4. No approval, consent or authorization of any governmental or public agency, authority, commission or person, or, to our knowledge, of any holder of any outstanding bonds or other indebtedness of Purchaser, is required with respect to the execution, delivery and performance by Purchaser of the Supply Contract or Purchaser's participation in the transactions contemplated thereby other than those approvals, consents and/or authorizations that have already been obtained.
5. The authorization, execution and delivery of the Supply Contract and compliance with the provisions thereof (a) will not conflict with or constitute a breach of, or default under, (i) any instrument relating to the organization, existence or operation of Purchaser, (ii) any ruling, regulation, ordinance, judgment, order or decree to which Purchaser (or any of its officers in their respective capacities as such) is subject or (iii) any provision of the laws of the State relating to Purchaser and its affairs, and (b) to our knowledge will not result in, or require the creation or imposition of, any lien on any of the properties or revenues of Purchaser pursuant to any of the foregoing.
6. Purchaser is not in breach of or default under any applicable constitutional provision or any law or administrative regulation of the State or the United States or any applicable judgment or decree or, to our knowledge, any loan or other agreement, resolution, indenture, bond, note, resolution, agreement or other instrument to which Purchaser is a party or to which Purchaser or any of its property or assets is otherwise subject, and to our knowledge no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument.
Attachment Staff Report Item 6D
E-3
7. Payments to be made by Purchaser under the Supply Contract shall constitute operating expenses of Purchaser's CCA System payable solely from the revenues and other available funds of Purchaser's CCA System as a cost of purchased electricity. The application of the revenues and other available funds of Purchaser's CCA System to make such payments is not subject to any prior lien, encumbrance or other restriction.
8. As of the date of this opinion, to the best of our knowledge after due inquiry, there is no pending or threatened action or proceeding at law or in equity or by any court, government agency, public board or body affecting or questioning the existence of Purchaser or the titles of its officers to their respective offices or affecting or questioning the legality, validity, or enforceability of this Supply Contract nor to our knowledge is there any basis therefor.
This opinion is rendered solely for the use and benefit of the addressees listed above in connection with the Supply Contract and may not be relied upon other than in connection with the transactions contemplated by the Supply Contract, or by any other person or entity for any purpose whatsoever, nor may this opinion be quoted in whole or in part or otherwise referred to in any document or delivered to any other person or entity, without the prior written consent of the undersigned.
Very truly yours,
Attachment Staff Report Item 6D
F-1
EXHIBIT F
MONTHLY DISCOUNT
Monthly Discount: $6.82/MWh
Attachment Staff Report Item 6D
G-1
EXHIBIT G
FORM OF CLOSING CERTIFICATE
CLOSING CERTIFICATE OF PURCHASER
__________, 2022
Re: California Community Choice Financing Authority
Clean Energy Project Revenue Bonds
The undersigned _____________________________ of East Bay Community Energy Authority (the “Purchaser”), hereby certifies as follows in connection with the Power Supply Contract dated as of __________, 2022 (the “Agreement”) between the Purchaser and California Community Choice Financing Authority (“Issuer”) and the issuance and sale by Issuer of the above-referenced bonds (the “Bonds”) (capitalized terms used and not defined herein shall have the meanings given to them in the Agreement):
1. Purchaser is a community choice aggregator, duly created and validly existing as a joint powers authority, and is in good standing, under the laws of the State of California (the “State”), and has the corporate power and authority to enter into and perform its obligations under the Agreement.
2. By all necessary official action on its part, the Purchaser has duly authorized and approved the execution and delivery of, and the performance by the Purchaser of the obligations on its part contained in the Agreement, and such authorization and approval has not been amended, supplemented, rescinded or modified in any respect since the date thereof.
3. The Agreement constitutes the legal, valid and binding obligation of the Purchaser.
4. The authorization, execution and delivery of the Agreement and compliance with the provisions on the Purchaser's part contained therein (a) will not conflict with or constitute a breach of or default under (i) any instrument relating to the organization, existence or operation of Purchaser, (ii) any ruling, regulation, ordinance, judgment, order or decree to which Purchaser (or any of its officers in their respective capacities as such) is subject or (iii) any provision of the laws of the State relating to Purchaser and its affairs, and (b) will not result in, or require the creation or imposition of, any lien on any of the properties or revenues of Purchaser pursuant to any of the foregoing.
5 The Purchaser is not in breach of or default under any applicable constitutional provision, law or administrative regulation of the State or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Purchaser is a party or to which the Purchaser or any of its property or assets are subject, and no event has occurred and is continuing which constitutes or with the Attachment Staff Report Item 6D
G-2
passage of time or the giving of notice, or both, would constitute a default or event of default by the Purchaser under any of the foregoing.
6. Payments to be made by the Purchaser under the Agreement shall constitute operating expenses of the Purchaser’s CCA System (as defined in the Agreement) payable solely from the revenues and other available funds of Purchaser’s CCA System as a cost of purchased electricity. The application of the revenues and other available funds of the Purchaser’s CCA System to make such payments is not subject to any prior lien, encumbrance or other restriction.
7. No litigation, proceeding or tax challenge is pending or, to its knowledge, threatened, against the Purchaser in any court or administrative body which would (a) contest the right of the officials of the Purchaser to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Purchaser, (c) contest the validity, due authorization and execution of the Agreement or (d) attempt to limit, enjoin or otherwise restrict or prevent the Purchaser from executing, delivering and performing the Agreement, nor to the knowledge of the Purchaser is there any basis therefor.
8. All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Purchaser of its obligations under the Agreement have been duly obtained.
9. The representations and warranties of the Purchaser contained in the Agreement were true, complete and correct on and as of the date thereof and are true, complete and correct on and as of the date hereof.
10. The statements and information with respect to the Purchaser contained in the Official Statement dated ___________, 2022 with respect to the Bonds, including Appendix B thereto (the “Official Statement”), fairly and accurately describe and summarize the financial and operating position of the Purchaser for the periods shown therein, and such statements and information did not as of the date of the Official Statement and do not as of the date hereof contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make such statements and information, in the light of the circumstances under which they were made, not misleading.
11. No event affecting the Purchaser has occurred since the date of the Official Statement which should be disclosed therein in order to make the statements and information with respect to the Purchaser contained therein, in light of the circumstances under which they were made, not misleading in any material respect.
IN WITNESS WHEREOF the undersigned has executed this Certificate on and as of the date first written above.
Attachment Staff Report Item 6D
G-3
EAST BAY COMMUNITY ENERGY
AUTHORITY
By
Name:
Title:
Attachment Staff Report Item 6D
H-1
EXHIBIT H
FORM OF REMEDIATION CERTIFICATE
[_____], 20__
[_____]
Morgan Stanley Energy Structuring, L.L.C.
1585 Broadway
New York, NY 10036-8293
Attn: Miscellaneous Notices
Email: [email protected]
Re: Power Supply Contract with California Community Choice Financing Authority: Section
7.5 Remediation
To the addressees:
The undersigned, duly authorized representative of East Bay Community Energy Authority (“Purchaser”), hereby certifies as follows in connection with the Power Supply Contract, dated as of [____], 2023 (the “Contract”), between Purchaser and California Community Choice Financing Authority and remediation of Disqualified Remarketing Proceeds pursuant to Section
7.5 of the Contract. Capitalized terms used herein shall have the meanings set forth in the Contract.
Set forth as Attachment 1 hereto is a copy of Purchaser’s invoice for the Month of [____] for purchases of Energy from [____] [NOTE: Insert reference to supplier.] pursuant that certain [____] [NOTE: Insert reference to applicable supply agreement.], and all of such Energy was used in compliance with the Qualifying Use Requirements.
In witness whereof the undersigned has executed this Certificate on and as of the date first written above.
EAST BAY COMMUNITY ENERGY
AUTHORITY
By ____________________________________
[Name]
[Title]
Attachment Staff Report Item 6D
SM Draft 19 May 2023
LETTER AGREEMENT
[____], 2023
East Bay Community Energy Authority
1999 Harrison Street, Suite 800
Oakland, CA 94612
Email: [email protected]
California Community Choice Financing Authority
1125 Tamalpais Avenue
San Rafael, CA 94901
Email: [____]
Re: PPA Assignments for Delivery under Prepay Energy Agreements Ladies and Gentlemen:
This Letter Agreement (this “Letter Agreement”) confirms our mutual agreement with respect to the matters set forth below and relates to (i) that certain Power Supply Contract (the “Power Supply Contract”), dated as of the date hereof, by and between California Community Choice Financing Authority (“Issuer”) and East Bay Community Energy Authority (“Project Participant”), (ii) that certain Prepaid Energy Sales Agreement (the “Prepaid Agreement”), dated as of the date hereof, by and between Morgan Stanley Energy Structuring, L.L.C. (“MSES”) and Issuer, and (iii) that certain Energy Management Contract (together with the Power Supply Contract and the Prepaid Agreement, the “Prepay Energy Agreements”), dated as of the date hereof, by and between Morgan Stanley Capital Group Inc. (“MSCG”) and MSES. Any capitalized term used in this Letter Agreement and not otherwise defined herein shall have the meaning assigned to such term in the Power Supply Contract. In consideration of each party’s execution of the respective Prepay Energy Agreements, as well as the premises above and the mutual covenants and agreements set forth herein, Issuer, Project Participant, MSES and MSCG (collectively, the “Parties”) agree as follows:
1. PPA Assignments for Delivery under Prepay Energy Agreements. (a) Initial Assignment. Concurrently with the execution of the Prepay Energy Agreements, Project Participant has assigned and MSES has agreed to assume a portion of Project Participant’s rights and obligations under the Initial Assigned PPA. (b) Replacement Assignments. Commencing (i) six months prior to the expiration of any EPS Energy Period or the resumption of deliveries in a new Reset Period following Participant’s issuance of a Remarketing Election Notice pursuant to [Section 3.4 of the Power Supply Contract] or (ii) otherwise immediately upon the early termination or anticipated early termination of an EPS Energy Period, Project Participant shall exercise Commercially Reasonable Efforts to assign a portion of Project Participant’s rights and obligations (the “Assigned Rights and Obligations”) under one or more power purchase agreements under which Project Participant is purchasing EPS Compliant Energy pursuant to an Assignment Agreement substantially in the form of (A) the Limited Assignment Agreement set forth as Exhibit A hereto if the PPA Supplier is an unrelated third party or Attachment Staff Report Item 6E
2 (B) the Limited Assignment Agreement set forth as Exhibit B hereto if the PPA Supplier is MSCG, and the Parties shall cooperate in good faith with respect to any proposed assignments; provided that
(1) any subsequent Assignment Agreement shall provide (I) for the assignment by Project Participant to either (a) MSES if MSCG is the PPA Supplier or (b) MSCG if the PPA Supplier is an unrelated third party of its right to receive a portion of the Energy (and any associated products set forth in the Assignment Agreement) delivered under the applicable power purchase agreement for each Month of the applicable EPS Energy Period and (II) for payment by MSES or MSCG as applicable to the PPA Supplier under such subsequent power purchase agreement of the Day-Ahead Average Price for each Month of the applicable EPS Energy Period, with such amounts to be credited in the PPA Supplier’s monthly invoice to Project Participant against other amounts owed by Project Participant under the Assigned PPA during the EPS Energy Period;
(2) any third party PPA Supplier must satisfy MSCG’s internal credit and approval requirements and other requirements applied on a nondiscriminatory basis, including any “know your customer” rules, policies and procedures, anti-money laundering rules and regulations, Dodd-Frank Act, Commodity Exchange Act, Patriot Act and similar rules, regulations, requirements and corresponding policies; (3) any such assignment must be agreed and consented to by Project Participant, MSES and MSCG in their reasonable discretion; and
(4) the Parties recognize that MSCG will be obligated to sell and deliver Assigned Product it receives from a third party PPA Supplier to MSES under the Energy Management Agreement; MSES will be obligated to deliver Assigned Product that it acquires to Issuer under the terms of the Prepaid Agreement; and Issuer will be obligated to deliver Assigned Product that it acquires to Project Participant under the terms of the Power Supply Contract.
(c) MSCG Procurement of EPS Compliant Energy. To the extent that (i) Project Participant, MSES and MSCG have not agreed upon a replacement assignment of a power purchase agreement by the date that is 75 days prior to (A) the end of any EPS Energy Period or (B) the resumption of deliveries in a new Reset Period following Participant’s issuance of a Remarketing Election Notice pursuant to [Section 3.4 of the Power Supply Contract], or (ii) an early termination of an EPS Energy Period has occurred and Project Participant, MSES and MSCG have not agreed upon a replacement assignment of a power purchase agreement, then MSCG shall exercise Commercially Reasonable Efforts to obtain EPS Compliant Energy for ultimate redelivery to Project Participant, provided that:
(1) Project Participant must consent to MSCG’s procurement of any such EPS Compliant Energy for ultimate redelivery to Project Participant, with such consent not to be unreasonably withheld;
Attachment Staff Report Item 6E
3 (2) the Parties shall act in good faith and in a Commercially Reasonable manner to negotiate any necessary amendments to the Prepay Energy Agreements to facilitate the delivery of such EPS Compliant Energy; and
(3) the period of delivery for any such EPS Compliant Energy (any such period, a “MSCG EPS Energy Period”) shall not exceed the length, as applicable, of (A) the then-current Reset Period if such EPS Compliant Energy is obtained for delivery for the remainder of a Reset Period and (B) the length of the next succeeding Reset Period if such EPS Compliant Energy is obtained for delivery commencing in a subsequent Reset Period.
(d) Tax Opinion. The Parties acknowledge and agree that their ability to enter into a new Reset Period will be contingent on obtaining an Opinion of Bond Counsel (as defined in the Bond Indenture), which will be dependent on the availability of EPS Compliant Energy for delivery in such Reset Period.
2. Failure to Obtain EPS Compliant Energy. To the extent an EPS Energy Period terminates or expires and Project Participant and MSCG have been unable to obtain EPS Compliant Energy for delivery under the Prepay Energy Agreements pursuant to the provisions of Paragraph 1, then MSES shall remarket the Base Energy pursuant to the provisions of Exhibit C to the Prepaid Agreement, subject to the following:
(a) the Parties’ obligations set forth in Paragraph 1 shall continue to apply; (b) Project Participant shall not make any new commitment to purchase Priority Energy during such a remarketing; and
(c) consistent with [Section 7.5 of the Power Supply Contract], Project Participant shall exercise Commercially Reasonable Efforts to remediate any Disqualifed Remarketing Proceeds resulting from MSES’s remarketing;.
3. Representations. Each Party represents to each of the other Parties:
(a) Status. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing.
(b) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance. (c) No Violation or Conflict. Such execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the incurrence by such Party of its obligations under this Agreement, will not result in any violation of, or conflict with: (i) any term of any material contract or agreement applicable to it; (ii) any of its charter, bylaws, or other constitutional documents; (iii) any Attachment Staff Report Item 6E
4 determination or award of any arbitrator applicable to it; or (iv) any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, law, ordinance, rule or regulation of any Government Agency, applicable to it or any of its assets or properties or to any obligations incurred by it or by which it or any of its assets or properties or obligations are bound or affected, and shall not cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets. (d) Consents. All consents, approvals, orders or authorizations of, registrations, declarations, filings or giving of notice to, obtaining of any licenses or permits from, or taking of any other action with respect to, any Person or Government Agency that are required to have been obtained by such Party with respect to this Agreement and the transactions contemplated hereby, including the due authorization of such Party and its governing body and any approval or consent of any security holder of such Party or any holder (or any trustee for any holder) of any indebtedness or other obligation of such Party, have been obtained and are in full force and effect and all conditions of any such consents have been complied with. (e) Obligations Binding. Its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).
(f) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other Parties as investment advice or as a recommendation to enter into this Agreement; it being understood that information and explanations related to the terms and conditions of this Agreement shall not be considered investment advice or a recommendation to enter into this Agreement. It is entering into this Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by all Parties, considers this Agreement a legally enforceable contract. No communication (written or oral) received from any of the other Parties shall be deemed to be an assurance or guarantee as to the expected results of this Agreement. (g) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Agreement. It is also capable of assuming, and assumes, the risks of this Agreement. (h) Status of Parties. None of the other Parties is acting as a fiduciary for or an adviser to it in respect of this Agreement.
4. Counterparts. This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile or electronic transmission), each of which will be deemed an original.
Attachment Staff Report Item 6E
5 5. Costs and Expenses. The Parties will each pay their own costs and expenses (including legal fees) incurred in connection with this Agreement and as a result of the negotiation, preparation, and execution of this Agreement.
6. Amendments. No amendment, modification, or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile or electronic transmission) and executed by each of the Parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system.
7. Notices. Any notice, demand, statement or request required or authorized by this Agreement to be given by one Party to another shall be in writing, except as otherwise expressly provided herein. It shall be sent by email transmission, courier, or personal delivery (including overnight delivery service) to each of the notice recipients and addresses for each of the other Parties designated in Appendix 2 hereto. Any such notice, demand, or request shall be deemed to be given (i) when delivered by email transmission, or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service). Each Party shall have the right, upon written 10 days’ prior written notice to the other Parties, to change its address at any time, and to designate that copies of all such notices be directed to another person at another address.
The Parties may mutually agree in writing at any time to deliver notices, demands or requests through alternate or additional methods. Notwithstanding the foregoing, any Party may at any time notify the other Parties that any notice, demand, statement or request to it must be provided by email transmission for a specified period of time or until further notice, and any communications delivered by means other than email transmission during such time shall be ineffective.
8. Dispute Resolution.
(a) Governing Law. This Agreement and the rights and duties of the Parties under this Agreement will be governed by and construed, enforced and performed in accordance with the laws of the state of New York, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws; provided, however, that the authority of Project Participant and Issuer to enter into and perform their obligations under this Agreement shall be determined in accordance with the laws of the State of California. (b) Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope of this agreement to arbitrate, shall be determined by final, non-appealable binding arbitration in San Francisco, California before three (3) arbitrators. The arbitration shall be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures. Within fifteen (15) days after the commencement of arbitration, each of MSCG and Project Participant shall select one person to act as arbitrator, and the two so-selected arbitrators shall select a third arbitrator (the “chairperson”) within thirty (30) days of the commencement of the arbitration. If either MSCG or Project Participant is unable or fails to select one person to act as arbitrator, such arbitrator shall be appointed by JAMS. If MSCG and Project Participant-selected arbitrators are unable or fail to agree upon a chairperson, the chairperson shall be appointed by JAMS. The chairperson shall be a person who has experience in renewable energy-related transactions, and none of the arbitrators shall have been previously employed by any Party or have any direct pecuniary interest in any Party or the subject matter of the arbitration, unless such conflict is expressly acknowledged and Attachment Staff Report Item 6E
6 waived in writing by all of the Parties. The Parties shall maintain the confidential nature of the arbitration proceeding and any award, including any hearing(s), except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under any law or right, with the Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing Party or Parties, if any, the costs and attorneys’ fees reasonably incurred in seeking to enforce the application of this Section 8(b) and by the prevailing party in connection with the arbitration.
Notwithstanding the foregoing provisions of this Section 8(b), any costs incurred by a Party in seeking judicial enforcement of any written decision of the arbitrators shall be chargeable to and borne exclusively by the Party against whom such court order is obtained. The award shall be final and binding on the Parties and judgment upon any award may be entered in any court of competent jurisdiction.
(c) Judicial Reference. Without limiting the provisions in Section 8(b), if Section 8(b) is deemed ineffective or unenforceable in any respect, any dispute between the Parties arising out of or in connection with this Agreement or its performance, breach, or termination (including the existence, validity and interpretation of this Agreement and the applicability of any statute of limitation period) (each, a “Dispute”) shall be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections (a “Reference Proceeding”), which shall constitute the exclusive remedy for the resolution of any Dispute. As a condition precedent to initiating a Reference Proceeding with respect to any Dispute, the Parties shall comply with the provisions of Section 8(c)(i).
i. Notice of Dispute. Prior to initiating the Reference Proceeding, a Party (the “Disputing Party”) shall provide the other Parties (the “Responding Parties”) with a written notice of each issue in dispute, a proposed means for resolving each such issue, and support for such position (the “Notice of Dispute”). Within ten (10) Days after receiving the Notice of Dispute, the Responding Parties shall provide the Disputing Party with a written Notice of each additional issue (if any) with respect to the dispute raised by the Notice of Dispute, a proposed means for resolving every issue in dispute, and support for such position (the “Dispute Response”). Thereafter, the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute. If the Parties do not resolve the dispute by unanimous agreement within sixty (60) Days after receipt of the Dispute Response, (the “Negotiation Period”), then any Party may provide to the other Parties written notice of intent for judicial reference (the “Impasse Notice”) in accordance with the further provisions of this Section 8(c). ii. Applicability; Selection of Referees.
(A) Within ten days of the delivery of an Impasse Notice, each of MSCG and Project Participant shall nominate one (1) referee. The two (2) referees (the “Party-Appointed Referees”) shall appoint a third referee (the “Third Referee”).
Attachment Staff Report Item 6E
7 The Party-Appointed Referees shall be competent and experienced in matters involving the electric energy business in the United States, with at least ten (10) years of electric industry experience as a practicing attorney. The Third Referee shall be an active or retired California state or federal judge. Each of the Party-Appointed Referees and the Third Referee shall be impartial and independent of each of the Parties and of the other referees and not employed by any of the Parties in any prior matter.
(B) If the Party-Appointed Referees are unable to agree on the Third Referee within forty-five (45) Days from delivery of the Impasse Notice, then the Third Referee shall be appointed pursuant to CCP Section 640(b) in an action filed in the Superior Court of California, County of San Francisco (the “Court”), and with due regard given to the selection criteria above. A request for appointment of a referee may be heard on an ex parte or expedited basis, and the Parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP Section 170.6, each of Project Participant and MSCG shall have one (1) peremptory challenge to the referee selected by the Court.
iii. Discovery; Proceedings.
(A) The Parties agree that time is of the essence in conducting the Reference Proceeding. Accordingly, the referees shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within twenty (20) days after the date of selection of the Third Referee, (ii) if practicable, try all issues of law or fact within one hundred eighty (180) days after the date of the conference, and (iii) report a statement of decision within twenty (20) days after the matter has been submitted for decision.
(B) Discovery and other pre-hearing procedures shall be conducted as agreed to by the Parties, or if they cannot agree, as determined by the Third Referee after discussion with the Parties regarding the need for discovery and other pre-hearing procedures. (C) Except as expressly set forth herein, the Third Referee shall determine the manner in which the Reference Proceeding is conducted, including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the Reference Proceeding. The Reference Proceeding, including the trial, shall be conducted at a neutral location selected by the Parties, or if not agreed by the Parties, by the Third Referee, in San Francisco, California.
(D) All proceedings and hearings conducted before the referees, except for trial, shall be conducted without a court reporter, except that when any Party so requests, a court reporter will be used at any hearing conducted before the referees, and the referees will be provided a courtesy copy of the transcript. The Party making such a request shall have the obligation to arrange for and pay the court reporter.
Attachment Staff Report Item 6E
8 iv. Decision. The referees shall render a written statement of decision setting forth findings of fact and conclusions of law. The decision shall be entered as a judgment in the court in accordance with the provisions of CCP Sections 644 and 645. The decision shall be appealable to the same extent and in the same manner that such decision would be appealable if rendered by a judge of the Court. The Parties intend this general reference agreement to be specifically enforceable in accordance with the CCP. v. Expenses. Each of MSCG and Project Participant shall bear the compensation and expenses of its respective Party-Appointed Referee, own counsel, witnesses, consultants and employees. All other expenses of judicial reference shall be split equally between MSCG and Project Participant.
9. Limitation of Liability. Notwithstanding anything to the contrary herein, all obligations of Issuer under this Agreement, including without limitation all obligations to make payments of any kind whatsoever, are special, limited obligations of Issuer, payable solely from the Trust Estate (as such term is defined in the Bond Indenture) as and to the extent provided in the Bond Indenture, including with respect to Operating Expenses (as such term is defined in the Bond Indenture). Issuer shall not be required to advance any moneys derived from any source other than the Revenues (as such term is defined in the Bond Indenture) and other assets pledged under the Bond Indenture for any of the purposes in this Agreement mentioned. Neither the faith and credit of Issuer nor the taxing power of the State of California or any political subdivision thereof is pledged to payments pursuant to this Agreement. Issuer shall not be directly, indirectly, contingently or otherwise liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reasons of or in connection with this Agreement, except solely to the extent Revenues (as such term is defined in the Bond Indenture) are received for the payment thereof and may be applied therefor pursuant to the terms of the Bond Indenture.
[Signature Pages to Follow]
Attachment Staff Report Item 6E
Signature Page to Letter Agreement
Very truly yours,
MSES
MORGAN STANLEY ENERGY STRUCTURING,
L.L.C.
By:
Name:
Title:
MSCG
MORGAN STANLEY CAPITAL GROUP INC.
By:
Name:
Title:
ACKNOWLEDGED, ACCEPTED AND AGREED TO as of the date first set forth above:
PARTICIPANT
EAST BAY COMMUNITY ENERGY AUTHORITY
By:
Name:
Title:
ISSUER
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By:
Name:
Title:
Attachment Staff Report Item 6E
EXHIBIT A
FORM OF LIMITED ASSIGNMENT AGREEMENT FOR THIRD PARTY AS PPA
SUPPLIER
This Limited Assignment Agreement (this “Agreement”) is entered into as of [____] by and among [____], a [____] (“PPA Seller”), East Bay Community Energy Authority, a joint powers authority and a community choice aggregator organized under the laws of the State of California (“PPA Buyer”), and Morgan Stanley Capital Group Inc., a Delaware corporation (“MSCG”).
RECITALS
WHEREAS, PPA Buyer and PPA Seller are parties to that certain [____], dated as of [____] (the “PPA”);
WHEREAS, in connection with a prepaid electricity transaction between [_______] (“Issuer”) and Prepay Seller (as defined below), and with effect from and including the Assignment Period Start Date (as defined below), PPA Buyer wishes to transfer by limited assignment to MSCG, and MSCG wishes to accept the transfer by limited assignment of, the Assigned Rights and Obligations (as defined below) for the duration of the Assignment Period (as defined below); and
WHEREAS, pursuant to this Agreement, MSCG will receive the Assigned Product and MSCG will deliver the Assigned Product to Prepay Seller, which will redeliver the Assigned Product to Issuer for ultimate redelivery to PPA Buyer; and WHEREAS, pursuant to this Agreement, MSCG will assume responsibility for the Delivered Product Payment Obligation.
THEREFORE, in consideration of the premises above and the mutual covenants and agreements herein set forth, PPA Seller, PPA Buyer and MSCG (the “Parties” hereto; each is a “Party”) agree as follows:
AGREEMENT
1. Definitions.
The following terms, when used in this Agreement and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Agreement” has the meaning specified in the first paragraph above. “Assigned Delivery Point” has the meaning specified in Appendix 1. “Assigned Energy” means any Electricity associated with the Assigned Product to be delivered to MSCG hereunder pursuant to the Assigned Rights and Obligations.
Attachment Staff Report Item 6E
2 “Assigned Product” includes all (i) Energy and (ii) Green Attributes (PCC1) (as defined in the PPA) produced by the Facility (as defined in the PPA). “Assigned Product Price” means [NOTE: To be the Day-Ahead Price averaged for each day of the prior month if the assignment occurs after the commencement of the prepay transaction or the fixed price for energy under the PPA if assigned in connection with execution of the prepay transaction.].
“Assigned Rights and Obligations” means (i) the rights of PPA Buyer under the PPA to receive the Assigned Products in each Month during the Assignment Period, as such rights may be limited or further described in the “Further Information” section on Appendix 1, and (ii) the Delivered Product Payment Obligation, which right and obligation are transferred and conveyed to MSCG hereunder, but which shall not relieve PPA Buyer of its obligations under the PPA in any respects.
“Assignment Early Termination Date” has the meaning specified in Section 5(b). “Assignment Period” has the meaning specified in Section 5(a). “Assignment Period End Date” means 11:59:59 p.m. pacific prevailing time on [____]. “Assignment Period Start Date” means [_____].
“Business Day” means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day begins at 8:00 a.m. and ends at 5:00 p.m. local time for the Party sending a notice, or payment, or performing a specified action. “CAISO Tariff” means the California Independent System Operator Corporation Agreement and Tariff, Business Practice Manuals (BPMs), and Operating Procedures, including the rules, protocols, procedures and standards attached thereto, as the same may be amended or modified from time-to-time and approved by the Federal Energy Regulatory Commission. “Claims” means all claims or actions, threatened or filed, and the resulting losses, damages, expenses, attorneys’ fees, experts’ fees, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement, in each case arising under, in respect of or related in any way to the PPA or any transaction thereunder, except for the Delivered Product Payment Obligation. “Delivered Product Payment Obligation” has the meaning specified in Section 3(a). “Electricity” means three-phase, 60-cycle alternating current electric energy, expressed in megawatt hours (MWh).
“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.
Attachment Staff Report Item 6E
3 “Issuer” has the meaning specified in Appendix 2.
“Inter-SC Trade” or “IST” has the meaning set forth in the CAISO Tariff. “Month” means a calendar month.
“MSCG” has the meaning specified in the first paragraph of this Agreement. “Person” means any individual, corporation, partnership, joint venture, trust, unincorporated organization, or Government Agency.
“PPA Buyer” has the meaning specified in the first paragraph of this Agreement. “PPA Seller” has the meaning specified in the first paragraph of this Agreement. “Prepaid Agreement” has the meaning specified in Appendix 2. “Prepay Power Supply Contract” has the meaning specified in Appendix 2. “Prepay Seller” has the meaning specified in Appendix 2. “Receivables” has the meaning given to such term in Section 3(d). “Retained Rights and Obligations” has the meaning specified in Section 3. “Scheduling Coordinator” or “SC” means an entity certified by the CAISO as qualifying as a Scheduling Coordinator pursuant to the CAISO Tariff for the purposes of undertaking the functions specified in “Responsibilities of a Scheduling Coordinator,” of the CAISO Tariff, as amended from time to time.
2. Transfer and Undertakings.
(a) PPA Buyer hereby assigns, transfers and conveys to MSCG all right, title and interest in and to the rights of PPA Buyer under the PPA to receive delivery of the Assigned Product during the Assignment Period. In connection with this assignment, PPA Buyer hereby delegates to MSCG the Assigned Rights and Obligations during the Assignment Period. (b) PPA Seller hereby consents and agrees to PPA Buyer’s assignment, transfer and conveyance of all right, title and interest in and to the Assigned Product and Assigned Rights and Obligations to MSCG and the exercise and performance by MSCG of the Assigned Rights and Obligations during the Assignment Period.
(c) MSCG hereby accepts such assignment, transfer and conveyance of the Assigned Rights and Obligations during the Assignment Period and agrees to perform any such Assigned Rights and Obligations due from it during the Assignment Period to the extent expressly set forth in this Agreement.
3. Limited Assignment.
Attachment Staff Report Item 6E
4 The Parties acknowledge and agree that (i) the Assigned Rights and Obligations include only a portion of PPA Buyer’s rights and obligations under the PPA, and that all rights and obligations arising under the PPA that are not expressly included in the Assigned Rights and Obligations shall be “Retained Rights and Obligations”, and (ii) the Retained Rights and Obligations include all rights and obligations of PPA Buyer arising during the Assignment Period except the rights and obligations expressly included in the Assigned Rights and Obligations. In this regard:
(a) Limited to Delivered Product Payment Obligation; Invoicing. i. MSCG’s sole obligation to PPA Seller will be to pay the Assigned Product Price to PPA Seller for the Assigned Products delivered during each Month of the Assignment Period on each applicable payment date under Section [__] of the PPA (the “Delivered Product Payment Obligation”). To the extent MSCG fails to pay the Delivered Product Payment Obligation by the due date for payment set forth in the PPA, notwithstanding anything in this Agreement to the contrary, PPA Buyer agrees that it remains responsible for such payment; provided that, to the extent PPA Buyer makes a payment to PPA Seller with respect to the Delivery Product Payment Obligation because MSCG has failed to pay the Delivered Product Payment Obligation, PPA Seller will have no further claim against MSCG for such amounts, and MSCG will be obligated to pay such amounts to PPA Buyer. Any payment adjustments or subsequent reconciliations occurring after payment by MSCG under Section 3(a)(i) will be resolved exclusively between PPA Buyer and PPA Seller consistent with the applicable provisions of the PPA. ii. PPA Buyer shall remain solely responsible for any payment obligations other than the Delivered Product Payment Obligation due under the PPA during the Assignment Period (the “Retained Payment Obligation”). Any Claims arising or existing in connection with or related to the PPA, whether related to performance by PPA Seller, PPA Buyer or MSCG, and whether arising before, during or after the Assignment Period, in each case excluding the Delivered Product Payment Obligation, will be included in the Retained Rights and Obligations and any such Claims will be resolved exclusively between PPA Seller and PPA Buyer in accordance with the PPA.
iii. Promptly following PPA Buyer’s receipt of each monthly invoice from PPA Seller during the Assignment Period and, in any event, no later than seven days thereafter, PPA Buyer shall deliver (i) a copy of such monthly invoice and the related supporting data to MSCG (ii) a statement to each of MSCG and the custodian described below indicating (A) the total amount due to PPA Seller under the PPA for such Month (the “Monthly Gross Amount”); (B) the Delivered Product Payment Obligation; and (C) the Retained Payment Obligation, which (I) shall be determined by subtracting the Delivered Product Payment Obligation from the Monthly Gross Amount and (II) shall reflect an amount due from PPA Buyer to the extent it is a positive number and an amount due to PPA Buyer to the extent it is a negative number. The Delivered Product Payment Obligation and Retained Payment Obligation shall be administered by a custodian who will pay (1) the Monthly Gross Amount to PPA Seller on each payment due date and (2) the absolute value of the Retained Payment Obligation to PPA Buyer to the extent such amount is negative for any given Month.
(b) Scheduling. All scheduling of Electricity associated with Assigned Product and other communications related to the PPA shall take place between PPA Buyer and PPA Seller Attachment Staff Report Item 6E
5 pursuant to the terms of the PPA; provided that (i) title to Assigned Product will pass to MSCG upon delivery by PPA Seller at the Assigned Delivery Point in accordance with the PPA; (ii) immediately thereafter, title to such Assigned Product will pass to Prepay Seller, Issuer and then to PPA Buyer upon delivery by MSCG at the same point where title is passed to MSCG pursuant to clause (i) above; (iii) PPA Buyer will be deemed to be acting as MSCG’s agent with regard to scheduling Assigned Energy; provided, however, that PPA Buyer shall be entitled to retain for its own account all CAISO revenues associated with delivery of the Assigned Product to CAISO, including where PPA Buyer is acting as Scheduling Coordinator for the Facility (as defined in the PPA) and through scheduling of ISTs; and (iv) (A) PPA Buyer and PPA Seller will provide copies to MSCG of (I) any notice of force majeure delivered under the PPA and (II) any notice of a default or of a breach or other event that, if not cured within an applicable grace period, could result in a default; (B) PPA Seller will provide copies to MSCG of annual forecasts and monthly forecasts and generation reports delivered under the PPA; and (C) PPA Buyer and PPA Seller, as applicable, will provide copies to MSCG of any other information reasonably requested by MSCG relating to Assigned Product.
(c) Amendments. PPA Buyer and PPA Seller will provide written notice (including copies thereof) of any amendment, waiver, supplement, modification, or other changes to the PPA to MSCG relating to the Assigned Rights and Obligations, and the Parties hereby acknowledge and agree that an amendment, waiver, supplement, modification or other change will not have any effect on MSCG’s rights or obligations under this Agreement until and unless MSCG receives written notice thereof.
(d) Setoff of Receivables. Pursuant to the Prepaid Agreement, Prepay Seller has agreed to purchase the rights to payment of the net amounts owed by PPA Buyer under the Prepay Power Supply Contract (“Receivables”) in the case of non-payment by PPA Buyer. To the extent any such Receivables relate to Assigned Product purchased by MSCG pursuant to the Assigned Rights and Obligations, Prepay Seller may sell such Receivables to MSCG and MSCG may transfer such Receivables (excluding any penalties, late payment fees, late payment interest or other fees, costs or interest included in such Receivables) to PPA Seller and apply the face amount of such Receivables (excluding any penalties, late payment fees, late payment interest or other fees, costs or interest included in such Receivables) as a reduction to any Delivered Product Payment Obligations; provided, however, that at no time shall PPA Seller be required to pay MSCG for any amounts by which such Receivables exceed any Delivered Product Payment Obligations then due and owed to PPA Seller.
4. Forward Contract.
The Parties acknowledge and agree that this Agreement constitutes a “forward contract” and that the Parties shall constitute “forward contract merchants” within the meaning of the United States Bankruptcy Code.
5. Assignment Period; Assignment Early Termination.
(a) Assignment Period. The “Assignment Period” shall begin on the Assignment Period Start Date and extend until the Assignment Period End Date; provided that in no event shall the Assignment Period extend past an Assignment Early Termination Date.
Attachment Staff Report Item 6E
6 (b) Early Termination. An “Assignment Early Termination Date” will occur under the following circumstances and as of the dates specified below:
i. the assignment of the Prepay Power Supply Contract by PPA Buyer or Issuer pursuant to Article XIII thereof, which Assignment Early Termination Date shall occur immediately as of the time of such assignment;
ii. the suspension, expiration, or termination of performance of the PPA by either PPA Buyer or PPA Seller for any reason other than the occurrence of Force Majeure under and as defined in the PPA, which Assignment Early Termination Date shall occur immediately as of the time of PPA Seller’s last performance under the PPA following such suspension, expiration, or termination;
iii. the election of MSCG in its sole discretion to declare an Assignment Early Termination Date as a result of (a) any event or circumstance that would give either PPA Buyer or PPA Seller the right to terminate or suspend performance under the PPA (regardless of whether PPA Buyer or PPA Seller exercises such right) or (b) the execution of an amendment, waiver, supplement, modification or other change to the PPA that adversely affects the Assigned Rights and Obligations or MSCG’s rights or obligations under this Agreement (provided that MSCG shall not have a right to terminate under this clause (b) to the extent that MSCG (i) receives prior notice of such change and (ii) provides its written consent thereto), which Assignment Early Termination Date shall occur upon the date set forth in a written notice of such election delivered by MSCG to PPA Buyer and PPA Seller;
iv. termination or suspension of deliveries for any reason other than force majeure under the Prepaid Agreement or Prepay Power Supply Contract, which Assignment Early Termination Date shall occur immediately as of the time of the last deliveries under the relevant contract following such suspension or termination; v. the election of PPA Seller or PPA Buyer in its sole discretion to declare an Assignment Early Termination Date if MSCG fails to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such failure continues for five Business Days following receipt by MSCG of written notice thereof, which Assignment Early Termination Date shall occur upon the date set forth in a written notice of such election delivered by PPA Seller or PPA Buyer, as applicable, to MSCG, and with a copy to PPA Buyer or PPA Seller, as applicable; vi. the election of PPA Seller or PPA Buyer in its sole discretion to declare an Assignment Early Termination Date if either (a) an involuntary case or other proceeding is commenced against MSCG seeking liquidation, reorganization or other relief with respect to it or its debts under any applicable Federal or State bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar law now or hereafter in effect or seeking the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed, or an order or decree approving or ordering any of the foregoing is entered and continued unstayed and in effect, in any such event, for a period of 60 days, or (b) MSCG commences a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, fraudulent Attachment Staff Report Item 6E
7 transfer, reorganization, moratorium or other similar law or any other case or proceeding to be adjudicated as bankrupt or insolvent, or MSCG consents to the entry of a decree or order for relief in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, files a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or consents to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of MSCG or any substantial part of its property, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due, which Assignment Early Termination Date shall occur upon the earliest date set forth in a written notice of such election delivered by PPA Seller or PPA Buyer, as applicable, to MSCG, and with a copy to PPA Buyer or PPA Seller, as applicable; vii. either MSCG or PPA Buyer may designate an Assignment Early Termination Date with written notice to the other Parties to the extent that MSCG and PPA Buyer have mutually agreed upon a replacement Assignment Agreement (as defined in the Prepay Power Supply Contract) that will replace the Assigned Rights and Obligations hereunder immediately following the termination hereof, which Assignment Early Termination Date shall occur effective as of the end of the Month preceding the commencement of the “Assignment Period” under the replacement Assignment Agreement as specified in the notice from MSCG or PPA Buyer to the other Parties; and viii. PPA Buyer may deliver written notice of termination to the other Parties if any change, event or effect occurs, including but not limited a change in applicable laws or regulations, any issues with the PPA Seller or the PPA, a dispute under the PPA or other similar circumstance, that individually or collectively have or are reasonably expected by PPA Buyer to have a material adverse effect upon (A) the PPA Buyer, (B) its rights and obligations under this Agreement, the Prepay Power Supply Contract, or the PPA, or (C) the benefit the PPA Buyer is receiving by assigning the Assigned Rights and Obligations, with such Assignment Early Termination Date to be the date set forth in a written notice delivered by PPA Buyer to the other Parties; provided that (x) PPA Buyer will provide notice to the other Parties as soon as is reasonably possible that PPA Buyer anticipates exercising this termination right, and (y) PPA Buyer shall exercise commercially reasonable efforts to propose and agree with MSCG upon a replacement Assignment Agreement prior to exercising this termination right.
(c) Reversion of Assigned Rights and Obligations. The parties acknowledge and agree that upon the occurrence of an Assignment Early Termination Date the Assigned Rights and Obligations will revert from MSCG to PPA Buyer. Any Assigned Rights and Obligations that would become due for payment or performance on or after such Assignment Early Termination Date shall immediately and automatically revert from MSCG to PPA Buyer, provided that (i) MSCG shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to MSCG prior to the Assignment Early Termination Date, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the occurrence of the Assignment Early Termination Date.
6. Representations and Warranties.
Attachment Staff Report Item 6E
8 (a) Copy of PPA. PPA Seller and PPA Buyer represent and warrant to MSCG that a true, complete, and correct copy of the PPA is attached hereto as Appendix 4. (b) No Default. PPA Seller and PPA Buyer represent and warrant to MSCG that no event or circumstance exists (or would exist with the passage of time or the giving of notice) that would give either of them the right to terminate the PPA or suspend performance thereunder. (c) Other. Each of PPA Buyer and PPA Seller represents and warrants to each other and to MSCG that:
i. it has made no prior transfer (whether by way of security or otherwise) of any interest in the Assigned Rights and Obligations; and ii. all obligations of PPA Buyer and PPA Seller under the PPA required to be performed on or before the Assignment Period Start Date have been fulfilled. (d) Representations. Each Party represents to each of the other Parties:
i. Status. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing.
ii. Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance. iii. No Violation or Conflict. Such execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the incurrence by such Party of its obligations under this Agreement, will not result in any violation of, or conflict with: (i) any term of any material contract or agreement applicable to it; (ii) any of its charter, bylaws, or other constitutional documents; (iii) any determination or award of any arbitrator applicable to it; or (iv) any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, law, ordinance, rule or regulation of any Government Agency, applicable to it or any of its assets or properties or to any obligations incurred by it or by which it or any of its assets or properties or obligations are bound or affected, and shall not cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets. iv. Consents. All consents, approvals, orders or authorizations of, registrations, declarations, filings or giving of notice to, obtaining of any licenses or permits from, or taking of any other action with respect to, any Person or Government Agency that are required to have been obtained by such Party with respect to this Agreement and the transactions contemplated hereby, including the due authorization of such Party and its governing body and any approval or consent of any security holder of such Party or any holder (or any trustee for any holder) of any indebtedness or other obligation of such Party, have been obtained and are in full force and effect and all conditions of any such consents have been complied with.
Attachment Staff Report Item 6E
9 v. Obligations Binding. Its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).
vi. Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other Parties as investment advice or as a recommendation to enter into this Agreement; it being understood that information and explanations related to the terms and conditions of this Agreement shall not be considered investment advice or a recommendation to enter into this Agreement. It is entering into this Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by all Parties, considers this Agreement a legally enforceable contract. No communication (written or oral) received from any of the other Parties shall be deemed to be an assurance or guarantee as to the expected results of this Agreement. vii. Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Agreement. It is also capable of assuming, and assumes, the risks of this Agreement. viii. Status of Parties. None of the other Parties is acting as a fiduciary for or an adviser to it in respect of this Agreement.
7. Counterparts.
This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile or electronic transmission), each of which will be deemed an original.
8. Costs and Expenses.
The Parties will each pay their own costs and expenses (including legal fees) incurred in connection with this Agreement and as a result of the negotiation, preparation, and execution of this Agreement.
9. Amendments.
No amendment, modification, or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by an electronic transmission) and executed by each of the Parties or confirmed by emails or electronic messages on an electronic messaging system.
10. Notices.
Attachment Staff Report Item 6E
10 Any notice, demand, statement or request required or authorized by this Agreement to be given by one Party to another shall be in writing, except as otherwise expressly provided herein. It shall be sent by email transmission, courier, or personal delivery (including overnight delivery service) to each of the notice recipients and addresses for each of the other Parties designated in Appendix 3 hereto. Any such notice, demand, or request shall be deemed to be given (i) when sent by email transmission, or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service). Each Party shall have the right, upon 10 days’ prior written notice to the other Parties, to change its address at any time, and to designate that copies of all such notices be directed to another person at another address. The Parties may mutually agree in writing at any time to deliver notices, demands or requests through alternate or additional methods.
Notwithstanding the foregoing, any Party may at any time notify the other Parties that any notice, demand, statement or request to it must be provided by email transmission for a specified period of time or until further notice, and any communications delivered by means other than email transmission during such time shall be ineffective.
11. Miscellaneous.
(a) Governing Law. This Agreement and the rights and duties of the Parties under this Agreement will be governed by and construed, enforced and performed in accordance with the laws of the state of New York, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws; provided, however, that the authority of PPA Buyer to enter into and perform its obligations under this agreement shall be determined in accordance with the laws of the state of California.
(b) U.S. Resolution Stay. The Parties hereby confirm that they are adherents to the ISDA 2018 U.S. Resolution Stay Protocol (“ISDA U.S. Stay Protocol”), the terms of the ISDA U.S. Stay Protocol are incorporated into and form a part of this Agreement, and this Agreement shall be deemed a Protocol Covered Agreement for purposes thereof. For purposes of incorporating the ISDA U.S. Stay Protocol, MSCG shall be deemed to be a Regulated Entity, and PPA Buyer and PPA Seller each shall be deemed to be an Adhering Party. In the event of any inconsistences between this Agreement and the ISDA U.S. Stay Protocol, the ISDA U.S. Stay Protocol will prevail.
(c) Appendix 2 Prepaid Transaction Details. Appendix 2 sets forth certain details relating to the commodity prepayment transaction pursuant to which the Assigned Products shall be redelivered, provided that such Appendix 2 may be updated from time to time to change the relevant commodity prepayment transaction pursuant to which the Assigned Products shall be redelivered by written notice of MSCG and PPA Buyer to PPA Seller. (d) Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope of this agreement to arbitrate, shall be determined by final, non-appealable binding arbitration in San Francisco, California before three (3) arbitrators. The arbitration shall be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures. Within fifteen (15) days after the commencement of arbitration, each of MSCG and PPA Buyer shall select one person to act as arbitrator, and the two so-selected arbitrators shall select a third arbitrator (the “chairperson”) within thirty (30) days of the commencement of the arbitration. If either MSCG or PPA Buyer is unable or fails to select one person to act as arbitrator, such arbitrator shall be appointed by JAMS.
Attachment Staff Report Item 6E
11 If the MSCG and PPA Buyer-selected arbitrators are unable or fail to agree upon a chairperson, the chairperson shall be appointed by JAMS. The chairperson shall be a person who has experience in renewable energy-related transactions, and none of the arbitrators shall have been previously employed by any Party or have any direct pecuniary interest in any Party or the subject matter of the arbitration, unless such conflict is expressly acknowledged and waived in writing by all of the Parties. The Parties shall maintain the confidential nature of the arbitration proceeding and any award, including any hearing(s), except as may be necessary to prepare for or conduct the arbitration hearing on the merits, or except as necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under any law or right, with the Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing Party or Parties, if any, the costs and attorney’s fees reasonably incurred in seeking to enforce the application of this Section 1(b) and by the prevailing party in connection with the arbitration. Notwithstanding the foregoing provisions of this Section 1(b), any costs incurred by a Party in seeking judicial enforcement of any written decision of the arbitrators shall be chargeable to and borne exclusively by the Party against whom such court order is obtained. The award shall be final and binding on the Parties and judgment upon any award may be entered in any court of competent jurisdiction. (e) Judicial Reference. Without limiting the provisions in Section 1(b), if Section 1(b) is deemed ineffective or unenforceable in any respect, any dispute between the Parties arising out of or in connection with this Agreement or its performance, breach, or termination (including the existence, validity and interpretation of this Agreement and the applicability of any statute of limitation period) (each, a “Dispute”) shall be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections (a “Reference Proceeding”), which shall constitute the exclusive remedy for the resolution of any Dispute. As a condition precedent to initiating a Reference Proceeding with respect to any Dispute, the Parties shall comply with the provisions of Section 1(c)i).
i. Notice of Dispute. Prior to initiating the Reference Proceeding, a Party (the “Disputing Party”) shall provide the other Parties (the “Responding Parties”) with a written notice of each issue in dispute, a proposed means for resolving each such issue, and support for such position (the “Notice of Dispute”). Within 10 days after receiving the Notice of Dispute, the Responding Parties shall provide the Disputing Party with a written Notice of each additional issue (if any) with respect to the dispute raised by the Notice of Dispute, a proposed means for resolving every issue in dispute, and support for such position (the “Dispute Response”). Thereafter, the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute. If the Parties do not resolve the dispute by unanimous agreement within sixty 60 days after receipt of the Dispute Response, (the “Negotiation Period”), then any Party may provide to the other Parties written notice of intent for judicial reference (the “Impasse Notice”) in accordance with the further provisions of this Section 11.
ii. Applicability; Selection of Referees.
Attachment Staff Report Item 6E
12 (A) Within 10 days of the delivery of an Impasse Notice, each of MSCG and PPA Buyer shall nominate one (1) referee. The two (2) referees (the “Party-Appointed Referees”) shall appoint a third referee (the “Third Referee”, together with the Party-Appointed Referees, the “Referees”). The Party-Appointed Referees shall be competent and experienced in matters involving the electric energy business in the United States, with at least ten (10) years of electric industry experience as a practicing attorney. The Third Referee shall be an active or retired California state or federal judge. Each of the Party-Appointed Referees and the Third Referee shall be impartial and independent of each of the Parties and of the other referees and not employed by any of the Parties in any prior matter. (B) If the Party-Appointed Referees are unable to agree on the Third Referee within 45 days from delivery of the Impasse Notice, then the Third Referee shall be appointed pursuant to CCP Section 640(b) in an action filed in the Superior Court of California, County of San Francisco (the “Court”), and with due regard given to the selection criteria above. A request for appointment of a referee may be heard on an ex parte or expedited basis, and the Parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP Section 170.6, each of PPA Buyer and MSCG shall have one (1) peremptory challenge to the referee selected by the Court.
iii. Discovery; Proceedings.
(A) The Parties agree that time is of the essence in conducting the Reference Proceeding. Accordingly, the referees shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within 20 days after the date of selection of the Third Referee, (ii) if practicable, try all issues of law or fact within 180 days after the date of the conference, and (iii) report a statement of decision within 20 days after the matter has been submitted for decision. (B) Discovery and other pre-hearing procedures shall be conducted as agreed to by the Parties, or if they cannot agree, as determined by the Third Referee after discussion with the Parties regarding the need for discovery and other pre-hearing procedures. (C) Except as expressly set forth herein, the Third Referee shall determine the manner in which the Reference Proceeding is conducted, including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the Reference Proceeding. The Reference Proceeding, including the trial, shall be conducted at a neutral location selected by the Parties, or if not agreed by the Parties, by the Third Referee, in San Francisco, California.
(D) All proceedings and hearings conducted before the referees, except for trial, shall be conducted without a court reporter, except that when any Party so requests, a court reporter will be used at any hearing conducted before the referees, and the referees will be provided a courtesy copy of the transcript. The Party Attachment Staff Report Item 6E
13 making such a request shall have the obligation to arrange for and pay the court reporter.
iv. Decision. The referees shall render a written statement of decision setting forth findings of fact and conclusions of law. The decision shall be entered as a judgment in the court in accordance with the provisions of CCP Sections 644 and 645. The decision shall be appealable to the same extent and in the same manner that such decision would be appealable if rendered by a judge of the Court. The Parties intend this general reference agreement to be specifically enforceable in accordance with the CCP. v. Expenses. Each of MSCG and PPA Buyer shall bear the compensation and expenses of its respective Party-Appointed Referee, own counsel, witnesses, consultants and employees. All other expenses of judicial reference shall be split equally between MSCG and PPA Buyer.
Attachment Staff Report Item 6E
Signature Page to Limited Assignment Agreement
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first set forth above.
[PPA SELLER]
By: ____________________________
Name:_______________________
Title:________________________
EAST BAY COMMUNITY ENERGY AUTHORITY
By: ____________________________
Name:_______________________
Title:________________________
MORGAN STANLEY CAPITAL GROUP INC.
By: ____________________________
Name:_______________________
Title:________________________
Attachment Staff Report Item 6E
Appendix 1 - 1
Appendix 1
Assigned Rights and Obligations
PPA: Renewable Power Purchase Agreement dated as of [____], by and between PPA Buyer and PPA Seller
Assigned Delivery Point: [Facility PNode/Settlement Point (as defined in the PPA)] Further Information: PPA Seller shall continue to transfer the WREGIS Certificates associated with all Renewable Energy Credits corresponding to all Facility Energy under the PPA, provided that the transferee of such WREGIS Certificates may be changed from time to time in accordance with the written instructions of both MSCG and PPA Buyer upon fifteen (15) Business Days’ notice, which change shall be effective as of the first day of the next calendar month, unless otherwise agreed. Terms with initial capitalization used in this paragraph but not otherwise defined in this Agreement have the meaning set forth in the PPA. [Include additional requirements, if any]
Attachment Staff Report Item 6E
Appendix 2 - 1
Appendix 2
Prepay Transaction Details
“Issuer” means California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended).
“Prepaid Agreement” means that certain Prepaid Energy Sales Agreement, dated as of [____], 2023, by and between Prepay Seller and Issuer.
“Prepay Power Supply Contract” means that certain Power Supply Contract, dated as of [____], 2023 by and between PPA Buyer and Issuer.
“Prepay Seller” means Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company.
Attachment Staff Report Item 6E
Appendix 3 - 1
Appendix 3
Notice Information
[To be completed before signing.]
Attachment Staff Report Item 6E
Appendix 4 - 1
Appendix 4
Copy of Power Sales Contract
[To be attached.]
Attachment Staff Report Item 6E
EXHIBIT B
FORM OF LIMITED ASSIGNMENT AGREEMENT FOR MSCG AS PPA SUPPLIER This Limited Assignment Agreement (this “Agreement”) is entered into as of [____] by and among Morgan Stanley Capital Group Inc., a Delaware corporation (“PPA Seller”), East Bay Community Energy Authority, a joint powers authority and a community choice aggregator organized under the laws of the State of California (“PPA Buyer”), California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended) (“Issuer”), and Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company (“MSES”).
RECITALS
WHEREAS, PPA Buyer and PPA Seller are parties to that certain [____], dated as of [____] (the “PPA”);
WHEREAS, in connection with a prepaid electricity transaction between Issuer and MSES, and with effect from and including the Assignment Period Start Date (as defined below), PPA Buyer wishes to transfer by limited assignment to MSES, and MSES wishes to accept the transfer by limited assignment of, the Assigned Rights and Obligations (as defined below) for the duration of the Assignment Period (as defined below); and
WHEREAS, pursuant to this Agreement, MSES will receive the Assigned Product and MSES will deliver the Assigned Product to MSES, which will redeliver the Assigned Product to Issuer for ultimate redelivery to PPA Buyer; and
WHEREAS, pursuant to this Agreement, MSES will assume responsibility for the Delivered Product Payment Obligation.
THEREFORE, in consideration of the premises above and the mutual covenants and agreements herein set forth, Issuer, PPA Seller, PPA Buyer and MSES (the “Parties” hereto; each is a “Party”) agree as follows:
AGREEMENT
1. Definitions.
The following terms, when used in this Agreement and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Agreement” has the meaning specified in the first paragraph above. “Assigned Delivery Point” has the meaning specified in Appendix 1.
Attachment Staff Report Item 6E
2 “Assigned Energy” means any Electricity associated with the Assigned Product to be delivered to MSES hereunder pursuant to the Assigned Rights and Obligations. “Assigned Quantity” means all Assigned Product delivered in accordance with the PPA by PPA Seller in each year during the Assignment Period. “Assigned Product” includes all [Specified Source Energy]/[Carbon Free Energy] (as defined in the PPA) associated with the Assigned Quantity. “Assigned Product Price” means the [Energy Price]/[Flat Price] (as defined in the PPA and specified in Appendix 1).
“Assigned Rights and Obligations” means (i) the rights of PPA Buyer under the PPA to receive the Assigned Quantity of Assigned Product during the Assignment Period, as such rights may be limited or further described in the “Further Information” section on Appendix 1, and (ii) the Delivered Product Payment Obligation, which right and obligation are transferred and conveyed to MSES hereunder.
“Assignment Early Termination Date” has the meaning specified in Section 5(b). “Assignment Period” has the meaning specified in Section 5(a). “Assignment Period End Date” means 11:59:59 p.m. pacific prevailing time on [____]. “Assignment Period Start Date” means [_____].
“Business Day” means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day begins at 8:00 a.m. and ends at 5:00 p.m. local time for the Party sending a notice, or payment, or performing a specified action. “CAISO Tariff” means the California Independent System Operator Corporation Agreement and Tariff, Business Practice Manuals (BPMs), and Operating Procedures, including the rules, protocols, procedures and standards attached thereto, as the same may be amended or modified from time-to-time and approved by the Federal Energy Regulatory Commission. “Claims” means all claims or actions, threatened or filed, and the resulting losses, damages, expenses, attorneys’ fees, experts’ fees, and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement, in each case arising under, in respect of or related in any way to the PPA or any transaction thereunder, except for the Delivered Product Payment Obligation. “Delivered Product Payment Obligation” has the meaning specified in Section 3(a). “Electricity” means three-phase, 60-cycle alternating current electric energy, expressed in megawatt hours (MWh).
“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, Attachment Staff Report Item 6E
3 including, but not limited to, courts, administrative bodies, departments, commissions, boards, bureaus, agencies, or instrumentalities.
“Issuer” has the meaning specified in the first paragraph of this Agreement. “Inter-SC Trade” or “IST” has the meaning set forth in the CAISO Tariff. “Month” means a calendar month.
“MSES” has the meaning specified in the first paragraph of this Agreement. “Person” means any individual, corporation, partnership, joint venture, trust, unincorporated organization, or Government Agency.
“PPA Buyer” has the meaning specified in the first paragraph of this Agreement. “PPA Seller” has the meaning specified in the first paragraph of this Agreement. “Prepaid Agreement” means that certain Prepaid Energy Sales Agreement dated as of [____], 2023 by and between MSES and Issuer.
“Prepay Power Supply Contract” means that certain Prepay Power Supply Contract dated as of [____], 2023 by and between PPA Buyer and Issuer. “Receivables” has the meaning given to such term in Section 3(d). “Retained Rights and Obligations” has the meaning specified in Section 3. “Scheduling Coordinator” or “SC” means an entity certified by the CAISO as qualifying as a Scheduling Coordinator pursuant to the CAISO Tariff for the purposes of undertaking the functions specified in “Responsibilities of a Scheduling Coordinator,” of the CAISO Tariff, as amended from time to time.
2. Transfer and Undertakings.
(a) PPA Buyer hereby assigns, transfers and conveys to MSES all right, title and interest in and to the rights of PPA Buyer under the PPA to receive delivery of the Assigned Product during the Assignment Period. In connection with this assignment, PPA Buyer hereby delegates to MSES the Assigned Rights and Obligations during the Assignment Period. (b) PPA Seller hereby consents and agrees to PPA Buyer’s assignment, transfer and conveyance of all right, title and interest in and to the Assigned Product and Assigned Rights and Obligations to MSES and the exercise and performance by MSES of the Assigned Rights and Obligations during the Assignment Period.
(c) MSES hereby accepts such assignment, transfer and conveyance of the Assigned Rights and Obligations during the Assignment Period and agrees to perform any such Assigned Rights and Obligations due from it during the Assignment Period to the extent expressly set forth in this Agreement.
Attachment Staff Report Item 6E
4 3. Limited Assignment.
The Parties acknowledge and agree that (i) the Assigned Rights and Obligations include only a portion of PPA Buyer’s rights and obligations under the PPA, and that all rights and obligations arising under the PPA that are not expressly included in the Assigned Rights and Obligations shall be “Retained Rights and Obligations”, and (ii) the Retained Rights and Obligations include all rights and obligations of PPA Buyer arising during the Assignment Period except the rights and obligations expressly included in the Assigned Rights and Obligations. In this regard:
(a) Limited to Delivered Product Payment Obligation; Invoicing. i. MSES’s sole obligation to PPA Seller will be to pay the Assigned Product Price to PPA Seller for the Assigned Product delivered during each Month of the Assignment Period on each applicable payment date under [Section 4.2 of the Confirmation] to the PPA for a quantity determined under this Section 3(a)i (the “Delivered Product Payment Obligation”). PPA Buyer shall remain solely responsible for any payment obligations other than the Delivered Product Payment Obligation due under the PPA during the Assignment Period (the “Retained Payment Obligation”). For purposes of determining the Delivered Product Payment Obligation and other related payment obligations during the Assignment Period, each Party acknowledges and agrees as follows:
(A) the PPA provides for the delivery of the Assigned Quantity on an annual basis, but the Assigned Quantity shall be settled on a monthly basis by multiplying the [Hourly Quantity (as defined in the PPA)] by the number CAISO Energy Delivery Hours (as defined in the PPA) in each Month (the “Settlement Monthly Quantity”) for the purpose of determining amounts due under this Agreement, the Prepay Power Supply Contract and the Prepaid Agreement for each Month of the Assignment Period (as futher described below); (B) regardless of the Assigned Quantity actually delivered in any Month during the Assignment Period, (I) the Delivered Product Payment Obligation shall be an amount equal to the result of (x) the Settlement Monthly Quantity, multiplied by (y) the Assigned Product Price; and (II) the payment due from PPA Buyer to Issuer under the Prepay Power Supply Contract shall be an amount equal to the result of (x) the Settlement Monthly Quantity, multiplied by (y) the Contract Price (as defined in the Prepay Power Supply Contract); and
(C) to the extent that (I) an amount less than the Annual Quantity (as defined in the PPA) has been delivered as of the end of December for any year during the Assignment Period or (II) an Assignment Early Termination Date occurs and the Assigned Quantity actually delivered prior to such date is less than the Settlement Monthly Quantity through such date (any such shortfall amount under clauses (I) or (II), an “Assigned Shortfall Quantity”), then MSES will be deemed to have remarketed the Assigned Shortfall Quantity in a Private Business Sale (as defined in Exhibit C to the Prepaid Agreement), and MSES will record any such Assigned Shortfall Quantity as a Ledger Entry on the Private Business Sales Ledger consistent with [Section 5(a) of Exhibit C to the Prepaid Agreement]; provided in addition that, notwithstanding anything to the contrary in the Prepaid Agreement, Attachment Staff Report Item 6E
5 MSES shall have no remarketing payment obligations with respect to any such Assigned Shortfall Quantity.
ii. PPA Seller shall deliver each monthly invoice and related supporting data during the Assignment Period to each of PPA Buyer and MSES, and each such invoice shall indicate (A) the total amount due to PPA Seller under the PPA for such Month (the “Monthly Gross Amount”); (B) the Delivered Product Payment Obligation; and (C) the Retained Payment Obligation, which (I) shall be determined by subtracting the Delivered Product Payment Obligation from the Monthly Gross Amount and (II) shall reflect an amount due from PPA Buyer to the extent it is a positive number and an amount due to PPA Buyer to the extent it is a negative number; provided in addition that any payment adjustments or subsequent reconciliations occurring after the date that is 10 days prior to the payment due date for a monthly invoice will be resolved solely between PPA Buyer and PPA Seller. The Delivered Product Payment Obligation and Retained Payment Obligation shall be administered by a custodian who will pay (1) the Monthly Gross Amount to PPA Seller on each payment due date and (2) the absolute value of the Retained Payment Obligation to PPA Buyer to the extent such amount is negative for any given Month.
(b) Retained Rights and Obligations. Any Claims (other than the Delivered Product Payment Obligation or a failure to perform the same) arising or existing in connection with or related to the PPA, whether related to performance by PPA Seller, PPA Buyer or MSES, and whether arising before, during or after the Assignment Period, in each case excluding the Delivered Product Payment Obligation, will be included in the Retained Rights and Obligations and any such Claims will be resolved exclusively between PPA Seller and PPA Buyer in accordance with the PPA.
(c) Scheduling. All scheduling of Electricity associated with Assigned Product and other communications related to the PPA shall take place between PPA Buyer and PPA Seller pursuant to the terms of the PPA; provided that (i) title to Assigned Product will pass to MSES upon delivery by PPA Seller at the Assigned Delivery Point in accordance with the PPA; (ii) immediately thereafter, title to such Assigned Product will pass to MSES, Issuer and then to PPA Buyer upon delivery by MSES at the same point where title is passed to MSES pursuant to clause (i) above; (iii) PPA Buyer will be deemed to be acting as MSES’s agent with regard to scheduling Assigned Energy; provided, however, that PPA Buyer shall be entitled to retain for its own account all CAISO revenues associated with delivery of the Assigned Product to CAISO, including where PPA Buyer is acting as Scheduling Coordinator for the Facility (as defined in the PPA) and through scheduling of ISTs; and (iv) (A) PPA Buyer and PPA Seller will provide copies to MSES of (I) any notice of force majeure delivered under the PPA and (II) any notice of a default or of a breach or other event that, if not cured within an applicable grace period, could result in a default; (B) PPA Seller will provide copies to MSES of annual forecasts and monthly forecasts and generation reports delivered under the PPA; and (C) PPA Buyer and PPA Seller, as applicable, will provide copies to MSES of any other information reasonably requested by MSES relating to Assigned Product.
(d) Amendments. PPA Buyer and PPA Seller will provide written notice (including copies thereof) of any amendment, waiver, supplement, modification, or other changes to the PPA to MSES relating to the Assigned Rights and Obligations, and the Parties hereby acknowledge and agree that an amendment, waiver, supplement, modification or other change will not have any Attachment Staff Report Item 6E
6 effect on MSES’s rights or obligations under this Agreement until and unless MSES receives written notice thereof.
(e) Setoff of Receivables. Pursuant to the Prepaid Agreement, MSES has agreed to purchase the rights to payment of the net amounts owed by PPA Buyer under the Prepay Power Supply Contract (“Receivables”) in the case of non-payment by PPA Buyer. To the extent any such Receivables relate to Assigned Product purchased by MSES pursuant to the Assigned Rights and Obligations, MSES may transfer such Receivables (excluding any penalties, late payment fees, late payment interest or other fees, costs or interest included in such Receivables) to PPA Seller and apply the face amount of such Receivables (excluding any penalties, late payment fees, late payment interest or other fees, costs or interest included in such Receivables) as a reduction to any Delivered Product Payment Obligations; provided, however, that at no time shall PPA Seller be required to pay MSES for any amounts by which such Receivables exceed any Delivered Product Payment Obligations then due and owed to PPA Seller.
(f) Joinder to Intercreditor Agreement. In connection with the execution of this Agreement and as a condition precedent to the effectiveness hereof, Issuer shall execute a joinder to the Intercreditor and Collateral Agency Agreement (as defined in the PPA), which will provide Issuer with certain rights under the Security Documents (as defined in the PPA). PPA Buyer agrees that it shall make payments with respect to the Assigned Quantity to Issuer under the Prepay Power Supply Contract on the 20th or preceding business day of the month following deliveries consistent with the terms thereof, and such payments will be made from PPA Buyer’s available funds not pledged to the Special Fund (as defined in the PPA); provided that, in the event PPA Buyer fails to make any such payment when due, PPA Buyer shall cause such payment due to Issuer to be included as Regular Charges (as defined in the Security Documents) on the first Distribution Date Certificate (as defined in the Security Documents) to be issued thereafter. If PPA Buyer fails to do so, Issuer shall dispute such Distribution Date Certificate and otherwise pursue its rights to payment thereon pursuant to the terms of the Intercreditor and Collateral Agency Agreement. To the extent Issuer receives any amounts under the Security Documents or Intercreditor and Collateral Agency Agreement in respect of any Receivables purchased by MSES, Issuer shall (i) hold such amounts in trust for the benefit of MSES, (ii) promptly notify MSES thereof and (iii) promptly remit such amounts directly to an account specified by MSES.
4. Forward Contract.
The Parties acknowledge and agree that this Agreement constitutes a “forward contract” and that the Parties shall constitute “forward contract merchants” within the meaning of the United States Bankruptcy Code.
5. Assignment Period; Assignment Early Termination.
(a) Assignment Period. The “Assignment Period” shall begin on the Assignment Period Start Date and extend until the Assignment Period End Date; provided that in no event shall the Assignment Period extend past an Assignment Early Termination Date. (b) Early Termination. An “Assignment Early Termination Date” will occur under the following circumstances and as of the dates specified below:
Attachment Staff Report Item 6E
7 i. the assignment of the Prepay Power Supply Contract by PPA Buyer or Issuer pursuant to Article XIII thereof, which Assignment Early Termination Date shall occur immediately as of the time of such assignment;
ii. the suspension, expiration, or termination of performance of the PPA by either PPA Buyer or PPA Seller for any reason other than the occurrence of Force Majeure under and as defined in the PPA, which Assignment Early Termination Date shall occur immediately as of the time of PPA Seller’s last performance under the PPA following such suspension, expiration, or termination;
iii. the election of MSES in its sole discretion to declare an Assignment Early Termination Date as a result of (a) any event or circumstance that would give either PPA Buyer or PPA Seller the right to terminate or suspend performance under the PPA (regardless of whether PPA Buyer or PPA Seller exercises such right) or (b) the execution of an amendment, waiver, supplement, modification or other change to the PPA that adversely affects the Assigned Rights and Obligations or MSES’s rights or obligations under this Agreement (provided that MSES shall not have a right to terminate under this clause (b) to the extent that MSES (i) receives prior notice of such change and (ii) provides its written consent thereto), which Assignment Early Termination Date shall occur upon the date set forth in a written notice of such election delivered by MSES to PPA Buyer and PPA Seller;
iv. termination or suspension of deliveries for any reason other than force majeure under the Prepaid Agreement or Prepay Power Supply Contract, which Assignment Early Termination Date shall occur immediately as of the time of the last deliveries under the relevant contract following such suspension or termination; v. the election of PPA Seller or PPA Buyer in its sole discretion to declare an Assignment Early Termination Date if MSES fails to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such failure continues for five Business Days following receipt by MSES of written notice thereof, which Assignment Early Termination Date shall occur upon the date set forth in a written notice of such election delivered by PPA Seller or PPA Buyer, as applicable, to MSES, and with a copy to PPA Buyer or PPA Seller, as applicable;
vi. the election of PPA Seller or PPA Buyer in its sole discretion to declare an Assignment Early Termination Date if either (a) an involuntary case or other proceeding is commenced against MSES seeking liquidation, reorganization or other relief with respect to it or its debts under any applicable Federal or State bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar law now or hereafter in effect or seeking the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed, or an order or decree approving or ordering any of the foregoing is entered and continued unstayed and in effect, in any such event, for a period of 60 days, or (b) MSES commences a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar law or any other case or proceeding to be adjudicated as bankrupt or insolvent, or MSES consents to the entry of a decree or order for relief in an involuntary case or proceeding under any applicable Federal or State Attachment Staff Report Item 6E
8 bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, files a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or consents to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of MSES or any substantial part of its property, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due, which Assignment Early Termination Date shall occur upon the earliest date set forth in a written notice of such election delivered by PPA Seller or PPA Buyer, as applicable, to MSES, and with a copy to PPA Buyer or PPA Seller, as applicable;
vii. either MSES or PPA Buyer may designate an Assignment Early Termination Date with written notice to the other Parties to the extent that MSES and PPA Buyer have mutually agreed upon a replacement Assignment Agreement (as defined in the Prepay Power Supply Contract) that will replace the Assigned Rights and Obligations hereunder immediately following the termination hereof, which Assignment Early Termination Date shall occur effective as of the end of the Month preceding the commencement of the “Assignment Period” under the replacement Assignment Agreement as specified in the notice from MSES or PPA Buyer to the other Parties; and viii. PPA Buyer may deliver written notice of termination to the other Parties if any change, event or effect occurs, including but not limited a change in applicable laws or regulations, any issues with the PPA Seller or the PPA, a dispute under the PPA or other similar circumstance, that individually or collectively have or are reasonably expected by PPA Buyer to have a material adverse effect upon (A) the PPA Buyer, (B) its rights and obligations under this Agreement, the Prepay Power Supply Contract, or the PPA, or (C) the benefit the PPA Buyer is receiving by assigning the Assigned Rights and Obligations, with such Assignment Early Termination Date to be the date set forth in a written notice delivered by PPA Buyer to the other Parties; provided that (x) PPA Buyer will provide notice to the other Parties as soon as is reasonably possible that PPA Buyer anticipates exercising this termination right, and (y) PPA Buyer shall exercise commercially reasonable efforts to propose and agree with MSES upon a replacement Assignment Agreement prior to exercising this termination right.
(c) Reversion of Assigned Rights and Obligations. The parties acknowledge and agree that upon the occurrence of an Assignment Early Termination Date the Assigned Rights and Obligations will revert from MSES to PPA Buyer. Any Assigned Rights and Obligations that would become due for payment or performance on or after such Assignment Early Termination Date shall immediately and automatically revert from MSES to PPA Buyer, provided that (i) MSES shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to MSES prior to the Assignment Early Termination Date, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the occurrence of the Assignment Early Termination Date.
6. Representations and Warranties.
(a) Copy of PPA. PPA Seller and PPA Buyer represent and warrant to MSES that a true, complete, and correct copy of the PPA is attached hereto as Appendix 3.
Attachment Staff Report Item 6E
9 (b) No Default. PPA Seller and PPA Buyer represent and warrant to MSES that no event or circumstance exists (or would exist with the passage of time or the giving of notice) that would give either of them the right to terminate the PPA or suspend performance thereunder. (c) Other. Each of PPA Buyer and PPA Seller represents and warrants to each other and to MSES that:
i. it has made no prior transfer (whether by way of security or otherwise) of any interest in the Assigned Rights and Obligations; and ii. all obligations of PPA Buyer and PPA Seller under the PPA required to be performed on or before the Assignment Period Start Date have been fulfilled. (d) Representations. Each Party represents to each of the other Parties:
i. Status. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing.
ii. Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance. iii. No Violation or Conflict. Such execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the incurrence by such Party of its obligations under this Agreement, will not result in any violation of, or conflict with: (i) any term of any material contract or agreement applicable to it; (ii) any of its charter, bylaws, or other constitutional documents; (iii) any determination or award of any arbitrator applicable to it; or (iv) any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, law, ordinance, rule or regulation of any Government Agency, applicable to it or any of its assets or properties or to any obligations incurred by it or by which it or any of its assets or properties or obligations are bound or affected, and shall not cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets. iv. Consents. All consents, approvals, orders or authorizations of, registrations, declarations, filings or giving of notice to, obtaining of any licenses or permits from, or taking of any other action with respect to, any Person or Government Agency that are required to have been obtained by such Party with respect to this Agreement and the transactions contemplated hereby, including the due authorization of such Party and its governing body and any approval or consent of any security holder of such Party or any holder (or any trustee for any holder) of any indebtedness or other obligation of such Party, have been obtained and are in full force and effect and all conditions of any such consents have been complied with. v. Obligations Binding. Its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms Attachment Staff Report Item 6E
10 (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).
vi. Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other Parties as investment advice or as a recommendation to enter into this Agreement; it being understood that information and explanations related to the terms and conditions of this Agreement shall not be considered investment advice or a recommendation to enter into this Agreement. It is entering into this Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by all Parties, considers this Agreement a legally enforceable contract. No communication (written or oral) received from any of the other Parties shall be deemed to be an assurance or guarantee as to the expected results of this Agreement. vii. Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Agreement. It is also capable of assuming, and assumes, the risks of this Agreement. viii. Status of Parties. None of the other Parties is acting as a fiduciary for or an adviser to it in respect of this Agreement.
7. Counterparts.
This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile or electronic transmission), each of which will be deemed an original.
8. Costs and Expenses.
The Parties will each pay their own costs and expenses (including legal fees) incurred in connection with this Agreement and as a result of the negotiation, preparation, and execution of this Agreement.
9. Amendments.
No amendment, modification, or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by an electronic transmission) and executed by each of the Parties or confirmed by emails or electronic messages on an electronic messaging system.
10. Notices.
Any notice, demand, statement or request required or authorized by this Agreement to be given by one Party to another shall be in writing, except as otherwise expressly provided herein. It shall be sent by email transmission, courier, or personal delivery (including overnight delivery service) to Attachment Staff Report Item 6E
11 each of the notice recipients and addresses for each of the other Parties designated in Appendix 2 hereto. Any such notice, demand, or request shall be deemed to be given (i) when sent by email transmission, or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service). Each Party shall have the right, upon 10 days’ prior written notice to the other Parties, to change its address at any time, and to designate that copies of all such notices be directed to another person at another address. The Parties may mutually agree in writing at any time to deliver notices, demands or requests through alternate or additional methods.
Notwithstanding the foregoing, any Party may at any time notify the other Parties that any notice, demand, statement or request to it must be provided by email transmission for a specified period of time or until further notice, and any communications delivered by means other than email transmission during such time shall be ineffective.
11. Miscellaneous.
(a) Governing Law. This Agreement and the rights and duties of the Parties under this Agreement will be governed by and construed, enforced and performed in accordance with the laws of the state of New York, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws; provided, however, that the authority of PPA Buyer to enter into and perform its obligations under this agreement shall be determined in accordance with the laws of the state of California.
(b) U.S. Resolution Stay. The Parties hereby confirm that they are adherents to the ISDA 2018 U.S. Resolution Stay Protocol (“ISDA U.S. Stay Protocol”), the terms of the ISDA U.S. Stay Protocol are incorporated into and form a part of this Agreement, and this Agreement shall be deemed a Protocol Covered Agreement for purposes thereof. For purposes of incorporating the ISDA U.S. Stay Protocol, MSES and PPA Seller shall each be deemed to be a Regulated Entity, and PPA Buyer shall be deemed to be an Adhering Party. In the event of any inconsistences between this Agreement and the ISDA U.S. Stay Protocol, the ISDA U.S. Stay Protocol will prevail.
(c) Reserved.
(d) Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope of this agreement to arbitrate, shall be determined by final, non-appealable binding arbitration in San Francisco, California before three (3) arbitrators. The arbitration shall be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures. Within fifteen (15) days after the commencement of arbitration, each of PPA Seller and PPA Buyer shall select one person to act as arbitrator, and the two so-selected arbitrators shall select a third arbitrator (the “chairperson”) within thirty (30) days of the commencement of the arbitration. If either PPA Seller or PPA Buyer is unable or fails to select one person to act as arbitrator, such arbitrator shall be appointed by JAMS. If the PPA Seller and PPA Buyer-selected arbitrators are unable or fail to agree upon a chairperson, the chairperson shall be appointed by JAMS. The chairperson shall be a person who has experience in renewable energy-related transactions, and none of the arbitrators shall have been previously employed by any Party or have any direct pecuniary interest in any Party or the subject matter of the arbitration, unless such conflict is expressly acknowledged and waived in writing by all of the Parties. The Parties shall maintain the confidential nature of the arbitration proceeding and any award, including any hearing(s), except as may be necessary to Attachment Staff Report Item 6E
12 prepare for or conduct the arbitration hearing on the merits, or except as necessary in connection with a court application for a preliminary remedy, a judicial challenge to an award or its enforcement, or unless otherwise required by law or judicial decision. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under any law or right, with the Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing Party or Parties, if any, the costs and attorney’s fees reasonably incurred in seeking to enforce the application of this Section 1(b) and by the prevailing party in connection with the arbitration.
Notwithstanding the foregoing provisions of this Section 1(b), any costs incurred by a Party in seeking judicial enforcement of any written decision of the arbitrators shall be chargeable to and borne exclusively by the Party against whom such court order is obtained. The award shall be final and binding on the Parties and judgment upon any award may be entered in any court of competent jurisdiction.
(e) Judicial Reference. Without limiting the provisions in Section 1(b), if Section 1(b) is deemed ineffective or unenforceable in any respect, any dispute between the Parties arising out of or in connection with this Agreement or its performance, breach, or termination (including the existence, validity and interpretation of this Agreement and the applicability of any statute of limitation period) (each, a “Dispute”) shall be resolved by a reference proceeding in California in accordance with the provisions of Sections 638 et seq. of the California Code of Civil Procedure (“CCP”), or their successor sections (a “Reference Proceeding”), which shall constitute the exclusive remedy for the resolution of any Dispute. As a condition precedent to initiating a Reference Proceeding with respect to any Dispute, the Parties shall comply with the provisions of Section 1(c)i).
i. Notice of Dispute. Prior to initiating the Reference Proceeding, a Party (the “Disputing Party”) shall provide the other Parties (the “Responding Parties”) with a written notice of each issue in dispute, a proposed means for resolving each such issue, and support for such position (the “Notice of Dispute”). Within 10 days after receiving the Notice of Dispute, the Responding Parties shall provide the Disputing Party with a written Notice of each additional issue (if any) with respect to the dispute raised by the Notice of Dispute, a proposed means for resolving every issue in dispute, and support for such position (the “Dispute Response”). Thereafter, the Parties shall meet to discuss the matter and attempt in good faith to reach a negotiated resolution of the dispute. If the Parties do not resolve the dispute by unanimous agreement within sixty 60 days after receipt of the Dispute Response, (the “Negotiation Period”), then any Party may provide to the other Parties written notice of intent for judicial reference (the “Impasse Notice”) in accordance with the further provisions of this Section 11.
ii. Applicability; Selection of Referees.
(A) Within 10 days of the delivery of an Impasse Notice, each of PPA Seller and PPA Buyer shall nominate one (1) referee. The two (2) referees (the “Party-Appointed Referees”) shall appoint a third referee (the “Third Referee”, together with the Party-Appointed Referees, the “Referees”). The Party-Appointed Referees shall be competent and experienced in matters involving the electric Attachment Staff Report Item 6E
13 energy business in the United States, with at least ten (10) years of electric industry experience as a practicing attorney. The Third Referee shall be an active or retired California state or federal judge. Each of the Party-Appointed Referees and the Third Referee shall be impartial and independent of each of the Parties and of the other referees and not employed by any of the Parties in any prior matter. (B) If the Party-Appointed Referees are unable to agree on the Third Referee within 45 days from delivery of the Impasse Notice, then the Third Referee shall be appointed pursuant to CCP Section 640(b) in an action filed in the Superior Court of California, County of San Francisco (the “Court”), and with due regard given to the selection criteria above. A request for appointment of a referee may be heard on an ex parte or expedited basis, and the Parties agree that irreparable harm would result if ex parte relief is not granted. Pursuant to CCP Section 170.6, each of PPA Buyer and PPA Seller shall have one (1) peremptory challenge to the referee selected by the Court.
iii. Discovery; Proceedings.
(A) The Parties agree that time is of the essence in conducting the Reference Proceeding. Accordingly, the referees shall be requested, subject to change in the time periods specified herein for good cause shown, to (i) set the matter for a status and trial-setting conference within 20 days after the date of selection of the Third Referee, (ii) if practicable, try all issues of law or fact within 180 days after the date of the conference, and (iii) report a statement of decision within 20 days after the matter has been submitted for decision. (B) Discovery and other pre-hearing procedures shall be conducted as agreed to by the Parties, or if they cannot agree, as determined by the Third Referee after discussion with the Parties regarding the need for discovery and other pre-hearing procedures. (C) Except as expressly set forth herein, the Third Referee shall determine the manner in which the Reference Proceeding is conducted, including the time and place of hearings, the order of presentation of evidence, and all other questions that arise with respect to the course of the Reference Proceeding. The Reference Proceeding, including the trial, shall be conducted at a neutral location selected by the Parties, or if not agreed by the Parties, by the Third Referee, in San Francisco, California.
(D) All proceedings and hearings conducted before the referees, except for trial, shall be conducted without a court reporter, except that when any Party so requests, a court reporter will be used at any hearing conducted before the referees, and the referees will be provided a courtesy copy of the transcript. The Party making such a request shall have the obligation to arrange for and pay the court reporter.
iv. Decision. The referees shall render a written statement of decision setting forth findings of fact and conclusions of law. The decision shall be entered as a judgment in the court in accordance with the provisions of CCP Sections 644 and 645. The decision Attachment Staff Report Item 6E
14 shall be appealable to the same extent and in the same manner that such decision would be appealable if rendered by a judge of the Court. The Parties intend this general reference agreement to be specifically enforceable in accordance with the CCP. v. Expenses. Each of PPA Seller and PPA Buyer shall bear the compensation and expenses of its respective Party-Appointed Referee, own counsel, witnesses, consultants and employees. All other expenses of judicial reference shall be split equally between PPA Seller and PPA Buyer.
(f) Limitation of Liability. Notwithstanding anything to the contrary herein, all obligations of Issuer under this Agreement, including without limitation all obligations to make payments of any kind whatsoever, are special, limited obligations of Issuer, payable solely from the Trust Estate (as such term is defined in the Bond Indenture) as and to the extent provided in the Bond Indenture, including with respect to Operating Expenses (as such term is defined in the Bond Indenture). Issuer shall not be required to advance any moneys derived from any source other than the Revenues (as such term is defined in the Bond Indenture) and other assets pledged under the Bond Indenture for any of the purposes in this Agreement mentioned. Neither the faith and credit of Issuer nor the taxing power of the State of California or any political subdivision thereof is pledged to payments pursuant to this Agreement. Issuer shall not be directly, indirectly, contingently or otherwise liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reasons of or in connection with this Agreement, except solely to the extent Revenues (as such term is defined in the Bond Indenture) are received for the payment thereof and may be applied therefor pursuant to the terms of the Bond Indenture
Attachment Staff Report Item 6E
Signature Page to Limited Assignment Agreement
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first set forth above.
MORGAN STANLEY CAPITAL GROUP INC.
By: ____________________________
Name:_______________________
Title:________________________
EAST BAY COMMUNITY ENERGY AUTHORITY
By: ____________________________
Name:_______________________
Title:________________________
MORGAN STANLEY ENERGY STRUCTURING, L.L.C.
By: ____________________________
Name:_______________________
Title:________________________
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: ____________________________
Name:_______________________
Title:________________________
Attachment Staff Report Item 6E
Appendix 1 - 1
Appendix 1
Assigned Rights and Obligations
PPA: Master Power Purchase and Sale Agreement dated as of [____] and the Confirmation thereunder dated as of [____], by and between PPA Buyer and PPA Seller Assigned Delivery Point: [NP15 EZ GEN HUB)]
Assigned Product Price: [To list applicable Energy Price or Flat Price specified in the PPA] Further Information: [Include additional requirements, if any] Attachment Staff Report Item 6E
Appendix 2 - 1
Appendix 2
Notice Information
[To be completed before signing.]
Attachment Staff Report Item 6E
Appendix 3 - 1
Appendix 3
Copy of Power Sales Contract
[To be attached.]
Attachment Staff Report Item 6E
SM Draft 28 June 2023
CUSTODIAL AGREEMENT
This Custodial Agreement (this “Agreement”) is made and entered into as of [_____], 2023, by and among California Community Choice Financing Authority, a joint powers authority and a public entity of the State of California established pursuant to the provisions of the Joint Exercise of Powers Act (Article 1, Chapter 5, Division 7, Title 1, Section 6500 et seq. of the California Government Code, as amended) (defined below) (the “Issuer”), East Bay Community Energy Authority, a joint powers authority and a community choice aggregator organized under the laws of the State of California (“Participant”), Morgan Stanley Capital Group Inc., a Delaware corporation (“MSCG”), Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company (“MSES”), and The Bank of New York Mellon Trust Company, N.A., a national banking association, (the “Custodian” and together with the Issuer, Participant, MSES and MSCG, the “Parties”, and each individually, a “Party”).
RECITALS:
WHEREAS, the Issuer is issuing its [Clean Energy Project Revenue Bonds, Series 2023_] (the “Bonds”) pursuant to the Trust Indenture, dated as of [_____], 2023 (the “Bond Indenture”) between Issuer and The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee under the Bond Indenture (the “Trustee”); and
WHEREAS, MSES and Issuer are entering into that certain Prepaid Energy Sales Agreement, dated as of [_____], 2023 (the “Prepaid Agreement”); and WHEREAS, in connection with the execution of the Prepaid Agreement, MSES and MSCG are entering into an Energy Management Agreement, dated as of [_____], 2023 (the “Energy Management Agreement”); and
WHEREAS, in connection with the execution of the Prepaid Agreement, Issuer and Participant are entering into a Power Supply Agreement, dated as of [_____], 2023 (the “Power Supply Agreement” and together with the Prepaid Agreement and the Energy Management Agreement, the “Prepay Supply Contracts”); and
WHEREAS, in connection with or subsequent to the execution of the Prepay Supply Contracts, MSCG, Issuer and Participant may enter into one or more Limited Assignment Agreements (the “Assignment Agreements”) pursuant to which Participant partially assigns its rights and obligations under its power supply contracts (“Assigned PPAs”) for redelivery of energy and other specified products pursuant to the Prepay Supply Contracts; and WHEREAS, the Parties propose to enter into this Custodial Agreement in order to administer payments to be received by the sellers under the Assigned PPAs (each, individually, a “PPA Seller” and collectively the “PPA Sellers”, and which definitions shall include any new PPA Seller identified by MSCG’s delivery of an updated Exhibit A consistent with Section 3(c)).
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:
Section 1. Defined Terms.
Attachment Staff Report Item 6F
2 (a) Any capitalized term used herein and not otherwise defined herein (including in the recitals) shall have the meaning assigned to such term in the Power Supply Agreement. The following additionalterms, when used in this Agreement (including the preamble or recitals to this Agreement) and identified by the capitalization of the first letter thereof, have the respective meanings set forth below, unless the context otherwise requires:
“Assignment Period” has the meaning specified in Exhibit A, as may be updated from time to time consistent with the terms hereof.
“Assigned Product Price” has the meaning specified in Exhibit A, as may be updated from time to time consistent with the terms hereof. “Custodial Agreement Payment Date” means the last Business Day preceding the PPA Monthly Statement Payment Date.
“Delivered Product Payment Amount” means, in respect of each PPA Monthly Statement, an amount equal to the lesser of (a) the Monthly Projected Quantity under the relevant Assigned PPA for such Month multiplied by the Assigned Product Price for such Assigned PPA, and (b) the actual quantity of Assigned Product reflected in such Monthly PPA Invoice multiplied by the Assigned Product Price then in effect under the relevant Assigned PPA, minus the face amount of any Receivable (as defined in the Prepaid Agreement) that is delivered by PPA Assignee to the Custodian pursuant to Section 4(e); provided that, notwithstanding the foregoing or anything to the contrary herein, there shall be no Delivered Product Payment Amount or any other obligations of PPA Assignee with respect to quantities of Assigned Product delivered in excess of the Annual Quantity in any Contract Year.
“Issuer Negative Pricing Payment Amount” means the positive difference, if any, for any Month of an Assignment Period between (a) amounts due from Issuer to Participant under Section 3.2(a) of the Power Supply Contract with respect to negatively priced Energy and (b) amounts due from Participant to Issuer under Section 3.2(a) of the Power Supply Contract with respect to positively priced Energy.
“Monthly Gross Amount” means, in respect of each PPA Monthly Statement, an amount equal to the total net amount due to the applicable PPA Seller in respect of such PPA Monthly Statement and shall consist of the following components: (a) the Delivered Product Payment Amount and (b) the Retained Payment Amount (if such amount is a positive number for such Month).
“MSES Prepay Payment Date” means the payment due date for amounts due from MSES to Issuer under the Prepaid Agreement as set forth in [Section 14.2(a)] thereof. “PPA Assignee” means MSCG or, to the extent that MSCG is a PPA Seller under the applicable Assigned PPA, MSES, in each case, in its capacity as the limited assignee under the applicable Assignment Agreement.
“PPA Assignee Resettlement Amount” means, in respect of any PPA Monthly Statement that (a) is delivered after the delivery of the Billing Statement under the Power Supply Contract for such Month and (b) reflects a quantity of Assigned Product less than the Monthly Projected Quantity was delivered in such Month under the relevant Assigned PPA, an amount Attachment Staff Report Item 6F
3 equal to the product of (x) the Monthly Projected Quantity for such Month minus the quantity of Assigned Products actually delivered under the Assigned PPA in such Month, multiplied by (y) the Day-Ahead Market Price during the Initial EPS Energy Period and the Day-Ahead Average Price during any EPS Energy Period subsequent to the Initial EPS Energy Period; provided that, notwithstanding the foregoing or anything to the contrary herein, there shall be no PPA Assignee Resettlement Amount or any other obligations of PPA Assignee with respect to quantities of Assigned Product delivered in excess of the Annual Quantity in any Contract Year. “PPA Monthly Statement” means the monthly consolidated invoice delivered to PPA Assignee and Participant consistent with the terms of the applicable Assignment Agreement. “PPA Monthly Statement Payment Date” means the last Business Day on which payment with respect to a PPA Monthly Statement may be made before any incremental interest arises thereon or any default or breach arises under the Assigned PPA. “Provisional Payment” has the meaning specified in the Prepaid Agreement. “Retained Payment Amount” means, in respect of each PPA Monthly Statement, an amount equal to all amounts owed to the applicable PPA Seller for such Month, less (b) the sum of the Delivered Product Payment Amount and the PPA Assignee Resettlement Amount, if any; provided that, to the extent the Retained Payment Amount is negative in any Month, then the absolute value of such amount shall represent an amount to be paid by the Custodian to Participant pursuant to Section 4(c)(ii) hereof; provided furthermore that all amounts due with respect to quantities of Assigned Product in excess of the Annual Quantity for any Contract Year shall be Participant’s sole responsibility as a portion of the Retained Payment Amount. (b) Except where expressly provided otherwise, any reference herein to any agreement or document includes all amendments, supplements or restatements to and of such agreement or document as may occur from time to time in accordance with its terms and the terms hereof, and any reference to a party to any such agreement includes all successors and assigns of such party thereunder permitted by the terms hereof and thereof.
Section 2. Appointment of Custodian. Participant, MSES and MSCG hereby appoint The Bank of New York Mellon Trust Company, N.A. as Custodian under this Agreement, with such rights and obligations as are specifically set forth herein. The Custodian hereby accepts such appointment under the terms and conditions set forth herein.
Section 3. Payment Instructions to Custodian; Assigned PPA Exhibits. (a) No later than [seven]
1 days following Participant’s receipt of a PPA Monthly Statement from a PPA Seller, Participant shall deliver a statement to the other Parties hereto listing the following: the Delivered Product Payment Amount, the Retained Payment Amount, the Monthly Gross Amount, the PPA Monthly Statement Payment Date, the Custodial Agreement Payment Date, the PPA Assignee Resettlement Amount, if any, the Monthly Excess Quantities, if any, the Assigned Paygo Quantities reflected in such PPA Monthly Statement and any Issuer Negative Pricing Payment Amount for such Month (such notice from the Participant, the 1 NTD: Parties to confirm whether this provides sufficient time based on invoice timing under EBCE’s renewables PPAs and the corresponding invoicing provisions of the Prepay Supply Contracts.
Attachment Staff Report Item 6F
4 “Participant Monthly Statement”), as determined, in each case, based on the relevant PPA Monthly Statement for such Month. The Parties agree to exercise commercially reasonable efforts to implement a test billing period for a period of at least two Months prior to the effectiveness of any Assignment Agreement after the Initial Assignment Agreement. (b) PPA Assignee shall notify Participant and each other Party promptly following Participant’s delivery of a Participant Monthly Statement if PPA Assignee believes any information included on such PPA Monthly Statement is incorrect. Following receipt and verification of the information included in any such notice from PPA Assignee, Participant shall, to the extent appropriate and in consultation with PPA Assignee, issue a corrected PPA Monthly Statement to all Parties.
(c) Exhibit A to this Agreement sets forth certain information regarding the Assigned PPAs as of the date hereof, including the Assignment Periods and Assigned Product Prices for each Assigned PPA, the PPA Sellers thereunder and the payment instructions for payments to the PPA Sellers. MSCG shall deliver an updated Exhibit A to each of the other Parties hereto to reflect any changes to the information set forth therein, including due to the expiration, extension or termination of an Assignment Period or the commencement of a new Assignment Period.
Section 4. Assigned PPA Payments Account.
(a) Custodial Account. With respect to payments required to be made by PPA Assignee and Participant to the PPA Sellers under the Assigned PPAs, there is hereby established with the Custodian at its office located at 333 South Hope Street, Suite 2525, Los Angeles, California 90071, the following custodial account: a payments account designated as the “[____]”, bearing Custodian’s Account No. [____] (the “Assigned PPA Payments Account”) and all payments made by PPA Assignee and Participant hereunder shall be wired to such Assigned PPA Payments Account:
The Bank of New York Mellon, N.A.
ABA# 021000018
A/C#: [____]
FBO: [____]
Attn: Matthew Kuper 904.645.1947
(b) PPA Assignee and Participant Monthly Payments.
(i) PPA Assignee shall make payment of the Delivered Product Payment Amount and any PPA Assignee Resettlement Amount into the Assigned PPA Payments Account on the Custodial Agreement Payment Date for each Month of any Assignment Period; provided that, to the extent that (i) the Delivered Product Payment Amount and any PPA Assignee Resettlement Amount are due and (ii) PPA Assignee pays some portion of such amounts but less than the total amount due, PPA Assignee’s partial payment shall be applied first to the Delivered Product Payment Obligation. (ii) For each Month of any Assignment Period for which the Retained Payment Amount is a positive number, Participant shall make payment of such amount into the Assigned PPA Payments Account on the Custodial Agreement Payment Date. For each Month of any Assignment Period for which the Retained Payment Amount is a negative Attachment Staff Report Item 6F
5 number, Participant shall have no payment obligation for such Month with respect to the Retained Payment Amount and the Custodian will pay the absolute value of such amount to Participant consistent with Section 4(c)(ii).
(iii) For each Month, if any, of an Assignment Period for which there is an Issuer Negative Pricing Payment Amount, Participant shall make payment of such amount into the Assigned PPA Payments Account on the Custodial Agreement Payment Date; provided that, notwithstanding the foregoing, Participant shall have no payment obligation hereunder with respect to an Issuer Negative Pricing Payment Amount to the extent that PPA Assignee receives such amount from the PPA Seller pursuant to the terms of the applicable Assignment Agreement.
(c) Transfers by Custodian.
(i) For any Month in an Assignment Period for which the Retained Payment Amount is a positive number, the Custodian shall withdraw the amounts on deposit in the Assigned PPA Payments Account to make payment of the Monthly Gross Amount on the PPA Monthly Statement Payment Date by a single wire transfer to the applicable PPA Seller of the amounts received from each of PPA Assignee and Participant. (ii) For any Month in an Assignment Period for which the Retained Payment Amount is a negative number, the Custodian shall withdraw amounts on deposit in the Assigned PPA Payments Account (A) first to make payment of the Monthly Gross Amount to the applicable PPA Seller in respect of each PPA Monthly Statement on the relevant PPA Monthly Statement Payment Date pursuant to the payment instructions set forth on Exhibit A; and (B) immediately thereafter to make payment of the absolute value of such Retained Payment Amount to Participant pursuant to the payment instructions set forth on Exhibit B. If the amounts on deposit in the Assigned PPA Payments Account are insufficient to pay the entirety of either such amounts, the Custodian shall apply the amounts available in the order specified in the preceding sentence. (iii) For any Month in an Assignment Period for which an Issuer Negative Pricing Payment Amount is due from Participant, the Custodian shall, after application of amounts on deposit in the Assigned PPA Payments Account pursuant to clause (i) or (ii) above, as applicable, withdraw amounts on deposit in the Assigned PPA Payments Account to make payment of the Issuer Negative Pricing Payment Amount to PPA Assignee. (d) Amounts deposited in the Assigned PPA Payments Account shall be held in trust for the benefit of Participant until applied as set forth in Section 4(c) and Section 14, as applicable, and there is hereby granted to Participant a lien on and security interest in the Assigned PPA Payments Account pending such application. Except for any amounts due and payable to Participant pursuant to Section 4(c)(ii), the Custodian shall not be required to comply with any orders, demands, or other instructions from Participant with respect to the Assigned PPA Payments Account, including, without limitation, items presented for payment, or any order or instruction directing the disposition of funds or other assets held in or credited to the Assigned PPA Payments Account, and Participant agrees that, except as set forth in Section 4(c)(ii), prior to the termination of this Agreement in accordance with the terms hereof, it shall have no right to direct the disposition of funds or other assets held in or credited to the Assigned PPA Payments Account, or Attachment Staff Report Item 6F
6 to withdraw or otherwise obtain funds or other assets held in or credited to the Assigned PPA Payments Account, whether by order or instruction to the Custodian or otherwise. (e) With respect to each PPA Monthly Statement, to the extent PPA Assignee has purchased Receivables (as defined in the Prepaid Agreement) for amounts owed by Participant for the Month to which such PPA Monthly Statement relates, PPA Assignee may, at its option, (i) notify the Custodian that it intends to transfer all or any portion of such Receivables to the PPA Seller, and (ii) reduce the Delivered Product Payment Amount by the face amount of such Receivables to be transferred. To the extent PPA Assignee has notified the Custodian of its intent to transfer any such Receivables, PPA Assignee shall cause such Receivables to be transferred to the PPA Seller not later than the relevant PPA Monthly Statement Payment Date.
Section 5. Provisional Payments Account.
(a) Custodial Account. With respect to Provisional Payments required to be made by MSES to Issuer under the Prepaid Agreement, as reflected in the Billing Statement (as defined in the Prepaid Agreement) which shall be delivered by MSES to each of the parties hereof consistent with [Section 14.1(b)] of the Prepaid Agreement, there is hereby established with the Custodian at its office located at 333 South Hope Street, Suite 2525, Los Angeles, California 90071, the following custodial account: a payments account designated as the “[____]”, bearing Custodian’s Account No. [____] (the “Provisional Payments Account”) and all payments made by PPA Assignee and Participant hereunder shall be wired to such Provisional Payments Account:
The Bank of New York Mellon, N.A.
ABA# 021000018
A/C#: [____]
FBO: [____]
Attn:: Matthew Kuper 904.645.1947
(b) PPA Assignee and Participant Monthly Payments. For each Month of the Delivery Period, MSES shall make payment of the Provisional Payment, if any, due under the Prepaid Agreement for such Month into the Provisional Payments Account on or before the MSES Prepaid Payment Date for each Month of the Delivery Period. The Parties acknowledge and agree that any Provisional Payment due shall be reflected in the Billing Statement (as defined in the Prepaid Agreement) delivered by MSES under [Section 14.1(b)] of the Prepaid Agreement, which MSES has agreed to deliver to each of the parties hereunder. (c) Transfers by Custodian; Segregation and Application of Discount Dollars. (i) Upon receipt of any Provisional Payment under Section 5(b), the Custodian shall promptly withdraw the portion of such Provisional Payment that represents the Net Participant Price (as defined in the Prepaid Agreement) that would otherwise be payable by Participant to Issuer with respect thereto under the Power Supply Agreement, as reflected in the Billing Statement delivered by MSES pursuant to [Section 14.(b)] of the Prepaid Agreement.
(ii) The portion of any Provisional Payment in excess of the Net Participant Price (such portion, the “Discount Dollars”) shall be segregated by the Custodian and applied as set forth below:
Attachment Staff Report Item 6F
7 (A) to the extent that (I) there is a positive balance of Discount Dollars being held by the Custodian and (II) any Participant Monthly Statement reflects that Monthly Excess Quantities were delivered under an Assigned PPA for any given Month, the Custodian shall withdraw $[___]2 per MWh of Monthly Excess Quantities on the relevant PPA Monthly Statement Payment Date and transfer such amount to Participant pursuant to the payment instructions set forth for payments to Participant on Exhibit A; and
(B) MSES shall notify the Custodian and each of the other Parties hereto if less than the Annual Quantity is delivered for any Contract Year, and, promptly following receipt of any such notice, the Custodian shall transfer any remaining Discount Dollars to the Trustee for deposit in [Energy Remarketing Reserve Account] under and as defined in the Bond Indenture.
Section 6. Custodian. The Custodian shall have (a) no liability under any agreement other than this Agreement and (b) no duty to inquire as to the provisions of any agreement other than this Agreement and the Assigned PPAs. The Custodian may rely upon and shall not be liable for acting or refraining from acting upon any written notice, document, instruction or request furnished to it hereunder in accordance with the terms hereof and believed by it to be genuine and to have been signed or presented by the proper Party or Parties. The Custodian shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document, notice, instruction or request. The Custodian shall have no duty to solicit or compel any payments which may be due to it, or to take any action to compel PPA Assignee or Participant to make the deposits required under Section 4. The Custodian shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that the Custodian’s gross negligence or willful misconduct was the primary cause of any loss to any other Party hereto. In connection with the execution of any of its powers or the performance of any of its duties hereunder, theCustodian may consult with counsel, accountants and other skilled persons selected and retained by it. The Custodian shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons, provided the Custodian exercised due care and good faith in the selection of such person. The permissive rights of the Custodian to take actions enumerated under this Agreement shall not be construed as duties. In the event that the Custodian shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any Party hereto which, in its opinion, conflict with any of the provisions of this Agreement, it shall be entitled to refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow until it shall be directed otherwise in writing by all of the other Parties hereto or by a final order or judgment of a court of competent jurisdiction. The Custodian may interplead all of the assets held hereunder into a court of competent jurisdiction or may seek a declaratory judgment with respect to certain circumstances, and thereafter be fully relieved from any and all liability or obligation with respect to such interpleaded assets or any action or non-action based on such declaratory judgment. Anything in this Agreement to the contrary notwithstanding, in no event shall the Custodian be liable for special, indirect, incidental, consequential, or punitive damages, losses or penalties of any kind whatsoever (including but not limited to lost profits), regardless of the form of action. The Custodian may engage and act through agents and attorneys and shall not be liable for the misconduct or negligence of any such agent or attorney appointed with due care. The Custodian shall not be liable for any action taken by it in good faith in 2 NTD: To list Monthly Discount dollar amount.
Attachment Staff Report Item 6F
8 accordance with instruction received in accordance with this Agreement, or for the application of funds by other actions of omissions of other persons. The Custodian shall be responsible only for funds actually received by it for deposit into the Assigned PPA Payments Account, and the Custodian shall not be obliged to advance or risk its own funds to make any payments required hereunder. The Custodian shall have only those duties expressly set forth in this Agreement and no implied duties shall be read into this Agreement against the Custodian. The Parties hereto acknowledge and agree that the Custodian is not a fiduciary by virtue of accepting and carrying out its obligations under this Agreement and has not accepted any fiduciary duties, responsibilities or liabilities with respect to its services hereunder. The Custodian shall not be responsible for the perfection of any security interest granted hereunder.
Section 7. Succession. The Custodian may resign and be discharged from its duties or obligations hereunder by giving not less than 30 days’ advance notice in writing of such resignation to the other Parties hereto specifying a date when such resignation shall take effect; and such resignation shall take effect upon the day specified in such notice unless a successor shall not have been appointed by the other Parties hereto on such date, in which event such resignation shall not take effect until a successor is appointed. The other Parties hereto shall use their commercially reasonable efforts to make such appointment in a timely fashion, provided that any custodian appointed in succession to the Custodian shall be a bank or trust company organized under the laws of any state or a national banking association and shall have capital stock, surplus and undivided earnings aggregating at least $50,000,000 and shall be a bank with trust powers or trust company willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by this Agreement. Any corporation or association into which the Custodian may be merged or converted or with which it may be consolidated, or any corporation or association to which all or substantially all of the Custodian’s corporate trust line of business may be transferred, shall be the Custodian under this Agreement without further act. Notwithstanding the foregoing, if no appointment of a successor Custodian shall be made pursuant to the foregoing provisions of this Section 7 within 30 days after the Custodian has given written notice to the other Parties of its resignation as provided in this Section 7, the Custodian may, in its sole discretion, apply to any court of competent jurisdiction to appoint a successor Custodian. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Custodian.
Section 8. Fees. MSES agrees to pay the Custodian reasonable compensation for the services to be rendered hereunder, which compensation shall be $[____] for each year that this Agreement is in effect. The parties hereto acknowledge that this provision shall survive the resignation or removal of the Custodian or the termination of this Agreement.
Section 9. Reimbursement. The Issuer, MSCG, MSES and Participant agree, jointly and severally (subject to the second proviso of this Section 9), to reimburse the Custodian and its directors, officers, agents and employees for any and all loss, liability or expense (including the fees and expenses of in-house or outside counsel and experts and their staffs and all expense of document location, duplication and shipment) arising out of or in connection with (a) its acting as the Custodian under this Agreement, except to the extent that such loss, liability or expense is finally adjudicated to have been caused primarily by the gross negligence or willful misconduct of the Custodian or such director, officer, agent or employee seeking reimbursement, or (b) its following any instructions or other directions from MSCG, MSES or Participant, except to the extent that its following any such instruction or direction is expressly forbidden by the terms hereof; provided, however, that any amounts due under this Section 9 shall not duplicate any other Attachment Staff Report Item 6F
9 amounts due under this Agreement, including without limitation amounts due under Section 15 hereof; provided further, however, that, notwithstanding the joint and several nature of the obligations under this Section 9, any amounts due under clause (b) of this sentence resulting from instructions or directions that are not expressly provided for in this Agreement and are given to the Custodian by only one Party shall be the sole obligation of such Party. The Parties hereto acknowledge that this provision shall survive the resignation or removal of the Custodian or the termination of this Agreement.
Section 10. Taxpayer Identification Numbers; Tax Matters. MSCG, MSES and Participant represent that their correct taxpayer identification numbers assigned by the Internal Revenue Service or any other taxing authority is set forth on the signature page hereof. Any tax returns or reports required to be prepared and filed in connection with the Assigned PPA Payments Account will be prepared and filed by Participant, and the Custodian shall have no responsibility for the preparation and/or filing of any tax return with respect to any income earned on the Assigned PPA Payments Account. In addition, any tax or other payments required to be made pursuant to such tax return or filing shall be paid by Participant. The Custodian shall have no responsibility for making such payment unless directed to do so in writing by the appropriate authorized Party and fully indemnified to the Custodian’s satisfaction.
Section 11. Notices.
(a) Any notice, demand, statement or request required or authorized by this Agreement to be given by one Party to another Party shall be in writing and shall either be sent by email transmission or other Electronic Means (defined below), courier, or personal delivery (including overnight delivery service) to each of the notice recipients and addresses specified in Exhibit B for the receiving Party. Any such notice, demand, or request shall be deemed to be given (i) when delivered by email transmission or other Electronic Means (defined below), or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service); provided that, if a Party delivers a notice, demand or request by any means other than email transmission, such notice shall not be effective unless and until the Party also delivers a copy thereof to the other Parties’ email address specified in Exhibit B. Each Party shall have the right, upon 10 days’ prior written notice to the other Parties, to change its list of notice recipients and addresses in Exhibit B. The Parties may mutually agree in writing at any time to deliver notices, demands or requests through alternate or additional methods, such as electronic mail.
Notwithstanding the foregoing, any Party may at any time notify the others that any notice, demand, statement or request to it must be provided by email transmissions for a specified period of time or until further notice, and any communications delivered by means other than email transmission during the specified period of time shall be ineffective. In the event that the Custodian, in its sole discretion, shall determine that an emergency exists, the Custodian may use such other means of communication as the Custodian deems appropriate. (b) Exhibit A shall include each PPA Seller’s notice and payment information as set forth in the Assigned PPAs, and MSCG and Participant promptly shall cause such information to be updated to the extent there are any changes to such information under the Assigned PPAs. (c) The Custodian shall have the right to accept and act upon instructions or directions given pursuant to this Custodial Agreement, or any other document reasonably relating to the matters described herein, delivered using Electronic Means (defined below); provided, however, that each party giving directions to the Custodian hereunder shall provide to a Responsible Officer Attachment Staff Report Item 6F
10 of the Custodian an incumbency certificate, substantially in the form attached hereto as Exhibit C, listing persons with the authority to provide such instructions or directions (each an “Authorized Officer”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended, with written notice to a Responsible Officer of the Custodian, whenever a person is to be added or deleted from the listing. If a party elects to give the Custodian directions or instructions using Electronic Means and the Custodian in its discretion elects to act upon such directions, the Custodian’s understanding of such directions shall be deemed controlling. The parties understand and agree that the Custodian cannot determine the identity of the actual sender of such directions and that the Custodian shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided by a party to a Responsible Officer of the Custodian have been sent by such Authorized Officer. The party giving such instructions shall be solely responsible for ensuring that only Authorized Officers transmit such directions to the Custodian and that all Authorized Officers treat applicable user and authorization codes, passwords and/or authentication keys issued by the Custodian as confidential and with extreme care. The Custodian shall not be liable for any losses, costs or expenses arising directly or indirectly from the Custodian’s reliance upon and compliance with such directions notwithstanding that such directions conflict or are inconsistent with a subsequent written direction. The party giving such directions agrees: (i) to assume all risks arising out of the use of Electronic Means to submit directions to the Custodian, including without limitation the risk of the Custodian acting on unauthorized directions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting directions to the Custodian and that there may be more secure methods of transmitting directions; (iii) that the security procedures (if any) to be followed in connection with its transmission of directions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Custodian immediately upon learning of any compromise or unauthorized use of the security procedures. (d) As used herein, “Electronic Means” shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Custodian, or another method or system specified by the Custodian as available for use in connection with its services hereunder.
Section 12. Miscellaneous.
(a) The provisions of this Agreement may be waived, altered, amended or supplemented, in whole or in part, only by a writing signed by all of the Parties hereto. (b) Neither this Agreement nor any right or interest hereunder may be assigned in whole or in part by any Party, except as provided in Section 7, without the prior written consent of the other Parties.
(c) THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED, AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLE THAT WOULD DIRECT THE APPLICATION OF THE LAWS ANOTHER JURISDICTION; PROVIDED, HOWEVER,
THAT THE AUTHORITY OF PARTICIPANT TO ENTER INTO AND PERFORM ITS Attachment Staff Report Item 6F
11 OBLIGATIONS UNDER THIS AGREEMENTSHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
(d) EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION ON
THE GROUNDS OF VENUE, FORUM NON-CONVENIENS OR ANY SIMILAR GROUNDS
AND IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY MAIL OR IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW AND CONSENTS TO THE
EXCLUSIVE JURISDICTION OF (A) THE COURTS OF THE STATE OF NEW YORK
LOCATED IN THE BOROUGH OF MANHATTAN, (B) THE FEDERAL COURTS OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK OR (C)
THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA IN ANY OTHER STATE WHERE AN OFFICE OF THE CUSTODIAN IS LOCATED. THE PARTIES FURTHER
HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LAWSUIT OR JUDICIAL PROCEEDING ARISING OR RELATING TO THIS AGREEMENT. (e) No Party to this Agreement shall be liable to any other Party hereto for losses due to, or if it is unable to perform its obligations under the terms of this Agreement because of, acts of God, fire, war, terrorism, floods, strikes, electrical outages, equipment or transmission failure, or other causes reasonably beyond its control; provided that a Party affected by any such event shall exercise commercially reasonable efforts to resume performance as quickly as possible. (f) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All signatures of the Parties to this Agreement may be transmitted by facsimile or by digital pdf transmission, and such facsimile or pdf will, for all purposes, be deemed to be the original signature of such Party whose signature it reproduces, and will be binding upon such Party. All signatures of the parties to this Agreement may be transmitted by facsimile or by digital pdf transmission under the terms set forth in this Section 12(f). The parties agree that the electronic signature of a party to this Agreement, including all acknowledgements, authorizations, directions, waivers and consents thereto (or any amendment or supplement thereto) shall be as valid as an original signature of such party and shall be effective to bind such party to this Agreement. The parties agree that any electronically signed document (including this Agreement) shall be deemed (i) to be “written” or “in writing,” (ii) to have been signed, and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files. For purposes hereof, “electronic signature” means a manually signed original signature that is then transmitted by electronic means; “transmitted by electronic means” means sent in the form of a facsimile or sent via the Internet as a pdf (portable document format) or other replicating image attached to an e mail message; and, “electronically signed document” means a document transmitted by electronic means and containing, or to which there is affixed, an electronic signature. Paper copies or “printouts”, if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the parties to the same extent and under the same conditions as other original business records created and maintained in documentary form. Neither party shall contest the admissibility of true and accurate copies of electronically signed documents on the basis of the best evidence rule or as not satisfying the business records exception to the hearsay rule.
(g) The Custodian shall not be under any obligation to invest or pay interest on amounts held in the Assigned PPA Payments Account from time to time.
Attachment Staff Report Item 6F
12 (h) Issuer shall have only such duties under this Agreement as are expressly set forth herein as duties on its part to be performed, and no implied duties shall be read into this Agreement against Issuer.
Section 13. Compliance with Court Orders. In the event that any amount held by the Custodian hereunder shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court affecting the property deposited under this Agreement, the Custodian is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing are binding upon it, whether with or without jurisdiction, and in the event that the Custodian obeys or complies with any such writ, order or decree it shall not be liable to any of the Parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding that such writ, order or decree may be subsequently reversed, modified, annulled, set aside or vacated.
Section 14. Term; Winding Up. This Agreement will expire concurrently with the receipt of written notice from Participant, with a copy to the other Parties, that the Power Supply Agreement has terminated in accordance with its terms. Following the Custodian’s payment of any Monthly Gross Amount due in respect of the final Month of power deliveries prior to such a termination, any remaining balance in the Assigned PPA Payments Account shall be paid to Participant.
Section 15. Indemnification. The Issuer, MSCG, MSES and Participant, jointly and severally, agree to protect, indemnify, defend and hold harmless, the Custodian, and its affiliates, and each person who controls the Custodian (and each of their respective directors, officers, agents and employees) from and against all claims, damages, losses, liabilities, actions, suits, costs, judgments and expenses (including, without limitation, court costs and reasonable attorneys’ fees) arising from its acting as Custodian hereunder (including, for the avoidance of doubt, any costs, expenses and reasonable attorneys’ fees incurred in enforcing any payment obligation of an indemnifying Party), except for any claim, damage, loss, liability, action, suit, cost, judgment or expense resulting from the gross negligence or willful misconduct of the Custodian; provided, however, that any amounts due under this Section 15 shall not duplicate any other amounts due under this Agreement, including without limitation amounts due under Section 9 hereof. The obligations of this Section 15 shall survive any resignation or removal of the Custodian and the termination of this Agreement. In addition, notwithstanding anything herein to the contrary, the Custodian shall have all of the rights (including the indemnification rights), benefits, privileges and immunities under this Agreement as are granted to the Trustee under the Bond Indenture, all of which are incorporated, mutatis mutandis, into this Agreement.
Section 16. Patriot Act. The Issuer, MSCG, MSES and Participant acknowledge that the Custodian is subject to federal laws, including the Customer Identification Program (“CIP”) requirements under the USA PATRIOT Act and its implementing regulations, pursuant to which the Custodian must obtain, verify and record information that allows the Custodian to identify MSCG, MSES and Participant. Accordingly, prior to opening the Assigned PPA Payments Account described in Section 4 of this Agreement, the Custodian will ask the Issuer, MSCG, MSES and Participant to provide certain information including but not limited to name, physical address, tax identification number and other information that will help the Custodian identify and verify the Issuer, MSCG, MSES and Participant’s identities, such as organizational documents, certificate of good standing, license to do business, or other pertinent identifying information. The Attachment Staff Report Item 6F
13 Issuer, MSCG, MSES and Participant agree that the Custodian cannot open any account hereunder unless and until the Custodian verifies the Issuer’s MSCG, MSES and Participant’s identities in accordance with its CIP.
Section 17. Limitation of Liability. Notwithstanding anything to the contrary herein, all obligations of the Issuer under this Agreement, including without limitation all obligations to make payments of any kind whatsoever, are special, limited obligations of the Issuer, payable solely from the Trust Estate (as such term is defined in the Bond Indenture) as and to the extent provided in the Bond Indenture, including with respect to Operating Expenses (as such term is defined in the Bond Indenture). The Issuer shall not be required to advance any moneys derived from any source other than the Revenues (as such term is defined in the Bond Indenture) and other assets pledged under the Bond Indenture for any of the purposes in this Agreement mentioned.
Neither the faith and credit of the Issuer nor the taxing power of the State of California or any political subdivision thereof is pledged to payments pursuant to this Agreement. The Issuer shall not be directly, indirectly, contingently or otherwise liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under or by reasons of or in connection with this Agreement, except solely to the extent Revenues (as such term is defined in the Bond Indenture) are received for the payment thereof and may be applied therefor pursuant to the terms of the Bond Indenture.
[Signature Pages Follow]
Attachment Staff Report Item 6F
Signature Page to Custodial Agreement
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the date first written above.
EAST BAY COMMUNITY ENERGY
AUTHORITY
By:___________________________________
Name: _____________________________
Title: ______________________________
Taxpayer ID Number:_________________
MORGAN STANLEY CAPITAL GROUP
INC.
By:___________________________________
Name: _____________________________
Title: ______________________________
Taxpayer ID Number: _________________
MORGAN STANLEY ENERGY
STRUCTURING, L.L.C.
By:___________________________________
Name: ________________________________
Title: _________________________________
Taxpayer ID Number:____________________
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.
By:___________________________________
Name: _____________________________
Title: ______________________________
CALIFORNIA COMMUNITY CHOICE
FINANCING AUTHORITY
Attachment Staff Report Item 6F
Signature Page to Custodial Agreement
By:___________________________________
Name: _____________________________
Title: ______________________________
Taxpayer ID Number:_________________
Attachment Staff Report Item 6F
EXHIBIT A
ASSIGNED PPAS
[To come.]
Attachment Staff Report Item 6F
EXHIBIT B
NOTICE INFORMATION
Participant:
East Bay Community Energy Authority
1999 Harrison Street, Suite 800
Oakland, CA 94612
Email: : [email protected]
EBCE Payment Information:
Bank Name: River City Bank
Bank Routing Number: 121133416
Account Number: 5648137551
Account Name: Operating Fund Account
FBO: East Bay Community Energy Authority
MSCG:
Morgan Stanley Capital Group Inc.
1585 Broadway
New York, NY 10036-8293
Email: [_____]
MSES:
Morgan Stanley Energy Structuring, L.L.C.
1585 Broadway
New York, NY 10036-8293
Email: [_____]
Custodian:
The Bank of New York Mellon Trust Company, N.A.
333 South Hope Street, Suite 2525
Los Angeles, California 90071Telephone: 213.553.4343
Attention: Corporate Trust – Global Client Services
Fax: 877.269.6192
Email: [email protected]
Attachment Staff Report Item 6F
Signature Page to Custodial Agreement
EXHIBIT C
FORM OF CERTIFICATE OF INCUMBENCY
The undersigned, a duly authorized officer of [__________________________], in connection with the Custodial Agreement by and among California Community Choice Financing Authority (“Issuer”), East Bay Community Energy Authority, a joint powers authority and a community choice aggregator organized under the laws of the State of California (“Participant”), Morgan Stanley Capital Group Inc., a Delaware corporation (“MSCG”), Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company (“MSES”), and The Bank of New York Mellon Trust Company, N.A. (the “Custodian”) dated as of [____], 2023 (the “Custodial Agreement”), HEREBY CERTIFIES that the persons whose names, titles and signatures appear below are duly qualified and acting representatives of [_______] (“Authorized Representatives”) on the date hereof. Each holds the office set forth beside his/her name, and the signature appearing opposite his/her name is the genuine signature of such Authorized Representative. Only those individuals, or such additional individuals as the undersigned may designate prior to written notice to the Custodian in the future, shall execute and deliver any written instructions, confirmations or certificates on behalf of [_______] in connection with the Custodial Agreement. Custodian shall not be obligated to accept any written instructions, confirmations or certificates executed by an individual other than those listed below or so designated in the future.
NAME TITLE PHONE NO. SIGNATURE
Capitalized terms used herein and not otherwise defined shall have the meaning assigned in the Custodial Agreement.
[___________] acknowledges that Custodian will accept notices by Electronic Means only if [_________] acknowledges and assumes all risks relating to the use of such notices. [_______] hereby acknowledges and assumes all risks relating to the sending of notices by Electronic Means.
Attachment Staff Report Item 6F
Signature Page to Custodial Agreement
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed for and on behalf of [__________] this ___day of __________. [NAME OF PARTY]
By: _____________________________________
Name:
Title:
Attachment Staff Report Item 6F
MEMORANDUM OF UNDERSTANDING (“MOU”)
Date: June 22, 2023
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 East Bay Community Energy Authority
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. CCCFA will sell all the Prepaid Energy acquired from this transaction to the East Bay Community Energy Authority (“EBCE” or the “Project Participant”).
Rating Agency Fee and Green Bond Opinion Fee
The Rating Agency Fee and expenses (“Rating Agency Fee”) is 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 the Bonds are not issued due to market conditions and there remains a Rating Agency Fee payable to the rating agency, Morgan Stanley and CCCFA agree to split this Rating Agency Fee 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 achieve a minimum established target discount, the Rating Agency Fee will be their sole responsibility. To the extent that CCCFA incurs any Rating Agency Fee if the bonds are not issued, the Project Participant agrees that it will be liable for any costs and make direct payment to the rating agency 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 achieve 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 Fee”) shall be incurred by Morgan Stanley and in such event, to the extent the Green Bond Fee was 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 of the Bonds and the purchase of the Prepaid Energy, other than the Rating Agency Fee and Green Bond Fee as described in this MOU and as further described in the Bond Purchase Agreement (as defined herein).
Attachment Staff Report Item 6G
Miscellaneous
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 Fee and Green Bond Opinion Fee” shall be binding upon the parties.
Sincerely,
_________________________
Grant Fraunfelder, Executive Director
MORGAN STANLEY & CO. LLC
Attachment Staff Report Item 6G
ACCEPTED AND AGREED:
EAST BAY COMMUNITY ENERGY AUTHORITY
By: ____________________________
Name: ___________________________
Date: ___________________________
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: ____________________________
Name: ___________________________
Date: ___________________________
Attachment Staff Report Item 6G
C&C DRAFT: 5.--.23
PRELIMINARY OFFICIAL STATEMENT DATED [_______], 2023
This Preliminary Official Statement and the information contained herein are subject to completion or amendment without notice. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securitie s in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
NEW ISSUE - BOOK-ENTRY ONLY RATING: (SEE “RATING” HEREIN) 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 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, 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. See “TAX MATTERS” herein. [CCCFA LOGO]/[KESTREL
LOGO]
$[_________]*
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
CLEAN ENERGY PROJECT REVENUE BONDS
$________________
SERIES 2023[_]-1 (GREEN
BONDS)
(TERM RATE)
$_____________
SERIES 2023[_]-2 (GREEN
BONDS)
(SIFMA INDEX RATE)
$_______________
SERIES 2023[_]-3
(GREEN BONDS)
(SOFR INDEX RATE)
DATED: Date of Delivery DUE: As shown on the inside cover California Community Choice Financing Authority (“CCCFA”) is issuing its Clean Energy Project Revenue Bonds, Series 2023[_]-1 (Green Bonds) (Term Rate) (the “Series 2023[_]-1 Bonds”), its Clean Energy Project Revenue Bonds, Series 2023[_]-2 (Green Bonds) (SIFMA Index Rate) (the “Series 2023[_]-2 Bonds”) and its Clean Energy Project Revenue Bonds, Series 2023[_]-3 (Green Bonds) (SOFR Index Rate) (the “Series 2023[_]-3 Bonds” and, together with the Series 2023[_]-1 Bonds and Series 2023[_]-2, the “Bonds”), under a Trust Indenture between CCCFA and The Bank of New York Mellon Trust Company, N.A., as Trustee. The Bonds will be issued in book-entry form through the facilities of The Depository Trust Company (“DTC”). Purchases of the Bonds will be made in book-entry form through DTC participants in denominations of $5,000 or any multiple thereof. Payments of principal of, premium, if any, and interest on the Bonds will be made directly to DTC and will subsequently be disbursed to DTC participants and thereafter to Beneficial Owners of the Bonds, all as described herein. Capitalized terms used and not otherwise defined on this cover page have the meanings set forth herein.
From their Initial Issue Date to and including [________], 20[__]*(the “Initial Interest Rate Period”), the Series 2023[_]-1 Bonds will bear interest in a Term Rate Period, the Series 2023[_]-2 Bonds will bear interest in a SIFMA Index Rate Period and the Series 2023[_]-3 Bonds will bear interest in a SOFR Index Rate Period, as shown on the inside cover page and described herein. During the Initial Interest Rate Period, interest on the Series 2023[_]-1 Bonds is payable semiannually on each [_______] 1 and [_______] 1, commencing [_______] 1, 2023*and interest on the Series 2023[_]-2 Bonds and the Series 2023[_]-3 Bonds is payable on the first Business Day of each month, commencing on the first Business Day of [_______] 2023*. The Bonds are subject to optional and extraordinary mandatory redemption during the Initial Interest Rate Period, and the Bonds of each Series maturing on [_______] 1, 2053 are subject to mandatory tender for purchase on [_______] 1, 20[__]*(the “Mandatory Purchase Date”).
Proceeds of the Bonds will be used to prepay the costs of the acquisition of EPS Compliant Energy to be delivered over approximately 30 years under a Prepaid Energy Sales Agreement (the “Prepaid Energy Sales Agreement”), between Morgan Stanley Energy Structuring, L.L.C., a Delaware limited liability company (“MSES” or the “Energy Supplier”) and CCCFA. “EPS Compliant Energy” means three-phase, 60-cycle alternating current electric energy (“Energy”) that the Project Participant (hereinafter defined) can contract for and purchase in compliance with California’s Emissions Performance Standards (“EPS”), 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, that are applicable to such Project Participant. Pursuant to the Prepaid Energy Sales Agreement, MSES is obligated to deliver specified quantities of EPS Compliant Energy to CCCFA (the “Prepaid Energy”), make certain payments for any Prepaid Energy not delivered, remarket quantities of Base Energy (defined herein) in respect of Prepaid Energy not taken by the Project Participant and make a Termination Payment upon any early termination of the Prepaid Energy Sales Agreement in whole or in part. Any such Termination Payment (defined herein) will be applied to the mandatory redemption of the Bonds in whole or in part, as applicable. The payment obligations of MSES under the Prepaid Energy Sales Agreement, including the Receivables Purchase Provisions therein, and the Interest Rate Swap are unconditionally guaranteed by Morgan Stanley, a Delaware corporation (“Morgan Stanley”).
CCCFA will sell all of the Prepaid Energy acquired under the Prepaid Energy Sales Agreement to East Bay Community Energy Authority (“EBCE” or the “Project Participant”) under a Power Supply Contract (the “Power Supply Contract”) between CCCFA and the Project Participant.
Under the terms of the Prepaid Energy Sales Agreement and the Power Supply Contract, the Project Participant may assign its rights to the delivery of EPS Compliant Energy under existing and future power purchase agreements to MSES or to Morgan Stanley Capital Group, Inc. (“MSCG”) for ultimate delivery of such EPS Compliant Energy from such agreements to the Project Participant. The Project Participant has entered into a limited assignment agreement relating to specific power purchase agreement(s) as of the Date of Delivery.
The Bonds have been designated “Green Bonds”. See “DESIGNATION OF BONDS AS GREEN BONDS” and Second Party Opinion by Kestrel Verifiers set forth herein.
THE PAYMENT OF THE BONDS IS NOT GUARANTEED BY THE ENERGY SUPPLIER, MSCG, MORGAN STANLEY, THE
UNDERWRITER, THE COMMODITY SWAP COUNTERPARTY, THE INVESTMENT AGREEMENT PROVIDER, CCCFA OR ITS MEMBERS, ORTHE PROJECTPARTICIPANT. THE BONDS DO NOTCONSTITUTE GENERALOBLIGATIONS ORINDEBTEDNESS OF
CCCFA, THE MEMBERS OF CCCFA, THE PROJECTPARTICIPANT, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION * Preliminary, subject to change.
Attachment Staff Report Item 6H
OF THE STATE AND NEITHER THE FAITH AND CREDIT OF CCCFA NOR THE TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO PAYMENTS PURSUANTTO THEINDENTURE ORTHEBONDS. THEBONDS ARESPECIAL,
LIMITED OBLIGATIONS OF CCCFA, PAYABLESOLELY FROM AND SECURED SOLELY BY THE TRUST ESTATE, IN THE MANNER AND TO THEEXTENT PROVIDED IN THEINDENTURE.
This Official Statement describes the Bonds only during the Initial Interest Rate Period and must not be relied upon if the Bonds are converted to any other interest rate period. The purchase and ownership of the Bonds involve investment risk and may not be suitable for all investors. This cover page is not intended to be a summary of the terms of or the security for the Bonds. Investors are advised to read this Official Statement in its entirety to obtain information essential to the making of an informed investment decision with respect to the Bonds, giving particular attention to the matters discussed under “INVESTMENT CONSIDERATIONS” herein.
The Bonds are offered, when, as and if issued by CCCFA and accepted by the Underwriter, subject to the approval of validity by Orrick, Herrington & Sutcliffe LLP, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for CCCFA by its General Counsel, for the Project Participant by Chapman and Cutler LLP; for the Energy Supplier by Sheppard, Mullin, Richter & Hampton LLP; and for the Underwriter by Nixon Peabody LLP. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about [__________], 2023.
Morgan Stanley
This Official Statement is dated ________, 2023.
Attachment Staff Report Item 6H
$850,000,000*
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
CLEAN ENERGY PROJECT REVENUE BONDS
MATURITY DATES, PRINCIPAL AMOUNTS,INTEREST RATES, YIELDS AND CUSIPNUMBERS 1 $____________ SERIES 2023[_]-1 BONDS
(TERM RATE)
$_________ SERIAL BONDS
MATURITY DATE
PRINCIPAL
AMOUNT
INTEREST
RATE YIELD CUSIP
$_________ ____% Term Bond due [_________] 1, 20532, Yield: ____%, CUSIP _________ $__________ SERIES 2023[_]-2 BONDS
(SIFMA INDEX RATE)
MATURITY DATE INDEX
APPLICABLE
SPREAD3 CUSIP
[_______] 1, 20532
SIFMA Index __ basis points ___________
$__________ SERIES 2023[_]-3 BONDS
(SOFR INDEX RATE)
MATURITY DATE
APPLICABLE
FACTOR4INDEX
APPLICABLE
SPREAD3 CUSIP
[______] 1, 2053
2 SOFR Index
*
Preliminary; subject to change.
1 CUSIP® is a registered trademark of the American Bankers Association. The CUSIP numbers listed above have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by FactSet Research Systems Inc., and are included solely for the convenience of bondholders only. CCCFA and the Underwriter make no representation with respect to such numbers or undertake any responsibility for their accuracy. The CUSIP numbers are subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to a refunding in whole or in part of the Bonds. 2 The Bonds of each Series maturing on [_____] 1, 2053 are required to be tendered for purchase on [_______] 1, 20[__]* .
3 Applicable Spread means, (i) with respect to the Series 2023[_]-2Bonds, the margin added to the SIFMA Municipal Swap Index to determine the SIFMA Index Rate and (ii) with respect to the Series 2023[_]-3Bonds, the margin added to the product of the Applicable Factor and the SOFR Index to determine the Secured Overnight Financing Rate. The Applicable Spread will remain constant for the duration of the initial SIFMA Index Rate Period and the initial SOFR Index Rate Period. See “THE BONDS – Series 2023[_]-2 Bonds” and “Series 2023[_]-3 Bonds” herein. 4 Applicable Factor means the percentage or factor of the SOFR Index used to calculate the SOFR Index Rate for the Series 2023[_]-3 Bonds. The Applicable Factor will remain constant for the duration of the initial SOFR Index Rate Period. See “THE BONDS – Series 2023[_]-3 Bonds” herein.
Attachment Staff Report Item 6H
The information contained in this Official Statement has been obtained from CCCFA, the Project Participant, the Energy Supplier, MSCG, Morgan Stanley, the Commodity Swap Counterparty, DTC and other sources believed to be reliable. This Official Statement is submitted in connection with the sale of the securities described herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement speaks only as of its date and the information contained in this Official Statement is subject to change without notice and neither the delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of any party since the d ate of this Official Statement.
No broker, dealer, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by CCCFA or the Underwriter. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
The Bonds will not be registered under the Securities Act of 1933, as amended, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other government entity or agency has or will have passed upon the adequacy of this Official Statement or, except for CCCFA, approved the Bonds for sale.
_____________________
In making an investment decision, investors must rely on their own examination of the terms of the offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. No commission or authority has confirmed the accuracy or determined the adequacy of this document.
_____________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICES OF THE BONDS. SUCH TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
CCCFA and the Project Participant each maintain a website and certain social media accounts. However, the information presented on such website and on such accounts is not part of this Official Stateme nt and should not be relied upon in making investment decisions with respect to the Bonds. References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience.
Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, Rule 15c2 -12 of the United States Securities and Exchange Commission.
Certain statements included or incorporated by reference in this Official Statement constitute “forward - looking statements.” Such statements are generally identifiable by the terminology used, such as “plan,” “project,” “expect,” “anticipate,” “intend,” “believe,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward -looking statements. CCCFA does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.
Attachment Staff Report Item 6H
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
1125 TAMALPAIS AVENUE
SAN RAFAEL, CA 94901
BOARD OF DIRECTORS
Nick Chaset, Chair
Girish Balachandran, Vice Chair
Garth Salisbury, Member
Tom Habashi, Member
Theodore Bardacke, Member
MANAGEMENT
Garth Salisbury, Treasurer/Controller
David Ruderman of Colantuono, Highsmith & Whatley, PC, General Counsel
MEMBERS
Central Coast Community Energy
Clean Power Alliance of Southern California
East Bay Community Energy Authority
Marin Clean Energy
Pioneer Community Energy
Silicon Valley Clean Energy Authority
PROJECT PARTICIPANT
East Bay Community Energy Authority
GREEN BONDS EXTERNAL REVIEWER
Kestrel Verifiers
BOND COUNSEL PROJECT PARTICIPANT’S COUNSEL
Orrick Herrington & Sutcliffe LLP Chapman and Cutler LLP
TRUSTEE FINANCIAL ADVISOR
The Bank of New York Mellon Trust
Company, N.A
PFM Financial Advisors LLC
Attachment Staff Report Item 6H
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Attachment Staff Report Item 6H
TABLE OF CONTENTS
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INTRODUCTION .......................................................................................................................... 1 California Community Choice Financing Authority ............................................................... 1 The Bonds................................................................................................................................ 1 Security for the Bonds............................................................................................................. 2 The Clean Energy Project ........................................................................................................ 3 The Project Participant ............................................................................................................ 4 The Prepaid Energy Sales Agreement ..................................................................................... 4 The Receivables Purchase Provisions ..................................................................................... 6 The Power Supply Contract..................................................................................................... 6 Re-Pricing Agreement ............................................................................................................. 7 Interest Rate Swap................................................................................................................... 7 Commodity Swaps................................................................................................................... 7 Morgan Stanley Guarantees..................................................................................................... 8 The Energy Supplier, MSCG and Morgan Stanley ................................................................. 8 Certain Relationships............................................................................................................... 9 THE CLEAN ENERGY PROJECT ............................................................................................. 10 Assignment of Power Purchase Agreements by the Project Participant ............................... 10 Structure of the Clean Energy Project ................................................................................... 11 CLEAN ENERGY PROJECT TRANSACTION STRUCTURE................................................. 13 DESIGNATION OF BONDS AS GREEN BONDS.................................................................... 14 Green Bonds Designation...................................................................................................... 14 Independent Second Party Opinion on Green Bond Designation and Disclaimer ................ 14 INVESTMENT CONSIDERATIONS......................................................................................... 14 Special and Limited Obligations ........................................................................................... 14 Structure of the Clean Energy Project ................................................................................... 15 Performance by Others.......................................................................................................... 15 Energy Remarketing .............................................................................................................. 17 Limitations on Exercise of Remedies.................................................................................... 17 Enforceability of Contracts.................................................................................................... 17 No Established Trading Market............................................................................................. 18 Loss of Tax Exemption on the Bonds.................................................................................... 18 Certain Risks of SOFR Index Rate Bonds............................................................................. 18 SECURITY FOR THE BONDS................................................................................................... 19 The Indenture......................................................................................................................... 19 Flow of Funds........................................................................................................................ 21 Debt Service Fund - Debt Service Account........................................................................... 22 Administrative Fee Fund ....................................................................................................... 23 Commodity Swap Payment Fund .......................................................................................... 23 Debt Service Fund - Redemption Account............................................................................ 23 Restriction on Additional Obligations................................................................................... 23 Amendment of Indenture....................................................................................................... 23 Attachment Staff Report Item 6H
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Investment of Funds.............................................................................................................. 24 Enforcement of Project Agreements...................................................................................... 25 SOURCES AND USES OF FUNDS............................................................................................ 28 THE BONDS ................................................................................................................................ 29 General................................................................................................................................... 29 Interest ................................................................................................................................... 29 Tender.................................................................................................................................... 33 Redemption*.......................................................................................................................... 34 Book-Entry System................................................................................................................ 38 THE PREPAID ENERGY SALES AGREEMENT..................................................................... 39 Purchase and Sale .................................................................................................................. 39 Delivery of Prepaid Energy ................................................................................................... 39 Assignment of Power Purchase Agreements......................................................................... 40 Failure to Deliver or Receive Energy .................................................................................... 40 Energy Remarketing .............................................................................................................. 41 Remarketing Non-Default Termination Event ...................................................................... 42 Payment Provisions ............................................................................................................... 42 Force Majeure ........................................................................................................................ 43 Assignment ............................................................................................................................ 43 Termination............................................................................................................................ 43 Termination Payment............................................................................................................. 45 Security .................................................................................................................................. 45 Receivables Purchase Provisions........................................................................................... 46 THE INTEREST RATE SWAP ................................................................................................... 46 General................................................................................................................................... 46 Payments Under the Interest Rate Swap................................................................................ 46 Events of Default and Termination Events under the Interest Rate Swap ............................ 47 THE RE-PRICING AGREEMENT.............................................................................................. 47 General................................................................................................................................... 47 THE ENERGY SUPPLIER, MSCG AND MORGAN STANLEY............................................. 48 THE POWER SUPPLY CONTRACT ......................................................................................... 49 General................................................................................................................................... 49 Pricing Provisions.................................................................................................................. 49 Project Administration Fee .................................................................................................... 49 Assignment of Power Purchase Agreements......................................................................... 50 Billing and Payment .............................................................................................................. 50 Annual Refunds..................................................................................................................... 50 Covenants of the Project Participant...................................................................................... 51 Delivery Points; Title and Risk of Loss................................................................................. 51 Failure to Perform.................................................................................................................. 52 Attachment Staff Report Item 6H
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Remarketing of Energy.......................................................................................................... 52 Force Majeure ........................................................................................................................ 52 Default ................................................................................................................................... 52 Assignment ............................................................................................................................ 53 CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY..................................... 54 General................................................................................................................................... 54 Powers and Authority ............................................................................................................ 54 Governance and Management ............................................................................................... 55 Other CCCFA Projects.......................................................................................................... 55 Separate Obligations.............................................................................................................. 56 Limited Liability .................................................................................................................... 56 COMMUNITY CHOICE AGGREGATORS............................................................................... 57 General................................................................................................................................... 57 Establishment of Community Choice Aggregators ............................................................... 57 Community Choice Service Model ....................................................................................... 57 Service Contract Requirements and Registration with the Public Utilities Commission...... 57 Customer Participation and Opt-out Rights........................................................................... 57 Regulatory Compliance ......................................................................................................... 58 Cost Recovery Related to Transfer of Customers to a CCA................................................. 58 THE COMMODITY SWAPS ...................................................................................................... 58 CCCFA Commodity Swap .................................................................................................... 58 Form of Commodity Swaps and Term .................................................................................. 59 Payment ................................................................................................................................. 59 Early Termination .................................................................................................................. 59 Custodial Agreements............................................................................................................ 63 THE COMMODITY SWAP COUNTERPARTY........................................................................ 64 CONTINUING DISCLOSURE.................................................................................................... 64 LITIGATION................................................................................................................................ 65 NO FINANCIAL STATEMENTS ............................................................................................... 65 FINANCIAL ADVISOR .............................................................................................................. 65 UNDERWRITING........................................................................................................................ 66 CERTAIN RELATIONSHIPS ..................................................................................................... 67 RATING........................................................................................................................................ 67 TAX MATTERS........................................................................................................................... 67 APPROVAL OF LEGAL MATTERS.......................................................................................... 70 MISCELLANEOUS ..................................................................................................................... 70 Attachment Staff Report Item 6H