Board of Directors of the
Clean Power Alliance of Southern California
Regular Meeting
Thursday, April 6, 2023
2:00 p.m.
Visit CPA’s YouTube Channel to view a Live Stream of the Meeting *There may be a streaming delay of up to 90 seconds. This is a view-only live stream.
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting at the following locations:
Calabasas City Hall
Council Conference Room
100 Civic Center Way
Calabasas, CA 91301
Ventura County Government Center
Channel Islands Conference Room, 4th Floor
Hall of Administration
800 South Victoria Avenue
Ventura, CA 93009
Whittier City Hall
Admin Conference Room
13230 Penn Street
Whittier, CA 90602
South Bay Cities Council of Governments
Conference Room
2355 Crenshaw Blvd., Suite 125
Torrance, CA 90501
Westlake Village City Hall
Council Office/Conference Room
31200 Oak Crest Drive
Westlake Village, CA 91361
Claremont City Yard Building A
Front Conference Room
1616 Monte Vista Ave.
Claremont, CA
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: The General Public Comment item is reserved for persons wishing to address the Board on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called. Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Board at CPA’s Office are requested to complete a comment card and provide it to staff. If you are attending from a remote location, please identify yourself to a CPA representative when your item is called. Each speaker is limited to two (2) minutes (in whole-minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Agenda Page 1 of 570
Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
NAVIGATING OUR AGENDA PACKETS: The meeting agenda packets are bookmarked PDFs, which display a list of agenda items to the left of the page and allow you to click to view specific items within the packet. If viewing in your browser, click the "document outline" button in the upper left corner of the screen.
If the PDF is downloaded, the bookmark panel (ribbon icon) appears on the left side of the screen.
ACCESSIBILITY: 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 two (2) working days before the meeting at [email protected] or (213) 713- 5995. Notification in advance of the meeting, while not required, will enable us to make reasonable arrangements to ensure accessibility to this meeting and the materials related to it.
CALL TO ORDER AND ROLL CALL
PLEDGE OF ALLEGIANCE
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from March 2, 2023, Board of Directors Meeting
2. Approve Fiscal Year 2022/2023 Amended Budget as Reflected Herein
3. Approve Proposed Amendments to the Net Energy Metering Tariff Effective April 1, 2023
4. Receive and File Bill Positions Monthly Report
5. Receive and File Community Advisory Committee Monthly Report
REGULAR AGENDA
Action Items
6. Election of One Los Angeles County At-Large Position on the Executive Committee
7. (a) Adopt Resolution No. 23-04-047 (Attachment 2) Approving Parameters Under which an Energy Prepayment Transaction can be Completed; Authorizing and/or Approving Documents or “Form of” Documents Supporting the Prepay Transaction; and Directing California Community Choice Financing Authority (CCCFA) to Make Payments to Service Providers for Issuance Costs from Prepay Bond Proceeds
(b) Approve Professional Services Agreement with Municipal Capital Markets Group, Inc. with a Not-To-Exceed Amount of $340,000 to be Paid from Bond Proceeds for Municipal Financial Advisory, Guaranteed Investment Contract Broker, and Qualified Independent Representative Services
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(c) Approve Legal Services Agreement with Chapman and Cutler, LLP with a Not-To-Exceed Amount of $200,000 to be Paid from Bond Proceeds for Prepay Counsel Services
(d) Approve the Selection of Goldman Sachs as the Underwriter and Prepaid Supplier and the selection of CCCFA as the Bond Issuer for the Proposed Energy Prepayment Financing and Authorize Staff to Select a Funding Recipient
8. Approve a Long-Term Energy Storage Agreement (ESA) with NextEra Energy Resources for the Desert Sands Energy Storage I, LLC (Desert Sands) 75 MW Long-Duration Storage Project or in the event Desert Sands is Unable to Achieve Full Capacity Deliverability Status by January 2025, Approve a Long-Term ESA with NextEra Energy Resources for the Key Energy Storage Center 75 MW Long-Duration Storage Project Under Substantially Similar Terms as the Desert Sands ESA and Authorize the Chief Executive Officer to Execute Either Agreement Information Items
9. Local Government Sustainability Assistance Program Presentation
10.Preview of FY 23/24 Rate Setting
MANAGEMENT REPORT
COMMITTEE CHAIR UPDATES
Director Deborah Klein Lopez, Chair, Legislative & Regulatory Committee Director Susan Santangelo, Chair, Finance Committee
Director Robert Parkhurst, Chair, Energy Planning & Resources Committee
BOARD MEMBER COMMENTS
REPORT FROM THE CHAIR
ADJOURN – NEXT REGULAR MEETING ON MAY 4, 2023*
*A remote location will be available at the SCAG General Assembly Public Records: Public records that relate to any item on the open session agenda for a regular Board Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Board. Public records are available for inspection at CPA’s Office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, or online at www.cleanpoweralliance.org/agendas.
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Commonly Used Acronyms
BESS Battery Energy Storage System
CAC Community Advisory Committee
CAISO California Independent System Operator
CALCCA California Community Choice Association
CalEVIP California Electric Vehicle Incentive Program
CARB California Air Resources Board
CARE California Alternate Rates for Energy (Low Income Discount Rate) CCA Community Choice Aggregation
CEC California Energy Commission
CPUC California Public Utilities Commission
DA Direct Access (Private Retail Energy Supplier)
DAC Disadvantaged Community (As Defined by Calenviroscreen 3.0) DER Distributed Energy Resources
DR Demand Response
ERMP Energy Risk Management Policy
ERRA Energy Resource Recovery Account (SCE Generation Rate Setting)
ESA Energy Storage Agreement
EVSE Electric Vehicle Supply Equipment (EV Charger)
FERA Family Electric Rate Assistance (Low Income Discount Rate) GHG Greenhouse Gas
IOU Investor Owned Utility
IRP Integrated Resource Plan
JPA Joint Powers Authority
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Commonly Used Acronyms
Kwh Kilowatt-Hour (A Measure of Energy Used in A One-Hour Period) Kw Kilowatt = 1,000 Watts (Watt = A Measure of Instantaneous Power) LSE Load Serving Entity
MB Medical Baseline (Discount Rate for Medical Equipment Needs) MW Megawatt = 1,000 Kilowatts
Mwh Megawatt-Hour = 1,000 Kilowatt-Hours
NEM Net Energy Metering (Usually for Customers with Solar) OAT Other Applicable Tariffs
PCIA Power Charge Indifference Adjustment (Can Be Called “Exit Fee”) PCC1 Renewable Energy Generated Inside California
PCC2 Renewable Energy Generated Outside California
PCC3 A REC from A Renewable Resource, Delivered Without Energy PCL Power Content Label
POU Publicly Owned or Municipal Utility
PPA Power Purchase Agreement
PSPS Public Safety Power Shutoff
PV Photovoltaic (Solar) Panels
RA Resource Adequacy
REC Renewable Energy Credit
RPS Renewables Portfolio Standard
T&D Transmission and Distribution
TOU Time Of Use (Used to Refer to Rates that Differ by Time Of Day) WECC Western Electricity Coordinating Council
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Board of Directors Item 1
MINUTES
REGULAR MEETING of the Board of Directors of the
Clean Power Alliance of Southern California
Thursday, March 2, 2023, 2:00 p.m.
Meeting videos are available on CPA’s YouTube Channel.
www.youtube.com/@CPApublicmeetings
Board members participated from the following locations:
Calabasas City Hall
Council Conference Room
100 Civic Center Way
Calabasas, CA 91301
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Whittier City Hall
Admin Conference Room
13230 Penn Street
Whittier, CA 90602
Ventura County Government Center
Channel Islands Conference Room, 4th Floor
Hall of Administration
800 South Victoria Avenue
Venture, CA 93009
South Bay Cities Council of Governments
Conference Room
2355 Crenshaw Blvd., Suite 125
Torrance, CA 90501
Westlake Village City Hall
Council Office/Conference Room
31200 Oak Crest Drive
Westlake Village, CA 91361
CALL TO ORDER & ROLL CALL
Chair Julian Gold called the meeting to order at 2:00 p.m. and Gabriela Monzon, Clerk of the Board, conducted roll call.
Roll Call
1 Agoura Hills Deborah Klein Lopez Director Remote
2 Alhambra Sasha Renee Perez Alternate Present
3 Arcadia Michael Cao Director Present
4 Beverly Hills Julian Gold Chair Present
5 Calabasas David Shapiro
Edward Albrecht
Director
Alternate Remote
6 Camarillo Susan Santangelo Director Remote
7 Carson Cedric L. Hicks, Sr. Director Present
8 Claremont Jennifer Stark Alternate Present
9 Culver City Yasmine-Imani
McMorrin Alternate Present
10 Downey Absent
11 Hawaiian Gardens Ramie L. Torres Alternate Remote
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Clean Power Alliance Board of Directors Page 2 of 6
March 2, 2023 Minutes
12 Hawthorne Alex Monteiro Director Present
13 Los Angeles County Lindsey Horvath Vice Chair Present 14 Malibu Absent
15 Manhattan Beach Amy Howorth Director Remote
16 Moorpark Absent
17 Ojai Betsy Stix Director Remote
18 Oxnard Bert Perello Director Remote
19 Paramount Vilma Cuellar Stallings Director Present
20 Redondo Beach Christian Horvath Director Remote
21 Rolling Hills Estates Debby Stegura Director Remote
22 Santa Monica Gleam Davis Director Present
23 Sierra Madre Robert Parkhurst Director Present
24 Simi Valley Rocky Rhodes Director Present
25 South Pasadena Diana Mahmud Alternate Present
26 Temple City Fernando Vizcarra Director Present
27 Thousand Oaks David Newman Director Remote
28 City of Ventura Liz Campos Director Remote
29 Ventura County Vianey Lopez Vice Chair Remote
30 West Hollywood John Erickson
Chelsea Byers
Director
Alternate Present
31 Westlake Village Ned Davis Director Remote
32 Whittier Leon Vasquez Alternate Remote
All votes are unanimous unless otherwise stated.
PLEDGE OF ALLEGIANCE
Director Christian Horvath led the pledge of allegiance.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from February 2, 2023, Board of Directors Meeting
2. Approve Policy No. 2023-18 - Complimentary Ticket or Pass Distribution Policy
3. Approve Brand Campaign Task Orders With:
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Clean Power Alliance Board of Directors Page 3 of 6
March 2, 2023 Minutes
a. Fraser Communications for Media Planning and Purchasing Plus the Creation of a Stakeholder Education and Engagement Campaign Associated with CPA’s 2023 Brand Campaign for a Not-to-Exceed Amount of $180,788; and b. Pastilla, Inc. for Creation of a Commercial and Residential Customer Awareness and Engagement Campaign with CPA’s 2023 Brand Campaign for a Not-to-Exceed Amount of $109,000
4. Receive and File Q4 Risk Management Team Report
5. Receive and File FY Q2 Financial Results
6. Receive and File Bill Positions Monthly Report
7. Receive and File Community Advisory Committee Monthly Report Motion: Director Hicks, Carson
Second: Director Erickson, West Hollywood
Vote: The consent agenda was approved by a roll call vote with an abstention by Directors Cao, Cuellar Stallings, McMorrin, and Stegura on Item 1.
REGULAR AGENDA
8. Adopt Resolution No. 23-03-046 to Approve 2023 Interim Rates for Phases 1 through 5 Customers
Matt Langer, Chief Operating Officer, provided a presentation on the proposed interim FY 2022-23 market adjustment to go into effect April 1, 2023. Mr. Langer reviewed CPA’s financial trajectory for FY 22/23. Given the extraordinary market events of September, December, and January, CPA is projecting a $40-60 million contribution to the net position. Mr. Langer reviewed the benefits of receiving an investment grade credit rating; specified the credit rating metrics including Days Liquidity on Hand (DLOH) and discussed the residential rate comparisons between CPA and Southern California Edison (SCE). Mr. Langer presented three rate adjustment options. Option 1 would adjust residential rates to July 2022 total bill levels, Option 2 would adjust residential rates to December 2022 total bill levels, and Option 3 would set residential 100% Green rates to 1% less than SCE. Mr.
Langer reviewed the three options and noted that for each option, an equal percentage rate increase would be applied to all customer classes and rate products so comparisons will vary by the rate group. The Executive Committee discussed and recommended Option 3, an interim rate change based on a 1% discount compared to SCE for residential 100% Green rate and greater discounts for Lean Power and Clean Power rates. Option 3 would allow CPA to offset the impact of market volatility, make progress towards achieving an investment-grade credit rating, contribute to reserves, and help provide for competitive rates in the coming years.
Director Perello asked for an explanation of collateral posting. Mr. Langer clarified that the collateral posting is the financial security CPA must post for any transaction it enters into and is similar to a security deposit paid when renting an apartment. Director Perello requested feedback from the Executive Committee on their recommendation. Vice Chair Horvath commented that the Committee agreed that an adjustment was advantageous, as the short three-month period would yield a financial gain and increase financial reserves and stability. After a lengthy discussion, the Executive Committee adjusted Option 3, to ensure that all residential customers still have savings during the adjustment period compared to Agenda Page 8 of 570
Clean Power Alliance Board of Directors Page 4 of 6
March 2, 2023 Minutes
SCE. Director Klein Lopez added that the Executive Committee’s robust discussion was focused on ensuring that CPA maintains stability while staying true to its commitments of providing competitive rates to its communities. Director Rhodes inquired about the thought process behind larger rate increases for commercial customers. Mr. Langer specified that the methodology applied included taking the amount needed to increase the 100% Green rate to a 1% discount and then applying that amount to all other product rates. SCE delivery rates differ among the different rate classes, yielding varying comparisons when applying the same increase. Vice Chair Horvath added that SCE has subsidized some commercial rates through residential rates and that the CPA Board has historically tried to avoid such subsidies in its ratemaking. Director Perez asked several questions on the overall goal of the interim rate adjustment, rate percentage differences, and communication strategies. Chair Gold shared that the goals include the investment grade credit rating and its benefits, including financial security and protection against future energy market volatility. Regarding future rate settings, Chair Gold indicated the rate setting process is a Board decision.
The Board decided to shift its rate setting process to a cost-of-service approach and it can always revisit its process when it sets rates annually. Lastly, Mr.
Bardacke shared some of the communication methods, including bill messaging about the rate setting process and public participation, through interaction with Board members, and through social media. Director Parkhurst asked about the competitive environment CPA functions in when making power purchases. Staff explained that there are other groups that CPA is competing with for power purchases including other Community Choice Aggregations (CCAs), Investor Owned Utilities (IOUs), direct access providers serving large businesses, and corporate entities. CPA adheres closely to its transparent and public process; in some cases, corporate entities can be nimbler in procuring energy because they can make purchases without a public approval process. Additionally, staff clarified that CPA shortlisted 8-10 projects in its 2021 RFO and executed one contract. Mr.
Langer noted that the market trend is moving towards a seller’s market. Director Hicks asked several questions on rate increase percentages, reserves, and future rate setting. Staff explained last years’ comparisons; Lean Power had a 1% discount, Clean Power was at parity, and 100% Green power was 3% more expensive. Option 3 would bring the 100% Green product to 1% cheaper. Staff added that the most vulnerable customers receive an even lower comparison than other residential customers if they are enrolled in the California Alternate Rates for Energy (CARE) program. Regarding reserves, Mr. Bardacke shared that CPA’s goal was to meet a minimum 30% in reserves, putting less pressure on rates in the future. Although there were other options that would achieve the minimum reserves, those would have impacted customers to a greater extent. With Option 3, CPA would reach 26% reserves. Moving forward, rate options will remain within historical ranges, but volatile energy markets can affect those projections. Director Erickson expressed support for the Executive Committee recommendation.
Director Monteiro commented that a rate increase now makes better sense for customers than a larger rate increase later due to SCE costs. Director Cao inquired about the process for enrolling in the CARE program. Mr. Bardacke clarified that the enrollment process is simple, and customers can sign up through SCE; customers who already receive public assistance may automatically qualify; the CARE program provides about a 30% discount. Director Shapiro expressed support for Option 3 and thanked the Executive Committee for their work.
Responding to Director Perello’s questions regarding the investment-grade credit Agenda Page 9 of 570
Clean Power Alliance Board of Directors Page 5 of 6
March 2, 2023 Minutes
rating and customer participation, David McNeil, Chief Financial Officer, indicated that CPA is aiming for the BBB range. Mr. Bardacke expressed that staff is readily anticipating an increase in calls to the call center and an increase in visits to CPA’s online bill comparison tool. Director Perello emphasized the importance of meeting reserve targets. In response to Director Torres’ question about discussions around minimizing customer impact, Chair Gold indicated that staff modified Option 3 at the request of the Executive Committee following a lengthy discussion about reducing impact on CPA customers.
Director Mahmud added that CPA residential and commercial costs are less than 50% of the total cost of the bill; transmission and distribution costs are almost 50%, and the remaining balance is made up of additional costs imposed by the California Public Utilities Commission (CPUC). Notwithstanding the recent increases in energy costs, SCE’s distribution and transmission costs will continue to rise at a greater rate than any anticipated increase in CPA energy costs; this is important to highlight for customers. CPA’s energy rates have two primary components: they are based on revenues needed to address costs, and include the Power Charge Indifference Adjustment (PCIA). The PCIA represents CPA’s responsibility to reimburse SCE for investments it made on behalf of customers that CPA is now serving. Director Mahmud commented that as of January 2023, CPA is in the extraordinary position of receiving PCIA payments from SCE because energy costs have increased to an extent greater than anticipated by SCE. Director Mahmud opined that CPA could benefit from this particular opportunity to add to reserves, as CPA’s rates will still be more favorable. SCE lost $800 million in December 2022, substantially increased their rates in January, and have already filed with the CPUC an additional 4% rate increase to take place this summer. CPA is subject to the same market volatility as SCE, but CPA staff and the Board have worked diligently to minimize the impact on CPA. Chair Gold requested that staff develop a list of public information talking points from Director Mahmud’s comments that could be shared with Board members.
Motion: Director Erickson, West Hollywood
Second: Director Monteiro, Hawthorne
Vote: Item 8 was approved by a roll call vote with an abstention from Director Vasquez.
OPEN NOMINATION PERIOD FOR ONE LOS ANGELES COUNTY AT-LARGE EXECUTIVE COMMITTEE POSITION FOR A TERM ENDING JUNE 30, 2024 Chair Gold opened the nomination period for the Los Angeles County at-large Executive Committee position.
MANAGEMENT REPORT
Mr. Bardacke congratulated and thanked members of the Finance Committee and staff for their work finalizing the issuance of a prepay transaction. This prepay bond will save CPA customers over $8 million a year on renewable energy purchasing costs. Mr.
Bardacke advised that a second prepay transaction may be brought to the Finance Committee and Board at a future time. Board members may now request alternate meeting locations outside of the five standard remote locations on an as-needed basis up to three times per year. Mr. Bardacke thanked all Board Members who participated in the annual Lobby Day and invited participation in the California Community Choice Association (CalCCA) annual conference in May.
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Clean Power Alliance Board of Directors Page 6 of 6
March 2, 2023 Minutes
In response to Director Mahmud’s question about letters of support for the bill CPA is sponsoring, Mr. Bardacke indicated that staff will follow-up with Board members the following week.
COMMITTEE CHAIR UPDATES
Director Deborah Klein Lopez, Chair, Legislative & Regulatory Committee, thanked everyone who participated in the annual Lobby Day, where Directors met with both legislators and members of the Governor’s Office to introduce CPA. Director Klein Lopez advised that Board members will receive a support letter template for AB 1538 to share with their cities.
Director Susan Santangelo, Chair, Finance Committee, shared that CPA recorded a net loss of $16.7 million in the first six months of FY 22/23, and the cost of energy was 19% higher than budgeted due to severe heat events, spikes in natural gas prices, and charges from previous years. As of the end of 2022, CPA has $49.5 million in unrestricted cash and almost $80 million in line of credit; residential Accounts Receivables (AR) make up the majority of past due accounts and are trending upwards; commercial accounts have decreased and stabilized after service disconnection notices went out.
Director Robert Parkhurst, Chair, Energy Planning & Resources Committee, shared that the Energy Committee is working on power purchase projects and is open to new members who may be interested in learning more about the procurement process.
BOARD MEMBER COMMENTS
None.
REPORT FROM THE CHAIR
Chair Gold congratulated staff on the success of the prepay bond, thanked Mr. Bardacke for his efforts over the past five years and contributing to the success of CPA.
ADJOURN
Chair Gold adjourned the meeting at 3:44 p.m.
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Staff Report – Agenda Item 2
To: Board of Directors
From: David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Approve the Fiscal Year 2022/23 Amended Budget Date: April 6, 2023
RECOMMENDATION
Approve Fiscal Year (FY) 2022/23 Amended Budget (“Amendment”) as reflected in Attachment 1.
BACKGROUND
Each year CPA develops an annual budget to govern the agency’s revenues and expenses during the upcoming fiscal year. In June 2022, CPA’s Board of Directors approved the FY 2022/23 Budget (“Budget”). In most years CPA also develops and implements a budget amendment in the fourth quarter of the fiscal year to account for market conditions and other changing circumstances with the operations of the organization.
The proposed Amendment increases the Cost of Energy (+$185,749,000, +21%), Billing Data Management Services (+$44,000, +0.4%), and Finance and Interest Expense (+$170,000, +30%) budget line items. These increases will be partially offset by an increase in the Revenue - Electricity net line item. All other revenue and expense budget line items remain unchanged.
The net effect is a budgeted contribution to the net position of $84 million, 25% more than the $67 million added to the net position in FY 2021/22. The FY 2022/23 budgeted increase in net position would be the fifth consecutive annual increase in net position and would bring CPA’s total net position to $225 million as of June 30, 2023.
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Board of Directors Item 2
At its March 16, 2023 meeting, CPA’s Finance Committee reviewed and recommended a draft FY 2022/23 Budget Amendment for approval to the Board. Subsequently, staff amended this draft 2022/23 Budget Amendment by adding an $18.95 million contingency to the Cost of Energy, in consideration of energy market volatility experienced over the past year and the potential for more volatility in the coming months. In all other respects, the Proposed 2022/23 Budget Amendment mirrors the draft budget amendment recommended by the Finance Committee. This additional contingency will ensure that CPA remains within budget even in the event of unexpected market events. If unspent, the contingency would be added to CPA’s net position.
Budget Detail
The Amendment includes changes to the following Budget line items:
Revenue (+$72,088,000, +6%): The proposed increase to the Revenue arises from an increase in retail electricity rates approved by the Board at its March 2, 2023 Board meeting and implemented on April 1, 2023.
Cost of Energy (+$185,749,000, +21%): The proposed increase to the Cost of Energy is due to the major heat event in September 2023, a spike in wholesale electricity prices in December 2022 and January 2023, prior period charges recorded in FY 2022/23, higher renewable energy prices and costs than anticipated in the FY 2022/23 Budget, and the addition of an $18.95 million contingency.
Billing Data Management Services (+$44k, +0.4%): The proposed increase in Billing Data Management Services budget line item arises from a higher estimate of the number of customer accounts served by CPA and resulting higher customer account costs which are incurred on a cost per account basis.
Finance and Interest Expense (+$170k, +30%): The proposed increase to the Interest Expense budget line item is intended to accommodate increased expenses arising from greater borrowing on the line of credit than anticipated in the FY 2022/23 budget and increased costs arising from a planned amendment to CPA’s credit agreement with Agenda Page 13 of 570
Board of Directors Item 2
JPMorgan. Staff expects to present i) a summary of a proposed amendment to the Credit Agreement to the Finance Committee at its April 26th, 2023 meeting and ii) a recommendation to the Board to adopt a resolution authorizing staff to enter into an amendment to the Credit Agreement at its May 4, 2023 Board meeting. The amended Credit Agreement would come into effect by the end of May 2023.
ATTACHMENT
1. Proposed FY 2022/23 Amended Budget
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A B C D E F
FY 2022/23
Budget Amendment
FY 2022/23
Amended Budget
Budget
Difference ($)
Budget
Difference
(%)
Revenue ‐ Electricity net 1,110,781,000 72,088,000 1,182,869,000 72,088,000 6% Transfer from Fiscal Stabilization Fund ‐ Other revenue 2,742,000 2,742,000 ‐ 0% TOTAL REVENUE 1,113,523,000 72,088,000 1,185,611,000 72,088,000 6% TOTAL ENERGY COSTS 870,533,000 185,749,000 1,056,282,000 185,749,000 21% NET ENERGY REVENUE 242,990,000 (113,661,000) 129,329,000 ‐ (113,661,000) 47%
OPERATING EXPENSES
Staffing 13,976,000 ‐ 13,976,000 0% Technical services 1,436,000 1,436,000 ‐ 0% Legal services 1,243,000 1,243,000 ‐ 0% Other services 1,902,000 1,902,000 ‐ 0% Communications and marketing services 2,018,000 2,018,000 ‐ 0% Customer notices and mailing services 1,346,000 1,346,000 ‐ 0% Billing data management services 10,474,000 44,000 10,518,000 44,000 0.4% Service fees ‐ SCE 2,116,000 2,116,000 ‐ 0% Customer programs 4,663,000 4,663,000 ‐ 0% General and administration 5,877,000 5,877,000 ‐ 0% TOTAL OPERATING EXPENSES 45,051,000 44,000 45,095,000 44,000 0% OPERATING INCOME 197,939,000 (113,705,000) 84,234,000 ‐ (113,705,000) 57% Finance and interest expense 562,000 170,000 732,000 170,000 30% TOTAL NON OPERATING EXPENSES 562,000 170,000 732,000 170,000 30% Interest Income ‐ 486,000 ‐ 486,000 0% TOTAL NON OPERATING REVENUE ‐ 486,000 ‐ 486,000 0% NON OPERATING REVENUE (EXPENSE) (76,000) (170,000) (246,000) (170,000) 224% CHANGE IN NET POSITION 197,863,000 (113,875,000) 83,988,000 ‐ (113,875,000) 58% NET POSITION BEGINNING OF PERIOD 104,098,000 141,253,000 37,155,000 36% NET POSITION END OF PERIOD 301,961,000 225,241,000 ‐ (76,720,000) 25% FISCAL STABILIZATION FUND ‐ ‐ ‐ 0% RESERVES END OF PERIOD (Net Position + FSF) 301,961,000 225,241,000 ‐ (76,720,000) 25% Other Uses
Capital Outlay 225,000 ‐ 225,000 0% Depreciation & Amortization (622,000) ‐ (622,000) 0% CHANGE IN FUND BALANCE 198,260,000 (113,875,000) 84,385,000 ‐ (113,875,000) 57% Note: Funds may not sum precisely due to rounding
CLEAN POWER ALLIANCE of SOUTHERN CALIFORNIA
Fiscal Year 2022/2023 Amended Budget
PROPOSED
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Staff Report – Agenda Item 3
To: Board of Directors
From: Karen Schmidt, Director, Rates and Strategy
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Net Energy Metering Tariff Amendment – Check Issuance Policy Date: April 6, 2023
RECOMMENDATION
Approve proposed amendments to the Net Energy Metering Tariff effective April 1, 2023.
BACKGROUND
On February 7, 2019, the Board of Directors approved a policy governing Net Energy Metering, renamed as “NEM Tariff” on March 4, 2021. The NEM Tariff governs operation of CPA’s NEM Program and includes the method by which credits are calculated and applied to customer bills for excess electricity generation from customer sited, behind the meter, and primarily roof top solar facilities. It also governs how “cash-outs” payments are administered to customers that generate more electricity and/or retail credits than they use.
In March 2019, October 2019, and March 2021, the Board approved subsequent amendments to the NEM Tariff that incorporated clarifications and updates.
Staff is in the process of analyzing the implications of the California Public Utility Commission’s recent Net Energy Metering (NEM) 3.0 decision on CPA and its customers and developing recommendations on CPA’s future NEM policy. The recommendations will be developed with input from the Community Advisory Committee over the next Agenda Page 16 of 570
Board of Directors Item 3
several months with the goal of presenting options and a recommendation to the Board later this year.
NEM Annual True Up for Active NEM Customers
During the April billing cycle of each year, CPA conducts a “true up” of NEM accounts.
During true up, CPA determines if a customer is a “net generator”, meaning they generated more electricity than they used over the course of a year, and issues the customer a payment for that excess energy at CPA’s net surplus compensation rate. The net surplus compensation rate fluctuates monthly based on wholesale energy prices but is always 10% higher than SCE’s rate. At the time of true up CPA also conducts a lookback to determine whether a customer that has unused remaining bill credits is able to offset any charges they may have incurred earlier in the prior twelve-month period, and refunds that amount to the customer (“generation credit refund”).
If the combined value of a customer’s net surplus compensation and generation credit refund is greater than $100, CPA issues the customer a check. If the combined value is less than $100, CPA applies the payment as a rollover credit on the customer bill to offset future charges.
On rare occasions customers contact CPA’s Customer Service Center at the end of the annual true-up period to request that a credit that is less than $100 be issued as a check rather than applied as a credit on their bill. The proposed NEM tariff amendment would give CPA the authority to issue checks for credit refunds less than $100 upon customer request.
Proposed Amendment
Staff proposes to update the NEM Tariff effective April 1, 2023, to provide that customers whose annual true up credit is less than $100 can, upon request, be issued a check for their credit balance rather than having it applied as a credit on their bill. If the credit has already been applied to the customers’ bill by the time the customer makes the request, they would be issued a check for any remaining unapplied credit balance.
Agenda Page 17 of 570
Board of Directors Item 3
The amendment will allow CPA Customer Service Representatives to quickly resolve inquiries from a small but active number of NEM customers who prefer to receive a check rather than a rollover credit for their annual true up balance.
FISCAL IMPACT
CPA currently receives one or two requests each year for true up checks from customers with credit balances under $100. Staff does not anticipate that this number will increase significantly because of this amendment, and the incremental cost of tracking and issuing these checks will be minimal.
ATTACHMENT
1. NEM Tariff Proposed Amendment (redline)
Agenda Page 18 of 570
CPA NEM Tariff – Amended and Approved on March 4, 2021 / Amended on April 6, 2023 Net Energy Metering (NEM) Service Tariff
APPLICABILITY: Clean Power Alliance of Southern California’s (CPA) Net Energy Metering Program (CPA NEM Program) is available to those CPA customers who are eligible under Southern California Edison’s (SCE) net energy metering program pursuant to the following SCE rate schedules: (i) Schedule NEM (Net Energy Metering); (ii) Schedule NEM-ST (Net Energy Metering Successor Tariff), (iii) Schedule NEM-V (Virtual Net Energy Metering for Multi-Tenant and Multi-Meter Properties); (iv) Schedule NEM-V-ST (Virtual Net Energy Metering for Multi-Tenant and Multi-Meter Properties Succesor Tariff); (v) Schedule MASH-VNM (Multifamily Affordable Solar Housing Virtual Net Metering); (vi) Schedule MASH-VNM-ST (Multifamily Affordable Solar Housing Virtual Net Metering Successor Tariff); (vii) Schedule BG-NEM (Biogas Net Energy Metering); and (viii) Schedule FC-NEM (Fuel Cell Net Energy Metering) (jointly referred to as “SCE NEM Rate Schedules”). These SCE NEM Rate Schedules are available at:
https://www.sce.com/regulatory/tariff-books/rates-pricing-choices/other-rates and may be amended or replaced by SCE from time to time. CPA’s NEM Tariff may be amended or clarified from time to time.
CPA customers who want to participate in NEM after enrolling with CPA must provide SCE with a completed SCE NEM Application and comply with all other SCE requirements before being eligible for the CPA NEM Program.
Eligible CPA customers who meet the requirements for the SCE NEM Program will be automatically enrolled in the CPA NEM Program either at the time of initially enrolling with CPA or at the time SCE accepts them into SCE’s NEM Program.
RATES: All rates for the CPA NEM Program will be in accordance with the customer’s applicable CPA rate schedule (CPA OAS). Nothing in this tariff will supersede any SCE authorized charges.
CHARGES & BILLING: CPA’s charges for energy (kWh) will be calculated at the CPA OAS and billed on the net metered usage, as described below.
a) For a customer with Non-Time of Use (TOU) Rates1
:
If the customer is a “Net Consumer,” having overall positive usage during a specific monthly billing cycle, the customer will be billed in accordance with the customer’s CPA OAS.
If the customer is a “Net Generator,” having overall negative usage during a specific monthly billing cycle, any net energy production shall be valued at the applicable rate as set forth in the customer’s CPA OAS. The calculated value of any net energy production shall be credited to the customer according to the CPA OAS and applied as described in Sections (c) and (d).
1 Only applicable to grandfathered SCE NEM 1.0 customers. Please visit https://www.sce.com/residential/generating-your-own-power/net-energy-metering for more information.
Agenda Page 19 of 570
CPA NEM Tariff – Amended and Approved on March 4, 2021 / Amended on April 6, 2023 b) For a customer with TOU Rates:
If the customer is a Net Consumer during any discrete TOU period reflected within a specific monthly billing cycle, the net kWh consumed during such TOU period shall be billed in accordance with applicable TOU period-specific rates or charges as specified in the customer’s OAS.
If the customer is a Net Generator during any discrete TOU period reflected within a specific monthly billing cycle, any net energy production shall be valued at the applicable TOU period-specific rates or charges as specified in the customer’s CPA OAS. The calculated value of such net energy production shall be credited to the customer according to the CPA OAS and applied as described in Sections (c) and (d). c) Monthly Settlement of CPA Charges/Credits:
Each customer will receive a statement as part of its monthly SCE bill indicating any accrued charges for electric energy usage during the current monthly billing cycle. When a customer’s net energy production results in an accrued credit balance in excess of currently applicable charges, the value of any net energy production during the monthly billing cycle (in excess of currently applicable charges) shall be valued at the CPA OAS and noted on the customer’s bill, including the quantity of any surplus NEM production (measured in kWh), and carried over as a bill credit for use in a subsequent billing cycle(s).
A customer who has accrued credits during previous billing cycles will see such credits applied against currently applicable charges, reducing otherwise applicable charges by an equivalent amount to such credits. Any remaining credits reflected on the customer’s billing statement shall be carried forward to subsequent billing cycle(s) until either the excess the credit is used to satisfy current charges, the customer no longer receives service from CPA or an annual account true-up is performed. d) CPA Annual True-Up & Cash-Out Processes:
i) CPA Annual True-Up: During the April monthly billing cycle of each year, CPA will perform a true-up of the most recent twelve (12) month billing cycle, or the period of time from the customer’s commencement of participation in the CPA NEM Program up to the following April (the “Relevant Period”).
For customers who enrolled in the CPA NEM Program prior to May 1, 2019, CPA will perform the first Annual True-Up in April 2020. Commencing in April 2021, CPA will perform the Annual True Up each April for the 12-month period between April to March for all active NEM customers with at least 12 months of participation in the CPA NEM program.
a. NEM Generation Credit Refund: At the time of the Annual True-Up, if the customer has accumulated any NEM generation credits in excess of any currently outstanding charges, those NEM generation credits will be refunded to the customer up to the total CPA charges paid by the customer on the same Agenda Page 20 of 570
CPA NEM Tariff – Amended and Approved on March 4, 2021 / Amended on April 6, 2023 NEM account during the Relevant Period, consistent with CPA’s Annual Cash-Out practice in (ii). 2 b. Net Surplus Compensation: Net Surplus Energy is defined as any generation that exceeds total customer energy usage during the Relevant Period, as measured in kWh. CPA will also determine at the time of Annual True-Up whether each customer has produced Net Surplus Energy over the course of the Relevant Period. If a customer has produced Net Surplus Energy, then CPA shall credit such customer an amount not to exceed $10,000 that is equal to the current Net Surplus Compensation rate per kWh, as defined in CPA Net Surplus Compensation Rate Schedule, multiplied by the quantity of Net Surplus Energy produced by the customer during the Relevant Period, consistent with CPA’s Annual Cash-Out practice in (ii) below. The CPA Net Surplus Compensation Rate Schedule will be posted to CPA’s website and updated monthly. CPA Net Surplus Compensation Schedule can be viewed at https://cleanpoweralliance.org/wp-content/uploads/2019/01/CPA-NSCR.pdf. ii) CPA Annual Cash-Out: During the April monthly billing cycle of each year, any current customer who has a combined NEM generation credit and Net Surplus Compensation value of $100 or more, as determined during the Annual True-Up process, that exceeds any outstanding charges, will be sent a payment by check via U.S. Mail to the customer’s U.S. mailing address on file at the time of mailing for the credit balance on their account, as determined through CPA’s Annual True-Up process (i). Customers receiving direct payment will have an equivalent amount removed from their NEM account balance at the time of check issuance. In the event that customers do not have a combined NEM generation credit and Net Surplus Compensation value exceeding $100, such credit balance will be carried forward to offset future CPA charges, unless the customer requests issuance of a check for the credit balance by contacting the CPA Customer Service Center via phone or email. If such a request is received after the customer’s rollover credit has been applied to charges in months following the annual true up, a check will be issued for the remaining credit balance on the account. All NEM accounts will be reset to zero kilowatt hours annually as of the customer’s May monthly billing cycle and the only NEM credits that will be carried forward on the customer’s account will be the combined NEM generation credit and Net Surplus Compensation credit balances less than $100. Checks will expire 90 calendar days after issuance. If checks expire, check amount will be returned to a customer’s NEM account as bill credits and will be applied toward future charges. iii) CPA Cash-Out for Terminations: Customers, who close their electric account through SCE, opt-out of CPA and return to bundled service, or move outside of the CPA service area prior to the April monthly billing cycle of each year, shall be trued up according to CPA’s Annual True-Up Process. If applicable, the customer shall receive a refund payment by check via U.S. Mail to the customer’s U.S. mailing address on file at the time of mailing for any NEM generation credit on their account that exceeds outstanding charges at the time of true-up, up to the amount paid by 2 If the Customer Account has any outstanding balance at the time of Annual True-Up, the customer will have a 30 day grace period to pay in full before their Annual True-Up is performed in order to be eligible for NEM Generation Credit refund.
Agenda Page 21 of 570
CPA NEM Tariff – Amended and Approved on March 4, 2021 / Amended on April 6, 2023 the customer during the Relevant Period. If determined to have produced Net Surplus Energy, the customer shall also receive a check via U.S. Mail to the customer’s mailing address on file at the time of mailing for Net Surplus Compensation, up to a maximum of $10,000. Payments will be released 30 days after final billing to allow for any revised usage and/or adjustments from SCE.
Checks will expire 90 calendar days after issuance. If checks expire or are returned to CPA, customers may request the reissuance of a check for up to one year after check issuance date and CPA will make a reasonable effort to reissue the check within 30 days of a customer’s request. After one year, the funds will be considered unclaimed property and turned over to the California State Controller’s Office.
e) SCE NEM Program:
Customers are subject to applicable terms and conditions and billing procedures of SCE for SCE charges as described in SCE NEM Rate Schedules (with the exception of generation-related charges, which are described in CPA’s rate schedules). Customers should be aware that while CPA settles balances for generation on a monthly basis, SCE will continue to calculate charges for delivery, transmission and other services annually for those customers with an annual billing option, and CPA NEM credits cannot be applied to any SCE charges.
Customers are encouraged to review SCE NEM Rate Schedules at https://www.sce.com/regulatory/tariff-books/rates-pricing-choices/other-rates. f) Return to SCE Bundled Service:
CPA customers participating in the CPA NEM Program may opt out and return to SCE’s bundled service, subject to any applicable restrictions imposed by SCE. If a CPA customer opts out more than 60 days after their initial enrollment date, CPA will perform a true-up of their account, as specified in section (d)(iii), at the time of return to SCE bundled service.
For details concerning opting out of CPA service, please contact CPA Customer Service at 888-585-3788 or [email protected] Agenda Page 22 of 570
Staff Report – Agenda Item 4
To: Board of Directors
From: Gina Goodhill, Senior Director, Government Affairs Approved By: Ted Bardacke, Chief Executive Officer
Subject: Monthly Bill Position Tracker
Date: April 6, 2023
RECOMMENDATION
Receive and file.
BILL POSITIONS
Bill Number &
Author
Title & Summary Status CPA
Position
Alignment
with CPA
Policy
Platform
Notes
AB 1538
Assemblymember
Al Muratsuchi
Clean Energy
Reliability Program
Would create an
incentive program for
load-serving entities
that procure clean
energy capacity
above their minimum
CPUC requirements
in order to enhance
electricity system
reliability and reduce
customer costs.
Introduced
2/17/2023
SPONSOR 2a; 2d;
5a; 5c;
This will be
CPA’s top
legislative
priority. Support
for this bill was a
key ask during
CPA’s Lobby
Day.
ATTACHMENT
1. 2023 Legislative & Regulatory Platform (link)
Agenda Page 23 of 570
Staff Report – Agenda Item 5
To: Board of Directors
From: Christian Cruz, Community Outreach Manager
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Community Advisory Committee (CAC) Report
Date: April 6, 2023
RECOMMENDATION
Receive and file.
MEETING REPORT
The Community Advisory Committee did not meet in March.
Agenda Page 24 of 570
Staff Report – Agenda Item 6
To: Board of Directors
From: Gabriela Monzon, Clerk of the Board
Nancy Whang, General Counsel
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Election of One Los Angeles County At-Large Position on the Executive Committee
Date: April 6, 2023
RECOMMENDATION
Elect a Los Angeles County At-Large member of the Executive Committee to a term ending June 30, 2024.
BACKGROUND/DISCUSSION
At the March 2, 2023 Board of Directors meeting, Board Chair Julian Gold opened the nomination period for a vacancy in the Los Angeles County At-Large position on the Executive Committee, created when Director Deborah Klein Lopez was appointed as Chair of the Legislative and Regulatory Committee.
The eligibility criteria for at-large positions are as follows:
• Must be a Regular Director (i.e. not an Alternate);
• Must have attended at least 50% of the regular Board Meetings in last 12 months; and
• Must affirm intent to serve a full term.
Pursuant to Article IX, Sec 6 of the Bylaws, the term for this At-Large position will conclude on June 30, 2024 concurrent with the term of the Board Chair.
Agenda Page 25 of 570
Board of Directors Item 6
The nomination period for the At-Large position closed on Friday, March 10, 2023. During the nomination period, the following nominations were received:
1. Cedric Hicks, Carson
2. Jeff Maloney, Alhambra
The Clerk of the Board has verified that the nominees meet the eligibility criteria. At the request of the Executive Committee, both candidates submitted statements to provide all voting Directors with information that they may wish to consider prior to casting their votes. (Attachment 2)
Election Procedures
The Los Angeles County At-Large position must be elected by Regular Directors representing jurisdictions in Los Angeles County. Alternate Directors may not vote in the election of At-Large Executive Committee positions.
All Los Angeles County Regular Directors may cast their votes using the Voting Form provided as Attachment 1. Voting Forms will be collected by CPA staff commencing at the start of the April 6, 2023 Board meeting up until the item is called. The Voting Form must be submitted in person by the Regular Director. These forms will be transmitted to the Board Clerk. Votes will be tallied during the Board’s consideration of this item.
ATTACHMENTS
1. Voting Form
2. Candidate Statements
Agenda Page 26 of 570
Voting Form Completion Instructions
This voting form may be submitted to CPA Staff Contacts at the following locations before or during the Board’s consideration of the election item on Thursday, April 6, 2023.
Locations Room CPA Staff Contacts
CPA Office
801 S. Grand Ave, Suite 400
Los Angeles, CA 90018
N/A Gabby Monzon
Calabasas City Hall
100 Civic Center Way
Calabasas, CA 91301
Council Conference Room Joe Cabral
Whittier City Hall
13230 Penn Street
Whittier, CA 90602
Administrative Conference
Room
Dalia Gomez
South Bay Cities COG
2355 Crenshaw Blvd., Suite
125
Torrance, CA 90501
Conference Room Mili Shah
Westlake Village City Hall
31200 Oak Crest Drive
Westlake Village, CA 91361
Council Office/Conference
Room
Alexis Rizo
Claremont City Yard
1616 Monte Vista Ave.
Claremont, CA
Conference Room Dusty Shaller
Please be sure to sign your Voting Form to certify your vote and return to CPA staff at the locations listed above. The Voting Form must be submitted in person by the Regular Director.
Agenda Page 27 of 570
VOTING FORM
April 2023 CPA Executive Committee At-Large Election
Los Angeles County
Los Angeles County At-Large Member Candidates are listed below.
Vote for no more than one candidate. Mark your selection with an “X” in the box.
Director Cedric Hicks, City of Carson
Director Jeff Maloney, City of Alhambra
Please certify your vote here.
I (name)________________________, am a Regular Director representing a member agency in Los Angeles County.
Signature: ______________________________
Member Agency: ________________________
Agenda Page 28 of 570
Cedric L. Hicks Sr. - Executive Committee Candidate Statement
1. Please describe your background and history with Clean Power Alliance.
I am a graduate of Los Angeles Harbor College, California State University Fullerton, and am a Distinguished Alum of California State University, Dominguez Hills with a master’s degree in Behavioral Science. I also graduated from the Anderson School of Management at UCLA - Johnson and Johnson Fellows program. I officially retired, after 32-years of day-to-day work, from the City of Compton as the Assistant City Manager.
I was first appointed to the Carson City Council on April 19, 2016, and was re-elected twice on November 8, 2016, and on November 3, 2020. My mission for the City of Carson is to enhance the quality of life of the residents and businesses by ensuring that the City is a safe, thriving, and healthy community with access to clean, reliable, and affordable energy.
I have been a member of the CPA’s Board of Directors since its inception in 2017 and I’ve also served on the Board's Legislative & Regulatory Committee since 2018. I have been an advocate for affordable electricity bills, reduction of GHG emissions, local clean energy projects, and local programs.
2. Please describe the vision and perspective that you would bring to the Clean Power Alliance Executive Committee.
I have been a longtime environmental champion and I believe in an affordable, clean energy future where communities and customers continue to be given a choice in renewable products and programs that work best for them. We are at a critical time in the State’s transition to clean energy and I bring a unique perspective to issues that we are facing today. CPA has grown and flourished into the largest provider of 100% renewable energy in the United States, but we still have a lot more work to do. I will work to ensure that our collective vision for this organization shapes our future decisions.
Carson has the second-largest load share of all the member agencies, and it is one of a few CPA member agencies that is a state-designated disadvantaged community. I know, firsthand, what it takes to serve and support an underserved and diverse customer base.
If I was elected to serve on the Executive Board it would allow me to share insight early in the planning and development process.
I will be the new Chair of the South Bay Cities of Council Government which will help to further CPA’s mission to onboard new members.
The Board has done an exceptional job of establishing a culture of collaboration with Directors and CPA staff members and I will continue to build on that work to help lead this organization.
Agenda Page 29 of 570
Jeff Maloney – Executive Committee Candidate Statement
1. Please describe your background and history with Clean Power Alliance.
I was born and raised in the west San Gabriel Valley, attended local schools, and, except for my undergraduate studies at UC San Diego, I have lived in this area my entire life. Politics and public policy have been among my primary interests for many years, especially issues related to the environment and sustainability.
Shortly after graduation from USC Law School, I joined the Mountains Recreation and Conservation Authority, an agency associated with the Santa Monica Mountains Conservancy ("Conservancy") that acquires, restores, and preserves valuable open space habitat and recreational lands around Los Angeles. In 2013, I became Chief Counsel of the Conservancy and have continued to help lead the Conservancy in its preservation and restoration efforts.
In 2016, I was elected to the Alhambra City Council, largely on a platform of environmental reform, expansion of open space and parks, and social and economic equity. As a new Councilmember, I spearheaded the effort for Alhambra to join the Clean Power Alliance (at that point known as Los Angeles Community Choice Energy). I am proud to have led that effort and I was honored when my colleagues unanimously supported my proposal.
I have enjoyed serving as Alhambra's primary or alternate representative to the CPA board since 2017. In 2021, I joined the CPA Energy Committee, helping to review and make recommendations for new power purchase agreements. Last year, while serving as Mayor, I supported moving Alhambra to CPA's 100% Green Power tier, which was approved unanimously.
The majority of my professional and political career has been dedicated to environmental sustainability. I consider my involvement with CPA to be a core part of my work in the sustainability field and I would be honored to continue to serve this agency as a member of the Executive Committee.
2. Please describe the vision and perspective that you would bring to the Clean Power Alliance Executive Committee.
I believe that climate change is an existential threat to humanity. Air, water, and soil pollution is causing untold damage to public health. As a father of two young children, I am concerned for our future and I believe our society's dependence on fossil fuel - an outdated 20th century technology - must end. This is why I am fully committed to the mission and objectives of CPA and I strongly support CPA's current trajectory.
Since its inception, CPA has successfully fulfilled its stated objectives of providing clean power to its customers, becoming financially solvent, and investing in our communities - more often than not ahead of schedule. Our success is a testament to the talent, commitment, and drive of our leadership, staff, and board. I am proud to be a part of this incredible organization.
Agenda Page 30 of 570
Jeff Maloney – Executive Committee Candidate Statement
Looking towards the future, I will help to ensure that CPA continues to provide reliable, affordable, and sustainable energy to its customers. We must continue to meet our energy goals while quickly transitioning to a 100% greenhouse gas future. Simultaneously, it is crucial that we continue to fulfill our promise to provide our product at a discount in comparison to the default energy provider in our jurisdiction.
We must also rapidly expand programs that provide financial incentives and subsidies to low income customers and communities of color. As a Councilmember in an extremely economically and ethnically diverse community, I know that immigrant, nonwhite, and non-English speakers bear the brunt of climate change and environmental injustice. Statistically, those communities are also often unable or unwilling to take advantage of assistance programs designed for their benefit. It is incumbent upon agencies like CPA to expand its reach to these communities and to ensure that we meet them where they are to ensure better health and environmental outcomes for them and success for CPA's efforts.
Lastly, as the largest provider of 100% renewable energy in the nation, CPA has quickly established itself as a leader in the energy sector. We know that our future may depend on the expansion of what we are doing here in Southern California. I believe we have a responsibility to continue to prove that our success can be scaled up and replicated in communities across the nation and the planet.
Agenda Page 31 of 570
Staff Report – Agenda Item 7
To: Board of Directors
From: Kate Freeman, Financial Strategy & Initiatives Manager David McNeil, Chief Financial Officer
Approved By: Ted Bardacke, Chief Executive Officer
Subject: Board Resolution authorizing execution of an Energy Prepayment Transaction; Agreements with Municipal Capital Markets Group, Inc. (“MCM”) and Chapman and Cutler LLP (“Chapman”); Selection of Goldman Sachs & Company, LLC. and J. Aron and Company, LLC (collectively, “GS”) as Underwriter and Prepaid Supplier Date: April 6, 2023
RECOMMENDATION
(a) Adopt Resolution No. 23-04-047 (Attachment 2) approving parameters under which an energy prepayment transaction can be completed; authorizing and/or approving documents or “form of” documents supporting the prepay transaction; and directing California Community Choice Financing Authority (CCCFA) to make payments to service providers for issuance costs from prepay bond proceeds. (b) Approve Professional Services Agreement with Municipal Capital Markets Group, Inc. (“MCM”) with a Not-to-Exceed Amount of $340,000 to be paid from Bond Proceeds for municipal financial advisory, guaranteed investment contract (GIC) broker, and Qualified Independent Representative (QIR) services. (c) Approve Legal Services Agreement with Chapman and Cutler, LLP (“Chapman”) with a Not-to-Exceed Amount of $200,000 to be paid from Bond Proceeds for prepay counsel services.
(d) Approve the selection of GS as the Underwriter and Prepaid Supplier and the selection of CCCFA as the Bond Issuer for the proposed energy prepayment financing and authorize staff to select a Funding Recipient.
Agenda Page 32 of 570
Board of Directors Item 7
BACKGROUND
At the October 6, 2022, Board of Directors meeting, the Board adopted a Resolution authorizing staff to structure and execute a prepay transaction subject to approved parameters. Pursuant to Board direction, staff and prepay service providers completed preparations for the prepay bond transaction in early February 2023 including the finalization of all prepay agreements, the rating of the prepay bonds by Moody’s and Kestrel Verifiers, and the selection of a third-party Funding Recipient that provided the highest level of savings to CPA. Following completion of preparations, CCCFA successfully issued energy prepayment bonds in the par amount of $998.8 million on February 15, 2023. The prepay transaction is expected to provide CPA with energy cost savings of $66 million over the initial eight-year period of the bonds.
In March 2023, staff began work to structure a second prepay transaction that would use the same structure utilized in the first prepay transaction. On March 22, 2023, the Finance Committee received an update from staff on the proposed second prepay transaction and supported making a proposal to the full Board of Directors.
It is conservatively estimated that the proposed second energy prepayment transaction will save CPA between $2 million and $5 million annually in energy procurement costs.
REQUESTED ACTION
The proposed Board Resolution encompasses the following approvals or authorizations relating to the execution of the prepay transaction:
• Defines the parameters under which the prepay transaction can be completed; • Authorizes staff to execute, or approve for distribution, documents and “form of” documents supporting the prepay transaction; and
• Selects CCCFA as bond issuer and directs CCCFA to make payments out of bond proceeds to services providers for activities required to issue the prepay bonds.
Agenda Page 33 of 570
Board of Directors Item 7
The proposed Board Resolution is substantially similar to the Resolution approved by the Board in October 2022 to support the first prepay transaction. The proposed Resolution will allow staff to act nimbly to close the second prepay transaction when market conditions are advantageous for CPA.
Prepay Transaction Parameters
Through the proposed Board Resolution, CPA defines the parameters which must be satisfied in order to execute the prepay transaction. Those parameters are:
• That the prepay bonds will be limited obligations of CCCFA, not obligations of CPA;
• That the aggregate bond principal will not exceed $1.3 billion. Proceeds will be applied to make the energy prepayment, to fund reserves as required, and to pay costs of issuance of the Bonds. This defines the upper bound of the size of the prepay transaction and specifies the uses of proceeds. The final size of the transaction will be determined at the initial pricing date of the bonds in response to market conditions;
• That the minimum “Monthly Discount Percentage” shall be at least 5%. This establishes the minimum cost savings to CPA at the initial issuance and reset dates of the bonds. CPA retains the right to not enter into a prepay transaction or to participate in such transaction in future reset periods if the minimum Monthly Discount Percentage cannot be achieved.
• That CCCFA’s total cost of issuance (TCOI) shall not exceed 1% of the amount of bond proceeds.
Prepay Documents
The Resolution authorizes staff to execute, or approve for release, the following documents supporting the prepay transaction:
• Clean Energy Purchase Contract – a 30-year agreement between CPA and CCCFA under which CPA purchases assigned discounted energy from CCCFA; Agenda Page 34 of 570
Board of Directors Item 7
• Operational Services Agreement – an agreement between CPA and CCCFA permitting CPA to control various actions of CCCFA relating to prepay project operations;
• White Hills Limited Assignment Agreement – an agreement between CPA, Mohave County Wind Farm, LLC, and J. Aron governing the assignment of the White Hills / Mohave PPA1 into the prepay project;
• Form of Limited Assignment Agreement – a “form of” agreement between CPA, PPA Seller(s), and J. Aron governing the assignment of existing and future PPAs into the prepay project;
• Letter Agreement re: Limited Assignment Agreement – an agreement between CPA and J. Aron to use the Form of Limited Assignment Agreement for future PPA assignments into the prepay project;
• PPA Payment Custodial Agreement – an agreement between CPA, CCCFA, J.
Aron, Aron Prepay LLC and Custodian that creates a custody account for receipt of payments from J. Aron and CPA to settle monthly PPA Seller invoices; and • Memorandum of Understanding (CCCFA) – an agreement between CPA and CCCFA under which CPA agrees to indemnify CCCFA against certain ratings agency and green bond verification fees payable by CCCFA in the event the prepay financing is unsuccessful.
• Preliminary Official Statement – a document used for marketing the prepay bonds that describes the bonds and the structure of the prepay project and includes an Appendix providing descriptive, operating, and financial information about CPA to an investor audience.
Compensation to Service Providers
The proposed Resolution directs CCCFA to make payments to service providers for activities required to issue the prepay bonds. In the event of a successful bond issuance, compensation to these providers for bond issuance (the Total Cost of 1 The White Hills PPA is a 300 MW Wind Farm in Mojave, AZ that CPA contracted for in October 2019 and became operational in December 2020.
Agenda Page 35 of 570
Board of Directors Item 7
Issuance, or TCOI) will be paid out of bond proceeds (i.e., not from CPA) and shall not exceed 1% of bond proceeds. The service providers and their roles in the issuance of the prepay bonds are:
• GS – bond underwriting services
• Orrick, Herrington & Sutcliffe – tax and bond counsel services • Chapman – prepay counsel services to CPA
• MCM – municipal financial advisory, GIC brokerage, and QIR services to CPA • Moody’s – bond rating services
• Kestrel Verifiers – green bond certification
• National Bank or Trust Company – trustee and custodial services • Trustee’s Counsel – trustee counsel retained by trustee to provide legal services
• Other parties TBD – accountancy services and miscellaneous In the unlikely event a bond is not issued,
• CPA will make direct payment to Moody’s (total costs estimated to be $300,000), with a reimbursement to CPA for 50% of the credit rating fee by GS • CPA will make a direct payment to Kestrel Verifiers (total cost estimated to be $30,000)
The total at-risk costs to CPA are approximately $180,000 if no bond is issued.
Selection of Service Providers
Staff recommend Board approval for a new Professional Services Agreement with MCM. The new agreement with MCM is substantially similar to the 2022 agreement with MCM to provide municipal financial advisory and QIR services, with the following changes:
• The expansion of the Scope of Work (SOW) to include GIC brokerage services.
GIC brokerage services include the solicitation of bids from providers of GICs (under which investors borrow funds from the prepay estate in exchange for Agenda Page 36 of 570
Board of Directors Item 7
interest payments that enhance CPA’s overall cost savings), and the finalization and execution of GIC related documents.
• The Transaction Fee payable to MCM upon the successful completion of the second prepay transaction is $290,000, a 33% reduction from the Not-To-Exceed Transaction Fee payable under the services agreement pertaining to the first prepay transaction. As in the first agreement with MCM, in the event CPA terminates the Agreement for convenience sixty or fewer days prior to the closing date of the prepay financing, MCM shall be paid 75% of the Transaction Fee from bond proceeds.
• The addition of a Transaction Fee for GIC brokerage services Not-to-Exceed $40,000, payable exclusively from the proceeds of an investment transaction by the selected investment provider (i.e., not payable by CPA or CCCFA) • The total compensation to MCM, inclusive of the GIC broker services Transaction Fee shall not exceed $380,000
Staff recommend Board approval for a new Legal Services Agreement with Chapman.
The new agreement with Chapman is substantially similar to the May 2022 agreement but includes a reduction in Chapman’s fee to $200,000 from the previous $300,000.
Staff recommend Board approval for the selection of GS as the Underwriter and Prepaid Supplier on the prepay transaction. In Q2 2022, Staff conducted competitive solicitations to identify qualified Prepaid Suppliers and Bond Issuers and received Board approval for the selection of GS at its July 7, 2022 meeting. The GS team is experienced in the prepay market, helped CPA achieve a successful prepay transaction in February 2023, and has the capacity to allow CPA to issue a second prepay bond later in 2023. Additionally, the prepay structure developed by GS provides transparency and market-level savings to CPA for the initial period of the prepay, as well as at each subsequent interest rate reset which is estimated to occur each 5 to 10 years over the bond term. This structure helped CPA achieve additional savings in its February 2023 prepay transaction. Lastly, GS has offered to reduce its underwriter’s discount by 10% relative to the first prepay transaction, which will decrease TCOI by approximately Agenda Page 37 of 570
Board of Directors Item 7
$500,000.
Staff recommend that the board authorize CPA to select a Funding Recipient in accordance with the parameters described in Board Resolution 23-04-047. The GS prepay structure allows CPA to elect to either use GS as a prepayment Funding Recipient or to use a third-party Funding Recipient, separate from GS. The flexibility to use a third-party Funding Recipient may enhance CPA savings by helping ensure the participation of a Funding Recipient: i) whose credit is in demand from investors, ii) has appetite for funding at the tenor CPA prefers, and/or iii) can generate the desired savings. Were CPA to elect to use a third-party Funding Recipient, GS would continue to serve as the Prepaid Supplier.
Staff recommend Board approval for the selection of CCCFA as the Bond Issuer on the prepaid transaction. In 2022, Staff conducted a competitive solicitation to identify qualified Bond Issuers and recommended the selection of CCCFA. The Board approved this selection at its July 7, 2022 meeting and adopted Resolution 22-07-037 entering CPA as a Founding Member of the CCCFA JPA. CPA joined CCCFA in September 2022 and its CEO currently serves on the CCCFA Board of Directors.
As with the first prepay transaction, payments to MCM, Chapman, and GS are contingent upon the successful completion of the prepay transaction and are payable by CCCFA out of bond proceeds.
FISCAL IMPACT
Upon a successful bond issuance, the TCOI will be paid by CCCFA out of bond proceeds and not by CPA. Accordingly, there will be no fiscal impact to CPA’s operating expense budget. CPA conservatively estimates annual savings of $2 to $5 million on its energy costs as a result of the 2nd prepay transaction. The at-risk costs to CPA are approximately $180,000 if no bond is issued as described in Compensation to Service Providers section above.
Agenda Page 38 of 570
Board of Directors Item 7
NEXT STEPS
Following adoption of the Resolution, staff will continue to work with CCCFA, GS and service providers to finalize and execute prepay documents. Staff anticipates the second prepay transaction will be executed later in 2023 following approval by CCCFA’s Board of Directors.
ATTACHMENTS
1. Presentation on Proposed Board Action for Prepay Transaction (Pg. 40)
2. Resolution No. 23-04-047 (Pg. 56)
3. Clean Energy Purchase Contract (Pg. 63)
4. Operational Services Agreement (Pg. 152)
5. White Hills Limited Assignment Agreement (Pg. 157)
6. Form of Limited Assignment Agreement (Pg.172)
7. Letter Agreement re: Limited Assignment Agreements (Pg. 182)
8. PPA Payment Custodial Agreement (Pg. 188)
9. Memorandum of Understanding – CCCFA Prepay (Pg. 204)
10. Preliminary Official Statement (Pg. 206)
11. Professional Services Agreement with MCM (Pg. 331)
12. Legal Services Agreement with Chapman (Pg. 355)
Agenda Page 39 of 570
Item 7: Proposed Clean Energy
Prepayment Transaction
April 6, 2023
Agenda Page 40 of 570
2 Background
• Prepays are well-established financing mechanisms, grounded in the US tax code, that allow municipal utilities and CCAs to leverage their status as issuers of tax-exempt debt to reduce energy costs
• Sixteen municipal prepayment transactions totaling over $9.6 billion have been completed in California since 2006; six transactions have been completed by CCAs since Fall 2021
• At its October 6, 2022 meeting, the Board adopted a Resolution authorizing staff to structure and execute a prepay transaction subject to approved parameters • In February 2023, Staff and prepay service providers successfully issued $1 billion in energy prepayment bonds pursuant to Board direction. This first prepay transaction is expected to provide CPA energy cost savings of $66 million over the next eight years. • In March 2023, Staff began work to prepare a second prepay transaction that would utilize the same structure as in the first prepay transaction • On March 22, 2023, the Finance Committee received an update from staff on the proposed second prepay transaction and supported making a proposal to the full Board of Directors
Agenda Page 41 of 570
3 First Prepay Transaction Summary
• California Community Choice Financing Authority (CCCFA) issued $998,780,000 of bonds on February 15, 2023. The bonds were issued at an average yield of 4.60%. The bonds received a “Green Bonds” designation from Kestrel Verifiers and were rated Baa1 by Moody’s. • Bonds were oversubscribed by 1.6x, attracting 34 bidders. Roughly 2/3 of bids came from major bonds and mutual funds. CPA’s name was known and well-regarded among investors. • CPA has assigned three PPAs into the prepay:
• Geysers geothermal (50 MW)
• Arlington solar + storage (233 MW / 132 MW)
• Resurgence solar + storage (48 MW / 40 MW)
• During the initial eight-year period of the bonds, CPA will recognize energy cost savings of $66.5 million, or roughly $7.8 million annually
Background Continued…
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4 Adopt Resolution No. 23-04-047 that encompasses the following approvals or authorizations:
1. Define the parameters which must be satisfied in order to execute the prepay transaction • Bonds will be limited obligations of CCCFA, not obligations of CPA • Aggregate bond principal will not exceed $1.3 billion • The minimum "Monthly Discount Percentage" (i.e., cost savings) as determined at Initial Pricing Date and future Repricing Dates shall be at least 5% • CCCFA total cost of issuance (TCOI) shall not exceed 1% of the amount of bond proceeds (refer to Slide 9 for detailed breakdown of TCOI)
2. Execution of proposed CPA documents or document forms (described on Slide 7)
3. Direction to CCCFA to make payments out of bond proceeds to service providers for activities required to issue the prepay bonds
The Resolution is substantially similar to the Resolution approved by the Board in October 2022 to support the first prepay transaction and will allow staff to act nimbly to close the second prepay transaction when market conditions are advantageous for CPA Summary of the Proposed Board Action
Agenda Page 43 of 570
5 • Approve contracts with Municipal Capital Markets Group, Inc. (MCM) and Chapman and Cutler LLP (Chapman) to assist CPA with the structuring and eventual closing of the second prepay transaction
• Authorize CPA to utilize Goldman Sachs Group, Inc. (GS) and its wholly-owned subsidiary J.
Aron & Company, LLC (J. Aron) as Underwriter and Prepaid Supplier on the second prepay transaction
• Authorize CPA to select a Funding Recipient in accordance with the parameters described in Board Resolution 23-04-047
• Authorize CPA to utilize CCCFA as the Bond Issuer on the second prepay transaction.
Summary of the Proposed Board Action continued…
Agenda Page 44 of 570
(CPA)
4 5
6 6
Prepayment Transaction Diagram
Initial Issuance and Cash Flows
1. Debt Issuance – CCCFA issues the prepay bonds
2. Prepayment – CCCFA remits net bond proceeds to Prepay LLC in return for 30 years of assigned electricity deliveries
3. Unsecured Loan – Prepay LLC loans net bond proceeds to GS or another Funding Recipient. The Funding Recipient
makes fixed monthly payments to Prepay LLC equal to
expected assigned electricity multiplied by the PPA price of an assigned energy project
Monthly Cash / Energy Flows
4. Assigned PPAs – CPA assigns certain rights and obligations as a Buyer on existing PPAs to J. Aron; J. Aron makes monthly payments to PPA Sellers for assigned delivered energy
5. Electricity Supply – Prepay LLC enters into a long-term agreement to purchase electricity from J. Aron to match assigned electricity quantities/terms
6. Project Participant – CCCFA sells CPA all assigned electricity delivered by Prepay LLC at the discounted prepay price
Prepay LLC/CPA is able to solicit bids
from third-party Funding Recipients and
may select a non-GS party if they offer
greater savings to CPA
Agenda Page 45 of 570
7 The Board Resolution authorizes the execution or approval of the following documents:
1. Clean Energy Purchase Contract – Agreement between CPA and CCCFA to purchase assigned discounted electricity
2. Operational Services Agreement – Agreement between CPA and CCCFA permitting CPA to control various actions of CCCFA relating to project operations
3. Limited Assignment Agreement for White Hills – Agreement between CPA, Mohave County Wind Farm, LLC, and J. Aron governing the assignment of the White Hills PPA
4. Form of Limited Assignment Agreement – Form of agreement between CPA, PPA Sellers, and J.
Aron governing the assignment of existing and future PPAs
5. Letter Agreement re: Limited Assignment Agreement – CPA and J. Aron agree to use the Form of Limited Assignment Agreement for future PPA assignments
6. PPA Payment Custodial Agreement – Provides for creation of a custody account for receipt of payments from J. Aron and CPA to settle monthly PPA Seller invoices
7. Preliminary Official Statement – Describes the Bonds and includes an Appendix with descriptive, operating, and financial information re: CPA; used for marketing the Bonds
8. Memorandum of Understanding with CCCFA – CPA agrees to indemnify CCCFA for rating agency and green bond opinion fees in the event the prepay bonds are not issued Document Summary – April 6, 2023
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8 Selection of Prepay Services Providers
• Staff recommend approval of the following contracts:
• A new contract with MCM to provide financial advisory support, Guaranteed Investment Contract (GIC) broker and QIR services, with total compensation not-to-exceed $380,000 and payable from bond proceeds
• A new contract with Chapman for legal services and advisory support, with total compensation not-to-exceed $200,000 and payable from bond proceeds • Staff recommend that the Board approve GS / J. Aron as the Underwriter and Prepaid Supplier on the second prepay transaction and authorize Staff to select a Funding Recipient • GS has agreed to reduce its underwriter’s discount by 10% relative to the first prepay transaction • Prepay LLC/CPA retain the right to solicit bids for Funding Recipients at Pricing and Repricing Dates. If a 3rd party Funding Recipient offers greater savings than GS, CPA can direct Prepay LLC to select them instead
• Staff plan to authorize GS to utilize a co-managing underwriter on the deal. All potential co-managers on the deal are veteran- or minority-owned investment banks included in the State of California’s syndicate (underwriters that are eligible for appointments on all State and Financing Authority bond sales). Use of a co-manager will not impact CPA’s savings / prepay transaction fees. • Staff recommend that the Board approve CCCFA as the Issuer on the second prepay transaction. CPA joined CCCFA in September 2022 and its CEO currently serves on the CCCFA Board of Directors.
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9 Prepay Cost of Issuance, Service Provider Fees and Expenses Entity Fee Type
Prepay #1 Prepay #2 (1)
Amount % of Bond
Proceeds Amount % of Bond
Proceeds
Goldman
Sachs
Underwriting
Expenses $5,227,649 0.50% $4,538,511 0.45%
Various Prepay Services $1,486,581 0.14% $1,266,581 0.15% Orrick Tax and Bond Counsel $350,000 $350,000
Chapman &
Cutler Prepay Counsel $300,000 $200,000
MCM Financial Advisory and
QIR $460,000 $340,000
Moody’s Bond Rating (Level III
Complexity) $280,000 $280,000
Kestrel Green Bond
Certification $22,000 $22,000
Trustee
Counsel Trustee Counsel $30,000 $30,000
Trustee Trustee $15,750 $15,750
Accountancy
& Misc. $28,831 $28,831
Total Cost of Issuance (TCOI) $6,714,230 0.64% $5,805,092 0.60% • TCOI fees are paid out of bond proceeds. Other
fees for ongoing prepay administration services
(not shown) such as the Prepaid Supplier fee,
transaction fee for GIC broker services, and fees
charged by CCCFA are also paid from bond
proceeds.
• Fee arrangements vary by vendor. In general, the
larger the bond issuance amount, the larger the
TCOI and smaller TCOI in % terms. A
smaller issuance would result in lower TCOI fees
in dollar terms, and higher fees as a % of issuance.
• For prepay #2, Chapman has agreed to reduce its
fee by $100k, MCM has agreed to reduce its fee
by $120k, and GS has agreed to reduce its
underwriter’s discount by 10%, reducing
underwriting expenses by ~$500k
• Chapman and MCM have a fiduciary responsibility
to CPA and are reviewing all prepay
documentation. CPA’s energy contracting counsel,
Clean Energy Counsel, are providing legal review
of the limited assignment agreements.
(1) Example fees for prepay #2 based on a $1.0 billion transaction size, matching prepay #1 Agenda Page 48 of 570
10 Fiscal Impact
• CPA conservatively estimates annual savings of $2 to $5 million on its energy costs as a result of the 2nd prepay transaction.
• Upon a successful bond issuance, the TCOI will be paid by CCCFA out of bond proceeds and not by CPA. Accordingly, there will be no fiscal impact to CPA’s operating expense budget. • In the unlikely event a bond is not issued, the at-risk costs to CPA are approximately $180,000 pursuant to agreements with Moody’s and Kestrel Agenda Page 49 of 570
11 Proposed Board Action
• Adopt Resolution No. 23-04-047 approving parameters under which an energy prepayment transaction can be completed; authorizing and/or approving documents or “form of” documents supporting the prepay transaction; and directing California Community Choice Financing Authority (CCCFA) to make payments to service providers for issuance costs from prepay bond proceeds.
• Approve Professional Services Agreement with Municipal Capital Markets Group, Inc. (“MCM”) with a Not-to-Exceed Amount of $340,000 to be paid from Bond Proceeds for municipal financial advisory, guaranteed investment contract (GIC) broker, and QIR services.
• Approve Legal Services Agreement with Chapman and Cutler, LLP (“Chapman”) with a Not-to-Exceed Amount of $200,000 to be paid from Bond Proceeds for prepay counsel services.
• Approve the selection of GS as the Underwriter and Prepaid Supplier and the selection of CCCFA as the Bond Issuer for the proposed energy prepayment financing and authorize Staff to select a Funding Recipient
Agenda Page 50 of 570
Appendix
Agenda Page 51 of 570
13 • In October 2019, CPA and Mohave County Wind Farm, LLC agreed a 20-year PPA for the 300MW White Hills wind project. The project, developed and operated by NextEra, is located in Mohave County, Arizona and began operating in December 2020.
• The existing White Hills PPA is structured a contract-for-differences (CfD):
• NextEra receives credits from the California Independent Systems Operator (CAISO) associated with energy delivered from project. These credits belong to CPA under the terms of the PPA • NextEra invoices CPA for the difference between a) project energy delivered at the PPA price and b) the CAISO credits received by NextEra for project energy delivered to the CAISO • Under the Limited Assignment Agreement:
• NextEra agrees to schedule Inter-SC Trades (ISTs) to CPA in the CAISO market mirroring the energy schedule from the White Hills project; credits for these ISTs will appear on CPA’s weekly CAISO invoices • NextEra will invoice the Custodian for project energy delivered at PPA contract price, a net settlement of CAISO cost and credits(1), and an interest charge
• The interest charge is designed to offset NextEra’s opportunity costs arising from the trading of ISTs to CPA (1) PPA invoice calculation methodology (for illustration only) Current PPA: PPA Invoice = Energy Delivered (MWh) x PPA Price ($) – Energy Delivered (MWh) x CAISO Price ($) PPA w/ LAA: PPA Invoice = Energy Delivered (MWh) x PPA Price ($) – Energy Delivered (MWh) x CAISO Price ($) - IST Volume (MWh) x CAISO Price + interest payment
White Hills PPA and Proposed LAA
Agenda Page 52 of 570
14 • California Community Choice Financing Authority (CCCFA) (Bond Issuer) • Issues bond; uses bond proceeds to pay Prepay LLC in exchange for a 30-year supply of energy • Delivers energy to CPA in exchange for prepay energy payments under the CEPC • Pays Bond Investors
• Goldman Sachs Group, Inc. or selected 3rd Party (Funding Recipient) • Receives term loan from Prepay LLC for amount of bond proceeds • Makes monthly payments to Prepay LLC allowing it to meet obligations to J. Aron under the EPSSA • J. Aron / Prepay LLC (Prepaid Supplier)
• CPA assigns one or more existing PPAs to J. Aron, which assumes the PPA obligations of the “buyer” • J. Aron delivers energy to Prepay LLC under the EPSSA; Prepay LLC delivers energy to CCCFA under the MPSA • J. Aron makes monthly payments to PPA Seller via Custodial Account for assigned energy • CPA (Project Participant / Purchaser)
• Makes fixed monthly payments to CCCFA / Bond Trustee for prepaid energy • Makes monthly payments to PPA Seller via Custodial Account for non-prepaid energy, unassigned obligations • PPA Sellers
• Receive monthly cash flows from Custodial Account for energy assigned to J. Aron + non-prepaid energy and unassigned obligations
• Service Providers
• Municipal Financial Advisor, Bond and Tax Counsel, CPA Prepay Legal Counsel, Prepay Bond Underwriters • Support the structuring and issuance of a prepay Bond Prepayment Transaction – Entities
Agenda Page 53 of 570
15 • CPA prepay transaction will involve the sale of tax-exempt bonds to bond holders by CCCFA.(1) • CCCFA remits the net bond proceeds to a special purpose entity, Aron Prepay LLC (Prepay LLC), in return for a 30-year supply of electricity pursuant to the Master Power Supply Agreement (MPSA).
• The creation of Prepay LLC provides transparency and market level savings for the initial period of the prepay (5-10 years) as well as at each subsequent interest rate reset which is estimated to occur each 5-10 years over the bond term. Without Prepay LLC, prepay transaction terminates if GS cannot offer minimum savings at reset.
• Prepay LLC lends the net bond proceeds to GS under an unsecured term loan agreement (the Funding Agreement). GS makes monthly payments to Prepay LLC sufficient to allow it to meet its payment obligations under the Electricity Purchase Sale & Service Agreement (EPSSA; see below). GS issues a guaranty to back obligations of Prepay LLC under the MPSA.(2) • J. Aron and Prepay LLC enter into the EPSSA under which Prepay LLC purchases electricity + related products from J. Aron for delivery to CCCFA. J. Aron equitizes Prepay LLC through the Subordinated Term Loan Agreement.
(1) CPA does not issue the bonds. Bond proceeds do not flow to CPA or to renewable energy project developers/owners. CPA has no obligation to repay the bonds. (2) The bonds carry the credit rating of Goldman Sachs Group, Inc. or selected 3rd Party Transaction Summary – Prepay Bond Issuance
Agenda Page 54 of 570
16 • CPA will assign certain rights and obligations under existing PPAs with PPA Sellers to J. Aron via LAAs • Under the LAAs, the PPA Sellers will deliver assigned renewable energy to J. Aron and J. Aron assumes the obligation to pay the PPA Sellers for the assigned energy • Title to the renewable energy passes instantaneously from PPA Seller to J. Aron to Prepay LLC to CCCFA to CPA at the energy delivery point
• CPA retains other rights and unassigned payment obligations under the PPAs • CPA and CCCFA enter into the Clean Energy Purchase Contract (CEPC) under which CPA purchases assigned electricity + related products from CCCFA at a discounted price. This is the source of CPA’s savings. CCCFA uses CPA’s payments to service debt owed to bond holders. • CPA is responsible for assigning sufficient electricity into the prepay transaction via the LAAs • If an LAA terminates or expires, CPA will designate another PPA Seller for the term of the CEPC • PPA Sellers continue to provide a single monthly invoice for energy and related costs. Monthly payment obligations to the PPA Sellers are split between CPA and J. Aron as follows:
• J. Aron sells assigned energy to Prepay LLC under the EPSSA, Prepay LLC sells energy to CCCFA under the MPSA, and CCCFA sells energy to CPA under the CEPC • J. Aron pays the PPA Seller for assigned energy at the PPA price. CPA pays the PPA Seller for any unassigned obligations under the PPA.
• Settlement of payments are set forth in the PPA Payment Custodial Agreement.
Transaction Summary – PPA Assignments and Settlement
Agenda Page 55 of 570
RESO NO. 23-04-047
RESOLUTION NO. 23-04-047
RESOLUTION OF THE BOARD OF DIRECTORS OF CLEAN
POWER ALLIANCE OF SOUTHERN CALIFORNIA (CLEAN
POWER ALLIANCE) AUTHORIZING THE EXECUTION AND
DELIVERY OF A CLEAN ENERGY PURCHASE CONTRACT AND
CERTAIN OTHER DOCUMENTS IN CONNECTION WITH THE
ISSUANCE OF THE CALIFORNIA COMMUNITY CHOICE
FINANCING AUTHORITY (CCCFA) CLEAN ENERGY PROJECT
REVENUE BONDS; AND CERTAIN OTHER ACTIONS REQUIRED
TO ENSURE THE REDUCTION IN THE COSTS OF RENEWABLE
ENERGY THEREWITH
THE BOARD OF DIRECTORS OF CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA DOES HEREBY FIND, RESOLVE, AND ORDER AS FOLLOWS:
WHEREAS, Clean Power Alliance of Southern California (“Clean Power Alliance” or “CPA”) was formed on June 27, 2017, under the provisions of the Joint Exercise Powers Act of the State of California, Government Code section 6500 et seq. (the “JPA Law”);
WHEREAS, Clean Power Alliance is duly organized, validly existing, and in good standing under and by virtue of the laws of the State of California, is duly authorized to transact business, having obtained all necessary filings, governmental licenses and approvals in the State of California, and has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage;
WHEREAS, Clean Power Alliance maintains an office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, and this is the principal office at which it keeps its books and records;
WHEREAS, Clean Power Alliance is a community choice aggregator (as defined in Section 331.1 of the Public Utilities Code of the State of California (the “Public Utilities Code”), and is a public agency (as defined in the JPA Law) that has implemented a CCA program pursuant to Section 366.2 of the Public Utilities Code, and possesses the power to purchase and sell electric energy and enter into related contracts for such purposes; WHEREAS, Clean Power Alliance, acting pursuant to the JPA Law, may enter into a joint exercise of powers agreement with one or more other public agencies pursuant to which such contracting parties may jointly exercise any power common to them and, pursuant to Government Code Section 6588, to exercise certain additional powers; WHEREAS, pursuant to the provisions of the JPA Law, Clean Power Alliance and certain other California community choice aggregators entered into a joint powers agreement (the “Joint Powers Agreement”) pursuant to which the CCCFA (the “Issuer”) was organized for the purpose, among other things, of entering into contracts and issuing Agenda Page 56 of 570
RESO NO. 23-04-047
bonds to assist community choice aggregators, including Clean Power Alliance, in financing the acquisition of supplies of clean energy;
WHEREAS, the Issuer is authorized by its Joint Powers Agreement to acquire supplies of clean energy and to issue revenue bonds to finance the cost of acquisition of such supplies, and is vested with all powers necessary to accomplish the purposes for which it was created;
WHEREAS, Clean Power Alliance has determined that it is desirable to acquire a long-term supply of clean energy from the Issuer;
WHEREAS, Clean Power Alliance is requesting the Issuer to agree to purchase certain quantities of clean energy from Aron Energy Prepay 16 LLC, a Delaware limited liability company (“Prepay LLC”) on a prepaid basis (the “Project”) and to sell such clean energy to Clean Power Alliance, as contemplated herein; WHEREAS, Clean Power Alliance is requesting that the Issuer finance the costs of the Project with the proceeds of its clean energy project revenue bonds, with a Series designation determined by the Issuer based on the timing and sequence of issuance (the “Bonds”);
WHEREAS, Clean Power Alliance has determined to authorize the representatives of Clean Power Alliance to take all necessary action to accomplish the purchase of clean energy from the Issuer and to assist the Issuer in the issuance, sale and delivery of the Bonds; and
WHEREAS, there have been submitted to this meeting for approval forms of the following agreements to which Clean Power Alliance is a party (collectively, the “CPA Documents”):
1. Clean Energy Purchase Contract between Clean Power Alliance and the Issuer;
2. Custodial Agreement by and among Clean Power Alliance, J. Aron & Company LLC, a New York limited liability company (“J. Aron”), Prepay LLC, the Issuer, and a custodial bank agreed to by the Issuer and Clean Power Alliance;
3. Limited Assignment Agreement, by and among Clean Power Alliance, Mohave County Wind Farm, LLC, and J. Aron;
4. Form of Limited Assignment Agreement, by and among Clean Power Alliance, the counterparty to the power purchase agreements described therein, and J. Aron;
5. Letter Agreement between Clean Power Alliance and J. Aron regarding matters relating to Limited Assignment Agreements;
6. Operational Services Agreement relating to the Project, by and between Clean Power Alliance and the Issuer; and
7. Memorandum of Understanding between Clean Power Alliance and the Issuer indemnifying Issuer against certain ratings fees.
WHEREAS, there have also been submitted to this meeting forms of the following additional documents relating to the Project:
Agenda Page 57 of 570
RESO NO. 23-04-047
1. Preliminary Official Statement (the “Preliminary Official Statement”), to be used in connection with the offering and sale of the Bonds (together with the CPA Documents, the “Project Documents”);
NOW, THEREFORE, IT IS HEREBY DETERMINED, AFFIRMED, AND
ORDERED BY THE BOARD OF DIRECTORS OF THE CLEAN POWER ALLIANCE as follows:
Section 1. AUTHORIZED REPRESENTATIVES. The following named individuals are the authorized representatives of Clean Power Alliance with the respective titles specified below (collectively referred to as “Authorized Representatives” and individually referred to as an “Authorized Representative”):
NAMES TITLES
Julian Gold Chair of the Board
Ted Bardacke Chief Executive Officer
David McNeil Chief Financial Officer
Matthew Langer Chief Operating Officer
Nancy Whang General Counsel
Section 2. CPA Documents. The proposed forms of the CPA Documents, attached hereto as Exhibit A, are hereby approved. The form of Limited Assignment Agreement may be used, in a substantially similar form, for assignments of the initial or any additional Clean Power Alliance power purchase agreements, as needed to maintain the transactions approved hereby, and any such Limited Assignment Agreements shall be included in the CPA Documents are hereby approved. Subject to the parameters set forth in Section 5 of this Resolution, either the Chair of the Board, Chief Executive Officer, Chief Operations Officer, the Chief Financial Officer, or the General Counsel (each an “Authorized Representative”) is hereby authorized and directed, for and on behalf of Clean Power Alliance, to execute and deliver the CPA Documents in substantially similar form, with such changes and insertions therein as the Authorized Representatives executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 3. Preliminary Official Statement. The proposed form of the Preliminary Official Statement, attached hereto as Exhibit B, is hereby approved. The form of Preliminary Official Statement may be used, in a substantially similar form, as needed to maintain the transactions approved hereby. Any Authorized Representative is hereby authorized and directed, for and on behalf of Clean Power Alliance, to execute and deliver a certificate as to the information regarding Clean Power Alliance contained therein and in the final version of the Official Statement, with such changes and insertions therein as the Authorized Representative approving the same may deem necessary or appropriate. Subject to approval by the Issuer, Clean Power Alliance hereby authorizes the distribution of the Preliminary Official Statement to persons who may be interested in the purchase of the Bonds, and the delivery of the Official Statement in final form to the purchasers of the Bonds, in each case with such changes as may be approved as aforesaid.
Agenda Page 58 of 570
RESO NO. 23-04-047
Section 4. Actions Authorized. The Authorized Representatives, each acting alone, are hereby authorized and directed, for and in the name and on behalf of Clean Power Alliance, to execute and deliver any and all documents, including, without limitation, any tax certificate relating to its expected use of the energy to be purchased by it from the Project, any continuing disclosure certificate or similar agreement required for the offering or sale of the Bonds, and any and all closing certificates to be executed in connection with the issuance of the Bonds and to take any and all actions which may be necessary or advisable, in their discretion, to effectuate the actions which Clean Power Alliance has approved in this Resolution, for the issuance, sale and delivery of the Bonds, and to consummate by Clean Power Alliance the transactions contemplated by the Clean Power Alliance. Documents approved hereby and the other Project Documents presented to the Board herewith, including any subsequent amendments, waivers or consents entered into or given under or in accordance with such documents.
Section 5. Transaction Parameters. The approvals provided for herein shall be subject to the following parameters:
(a) the Bonds will not be obligations of Clean Power Alliance, but will be limited obligations of the Issuer payable solely from the revenues and other amounts pledged thereto, including amounts payable by Clean Power Alliance under the Clean Energy Purchase Contract;
(b) the aggregate principal amount of the Bonds shall not exceed $1,300,000,000;
(c) the “Monthly Discount Percentage” as provided for in the Clean Energy Purchase Contract shall be at least 5%; and
(d) CCCFA total cost of issuance including all underwriting, legal and consultant fees will not exceed 1.00% of the amount of the bond proceeds.
Section 6. Execution and delivery of the CPA Documents by an Authorized Representative shall be conclusive evidence that the parameters set forth in Section 5 have been met, and all actions heretofore taken by the Authorized Representatives with respect to the issuance of the Bonds are hereby ratified, confirmed, and approved.
Section 7. If Section 5 and Section 6 listed herein have been met, an Authorized Representative may direct CCCFA to make payments to vendors that provided professional services to CPA to complete the CPA Documents and ultimately the issuance of the bonds. These professional services include legal counsel, bond counsel, tax counsel, municipal financial advisor, swap advisor, trustee and trustee counsel, underwriter of the bonds, underwriter’s counsel, and any other vendor required to complete the issuance of the bonds. Payment to these vendors is considered a cost of issuance and will be paid by CCCFA out of the proceeds of the sale of the Bonds.
IT IS HEREBY FURTHER DETERMINED AND ORDERED that the Authorized Representatives are duly elected, appointed, or employed by or for Clean Power Alliance, as the case may be. This Resolution now stands of record on the books of Clean Power Agenda Page 59 of 570
RESO NO. 23-04-047
Alliance, is in full force and effect, and has not been modified or revoked in any manner whatsoever.
IT IS HEREBY FURTHER DETERMINED AND ORDERED that any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved.
IT IS HEREBY FURTHER DETERMINED AND ORDERED that this Resolution shall take effect upon its passage, shall be continuing and shall remain in full force and effect unless and until expressly revoked by further resolution of the Board of Directors.
ADOPTED AND APPROVED this ____ day of __________ 2023.
____________________________
Julian Gold, Chair
ATTEST:
_________________________
Gabriela Monzon, Secretary
Agenda Page 60 of 570
RESO NO. 23-04-047
EXHIBIT A
CPA Documents
(see attached)
Agenda Page 61 of 570
RESO NO. 23-04-047
EXHIBIT B
Additional Project Documents
(see attached)
Agenda Page 62 of 570
SM Draft 20 March 2023
CLEAN ENERGY PURCHASE CONTRACT
between
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
and
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
Dated as of [_____], 2023
Agenda Page 63 of 570
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ARTICLE I. DEFINITIONS ........................................................................................................2 Section 1.1 Defined Terms ................................................................................................2 Section 1.2 Definitions; Interpretation .............................................................................12 ARTICLE II. DELIVERY PERIOD; NATURE OF CLEAN ENERGY PROJECT; CONDITION PRECEDENT ........................................................................13 Section 2.1 Delivery Period .............................................................................................13 Section 2.2 Nature of Clean Energy Project ....................................................................13 Section 2.3 Condition Precedent ......................................................................................13 Section 2.4 Pledge of this Agreement ..............................................................................13 ARTICLE III. SALE AND PURCHASE; PRICING ...............................................................13 Section 3.1 Sale and Purchase of Product ........................................................................13 Section 3.2 Payments .......................................................................................................13 Section 3.3 Limited Obligation to Take Base Quantities ................................................14 Section 3.4 Annual Refund ..............................................................................................14 Section 3.5 Reset Period Remarketing.............................................................................14 ARTICLE IV. FAILURE TO SCHEDULE PRODUCT .........................................................15 Section 4.1 Issuer’s Failure to Schedule Base Quantity (Not Due to Force Majeure) ........................................................................................................15 Section 4.2 Purchaser’s Failure to Schedule or Take Base Quantities (Not Due to Force Majeure) ..............................................................................................16 Section 4.3 Failure to Deliver or Take Due to Force Majeure.........................................16 Section 4.4 Assigned Product ..........................................................................................17 Section 4.5 Sole Remedies ...............................................................................................17 ARTICLE V. DELIVERY POINTS; SCHEDULING .............................................................17 Section 5.1 Delivery Points..............................................................................................17 Section 5.2 Transmission and Scheduling .......................................................................17 Section 5.3 Title and Risk of Loss ...................................................................................18 Section 5.4 PCC1 Product and .........................................................................................18 Agenda Page 64 of 570
-ii-Section 5.5 Communications Protocol .............................................................................21 Section 5.6 Deliveries within CAISO or another Balancing Authority ...........................21 Section 5.7 Assigned Products .........................................................................................21 ARTICLE VI. ASSIGNMENT OF POWER PURCHASE AGREEMENTS ........................21 Section 6.1 Assignments Generally .................................................................................21 Section 6.2 Failure to Obtain ...........................................................................................22 Section 6.3 Adjustments to Base Quantities ....................................................................23 Section 6.4 J. Aron Non-Payment to APC Party. ............................................................23 ARTICLE VII. USE OF PRODUCT .........................................................................................23 Section 7.1 Tax Exempt Status of the Bonds ...................................................................23 Section 7.2 Priority Products ...........................................................................................23 Section 7.3 Assistance with Sales to Third Parties ..........................................................24 Section 7.4 Qualifying Use ..............................................................................................24 Section 7.5 Remediation ..................................................................................................24 Section 7.6 Remediation; Ledger Entries; Redemption ...................................................25 ARTICLE VIII. REPRESENTATIONS AND WARRANTIES; ADDITIONAL COVENANTS ................................................................................................26 Section 8.1 Representations and Warranties of Issuer .....................................................26 Section 8.2 Warranty of Title...........................................................................................27 Section 8.3 Disclaimer of Warranties ..............................................................................27 Section 8.4 Continuing Disclosure ..................................................................................27 ARTICLE IX. TAXES.................................................................................................................28 ARTICLE X. JURISDICTION; WAIVER OF JURY TRIAL ...............................................28 Section 10.1 Consent to Jurisdiction ..................................................................................28 Section 10.2 Waiver of Jury Trial ......................................................................................28 ARTICLE XI. FORCE MAJEURE ...........................................................................................29 Section 11.1 Applicability of Force Majeure .....................................................................29 Section 11.2 Settlement of Labor Disputes........................................................................29 Agenda Page 65 of 570
-iii-ARTICLE XII. GOVERNMENTAL RULES AND REGULATIONS ...................................29 Section 12.1 Compliance with Laws .................................................................................29 Section 12.2 Contests .........................................................................................................30 Section 12.3 Defense of Agreement ..................................................................................30 ARTICLE XIII. ASSIGNMENT ................................................................................................30 ARTICLE XIV. PAYMENTS.....................................................................................................30 Section 14.1 Monthly Statements ......................................................................................30 Section 14.2 Payments .......................................................................................................32 Section 14.3 Payment of Disputed Amounts .....................................................................32 Section 14.4 Late Payment ................................................................................................32 Section 14.5 Audit; Adjustments .......................................................................................32 Section 14.6 Netting; No Set-Off.......................................................................................33 Section 14.7 Rate Covenant ...............................................................................................33 ARTICLE XV. [RESERVED] ....................................................................................................34 ARTICLE XVI. NOTICES .........................................................................................................34 ARTICLE XVII. DEFAULT; REMEDIES; TERMINATION ...............................................34 Section 17.1 Issuer Default ................................................................................................34 Section 17.2 Purchaser Default ..........................................................................................34 Section 17.3 Remedies Upon Default ................................................................................35 Section 17.4 Termination of Master Power Supply Agreement ........................................36 Section 17.5 Limitation on Damages .................................................................................37 ARTICLE XVIII. MISCELLANEOUS .....................................................................................37 Section 18.1 Indemnification Procedure. ...........................................................................37 Section 18.2 Deliveries ......................................................................................................38 Section 18.3 Entirety; Amendments ..................................................................................38 Section 18.4 Governing Law .............................................................................................38 Section 18.5 Non-Waiver...................................................................................................39 Section 18.6 Severability ...................................................................................................39 Section 18.7 Exhibits .........................................................................................................39 Agenda Page 66 of 570
-iv-Section 18.8 Winding Up Arrangements ...........................................................................39 Section 18.9 Relationship of Parties ..................................................................................39 Section 18.10 Immunity .......................................................................................................39 Section 18.11 Rates and Indices ..........................................................................................39 Section 18.12 Limitation of Liability...................................................................................39 Section 18.13 Counterparts ..................................................................................................40 Section 18.14 Third Party Beneficiaries; Rights of Trustee ................................................40 Section 18.15 No Recourse to Members of Purchaser ........................................................40 Section 18.16 Waiver of Defenses .......................................................................................41 Section 18.17 Rate Changes ................................................................................................41 Exhibit A-1 — Base Quantities; Base Delivery Point; Commodity Reference Prices Exhibit A-2 — Initial Assigned Rights and Obligations
Exhibit B — Notices
Exhibit C — Remarketing Election Notice
Exhibit D — Federal Tax Certificate
Exhibit E — Purchaser’s Legal Opinion
Exhibit F — Assignment of Assignable Power Contracts
Exhibit G — Communications Protocol
Exhibit H — Pricing and Other Terms
Exhibit I — Closing Certificate
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CLEAN ENERGY PURCHASE CONTRACT
This Clean Energy Purchase Contract (this “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 Clean Power Alliance of Southern California, a California joint powers authority (“Purchaser”).
W I T N E S S E T H:
WHEREAS, Issuer has planned and developed a project to acquire long-term supplies of Product from Aron Energy Prepay 16 LLC, a Delaware limited liability company (“Prepay LLC”) and a wholly-owned subsidiary of The Goldman Sachs Group, Inc., pursuant to a Master Power Supply Agreement, dated as of [_____], 2023 (the “Master Power Supply Agreement”), to meet a portion of the Product supply requirements of Purchaser through a discounted clean energy purchase product (the “Clean Energy Project”); WHEREAS, Purchaser desires to enter into an agreement with Issuer for the purchase of Product acquired by the Issuer under the Clean Energy Project; WHEREAS, Issuer will finance its payment for Product under, and the other costs of, the Clean Energy Project by issuing Bonds;
WHEREAS, Purchaser is a joint powers authority and a community choice aggregator, duly organized, validly existing and in good standing under the laws of the State of California and the rules, regulations and orders of the California Public Utilities Commission, and is qualified to conduct business in each jurisdiction of the Joint Powers Agreement members for the transmission, distribution, sale, and delivery of Product to retail electric consumers within its service area;
WHEREAS, Purchaser is agreeable to purchasing a portion of its Product requirements from Issuer under the terms and conditions set forth in this Agreement and Issuer is agreeable to selling to Purchaser such supplies of Product under the terms and conditions set forth in this Agreement;
WHEREAS, concurrently herewith, Purchaser has assigned to J. Aron (as defined below) certain Assigned Rights and Obligations (as defined below), including the right to receive Assigned Product (as defined below), which Assigned Product will be resold to Prepay LLC under the Electricity Sale and Service Agreement, then resold to Issuer under the Master Power Supply Agreement and then resold to Purchaser hereunder; and
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WHEREAS, as a condition precedent to the effectiveness of the Parties’ obligations under this Agreement, Issuer shall have entered into the Master Power Supply Agreement and shall have issued the Bonds.
NOW, THEREFORE, in consideration of the premises above and the mutual covenants and agreements herein set forth, Issuer and Purchaser (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 (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:
“Administrative Fee” means the amount per MWh specified as such in Exhibit H. “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. “Alternate Delivery Point” has the meaning specified in Section 5.1(a). “Annual Refund” means the annual refund, if any, to be provided to the Purchaser and calculated pursuant to the procedures specified in Section 3.4. “APC Contract Price” has the meaning specified in Exhibit F. “APC Party” has the meaning specified in Exhibit F.
“Applicable Project” has the meaning specified in Exhibit F. “Assignable Power Contract” has the meaning specified in Section 6.1. “Assigned Delivery Point” means, with respect to any Assigned Energy, the Assigned Delivery Point as set forth in the applicable Assignment Schedule for such Assigned Energy.
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“Assigned Discounted Product” means, for any Month, the lesser of (i) the total quantity of Assigned Product delivered hereunder in such Month and (ii) the aggregate Assigned Prepay Quantities for such Month.
“Assigned Energy” means any Energy, including Energy associated with PCC1 Product and Long-Term PCC1 Product, to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Assigned PAYGO Product” means, for any Month, the amount, if any, by which the total quantity of Assigned Product delivered hereunder in such Month exceeds the aggregate Assigned Discounted Product for such Month.
“Assigned PPA” means any power purchase agreement that is assigned pursuant to an Assignment Agreement in accordance with the terms of this Agreement. “Assigned Prepay Quantity” has the meaning specified in Exhibit F. “Assigned Prepay Value” means, for any Month and each Assignment Schedule, the Assigned Prepay Quantity for such Month multiplied by the applicable APC Contract Price. “Assigned Product” means, as applicable, PCC1 Product, Long-Term PCC1 Product, Assigned Energy, Assigned RECs and any other Product included on an Assignment Schedule, subject to the limitations for such other Product set forth in Exhibit F. “Assigned Quantity” means, with respect to each Month during an Assignment Period, the quantity of Assigned Energy delivered in connection with the Assigned Product during such Month.
“Assigned RECs” means any RECs associated with PCC1 Product or Long-Term PCC1 Product to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Assigned Rights and Obligations” has the meaning specified in Section 6.1. “Assignment Agreement” means, for any Assigned Rights and Obligations, an agreement among Purchaser, J. Aron and the APC Party, approved by Issuer, in the form attached hereto as Annex II to Exhibit F (with such changes thereto as may be mutually agreed upon by Purchaser, J. Aron, the APC Party, and Issuer, each in its sole discretion). “Assignment Period” for any Assigned Rights and Obligations has the meaning specified in the applicable Assignment Agreement.
“Assignment Schedule” has the meaning specified in Exhibit F. “Available Discount Percentage” has the meaning specified in the Re-Pricing Agreement. For the avoidance of doubt, the “Available Discount Percentage” under the Re-Pricing Agenda Page 70 of 570
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Agreement includes the Monthly Discount Percentage, as well as additional discounting expected to be made available through the Annual Refund.
“Balancing Authority” has the meaning specified in the CAISO Tariff. “Base Delivery Point” has the meaning specified in Section 5.1(a). “Base Product” means Firm (LD) Energy delivered to the Base Delivery Point. “Base Quantity” means, with respect to each Delivery Hour during the Delivery Period, the Base Unadjusted Quantity for such Delivery Hour less the Base Quantity Reduction for such Delivery Hour, each as set forth on Exhibit A-1, as Exhibit A-1 may be revised pursuant to Article VI.
“Base Quantity Reduction” means, with respect to each Delivery Hour during the Delivery Period, the “Base Quantity Reduction” of Base Product (in MWh) set forth for such Delivery Hour on Exhibit A-1, as Exhibit A-1 may be revised pursuant to Article VI. “Base Unadjusted Quantity” means, with respect to each Delivery Hour during the Delivery Period, the “Base Unadjusted Quantity” (in MWh) set forth for such Delivery Hour on Exhibit A-1.
“Bond Closing Date” means the date on which Bonds are first 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, 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 generally in either New York, New York or the State of California are authorized or required by Law to close, or (iv) any day excluded from “Business Day” as therein defined, 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.
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“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.
“CEC” means California’s State Energy Resources Conservation and Development Commission, also known as the California Energy Commission, and any successor agency thereto. “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. “Clean Energy Project” has the meaning specified in the recitals. “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. “Commodity Reference Price” means either (i) the Day-Ahead Market Price, or (ii) the Real-Time Market Price, as applicable.
“Contract Price” means (i) with respect to the Base Product and any Delivery Hour, (A) the Day-Ahead Market Price for such Delivery Hour at the Base Delivery Point less (B) the product of the Fixed Price multiplied by the Monthly Discount Percentage, (ii) with respect to Assigned Discounted Product, (A) the applicable APC Contract Price(s) multiplied by (B) the result of 100% less the Monthly Discount Percentage, and (iii) with respect to Assigned PAYGO Product, the APC Contract Price(s).
“CPA Custodial Agreement” means that certain Custodial Agreement, dated as of the Bond Closing Date, by and among Purchaser, Issuer, J. Aron, Prepay LLC and the CPA Custodian.
“CPA Custodian” means U.S. Bank Trust Company, National Association, a national banking association.
“Day” means each period of 24 consecutive Hours commencing at the Hour ending at 01:00 (LPT) through the Hour ending at 24:00 (LPT).
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“Day-Ahead Market Price” has the meaning specified on Exhibit A-1 for each Delivery Point.
“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 Hour” has the meaning specified in Exhibit A-1. “Delivery Period” has the meaning specified in Exhibit H. “Delivery Point” means the Base Delivery Point or an Assigned Delivery Point, as applicable.
“Disqualified Sale Proceeds” has the meaning specified in Section 7.6. “Disqualified Sale Units” has the meaning specified in Section 7.6. “Electricity Sale and Service Agreement” has the meaning specified in the Master Power Supply Agreement.
“Eligible Renewable Energy Resource” has the meaning set forth in California Public Utilities Code Section 399.12(e) and California Public Resources Code Section 25741(a), as either code provision is amended or supplemented from time to time. “Energy” means three-phase, 60-cycle alternating current electric energy, expressed in megawatt hours.
“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 any Assignment Period or J. Aron EPS Energy Period. “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 or any successor thereto.
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“Firm (LD)” means, with respect to a Party’s obligation to sell and deliver or purchase and receive, that such Party’s liability for the failure to meet such obligation shall only be excused to the extent that, and for the period during which, such performance is prevented by Force Majeure, and that in the absence of Force Majeure, the Party to which performance of such obligation is owed shall be entitled to receive from the Party which failed to deliver/receive an amount determined pursuant to Article IV.
“Fixed Price” means $[____]/MWh, which is the fixed price under the Buyer Swap (as defined in the Master Power Supply Agreement).
“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 date this Agreement was executed, 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; provided that, for the avoidance of doubt, the declaration of “Force Majeure” by an APC Party under a PPA (as defined in an Assignment Agreement) shall constitute Force Majeure hereunder. Force Majeure shall include, provided the criteria in the first sentence are met, riot, insurrection, war, labor dispute, natural disaster, vandalism, terrorism, sabotage. Force Majeure shall not be based on (i) the loss of Purchaser’s markets; (ii) Purchaser’s inability economically to use or resell the Product purchased hereunder; (iii) the delay, loss or failure of Issuer’s supply; or (iv) Issuer’s ability to sell the Product 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 (x) such Party has contracted for firm transmission with a Transmission Provider for the Product to be delivered to or received at the applicable Delivery Point and (y) 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 a Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that a Force Majeure as defined in the first sentence hereof has occurred. Force Majeure invoked by Prepay LLC under the Master Power Supply Agreement shall constitute Force Majeure in respect of Issuer hereunder to the extent the conditions set forth above have been satisfied with respect to Prepay LLC. Notwithstanding the foregoing or anything to the contrary herein, to the extent that an Assignment Agreement is terminated early, such termination shall constitute Force Majeure with respect to Issuer hereunder until the earlier of (I) the commencement of an “Assignment Period” under a replacement Assignment Agreement, (II) the commencement of a J. Aron EPS Energy Period or (III) the end of the first 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, registration, filing, giving of notice to, decree, declaration of or regulation by any Government Agency relating to the valid execution, Agenda Page 74 of 570
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delivery or performance of this Agreement or the consummation of any of the transactions contemplated hereby.
“Hour” means the 60-minute period commencing at 00:00 (LPT) on first Day of the Delivery Period and ending at 01:00 (LPT) on the first Day of the Delivery Period, and each 60-minute interval thereafter.
“Initial Assigned Rights and Obligations” means the Assigned Rights and Obligations set forth in Exhibit A-2 hereto as of the date hereof. “Initial Reset Period” has the meaning specified in Exhibit H. “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. “ISTs” has the meaning specified in Section 5.1(a).
“J. Aron” means J. Aron & Company LLC, a New York limited liability company, and its permitted successors and assigns under an Assignment Agreement. “J. Aron EPS Energy Period” has the meaning specified in Section 6.1(c). “J. Aron Fixed Payment” has the meaning specified in the CPA Custodial Agreement.
“J. Aron Prepay Payment” has the meaning specified in the CPA Custodial Agreement.
“Joint Powers Act” means the Joint Exercise of Powers Act of the State of California (Government Code Section 6500 et seq.).
“Joint Powers Agreement” means that certain Joint Powers Agreement dated December 19, 2008, as amended from time to time, under which Purchaser is organized as a Joint Powers Authority in accordance with the Joint Powers Act. “Law” means any statute, law, rule or regulation or any written judicial or administrative decision, ruling or interpretation with respect thereto or 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 during the term of this Agreement. “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 J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
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“LPT” means the local prevailing time then in effect in the State of California. “Mandatory Purchase Date” has the meaning specified in the Bond Indenture. “Master Power Supply Agreement” has the meaning specified in the recitals. “Minimum Discount Percentage” has the meaning specified in Exhibit H. “Month” means a period beginning on the first Day of a calendar month and ending immediately prior to the commencement of the first Day of the next calendar month. “Monthly Discount Percentage” has the meaning specified in Exhibit H. “Municipal Utility” means any Person that (i) is a “governmental person” as defined in the implementing regulations under Section 141 of the Code and any successor provision, (ii) owns either or both a gas distribution utility or an electric distribution utility (or provides natural gas or electricity at wholesale to, or that is sold to entities that provide natural gas or electricity at wholesale to, governmental Persons that own such utilities), and (iii) agrees in writing to use the gas or electricity purchased by it (or cause such gas or electricity 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 Products” means any Products that are not Priority Products. “Party” has the meaning specified in the preamble.
“PCC1 Product” means bundled renewable energy and RECs meeting the requirements of Portfolio Content Category 1 to be delivered to J. Aron or any successor thereto pursuant to any Assigned Rights and Obligations.
“Person” means any individual, corporation, partnership, joint venture, trust, unincorporated organization, or Government Agency.
“Portfolio Content Category 1” or “PCC1” 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 3.5(b). “Prepay LLC” has the meaning stated in the recitals.
“Primary Delivery Point” has the meaning specified in Section 5.1(a).
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“Priority Products” means the Base Quantity and Assigned Products to be purchased by Purchaser under this Agreement, together with Products that (i) Purchaser is obligated to take under a long-term agreement, which Products either have been purchased by Purchaser or a joint action agency pursuant to a long-term prepaid power purchase agreement using the proceeds of bonds, notes, or other obligations, the interest on which is excluded from income for federal income tax purposes, or (ii) with respect to Energy, Energy that is generated using capacity that was constructed using the proceeds of bonds, notes, or other obligations, the interest on which is excluded from income for federal income tax purposes (provided that, for the avoidance of doubt, Priority Products 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). “Product” means Energy and, to the extent included on an Assignment Schedule, associated RECs or other products related to the foregoing; provided that the inclusion of any Product on an Assignment Schedule is subject to the limitation set forth in Exhibit F. “Purchaser” has the meaning specified in the preamble.
“Purchaser Default” has the meaning specified in Section 17.2. “Qualifying Use Requirements” means, with respect to any Product delivered under this Agreement, such Product 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.
“Re-Pricing Agreement” means the Re-Pricing Agreement, dated as of the Bond Closing Date (as defined in the Master Power Supply Agreement), by and between Prepay LLC and Issuer.
“Real-Time Market Price” has the meaning specified on Exhibit A-1 for each Delivery Point.
“Remarketing Election Deadline” means, for any Reset Period, the last date and time by which the Purchaser may provide a Remarketing Election Notice as set forth in the applicable Reset Period Notice.
“Remarketing Election Notice” has the meaning specified in Section 3.5(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.
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“Replacement Assigned Rights and Obligations” means any Assigned Rights and Obligations other than the Initial Assigned Rights and Obligations. “Replacement Price” means, with respect to any Shortfall Quantity of Base Quantities, the price at which Purchaser, acting in a Commercially Reasonable manner, purchases at the applicable Delivery Point Replacement Product for such Shortfall Quantity, plus (i) costs reasonably incurred by Purchaser in purchasing Replacement Product, and (ii) additional transmission charges, if any, reasonably incurred by Purchaser to the applicable Delivery Point, or at Purchaser’s option, the market price at the Delivery Point for such Product not delivered as determined by Purchaser in a Commercially Reasonable manner. The Replacement Price for any Shortfall Quantity shall not include any administrative or other internal costs incurred by Purchaser and shall be limited to a price that is Commercially Reasonable with respect to the timing and manner of purchase. In no event shall the Replacement Price include any penalties, ratcheted demand or similar charges, nor shall Purchaser be required to utilize or change its utilization of its owned or controlled assets or market positions to minimize Issuer’s liability. “Replacement Product” means any Energy purchased by Purchaser to replace any Shortfall Quantity at the Delivery Point where such Shortfall Quantity occurred; provided that such Energy is purchased for delivery in the Delivery Hour to which such Shortfall Quantity relates.
“Reset Period” means each “Reset Period” under the Re-Pricing Agreement. “Reset Period Notice” has the meaning specified in Section 3.5(a). “RPS Law” means the California Renewable Energy Resources Act, including the California Renewables Portfolio Standard Program, Article 16 of Chapter 2.3, Division 1 of the California Public Utilities Code, as implemented and amended from time to time, and any successor Law.
“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 and type of Product to be delivered during any given portion of the Delivery Period at a specified Delivery Point. “Shortfall Quantity” has the meaning specified in Section 4.1(a). “Transmission Provider” means any entity or entities transmitting or transporting the Product on behalf of Issuer or Purchaser to or from the Delivery Point. “Trustee” means U.S. Bank Trust Company, National Association, a national banking association, and its successors as trustee under the Bond Indenture. “Utility Revenues” means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of Purchaser’s electric system, including, without limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges, or other moneys derived by the Purchaser from the sale, furnishing and supplying of the electric capacity or energy or other Agenda Page 78 of 570
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services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Purchaser’s electric system, (2) the earnings on and income derived from the investment of such income, rents, rates, fees, charges, or other moneys to the extent that the use of such earnings and income is limited to Purchaser’s electric system by or pursuant to law, (3) deferred revenues and moneys maintained in the Purchaser’s operating reserve fund and (4) such other income, charges, revenue or moneys maintained in reserves as the Purchaser may specify in a written order of the Purchaser filed with the Issuer, but excluding (A) in all cases customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the Purchaser; and (B) such other income, charges, revenue or moneys as the Purchaser may specify in a written order of the Purchaser filed with the Issuer, provided that such written order of the Purchaser confirms that, following the filing of such written order of the Purchaser, (i) the requirements of Section 14.7 shall be satisfied; and (ii) the income, charges, revenue or moneys specified in such written order of the Purchaser shall be accounted for separately from the “Utility Revenues” as defined herein “Voided Remarketing Election Notice” has the meaning specified in Section 3.5(b). “Western EIM” has the meaning ascribed to “Energy Imbalance Market (EIM)” under the CAISO Tariff.
“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 broadest scope of such general statement, term or matter.
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.
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ARTICLE II.
DELIVERY PERIOD; NATURE OF CLEAN ENERGY PROJECT; CONDITION
PRECEDENT
Section 2.1 Delivery Period. Subject to Section 2.3, delivery of Product by Issuer to Purchaser shall commence at the beginning of the Delivery Period and, except for any Reset Period for which a Remarketing Election Notice is in effect as provided in Section 3.5(b), shall continue throughout the Delivery Period.
Section 2.2 Nature of Clean Energy Project. Purchaser acknowledges and agrees that Issuer will meet its obligations to provide Product to Purchaser under this Agreement exclusively through its purchase of Product from Prepay LLC pursuant to the Master Power Supply Agreement and that Issuer is financing its purchase of such supplies through the issuance of the Bonds.
Section 2.3 Condition Precedent. Notwithstanding anything to the contrary herein, commencement of deliveries and the rights and obligations of Issuer and Purchaser hereunder are subject to the condition precedent that Issuer shall have entered into the Master Power Supply Agreement and shall have issued the Bonds.
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 to secure Issuer’s obligations under the Bond Indenture.
ARTICLE III.
SALE AND PURCHASE; PRICING
Section 3.1 Sale and Purchase of Product. Issuer shall sell and deliver or cause to be delivered to Purchaser, and Purchaser shall purchase and receive from Issuer, the applicable Product in the quantities and at the times and subject to the terms and conditions set forth in this Agreement. The quantities of Product to be sold and purchased and delivered and received pursuant to the terms and conditions set forth in this Agreement shall be equal to (a) the Base Quantity, if any, for each Delivery Hour and (b) the Assigned Quantity delivered to J. Aron in each Month of the Delivery Period pursuant to the Assignment Agreements.
Section 3.2 Payments.
(a) For each Month for which an EPS Energy Period is in effect at the start of such Month:
(i) Purchaser shall pay Issuer the Contract Price multiplied by the Assigned Prepay Quantities actually delivered for such Month; and (ii) Pursuant to the terms of the CPA Custodial Agreement, Purchaser shall owe a separate CPA Gross Payment for each Assigned PPA Agenda Page 80 of 570
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consistent with the terms of the CPA Custodial Agreement, and, upon satisfying its obligations under the CPA Custodial Agreement in respect of such amount (after taking into consideration any PPA Seller Payment Obligation (as such term is defined in the CPA Custodial Agreement) credited to CPA in respect thereof), any portion of such amount attributable to Assigned PAYGO Product shall be deemed to be paid by Purchaser to the applicable APC Party on behalf of J. Aron and shall satisfy the obligations of the respective parties under each of the Electricity Sale and Service Agreement, the Master Power Supply Agreement, this Agreement and the applicable Assignment Agreement for such Assigned PAYGO Product.
(b) To the extent that Base Quantities are delivered hereunder in any Month, Purchaser shall pay Issuer the Contract Price multiplied by the Base Quantities actually delivered. (c) The Contract Price for Assigned Energy is inclusive of any amounts due in respect of other Assigned Products.
Section 3.3 Limited Obligation to Take Base Quantities. Notwithstanding anything to the contrary in this Agreement, Purchaser shall not be required to purchase and receive any Base Quantities hereunder, and Issuer, with respect to any Base Quantities that otherwise would be delivered hereunder, shall cause Prepay LLC to remarket such Base Quantities pursuant to the provisions of Exhibit C to the Master Power Supply Agreement.
Section 3.4 Annual Refund. In addition to any Monthly Discount Percentage applied to Energy Scheduled hereunder, Issuer shall credit such Annual Refund to Purchaser as may be available for distribution by Issuer pursuant to Section 5.12 of the Bond Indenture, subject to the provisions of this Section 3.4. Such Annual Refund, if any, shall be credited to the next amount due from Purchaser following the release of funds for such purpose to Issuer under the terms of the Bond Indenture. In determining the amount of such Annual Refund, if any, to be credited to Purchaser, Issuer may reserve such funds (i) as may be required under the terms of the Bond Indenture or (ii) with the prior written consent of Purchaser (a) to fund or maintain the Minimum Discount Percentage for any future Reset Period, (b) to fund or maintain any rate stabilization or working capital reserve, (c) to reserve or account for unfunded liabilities and expenses or (d) for other costs of the Clean Energy Project.
Section 3.5 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, written notice (a “Reset Period Notice”) setting forth (i) the duration of such Reset Period, (ii) the estimated Available Discount Percentage for such Reset Period, and (iii) the applicable Remarketing Election Deadline. Issuer may thereafter update such notice at any time prior to the Remarketing Election Deadline and in any such update may extend the Remarketing Election Deadline in its sole discretion.
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(b) Remarketing Election. If the Reset Period Notice (or any update thereto) for any Reset Period indicates that the estimated Available Discount Percentage specified in such notice is not at least equal to the Minimum Discount Percentage for such 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, Prepay LLC and the Trustee electing for the Assignment Agreements to be terminated and all Base Quantities with respect to such Reset Period to be remarketed; provided, however, if the actual Available Discount Percentage, as finally determined under the Re-Pricing Agreement, is equal to or greater than the Minimum Discount Percentage, then Issuer may, in its sole discretion, elect by written notice (a “Voided Remarketing Election Notice”) to Purchaser to treat such Remarketing Election Notice as void. If Purchaser issues a valid Remarketing Election Notice (other than a Voided Remarketing Election Notice) in accordance with this Section 3.5(b) for any Reset Period, then Purchaser shall have no rights or obligations to receive any Product hereunder during such Reset Period or to receive any Annual Refund attributable to such Reset Period.
(c) Final Determination of Available Discount Percentage. The Parties acknowledge and agree that the final Available Discount Percentage for any Reset Period following the Initial Reset Period will be determined on the Re-Pricing Date (as defined in the Re-Pricing Agreement) for such Reset Period, and that such Available Discount Percentage may differ from the estimate or estimates of such Available Discount Percentage last provided to Purchaser prior to the Remarketing Election Deadline for such Reset Period; provided that the Available Discount Percentage for any Reset Period will not be less than the lower of (i) the last estimated Available Discount Percentage set forth in the Reset Period Notice for such Reset Period (or any update thereof) sent to Purchaser by Issuer and (ii) the Minimum Discount Percentage for Reset Period.
(d) Obligations Following a Remarketing Election. Notwithstanding the issuance of any Remarketing Election Notice for a Reset Period, Purchaser shall not make any new commitment to purchase Priority Products 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 Products (including its obligation to purchase Priority Products hereunder) to exceed Purchaser’s expected aggregate requirements for Products that will be used (i) for a “qualifying use” as defined in U.S. Treas. Reg. § 1.148-1(e)(2)(iii) and (ii) in a manner that will not result in any “private business use” within the meaning of Section 141 of the Code. Unless Purchaser issues a new Remarketing Election Notice (other than a Voided Remarketing Election Notice) for any subsequent Reset Period in accordance with this Section 3.5, Purchaser and J. Aron will cooperate in good faith and exercise Commercially Reasonable Efforts to locate EPS Compliant Energy for redelivery hereunder in any such Reset Period.
ARTICLE IV.
FAILURE TO SCHEDULE PRODUCT
Section 4.1 Issuer’s Failure to Schedule Base Quantity (Not Due to Force Majeure).
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(a) Shortfall Quantity. If, for any Delivery Hour during the Delivery Period, Issuer breaches its obligation to Schedule or deliver all or any portion of the Base Quantity, after giving effect to reductions for Assigned Energy at any Delivery Point pursuant to the terms of this Agreement, then the portion of the Base Quantity that Issuer failed to Schedule or deliver shall be a “Shortfall Quantity”.
(b) Issuer Cover Damage Payments. To the extent Purchaser actually purchases Replacement Product with respect to any Shortfall Quantity, then Issuer shall pay to Purchaser the result determined by the following formula:
P = Q x (RP - CP + AF)
Where:
P = The amount payable by Issuer under this Section 4.1(b); Q = The quantity of Replacement Product purchased;
RP = The Replacement Price;
CP = The Contract Price that would have applied to such Product; and AF = The Administrative Fee.
(c) Purchaser Obligation to Mitigate. Purchaser shall exercise Commercially Reasonable Efforts to mitigate Issuer’s damages paid by Issuer hereunder.
Section 4.2 Purchaser’s Failure to Schedule or Take Base Quantities (Not Due to Force Majeure). If, for any Delivery Hour during the Delivery Period, Purchaser breaches its obligation to Schedule or take all or any portion of the Base Quantity at any Delivery Point pursuant to the terms of this Agreement, then Purchaser shall remain obligated to pay Issuer the Contract Price for such Base Quantity. Issuer shall credit to Purchaser’s account any net revenues Issuer may receive from Prepay LLC under the Master Power Supply Agreement in connection with the ultimate sale of any such Product by Prepay LLC to Municipal Utilities or, if necessary, other purchasers, up to the Contract Price.
Section 4.3 Failure to Deliver or Take Due to Force Majeure. If with respect to all or any portion of Base Quantities or Assigned Prepay Quantities:
(a) Purchaser fails to take or fails to deliver all or any portion of the such quantities at any Delivery Point pursuant to the terms of this Agreement; and (b) such failure is due to Force Majeure claimed by either Party, then the Parties shall have no payment obligations with respect to such quantities hereunder.
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Section 4.4 Assigned Product. 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.
Section 4.5 Sole Remedies. Except with respect to the termination of this Agreement pursuant to Article XVII, the remedies set forth in this Article IV shall be each Party’s sole and exclusive remedies for any failure by the other Party to Schedule, deliver or take Product, as applicable, pursuant to this Agreement.
ARTICLE V.
DELIVERY POINTS; SCHEDULING
Section 5.1 Delivery Points.
(a) Base Delivery Points. All Base Product delivered under this Agreement shall be Scheduled for delivery and receipt at (i) the Delivery Point set forth in Exhibit A-1 (the “Primary Delivery Point”) or (ii) any other point (an “Alternate Delivery Point”) that has been mutually agreed by Issuer, Purchaser and Prepay LLC (the Primary Delivery Point or, to the extent specified, any Alternate Delivery Point being the “Base Delivery Point”). Delivery of Energy to Purchaser at the Primary Delivery Point shall be facilitated through submission of Inter-SC Trades, as defined in the CAISO Tariff (“ISTs”). Purchaser shall designate a scheduling coordinator in the CAISO market for this purpose as specified in Exhibit G. (b) Alternate Base Market Prices. The Day-Ahead Market Price and Real-Time Market Price for each Alternate Delivery Point, as applicable, shall be the price mutually agreed and identified by the Parties, or if no such price is identified for such Alternate Delivery Point, the Day-Ahead Market Price and Real-Time Market Price, as applicable, specified on Exhibit A-1 for the Primary Delivery Point from which quantities are being shifted to such Alternate Delivery Point.
(c) Assigned Energy Delivery Points. Assigned Energy delivered under this Agreement shall be Scheduled for delivery and receipt at the applicable Assigned Delivery Point specified in the applicable Assignment Schedule. All other Assigned Product shall be delivered consistent with the terms of the applicable Assignment Agreement Section 5.2 Transmission and Scheduling. Issuer shall Schedule or arrange for Scheduling services with CAISO in accordance with the CAISO Tariff, to deliver the Base Product to the Base Delivery Point. Purchaser shall Schedule or arrange for Scheduling services with CAISO in accordance with CAISO Tariff, to receive the Base Product at the Base Delivery Point.
If Prepay LLC Schedules or arranges for Scheduling services, to deliver Base Product to the Base Delivery Point, then Issuer’s obligations under this Section shall be relieved pro tanto. Scheduling of Assigned Energy shall be in accordance with the applicable Assignment Schedule.
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Section 5.3 Title and Risk of Loss. Title to and risk of loss of the Product delivered under this Agreement shall pass from Issuer to Purchaser at the applicable Delivery Point. The transfer of title and risk of loss for all Assigned Product 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. Subject to Section 18.1, each Party shall indemnify, defend and hold harmless the other Party from and against any Claims made by a third party arising from or out of any event, circumstance, act or incident related to the Product delivered hereunder first occurring or existing during the period when control and title to Base Product or Assigned Product is vested in the indemnifying Party as provided in this Section; provided that, notwithstanding the foregoing, (a) Issuer shall have no obligations to indemnify, defend or hold harmless Purchaser for any such Claims relating to replacement costs, cover damages or similar liabilities that are payable to any Person because of Purchaser’s failure to deliver any Product to such Person and (b) no obligation to indemnify, defend or hold harmless shall supplant or control the provisions of this Agreement relating to Force Majeure. Notwithstanding anything to the contrary herein, no Party shall have any obligations to indemnify, defend or hold harmless the other Party in respect of any Claims relating to any Assigned Product.
Section 5.4 PCC1 Product and Long-Term PCC1 Product. Notwithstanding any other provision of this Agreement to the contrary, 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].
(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].
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(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]. With respect to Sections 5.4(a) through (c), “Seller” means “Issuer”, Buyer means “Purchaser”, and any other capitalized terms not otherwise defined therein shall have the meaning specified in the Assigned PPA.
(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) 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 APC Party;
(iv) Assigned Product to be purchased and sold pursuant to this Agreement has not been 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
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(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
(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 APC Party set forth in the Assigned PPAs in making the representations and warranties set forth in this Section 5.4 and has not performed any independent investigation with respect thereto; (ii) J. Aron has agreed pursuant to the Electricity Sale and Service Agreement 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
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(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 Communications Protocol. With respect to the Scheduling and delivery of Base Quantities, Issuer and Purchaser shall comply with the communications protocol set forth in Exhibit G. Scheduling and transmission of Assigned Energy shall be in accordance with the applicable Assignment Agreement pursuant to which the Project Participant shall act as scheduling agent for each of J. Aron, Prepay LLC and Issuer.
Section 5.6 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 (including a Balancing Authority operating within the Western EIM) 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 Product into the applicable Balancing Authority shall constitute delivery of such Product to Purchaser hereunder, provided that any associated Renewable Energy Credits and other Assigned Product are also delivered to Purchaser.
Section 5.7 Assigned Products. Notwithstanding anything to the contrary herein, except as provided in Section 6.3, Issuer shall have no liability under this Article V with respect to any Assigned Products.
ARTICLE VI.
ASSIGNMENT OF POWER PURCHASE AGREEMENTS
Section 6.1 Assignments Generally.
(a) Initial Assigned Rights and Obligations. Prior to the commencement of the Delivery Period, Purchaser agrees to exercise Commercially Reasonable Efforts to assign the Initial Assigned Rights and Obligations to J. Aron. (b) Assignments of Replacement Assigned Rights and Obligations.
Commencing (i) one year prior to the expiration of any EPS Energy Period or (ii) otherwise immediately upon the early termination or anticipated early termination of a EPS Energy Period or a failure to assign any portion of the Initial Assigned Rights and Obligations, Purchaser shall exercise Commercially Reasonable Efforts and cooperate with J. Aron in good faith to assign a portion of Purchaser’s rights and obligations (the “Assigned Rights and Obligations”) under one or more power purchase agreements (each such agreement, an “Assignable Power Contract”) pursuant to which Purchaser is purchasing EPS Compliant Energy, RECs and other products that may be assigned pursuant to Exhibit F. The Parties recognize that, in the case of such an assignment, J. Aron will be obligated to sell and deliver Assigned Product it receives under all Assigned Rights and Obligations to Prepay Agenda Page 88 of 570
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LLC under the terms of the Electricity Sale and Service Agreement, and Prepay LLC will be obligated to deliver such Product to Issuer under the terms of the Master Power Supply Agreement. To be effective hereunder, any assignment of Replacement Assigned Rights and Obligations must be proposed, agreed and consented to in accordance with Exhibit F and the Master Power Supply Agreement.
(c) J. Aron Procurement of EPS Compliant Energy. Under certain circumstances specified in Section 6.1(c) of the Electricity Sale and Service Agreement, J. Aron is obligated to exercise Commercially Reasonable Efforts to obtain EPS Compliant Energy for ultimate redelivery to Purchaser hereunder, and, in such case, Purchaser shall cooperate in good faith with J. Aron in connection therewith, provided that:
(i) J. Aron’s procurement of any such EPS Compliant Energy for ultimate redelivery hereunder shall be subject to Purchaser’s prior written consent, with such consent not to be unreasonably withheld, provided, for the avoidance of doubt, that it shall be reasonable for Purchaser to withhold its consent based on the requirements of the EPS or other regulatory requirements;
(ii) Issuer and Purchaser shall act in good faith and in a Commercially Reasonable manner to negotiate appropriate amendments to this Agreement to facilitate the delivery of such EPS Compliant Energy, including with respect to the Delivery Point, consequences of failing to deliver or receive and scheduling matters;
(iii) the period of delivery for any such EPS Compliant Energy (any such period, a “J. Aron 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 such succeeding Reset Period; and
(iv) during a J. Aron EPS Energy Period, if requested by J. Aron, Purchaser shall continue to exercise Commercially Reasonable Efforts and cooperate with J. Aron in good faith to assign Assigned Rights and Obligations to J. Aron under an Assignable Power Contract. (d) Amendments. Purchaser and Issuer agree to seek the written consent of J. Aron prior to any amendment to this Article VI or Exhibit F hereto.
Section 6.2 Failure to Obtain EPS Compliant Energy. To the extent an EPS Energy Period terminates or expires and Purchaser and J. Aron have been unable to obtain EPS Compliant Energy for delivery hereunder pursuant to the provisions of Section 6.1, then, until EPS Compliant Agenda Page 89 of 570
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Energy is obtained for delivery hereunder, Prepay LLC shall remarket Purchaser’s Base Quantities pursuant to the provisions of Exhibit C to the Master Power Supply Agreement, subject to the following:
(a) Purchaser’s and J. Aron’s obligations set forth in Section 6.1 shall continue to apply; and
(b) Purchaser shall not make any new commitment to purchase Priority Products during such a remarketing.
Section 6.3 Adjustments to Base Quantities. The Base Quantity Reductions set forth on Exhibit A-1 hereto have been calculated to reflect the Initial Assigned Rights and Obligations using the same methodology that would apply to determine such Base Quantity Reductions in connection with the assignment of any Replacement Assigned Rights and Obligations as provided in Exhibit F hereto. Effective upon the first day of the Month following the termination or expiration of an EPS Energy Period for any reason, Issuer shall revise Exhibit A-1 to (i) update the Base Quantity Reductions as provided in Exhibit F to the extent a subsequent EPS Energy Period will commence immediately following such termination or expiration or (ii) reverse such Base Quantity Reductions associated with the EPS Energy Period that terminated or expired for all remaining Hours in the Delivery Period to the extent a replacement EPS Energy Period will not commence immediately following such termination or expiration. In the case of any other commencement of a subsequent EPS Energy Period, Issuer shall revise the Base Quantity Reductions in Exhibit A-1 as provided by Exhibit F hereto.
Section 6.4 J. Aron Non-Payment to APC Party. To the extent that (a) J. Aron fails to pay when due any J. Aron Prepay Payment and (b) Purchaser makes a payment for such amounts to the applicable APC Party, Purchaser shall provide notice thereof to Issuer upon Purchaser’s payment to the applicable APC Party and Issuer shall make a payment to Purchaser in the amount of such non-payment.
ARTICLE VII.
USE OF PRODUCT
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 community choice aggregation program 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, if taken or omitted, respectively, would adversely affect the tax-exempt status of the Bonds.
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available to Purchaser that are not Priority Products; and (b) on at least a pari passu and non-discriminatory basis with other Priority Products.
Section 7.3 Assistance with Sales to Third Parties. If (a) (i) a quantity of Assigned Product less than the Assigned Prepay Quantity is delivered hereunder in any Month during an Assignment Period for any reason other than Force Majeure or (ii) an Assigned PPA FM Remarketing Event has occurred and is in effect (as defined in Exhibit F to the Master Power Supply Agreement), (b) Issuer is required under Section 3.3 to cause Base Quantities that otherwise would be delivered hereunder to be remarketed or (c) notwithstanding Purchaser’s compliance with Section 7.1, Purchaser does not require all or any portion of the Assigned Prepay Quantity to meet its requirements for Energy that it is obligated to purchase under this Agreement as a result of (i) insufficient demand by Purchaser’s retail customers or (ii) a change in Law, Purchaser may, with reasonable notice issued in the form of a remarketing notice in accordance with Exhibit G, request (and, in the case of clauses (a) and (b), shall be deemed to request) that Prepay LLC, as permitted by the Master Power Supply Agreement, sell such portion of such Base Quantities or Assigned Product (I) to another Municipal Utility, or (II) if necessary, to another purchaser. Any remarketing notice issued under clause (c)(ii) above shall constitute a Structural Remarketing Notice (as defined in the Master Power Supply Agreement) and shall be subject to the requirements set forth in the Master Power Supply Agreement. If Prepay LLC makes such a sale under Exhibit C to the Master Power Supply Agreement, Issuer shall credit against the amount owed by Purchaser to Issuer hereunder the amount received by Issuer from Prepay LLC for such sales less all reasonable costs and expenses directly incurred by Issuer, including but not limited to remarketing administrative charges paid by it to Prepay LLC under the Master Power Supply Agreement, but in no event shall the amount of such credit be more than the Contract Price for the Energy so sold.
Section 7.4 Qualifying Use. Without limiting Purchaser’s other obligations under this Article VII, Purchaser agrees that, subject to Section 7.5, it will use all of the Product 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.
(a) The Parties acknowledge that Purchaser may at times inadvertently remarket Products received hereunder in a manner that does not comply with Qualifying Use Requirements due to daily and hourly fluctuations in Purchaser’s Product needs. To the extent Purchaser does so, Purchaser shall (a) exercise Commercially Reasonable Efforts to use any Disqualified Sale Proceeds of such remarketing to purchase Products (other than Priority Products) that Purchaser then uses in compliance with the Qualifying Use Requirements and (b) reserve funds in an amount equal to any Disqualified Sale Proceeds until such Disqualified Sale Proceeds are remediated or transferred to the Trustee pursuant to Section 7.6(b) below.
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(b) To the extent that all or any portion of Assigned Quantities or Base Quantities are remarketed under Section 3.3 or under Section 7.3, as applicable, and any such remarketing results in a Ledger Entry (as defined in the Master Power Supply Agreement), Purchaser agrees that it shall (i) exercise Commercially Reasonable Efforts to use an amount equivalent to the remarketing proceeds associated with such any such Ledger Entry to purchase Non-Priority Products and use such Non-Priority Products in compliance with the Qualifying Use Requirements in order to remediate such Ledger Entries; and (ii) apply its purchases of Non-Priority Products to remediate any such proceeds under the Master Power Supply Agreement prior to remediating such proceeds under any other contract that provides for the purchase of Priority Products. To track compliance with Purchaser’s obligations under this Section 7.5(b), Purchaser shall deliver a remediation certificate to Issuer and Prepay LLC by the tenth day of the Month subsequent to any relevant Non-Priority Products purchases (which may include purchases of Energy from CAISO to the extent such Energy is used in compliance with the Qualifying Use Requirements); provided that the Parties acknowledge and agree that any purchases of Assigned PAYGO Products (commencing with purchases of Assigned PAYGO Products in the Month in which any such Ledger Entry occurs) shall be applied to remediate any such Ledger Entries and no remediation certificate shall be required with respect to purchases of Assigned PAYGO Products. For Ledger Entries remediated under this Section 7.5(b) that have not otherwise been remediated by Prepay LLC pursuant to the remarketing provisions of the Master Power Supply Agreement, Issuer shall pay Purchaser any portion of the Monthly Discount Percentage associated with such Ledger Entries that is available under the Bond Indenture on or before the last Business Day of the Month in which Purchaser provides a certificate under this Section 7.5(b) evidencing such remediation.
Section 7.6 Remediation; Ledger Entries; Redemption.
(a) Remediation. To track compliance with the requirements of Section 7.5(a), Purchaser will provide a quarterly report to Issuer (delivered not later than the 15th day of each April, July, October and January until the end of the Delivery Period) showing the following: the total quantity of proceeds from sales of Products received hereunder that (i) were sold by Purchaser to any Person in a transaction that does not comply with the Qualifying Use Requirements and (ii) have not been remediated by Purchaser by applying such proceeds to purchase Products that are used in compliance with the Qualifying Use Requirements (the quantities of Product producing such proceeds, “Disqualified Sale Units” and such proceeds received, “Disqualified Sale Proceeds”).
(b) Ledger Entries. Issuer shall report such unremediated Disqualified Sale Proceeds and the associated Disqualified Sale Units to Prepay LLC for addition to the remarketing ledgers maintained by Prepay LLC under the Master Power Supply Agreement, with the ledger entries to be dated as of the end of the first month of the relevant quarter.
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(c) Transfers to Trustee. Purchaser shall transfer (to the extent such unremediated Disqualified Sales Proceeds and associated Disqualified Sale Units remain reflected on the remarketing ledger described under Section 7.6(b) at the time such transfer is required by this Section 7.6(c)) any such unremediated Disqualified Sale Proceeds and any other required funds (i.e., all additional funds necessary for redemption of the Bonds referred to in this Section
7.6(c)) to the Trustee at least 95 days prior to the second anniversary of the date on which such unremediated Disqualified Sale Proceeds and the associated Disqualified Sale Units were first reflected on the remarketing ledgers in accordance with Section 7.6(b), with such funds to be deposited in the Debt Service Account (as defined in the Bond Indenture) and applied to the redemption of Bonds as directed by Issuer and approved by Special Tax Counsel (as defined in the Bond Indenture) as preserving the tax-exempt status of the Bonds.
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES; ADDITIONAL COVENANTS
Section 8.1 Representations and Warranties of Issuer. 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) in the case of Issuer as the representing Party, Issuer is a joint powers authority, duly organized and validly existing under the Laws of the State of California, (b) in the case of Purchaser as the representing Party, Purchaser is a public agency of the State of California, duly organized and validly existing under the Laws of the State of California;
(c) it has all requisite power and authority, corporate or otherwise, to own its material properties, carry on its material business as now being conducted, enter into, deliver and to perform its obligations under this Agreement and to carry out the terms and conditions hereof and the transactions contemplated hereby;
(d) there is no litigation, action, suit, proceeding with service of process accomplished with respect to such Party or investigation pending or, to the best of such Party’s knowledge, threatened, in each case before or by any Government Agency and, in each case, which could reasonably be anticipated to materially and adversely affect such Party’s ability to perform 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 have been duly authorized by all necessary action on the part of such Party and its governing body and do 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; Agenda Page 93 of 570
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(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 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, order, writ, judgment, 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, ordinance, rule or regulation 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 Governmental Approval 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 Governmental Approvals that have been obtained; and (j) it enters this Agreement as a bona-fide, arms-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 deliver to Purchaser (a) all Base Product free and clear of all liens, security interests, claims and encumbrances or any interest therein or thereto by any Person arising prior to the Delivery Point, and (b) all Assigned Product free and clear of all liens, security interests, claims and encumbrances or any interest therein or thereto by any Person that are imposed on such Assigned Product solely as a result of Issuer’s or Prepay LLC’s actions.
Section 8.3 Disclaimer of Warranties. EXCEPT FOR THE WARRANTIES
EXPRESSLY MADE BY ISSUER IN THIS ARTICLE VIII, ISSUER HEREBY DISCLAIMS
ALL 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 Purchaser’s 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 undertakings Agenda Page 94 of 570
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to enable the underwriters of the offerings of the Bonds to comply with the continuing disclosure provisions of 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.
ARTICLE IX.
TAXES
As between Issuer and Purchaser, Issuershall (i) be responsible for and pay or cause to be paid all ad valorem, excise, severance, production and other taxes assessed with respect to Product (other than any Assigned Product) delivered pursuant to this Agreement arising prior to the applicable Delivery Point and (ii) indemnify Purchaser and its Affiliates for any such taxes paid by Purchaser or its Affiliates. As between Issuer and Purchaser, Purchaser shall (i) be responsible for all taxes with respect to Product received pursuant to this Agreement assessed at or from the applicable Delivery Point, and (ii) indemnify Issuer and its Affiliates for any such taxes paid by Issuer or its Affiliates. Nothing shall obligate or cause a Party to pay or be liable for any tax for which it is exempt under Law.
ARTICLE X.
JURISDICTION; WAIVER OF JURY TRIAL
Section 10.1 Consent to Jurisdiction. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST EITHER PARTY ARISING OUT OF OR RELATING HERETO SHALL BE
BROUGHT EXCLUSIVELY IN (A) THE COURTS OF THE STATE OF CALIFORNIA
LOCATED IN THE CITY OF LOS ANGELES, (B) THE FEDERAL COURTS OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF CALIFORNIA SITTING IN THE COUNTY OF LOS ANGELES. BY EXECUTING AND DELIVERING THIS
AGREEMENT, EACH PARTY AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO THE PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH ARTICLE XVI; AND AGREES THAT SERVICE AS PROVIDED
ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE PARTY IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
Section 10.2 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, EACH
OF THE PARTIES HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
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CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING
INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS
AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING (OTHER THAN BY MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.2 AND EXECUTED BY EACH OF THE PARTIES), AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY A COURT.
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 remedy 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 over this Agreement or the transactions to be undertaken hereunder, 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 Agenda Page 96 of 570
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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 by either Party of this Agreement or any provision hereunder.
Section 12.3 Defense of Agreement. Excluding all matters involving a contractual dispute between the Parties, each Party shall hereafter exercise Commercially Reasonable Efforts to 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 subject either Party to any greater or different regulation or jurisdiction that materially affects 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; provided furthermore that, for the avoidance of doubt, any applicable Assignment Agreement shall terminate concurrent with the assignment of this Agreement. Prior to assigning this Agreement, Purchaser shall deliver to Issuer written confirmation from each Rating Agency (as defined in the Bond Indenture) then rating the Bonds, 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 such Rating Agency to the Bonds. Whenever an assignment or a transfer 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 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.
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(a) Purchaser’s Statements. 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 (i) in respect of the prior Month, if Base Quantities were required to be delivered in such Month and there is a Shortfall Quantity for such Month, the Replacement Price applicable to such Shortfall Quantity, and (ii) any other amounts due to Purchaser in connection with this Agreement with respect to prior Months.
(b) Billing Statements.
(i) No later than the 20th 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 Product delivered in the prior Month, (ii) any other amounts due to Issuer or Purchaser in connection with this Agreement with respect to the prior Months, and (iii) the net amount due to Issuer or Purchaser; provided that Prepay LLC’s delivery of a Billing Statement to Issuer and Purchaser pursuant to and as defined in the Master Power Supply Agreement shall be deemed to satisfy Issuer’s obligation to deliver a Billing Statement hereunder; provided furthermore that invoicing for all Assigned PAYGO Products shall occur under the CPA Custodial Agreement. (ii) If a Monthly Statement (as defined in the CPA Custodial Agreement) for an Assigned PPA has not been delivered by the 15th 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 Assigned Prepay Quantities were delivered under the applicable Assigned PPA for such Month. In such case, to the extent that a Monthly Statement subsequently delivered under the CPA Custodial Agreement reflects that less than the Assigned Prepay Quantities were actually delivered under any such Assigned PPA, then (A) the previously delivered Billing Statement shall be deemed to be updated in accordance with such Monthly Statement, (B) Prepay LLC shall be deemed under the remarketing provisions of the Master Power Supply Agreement to remarket and purchase such undelivered portion of the Assigned Prepay Quantities for its own account resulting in a Ledger Entry (as defined in the Master Power Supply Agreement) and (C) Issuer shall owe a resettlement payment to Purchaser in an amount equal to the product of (x) the applicable APC Contract Price multiplied by (y) the portion of the Assigned Prepay Quantities not delivered in such Month. The Parties acknowledge and agree that J. Aron shall have a separate resettlement payment obligation with respect to the amounts described in the clause (C) of the preceding sentence under the Electricity Sale and Service Agreement, and J. Aron’s payment of the J. Aron Resettlement Payment as defined in and pursuant to the CPA Custodial Agreement shall satisfy the corresponding obligations of the respective parties under each of the Electricity Sale and Service Agreement, the Master Power Supply Agreement and this Agreement.
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(c) Supporting Documentation. Upon request by either Party, the other Party shall deliver such supporting documentation of the foregoing statements and information described in this Section 14.1 as such requesting Party may reasonably request.
Section 14.2 Payments.
(a) Payments Due. If the Billing Statement indicates an amount due from Purchaser, then Purchaser shall remit such amount to Issuer by wire transfer (pursuant to the Trustee’s instructions), in immediately available funds, on or before the 23rd 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 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. Notwithstanding the foregoing, payments due from Purchaser for Assigned PAYGO Product shall be satisfied by Purchaser’s compliance with Section 3.2(a)(ii) in respect of such Assigned PAYGO Product.
(b) No Duty to Estimate. 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 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 Purchaser disputes any amounts included in a 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.
Section 14.4 Late Payment. If Purchaser fails to remit within one Business Day 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) Right to Audit. 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, Agenda Page 99 of 570
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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) Deadline for Objections. 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 Product delivery.
(c) Payment of Adjustments. 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 an incorrect Purchaser’s Statement or 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, no Party shall be entitled to net any amounts that are in dispute and 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 Rate Covenant. Purchaser agrees to make payments it is required to make under this Agreement from Utility Revenues, and only from such Utility Revenues, and as a charge against such Utility Revenues, as an operating expense of its electric system and a cost of purchased Product; provided, however, that Purchaser, in its discretion, may apply any legally available moneys to the payment of amounts due under this Agreement. Purchaser hereby covenants and agrees that it will establish, maintain, and set rates and charges for its electric system so as to provide Utility Revenues sufficient, together with all available electric system revenues, to enable Purchaser to pay to Issuer all amounts payable under this Agreement and to pay all other amounts payable from the revenues of Purchaser’s electric system, and to maintain any reserves as required by the Purchaser’s reserve policy. Purchaser further covenants and agrees that it shall not furnish or supply electric services free of charge to any person, firm, corporation association, or other entity, public or private, except any such service free of charge that Purchaser is supplying on the date hereof or such free service as required by order of the CPUC or the State of California, and that it shall promptly enforce the payment of any and all accounts owing to Purchaser for the sale of electricity or the provision of transmission, distribution or other services to its customers.
Purchaser further covenants and agrees that in any future bond issue, certificate of participation issue, interest rate swap agreement, commodity swap agreement or any other financing or financial transaction undertaken by, or on behalf of, Purchaser in connection with its electric system, Purchaser shall not pledge or encumber the Utility Revenues through a gross revenue pledge or in Agenda Page 100 of 570
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any other way which creates a prior or superior obligation to its obligation to make payments under this Agreement.
ARTICLE XV.
[RESERVED]
ARTICLE XVI.
NOTICES
Any notice, demand, statement, or request required or authorized by this Agreement to be given by one Party to the other Party (or to any third party) shall be in writing and shall either be sent by email transmission, 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 (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, such as electronic mail. Notwithstanding the foregoing, either Party may at any time notify the other 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 a “Issuer Default” under this Agreement:
(a) any representation or warranty made by Issuer in this Agreement shall prove to have been incorrect in any material respect when made; or (b) Issuer shall have failed 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 following receipt by Issuer of written notice thereof.
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 three Days following receipt by Purchaser of written notice thereof;
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(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 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 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, and such default is not remedied within thirty (30) days after receipt by Purchaser of written notice thereof; (d) Purchaser shall have failed to perform, observe or comply with any material covenant, agreement or term contained in this Agreement, and such failure continues for more than 30 days following the earlier of receipt by Purchaser of notice thereof; or (e) Purchaser shall have failed to establish, maintain, or collect rates or charges adequate to provide Utility Revenues sufficient to enable Purchaser to pay all amounts due to Issuer under this Agreement in accordance with Section 14.7 (Rate Covenant), and such failure continues for more than 30 days following the earlier of receipt by Purchaser of notice thereof.
Section 17.3 Remedies Upon Default.
(a) Termination. If at any time a 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 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 Agenda Page 102 of 570
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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 giving rise to 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 Product 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 Product 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) unless otherwise agreed by Issuer, 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 Product 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 Product tendered for delivery under this Agreement, Issuer shall have the right to sell such Product 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 sales and deliveries of Product to Purchaser under this Agreement shall terminate, and (iii) the obligation of Purchaser to purchase and receive deliveries of Product 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 Master Power Supply Agreement. Purchaser acknowledges and agrees that (i) in the event the Master Power Supply Agreement terminates prior to the end of the primary term of this Agreement, this Agreement shall terminate on the effective date of early termination of the Master Power Supply Agreement (which date shall be the last date upon which deliveries are required thereunder, subject to all winding up arrangements), (ii) Issuer’s obligation to deliver Product under this Agreement shall terminate upon the termination of deliveries of Product to Issuer under the Master Power Supply Agreement and (iii) Purchaser shall exercise its right to terminate any Assignment Agreements in effect. Issuer shall provide notice to Purchaser Agenda Page 103 of 570
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of any early termination date of the Master Power Supply Agreement. The Parties recognize and agree that, in the event that the Master Power Supply 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 Product under this Agreement for the remainder of such first Month, and, notwithstanding anything in this Agreement to the contrary, no Monthly Discount Percentage 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 PRODUCT 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 Agenda Page 104 of 570
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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 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),
(a) 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;
(b) on the Bond Closing Date, Purchaser shall deliver to Issuer a fully executed Federal Tax Certificate in substantially the form attached hereto as Exhibit D; (c) on the Bond Closing Date, Purchaser shall deliver to Issuer an opinion or opinions of counsel to Purchaser covering the matters set forth in the form attached hereto as Exhibit E; and
(d) on the Bond Closing Date, Purchaser shall deliver to Issuer a Closing Certificate in substantially the form set forth hereto as Exhibit I.
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.
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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 or breaches 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 and attachments 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 Relationship 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 with respect to its obligations or any Claims under this Agreement.
Section 18.11 Rates 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 Prepay LLC under Section 18.11 of the Master Power Supply 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 Master Power Supply Agreement.
Section 18.12 Limitation of Liability. Notwithstanding anything to the contrary herein, all obligations of Issuer under this Agreement, including without limitation all obligations to make Agenda Page 106 of 570
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payments of any kind whatsoever, are special, limited obligations of Issuer 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 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 18.13 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 Third 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 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 Issuer’s rights and Purchaser’s obligations under this Agreement, (c) J. Aron shall be a third-party beneficiary of this Agreement with the right to enforce the provisions of Article VI and Exhibit F of this Agreement, (d) the Trustee or any receiver appointed under the Bond Indenture shall have the right to perform all obligations of Issuer under this Agreement, and (e) in the event of any Purchaser Default under Section 17.2(a), (i) Prepay LLC may, to the extent provided for in, and in accordance with, the Receivables Purchase Exhibit to the Master Power Supply Agreement, take assignment from Issuer of receivables owed by Purchaser to Issuer under this Agreement, and Prepay LLC or any third party transferee who purchases and takes assignment of such receivables from Prepay LLC shall thereafter have all rights of collection with respect to such receivables (provided that, if at any time an insurance provider agrees to insure Purchaser’s payment obligations hereunder, then such insurance provider shall have the same rights under this Section
18.14 as Prepay LLC), and (ii) if such receivables are not so assigned, the Swap Counterparty or Swap Counterparties (as defined in the Bond Indenture) shall have the right to pursue collection of such receivables to the extent any non-payment by Issuer to any Swap Counterparty 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 18.15 No Recourse to Members of Purchaser. Purchaser is organized as a Joint Powers Authority in accordance with the Joint Exercise of Powers Act of the State of California Agenda Page 107 of 570
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(Government Code Section 6500, et seq.) pursuant to its Joint Powers Agreement and is a public entity separate from its constituent members. Purchaser shall solely be responsible for all debts, obligations and liabilities accruing and arising out of this Agreement. Issuer shall have no rights and shall not make any claims, take any actions or assert any remedies against any of Purchaser’s constituent members, or the employees, directors, officers, consultants or advisors or Purchaser or its constituent members, in connection with this Agreement.
Section 18.16 Waiver of Defenses. Each Party waives all rights to set-off, counterclaim, recoupment and any other defenses that might otherwise be available to it with regard to its obligations pursuant to the terms of this Agreement.
Section 18.17 Rate Changes.
(a) Standard of Review. 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) Waiver. 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).
IN WITNESS WHEREOF, the Parties have caused this Clean Energy Purchase 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]
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Signature Page to the Clean Energy Purchase Contract
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: ____________________________________
Name:______________________________
Title:_______________________________
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Signature Page to the Clean Energy Purchase Contract
CLEAN POWER ALLIANCE OF SOUTHERN
CALIFORNIA
By: ____________________________________
Name:______________________________
Title:_______________________________
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A-1
EXHIBIT A-1
BASE QUANTITIES; BASE DELIVERY POINTS; COMMODITY REFERENCE PRICES [To be attached.]
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A-2
EXHIBIT A-2
INITIAL ASSIGNED RIGHTS AND OBLIGATIONS
[To be attached.]
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B-1
EXHIBIT B
NOTICES
IF TO ISSUER: California Community Choice Financing Authority 1125 Tamalpais Avenue
San Rafael, CA 94901
Email: [email protected] and [email protected]
IF TO PURCHASER: Clean Power Alliance of Southern California 801 South Grand Avenue, Suite 400
Los Angeles, CA 90017
Email: [email protected]
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EXHIBIT C
REMARKETING ELECTION NOTICE
California Community Choice Financing Authority
1125 Tamalpais Avenue
San Rafael, CA 94901
Email: [email protected] and [email protected]
Aron Energy Prepay 16 LLC
c/o J. Aron & Company LLC
200 West Street
New York, NY 10282
U.S. Bank Trust Company, National Association
1349 W. Peachtree Street, Suite 1050
Atlanta, Georgia 30309
Attention: Mark Hallam
Telephone: (404) 898-2463
Email: [email protected]
To the Addressees:
The undersigned, duly authorized representative of Clean Power Alliance of Southern California (the "Purchaser"), is providing this notice (the “Remarketing Election Notice”) pursuant to the Clean Energy Purchase Contract, dated as of [_____], 2023 (the “Clean Energy Purchase Contract”), between California Community Choice Financing Authority and Purchaser.
Capitalized terms used herein shall have the meanings set forth in the Clean Energy Purchase Contract.
Pursuant to Section 3.5(b) of the Clean Energy Purchase Contract, the Purchaser has elected to have its Base Quantity, for each Hour of the Reset Period commencing __________ and extending to and including ______________, remarketed beginning as of the commencement of such Reset Period. The resumption of deliveries of Base Quantities in any future Reset Period shall be in accordance with Section 3.5(d) of the Clean Energy Purchase Contract.
Given this [___] day of [_________], 20[__].
CLEAN POWER ALLIANCE OF
SOUTHERN CALIFORNIA
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By: _____________________
Printed Name:
Title:
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EXHIBIT D
FORM OF FEDERAL TAX CERTIFICATE
This Federal Tax Certificate is executed in connection with the Clean Energy Purchase Contract dated as of [_____], 2023 (the “Clean Energy Purchase Contract”), by and between the California Community Choice Financing Authority (“Issuer”) and Clean Power Alliance of Southern California, a California joint powers authority (“Power Purchaser”). Capitalized terms used and not otherwise defined herein shall have the meanings given to them in the Clean Energy Purchase Contract, in the Tax Certificate and Agreement, or in the Bond Indenture.
WHEREAS Power Purchaser acknowledges that Issuer is issuing the Bonds to fund the prepayment price under the Master Power Supply 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 Power Purchaser’s use of Energy acquired pursuant to the Clean Energy Purchase Contract and certain funds and accounts of Power Purchaser will affect the Bonds’ qualification for such tax exemption.
NOW, THEREFORE, POWER PURCHASER HEREBY CERTIFIES AS FOLLOWS:
Power Purchaser is a joint powers authority and a community choice aggregator created and existing pursuant to the provisions of California law, organized under the laws of the State of California. As a community choice aggregator, the Power Purchaser is a load-serving entity providing electricity to customers within the boundaries of cities and/or counties that have elected to participate in Power Purchaser’s community choice aggregation program. For purposes of this Certificate, the term “service area” of the Power Purchaser means the boundaries of the cities and/or counties that have elected to participate in the Power Purchaser’s community choice aggregation program, as well as any other area recognized as the service area of the Power Purchaser under state or federal law.
Power Purchaser will resell all of the Energy acquired pursuant to the Clean Energy Purchase 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.
From January 2019 to October 2022, the monthly average amount of Energy purchased (other than for resale) by customers of Power Purchaser who are located within the service area of Power Purchaser is at least 943,468 MWh. Over the term of the Clean Energy Purchase Contract, the Power Purchaser expects the monthly average amount of Energy purchased (other than for resale) by customers of the Power Purchaser who are located within the service area of the Power Purchaser to be at least 992,405 MWh. The maximum monthly amount of Energy in any month being acquired pursuant to the Clean Energy Purchase Contract is [184,962] MWh.
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The Power Purchaser has existing rights to acquire other energy (including rights to capacity to generate electricity, whether owned, leased or otherwise contracted for) over the term of the Clean Energy Purchase Contract. Over the term of the Clean Energy Purchase Contract, the sum of (a) the amount of Energy being acquired pursuant to the Clean Energy Purchase Contract in any month, and (b) the amount of Energy that Power Purchaser otherwise has a right to acquire (including rights to capacity to generate electricity, whether owned, leased or otherwise contracted for) for such month does not exceed (i) 96.52% of the monthly amount of Energy expected to be purchased (other than for resale) by customers of Power Purchaser who are located within the service area of Power Purchaser in any month in calendar year 2023, and (ii) does not exceed
85.65% of the monthly amount of Energy expected to be purchased (other than for resale) by customers of Power Purchaser who are located within the service area of Power Purchaser in any month in later calendar years.
The Power Purchaser has assigned certain rights and obligations under power purchase agreements to J. Aron that, in addition to rights to Energy, include rights to capacity based on battery storage (the “Storage”) that will be charged from Energy produced at the same facilities and acquired pursuant to that same power purchase agreements. The Power Purchaser certifies that it will exercise its rights pursuant to such power purchase agreements to ensure that such Storage will only be charged from Energy produced at such facilities and acquired pursuant to such power purchase agreements.
In the event of the expiration or termination of an EPS Energy Period, Power Purchaser agrees to comply with its obligations in the Clean Energy Purchase Contract, including but not limited to its obligations to (a) exercise Commercially Reasonable Efforts to assign a portion of Power Purchaser’s rights and obligations under a power purchase agreement under which Power Purchaser is purchasing EPS Compliant Energy to J. Aron pursuant to an Assignment Agreement and (b) cooperate in good faith with Issuer and J. Aron with respect to any proposed assignments.
Power Purchaser expects to pay for Energy acquired pursuant to the Clean Energy Purchase Contract solely from funds derived from its power distribution operations. Power Purchaser expects to use current net revenues of its to pay for current Energy acquisitions. Neither the Power Purchaser nor any person who is a related party to the Purchaser will hold any funds or accounts in which monies are invested and which are reasonably expected to be used to pay for Energy acquired 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 Power Purchaser or any persons who are related Persons to Power Purchaser that are or were intended to be used for the purpose for which the Bonds were issued.
_______________, 2023
By: ________________________________
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[Name]
[Title]
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EXHIBIT E
OPINION OF COUNSEL
California Community Choice Financing Authority
San Rafael, CA
Aron Energy Prepay 16 LLC
New York, NY
Goldman Sachs & Co. LLC
New York, NY
U.S. Bank Trust Company, National Association
Atlanta, Georgia
Royal Bank of Canada
Toronto, Ontario
Re: Power Supply Contract between Clean Power Alliance of Southern California and California Community Choice Financing Authority dated as of [_____], 2023 Ladies and Gentlemen:
We are Counsel to Clean Power Alliance of Southern California (“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 Agenda Page 119 of 570
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(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).
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, Agenda Page 120 of 570
E-3
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.
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,
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1 EXHIBIT F
ASSIGNMENT OF ASSIGNABLE POWER CONTRACTS
1. General Requirements. Assigned Rights and Obligations under an Assignable Power Contract may only be assigned under this Exhibit F if the following requirements are satisfied or waived by J. Aron and Issuer:
1.1. The seller under such Assignable Power Contract (the “APC Party”) either (i) has a long-term senior unsecured credit rating that is “Baa3” or higher from Moody’s Investor’s Service, Inc. (or any successor to its credit rating service operation), “BBB- ” or higher from Standard & Poor’s Global Ratings (or any successor to its credit rating service operation) or “BBB-” or higher from Fitch Ratings, Inc. (or any successor to its credit rating service operation), (ii) provides credit support that is reasonably satisfactory to J. Aron or (iii) otherwise provides evidence of its creditworthiness that is reasonably satisfactory to J. Aron (which, for the avoidance of doubt, may include credit support provided by such APC Party to Purchaser).
1.2. The APC Party satisfies J. Aron’s internal requirements as they relate to “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.
1.3. The APC Party is organized in the United States and in a jurisdiction that does not present adverse tax consequences to J. Aron or Issuer in connection with such proposed assignment.
1.4. J. Aron, Purchaser, and Issuer have agreed on and executed an Assignment Schedule for such assignment.
1.5. J. Aron, Purchaser, Issuer, and the applicable APC Party have agreed on and executed an Assignment Agreement for such assignment.
1.6. The contract price (in $/MWh) payable by Purchaser under the applicable Assignable Power Contract (the “APC Contract Price”) is a fixed price unless Issuer, Purchaser and J. Aron agree, each in their sole discretion, to appropriate changes to the relevant documents to accommodate a floating APC Contract Price. For purposes of this Exhibit H, a “fixed price” shall be deemed to include any price that is fixed but for a periodic escalation, whether pre-determined or by reference to a price index, provided that the Base Quantity Reductions required to reflect any index-based escalation shall be made promptly following the time that such index is available.
1.7. If the Assignable Power Contract is unit-contingent or for an as-generated Product, then:
1.7.1. J. Aron has determined with a high degree of certainty that the Applicable Project will be able to generate the Assigned Prepay Value in each Month during the proposed Assignment Period.
1.7.2. The Applicable Project (as defined below) has generated the Assigned Prepay Value (as defined below) in each Month since commencing commercial operation.
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2 2. Proposed Assignment. Purchaser may propose an assignment of Assigned Rights and Obligations under Article VI of the Clean Energy Purchase Contract by delivering the following items to Issuer and to J. Aron:
2.1. A written notice of the proposed assignment signed by Purchaser.
2.2. A true and complete copy of the Assignable Power Contract under which such Assigned Rights and Obligations would arise.
2.3. Evidence reasonably satisfactory to Issuer and J. Aron that all authorizations, consents, approvals, licenses, rulings, permits, exemptions, variances, orders, judgments, decrees, declarations of or regulations by any Government Agency necessary in connection with the transactions contemplated by the Assignable Power Contract and the assignment of the Assignable Power Contract to J. Aron have been obtained and are in full force and effect. Such evidence may be provided by a closing certificate with appropriate back-up materials.
2.4. Such additional information as Issuer and J. Aron may reasonably request regarding the Assignable Power Contract and the APC Party.
2.5. If the Assignable Power Contract is unit-contingent or for an as-generated Product, then:
2.5.1. A description and information of the applicable project to which the Assignable Power Contract applies (the “Applicable Project”), including but not limited to information on the location, interconnection(s), and operating and compliance history of Applicable Project.
2.5.2. Either (i) a report from a nationally recognized consultant in the energy industry that is reasonably acceptable to Issuer and J. Aron showing the “P99” forecasted generation (“P99 Generation”) and “P50” forecasted generation (“P50 Generation”) of the Applicable Project for the entire Assignment Period, as the terms P99 and P50 are commonly used in the renewable energy industry or (ii) monthly historical generation and meteorological data of the Applicable Project dating back to the commercial operation date.
Following Issuer’s and J. Aron’s receipt of such information, Purchaser and Issuer will and J.
Aron has agreed in the Electricity Sale and Service Agreement to (i) negotiate in good faith with one another and exercise Commercially Reasonable Efforts to agree upon an Assignment Schedule, with the initial draft of such Assignment Schedule to be developed by J. Aron, and (ii) negotiate in good faith with one another and the APC Party regarding an Assignment Agreement, in each case related to the proposed assignment. If such Assignment Schedule and Assignment Agreement are agreed to by the representative parties thereto, the applicable parties will execute such Assignment Agreement and Assignment Schedule to be effective upon the assignment of the Assigned Rights and Obligations from Purchaser to J. Aron pursuant to the Assignment Agreement. J. Aron will act in good faith in considering proposed assignments that meet the criteria set forth in this Exhibit F, in accordance with the provisions set forth in the Electricity Sale and Service Agreement. For the avoidance of doubt, Purchaser acknowledges that J. Aron will not be required to execute any Assignment Agreement or Assignment Schedule, or otherwise accept any Assigned Rights and Obligations unless the APC Party (i) satisfies J. Aron’s internal requirements as they relate to “know your customer” rules, policies and procedures, anti-money laundering rules and regulations, Dodd-Frank Act, Agenda Page 123 of 570
3 Commodity Exchange Act, Patriot Act and similar rules, regulations, requirements and corresponding policies, (ii) is organized in the United States, and (iii) satisfies all other requirements in Section 1 of this Exhibit F.
3. Assignment Schedule. In connection with each assignment, an “Assignment Schedule” will be prepared in the form attached hereto as Annex I (with such changes as agreed by the Parties in their sole discretion), must be executed by Purchaser, Issuer and J. Aron, and must include each of the following:
3.1. The term of such Assigned Rights and Obligations (an “Assignment Period”) shall have the meaning specified in each applicable Assignment Agreement and shall (i) end not later than (a) the end of the delivery period under the Assignable Power Contract and (b) the end of the Delivery Period under this Agreement, (ii) not commence any earlier than sixty (60) days after Purchaser’s original notice under Section 2.1 above, and (iii) have a primary term that is not less than 18 Months in duration (provided, for the avoidance of doubt, the primary term references the term of the applicable Assignment Period and not the term of the Assignable Power Contract).
3.2. If the Assignable Power Contract is unit-contingent or for an as-generated product, then a description of the Applicable Project.
3.3. The “Assigned Prepay Quantity” means, for each Month of an Assignment Period and each Assignment Agreement, a quantity of Energy agreed upon by J. Aron, Issuer and Purchaser, which Assigned Prepay Quantity, if the Assignable Power Contract is unit contingent or for an as-generated Product, shall not exceed an amount that J. Aron has determined with a high degree of certainty that the Applicable Project will be able to generate in each Month during the Assignment Period; provided that the Assigned Prepay Quantity for each Month may not exceed the limit expressed in the proviso to Section 3.4 below. For the avoidance of doubt, the Assigned Rights and Obligations will include all of Purchaser’s rights to receive Energy under the Assignable Power Contract even if such rights to receive Energy may exceed the Assigned Prepay Quantity.
3.4. An updated Exhibit A-1 to the Clean Energy Purchase Contract reflecting a reduction in Base Quantity for each Hour during an Assignment Period after giving effect to the Assignment Schedule (each, a “Base Quantity Reduction”), which Base Quantity Reduction for each Hour will equal (i) the Assigned Prepay Quantity for such Hour, multiplied by (ii) the result of (A) the APC Contract Price applicable for such Hour, divided by (B) the [NOTE: To list the result of the following formula as determined at pricing: Front End Fixed Price + (Active Swap Fee – Standby Swap Fee).]; provided that if the Base Quantity Reduction for any Hour would result in a Base Quantity of less than zero, then the Assigned Prepay Quantity for such Hour will be reduced to the closest whole MWh such that the Base Quantity is not reduced below zero.
3.5. The APC Contract Price, which as set forth in Section 1.6 above must be a fixed price unless Issuer, Purchaser and J. Aron agree to appropriate changes to the relevant documents to accommodate a floating APC Contract Price.
3.6. The Assigned Delivery Point for all Assigned Energy.
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4 3.7. The Assigned Product included in the Assigned Rights and Obligations, which Assigned Product may not include any Product other than (a) Energy, (b) associated RECs, and (c) other product included within the sale of Energy and not separately delivered from Energy, provided that the APC Contract Price must be inclusive of any amounts due in respect of all Assigned Product, provided furthermore that Assigned Product may not in any case include capacity.
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5 ASSIGNMENT SCHEDULE
Assigned Product: [____]
Assigned Delivery Point: [____]
Assigned Prepay Quantity: As set forth in Appendix 2; provided that (i) all Assigned Products shall be delivered pursuant to the Limited Assignment Agreement during the Assignment Period as provided in Appendix 1 and (ii) the Assigned Prepay Quantity is defined for the convenience of PPA Buyer and J. Aron and shall have no impact on the obligations of the Parties under the Limited Assignment Agreement.
APC Contract Price: $[____]/MWh
Assignment Period: [____]
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1 FORM OF LIMITED ASSIGNMENT AGREEMENT
NOTE: Purchaser may include the form included in this Annex II as an exhibit to any PPA executed by Purchaser and include the following or similar language in the PPA: “[Seller] agrees that [Buyer] may assign a portion of its rights and obligations under this Agreement to J. Aron & Company LLC (“J. Aron”) at any time upon not less than [___] days’ notice by delivering a written request for such assignment, which request must include a proposed assignment agreement in the form attached hereto as [Exhibit ___], with the blanks in such form completed in [Buyer’s] sole discretion. Provided that [Buyer] delivers a proposed assignment agreement complying with the previous sentence, [Seller] agrees to (i) comply with J. Aron’s reasonable requests for know-your-customer and similar account opening information and documentation with respect to [Seller], including but not limited to information related to forecasted generation, credit rating, and compliance with anti-money laundering rules, the Dodd-Frank Act, the Commodity Exchange Act, the Patriot Act and similar rules, regulations, requirements and corresponding policies; and (ii) promptly execute such assignment agreement and implement such assignment as contemplated thereby, subject only to the countersignature of J. Aron and Company, LLC and [Buyer].”
LIMITED ASSIGNMENT AGREEMENT
This Limited Assignment Agreement (this “Assignment Agreement” or “Agreement”) is entered into as of [____], by and among [____], a [____] (“PPA Seller”), Clean Power Alliance of Southern California, a California joint powers authority (“PPA Buyer”), and J.
Aron & Company LLC, a New York limited liability company (“J. Aron”), and relates to that certain power purchase agreement (the “PPA”) between PPA Buyer and PPA Seller as described on Appendix 1. Unless the context otherwise specifies or requires, capitalized terms used but not defined in this Agreement have the meanings set forth in the PPA.
In consideration of the premises above and the mutual covenants and agreements herein set forth, PPA Seller, PPA Buyer and J. Aron (the “Parties” hereto; each is a “Party”) agree as follows:
1. Limited Assignment and Delegation.
(a) PPA Buyer hereby assigns, transfers and conveys to J. Aron all right, title and interest in and to the rights of PPA Buyer under the PPA to receive delivery of the products described on Appendix 1 (the “Assigned Products”) during the Assignment Period (as defined in Appendix 1), as such rights may be limited or further described in the “Further Information” section on Appendix 1 (the “Assigned Product Rights”). All Assigned Products shall be delivered pursuant to the terms and conditions of this Agreement during the Assignment Period as provided in Appendix 1. All other rights of PPA Buyer under the PPA are expressly reserved for PPA Buyer. (b) PPA Buyer hereby delegates to J. Aron the obligation to pay for all Assigned Products that are actually delivered to J. Aron pursuant to the Assigned Product Rights during the Assignment Period (the “Delivered Product Payment Obligation” and together with the Assigned Product Rights, collectively the “Assigned Rights and Obligations”); provided that (i) all other obligations of PPA Buyer under the PPA are expressly retained by PPA Buyer and PPA Buyer shall be solely responsible for any amounts due to PPA Seller that are not directly related to Assigned Products; and (ii) the Parties acknowledge and agree that PPA Seller will only be obligated to deliver a single consolidated invoice during the Assignment Period (with a copy to J. Aron Agenda Page 127 of 570
2 consistent with Section 10 hereof). To the extent J. Aron 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 shall have the option to make such payment and that it will be an Event of Default pursuant to Section [__] if PPA Buyer does not make such payment within five (5) Business Days of receiving Notice of such non-payment from PPA Seller, in which case PPA Buyer will exercise its reimbursement claim pursuant to Section 6.5 of the Clean Energy Purchase Contract, dated as of [____], by and between PPA Buyer and California Community Choice Financing Authority (the “Clean Energy Purchase Contract”).
(c) J. Aron hereby accepts and PPA Seller hereby consents and agrees to the assignment, transfer, conveyance and delegation described in clauses (a) and (b) above. (d) All scheduling of Assigned Products and other communications related to the PPA shall take place pursuant to the terms of the PPA; provided that (i) title to Assigned Product will pass from PPA Seller to J. Aron upon delivery by PPA Seller of Assigned Product in accordance with the PPA; (ii) PPA Buyer will provide copies to J. Aron of any Notice of a Force Majeure Event or Event of Default or default, breach or other occurrence that, if not cured within the applicable grace period, could result in an Event of Default contemporaneously upon delivery thereof to PPA Seller and promptly after receipt thereof from PPA Seller; (iii) PPA Seller will provide copies to J. Aron of annual forecasts of Energy and monthly forecasts of available capacity and Energy provided pursuant to Section [__] of the PPA; (iv) PPA Seller will provide copies to J. Aron of all invoices and supporting data provided to PPA Buyer pursuant to Section [__], provided 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, including pursuant to Section [__], will be resolved solely between PPA Buyer and PPA Seller and therefore PPA Seller will not be obligated to deliver copies of any communications relating thereto to J. Aron; and (v) PPA Buyer and PPA Seller, as applicable, will provide copies to J. Aron of any other information reasonably requested by J. Aron relating to Assigned Products.
(e) PPA Seller acknowledges that (i) J. Aron intends to immediately transfer title to any Assigned Products received from PPA Seller through one or more intermediaries such that all Assigned Products will be re-delivered to PPA Buyer; and (ii) in the event that PPA Buyer fails to pay the relevant intermediary entity for any such Assigned Products, the receivables owed by PPA Buyer for such Assigned Products (“PPA Buyer Receivables”) may be transferred to J. Aron. To the extent any such PPA Buyer Receivables are transferred to J. Aron, J. Aron may transfer such PPA Buyer Receivables to PPA Seller and apply the face amount thereof as a reduction to any Delivered Product Payment Obligation. Thereafter, PPA Seller shall be entitled to pursue collection on such PPA Buyer Receivables directly against PPA Buyer. (f) On or before the commencement of the Assignment Period, The Goldman Sachs Group (“Guarantor”), Inc. will issue, in favor of PPA Seller, a guaranty of J. Aron’s payment obligations under this Assignment Agreement substantially in the form of Appendix 3 attached hereto (“Guaranty”).
(g) Notwithstanding any other provision of this Agreement, 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. Nothing in this Agenda Page 128 of 570
3 Agreement modifies or amends any rights or obligations of PPA Buyer and PPA Seller under the PPA with respect to CAISO revenues and costs. As used in this clause (g), the following terms have the meanings specified below.
“CAISO” means California Independent System Operator or its successor. “CAISO Tariff” means CAISO’s Federal Energy Regulatory Commission approved tariff, as modified, amended or supplemented from time to time. “Inter-SC Trade” or “IST” has the meaning set forth in the CAISO Tariff. “Scheduling Coordinator” 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.
(h) The Assigned Prepay Quantity set forth in Appendix 2 relates to obligations by and between J. Aron and PPA Buyer and has no impact on PPA Seller’s rights and obligations under the PPA.
2. Assignment Early Termination.
(a) The Assignment Period may be terminated early upon the occurrence of any of the following:
(1) delivery of a written notice of termination specifying a termination date by either J. Aron or PPA Buyer to each of the other Parties;
(2) delivery of a written notice of termination specifying a termination date by PPA Seller to each of J. Aron and PPA Buyer following J. Aron’s failure to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such payment is not made by J. Aron within five (5) business days following receipt by J. Aron and PPA Buyer of written notice; (3) delivery of a written notice by PPA Seller if any of the events described in the definition of Bankrupt in the PPA occurs with respect to J. Aron; or (4) delivery of a written notice by J. Aron if any of the events described in in the definition of Bankrupt in the PPA occurs with respect to PPA Seller. (b) The Assignment Period will end at the end of last delivery hour on the date specified in the termination notice provided pursuant to Section 2(a), which date shall not be earlier than the end of the last day of the calendar month in which such notice is delivered if termination is pursuant to clause 2(a)(1) or 2(a)(2) above. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the early termination of the Assignment Period, provided that (i) J. Aron shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period (c) The Assignment Period will automatically terminate upon the expiration or early termination of the PPA. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the expiration of or early termination of the PPA, provided that Agenda Page 129 of 570
4 (i) J. Aron shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
(d) The Assignment Period will automatically terminate upon delivery by Guarantor of a notice of termination of the Guaranty. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the termination of the Assignment Period, provided that (i) J. Aron shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
3. Representations and Warranties. The PPA Seller and the PPA Buyer represent and warrant to J. Aron that (a) the PPA is in full force and effect; (b) 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; and (c) all of its obligations under the PPA required to be performed on or before the Assignment Period Start Date have been fulfilled.
4. Notices. Any notice, demand, or request required or authorized by this Assignment Agreement to be given by one Party to another Party shall be delivered in accordance with Article [__] of the PPA and to the addresses of each of PPA Seller and PPA Buyer specified in the PPA. PPA Buyer agrees to notify J. Aron of any updates to such notice information, including any updates provided by PPA Seller to PPA Buyer. Notices to J. Aron shall be provided to the following address, as such address may be updated by J. Aron from time to time by notice to the other Parties:
J. Aron & Company LLC
200 West Street
New York, New York 10282-2198
Email: [email protected]
5. Miscellaneous. Section [__] (Buyer’s Representations and Warranties), Article [__] (Confidential Information), Sections [__] (Severability), [__] (Counterparts), [__] (Amendments), [__] (No Agency, Partnership, Joint Venture or Lease), [__] (Mobile-Sierra), [__] (Electronic Delivery), Section [__] (Binding Effect) and [__] (No Recourse to Members of Buyer) of the PPA are incorporated by reference into this Agreement, mutatis mutandis, as if fully set forth herein.
6. U.S. Resolution Stay Provisions. 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 for the purposes of such incorporation, (i) J. Aron shall be deemed to be a Regulated Entity, (ii) each of PPA Buyer and PPA Seller shall be deemed to be an Adhering Party, and (iii) this Agreement shall be deemed a Protocol Covered Agreement. In the event of any inconsistencies between this Agreement and the ISDA U.S. Stay Protocol, the ISDA U.S. Stay Protocol will prevail.
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5 7. Governing Law, Jurisdiction, Waiver of Jury Trial. (a) Governing Law. This Assignment Agreement and the rights and duties of the parties under this Assignment Agreement will be governed by and construed, enforced and performed in accordance with the laws of the State of California, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws.
(b) Jurisdiction. Each party submits to the exclusive jurisdiction of the federal courts of the United States of America for the Southern District of California sitting in the city and county of Los Angeles.
(c) Waiver of Right to Trial by Jury. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this assignment agreement.
[Remainder of Page Intentionally Blank]
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6 IN WITNESS WHEREOF, the Parties have executed this Assignment Agreement effective as of the date first set forth above.
[PPA SELLER]
By:
Name:
Title:
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
By:
Name:
Title:
J. ARON & COMPANY LLC
By:
Name:
Title:
Execution and delivery of the foregoing Assignment Agreement is hereby approved.
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By:
Name:
Title:
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7 Appendix 1
Assigned Rights and Obligations
PPA: “PPA” means that certain Power Purchase and Sale Agreement dated [____], by and between Clean Power Alliance and [____], as amended from time to time. “Assignment Period” means the period beginning on [___________] and extending until [___________], provided that in no event shall the Assignment Period extend past the earlier of (i) the termination of the Assignment Period pursuant to Section 2 of the Assignment Agreement and (ii) the end of the Delivery Term under the PPA; provided that applicable provisions of this Agreement shall continue in effect after termination of the Assignment Period to the extent necessary to enforce or complete, duties, obligations or responsibilities of the Parties arising prior to the termination.
Assigned Product: “Assigned Products” include [____].
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 pursuant to Section [__] of 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 J. Aron and Clean Power Alliance upon twenty (20) Business Days’ notice, which change shall be effective as of the first day of the next calendar month, unless otherwise agreed. All Assigned Product delivered by PPA Seller to J. Aron shall be a sale made at wholesale, with J. Aron reselling all such Assigned Product.
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8 Appendix 2
Assigned Prepay Quantity
[NOTE: To be set forth in a monthly volume schedule.]
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10 Appendix 3
Form of GSG Guaranty
[Date]
NAME
ADDRESS
Attention:
Ladies and Gentlemen:
For value received, The Goldman Sachs Group, Inc. (the “Guarantor”), a corporation duly organized under the laws of the State of Delaware, hereby unconditionally guarantees the prompt and complete payment when due, whether by acceleration or otherwise, of all obligations and liabilities, whether now in existence or hereafter arising, of J. Aron & Company LLC, a subsidiary of the Guarantor and a limited liability company duly organized under the laws of the State of New York (the “Company”), to COUNTERPARTY NAME (the “Counterparty”) arising out of or under the Limited Assignment Agreement among the Company, the Counterparty and Clean Power Alliance dated as of [____]. This Guaranty is one of payment and not of collection.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of any obligation or liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking of other action by Counterparty against, and any other notice to, the Company, the Guarantor or others.
Counterparty may at any time and from time to time without notice to or consent of the Guarantor and without impairing or releasing the obligations of the Guarantor hereunder:
(1) agree with the Company to make any change in the terms of any obligation or liability of the Company to Counterparty, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of the Company to Counterparty, (3) exercise or refrain from exercising any rights against the Company or others, or (4) compromise or subordinate any obligation or liability of the Company to Counterparty including any security therefor. Any other suretyship defenses are hereby waived by the Guarantor.
This Guaranty shall continue in full force and effect until the opening of business on the fifth business day after Counterparty receives written notice of termination from the Guarantor. It is understood and agreed, however, that notwithstanding any such termination this Guaranty shall continue in full force and effect with respect to the obligations and liabilities set forth above which shall have been incurred prior to such termination.
The Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in whole or in part, without prior written consent of the Counterparty, and any purported Agenda Page 135 of 570
11 assignment or delegation absent such consent is void, except for (i) an assignment and delegation of all of the Guarantor’s rights and obligations hereunder in whatever form the Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of the Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise, and (ii) the Guarantor may transfer this Guaranty or any interest or obligation of the Guarantor in or under this Guaranty, or any property securing this Guaranty, to another entity as transferee as part of the resolution, restructuring or reorganization of the Guarantor upon or following the Guarantor becoming subject to a receivership, insolvency, liquidation, resolution or similar proceeding. Upon any such delegation and assumption or transfer of obligations, the Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption or transfer.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
GUARANTOR AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS
LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTY.
In the event the Guarantor becomes subject to a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together, the "U.S. Special Resolution Regimes"), the transfer of this Guaranty, and any interest and obligation in or under, and any property securing, this Guaranty, from the Guarantor will be effective to the same extent as the transfer would be effective under such U.S. Special Resolution Regime if this Guaranty, and any interest and obligation in or under this Guaranty, were governed by the laws of the United States or a state of the United States. In the event the Company or the Guarantor, or any of their affiliates, becomes subject to a U.S. Special Resolution Regime, default rights against the Company or the Guarantor with respect to this Guaranty are permitted to be exercised to no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if this Guaranty was governed by the laws of the United States or a state of the United States.
Very truly yours,
THE GOLDMAN SACHS GROUP, INC.
By: _______
Authorized Officer
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EXHIBIT G
COMMUNICATIONS PROTOCOL FOR BASE QUANTITIES
This Exhibit G (“Communications Protocol”) addresses the Scheduling of Base Quantities to be delivered and received at the Base Delivery Point. It is intended to be attached to both the Master Power Supply Agreement and the Clean Energy Purchase Contract, each as defined below.
1. ADDITIONAL DEFINED TERMS
In addition to the terms defined in Article I of this Agreement, the following terms used in this Communications Protocol shall have the following meanings:
1.1. “Agreement” means (i) when this Communications Protocol is attached to the Master Power Supply Agreement, the Master Power Supply Agreement and (ii) when this Communications Protocol is attached to the Clean Energy Purchase Contract, the Clean Energy Purchase Contract.
1.2. “Clean Energy Purchase Contract” means that certain Clean Energy Purchase Contract dated as of [_____], 2023 by and between Issuer and Project Participant.
1.3. “Delivery Scheduling Entity” means Prepay LLC or a Person designated by Prepay LLC, as set forth in Attachment 4 hereto or in a subsequent written notice to Issuer and the Project Participant.
1.4. “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).
1.5. “Master Power Supply Agreement” means that certain Master Power Supply Agreement dated as of [_____], 2023 by and between Prepay LLC and Issuer that is specified as relating to the Clean Energy Purchase Contract with Project Participant.
1.6. “Operational Nomination” has the meaning specified in Section 4.1.1.
1.7. “Prepay LLC” means Aron Energy Prepay 16 LLC, a Delaware limited liability company.
1.8. “Project Participant” means Clean Power Alliance of Southern California, a California joint powers authority.
1.9. “Receipt Scheduling Entity” for any Delivery Point means the Project Participant, unless the Clean Energy Purchase Contract has been suspended or terminated, in which case the Agenda Page 137 of 570
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Receipt Scheduling Entity will be Issuer or a Person designated by Issuer for such Delivery Point in accordance with this Communications Protocol.
1.10. “Relevant Contract” means the Master Power Supply Agreement and the Clean Energy Purchase Contract.
1.11. “Relevant Party” means Issuer, Prepay LLC or the Project Participant.
1.12. “Relevant Third Party” means any Person that is (i) a Transmission Provider that will or is intended to transport Product to be delivered or received under the Agreement, (ii) an independent system operator or control area that coordinates the Scheduling of Product at the Base Delivery Point, (iii) Scheduling receipt of Product by Issuer or for the account of Issuer to the extent such Product has been delivered to Issuer or for the account of Issuer under the Master Power Supply Agreement, and (iv) delivering Product to Issuer or for the account of Issuer to the extent such Product is intended to be re-delivered ultimately to the Project Participant or for the account of the Project Participant under the Clean Energy Purchase Contract.
1.13. “Scheduling Entities” means the Receipt Scheduling Entity and the Delivery Scheduling Entity.
2. AGREEMENTS OF RELEVANT PARTIES
Each Relevant Party that is a party to Relevant Contract to which this Communications Protocol is attached acknowledges that this Communications Protocol sets forth certain obligations that may be delegated to other Relevant Parties that are not parties to such Relevant Contracts. In connection therewith:
2.1 Reliance on Scheduling Entity. Each Relevant Party shall be entitled to rely exclusively on any communications or directions given by a Delivery Scheduling Entity or Receipt Scheduling Entity, in each case to the extent such communications are permitted hereunder.
2.2 Performance of Communications Protocol. Each Relevant Party to a Relevant Contract shall cause its counterparty to each other Relevant Contract to comply with the provisions of this Communications Protocol as the provisions apply to such counterparty to the extent required to perform the obligations of the Relevant Party under the Relevant Contract.
2.3 Third Party Beneficiaries. To the extent this Communications Protocol purports to give any Relevant Party (a “Beneficiary”) rights vis-à-vis any other Relevant Party (a “Burdened Party”) with whom such Beneficiary does not have privity under a Relevant Contract, such Beneficiary shall be deemed to be a third party beneficiary of each Relevant Contract to which the Burdened Party is a party to the Agenda Page 138 of 570
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extent necessary or convenient to enforce the obligations of the Burdened Party under this Communications Protocol.
2.4 Amendment of Relevant Contracts. No Relevant Party shall amend, waive or otherwise modify any provision of any Relevant Contract to which it is a party without the consent of each other Relevant Party whose rights or obligations would be materially and adversely affected by such amendment, waiver or modification as it relates to this Communications Protocol.
2.5 Amendment of Communications Protocol. No Relevant Party shall amend any provision of this Communications Protocol in a Relevant Contract without the consent of each other Relevant Party.
2.6 Waiver of Communications Protocol. No Relevant Party shall waive any provision of this Communications Protocol in a Relevant Contract without the consent of each other Relevant Party whose rights or obligations would be materially and adversely affected by such waiver.
3 DESIGNATION AND REPLACEMENT OF SCHEDULING ENTITIES
3.1 Designation of Delivery Scheduling Entity. Prepay LLC may designate a new Delivery Scheduling Entity upon thirty (30) days written notice to Issuer substantially in the form of Attachment 4. Any Scheduling Entity designated in accordance with this Section 3.1 shall commence service at the beginning of a Month, unless mutually agreed in writing between Prepay LLC and Issuer.
3.2 Assumption by Receipt Scheduling Entity. If any Delivery Scheduling Entity (other than Prepay LLC) persistently fails to perform its obligations as contemplated under this Communications Protocol, the Receipt Scheduling Entity may, by notice to Prepay LLC, require that Prepay LLC deal directly with the Receipt Scheduling Entity until a new Delivery Scheduling Entity is designated in accordance with this Section 3.1.
3.3 Scheduling Coordinator. Project Participant shall designate a scheduling coordinator for the purposes of accepting Base Product delivery at the Base Delivery Point through the scheduling of ISTs.
4 INFORMATION EXCHANGE AND COMMUNICATION BETWEEN ISSUER AND
PREPAY LLC
4.1 Communication of Operational Nomination Details.
4.1.1 Not later than three Days prior to each Day during which Base Product is required to be delivered under the Agreement, the Receipt Scheduling Entity for such Delivery Point may deliver an operational nomination in Agenda Page 139 of 570
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writing (the “Operational Nomination”) indicating any inability of a Project Participant to receive all of its Base Quantities during such Day, which Operational Nomination shall be without prejudice to any party’s rights under the Relevant Contracts for failure to receive Base Quantities. If no changes to Base Quantities are so submitted, the Operational Nomination shall be deemed to nominate the full Base Quantities required to be delivered on a Day.
4.1.2 Not later than three Days prior to each Day during which Base Product is required to be delivered under the Agreement, the Delivery Scheduling Entity for such Delivery Point may revise the Operational Nomination to indicate any inability of Prepay LLC to deliver all Base Quantities during such Day, which revised Operational Nomination shall be without prejudice to any party’s rights under the Relevant Contracts for failure to deliver Base Quantities.
4.2 Event-specific Communications.
4.2.1 Remarketing Notices issued by Issuer under the Master Power Supply Agreement shall be substantially in the form of Attachment 2 hereto. Any such notices to remarket must be delivered directly to Prepay LLC and the Delivery Scheduling Entity.
4.2.2 Each Scheduling Entity shall notify Prepay LLC, Issuer and the Project Participant as soon as practicable in the event of: (i) any deficiencies in Scheduling related to such Scheduling Entity; (ii) any deficiencies in Scheduling related to the other such Scheduling Entity; and (iii) any issues with Relevant Third Parties that that would reasonably be expected to create issues related to Product Scheduling under the Relevant Contract. 5 ACCESS AND INFORMATION
5.1 Verification of Product Scheduled. In addition to the delivery of and access to the records and data required pursuant to the Agreement, each Relevant Party agrees to provide relevant records from itself and other Relevant Third Parties necessary to document and verify Product Scheduled within and after the Month as needed to facilitate the Relevant Contracts.
5.2 View Rights. To the extent requested by a Delivery Scheduling Entity or Prepay LLC, the Receipt Scheduling Entities will use Commercially Reasonable Efforts to cooperate with the Delivery Scheduling Entity and Prepay LLC to ensure that Delivery Scheduling Entity and Prepay LLC has sufficient agency view rights from each such Scheduling Entity to allow Prepay LLC to view Base Product Scheduling at the Base Delivery Point.
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6 NOTICES
Any notice, demand, request or other communication required or authorized by this Communications Protocol to be given by one Relevant Party to another Relevant Party shall be in writing, except as otherwise expressly provided herein. It shall either be sent by facsimile (with receipt confirmed by telephone and electronic transmittal receipt), courier, or personally delivered (including overnight delivery service) to the representative of the other Relevant Party designated in Attachment 1 hereto. Any such notice, demand, or request shall be deemed to be given (i) when sent by facsimile confirmed by telephone and electronic transmittal receipt or (ii) when actually received if delivered by courier or personal delivery (including overnight delivery service).
Each Relevant Party shall have the right, upon written notice to the other Relevant 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.
7 NO IMPACT ON CONTRACTUAL OBLIGATIONS
Except as expressly set forth herein or in an applicable Relevant Contract, nothing in this Communications Protocol nor any Relevant Party’s actions or inactions hereunder shall have any impact on any Relevant Party’s rights or obligations under the Relevant Contracts.
8 ATTACHMENTS
Attachment 1 - Key Personnel
Attachment 2 - Remarketing Notice Form
Attachment 3 - Designation of Alternate Base Delivery Points Form Attachment 4 - Designation of Scheduling Entities Form
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Attachment 1
Key Personnel
Prepay LLC Marketing Personnel:
Kenan Arkan
Sales and Trading
Telephone: (212) 357-2542
[email protected]
Prepay LLC Scheduling Personnel:
Scheduling Team
Email: [email protected]
Direct Phone: (212) 902-8148
Fax: 212.493.9847
Carly Norlander
ICE Chat: cnorlander1
Email: [email protected]
Direct Phone: (403) 233-9299
Fax: (212) 493-9847
Other Prepay LLC Personnel:
Eric Hudson
Telephone: (212) 855-0880
[email protected]
Patricia Hazel
Telephone: (212) 855-0880
[email protected]
Andres E. Aguila
Telephone: (212) 855-6008
Fax: (212) 291-2124
[email protected]
Issuer Personnel:
[email protected] and [email protected]
Project Participant Personnel:
[email protected]
Agenda Page 142 of 570
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Attachment 2
Remarketing Notice Form
Date: [_____________]
To: Prepay LLC Scheduling
From: Project Participant Scheduling
This notice is being delivered pursuant to that certain Master Power Supply Agreement (the “Master Power Supply Agreement”) dated as of [_____], 2023 by and between Aron Energy Prepay 16 LLC (“Prepay LLC”) 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) (“Issuer”) and relates to the Clean Energy Purchase Contract (the “Clean Energy Purchase Contract”) dated as of [_____], 2023 by and between Issuer and Clean Power Alliance of Southern California (“Project Participant”).
Capitalized terms not defined herein are defined in the Master Power Supply Agreement.
Check the box to indicate type of Remarketing Notice (The numbers of the Primary (“P”) and Alternate (“A”) Delivery Points below correspond to those same Primary Delivery Points and Alternate Delivery Points set forth in Exhibit A-1 of the Agreement, or as may be designated by the Parties from time to time):
Monthly Remarketing Notice:
Month(s) for which remarketing is requested: _____________________, 20__ through _______________________, 20__.
Pursuant to Section 3(b) of Exhibit C of the Clean Energy Purchase Contract, Project Participant requests that Prepay LLC remarket in such Month(s) the following Base Quantities of Product required to be delivered at the following Delivery Points:
Delivery Point (P/A, #) MWh/ Hour for each Hour in the Month Daily Remarketing Notice:
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Hours for which remarketing is requested: _____________________, 20__ through _______________________, 20__.
Pursuant to Section 3(c) of Exhibit C of the Clean Energy Purchase Contract, Project Participant requests that Prepay LLC remarket for such Hours the following Base Quantities of Product required to be delivered at the following Delivery Point:
Delivery Point (P/A, #) MWh/Hour
Submitted by Project Participant:
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
By:____________________
Name:
Title:
Agenda Page 144 of 570
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Attachment 3
Designation of Alternate Base Delivery Points Form
This designation is delivered pursuant to that certain Master Power Supply Agreement (the “Master Power Supply Agreement”) dated as of [_____], 2023 by and between Aron Energy Prepay 16 LLC (“Prepay LLC”) 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) (“Issuer”) and the Clean Energy Purchase Contract (the “Clean Energy Purchase Contract”) dated as of [_____], 2023 by and between Issuer and Clean Power Alliance of Southern California (“Project Participant”). Capitalized terms not defined herein are defined in the Master Power Supply Agreement and the Clean Energy Purchase Contract. [Project Participant and/or Issuer] hereby proposes the following Alternate Delivery Points for deliveries of Energy that would otherwise be made at the specified Primary Delivery Point:
ALTERNATE
DELIVERY POINT
PRIMARY
DELIVERY POINT
AFFECTED
COMMODITY
REFERENCE PRICE
PRICING POINT
ADDITIONAL
RESTRICTIONS
1 [e.g.
2 Vol. Limit:____
3 Time Limit:]___
(etc.)
Unless otherwise agreed among Prepay LLC, Issuer and Project Participant, an Alternate Delivery Point shall utilize the same Commodity Reference Price as the Primary Delivery Point it replaces or otherwise affects. Project Participant is not required to agree or accept this designation (or any change to the Commodity Reference Price) if it is being submitted by Issuer pursuant to the Master Power Supply Agreement only.
AGREED AND
ACCEPTED BY PREPAY
LLC:
(if required) AGREED TO
AND ACCEPTED BY
PROJECT
PARTICIPANT:
(if required) AGREED TO
AND ACCEPTED BY
ISSUER:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
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Attachment 4
Designation of Scheduling Entities Form
This designation is being delivered pursuant to that certain Master Power Supply Agreement (the “Master Power Supply Agreement”) dated as of [_____], 2023 by and between J. Aron Energy Prepay 16 LLC (“Prepay LLC”) 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) (“Issuer”) and relates to the Clean Energy Purchase Contract (the “Clean Energy Purchase Contract”) dated as of [_____], 2023 by and between Issuer and Clean Power Alliance of Southern California (“Project Participant”).
Capitalized terms not defined herein are defined in the Master Power Supply Agreement and Clean Energy Purchase Contract.
[If delivered by Project Participant:
Receipt Scheduling Entity:
Delivery Point: ________________________
Effective Date(s) of Service of Receipt Scheduling Entity (full Months only):
________________, ______ to ________________, ______, if applicable Notice Information for Receipt Scheduling Entity:
Name: ______________________________
Attention: ______________________________
Address: ______________________________
______________________________
Telephone: ______________________________
Fax: ______________________________]
[If delivered by Prepay LLC:
Delivery Scheduling Entity:
Delivery Point: ________________________
Effective Date(s) of Service of Delivery Scheduling Entity (full Months only):
________________, ______ to ________________, ______, if applicable Agenda Page 146 of 570
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Notice Information for Delivery Scheduling Entity:
Name: ______________________________
Attention: ______________________________
Address: ______________________________
______________________________
Telephone: ______________________________
Fax: ______________________________]
Submitted by:
[Project Participant or Prepay LLC]
By: _____________________________
Name: _____________________________
Title: _____________________________
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EXHIBIT H
PRICING AND OTHER TERMS
Administrative Fee: $0.50/MWh
Delivery Period: The period beginning on and including [____] and ending at the end of the Day before [____]; provided that the Delivery Period shall end immediately upon termination of deliveries of Product under the Master Power Supply Agreement pursuant to Article XVII thereof or early termination of the Clean Energy Purchase Contract pursuant to Article XVII hereof.
Initial Reset Period: The period beginning at the beginning of the Day on [____] and ending at the end of the last Day of the Month preceding the last Month of the Initial Interest Rate Period (as defined in the Bond Indenture).
Minimum Discount
Percentage:
An Available Discount Percentage as determined under the Re-Pricing Agreement of [___]%.
Monthly Discount Percentage: For each Month of the Initial Reset Period, [____]%, and for each Month of any other Reset Period, the percentage
determined by the Calculation Agent as defined in and
pursuant to the Re-Pricing Agreement, exclusive of any
Annual Refund.
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EXHIBIT I
FORM OF CLOSING CERTIFICATE
CLOSING CERTIFICATE OF PURCHASER
__________, 2023
Re: California Community Choice Financing Authority
[Clean Energy Project Revenue Bonds]
The undersigned _____________________________ of Clean Power Alliance of Southern California (“Purchaser”) hereby certifies as follows in connection with the Power Supply Contract dated as of __________, 2023 (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 joint powers authority, duly organized and validly existing and 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, Purchaser has duly authorized and approved the execution and delivery of, and the performance by 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 Purchaser.
4. The authorization, execution and delivery of the Agreement and compliance with the provisions on 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.
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5 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 Purchaser is a party or to which Purchaser or any of its property or assets are subject, and no event has occurred and is continuing which constitutes, or with the passage of time or the giving of notice, or both, would constitute, a default or event of default by Purchaser under any of the foregoing.
6. Payments to be made by Purchaser under the Agreement shall constitute operating expenses of Purchaser's power supply system payable solely from the revenues and other available funds of Purchaser's power supply system as a cost of purchased electricity.
7. No litigation, proceeding or tax challenge is pending or, to its knowledge, threatened, against Purchaser in any court or administrative body which would (a) contest the right of the officials of Purchaser to hold and exercise their respective positions, (b) contest the due organization and valid existence of Purchaser, (c) contest the validity, due authorization and execution of the Agreement, or (d) attempt to limit, enjoin or otherwise restrict or prevent Purchaser from executing, delivering and performing the Agreement, nor to the knowledge of 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 Purchaser of its obligations under the Agreement have been duly obtained.
9. The representations and warranties of 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 Purchaser contained in the Preliminary Official Statement dated [____], 2023 and the Official Statement dated [_____], 2023 with respect to the Bonds, including Appendix A thereto (together, the “Official Statement”), fairly and accurately describe and summarize the financial and operating position of Purchaser for the periods shown therein, and such statements and information did not as of the respective dates 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. To Purchaser's knowledge, no event affecting Purchaser has occurred since the date of the Official Statement which should be disclosed therein in order to make the statements and Agenda Page 150 of 570
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information with respect to 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.
CLEAN POWER ALLIANCE OF SOUTHERN
CALIFORNIA
By
Name:
Title:
Agenda Page 151 of 570
1 CLEAN ENERGY PROJECT OPERATIONAL SERVICES AGREEMENT
This Clean Energy Project Operational Services Agreement (this “Agreement”) is made and entered into as of [_______], 2023, by and between California Community Choice Financing Authority (“CCCFA”) and Clean Power Alliance of Southern California (“CPA”) with respect to the Clean Energy Project (defined below). CCCFA and CPA may be referred to individually herein as a “Party” and collectively as the “Parties”.
W I T N E S S E T H:
WHEREAS, CPA is a “community choice aggregator” under the Public Utilities Code of the State of California, as amended; and
WHEREAS, CCCFA is a joint exercise of powers authority under and pursuant to the Joint Exercise of Powers Act, constituted as Chapter 5 of Division 7 of Title 1 of the California Government Code, being Section 6500 and following, as amended (the “Joint Power Act”), and pursuant to the Joint Power Act, a Joint Powers Agreement by and among the Members of CCCFA named therein, including CPA (as the same may be amended or supplemented from time to time in accordance with its terms, the “Joint Powers Agreement”); and
WHEREAS, CCCFA’s purpose is to assist its Members, including CPA, by undertaking the financing or refinancing of energy prepayments that can be financed with tax advantaged bonds and other obligations on behalf of one or more of the Members by, among other things, issuing or incurring bonds and entering into related contracts with Members; and
WHEREAS, CCCFA and CPA are entering into a Clean Energy Purchase Contract, dated [_______ __], 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the “Clean Energy Purchase Contract”), pursuant to which CCCFA has agreed to supply Energy to CPA under the terms set forth therein; and
WHEREAS, in order to provide such Energy to CPA under the Clean Energy Purchase Contract, CCCFA is entering into a Master Power Supply Agreement, dated [_________], 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the “Master Power Supply Agreement”), between CCCFA, as buyer, and Aron Energy Prepay 16 LLC, a Delaware limited liability company, as seller (the “Prepaid Seller”), under which it will make a prepayment to the Prepaid Seller for the purchase and delivery of such Energy; and
WHEREAS, in order to meet its obligations under the Master Power Supply Agreement, Prepaid Seller will enter into an Electricity Purchase, Sale and Service Agreement, dated as of [_________], 2023 (as amended, restated, supplemented or otherwise modified from time to time, the “ESSA”) with J. Aron & Company LLC, a New York limited liability company (“J. Aron); and WHEREAS, the Issuer will finance the prepayment under the Master Power Supply Agreement and related costs by issuing its Clean Energy Project Revenue Bonds, Series 2023[__] (the “Bonds”) pursuant to a Trust Indenture, dated as of [_______], 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the “Bond Indenture”), between CCCFA and [______________], as trustee (together with any successor or replacement trustee under the Bond Indenture, the “Trustee”); and
Agenda Page 152 of 570
2 WHEREAS, the issuance of the Bonds by CCCFA and relating undertakings of CCCFA under the Bond Indenture, the acquisition and sale of Energy and related undertakings of CCCFA under the Master Power Supply Agreement and the Clean Energy Purchase Contract, and the sale to CPA of such Energy and related undertakings of CPA under the Clean Energy Purchase Contract are referred to herein as the “Clean Energy Project”; and
WHEREAS, the Parties are entering into this Agreement in order to provide for the administration of certain operational matters relating to the Clean Energy Project; 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, the Parties agree as follows:
Section 1. Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Bond Indenture, the Clean Energy Purchase Contract, or the Master Power Supply Agreement, as applicable.
Section 2. Assignment Agreements. As contemplated by the ESSA, the Master Power Supply Agreement, and the Clean Energy Purchase Contract, CPA will enter into the Initial Assignment Agreements and may from time to time enter into additional Assignment Agreements to provide for the assignment of Assigned Product for delivery to CCCFA under the Master Power Supply Agreement and to CPA under the Clean Energy Purchase Contract. With respect to any Assignment Agreement, the Parties acknowledge and agree as follows:
(a) as of the date of this Agreement, CPA has entered into the Initial Assignment Agreements specified in the Clean Energy Purchase Contract; (b) subject to the terms of the applicable Assignment Letter Agreement, CPA may from time to time enter into additional Assignment Agreements with respect to all or a portion of its Base Quantities specified in the Clean Energy Purchase Contract; and (c) CPA shall determine in its sole discretion when and if any Assignment Agreement is entered into (subject to J. Aron’s consent as provided in the Clean Energy Purchase Contract) or terminated (subject to the terms of the Assignment Letter Agreement) and the underlying power purchase agreement and portion of the Base Quantities to which such Assignment Agreement relates.
Section 3. Scheduling and Delivery of Assigned Energy. Assigned Energy and any other Assigned Product delivered to CCCFA under the Master Power Supply Agreement shall be Scheduled by CPA for delivery to CCCFA under the Master Power Supply Agreement and for delivery to CPA under the Clean Energy Purchase Contract, and CCCFA shall have no responsibility for (a) any Scheduling or other operational requirements necessary for the delivery of Assigned Energy to CPA’s Assigned Delivery Point and the transfer of other Assigned Product to CPA, or (b) any accounting for under-deliveries or over-deliveries or other record-keeping requirements with respect to any Assigned Energy and other Assigned Product, all of which shall be the sole responsibility of CPA.
Section 4. Qualified Use; Remarketing of Base Energy. Any Base Quantities required to be delivered by the Prepaid Seller are required to be remarketed by the Prepaid Seller pursuant to the Master Power Supply Agreement except in the circumstances specified in Section 3.2 of the Master Power Supply Agreement. CPA shall be responsible for any notices or other communications required from CCCFA in Agenda Page 153 of 570
3 connection with such remarketing, as well for communications required for the Scheduling and delivery of Base Quantities under the communications protocol set forth in Exhibit G to the Master Power Supply Agreement and any other operational requirements related to the delivery and remarketing of Base Quantities under the Master Power Supply Agreement. CPA will account for any Base Quantities and subsequently remarketed, including accounting for any remediation of any such remarketing sales as may be required pursuant to the Qualifying Use Requirements and the terms of the Clean Energy Purchase Contract. CPA agrees to provide to CCCFA any information reasonably requested by it in order to comply with any reporting or record-keeping requirements related to such delivery and remarketing of Base Quantities, including such information relating to compliance with the Qualifying Use Requirements, as may be required pursuant to the Master Power Supply Agreement or the Bond Indenture.
Section 5. Directions, Consents, and Waivers. CCCFA may be requested or required from time to time to provide certain directions, consents, or waivers under the terms of the Master Power Supply Agreement, the Bond Indenture and the Re-pricing Agreement. Provided no event of default has occurred and is continuing with respect to CPA under the Clean Energy Purchase Contract, such direction, consent, or waiver shall only be provided by CCCFA in accordance with written instructions provided by CPA.
Section 6. Re-pricing Information. CCCFA shall provide, or cause Prepaid Seller to provide, to CPA such information as is required to be provided by Prepaid Seller to CCCFA in accordance with the Re-pricing Agreement at such times as are required under the Re-pricing Agreement. Provided no event of default has occurred and is continuing with respect to CPA under the Clean Energy Purchase Contract, any direction, consent, or waiver requested or required to be provided by CCCFA under the Re-pricing Agreement shall only be provided by CCCFA in accordance with written instructions provided by CPA.
Section 7. Project Administration Fee; Reimbursement and Refund of Operating Expenses. (a) Under the Clean Energy Purchase Contract, CPA is required to include in its payment to CCCFA for [______] of each year commencing [______ 202_], an annual Project Administration Fee determined by CCCFA based on the budgeted Operating Expenses of CCCFA for the next succeeding annual period, but only to the extent the expected Revenues (as defined in the Bond Indenture) for such annual period will not be sufficient to pay such Operating Expenses as the same become due. CCCFA agrees to allocate amounts received in respect of the Project Administration Fee to pay Operating Expenses (as defined in the Bond Indenture) as the same become due and payable during such annual period to the extent not paid from Revenues. In the event amounts paid in respect of the Project Administration Fee are not sufficient to pay such Operating Expenses when due, CPA agrees to pay such additional amounts as are necessary to pay such Operating Expenses upon receipt of notice of the amount due from the Trustee or CCCFA.
(b) As soon as practicable following the end of each annual period referred to in paragraph (a), CCCFA agrees to reconcile the amounts received in respect of the Project Administration Fee for such annual period with the Operating Expenses paid or accrued for such period. In the event that, following each such reconciliation, it is determined that the amounts received in respect of the Project Administration Fee during the applicable annual period exceed Operating Expenses paid or accrued for such period, CCCFA will provide written notice thereof to CPA and include the amount of such excess in its Annual Refund to CPA under the Clean Energy Purchase Contract.
Section 8. Notices. Notices and other information to be provided by a Party to the other Party under this Agreement shall be provided in accordance with Article XVI of the Clean Energy Purchase Contract.
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4 Section 9. Governing Law. This Agreement and the obligations of the Parties hereunder shall be governed by and determined in accordance with the laws of the State of California.
Section 10. 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.
[Signature Page Follows]
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5 IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
CALIFORNIA COMMUNITY CHOICE FINANCING
AUTHORITY
By: ________________________________
Name: ______________________________
Title: _______________________________
CLEAN POWER ALLIANCE OF SOUTHERN
CALIFORNIA
By: ________________________________
Name: ______________________________
Title: _______________________________
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FORM OF LIMITED ASSIGNMENT AGREEMENT
LIMITED ASSIGNMENT AGREEMENT
This Limited Assignment Agreement (this “Assignment Agreement” or “Agreement”) is entered into as of [_____], 2023 the “Limited Assignment Agreement Effective Date”) by and among Mohave County Wind Farm, LLC, a Delaware limited liability company (“PPA Seller”), Clean Power Alliance of Southern California, a California joint powers authority (“PPA Buyer”), and J. Aron & Company LLC, a New York limited liability company (“Financing Party”), and relates to that certain PPA defined in Appendix 1 hereto. Unless the context otherwise specifies or requires, capitalized terms used but not defined in this Agreement have the meanings set forth in the PPA.
In consideration of the premises above and the mutual covenants and agreements herein set forth, PPA Seller, PPA Buyer and Financing Party (the “Parties” hereto; each is a “Party”) agree as follows:
1. Limited Assignment and Delegation.
a. PPA Buyer hereby assigns, transfers and conveys to Financing Party all right, title and interest in and to the rights of PPA Buyer under the PPA to receive delivery of, or have made available to it, the products described in Appendix 1 (collectively, and subject to the exclusions specified in Appendix 1, the “Assigned Product”) during the Assignment Period (as defined in Appendix 1), as such rights may be limited or further described in the “Further Information” section in Appendix 1 (the “Assigned Product Rights”).
All other rights of PPA Buyer under the PPA are expressly reserved for PPA Buyer. b. PPA Buyer hereby delegates to Financing Party the obligation to pay for all Assigned Product that is actually delivered or made available to Financing Party pursuant to the Assigned Product Rights during the Assignment Period (the “Delivered Product Payment Obligation” and together with the Assigned Product Rights, collectively the “Assigned Rights and Obligations”). All other obligations of PPA Buyer under the PPA are expressly retained by PPA Buyer, including without limitation obligations with respect to the provision of PPA Buyer financial statements, Buyer Credit Notices, and Buyer Credit Support, and payment for any Product which is not included in the Assigned Product and any other amounts (including without limitation for Deemed Delivered Energy) owed under the PPA. To the extent Financing Party fails to pay for any Assigned Product by the due date for payment set forth in the PPA, PPA Buyer remains responsible for such payment, and it will be a Buyer Event of Default pursuant to PPA Section 11.1(a)(i) if PPA Buyer does not make such payment within five (5) Business Days of receiving notice of such non-payment from PPA Seller. c. Financing Party hereby accepts and agrees, and PPA Seller hereby consents, to the assignment, transfer, conveyance and delegation described in clauses (a) and (b) above.
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d. All scheduling of 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 during the Assignment Period (i) title to Assigned Product will pass from PPA Seller to Financing Party upon delivery by PPA Seller of Assigned Product in accordance with the PPA; (ii) PPA Buyer is hereby authorized by Financing Party to and shall act as Financing Party’s agent with regard to scheduling Assigned Product; (iii) PPA Buyer will provide copies to Financing Party of any Notice (as defined in the PPA) of a Force Majeure Event or Event of Default or default, breach or other occurrence that, if not cured within the applicable grace period, could result in an Event of Default contemporaneously upon delivery thereof to PPA Seller and promptly after receipt thereof from PPA Seller; (iv) PPA Buyer will forward to Financing Party copies of annual forecasts of Energy provided pursuant to Section 4.4(a) of the PPA and monthly forecasts of available capacity of the Generating Facility provided pursuant to Section 4.4(b) of the PPA; (v) PPA Buyer and PPA Seller will forward copies to Financing Party of all invoices provided to PPA Buyer pursuant to Section 8.1, provided 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, including pursuant to Section 8.4, will be resolved solely between PPA Buyer and PPA Seller and therefore PPA Seller will not be obligated to deliver copies of any communications relating thereto to Financing Party. PPA Buyer shall promptly reimburse PPA Seller for any additional costs or expenses reasonably and actually incurred by PPA Seller as a result of this subsection (d).
e. PPA Seller acknowledges that (i) PPA Buyer and Financing Party have advised PPA Seller that Financing Party intends to immediately transfer title to any Assigned Product received from PPA Seller through one or more intermediaries such that all Assigned Product will be re-delivered to PPA Buyer, and (ii) Financing Party has the right to purchase receivables due from PPA Buyer for any such Assigned Products. To the extent Financing Party purchases any such receivables due from PPA Buyer, Financing Party may transfer such receivables to PPA Seller and apply the face amount thereof as a reduction to any Delivered Product Payment Obligation; provided, however, that (A) at no time shall PPA Seller be required to pay Financing Party for any amounts by which any such receivables exceed any Delivered Product Payment Obligation, (B) any such application by Financing Party shall not affect any amounts due and owing under the PPA by PPA Buyer (which, for clarity purposes, includes any amount of Delivered Product Payment Obligation not paid by Financing Party as a result of any such application by Financing Party under this Section 1(e)), including under any invoice, and (C) at all times, PPA Buyer remains liable to PPA Seller for all amounts due and owing under the PPA, including the total gross amount due to PPA Seller under each invoice.
f. At least three (3) Business Days before the commencement of the Assignment Period, The Goldman Sachs Group, Inc. (the “Guarantor”) will issue, in favor of PPA Seller, a guaranty of Financing Party’s payment obligations under this Assignment Agreement substantially in the form of Appendix 2 attached hereto (the “Guaranty”). PPA Seller may draw upon, apply, or make demand under the Guaranty to recover any unpaid Agenda Page 158 of 570
amounts due from Financing Party and not timely paid as set forth herein; provided, however, that PPA Seller’s rights under the Guaranty and this subsection (f) shall not reduce or affect PPA Buyer’s obligation to render payments when due under the PPA or extend any deadlines in the PPA.
g. The Parties acknowledge that in addition to other provisions in the PPA, including other provisions related to compensation and Scheduling, the PPA currently provides for PPA Seller to Schedule Facility Energy into the Day-Ahead Market on behalf of PPA Buyer, and for net settlements between PPA Seller and PPA Buyer of (x) CAISO Revenues in excess of CAISO Costs for each Settlement Interval and (y) PPA Buyer’s obligation to pay the Contract Price for Facility Energy for each Settlement Interval.
During the Assignment Period, the PPA will be amended to provide that PPA Seller shall Schedule to PPA Buyer in the Day-Ahead Market an amount of Facility Energy consistent with the EIRP Forecast or other forecast agreed upon pursuant to Section
4.3(b) at SP-15 using an Inter-SC Trade, with the compensation provisions under the PPA to provide for a true-up for any volumetric, price or any other differences. This change in Scheduling to an Inter-SC Trade using the Day-Ahead Market at SP-15 will result among other things in the following: (i) the CAISO will directly credit PPA Buyer’s account for revenues received with respect to the Inter-SC Trade using the Day-Ahead Market at SP-15; (ii) PPA Seller as Scheduling Coordinator will incur certain CAISO Costs and CAISO Revenues with respect to such Inter-SC Trades at SP-15, including in connection with the Real Time Market; and (iii) PPA Seller as Scheduling Coordinator will incur certain CAISO Costs and CAISO Revenues with respect to Facility Energy delivered at the Delivery Point, including in connection with the Real-Time Market.
Notwithstanding the foregoing or anything else to the contrary in this Assignment Agreement, it is the intention of each Party to this Assignment Agreement that the overall economics of the PPA shall not change during the Assignment Period (i.e., PPA Seller shall be entitled to be compensated by Financing Party and PPA Buyer the same total amount for the Product during the Assignment Period as PPA Seller would have been compensated in the absence of the Assignment Agreement, and PPA Seller shall not be exposed to any increased or new costs, liabilities, or risks during the Assignment Period that it would not have been exposed to in the absence of this Assignment Agreement).
Therefore, during the Assignment Period only, the PPA will be deemed to be amended to provide that:
(1) The following definitions shall be amended to read as follows:
“CAISO Costs” means the debits, costs, penalties and interest that are directly assigned by the CAISO to the CAISO Resource ID for the Facility for, or attributable to, Scheduling or deliveries from the Facility, including for clarification purposes in Agenda Page 159 of 570
connection with an Inter-SC Trade, under this Agreement in each applicable Settlement Interval.
“CAISO Revenues” means the credits and other payments incurred or received by Seller, on behalf of Buyer, as the Facility’s Scheduling Coordinator, as a result of Scheduling or Facility Energy from the Facility delivered by Seller to any CAISO administered market, including for clarification purposes in connection with an Inter-SC Trade, including costs and revenues associated with CAISO dispatches, for each applicable Settlement Interval.
(2) Section 3.3 shall be amended to read as follows:
Compensation
(a) During the Delivery Term, Buyer shall pay Seller the following amounts for each MWh of Facility Energy and Deemed Delivered Energy during a Contract Year:
(i) For each Settlement Interval, the product of the Contract Price and the aggregate MWh of Facility Energy in such Settlement Interval; and (ii) For each MWh of Deemed Delivered Energy in each
Settlement Interval, the Contract Price associated with such Deemed Delivered Energy. (b) Buyer shall pay to Seller interest on the amount of CAISO Revenue Seller would have received if Seller had sold the Facility Energy into the CAISO market instead of scheduling such Facility Energy to Buyer as an IST for the period from the date Seller would have received such CAISO Revenue pursuant to the CAISO Tariff through the date Buyer or Seller, as applicable, pays the net due amount of Seller’s invoice for the applicable month at the prevailing Wall Street Journal Prime Rate on each day in the applicable period (an “IST Interest Payment”); provided, (i) for each twelve (12)-month period in which Seller is scheduling Facility Energy as ISTs to Buyer, Buyer shall pay a fixed monthly estimated IST Interest Payment (each an “Estimated IST Interest Payment”); (ii) during the first twelve (12)-month period, the Estimated IST Interest Payment shall be an amount equal to __________ dollars ($_________); (iii) at the end of each twelve (12)-month period, Seller shall calculate the actual IST Interest Payment amounts for the prior twelve (12)-month period, and if the difference of the total Estimated IST Interest Payments minus the actual IST Interest Payment amounts is a positive difference, Seller shall reimburse such difference to Buyer, and if the difference is a negative amount, Buyer shall pay such difference to Seller; and
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(iv) following each twelve-(12) month period, the amount of the monthly Estimated IST Interest Payment for the next twelve (12)-month period shall be adjusted to equal the total IST Interest Payments for such twelve (12)-month period divided by twelve (12).
(c) During the Delivery Term, Seller shall receive no compensation from Buyer for Curtailed Energy or Facility Energy that is delivered in violation of a Curtailment Order.
(d) (i) With respect to any calendar month during the Delivery Term that the difference of (A) the product of the Contract Price and the aggregate MWh of Facility Energy for all Settlement Intervals in such calendar month, minus (B) the excess of any CAISO Revenues over CAISO Costs associated with such calendar month is negative, no amounts respecting Facility Energy shall be due from Buyer and Seller shall pay the amount of such difference to Buyer on or before the last day of the calendar month following the month in which such negative difference occurs. (ii) With respect to any calendar month during the Delivery Term in which there is an excess of any CAISO Costs over CAISO Revenues associated with such calendar month, such excess amounts shall be due from Buyer to Seller. (e) With respect to each calendar month during the Delivery Term, Seller will invoice Buyer for Pass-Through Amounts associated with such calendar month. “Pass-Through Amounts” shall equal costs or charges incurred by or imposed by the CAISO on Seller or the Facility during the applicable month for all forecasting fees and related charges associated with the Facility’s participation in the CAISO market and in EIRP; provided, however, that Pass-Through Amounts shall not include penalties or charges assessed to the Facility or Seller attributable to Seller’s failure to comply with the CAISO Tariff, any Curtailment Order or Prudent Operating Practice. (f) With respect to each calendar month during the Delivery Term, Seller will invoice Buyer an amount equal to four thousand five hundred dollars ($4,500), as payment for Seller, or an Affiliate of Seller, performing the duties of Scheduling Coordinator on Buyer’s behalf hereunder.
(3) Section 4.3(b) shall be amended to read as follows:
CAISO Market Participation. During the Delivery Term, Seller, on behalf of Buyer, as the Party responsible for all Scheduling Coordinator activities with respect to the Facility, shall submit bids by use of Inter-SC Trades in the Day-Ahead Market at SP-15 with the EIRP Forecast. Seller’s bids by use of Inter-SC Trades in the Day-Ahead Market at SP-15 shall be consistent with the EIRP Forecast at the LMP Strike Price consistent with Prudent Operating Practice. Buyer may change the LMP Strike Price by providing written notice to Seller at least five (5) Business Days prior to the effective date of such change, which notice must identify the new LMP Strike Price and the effective date for the new LMP Strike Price.
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(4) The first two sentences of Section 8.2 shall be amended to read as follows:
“Buyer shall make payment to Seller for Product by wire transfer or ACH payment to the bank account provided on each monthly invoice. Buyer shall pay undisputed invoice amounts within ten (10) Business Days after Buyer’s receipt of the invoice.” h. Despite it being the intention of each Party to this Assignment Agreement that the overall economics of the PPA shall not change during the Assignment Period (i.e., PPA Seller shall be entitled to be compensated by Financing Party and PPA Buyer the same net amount for the Product during the Assignment Period as PPA Seller would have received in the absence of the Assignment Agreement, and PPA Seller shall not be exposed to any increased or new costs, liabilities, or risks during the Assignment Period that it would not have been exposed to in the absence of this Assignment Agreement), to the extent adverse consequences do occur or are at risk of occurring with respect to PPA Seller, the Parties shall take reasonable actions within thirty (30) days, or such longer time as may be agreed to by each of the Parties in writing, to compensate PPA Seller for any such adverse consequences and to eliminate them on a going-forward basis, including to the extent necessary making any further appropriate amendments to the PPA, for the Assignment Period only, under the preceding Section 1(g).
i. Except as set forth in Section 1(j) of this Assignment Agreement, and except as expressly set forth in Section 1(a) of this Assignment Agreement with respect to the Product delivery obligations, nothing in this Agreement modifies or amends any rights or obligations of PPA Buyer and PPA Seller under the PPA, including with respect to CAISO revenues and costs; provided that, for avoidance of doubt, nothing set forth in this Assignment Agreement affects PPA Buyer’s liabilities and obligations to PPA Seller under the PPA, including if Financing Party fails to perform. j. Notwithstanding anything to the contrary in this Assignment Agreement including without limitation the immediately preceding Section 1(i) (with respect to the phrase “nothing in this Agreement modifies or amends any rights or obligations of PPA Buyer and PPA Seller under the PPA”) and Section 6(i) hereof, the Parties hereby agree that if (1) the assignment, transfer or conveyance of the Assigned Product pursuant to this Assignment Agreement, or (2) PPA Seller’s performance of any obligation under this Assignment Agreement, including without limitation if PPA Seller makes any change to the recipient of the WREGIS Certificates as directed by Financing Party and PPA Buyer pursuant to Appendix 1 hereof, fails to meet any requirements of the PPA, then PPA Seller shall not be deemed to be in breach of any obligation in the PPA, including without limitation any representation or warranty therein.
2. Assignment Early Termination.
a. The Assignment Period may be terminated early upon the occurrence of any of the following:
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i) delivery of a written notice of termination by either Financing Party or PPA Buyer to each of the other Parties hereto;
ii) delivery of a written notice of termination by PPA Seller to each of Financing Party and PPA Buyer following Financing Party’s failure to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such payment is not made by Financing Party within three (3) Business Days following receipt by Financing Party and PPA Buyer of written notice thereof; iii) delivery of a written notice by PPA Seller if any of the events described in the definition of Bankrupt in the PPA occurs with respect to Financing Party; iv) delivery of a written notice by Financing Party if any of the events described in the definition of Bankrupt in the PPA occurs with respect to PPA Seller; v) failure of the Guaranty provided by the Guarantor to PPA Seller hereunder to be in full force and effect (other than in accordance with its terms) prior to the indefeasible satisfaction of all obligations of Financing Party hereunder or if the Guarantor provides notice of termination of the Guaranty or otherwise repudiates, disaffirms, disclaims, or rejects, in whole or in part, or challenges the validity of the Guaranty; or
vi) neither Financing Party nor the Guarantor maintains a Credit Rating equal to or greater than Baa3 from Moody’s and BBB- from S&P, and if ratings by S&P and Moody’s are not equivalent, the lower rating shall apply (a “Required Credit Rating”).
b. The Assignment Period will end at the end of the last delivery hour on the date specified in the termination notice provided pursuant to Section 2(a), which date shall not be earlier than the end of the last day of the calendar month in which such notice is delivered if termination is pursuant to clause (a)(1) or (a)(2) above. All Assigned Rights and Obligations shall revert from Financing Party to PPA Buyer upon the expiration or early termination of the Assignment Period, provided that (i) Financing Party shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered or made available to Financing Party prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
c. The Assignment Period will automatically terminate upon the expiration or early termination of the PPA. All Assigned Rights and Obligations shall revert from Financing Party to PPA Buyer upon the expiration of or early termination of the PPA, provided that (i) Financing Party shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered or made available to Financing Party prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy Agenda Page 163 of 570
law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
3. Representations and Warranties. The PPA Seller and the PPA Buyer represent and warrant to Financing Party, as of the Assignment Agreement Effective Date, that (a) the PPA is in full force and effect; and (b) 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. Financing Party represents and warrants to PPA Seller, as of the Assignment Agreement Effective Date, that the Guarantor has a Required Credit Rating.
4. Notices. Any notice, demand, or request required or authorized by this Assignment Agreement to be given by one Party to another Party shall be delivered in accordance with Article 9 of the PPA and to the addresses of each of PPA Seller and PPA Buyer specified in the PPA. PPA Buyer agrees to notify Financing Party of any updates to such notice information, including any updates provided by PPA Seller to PPA Buyer. Notices to Financing Party shall be provided to the following address, as such address may be updated by Financing Party from time to time by notice to the other Parties:
J. Aron & Company LLC
200 West Street
New York, New York 10282-2198
Email: [email protected]
5. Costs and Expenses. Each Party will pay its own costs and expenses (including legal fees) incurred in connection with this Assignment Agreement and as a result of the negotiation, preparation, and execution of this Assignment Agreement; provided, however, Buyer shall reimburse Seller for all out-of-pocket expenses reasonably incurred by Seller in excess of five thousand dollars ($5,000) but not to exceed a total reimbursement of ten thousand dollars ($10,000) for the term of this Assignment Agreement; provided further prior to any such reimbursement, Seller shall send Buyer an accounting of the out-of-pocket expenses reasonably incurred within 30 days following the end of each quarter in a calendar year.
6. Miscellaneous. Section 13.2 (Buyer’s Representations and Warranties), Article 18 (Confidential Information), Sections 19.5 (Severability), 19.7 (Counterparts), 19.2 (Amendments), 19.4 (No Agency, Partnership, Joint Venture or Lease), 19.6 (Mobile-Sierra),
19.8 (Electronic Delivery), 19.9 (Binding Effect) and 19.10 (No Recourse to Members of Buyer) of the PPA are incorporated by reference into this Agreement, mutatis mutandis, as if fully set forth herein. For avoidance of doubt, and notwithstanding anything to the contrary in this Assignment Agreement: (i) except as expressly set forth Section 1(j) of this Assignment Agreement, and except as expressly set forth in Section 1(a) of this Assignment Agreement with respect to the Product delivery obligations, nothing in this Assignment Agreement shall modify any provision of the PPA; (ii) PPA Buyer remains obligated to perform all its obligations under the PPA notwithstanding the limited assignment under this Assignment Agreement (including without limitation any such obligations not timely performed by Financing Party under this Assignment Agreement), and any failure by Financing Party to make payments to PPA Seller as provided in this Assignment Agreement when due under the Agenda Page 164 of 570
PPA shall be a Buyer Event of Default under the PPA if not cured within the applicable cure period specified in Section 11.1(a)(i) of the PPA; (iii) this Assignment Agreement shall not purport to convey or otherwise allege any right of PPA Buyer or Financing Party to make any prepayment to Seller under the PPA or to file or impose any lien on the Facility; and (iv) Limited Assignee and PPA Buyer shall comply with all reasonable requests from any Lender in connection with this Assignment Agreement, including in connection with any Consent to Collateral Agreement; and (v) neither Financing Party nor PPA Buyer shall make any assignment of its rights or delegation of its obligations under this Assignment Agreement without the prior written consent of PPA Seller, which it may withhold in its sole discretion.
7. U.S. Resolution Stay Provisions. If each of the Parties hereto have not adhered to the ISDA 2018 U.S. Resolution Stay Protocol, as published by the International Swaps and Derivatives Association, Inc. as of July 31, 2018 (the “ISDA U.S. QFC Protocol”), the terms of the ISDA U.S. QFC Protocol shall be incorporated into and form a part of this Assignment Agreement.
For purposes of incorporating the ISDA U.S. QFC Protocol, each Party shall be deemed to have the same status as “Regulated Entity” and/or “Adhering Party” (as such terms are defined therein) applicable to it under the ISDA U.S. QFC Protocol and this Assignment Agreement shall be deemed to be a “Protocol Covered Agreement” (as defined therein).
8. Governing Law, Jurisdiction, Waiver of Jury Trial
a) Governing Law. This Assignment Agreement and the rights and duties of the Parties under this Assignment Agreement will 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 provisions that would direct the application of another jurisdiction’s laws.
b) Jurisdiction. Each Party submits to the exclusive jurisdiction of the federal courts of the United States, or the courts of the State of California, sitting in the City and County of Los Angeles, California.
c) Waiver of Right to Trial by Jury. TO THE EXTENT PERMITTED BY LAW, EACH
PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS ASSIGNMENT AGREEMENT.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the Parties have executed this Assignment Agreement effective as of the date first set forth above.
MOHAVE COUNTY WIND FARM, LLC
a Delaware limited liability company
By: _____________________
Name: _____________________
Title: _____________________
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
By: _____________________
Name: _____________________
Title: _____________________
J. ARON & COMPANY LLC
By: _____________________
Name: _____________________
Title: _____________________
Execution and delivery of the foregoing Assignment Agreement is hereby approved.
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: _____________________
Name:
Title:
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Appendix 1
Assigned Rights and Obligations
“PPA” means that certain Power Purchase and Sale Agreement dated October 3, 2019, by and between Clean Power Alliance of Southern California, a California joint powers authority, and Mohave County Wind Farm, LLC, a Delaware limited liability company, as amended from time to time.
“Assignment Period” means the period beginning on [______] and extending until [______], provided that in no event shall the Assignment Period extend past the earlier of (i) the termination of the Assignment Period pursuant to Section 2 of the Assignment Agreement and (ii) the end of the Delivery Term under the PPA; provided that applicable provisions of this Agreement shall continue in effect after termination of the Assignment Period to the extent necessary to enforce or complete, duties, obligations or responsibilities of the Parties arising prior to the termination.
Assigned Product: (1) Energy and (2) Green Attributes (PCC1 RECs) that are required to be sold to PPA Buyer under the PPA.
Further Information: PPA Seller shall transfer the WREGIS Certificates associated with all Renewable Energy Credits corresponding to all Facility Energy pursuant to Section 4.8 of 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 Financing Party and PPA Buyer upon twenty (20) Business Days’ notice, which change shall be effective as of the first day of the next calendar month after such notice period has expired, unless otherwise agreed. All Assigned Product delivered by PPA Seller to Financing Party shall be a sale made at wholesale, with Financing Party reselling all such Assigned Product.
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Appendix 2
Form of Guaranty
[], 2023
NAME
ADDRESS
Attention:
Ladies and Gentlemen:
For value received, The Goldman Sachs Group, Inc. (the “Guarantor”), a corporation duly organized under the laws of the State of Delaware, hereby unconditionally guarantees the prompt and complete payment when due, whether by acceleration or otherwise, of all obligations and liabilities, whether now in existence or hereafter arising, of J. Aron & Company, LLC, a subsidiary of the Guarantor and limited liability company duly organized under the laws of the State of New York (the “Company”), to COUNTERPARTY NAME (the “Counterparty”) arising out of or under the Limited Assignment Agreement among the Company, the Counterparty and Clean Power Alliance of Southern California dated as of [___], 2023. This Guaranty is one of payment and not of collection.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of any obligation or liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking of other action by Counterparty against, and any other notice to, the Company, the Guarantor or others.
Counterparty may at any time and from time to time without notice to or consent of the Guarantor and without impairing or releasing the obligations of the Guarantor hereunder: (1) agree with the Company to make any change in the terms of any obligation or liability of the Company to Counterparty, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of the Company to Counterparty, (3) exercise or refrain from exercising any rights against the Company or others, or (4) compromise or subordinate any obligation or liability of the Company to Counterparty including any security therefor. Any other suretyship defenses are hereby waived by the Guarantor.
This Guaranty shall continue in full force and effect until the opening of business on the fifth business day after Counterparty receives written notice of termination from the Guarantor. It is understood and agreed, however, that notwithstanding any such termination this Guaranty shall continue in full force and effect with respect to the obligations and liabilities set forth above which shall have been incurred prior to such termination.
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The Guarantor further agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the guaranteed obligations, or interest thereon is rescinded or must otherwise be restored or returned by the Counterparty upon the bankruptcy, insolvency, dissolution or reorganization of the Company. No failure on the part of the Counterparty to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Counterparty of any right, remedy or power hereunder preclude any other or future exercise of any right, remedy or power.
No term or provision of this Guaranty shall be amended, modified, altered, waived or supplemented except in a writing signed by Guarantor and Counterparty.
The Guarantor hereby represents as follows:
(a) The Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Delaware and has full power and authority to execute and deliver this Guaranty. (b) The execution and delivery of this Guaranty have been and remain duly authorized by all necessary action and do not contravene any provision of the Guarantor's certificate of incorporation or by-laws, as amended to date, or any law, regulation, decree, order, judgment, resolution or any contractual restriction binding on the Guarantor or its assets that could affect, in a materially adverse manner, the ability of the Guarantor to perform any of its obligations hereunder.
(c) All consents, licenses, clearances, authorizations, and approvals of, and registration and declarations with, any governmental or regulatory authority necessary for the due execution and delivery of this Guaranty have been obtained 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 or regulatory authority is required in connection with the execution or delivery of this Guaranty.
This Guaranty constitutes the legal, valid, and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with all of its terms and conditions (subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally). The enforceability of the Guarantor’s obligations is also subject to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
The Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in whole or in part, without prior written consent of the Counterparty, and any purported assignment or delegation absent such consent is void, except for (i) an assignment and delegation of all of the Guarantor’s rights and obligations hereunder in whatever form the Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of the Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise, and (ii) the Guarantor may transfer this Guaranty or any interest or obligation of the Guarantor in or under this Guaranty, or any property securing this Agenda Page 170 of 570
Guaranty, to another entity as transferee as part of the resolution, restructuring or reorganization of the Guarantor upon or following the Guarantor becoming subject to a receivership, insolvency, liquidation, resolution or similar proceeding. Upon any such delegation and assumption or transfer of obligations, the Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption or transfer.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR AGREES TO THE
EXCLUSIVE JURISDICTION OF COURTS LOCATED IN THE STATE OF NEW
YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTY.
In the event the Guarantor becomes subject to a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together, the "U.S. Special Resolution Regimes"), the transfer of this Guaranty, and any interest and obligation in or under, and any property securing, this Guaranty, from the Guarantor will be effective to the same extent as the transfer would be effective under such U.S. Special Resolution Regime if this Guaranty, and any interest and obligation in or under this Guaranty, were governed by the laws of the United States or a state of the United States. In the event the Company or the Guarantor, or any of their affiliates, becomes subject to a U.S. Special Resolution Regime, default rights against the Company or the Guarantor with respect to this Guaranty are permitted to be exercised to no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if this Guaranty was governed by the laws of the United States or a state of the United States.
Very truly yours,
The Goldman Sachs Group, Inc.
By: __________________________
Authorized Officer
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SM Draft 20 March 2023
FORM OF ASSIGNMENT SCHEDULE
Assigned Product: [____]
Assigned Delivery Point: [____]
Assigned Prepay Quantity: As set forth in Appendix 2; provided that (i) all Assigned Products shall be delivered pursuant to the Limited Assignment Agreement during the Assignment Period as provided in Appendix 1 and (ii) the Assigned Prepay Quantity is defined for the convenience of PPA Buyer and J. Aron and shall have no impact on the obligations of the Parties under the Limited Assignment Agreement.
APC Contract Price: $[____]/MWh
Assignment Period: [____]
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1 FORM OF LIMITED ASSIGNMENT AGREEMENT
This Limited Assignment Agreement (this “Assignment Agreement” or “Agreement”) is entered into as of [____], by and among [____], a [____] (“PPA Seller”), Clean Power Alliance of Southern California, a California joint powers authority (“PPA Buyer”), and J.
Aron & Company LLC, a New York limited liability company (“J. Aron”), and relates to that certain power purchase agreement (the “PPA”) between PPA Buyer and PPA Seller as described on Appendix 1. Unless the context otherwise specifies or requires, capitalized terms used but not defined in this Agreement have the meanings set forth in the PPA.
In consideration of the premises above and the mutual covenants and agreements herein set forth, PPA Seller, PPA Buyer and J. Aron (the “Parties” hereto; each is a “Party”) agree as follows:
1. Limited Assignment and Delegation.
(a) PPA Buyer hereby assigns, transfers and conveys to J. Aron all right, title and interest in and to the rights of PPA Buyer under the PPA to receive delivery of the products described on Appendix 1 (the “Assigned Products”) during the Assignment Period (as defined in Appendix 1), as such rights may be limited or further described in the “Further Information” section on Appendix 1 (the “Assigned Product Rights”). All Assigned Products shall be delivered pursuant to the terms and conditions of this Agreement during the Assignment Period as provided in Appendix 1. All other rights of PPA Buyer under the PPA are expressly reserved for PPA Buyer. (b) PPA Buyer hereby delegates to J. Aron the obligation to pay for all Assigned Products that are actually delivered to J. Aron pursuant to the Assigned Product Rights during the Assignment Period (the “Delivered Product Payment Obligation” and together with the Assigned Product Rights, collectively the “Assigned Rights and Obligations”); provided that (i) all other obligations of PPA Buyer under the PPA are expressly retained by PPA Buyer and PPA Buyer shall be solely responsible for any amounts due to PPA Seller that are not directly related to Assigned Products; and (ii) the Parties acknowledge and agree that PPA Seller will only be obligated to deliver a single consolidated invoice during the Assignment Period (with a copy to J. Aron consistent with Section 1(d) hereof). To the extent J. Aron 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 shall have the option to make such payment and that it will be an Event of Default pursuant to Section [__] if PPA Buyer does not make such payment within five (5) Business Days of receiving Notice of such non-payment from PPA Seller, in which case PPA Buyer will exercise its reimbursement claim pursuant to Section 6.5 of the Clean Energy Purchase Contract, dated as of [____], by and between PPA Buyer and California Community Choice Financing Authority (the “Clean Energy Purchase Contract”).
(c) J. Aron hereby accepts and PPA Seller hereby consents and agrees to the assignment, transfer, conveyance and delegation described in clauses (a) and (b) above. (d) All scheduling of Assigned Products and other communications related to the PPA shall take place pursuant to the terms of the PPA; provided that (i) title to Assigned Product will pass from PPA Seller to J. Aron upon delivery by PPA Seller of Assigned Product in accordance with the PPA; (ii) PPA Buyer will provide copies to J. Aron of any Notice of a Force Majeure Event or Event of Default or default, breach or other occurrence Agenda Page 173 of 570
2 that, if not cured within the applicable grace period, could result in an Event of Default contemporaneously upon delivery thereof to PPA Seller and promptly after receipt thereof from PPA Seller; (iii) PPA Seller will provide copies to J. Aron of annual forecasts of Energy and monthly forecasts of available capacity and Energy provided pursuant to Section [__] of the PPA; (iv) PPA Seller will provide copies to J. Aron of all invoices and supporting data provided to PPA Buyer pursuant to Section [__], provided 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, including pursuant to Section [__], will be resolved solely between PPA Buyer and PPA Seller and therefore PPA Seller will not be obligated to deliver copies of any communications relating thereto to J. Aron; and (v) PPA Buyer and PPA Seller, as applicable, will provide copies to J. Aron of any other information reasonably requested by J. Aron relating to Assigned Products.
(e) PPA Seller acknowledges that (i) J. Aron intends to immediately transfer title to any Assigned Products received from PPA Seller through one or more intermediaries such that all Assigned Products will be re-delivered to PPA Buyer; and (ii) in the event that PPA Buyer fails to pay the relevant intermediary entity for any such Assigned Products, the receivables owed by PPA Buyer for such Assigned Products (“PPA Buyer Receivables”) may be transferred to J. Aron. To the extent any such PPA Buyer Receivables are transferred to J. Aron, J. Aron may transfer such PPA Buyer Receivables to PPA Seller and apply the face amount thereof as a reduction to any Delivered Product Payment Obligation. Thereafter, PPA Seller shall be entitled to pursue collection on such PPA Buyer Receivables directly against PPA Buyer. (f) On or before the commencement of the Assignment Period, The Goldman Sachs Group (“Guarantor”), Inc. will issue, in favor of PPA Seller, a guaranty of J. Aron’s payment obligations under this Assignment Agreement substantially in the form of Appendix 3 attached hereto (“Guaranty”).
(g) Notwithstanding any other provision of this Agreement, 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. Nothing in this Agreement modifies or amends any rights or obligations of PPA Buyer and PPA Seller under the PPA with respect to CAISO revenues and costs. As used in this clause (g), the following terms have the meanings specified below.
“CAISO” means California Independent System Operator or its successor. “CAISO Tariff” means CAISO’s Federal Energy Regulatory Commission approved tariff, as modified, amended or supplemented from time to time. “Inter-SC Trade” or “IST” has the meaning set forth in the CAISO Tariff. “Scheduling Coordinator” 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.
(h) The Assigned Prepay Quantity set forth in Appendix 2 relates to obligations by and between J. Aron and PPA Buyer and has no impact on PPA Seller’s rights and obligations under the PPA.
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3 2. Assignment Early Termination.
(a) The Assignment Period may be terminated early upon the occurrence of any of the following:
(1) delivery of a written notice of termination specifying a termination date by either J. Aron or PPA Buyer to each of the other Parties;
(2) delivery of a written notice of termination specifying a termination date by PPA Seller to each of J. Aron and PPA Buyer following J. Aron’s failure to pay when due any amounts owed to PPA Seller in respect of any Delivered Product Payment Obligation and such payment is not made by J. Aron within five (5) business days following receipt by J. Aron and PPA Buyer of written notice; (3) delivery of a written notice by PPA Seller if any of the events described in the definition of Bankrupt in the PPA occurs with respect to J. Aron; or (4) delivery of a written notice by J. Aron if any of the events described in in the definition of Bankrupt in the PPA occurs with respect to PPA Seller. (b) The Assignment Period will end at the end of last delivery hour on the date specified in the termination notice provided pursuant to Section 2(a), which date shall not be earlier than the end of the last day of the calendar month in which such notice is delivered if termination is pursuant to clause 2(a)(1) or 2(a)(2) above. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the early termination of the Assignment Period, provided that (i) J. Aron shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period (c) The Assignment Period will automatically terminate upon the expiration or early termination of the PPA. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the expiration of or early termination of the PPA, provided that (i) J. Aron shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
(d) The Assignment Period will automatically terminate upon delivery by Guarantor of a notice of termination of the Guaranty. All Assigned Rights and Obligations shall revert from J. Aron to PPA Buyer upon the termination of the Assignment Period, provided that (i) J. Aron shall remain responsible for the Delivered Product Payment Obligation with respect to any Assigned Product delivered to J. Aron prior to the end of the Assignment Period, and (ii) any legal restrictions on the effectiveness of such reversion (whether arising under bankruptcy law or otherwise) shall not affect the expiration or early termination of the Assignment Period.
3. Representations and Warranties. The PPA Seller and the PPA Buyer represent and warrant to J. Aron that (a) the PPA is in full force and effect; (b) no event or circumstance exists (or would exist with the passage of time or the giving of notice) that would give either Agenda Page 175 of 570
4 of them the right to terminate the PPA or suspend performance thereunder; and (c) all of its obligations under the PPA required to be performed on or before the Assignment Period Start Date have been fulfilled.
4. Notices. Any notice, demand, or request required or authorized by this Assignment Agreement to be given by one Party to another Party shall be delivered in accordance with Article [__] of the PPA and to the addresses of each of PPA Seller and PPA Buyer specified in the PPA. PPA Buyer agrees to notify J. Aron of any updates to such notice information, including any updates provided by PPA Seller to PPA Buyer. Notices to J. Aron shall be provided to the following address, as such address may be updated by J. Aron from time to time by notice to the other Parties:
J. Aron & Company LLC
200 West Street
New York, New York 10282-2198
Email: [email protected]
5. Miscellaneous. Section [__] (Buyer’s Representations and Warranties), Article [__] (Confidential Information), Sections [__] (Severability), [__] (Counterparts), [__] (Amendments), [__] (No Agency, Partnership, Joint Venture or Lease), [__] (Mobile-Sierra), [__] (Electronic Delivery), Section [__] (Binding Effect) and [__] (No Recourse to Members of Buyer) of the PPA are incorporated by reference into this Agreement, mutatis mutandis, as if fully set forth herein.
6. U.S. Resolution Stay Provisions. 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 for the purposes of such incorporation, (i) J. Aron shall be deemed to be a Regulated Entity, (ii) each of PPA Buyer and PPA Seller shall be deemed to be an Adhering Party, and (iii) this Agreement shall be deemed a Protocol Covered Agreement. In the event of any inconsistencies between this Agreement and the ISDA U.S. Stay Protocol, the ISDA U.S. Stay Protocol will prevail.
7. Governing Law, Jurisdiction, Waiver of Jury Trial.
(a) Governing Law. This Assignment Agreement and the rights and duties of the parties under this Assignment Agreement will be governed by and construed, enforced and performed in accordance with the laws of the State of California, without reference to any conflicts of laws provisions that would direct the application of another jurisdiction’s laws.
(b) Jurisdiction. Each party submits to the exclusive jurisdiction of the federal courts of the United States of America for the Southern District of California sitting in the city and county of Los Angeles.
(c) Waiver of Right to Trial by Jury. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this assignment agreement.
[Remainder of Page Intentionally Blank]
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5 IN WITNESS WHEREOF, the Parties have executed this Assignment Agreement effective as of the date first set forth above.
[PPA SELLER]
By:
Name:
Title:
CLEAN POWER ALLIANCE
By:
Name:
Title:
J. ARON & COMPANY LLC
By:
Name:
Title:
Execution and delivery of the foregoing Assignment Agreement is hereby approved.
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By:
Name:
Title:
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6 Appendix 1
Assigned Rights and Obligations
PPA: “PPA” means that certain Power Purchase and Sale Agreement dated [____], by and between Clean Power Alliance and [____], as amended from time to time. “Assignment Period” means the period beginning on [___________] and extending until [___________], provided that in no event shall the Assignment Period extend past the earlier of (i) the termination of the Assignment Period pursuant to Section 2 of the Assignment Agreement and (ii) the end of the Delivery Term under the PPA; provided that applicable provisions of this Agreement shall continue in effect after termination of the Assignment Period to the extent necessary to enforce or complete, duties, obligations or responsibilities of the Parties arising prior to the termination.
Assigned Product: “Assigned Products” include [____].
Custodial Account for Administration of Payments under Section 1(h):
[____]
[____]
[____]
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 pursuant to Section [__] of 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 J. Aron and Clean Power Alliance upon twenty (20) Business Days’ notice, which change shall be effective as of the first day of the next calendar month, unless otherwise agreed. All Assigned Product delivered by PPA Seller to J. Aron shall be a sale made at wholesale, with J. Aron reselling all such Assigned Product.
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7 Appendix 2
Assigned Prepay Quantity
[NOTE: To be set forth in a monthly volume schedule.]
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8 Appendix 3
Form of GSG Guaranty
[Date]
NAME
ADDRESS
Attention:
Ladies and Gentlemen:
For value received, The Goldman Sachs Group, Inc. (the “Guarantor”), a corporation duly organized under the laws of the State of Delaware, hereby unconditionally guarantees the prompt and complete payment when due, whether by acceleration or otherwise, of all obligations and liabilities, whether now in existence or hereafter arising, of J. Aron & Company LLC, a subsidiary of the Guarantor and a limited liability company duly organized under the laws of the State of New York (the “Company”), to COUNTERPARTY NAME (the “Counterparty”) arising out of or under the Limited Assignment Agreement among the Company, the Counterparty and Clean Power Alliance dated as of [____]. This Guaranty is one of payment and not of collection.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of any obligation or liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking of other action by Counterparty against, and any other notice to, the Company, the Guarantor or others.
Counterparty may at any time and from time to time without notice to or consent of the Guarantor and without impairing or releasing the obligations of the Guarantor hereunder:
(1) agree with the Company to make any change in the terms of any obligation or liability of the Company to Counterparty, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of the Company to Counterparty, (3) exercise or refrain from exercising any rights against the Company or others, or (4) compromise or subordinate any obligation or liability of the Company to Counterparty including any security therefor. Any other suretyship defenses are hereby waived by the Guarantor.
This Guaranty shall continue in full force and effect until the opening of business on the fifth business day after Counterparty receives written notice of termination from the Guarantor. It is understood and agreed, however, that notwithstanding any such termination this Guaranty shall continue in full force and effect with respect to the obligations and liabilities set forth above which shall have been incurred prior to such termination.
The Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in whole or in part, without prior written consent of the Counterparty, and any purported Agenda Page 180 of 570
9 assignment or delegation absent such consent is void, except for (i) an assignment and delegation of all of the Guarantor’s rights and obligations hereunder in whatever form the Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of the Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise, and (ii) the Guarantor may transfer this Guaranty or any interest or obligation of the Guarantor in or under this Guaranty, or any property securing this Guaranty, to another entity as transferee as part of the resolution, restructuring or reorganization of the Guarantor upon or following the Guarantor becoming subject to a receivership, insolvency, liquidation, resolution or similar proceeding. Upon any such delegation and assumption or transfer of obligations, the Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption or transfer.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
GUARANTOR AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS
LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTY.
In the event the Guarantor becomes subject to a proceeding under the Federal Deposit Insurance Act or Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together, the "U.S. Special Resolution Regimes"), the transfer of this Guaranty, and any interest and obligation in or under, and any property securing, this Guaranty, from the Guarantor will be effective to the same extent as the transfer would be effective under such U.S. Special Resolution Regime if this Guaranty, and any interest and obligation in or under this Guaranty, were governed by the laws of the United States or a state of the United States. In the event the Company or the Guarantor, or any of their affiliates, becomes subject to a U.S. Special Resolution Regime, default rights against the Company or the Guarantor with respect to this Guaranty are permitted to be exercised to no greater extent than such default rights could be exercised under such U.S. Special Resolution Regime if this Guaranty was governed by the laws of the United States or a state of the United States.
Very truly yours,
THE GOLDMAN SACHS GROUP, INC.
By: _______
Authorized Officer
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SM Draft 20 March 2023
LETTER AGREEMENT
[____], 2023
Clean Power Alliance
801 South Grand Avenue, Suite 400
Los Angeles, CA 90017
Re: Prepay Limited Assignment 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 those certain Limited Assignment Agreements listed on Exhibit A (the “Assignment Agreements”, which definitions shall include any new Assignment Agreements identified by J. Aron’s delivery of an updated Exhibit A consistent with Section 2), with each of the PPA Sellers identified in Exhibit A (each, individually, a “PPA Seller” and collectively the “PPA Sellers”, and which definitions shall include any new PPA Seller identified by J. Aron’s delivery of an updated Exhibit A consistent with Section 2). Any capitalized term used in this Letter Agreement and not otherwise defined herein shall have the meaning assigned to such term in the Clean Energy Purchase Contract. In consideration of each party’s execution of the Assignment Agreements, as well as the premises above and the mutual covenants and agreements set forth herein, J. Aron & Company LLC (“J. Aron”) and Clean Power Alliance of Southern California (“CPA” and together with J. Aron, collectively the “Parties”) agree as follows:
1. Assignment Early Termination. Each of the Parties agrees that it shall only exercise its right to deliver a written notice of termination of an Assignment Period under an Assignment Agreement consistent with the following:
(a) Either Party may deliver a notice of termination in the event of (i) the suspension, expiration, or termination of performance of a PPA by either CPA or the applicable PPA Seller; or (ii) the termination or suspension of deliveries for any reason other than force majeure under (A) that certain Clean Energy Purchase Contract (the “Clean Energy Purchase Contract”), dated as of [____], 2023 by and between CPA and California Community Choice Financing Authority (including, for the avoidance of doubt, due to a “Remarketing Election” by CPA under the Clean Energy Purchase Contract) or (B) that certain Electricity Purchase, Sale and Service Agreement, dated as of [____], 2023 by and between J. Aron and Aron Energy Prepay 16 LLC (the “Electricity Sale and Service Agreement”);
(b) CPA shall deliver a notice of termination contemporaneous with any assignment by CPA of its interest in the Clean Energy Purchase Contract, provided that J. Aron in any event shall be entitled to deliver a notice of termination to the extent CPA fails to do so in connection with the assignment of CPA’s interest under the Clean Energy Purchase Contract; (c) J. Aron may deliver a notice of termination if (i) PPA Seller delivers less than the Assigned Prepay Quantity for any five months in the aggregate during a twelve month period, (ii) Agenda Page 182 of 570
2 any event or circumstance occurs that would give either CPA or a PPA Seller the right to terminate or suspend performance under a PPA (regardless of whether CPA or the applicable PPA Seller exercises such right) or (iii) CPA requests remarketing of the Assigned Quantities under an Assigned PPA pursuant to the terms Section 7.3(c) of the Clean Energy Purchase Contract; (d) either Party may deliver a notice of termination to the extent that the Parties have mutually agreed upon an assignment of Replacement Assigned Rights and Obligations (as defined in the Clean Energy Purchase Contract) that will replace the Assigned Rights and Obligations under the applicable Assignment Agreement immediately following the termination thereof; and (e) either Party may deliver a notice of termination under the applicable Assignment Agreement to the extent that:
(i) any of the representations and warranties set forth in Sections 5.4 of the Electricity Sale and Service Agreement and the Clean Energy Purchase Contract, respectively, ceases to be true with respect to an Assigned PPA; (ii) the Assigned Energy being delivered pursuant to an Assignment Agreement ceases to be EPS Compliant Energy; or
(iii) any Assigned Product that constituted PCC1 Product or Long-Term PCC1 Product while being delivered directly to CPA under an Assigned PPA ceases to qualify as PCC1 Product or Long-Term PCC1 Product when being redelivered through the Electricity Sale and Service Agreement, Master Power Supply Agreement and Clean Energy Purchase Contract.
For the avoidance of doubt, each of the Parties agrees that it shall not terminate an Assignment Agreement pursuant to the at will termination provision thereof except in the circumstances set forth immediately above. The at will termination provision referenced in the immediately preceding sentence (x) is set forth in Section 2(a)(1) of the form of Assignment Agreement attached to the Clean Energy Purchase Contract (y) shall refer to any such provision forth in an Assignment Agreement entered into by the Parties consistent with the terms of the Clean Energy Purchase Contract and the Electricity Sale and Service Agreement.
2. Exhibit A. Promptly following execution of the Assignment Agreements with respect to the Initial Assigned Rights and Obligations, J. Aron shall deliver an Exhibit A that lists such Assignment Agreements. J. Aron shall deliver an updated Exhibit A to this Agreement to reflect any changes to the information set forth therein in connection with the termination, expiration or replacement of an Assignment Agreement consistent with the terms of the Clean Energy Purchase Contract.
3. Representations, Warranties and Covenants.
(a) CPA agrees that it shall provide a true, complete, and correct copy to J. Aron of any PPA to be assigned pursuant to an Assignment Agreement. (b) Each Party represents to the other:
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3 (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, deliver and perform its obligations under this Letter Agreement, the Assignment Agreement and any other documentation to which it is a party relating to this Letter Agreement and the Assignment Agreement, and it has taken all necessary action to authorize such execution, delivery and performance.
(iii)No Violation or Conflict. Such execution, delivery and performance of this Letter Agreement and the Assignment Agreement and the consummation of the transactions contemplated hereby and thereby, including the incurrence by such Party of its obligations under this Letter Agreement and the Assignment 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 or made by such Party with respect to this Letter Agreement and Assignment Agreement and the transactions contemplated hereby and thereby, 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 and the Assignment 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)).
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4 (vi)Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Agreement and the Assignment Agreement and as to whether this Agreement and the Assignment Agreement are 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 or the Assignment Agreement; it being understood that information and explanations related to the terms and conditions of this Agreement and the Assignment Agreement shall not be considered investment advice or a recommendation to enter into this Agreement. It is entering into this Agreement and the Assignment Agreement as a bona-fide, arm’s-length transaction involving the mutual exchange of consideration and, once executed by the applicable parties, considers this Agreement and the Assignment Agreement to be legally enforceable contracts. 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 or the Assignment 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 and the Assignment Agreement. It is also capable of assuming, and assumes, the risks of this Agreement and the Assignment Agreement.
(viii) Status of Parties. Neither of Parties is acting as a fiduciary for or an adviser to the other in respect of this Agreement or the Assignment Agreement.
4. Governing Law, Jurisdiction, Waiver of Jury Trial
(a) Governing Law. This Letter Agreement and the rights and duties of the parties under this Letter 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 CPA to enter into and perform its obligations under this Letter Agreement shall be determined in accordance with the laws of the State of California. (b) Jurisdiction. Each party submits to the exclusive jurisdiction of the federal courts of the United States of America for the Southern District of California sitting in the city and county of Los Angeles.
(c) Waiver of Right to Trial by Jury. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this Letter Agreement.
[Signature Pages to Follow]
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Signature Page to Letter Agreement
Very truly yours,
J. ARON
J. ARON & COMPANY LLC
By:
Name:
Title:
ACKNOWLEDGED, ACCEPTED AND AGREED TO as of the date first set forth above:
CPA
CLEAN POWER ALLIANCE OF SOUTHERN CALIFORNIA
By:
Name:
Title:
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Exhibit A
Assignment Agreements
[To come.]
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SM Draft 20 March 2023
CUSTODIAL AGREEMENT
This Agreement (this “Agreement”) is made and entered into as of [____], 2023, by and among Clean Power Alliance of Southern California, a California joint powers authority (“CPA”), J. Aron & Company LLC, a New York limited liability company (“J. Aron”), Aron Energy Prepay 16 LLC, a Delaware limited liability company (“Prepay LLC”), 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”) and U.S. Bank Trust Company, National Association, a national banking association, (the “Custodian” and together with CPA, J. Aron, Prepay LLC and Issuer, the “Parties”).
RECITALS:
WHEREAS, 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 U.S. Bank Trust Company, National Association, a national banking association, in its capacity as trustee under the Bond Indenture (the “Trustee”); and WHEREAS, Prepay LLC and Issuer are entering into that certain Master Power Supply Agreement, dated as of [____], 2023 (the “Master Power Supply Agreement”); and WHEREAS, in connection with the execution of the Master Supply Agreement, Prepay LLC and J. Aron are entering into an Electricity Purchase, Sale and Service Agreement, dated as of [____], 2023 (the “Electricity Sale and Service Agreement”); and WHEREAS, in connection with the execution of the Master Supply Agreement, Issuer and CPA are entering into a Clean Energy Purchase Contract, dated as of [____], 2023 (the “Clean Energy Purchase Contract” and together with the Master Power Supply Agreement and the Electricity Sale and Service Agreement, the “Clean Energy Prepay Agreements”); and WHEREAS, prior to the commencement of deliveries under the Clean Energy Prepay Agreements, J. Aron, Issuer and CPA will enter into Assignment Agreements (the “Assignment Agreements”, which definition shall include any new Assignment Agreement identified by J.
Aron’s delivery of an updated Exhibit A consistent with Section 3(b)) with the sellers under certain power purchase agreements (each, individually, a “PPA Seller” and collectively the “PPA Sellers”, and which definitions shall include any new PPA Seller identified by J. Aron’s delivery of an updated Exhibit A consistent with Section 3(b)), pursuant to which CPA will partially assign its rights and obligations under the Assigned PPAs (as defined in the Clean Energy Purchase Contract) to J. Aron; and
WHEREAS, the Parties propose to enter into this Agreement in order to administer payments to be received by the PPA Sellers under the Assigned PPAs.
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:
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2 Section 1. Defined Terms; Interpretation.
(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 Clean Energy Purchase Contract. The following additional terms, 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:
“J. Aron Fixed Payment” means, in respect of each Assigned PPA and each Month in an Assignment Period thereunder, the amount set forth for such Assigned PPA and Month on Exhibit B hereto.
“J. Aron Prepay Payment” means, in respect of each Monthly PPA Invoice, an amount determined by CPA as the lesser of (a) the J. Aron Fixed Payment for the relevant Month and Assigned PPA, and (b) the actual quantity of Assigned Energy reflected in such Monthly PPA Invoice multiplied by the contract price then in effect with respect to Energy in the relevant Assigned PPA; provided that the J. Aron Prepay Payment shall be reduced by the face amount of any Receivable (as defined in the Electricity Sale and Service Agreement) that is delivered by J.
Aron to the Custodian pursuant to Section 4(f); provided further that the J. Aron Prepay Payment will be determined without regard to any PPA Seller Payment Obligation. “J. Aron Resettlement Payment” means, in respect of any Monthly PPA Invoice that (a) is delivered after the delivery of the Billing Statement under the Clean Energy Purchase Contract for such Month and (b) reflects a quantity of Energy less than the Assigned Prepay Quantity was delivered in such Month under the relevant Assigned PPA, an amount equal to the product of (x) the Assigned Prepay Quantity for such Month minus the Assigned Quantity actually delivered under the relevant Assigned PPA, multiplied by (y) the applicable APC Contract Price. “Monthly PPA Payment” means, in respect of any Monthly PPA Invoice, an amount determined by CPA as the total amount to be withdrawn from the Assigned PPA Payments Account by the Custodian and paid to the relevant PPA Seller in respect of such Monthly PPA Invoice, which shall equal the total net amount due to such PPA Seller in respect of such Monthly PPA Invoice and shall consist of the following components:
(a) The J. Aron Prepay Payment, which shall be deemed to be paid to the relevant PPA Seller on behalf of J. Aron in respect of Assigned Energy; and (b) the CPA Net Payment.
“CPA Gross Payment” means, in respect of any Monthly PPA Invoice, an amount determined by CPA as the positive result, if any, of (a) all amounts owed to the relevant PPA Seller in respect of such Monthly PPA Invoice (determined without respect to the PPA Seller Payment Obligation), less (b) the J. Aron Prepay Payment; provided, for clarity, that the CPA Gross Payment (i) shall be deemed to be paid to the relevant PPA Seller on behalf of J. Aron to the extent it relates to any Assigned PAYGO Energy and Assigned RECs, and (ii) otherwise shall be deemed to be paid to the relevant PPA Seller on behalf of CPA.
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3 “CPA Net Payment” means, in respect of any Monthly PPA Invoice, an amount determined by CPA as the positive result, if any, of (a) the CPA Gross Payment, less (b) the PPA Seller Payment Obligation.
“PPA Seller Payment Obligation” means, in respect of any Monthly PPA Invoice, an amount determined by CPA as the total amount owed by the relevant PPA Seller as reflected in such Monthly PPA Invoice, including any amounts that have been netted or set-off against amounts owed to such PPA Seller; provided, for clarity, that the PPA Seller Payment Obligation shall be deemed to be paid to CPA and credited against the CPA Gross Payment thereby resulting in the CPA Net Payment required to be made by CPA hereunder.
“PPA Shortfall Lookback Summary” means, in respect of any Monthly PPA Invoice, a list that sets forth the following:
(i) which Months, if any, the relevant PPA Seller delivered less than the Assigned Prepay Quantity in the preceding 12 Months (any such Month, a “Lookback Shortfall Month”) under the applicable Assigned PPA and whether such under-deliveries were a result of Force Majeure (as defined in the relevant Assigned PPA); (ii) the percentage of the Assigned Prepay Quantity actually delivered under the applicable Assigned PPA for each such Lookback Shortfall Month; and (iii) an indication of whether an increased Remarketing Fee (as defined in the Master Power Supply Agreement) is in effect consistent with the terms of Exhibits C and F of the Master Power Supply Agreement.
(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. CPA, J. Aron, Prepay LLC and Issuer hereby appoint U.S. Bank Trust Company, National Association 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) Monthly Statements. No later than five Business Days following receipt of an invoice from a PPA Seller in respect of any Month in an Assignment Period (a “Monthly PPA Invoice”), CPA shall deliver a statement (the “Monthly Statement”) showing each of the following (based on the information provided by the relevant PPA Seller in the Monthly PPA Invoice) to each of the Parties hereto:
(i) the J. Aron Prepay Payment;
(ii) the J. Aron Resettlement Payment;
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4 (iii) the CPA Gross Payment;
(iv) the PPA Seller Payment Obligation;
(v) the CPA Net Payment;
(vi) the Monthly PPA Payment;
(vii) the “Monthly PPA Invoice Payment Date”, which shall be the last Business Day on which payment on such Monthly PPA Invoice may be made before any incremental interest arises thereon or any default or breach arises under the relevant Assigned PPA; (viii) the “Custodial Agreement Payment Date,” which shall be one Business Day preceding the Monthly PPA Invoice Payment Date;
(ix) the PPA Shortfall Lookback Summary;
provided that CPA shall deliver an updated Monthly Statement within seven days following agreement by CPA and any PPA Seller to an adjustment to a Monthly PPA Invoice to the extent that such adjustment is agreed upon prior to the date that is 10 days prior to the Monthly PPA Invoice Date; provided furthermore that the Parties acknowledge and agree that any adjustments agreed upon with respect to a Monthly PPA Invoice after the date specified in the foregoing provision shall be resolved solely between CPA and the relevant PPA Seller as provided in the Assignment Agreements.
(b) Monthly Statement Verification. J. Aron shall notify CPA and each other Party promptly, but in no event more than three (3) Business Days, following CPA’s delivery of a Monthly Statement if J. Aron believes any information included on such Monthly Statement is incorrect. Following receipt and verification of the information included in any such notice from J. Aron, CPA shall, to the extent appropriate and in consultation with J. Aron, issue a corrected Monthly Statement to all Parties. J. Aron and each other Party hereto acknowledges and agrees that (i) CPA is calculating the Monthly Statement only for convenience of the Parties, (ii) the purpose of this Agreement is solely to determine amounts to be paid by CPA and J. Aron under separate contracts, and (iii) none of CPA, J. Aron nor any other Party hereto will have any liability whatsoever with respect to any action taken or omitted by it under this Agreement (but without prejudice to an express payment obligation arising under another contract), including as a result of any failure by CPA to timely or properly calculate any amount to be included in a Monthly Statement. Without limiting the foregoing, J. Aron acknowledges that it will have an opportunity to review and comment on each calculation and date included in a Monthly Statement (and shall be aware if such Monthly Statement has not been timely delivered) and CPA will not be responsible in any way for any damages, costs, liabilities, loss of use or any other claims related to an insufficient or late payment under an Assigned PPA as a result of any deficiencies in any Monthly Statement.
(c) Assigned PPAs Exhibit. Promptly following the execution of the initial Assignment Agreements, J. Aron shall deliver Exhibit A to the other Parties hereto, which will set forth certain information regarding the Assigned PPAs as of the date hereof, including the Assignment Periods for each Assigned PPA, the Assigned Quantities, the PPA Sellers thereunder Agenda Page 191 of 570
5 and the payment instructions for payments to the PPA Sellers. Exhibit B to this Agreement sets forth the J. Aron Fixed Payments. J. Aron shall deliver an updated Exhibit A or Exhibit B, as applicable, to each of the other Parties hereto to reflect any changes to the information set forth therein.
Section 4. Assigned PPA Payments Account.
(a) Payments. With respect to certain payments required to be made by J. Aron and CPA to the PPA Sellers under the Assigned PPAs, there is hereby established the custodial account detailed below (the “Assigned PPA Payments Account”), and all payments made by J. Aron and CPA hereunder shall be wired to such Assigned PPA Payments Account :
U.S. Bank, NA
ABA: 091000022
FBO: U.S. Bank Trust NA
FFC: 277027014 – Clean Power Alliance 2023C PPA Cust
Address: 777 E. Wisconsin Av.
Milwaukee, WI 53202-5300
(b) J. Aron Payments. J. Aron shall pay the J. Aron Prepay Payment and any J. Aron Resettlement Payment into the Assigned PPA Payments Account, in respect of each Monthly Statement on the relevant Custodial Agreement Payment Date set forth in such statement. To the extent that (i) a J. Aron Prepay Payment and a J. Aron Resettlement Payment are due and (ii) J.
Aron pays some portion of such amounts but less than the total amount due, J. Aron’s partial payment shall be applied first to the J. Aron Prepay Payment. In addition, the Custodian agrees to promptly notify CPA if it does not receive the J. Aron Prepay Payment or any J. Aron Resettlement Payment from J. Aron on the Custodial Agreement Payment Date, and in such case CPA may elect in its sole discretion to make the J. Aron Prepay Payment to the Custodian for the purpose of satisfying the Monthly PPA Payment (in which case CPA will have a reimbursement claim against Issuer under Section 6.4 of the Clean Energy Purchase Contract). (c) CPA Payments. CPA shall pay the CPA Net Payment into the Assigned PPA Payments Account in respect of each Monthly Statement on the relevant Custodial Agreement Payment Date set forth in such statement.
(d) Application of Payments. The Custodian shall withdraw and apply amounts received under this Section 4 as follows:
(i) any J. Aron Prepay Payment received from J. Aron (including any payment be by CPA on J. Aron’s behalf pursuant to the last sentence of Section 4(b)) and any CPA Net Payment received from CPA shall be applied to the payment of the Monthly PPA Payment to each PPA Seller in respect of each Monthly Statement on the relevant Monthly PPA Invoice Payment Date pursuant to the payment instructions set forth on Exhibit A; provided that if amounts on deposit in the Assigned PPA Payment Account are insufficient to pay the entire Monthly PPA Payment on such date, the Custodian shall (i) withdraw and Agenda Page 192 of 570
6 pay to such PPA Seller the entire remaining balance of the Assigned PPA Payment Account and (ii) notify such PPA Seller of the amounts received for such Month from each of J.
Aron and CPA consistent with such PPA Seller’s contact information provided in Exhibit A; provided furthermore that, if the J. Aron Prepay Payment for any Month exceeds the Monthly PPA Payment, then the excess of the J. Aron Prepay Payment over the Monthly PPA Payment shall be remitted to CPA on the relevant Monthly PPA Invoice Payment Date pursuant to CPA’s payment instructions set forth on Exhibit C; and (ii) any J. Aron Resettlement Payment received from J. Aron shall be remitted to CPA on the relevant Monthly PPA Invoice Payment Date pursuant to CPA’s payment instructions set forth on Exhibit C.
(e) Amounts Held in Trust. Amounts deposited in the Assigned PPA Payments Account shall be held in trust for the benefit of CPA until applied as set forth in Section 4(d) and Section 12, as applicable, and there is hereby granted to CPA a lien on and security interest in the Assigned PPA Payments Account pending such application. The Custodian shall not be required to comply with any orders, demands, or other instructions from CPA 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 CPA agrees that 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 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.
(f) Transfer of Receivables. With respect to each Monthly Statement, to the extent J.
Aron has purchased Receivables (as defined in the Electricity Sale and Service Agreement) for amounts owed by CPA for the Month to which such Monthly Statement relates, J. Aron may, at its option, (i) notify the Custodian that it intends to transfer all or any portion of such Receivables to the applicable PPA Seller, and (ii) reduce the J. Aron Prepay Payment by the face amount of such Receivables to be transferred. To the extent J. Aron has notified the Custodian of its intent to transfer any such Receivables, J. Aron shall cause such Receivables to be transferred to the relevant PPA Seller not later than the relevant Custodial Agreement Payment Date.
Section 5. Custodian; Fees.
(a) Limitation on Liability. The Custodian shall have (i) no liability under any agreement other than this Agreement and (ii) 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 any payments which may be due to it, or to take any action to compel J. Aron or CPA 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 Agenda Page 193 of 570
7 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, the Custodian 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 or consequential damages, losses or penalties of any kind whatsoever (including but not limited to lost profits), regardless of the form of action. 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. (b) Custodian Fee. The Issuer 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 6. Succession. The Custodian may resign and be discharged from its duties or obligations hereunder by giving not less than 60 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 Agenda Page 194 of 570
8 act. Notwithstanding the foregoing, if no appointment of a successor Custodian shall be made pursuant to the foregoing provisions of this Section 6 within 60 days after the Custodian has given written notice to the other Parties of its resignation as provided in this Section 6, 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 7. Reimbursement. J. Aron and CPA agree, jointly and severally (subject to the second proviso of this Section 7), 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 J. Aron or CPA, 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 7 shall not duplicate any other amounts due under this Agreement, including without limitation amounts due under Section 13 hereof; provided further, however, that, notwithstanding the joint and several nature of the obligations under this Section 7, 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 8. Taxpayer Identification Numbers; Tax Matters. J. Aron and CPA represent that 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 CPA, 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 CPA. The Custodian shall have no responsibility for making such payment unless directed to do so by the appropriate authorized Party.
Section 9. Notices. 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, courier, or personal delivery (including overnight delivery service) to each of the notice recipients and addresses specified in Exhibit C for the receiving Party. 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 10 days’ prior written notice to the other Party, to change its list of notice recipients and addresses in Exhibit C. 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, a Party may at any time notify the others 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 Agenda Page 195 of 570
9 delivered by means other than email transmission during the specified period of time shall be ineffective.
Section 10. Notices.
(a) Amendments. 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) Assignments. 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 5, without the prior written consent of the other Parties.
(c) 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 New York, without regard to any conflicts of law principle that would direct the application of the laws another jurisdiction.
(d) Jurisdiction. 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. 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) Force Majeure. 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. (f) Counterparts. 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. (g) No Obligation to Invest. 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. (h) Limited Duties. 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 11. 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 Agenda Page 196 of 570
10 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 12. Term; Winding Up. This Agreement will expire concurrently with the receipt of written notice from CPA, with a copy to the other Parties, that the Clean Energy Purchase Contract has terminated in accordance with its terms. Following the Custodian’s payment of any Monthly PPA Payments due in respect of the final month of commodity deliveries prior to such a termination, any remaining balance in the Assigned PPA Payments Account shall be paid to CPA.
Section 13. Indemnification. J. Aron and CPA, jointly and severally, agree to protect, indemnify, defend and hold harmless, the Custodian, and affiliates, and each person who controls the Custodian (and each of their respective directors, officers, agents and employees) from and against all claims, losses, liabilities, actions, suits, costs, judgments and expenses (including 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 or loss resulting from the gross negligence or willful misconduct of the Custodian; provided, however, that any amounts due under this Section 13 shall not duplicate any other amounts due under this Agreement, including without limitation amounts due under Section 7 hereof. The obligations of this Section 13 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 and Issuer shall have all of the rights (including the indemnification rights), benefits, privileges and immunities under this Agreement as are granted to Issuer under the Bond Indenture, all of which are incorporated, mutatis mutandis, into this Agreement.
Section 14. 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.
Section 15. Patriot Act. J. Aron and CPA acknowledge that the Custodian is subject to federal laws, including the Customer Identification Program (“CIP”) requirements under the USA Agenda Page 197 of 570
11 PATRIOT Act and its implementing regulations, pursuant to which the Custodian must obtain, verify and record information that allows the Custodian to identify J. Aron and CPA. Accordingly, prior to opening the Assigned PPA Payments Account described in Section 3 of this Agreement, the Custodian will ask J. Aron and CPA 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 J. Aron’s and CPA’s identities, such as organizational documents, certificate of good standing, license to do business, or other pertinent identifying information. J.
Aron and CPA agree that the Custodian cannot open any account hereunder unless and until the Custodian verifies J. Aron’s and CPA’s identities in accordance with its CIP. [Signature Pages Follow]
Agenda Page 198 of 570
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.
CLEAN POWER ALLIANCE OF
SOUTHERN CALIFORNIA
By:___________________________________
Name: _____________________________
Title: ______________________________
Taxpayer ID Number:_________________
J. ARON & COMPANY LLC
By:___________________________________
Name: _____________________________
Title: ______________________________
Taxpayer ID Number: _________________
ARON ENERGY PREPAY 16 LLC
By: J. Aron & Company LLC, its
Manager
By:___________________________________
Name: _____________________________
Title: ______________________________
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION
By:___________________________________
Name: _____________________________
Title: ______________________________
CALIFORNIA COMMUNITY CHOICE
FINANCING AUTHORITY
By:___________________________________
Agenda Page 199 of 570
Name: _____________________________
Title: ______________________________
Agenda Page 200 of 570
EXHIBIT A
ASSIGNED PPAS
[To come.]
Agenda Page 201 of 570
EXHIBIT B
J. ARON FIXED PAYMENTS
[To be attached.]
Agenda Page 202 of 570
Agenda Page 203 of 570
MEMORANDUM OF UNDERSTANDING (“MOU”)
Date: ________, 2023
To: Garth Salisbury
Treasurer/Controller
California Community Choice Financing Authority
[email protected]
(415) 464-6037
From: Clean Power Alliance
Re: California Community Choice Financing Authority Prepay Transaction on behalf of Clean Power Alliance
Overview
The California Community Choice Financing Agency (“CCCFA” or the “Issuer”) seeks to procure a 30-year supply of energy, through the issuance of Clean Energy Project Revenue Bonds (the "Bonds") issued by CCCFA. The CCCFA will sell all the Prepaid Energy acquired from this transaction to Clean Power Alliance (“CPA”), the “Project Participant”.
Rating Agency Fees and Green Bond Opinion Fee
Rating Agency Fees and expenses (“Rating Agency Fees”) are paid from the proceeds of the Bonds. However, unlike most of the other fees associated with the issuance of the Bonds, payment of the Rating Agency Fees is not contingent upon the issuance of the Bonds.
In the event the Bonds are not issued, and there remains a Rating Agency Fee payable to Moody’s Investors Service (the “Rating Agency” or “Moody’s”), the Project Participant agrees that it will be liable for the costs and make direct payment to Moody’s for such fees.
In the event a Green Bond Second Opinion is obtained, and the Bonds are not issued, the fee payable to the Green Bond Second Opinion provider (the “Green Bond Fees”) shall be incurred by the Project Participant and in such event, to the extent the Green Bond Fees were already paid by CCCFA, the Project Participant agrees to reimburse CCCFA.
Agenda Page 204 of 570
Sincerely,
CLEAN POWER ALLIANCE
__________________________
David McNeil
Chief Financial Officer
ACCEPTED AND AGREED
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
By: __________________________
Name: Garth Salisbury, Treasurer/Controller
Date: ______, 2023
Agenda Page 205 of 570
4881-4854-5367.2
NP Draft 3/21/23
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 securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification d h ii l f h j i di i
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 individual alternative minimum tax. Bond Counsel observes that, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate 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[__] ([GREEN/CLIMATE] BONDS)
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[__] ([Green/Climate] Bonds)] (the “Bonds”), under a Trust Indenture between CCCFA and U.S. Bank Trust Company, National Association, 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 [________]* (the “Initial Interest Rate Period”), the Bonds will bear interest at a fixed Term Rate in a Term Rate Period as shown on the inside cover page. During the Initial Interest Rate Period, interest on the Bonds is payable semiannually on each [_____]* and [_____]*
, commencing [_____], 202[__]*. The Bonds are subject to optional and extraordinary mandatory redemption during the Initial Interest Rate Period, and the Bonds maturing on [_____] 1, 20[__]* are subject to mandatory tender for purchase on [_____] 1, 20[__]*(the “Mandatory Purchase Date”). See “THE BONDS – Tender” and “– Redemption.” [The Bonds have been designated “[Green/Climate] Bonds.” See “DESIGNATION OF BONDS AS [GREEN/CLIMATE] BONDS” and APPENDIX J hereto.]
Under the “Clean Energy Project,” Clean Power Alliance of Southern California (the “Project Participant” or “CPA”) anticipates purchasing approximately thirty years of Electricity at a net savings to the costs it would otherwise pay for such Electricity. “Electricity” means energy, renewable energy, and renewable energy credits, as further described herein. To effectuate the Clean Energy Project, CCCFA has issued the Bonds, using the proceeds to prepay the costs of the acquisition of Electricity to be delivered over approximately thirty years under a Master Power Supply Agreement (the “Master Power Supply Agreement”), between Aron Energy Prepay 16 LLC, a Delaware limited liability company (the “Electricity Supplier”) and CCCFA. CCCFA will sell all of the Electricity acquired under the Master Power Supply Agreement to the Project Participant under the Clean Energy Purchase Contract (the “Clean Energy Purchase Contract”). The Electricity Supplier will meet the Electricity delivery requirements under the Master Power Supply Agreement through the Electricity Purchase, Sale and Service Agreement with J. Aron & Company LLC (“J. Aron”).
Under the terms of the Master Power Supply Agreement and the Clean Energy Purchase Contract, the Project Participant can seek to assign existing and future power purchase agreements to J. Aron for ultimate delivery to the Project Participant. J. Aron must consent to any such assignment. As of the date of delivery of the Bonds, the Project Participant intends to initially enter into [_________] limited assignment agreements with J. Aron relating to specific power purchase agreements.
The Electricity Supplier will loan an amount approximately equal to the prepayment it receives from CCCFA to [_______] (the “Funding Recipient”) under a Term Loan Agreement (the “Funding Agreement”), and will enter into the Electricity Purchase, Sale and Service Agreement with J. Aron. Under the Electricity Purchase, Sale and Service Agreement, J. Aron will sell Electricity to the Electricity Supplier so that the Electricity Supplier can meet its obligations to CCCFA under the Master Power Supply Agreement and CCCFA can meet its obligations to the Project Participant under the Clean Energy Purchase Contract. The monthly payments scheduled to be made by the Funding Recipient under the Funding Agreement correspond to amounts sufficient to enable the Electricity Supplier to meet its payment obligations under the Electricity Purchase, Sale and Service Agreement.
THE PAYMENT OF THE BONDS IS NOT GUARANTEED BY THE ELECTRICITY SUPPLIER, J. ARON, [THE GOLDMAN SACHS GROUP, INC., THE FUNDING RECIPIENT], THE UNDERWRITERS, CCCFA OR ITS MEMBERS, OR THE PROJECT PARTICIPANT OR ITS MEMBERS. THE BONDS ARE NOT AN OBLIGATION OF THE
STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION, THE MEMBERS OF CCCFA OR THE PROJECT PARTICIPANT OR ITS MEMBERS, AND NEITHER THE FAITH
AND CREDIT OF CCCFA NOR THE TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO PAYMENTS PURSUANT TO THE INDENTURE OR THE BONDS. THE BONDS ARE SPECIAL AND LIMITED OBLIGATIONS OF CCCFA, PAYABLE SOLELY FROM THE TRUST ESTATE, AS AND TO THE EXTENT PROVIDED IN THE INDENTURE.
* Preliminary, subject to change.
Agenda Page 206 of 570
4881-4854-5367.2
- 2 -
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 Underwriters, 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 Electricity Supplier by Sheppard, Mullin, Richter & Hampton LLP; for the Funding Recipient by [_________]; and for the Underwriters by Nixon Peabody LLP. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about __________, 2023.
Goldman Sachs & Co. LLC [Co-Managing Underwriter]
Dated: _______, 2023
Agenda Page 207 of 570
4881-4854-5367.2
$[__________]*
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
CLEAN ENERGY PROJECT REVENUE BONDS
SERIES 2023[__] ([GREEN/CLIMATE] BONDS)
MATURITY DATES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS AND CUSIPS
MATURITY
[________] 1*
PRINCIPAL
AMOUNT
INTEREST
RATE YIELD CUSIP1
$_________ _____% Term Bond due [______] 1, 20[__]2
, Yield: ____%3, CUSIP1 _________
*
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 by FactSet Research Systems Inc. on behalf of The American Bankers Association, 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 maturing on [_____] 1, 20[__]* are required to be tendered for purchase on [____] 1, 20[__]* . See “THE BONDS – Tender” and “–
Redemption.”
3 Yield to the mandatory tender date of [____] 1, 20[__]* .
Agenda Page 208 of 570
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CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
CLEAN ENERGY PROJECT REVENUE BONDS
SERIES 2023[__] ([GREEN/CLIMATE] BONDS)
PREPAID COMMODITY TRANSACTION STRUCTURE
(EXPECTATION FOR INITIAL DELIVERY PERIOD – ASSIGNED PPAS IN EFFECT)
1. Debt Issuance: California Community Choice Financing Authority (“CCCFA”) issues the Bonds to fund the prepayment of electric energy, renewable energy, and renewable energy credits (collectively, “Electricity”), pay capitalized interest, fund a debt service reserve, a commodity swap reserve, and pay costs of issuance. The Bonds will bear interest at fixed interest rates during the Initial Interest Rate Period.
2. Prepayment: CCCFA will apply bond proceeds to prepay Aron Energy Prepay 16 LLC (the “Electricity Supplier”) for approximately thirty years of Electricity deliveries. Under the Master Power Supply Agreement, the Electricity Supplier will be obligated to (a) deliver Electricity to CCCFA during the Delivery Period; (b) make payments for any Prepaid Electricity not delivered or taken; and (c) make a Termination Payment upon a Termination Payment Event as described herein.
3. Funding Agreement: The Electricity Supplier, as lender, and [_____________], as Funding Recipient, will enter into an unsecured term loan agreement (the “Funding Agreement”) pursuant to which the Electricity Supplier will lend to the Funding Recipient an amount approximately equal to the proceeds of the prepayment received by the Electricity Supplier under the Master Power Supply Agreement. The Scheduled Amounts payable under the Funding Agreement replicate the Electricity Supplier’s monthly prepaid Electricity purchase obligations during the Delivery Period. The Funding Agreement will provide a fixed interest rate for a period equal to the Initial Interest Rate Period on the Bonds and will have a final maturity at the end of such period.
4. Electricity Supply: The Electricity Supplier will procure the Electricity from J. Aron & Company LLC (“J. Aron”). The Electricity Supplier will enter into a long-term Electricity Purchase, Sale and Service Agreement with J. Aron whereby the Electricity Supplier will purchase Electricity from J. Aron during the Delivery Period that matches the delivery quantities and terms under the Master Power Supply Agreement.
Prepayment
(Upfront)
Project
Participant
(CPA)
Funding
Recipient
Electricity
Supplier Issuer
(CCCFA) 2 3
Electricity
(Monthly)
Scheduled Amounts
(Monthly)
Electric Payments
(Monthly)
Bond
Proceeds
Debt
Service
The Bonds J. Aron
4 Electricity
(Monthly)
Unsecured Loans
(Upfront)
Electric
Payments
(Monthly) Electricity
(Monthly)
1 5
6 PPA Assignments
Agenda Page 209 of 570
4881-4854-5367.2
The Electricity Supplier will pay for the Electricity monthly in arrears. J. Aron’s payment obligations under the Electricity Purchase, Sale and Service Agreement will be guaranteed by GSG.
5. Project Participant: Under the Clean Energy Purchase Contract, CCCFA will sell to the Project Participant all of the prepaid Electricity delivered by the Electricity Supplier at the Contract Price (“Prepaid Electricity”).
So long as sufficient Assigned PPAs are assigned to J. Aron, the Project Participant must pay for all Electricity actually delivered under the Clean Energy Purchase Contract, provided that if neither the Project Participant nor CCCFA has requested the Prepaid Electricity be remarketed, and if the amount of Electricity actually delivered to the Project Participant is less than the scheduled Prepaid Electricity, the Electricity Supplier must sell the quantity of Electricity not delivered in a private business sale and in turn make a cash payment to CCCFA, subject to the terms of the Master Power Supply Agreement and the Clean Energy Purchase Contract. The amounts payable by the Project Participant and the Electricity Supplier are calculated to provide sufficient revenues (plus investment income from the Debt Service Account) to enable CCCFA to make the required scheduled deposits to the Debt Service Account.
6. Assigned PPAs: The Project Participant expects to initially assign certain rights, title and interest as purchaser under [_______ (_)] power purchase agreements (each an “Initially Assigned PPA”) to J. Aron, which are anticipated to deliver a quantity of Electricity that allows for J. Aron to meet the Electricity Supplier’s Prepaid Electricity delivery obligations during the Initial Interest Rate Period. J. Aron will use a portion of the Electricity delivered under the Initially Assigned PPAs to meet its obligation to deliver Electricity under the Electricity Purchase, Sale and Service Agreement (any additional Electricity is not pledged as part of the Trust Estate). Through this structure, the Project Participant anticipates being able to procure long-term clean energy electricity supplies at favorable prices.
Electricity Remarketing and Commodity Swaps: If the Project Participant does not require all or any portion of the Electricity that it is obligated to purchase under the Clean Energy Purchase Contract, or if it is unable to assign sufficient eligible power purchase agreements to J. Aron, it may request the Electricity Supplier remarket such portion of the Electricity to another purchaser. CCCFA will enter into a commodity price swap (the “CCCFA Commodity Swap”), which cash flows will remain inactive while Electricity is being delivered pursuant to the Assigned PPAs. In the event of a remarketing and Electricity is not delivered pursuant to the Assigned PPAs, the Electricity Supplier will deliver market power to CCCFA. Under the CCCFA Commodity Swap, if active, CCCFA will pay amounts based on the daily market price and receive fixed amounts from the Commodity Swap Counterparty to ensure its payment obligations are market based while ensuring that sufficient revenues are available to meet its fixed debt service obligations. The Electricity Supplier will enter into a mirror swap with the same Commodity Swap Counterparty to meet its requirements for market-referenced pricing to fulfill its delivery obligations. See “THE MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing” herein for further details on the timing, triggers and process of electricity remarketing.
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The information contained in this Official Statement has been obtained from CCCFA, the Project Participant, the Electricity Supplier, J. Aron, GSG, the Funding Recipient, 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 date 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 Underwriters. 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 UNDERWRITERS 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 Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have 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 Underwriters do not guarantee the accuracy or completeness of such information.
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.
Agenda Page 211 of 570
4881-4854-5367.2
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
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
Clean Power Alliance of Southern California
BOND COUNSEL PROJECT PARTICIPANT COUNSEL
ORRICK HERRINGTON & SUTCLIFFE LLP CHAPMAN AND CUTLER LLP
TRUSTEE FINANCIAL ADVISOR
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION
MUNICIPAL CAPITAL MARKETS GROUP, INC.
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TABLE OF CONTENTS
Page
(i)
INTRODUCTION .......................................................................................................................... 1 California Community Choice Financing Authority ............................................................... 1 Clean Power Alliance of Southern California ......................................................................... 1 The Bonds ................................................................................................................................ 2 Security for the Bonds ............................................................................................................. 2 The Clean Energy Project ........................................................................................................ 3 The Master Power Supply Agreement ..................................................................................... 6 The Receivables Purchase Provisions ..................................................................................... 9 The Funding Agreement ........................................................................................................ 10 The Electricity Purchase, Sale and Service Agreement ......................................................... 10 The Clean Energy Purchase Contract .................................................................................... 11 Debt Service and Commodity Reserves ................................................................................ 12 Re-Pricing Agreement ........................................................................................................... 12 Commodity Swaps ................................................................................................................. 12 The Electricity Supplier, J. Aron, and GSG .......................................................................... 13 Certain Relationships ............................................................................................................. 13 INVESTMENT CONSIDERATIONS ......................................................................................... 14 Special and Limited Obligations ........................................................................................... 14 Structure of the Clean Energy Project ................................................................................... 15 Performance by Others .......................................................................................................... 17 Electricity Remarketing ......................................................................................................... 19 Limitations on Exercise of Remedies .................................................................................... 21 Enforceability of Contracts .................................................................................................... 21 No Established Trading Market ............................................................................................. 21 Loss of Tax Exemption on the Bonds.................................................................................... 21 SECURITY FOR THE BONDS ................................................................................................... 22 The Indenture ......................................................................................................................... 22 Flow of Funds ........................................................................................................................ 24 Debt Service Account ............................................................................................................ 25 Debt Service Reserve Account .............................................................................................. 26 Commodity Reserve Account ................................................................................................ 27 Administrative Fee Fund ....................................................................................................... 27 Restriction on Additional Obligations ................................................................................... 27 Amendment of Indenture ....................................................................................................... 28 Investment of Funds .............................................................................................................. 28 Enforcement of Project Agreements ...................................................................................... 29 SOURCES AND USES OF FUNDS ............................................................................................ 32 THE BONDS ................................................................................................................................ 32 General ................................................................................................................................... 32 Interest ................................................................................................................................... 32 Increased Interest Rate Upon Ledger Event .......................................................................... 33 Tender .................................................................................................................................... 34 Agenda Page 214 of 570
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Page
(ii)
Redemption ............................................................................................................................ 35 Book-Entry System ................................................................................................................ 38 REVENUES AND DEBT SERVICE REQUIREMENTS ........................................................... 39 [DESIGNATION OF BONDS AS GREEN/CLIMATE BONDS] .............................................. 39 THE MASTER POWER SUPPLY AGREEMENT ..................................................................... 40 Purchase and Sale .................................................................................................................. 40 Delivery of Electricity ........................................................................................................... 40 Assignment of Power Purchase Agreements ......................................................................... 41 Failure to Deliver or Receive Electricity ............................................................................... 42 Electricity Remarketing ......................................................................................................... 43 Ledger Event .......................................................................................................................... 44 Payment Provisions ............................................................................................................... 45 Force Majeure ........................................................................................................................ 45 Assignment ............................................................................................................................ 45 Early Termination .................................................................................................................. 46 Replacement of Commodity Swaps....................................................................................... 48 Receivables Purchase Provisions ........................................................................................... 49 THE RE-PRICING AGREEMENT .............................................................................................. 51 General ................................................................................................................................... 51 Remarketing Election ............................................................................................................ 52 THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT ............................. 52 General ................................................................................................................................... 52 J. Aron as Agent .................................................................................................................... 52 Failure to Deliver or Receive Electricity ............................................................................... 53 Payment Provisions ............................................................................................................... 54 Force Majeure ........................................................................................................................ 54 Additional Amounts Payable Following a Ledger Event ...................................................... 54 Assignment ............................................................................................................................ 55 Defaults and Termination Events .......................................................................................... 55 Remedies and Termination .................................................................................................... 56 Security .................................................................................................................................. 56 THE FUNDING AGREEMENT .................................................................................................. 56 Amount and Term .................................................................................................................. 56 Repayment ............................................................................................................................. 56 [Extension of Term ................................................................................................................ 56 Prepayment Option ................................................................................................................ 57 Amendments .......................................................................................................................... 57 Loan Events of Default and Remedy ..................................................................................... 57 THE MASTER ELECTRICITY SUPPLIER CUSTODIAL AGREEMENT .............................. 58 GSG, J. ARON AND THE ELECTRICITY SUPPLIER ............................................................. 60 Agenda Page 215 of 570
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Page
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GSG ....................................................................................................................................... 60 The Electricity Supplier ......................................................................................................... 61 THE CLEAN ENERGY PURCHASE CONTRACT ................................................................... 62 General ................................................................................................................................... 62 Pricing Provisions .................................................................................................................. 62 Assignment of Power Purchase Agreements ......................................................................... 63 Billing and Payment .............................................................................................................. 64 Annual Refunds ..................................................................................................................... 65 Covenants of the Project Participant ...................................................................................... 65 Delivery Points; Title and Risk of Loss ................................................................................. 66 Failure to Perform. ................................................................................................................. 66 Remarketing of Energy .......................................................................................................... 66 Force Majeure ........................................................................................................................ 67 Default ................................................................................................................................... 67 Assignment ............................................................................................................................ 68 Project Participant Credit Enhancement ................................................................................ 68 CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY ..................................... 69 General ................................................................................................................................... 69 Powers and Authority ............................................................................................................ 69 Governance and Management ............................................................................................... 71 CCCFA Projects .................................................................................................................... 71 Separate Obligations .............................................................................................................. 71 Limited Liability .................................................................................................................... 72 COMMUNITY CHOICE AGGREGATORS ............................................................................... 72 General ................................................................................................................................... 72 Community Choice Service Model ....................................................................................... 72 Service Contract Requirements and Registration with the Public Utilities Commission ...... 72 Customer Participation and Opt-out Rights ........................................................................... 72 Regulatory Compliance ......................................................................................................... 73 Cost Recovery Related to Transfer of Customers to a CCA ................................................. 73 THE COMMODITY SWAPS ...................................................................................................... 73 General ................................................................................................................................... 74 Form of Commodity Swaps ................................................................................................... 74 Payment ................................................................................................................................. 74 Early Termination .................................................................................................................. 74 Commodity Swap Custodial Agreements .............................................................................. 76 THE COMMODITY SWAP COUNTERPARTY........................................................................ 77 CONTINUING DISCLOSURE .................................................................................................... 78 LITIGATION ................................................................................................................................ 79 FINANCIAL STATEMENTS ...................................................................................................... 79 Agenda Page 216 of 570
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Page
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FINANCIAL ADVISOR .............................................................................................................. 80 UNDERWRITING ....................................................................................................................... 80 CERTAIN RELATIONSHIPS ..................................................................................................... 80 RATING ....................................................................................................................................... 81 TAX MATTERS ........................................................................................................................... 81 APPROVAL OF LEGAL MATTERS.......................................................................................... 83 MISCELLANEOUS ..................................................................................................................... 84 APPENDIX A — THE PROJECT PARTICIPANT
APPENDIX B — AUDITED FINANCIAL STATEMENTS OF THE PROJECT PARTICIPANT FOR FISCAL YEAR 2021-22 APPENDIX C — DEFINITIONS OF CERTAIN TERMS
APPENDIX D — SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE APPENDIX E — FORM OF CONTINUING DISCLOSURE UNDERTAKING
APPENDIX F — PROPOSED FORM OF OPINION OF BOND COUNSEL
APPENDIX G — BOOK-ENTRY SYSTEM
APPENDIX H — REDEMPTION PRICE OF THE BONDS
APPENDIX I — SCHEDULE OF TERMINATION PAYMENTS
[APPENDIX J — SECOND PARTY OPINION REGARDING [GREEN/CLIMATE] BONDS DESIGNATION APPENDIX K — [DISCLOSURE RE FUNDING RECIPIENT]
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1 OFFICIAL STATEMENT
$[_____]*
CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY
CLEAN ENERGY PROJECT REVENUE BONDS
SERIES 2023[__] ([GREEN/CLIMATE] BONDS)
INTRODUCTION
This Official Statement, which includes the cover page and appendices attached hereto, contains information concerning (a) California Community Choice Financing Authority (“CCCFA”), (b) CCCFA’s Clean Energy Project Revenue Bonds, Series 2023[__] ([Green/Climate] Bonds) (the “Bonds”), being issued in the aggregate principal amount of $[_____]*
and (c) the Clean Energy Project (defined below)
being financed with proceeds of the Bonds. Capitalized terms used herein have the meanings shown in APPENDIX C.
California Community Choice Financing Authority
California Community Choice Financing Authority is a joint powers agency whose members consist of Clean Power Alliance of Southern California (“CPA” or the “Project Participant”), Central Coast Community Energy, East Bay Community Energy Authority, Marin Clean Energy, Pioneer Community Energy, and Silicon Valley Clean Energy Authority (each, a “Member” and collectively, the “Members”), each a community choice aggregator organized and existing under the laws of the State of California (the “State”). CCCFA is organized and existing pursuant to the laws of the State with the power to issue the Bonds and enter into the transaction documents described herein. CCCFA is authorized to exercise the common powers of its Members and to undertake all actions permitted by Joint Exercise of Powers Act, constituting Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the California Government Code, as amended and supplemented (the “Act”), in connection with the Clean Energy Project, including the purchase of the Electricity and the sale thereof to the Project Participant (defined below). See “CALIFORNIA COMMUNITY CHOICE FINANCING AUTHORITY” and “COMMUNITY CHOICE AGGREGATORS” herein.
Clean Power Alliance of Southern California
CCCFA has entered into an electricity supply agreement (the “Clean Energy Purchase Contract”) for the sale of Electricity to be delivered under the Clean Energy Project with the Project Participant, a joint powers authority and a community choice aggregator (“CCA”) duly organized and existing under the laws of the State of California.
CPA was formed in 2017 as a CCA and launched service to customers in February 2018. CPA’s mission, among others, is to address climate change by reducing energy-related greenhouse gas emissions by serving customers with renewable energy at competitive rates, providing local economic benefits such as jobs creation and workforce development opportunities, and offering energy programs to its customers and communities.
CPA provides CCA service to a service territory that currently covers 32 member communities across Southern California and currently includes the Counties, Cities and Towns of Agoura Hills, Alhambra, Arcadia, Beverly Hills, Calabasas, Camarillo, Carson, Claremont, Culver City, Downey, * Preliminary, subject to change.
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2 Hawaiian Gardens, Hawthorne, unincorporated Los Angeles County, Malibu, Manhattan Beach, Moorpark, Ojai, Oxnard, Paramount, Redondo Beach, Rolling Hills Estates, Santa Monica, Sierra Madre, Simi Valley, South Pasadena, Temple City, Thousand Oaks, Ventura, unincorporated Ventura County, West Hollywood, Westlake Village, and Whittier. CPA will begin providing service to customers in the Cities of Hermosa Beach, Monrovia, and Santa Paula in 2024, and CPA may expand to serve additional cities in Los Angeles or Ventura Counties in the future. During the Delivery Period, the Project Participant will use the electricity it purchases from CCCFA for sale to retail customers located in its established service area, and in continuing to meet its clean energy and financial goals.
For the fiscal year ending June 30, 2022, CPA sold 11,373 GWh to its approximately one million customers, representing approximately $868 million of revenue and approximately $67 million of operating income. As of September 30, 2022, CPA has approximately $99 million in unrestricted cash and short-term investments.
See APPENDIX A for certain operating and financial information with respect to CPA.
The Bonds
From their Initial Issue Date to and including [______]* (the “Initial Interest Rate Period”), the Bonds will bear interest at fixed Term Rates in a Term Rate Period, with interest payable semiannually on each [____] 1 and [____] 1, commencing [_____] 1, 20[__]* , as shown on the inside cover page and as
described herein. See “THE BONDS — Interest.”
The Bonds are subject to optional redemption and extraordinary mandatory redemption during the Initial Interest Rate Period, and the Bonds maturing on [_____], 1, 20[__]* are required to be tendered for purchase on [______], 20[__]* (the “Mandatory Purchase Date”). The purchase price of Bonds on the Mandatory Purchase Date is equal to the principal amount thereof, plus accrued and unpaid interest to such date (the “Purchase Price”). Under the Indenture, a “Failed Remarketing” will occur upon the failure (i) of the Trustee to receive the Purchase Price, or to have on deposit in the Bond Purchase Fund amounts sufficient and available to pay the Purchase Price, of any Bond required to be purchased on a Mandatory Purchase Date by 12:00 noon New York City time on the fifth Business Day preceding such Mandatory Purchase Date or (ii) to purchase or redeem such Bond in whole by such Mandatory Purchase Date (including from any funds on deposit in the Assignment Payment Fund and required to be used for such redemption). A Failed Remarketing will result in early termination of the Master Power Supply Agreement.
See “THE MASTER POWER SUPPLY AGREEMENT — Early Termination.” Security for the Bonds
The Bonds are issued pursuant to the authority contained in the California Joint Exercise of Powers Act constituting Chapter 5 of Division 7 of Title 1 (commencing with Section 6500), as amended or supplemented from time to time (the “Act”), and are issued and secured under a Trust Indenture, to be dated as of the first day of the month in which the Bonds are issued (the “Indenture”), between CCCFA and U.S.
Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are special, limited obligations of CCCFA, are payable solely from and secured solely by the Trust Estate as and to the extent provided in the Indenture, and are expected to be paid from the Revenues of the Clean Energy Project. See “SECURITY FOR THE BONDS.”
* Preliminary, subject to change.
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3 The Clean Energy Project
The Clean Energy Project is structured to assist the Project Participant to procure a long-term supply of electricity at attractive prices. In order to do so, the Clean Energy Project includes a feature whereby the Project Participant can seek to assign existing and future power purchase agreements (“PPAs”) to J. Aron & Company LLC (“J. Aron”), and if such assignment is accepted by J. Aron, Electricity thereunder will be delivered to Aron Energy Prepay 16 LLC (the “Electricity Supplier”) to meet the Electricity Supplier’s obligations to deliver prepaid Electricity (“Prepaid Electricity”) to CCCFA under the Master Power Supply Agreement (the “Master Power Supply Agreement”). CCCFA will then deliver such Prepaid Electricity to the Project Participant under the Clean Energy Purchase Contract (the “Clean Energy Purchase Contract”) at the Contract Price. The Project Participant expects to enter into limited assignment agreements relating to [___ (_)] power purchase agreements to J. Aron for delivery beginning [____] 1, 20[__]* (the “Initially Assigned PPAs”).
The description below is intended to provide a summary of transaction documents that comprise the Clean Energy Project.
Transaction Structure. CCCFA is issuing the Bonds to finance the cost of acquisition of an approximately thirty-year supply of Prepaid Electricity under a Master Power Supply Agreement between CCCFA and the Electricity Supplier. The Project Participant and CCCFA will, concurrently with the execution of the Master Power Supply Agreement, enter into the Clean Energy Purchase Contract for the sale of the Prepaid Electricity to be delivered under the Clean Energy Project by the Electricity Supplier at the Contract Price, and any excess assigned Electricity (as further described herein, “Assigned PAYGO Electricity”) to be delivered under the Clean Energy Project by the Electricity Supplier at the APC Contract Price. The acquisition of the approximately thirty-year supply of Electricity is referred to herein as the “Clean Energy Project.” See “THE MASTER POWER SUPPLY AGREEMENT.” The total quantity of Prepaid Electricity expected to be delivered by the Electricity Supplier during the initial Delivery Period under the Master Power Supply Agreement is an estimated [__]* million megawatt hours (“MWh”) of Energy.
The Assigned PPAs. The Project Participant expects to assign a portion of its rights and obligations (the “Assigned Rights and Obligations”) to renewable energy, including three-phase, 60-cycle alternating current electric energy (“Energy”), and renewable energy credits (“RECs”) (collectively, “Electricity”) delivered under the Initially Assigned PPAs to J. Aron pursuant to separate agreements (each, an “Assignment Agreement”) among the Project Participant, J. Aron, and the PPA Seller (as defined herein).
J. Aron will use the Electricity delivered under the Initially Assigned PPAs, and any future power purchase contracts assigned to it by the Project Participant (collectively, “Assigned PPAs”), to meet its obligation to deliver Prepaid Electricity under the Electricity Purchase, Sale and Service Agreement (the “Electricity Purchase, Sale and Service Agreement”) with the Electricity Supplier. The quantities of Electricity to be delivered in connection with the Assigned Rights and Obligations will be “Assigned Quantities” and will consist of “Assigned Prepay Quantities”, to the extent related to Prepaid Electricity, and “Assigned PAYGO Quantities”, to the extent related to Assigned PAYGO Electricity.
In the event of termination of the Master Power Supply Agreement or a requirement to remarket the Prepaid Electricity, the rights, title and interest under the Assigned PPAs will revert back to the Project Participant, who may continue to receive the Electricity delivered under such agreements at the price payable under the applicable Assigned PPA (the “APC Contract Price”). In the event of a termination of * Preliminary, subject to change.
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4 an Assignment Agreement, no termination payment other than payment for delivered Electricity will be required to be made by CCCFA, the Electricity Supplier, or J. Aron.
Comparison to Tax-Exempt Commodity Prepayment Structures The Clean Energy Project retains many of the features common to prior tax-exempt commodity prepayment transactions. For ease of investors, a short description of certain notable similarities and differences is provided below. These descriptions should not be used to make an investment decision. Any investment decision must be based upon reading the entire Official Statement, which describes the Clean Energy Project and the security for the Bonds.
Notable Similarities. The Clean Energy Project includes a number of similarities to traditional prepayment transactions. Some, but not all, of these similarities include:
• CCCFA issues the Bonds, the interest on which is exempt from Federal and California income taxes, to prepay for approximately thirty years of commodity deliveries. See “TAX MATTERS” herein.
• The proceeds of the Bonds are used to finance the prepayment, and the Bonds are subject to mandatory tender at the end of the initial Interest Rate Period. See “THE BONDS — Tender” herein.
• The Electricity Supplier is lending an amount of funds approximately equal to the prepayment amount to the Funding Recipient. See “THE FUNDING AGREEMENT” herein. • Upon a Termination Payment Event, the Electricity Supplier is required to make the Termination Payment, which has been calculated to be sufficient along with other funds scheduled to be on hand, to be sufficient to pay the Redemption Price. See “THE BONDS — Redemption” and “THE MASTER POWER SUPPLY AGREEMENT — Early Termination” herein.
• To the extent the Project Participant’s qualified electricity requirements decline such that the Project Participant can no longer use the Prepaid Electricity to make qualified retail sales, it has the right to request CCCFA to request the Electricity Supplier to remarket the Prepaid Electricity. See “THE MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing” herein.
• If the Project Participant fails to make a payment, CCCFA is required to stop all future deliveries of Electricity and request the Electricity Supplier remarket all such future deliveries, until such time as the Project Participant has cured its default. See “THE CLEAN ENERGY PURCHASE CONTRACT — Default” herein.
The above description is intended to just be a subset of certain similarities between the Clean Energy Project and prior prepayment transactions. Investors must read the entire Official Statement for a full description of the Clean Energy Project and the Bonds.
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5 Notable Differences. The Clean Energy Project contains certain differences from prior tax-exempt commodity prepayment transactions not involving CCAs, primarily related to the electric delivery function and the assignment of Assigned PPAs, to wit:
• Assigned PPAs. As discussed under “— The Assigned PPAs” above, the Project Participant expects to assign [____ (_)] Initially Assigned PPAs to J. Aron and has the obligation to use Commercially Reasonable Efforts to assign additional PPAs in the future (which assignment is subject to J. Aron’s consent). J. Aron will use the Electricity delivered under the Initially Assigned PPAs and any other Assigned PPAs, if any, to satisfy its obligations under the Electricity Purchase, Sale and Service Agreement. See THE CLEAN ENERGY PURCHASE CONTRACT — Assignment of Power Purchase Agreements.” • Project Participant Payment for Prepaid Electricity. The Project Participant shall pay for all Assigned Electricity actually delivered. The amount of Assigned Prepay Quantities to be delivered under the Initially Assigned PPAs is anticipated to be less than [__]% of the Project Participant’s annual electricity needs as measured by sales for fiscal year ending [June 30, 2022]. To the extent the Assigned PPAs provide an aggregate amount of Electricity less than the amount necessary to meet the planned volumes of Prepaid Electricity set forth in the Clean Energy Purchase Contract, the Electricity Supplier must sell the Assigned Electricity not delivered in a private business use sale at the APC Contract Price, and shall pay to CCCFA an amount equal to the product of the Assigned Prepay Quantity less the quantity of Assigned Electricity actually delivered multiplied by the APC Contract Price. See “THE MASTER POWER SUPPLY AGREEMENT — Failure to Deliver or Receive Electricity” herein. The Project Participant will be obligated to utilize an amount equivalent to the proceeds of such remarketing to remediate such private business use sale by purchasing Electricity for resale to retail customers located in its established service area. The Project Participant purchases Electricity to serve all of its retail load and expects such remediation will occur concurrently with such a remarketing. • Assigned PAYGO Electricity. To the extent the Assigned PPAs provide an aggregate amount of Electricity greater than the amount necessary to meet the delivery schedules of Prepaid Electricity set forth in the Clean Energy Purchase Contract, such Electricity will be delivered to the Project Participant at the APC Contract Price. Such excess Electricity, described herein as Assigned PAYGO Electricity, and associated payments are not part of the Trust Estate. See “THE CLEAN ENERGY PURCHASE CONTRACT — Pricing Provisions.” • Delivery of and Payment for Electricity. Assigned Electricity will be delivered by the Electricity Supplier to CCCFA under the Master Power Supply Agreement. In the event an Assigned PPA terminates, or otherwise there are not Assigned PPAs of sufficient quantities, the Electricity Supplier will deliver or remarket Electricity in an amount designated in the Master Power Supply Agreement, as it may be adjusted or reduced pursuant to the terms thereof to be delivered in such hour (“Base Quantities”). Base Quantities are not expected to be delivered during the Initial Interest Rate Period. • Remarketing. In the event the Project Participant is unable to assign PPAs with sufficient quantities to J. Aron under the Clean Energy Project, or the Project Participant does not require or is unable to receive all of the Assigned Electricity and the related Assignment Agreement for an Assigned PPA terminates, the amount of Base Quantities delivered will increase. To the extent Base Quantities are characterized as baseload Electricity but do not qualify as EPS Compliant Energy, as is currently the case, the Electricity Supplier is required to remarket the Base Quantities. In such a circumstance, the Project Participant Agenda Page 223 of 570
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6 is unlikely to realize the full discount intended to be realized from the Clean Energy Project, if any discount at all.
• Commodity Swaps. In the event Prepaid Electricity must be remarketed, the Electricity Supplier will either sell the Prepaid Electricity to qualified buyers or will purchase the Prepaid Electricity for its own account. In either event, the payments for the Electricity will be based on market pricing at such time. In order to ensure there are sufficient funds available to meet the payments of principal of and interest on the Bonds, CCCFA has entered into a thirty-year commodity swap with the Commodity Swap Counterparty under which CCCFA will pay market prices and receive fixed prices (the “CCCFA Commodity Swap”). The Electricity Supplier has entered into a mirror commodity swap (the “Electricity Supplier Commodity Swap” and, together with the CCCFA Commodity Swap, the “Commodity Swaps”). Payments are only made under the Commodity Swaps to the extent Base Quantities are being delivered, which currently would result in a remarketing.
Otherwise, the Commodity Swaps are dormant (as is anticipated for the Initial Interest Rate Period), and while such Commodity Swaps are dormant, CCCFA cannot have a cash flow default thereunder. See “THE COMMODITY SWAPS” herein.
The above description is intended to just be a subset of certain of the differences between the Clean Energy Project and prior prepayment transactions. Investors must read the entire Official Statement for a full description of the Clean Energy Project and the Bonds.
Summary of Transaction Documents
The Master Power Supply Agreement
General. Under the Master Power Supply Agreement, CCCFA has agreed to make a lump sum advance payment to the Electricity Supplier for all of the cost of the delivery of Electricity, consisting of energy delivered to J. Aron pursuant to Assigned Rights and Obligations (“Assigned Electricity”) and Base Quantities. The Electricity Supplier will be obligated under the Master Power Supply Agreement to deliver an estimated [__]* million MWh of Electricity to CCCFA during the Initial Interest Rate Period. J. Aron will, pursuant to the Electricity Purchase, Sale and Service Agreement, sell Electricity to the Electricity Supplier, which will enable the Electricity Supplier to meet its obligations under the Master Power Supply Agreement to deliver Electricity to CCCFA. See “THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT” herein. Neither CCCFA nor the Electricity Supplier will have any liability or other obligation to one another for any failure to Schedule, receive, or deliver Assigned Electricity, as further discussed under “THE MASTER POWER SUPPLY AGREEMENT —Assignment of Power Purchase Agreements” and “— Failure to Deliver or Receive Electricity — Force Majeure” herein.
The Electricity Supplier has also agreed to remarket Electricity designated for remarketing by CCCFA. See “THE MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing” and “THE CLEAN ENERGY PURCHASE CONTRACT — Remarketing of Energy.” If the quantity of energy delivered to J. Aron pursuant to Assigned Rights and Obligations for any month is less than the Assigned Prepay Quantity for such month for any reason other than Force Majeure events, CCCFA will be deemed to have requested the Electricity Supplier to remarket that portion of the Assigned Electricity not delivered and the Electricity Supplier will be obligated to make payment of the applicable APC Contract Price less applicable remarketing fees to CCCFA for the quantity of Assigned Electricity not delivered. An “Assigned PPA FM Remarketing Event” will occur if none of the Assigned Prepay Quantity is actually delivered under an Assigned PPA for six consecutive months due to Force Majeure and will remain in effect until such * Preliminary, subject to change.
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7 Assigned PPA has delivered 95% or more of the Assigned Prepay Quantity for three consecutive months.
If an Assigned PPA FM Remarketing Event is in effect with respect to an Assigned PPA, CCCFA will be deemed to have requested the Electricity Supplier to remarket any Assigned Electricity not delivered under the applicable Assigned PPA, and, in such case, the Electricity Supplier will be deemed to purchase any such Assigned Electricity for its own account and will be obligated to make a remarketing payment to CCCFA equal to the product of (x) the applicable APC Contract Price less the applicable remarketing fee, multiplied by (y) the Assigned Prepay Quantity of Electricity less the quantity of Assigned Electricity actually delivered. Other than the Electricity Supplier’s remarketing payment obligation and its payment obligation in connection with Force Majeure events, neither CCCFA nor the Electricity Supplier will have any liability or other obligation to one another for any failure to Schedule, receive, or deliver Assigned Electricity. The Electricity Supplier is obligated to remarket all Base Quantities under the Master Power Supply Agreement and make payments to CCCFA for Base Quantities not delivered or taken for any reason, including Force Majeure events. See “THE MASTER POWER SUPPLY AGREEMENT — Failure to Deliver or Receive Electricity” and “— Electricity Remarketing.”
Assignment of Power Purchase Agreements. The Project Participant expects to assign its Assigned Rights and Obligations under the Initially Assigned PPAs to J. Aron (the “Initial Assigned Rights and Obligations”) prior to the commencement of deliveries of Electricity pursuant to the Clean Energy Project, as discussed under the subheading “— The Clean Energy Project — The Assigned PPAs” above. In the event of any expiration, termination or anticipated termination of Assigned Rights and Obligations or a failure to assign any portion of the Initial Assigned Rights and Obligations, the Project Participant shall exercise Commercially Reasonable Efforts to assign replacement Assigned Rights and Obligations (“Replacement Assigned Rights and Obligations”) to J. Aron, which assignment is subject to J Aron’s consent. Upon such a replacement, the Base Quantities will be revised as provided in the Clean Energy Purchase Contract. Assigned Rights and Obligations are expected to be in place for the entirety of the Initial Interest Rate Period, and Base Quantities are not expected to be delivered or remarketed during the Initial Interest Rate Period.
Electricity Remarketing and Ledger Event. The Electricity Supplier must remarket Electricity designated for remarketing by CCCFA. In the event remarketing of Assigned Electricity is requested, the Electricity Supplier has the right to terminate the applicable Assignment Period and remarket a corresponding amount of Base Quantities on behalf of CCCFA. Under the Electricity Purchase, Sale and Service Agreement, J. Aron provides remarketing services necessary for the Electricity Supplier to meet its remarketing obligations with respect to Prepaid Electricity under the Master Power Supply Agreement.
These services include requirements to (a) enter all remarketing sales or purchases of Electricity on a ledger system that tracks compliance with the requirements of the U.S. Treasury Regulations applicable to tax-exempt bonds that finance prepaid electricity supplies, and (b) remediate any non-complying sales (i.e., non-qualifying use sales and private business use sales) through “qualifying use” sales within two years.
The Project Participant is obligated under the Clean Energy Purchase Contract to exercise Commercially Reasonable Efforts to remediate the proceeds of any non-complying sales with other qualifying purchases of energy, and J. Aron is obligated to exercise Commercially Reasonable Efforts to remediate such proceeds through qualifying sales to Municipal Utilities. In the event that there are any non-complying sales that have not been remediated by J. Aron within one year, the Electricity Supplier (acting at the direction of the director of the Electricity Supplier appointed by CCCFA) may appoint a third-party remarketing agent to remediate the outstanding ledger entries, subject to certain requirements.
In the event that any non-complying Electricity remarketing sales are not remediated within two years and exceed certain cumulative limits, a “Ledger Event” will occur, subject to certain provisions of the Master Power Supply Agreement. If a Ledger Event occurs, J. Aron will be obligated to pay the Electricity Supplier, and the Electricity Supplier will be obligated to pay CCCFA, scheduled amounts (the “Ledger Event Payments”) calculated to provide a sum sufficient (together with the interest component of the Agenda Page 225 of 570
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8 Scheduled Debt Service Deposits) to enable CCCFA to pay interest on the Bonds at a rate of 8.00% per annum (the “Increased Interest Rate”). The Indenture provides that, subject to CCCFA’s receipt of such Ledger Event Payments from the Electricity Supplier, interest on the Bonds will be paid at the Increased Interest Rate after the occurrence of a Ledger Event. See “THE BONDS — Increased Interest Rate Upon Ledger Event” and “THE MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing” and “— Ledger Event” herein.
[A Ledger Event does not, by itself, result in an Early Termination Payment Date under the Master Power Supply Agreement. However, if the Electricity Supplier designates an Electricity Delivery Termination Date due to a Ledger Event, J. Aron will have the option, subject to the consent of the Electricity Supplier, to pay to the Electricity Supplier the Early Termination Payment for the Month following the Month in which the Ledger Event occurs. Such payment will constitute a Termination Payment Event under the Master Power Supply Agreement, and accordingly an Early Termination Payment Date will occur as of the last Business Day of the Month following J. Aron’s payment of the Early Termination Payment.] See “THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT — J. Aron as Agent” and “— Additional Amounts Payable Following a Ledger Event.” Early Termination. An Electricity Delivery Termination Date will occur automatically under the Master Power Supply Agreement upon the occurrence of a Termination Payment Event (which includes a Failed Remarketing with respect to the Bonds) or an Automatic Electricity Delivery Termination Event.
When a Termination Payment Event occurs, the Electricity Delivery Termination Date will be the last Business Day of the first month that commences after such Termination Payment Event, and when an Automatic Electricity Delivery Termination Event occurs, the Electricity Delivery Termination Date will be the end of the Month in which an Automatic Electricity Delivery Termination Event occurs. Upon the occurrence of an Optional Electricity Delivery Termination Event, an Electricity Delivery Termination Date may be designated by the Electricity Supplier. If an Electricity Delivery Termination Date occurs, the Delivery Period under the Master Power Supply Agreement will end as of the last day of the month and the Electricity Supplier will be required:
(a) in the case of a Termination Payment Event, to pay a scheduled termination payment (the “Termination Payment”) to CCCFA (i) on the last Business Day of the Month following the Month in which the Termination Payment Event occurs, or (ii) in the case of a Termination Payment Event due to a Failed Remarketing, on the last Business Day of the then-current Interest Rate Period (in either case, the “Early Termination Payment Date”); or (b) in the case of an Electricity Delivery Termination Date that occurs for any other reason, to pay scheduled monthly amounts to CCCFA until the earlier of the last day of the Month in which (i) the Early Termination Payment Date occurs or (ii) the last due date for which payments are scheduled. The scheduled monthly amounts payable by the Electricity Supplier would be paid to the Trustee for deposit into the Revenue Fund and would be sufficient to enable the Trustee to make the required transfers in respect of Scheduled Debt Service Deposits factoring in earnings from the Debt Service Account.
For descriptions of Termination Payment Events, Automatic Electricity Delivery Termination Events, Optional Electricity Delivery Termination Events and the payments required to be made by the Electricity Supplier, see “THE MASTER POWER SUPPLY AGREEMENT — Early Termination” and “— Remedies and Termination Payment.”
If an Early Termination Payment Date occurs, the Bonds will be subject to extraordinary mandatory redemption in whole on the first day of the next Month, provided, however, that in the case of a Failed Remarketing, such extraordinary mandatory redemption will occur on the Mandatory Tender Date. The Agenda Page 226 of 570
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9 amount of the Termination Payment generally declines over time as the Electricity Supplier performs its Electricity delivery obligations under the Master Power Supply Agreement. The amount of the Termination Payment, together with the amounts scheduled to be on deposit in certain Funds and Accounts held by the Trustee, has been calculated to provide a sum at least sufficient to pay the Redemption Price of the Bonds, assuming that the Electricity Supplier, the Funding Recipient, the Project Participant (or if the Project Participant were to fail to pay, the performance of Project Participant Credit Enhancement (as defined herein under “THE CLEAN ENERGY PURCHASE CONTRACT — Project Participant Credit Enhancement”)), and the Investment Agreement Provider(s) (defined below), pay and perform their respective contract obligations when due. A performance shortfall from any one of these entities could result in a payment shortfall to Bondholders.
See “THE MASTER POWER SUPPLY AGREEMENT,” and “THE BONDS — Redemption — Extraordinary Mandatory Redemption.” A schedule of the monthly Termination Payment during the Initial Interest Rate Period under the Master Power Supply Agreement is attached as APPENDIX I. Upon an Early Termination of the Master Power Supply Agreement, the Assignment Agreements shall terminate.
The Receivables Purchase Provisions
Put Receivables. The Master Power Supply Agreement contains certain provisions (the “Receivables Purchase Provisions”) designed to mitigate risks to Bondholders resulting from non-payments by the Project Participant under the Clean Energy Purchase Contract. If the amounts on deposit in the Commodity Reserve Account and the Debt Service Reserve Account are less than the Minimum Amount and the Debt Service Reserve Requirement, respectively, at the time of an Early Termination Payment Date under the Master Power Supply Agreement or at the final maturity of the Bonds and insufficient funds are available to pay the amounts coming due on the Bonds, the Trustee is required to put certain Receivables relating to non-payments by the Project Participant to the Electricity Supplier (as “Receivables Purchaser”) for purchase (“Put Receivables”).
A separate account (the “Electricity Supplier Put Receivables Account”) is established with the Master Custodian under the Master Electricity Supplier Custodial Agreement (hereinafter described) and funded in an amount equal to the sum of the Minimum Amount and the Debt Service Reserve Requirement.
The amount on deposit in the Electricity Supplier Put Receivables Account may be used only to pay any amounts due from the Electricity Supplier under the Receivables Purchase Provisions in respect of Put Receivables. See “THE MASTER ELECTRICITY SUPPLIER CUSTODIAL AGREEMENT.” Swap Deficiency Call Receivables. If the Project Participant defaults on its obligation to make any payment under the Clean Energy Purchase Contract and such payment default results in a Swap Payment Deficiency, the Trustee shall offer to sell to the Electricity Supplier sufficient Swap Deficiency Call Receivables to fund any Swap Payment Deficiency (defined in APPENDIX C) resulting from such default.
No later than the Business Day following the Electricity Supplier’s receipt of a Swap Deficiency Call Receivables Offer, the Electricity Supplier may elect, in its discretion, to purchase the Call Receivables referenced in the Swap Deficiency Call Receivables Offer. If the Electricity Supplier does not make such election, the Electricity Supplier will be deemed to have elected not to purchase the referenced Swap Deficiency Call Receivables, which constitutes an Automatic Electricity Delivery Termination Event under the Master Power Supply Agreement. See “THE MASTER POWER SUPPLY AGREEMENT — Receivables Purchase Provisions” herein.
Elective Call Receivables. If the Project Participant defaults on its obligation to make any payment under the Clean Energy Purchase Contract and such payment default does not result in a Swap Payment Deficiency, the Trustee shall offer to sell to the Electricity Supplier Elective Call Receivables (defined in APPENDIX C) resulting from such default. The Electricity Supplier may elect, in its discretion, to purchase Agenda Page 227 of 570
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10 the Elective Call Receivables at any time. If the Electricity Supplier does not make such election, it does not constitute an Automatic Electricity Delivery Termination Event under the Master Power Supply Agreement. See “THE MASTER POWER SUPPLY AGREEMENT — Receivables Purchase Provisions” herein.
Under the Electricity Purchase, Sale and Service Agreement, J. Aron has agreed to purchase all Call Receivables purchased by the Electricity Supplier under the Receivables Purchase Provisions, provided that J. Aron’s obligation to purchase such Call Receivables is subject to it having provided its prior written consent to the purchase of such Call Receivables by the Electricity Supplier. See “THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT.”
The Funding Agreement
Upon receipt of the prepayment amount from CCCFA under the Master Power Supply Agreement, the Electricity Supplier will loan an equal amount to the Funding Recipient (less a fee paid to J. Aron), as borrower, under a [Term Loan Agreement] dated as of the Initial Issue Date (the “Funding Agreement”).
The Funding Recipient will repay the loan in scheduled monthly payments reflecting a fixed rate of interest commencing in _________ 20__ ending in ____________ 20__ (the “Scheduled Amounts”). The final Scheduled Amount is due on the second to last Business Day of the Initial Interest Rate Period of the Bonds.
Upon (a) a default by the Funding Recipient in the payment of the Scheduled Amounts that is not cured within 30 days or (b) certain insolvency events with respect to the Funding Recipient, the Funding Recipient is required to pay a scheduled final payment amount (the “Final Payment Amount”). The amount of the Final Payment Amount declines over time as the Funding Recipient pays the required Scheduled Amounts under the Funding Agreement. In addition, commencing six months after the date of the Funding Agreement, [the Funding Recipient] at its option may prepay the loan in full by payment of the Final Payment Amount upon or following an Electricity Delivery Termination Date under the Master Power Supply Agreement.
For a further description of the provisions of the Funding Agreement, see “THE FUNDING AGREEMENT” below.
The ability of the Electricity Supplier to meet its obligations under the Master Power Supply Agreement, the Electricity Purchase, Sale and Service Agreement and the Electricity Supplier Commodity Swap will directly and materially depend upon full and timely performance by the Funding Recipient under the Funding Agreement. Any failure by the Funding Recipient to timely pay the Scheduled Amounts or the Final Payment Amount when due under the Funding Agreement may result in an inability of the Electricity Supplier to meet its contract obligations to CCCFA and a shortfall in the amounts necessary for CCCFA to pay the principal, interest, Redemption Price and purchase price due on the Bonds. The Funding Agreement are unsecured obligations of the Funding Recipient. See “INVESTMENT CONSIDERATIONS — Performance by Others.”
The Electricity Purchase, Sale and Service Agreement
Under the Electricity Purchase, Sale and Service Agreement, J. Aron has agreed to sell Electricity during the Delivery Period to the Electricity Supplier to enable the Electricity Supplier to meet its Electricity delivery obligations under the Master Power Supply Agreement. J. Aron is obligated to make payments to the Electricity Supplier for Base Quantities not delivered or taken under the Electricity Purchase, Sale and Service Agreement for any reason, including Force Majeure events, however neither J. Aron nor the Electricity Supplier has any liability or obligation to the other for any failure to Schedule, receive, or deliver Assigned Electricity, except as described under “THE MASTER POWER SALES AGREEMENT — Assignment Agenda Page 228 of 570
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11 of Power Purchase Agreements” and “THE CLEAN ENERGY PURCHASE CONTRACT — Pricing Provisions – CPA Monthly Payments” herein.
J. Aron will remarket Electricity and make payments to the Electricity Supplier that enable it to meet its obligations under the Master Power Supply Agreement. J. Aron is appointed as the Electricity Supplier’s agent for taking all actions that the Electricity Supplier is required or permitted to take under the Master Power Supply Agreement, the Electricity Supplier Commodity Swap, the Re-Pricing Agreement and (with respect to ordinary course transactions) the Electricity Purchase, Sale and Services Agreement.
J. Aron’s Electricity Delivery, payment, remarketing and receivables purchase obligations under the Electricity Purchase, Sale and Service Agreement mirror the Electricity Supplier’s obligations under the Master Power Supply Agreement. The Electricity Supplier may net any amounts due and owing to it by J. Aron against its monthly payments to J. Aron, but J. Aron is not entitled to net any amounts due and owing to it against its monthly payments to the Electricity Supplier.
The payment obligations of J. Aron to the Electricity Supplier under the Electricity Purchase, Sale and Service Agreement are unconditionally guaranteed by GSG.
See “THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT.” The Clean Energy Purchase Contract
The Clean Energy Purchase Contract provides for the sale to the Project Participant of the Electricity to be delivered to CCCFA over the term of the Master Power Supply Agreement. Such Electricity will be comprised of Assigned Quantities and, if the Assigned Prepay Quantities multiplied by the APC Contract Price (“Assigned Prepay Value”) for all assignments are less than the aggregate prepaid value for such month, then Base Quantities for such month. Under the Clean Energy Purchase Contract, CCCFA has agreed to deliver, and the Project Participant has agreed to purchase such Assigned Quantities and to provide for the remarketing of any Base Quantities, to the extent Base Quantities are characterized as baseload Electricity but do not qualify as EPS Compliant Energy, during the Delivery Period.
The payments required to be made under the Clean Energy Purchase Contract, together with any net amounts received by CCCFA under the CCCFA Commodity Swap described below, constitute the primary and expected sources of the revenues pledged to the payment of the Bonds.
The obligations of the Project Participant under the Clean Energy Purchase Contract are payable solely from revenues of the Project Participant derived from its power customer sales operations.
If the Assigned Quantity of Electricity actually delivered in any month pursuant to the Assigned PPAs is less than the Assigned Prepay Quantity for any reason other than Force Majeure events, the Project Participant will be deemed to have requested that that portion of the Assigned Electricity not delivered be remarketed by the Electricity Supplier as provided in the Master Power Supply Agreement. If an Assigned PPA FM Remarketing Event has occurred and is in effect, then CCCFA will be deemed to have requested the Electricity Supplier to remarket any Assigned Electricity not delivered for any reason under such Assigned PPA while such Assigned PPA FM Remarketing Event is in effect. In either event, the Electricity Supplier must sell the Assigned Electricity not delivered in a private business use sale at the APC Contract Price less the applicable remarketing fee. All such sales will constitute a private business use sale and the Project Participant will be obligated to utilize an amount equivalent to the proceeds of such remarketing to remediate such private business use sale by purchasing Electricity for resale to retail customers located in its established service area, which is expected to occur contemporaneously.
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12 The Electricity Supplier has agreed to remarket, on a daily or monthly basis, Electricity subject to specific requirements. In the event the Electricity Supplier is unable to remarket any such Electricity, the Electricity Supplier has agreed to purchase such Electricity.
Debt Service and Commodity Reserves
The Indenture establishes funding requirements for various funds and accounts, including the Debt Service Account, the Debt Service Reserve Account and the Commodity Reserve Account. Scheduled Debt Service Deposits are required to made monthly into the Debt Service Account in amounts equal to the accrued debt service on the Bonds. The Debt Service Account, the Debt Service Reserve Account and the Commodity Reserve Account will be invested pursuant to investment agreements (the “Investment Agreements”). ____________, ____________ and _____________, the providers of the Debt Service Account Investment Agreement, the Commodity Reserve Account Investment Agreement, and the Debt Service Reserve Account Investment Agreement, respectively (the “Investment Agreement Providers”), have agreed to the timely payment of scheduled amounts due under the Investment Agreements which, together with other Revenues, provide sufficient monies to CCCFA to pay debt service. See “SECURITY FOR THE BONDS — Investment of Funds.”
The Debt Service Reserve Account and the Commodity Reserve Account provide reserves for debt service deposits and payments to the Commodity Swap Counterparty in the event of payment defaults by the Project Participant under the Clean Energy Purchase Contract. The Debt Service Reserve Requirement is $[_______]*
, which is approximately equal to the two largest months of the maximum monthly Scheduled Debt Service Deposit during the Initial Interest Rate Period. The Minimum Amount required to be on deposit in the Commodity Reserve Account is approximately $[______]* . The Debt Service Reserve
Requirement and the Minimum Amount are sufficient to cover a payment default by the Project Participant for over three months of maximum CPA payments for Assigned Prepay Quantities during the Initial Interest Rate Period.
Re-Pricing Agreement
On the Initial Issue Date of the Bonds, CCCFA and the Electricity Supplier will enter into a Re-Pricing Agreement (the “Re-Pricing Agreement”), which provides for (a) the determination of Electricity Delivery periods subsequent to the initial Delivery Period to correspond to the related Interest Rate Periods on the Bonds (“Reset Periods”) and (b) the determination of the amount of the discount, as a percentage of the fixed prices of the Electricity that is available under the Assigned PPAs for such Reset Period (the “Minimum Discount Percentage”) for sales to the Project Participant under the Clean Energy Purchase Contract during each Reset Period.
The initial Delivery Period under the Master Power Supply Agreement begins on the first day of [_____] 202[__]* and ends on the last day of [_____] 20[__]* , and the first Reset Period is expected to begin
on the first day of [_____] 20[__]*
. In the event that the Available Discount Percentage for any Reset Period is less than the Minimum Discount Percentage, the Project Participant may elect not to take Electricity during the Reset Period and to have the Electricity remarketed for the duration of the Reset Period (a “Remarketing Election”) by giving notice of such election to CCCFA.
Commodity Swaps
Payments of fixed and floating amounts under the Commodity Swaps described herein are not made until and unless one or more Assignment Agreements terminates or ends, in which case Base Quantities are * Preliminary, subject to change.
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13 required to be delivered or remarketed by the Electricity Supplier. Base Quantities are not expected to be delivered or remarketed during the Initial Interest Rate Period, and as such, payments under the Commodity Swaps are not expected to be made during the Initial Interest Rate Period.
If the Project Participant requires remarketing of Electricity, the Project Participant can request CCCFA remarket all or a portion of the Electricity, and in turn, CCCFA can request the Electricity Supplier remarket all or a portion of the Electricity. In such a circumstance, the Electricity Supplier would remarket Base Quantities and the Commodity Swaps would become effective.
The commodity swap counterparty is Royal Bank of Canada (“RBC” or “Commodity Swap Counterparty”). See “THE COMMODITY SWAPS” and “THE COMMODITY SWAP COUNTERPARTY.
The Electricity Supplier, J. Aron, and GSG
The Electricity Supplier is a Delaware limited liability company organized for the sole purpose of entering into the transactions on its part with respect to the Clean Energy Project described herein. J. Aron is the sole member of the Electricity Supplier, and will fund the Electricity Supplier with a cash equity contribution, an initial subordinated loan and a contingent subordinate loan that together equal to at least three percent (3.0%) of the outstanding (unamortized) amount of the prepayment under the Master Power Supply Agreement (approximately $[______] million* as of the Initial Issue Date).
J. Aron is wholly owned by GSG, and is engaged principally as a swap dealer and market-maker for Electricity, currencies and derivative contracts thereon. J. Aron’s payment obligations to the Electricity Supplier under the Electricity Purchase, Sale and Service Agreement have been unconditionally guaranteed by GSG. See “THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT — Security.” J. Aron, a participant in the commodities business for over 100 years, was acquired in 1981 by GSG, and is the entity through which GSG participates in Electricity markets. J. Aron is a registered swap dealer and market-maker for a wide array of commodity derivative contracts, including Electricity.
J. Aron has market-based rate authority from the FERC for energy, capacity and ancillary services sales at market-based rates. Since 2006, J. Aron has executed more than thirty commodity prepayment transactions with municipal utilities and joint action agencies. Since 2018, J. Aron has enabled more than 2,000 MWs of renewable offtake transactions.
GSG, together with its consolidated subsidiaries, is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals.
See “GSG, J. ARON AND THE ELECTRICITY SUPPLIER.”
Certain Relationships
The Electricity Supplier, which is the prepaid seller under the Master Power Supply Agreement, the Receivables Purchaser, the counterparty to the Electricity Supplier Commodity Swap, the buyer under the Electricity Purchase, Sale and Service Agreement and the lender under the Funding Agreement, is wholly owned by J. Aron. J. Aron has right to direct certain ordinary course actions taken by the Electricity Supplier.
* Preliminary, subject to change.
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14 J. Aron is wholly owned by GSG. The payment obligations of J. Aron under the Electricity Purchase, Sale and Service Agreement are unconditionally guaranteed by GSG. Goldman Sachs & Co.
LLC, an Underwriter of the Bonds, is wholly owned by GSG.
The relationships described above could create an actual or apparent conflict of interest. ___________________
This Official Statement includes information regarding and descriptions of CCCFA, the Clean Energy Project, the Electricity Supplier, J. Aron, the Funding Recipient, GSG, the Commodity Swap Counterparty, the Project Participant and the Bonds, and summaries of certain provisions of the Indenture, the Clean Energy Purchase Contract, the Master Power Supply Agreement, the Electricity Purchase, Sale and Service Agreement, the Funding Agreement, the Commodity Swaps, the Receivables Purchase Provisions, the Re-Pricing Agreement, the Investment Agreements and the Custodial Agreements referred to herein. Such descriptions and summaries do not purport to be complete or definitive, and such summaries are qualified by reference to such documents. Certain of these documents are available to prospective investors during the initial offering period of the Bonds and thereafter to Bondholders, in each case upon request to CCCFA. Descriptions of the Indenture, the Bonds, the Clean Energy Purchase Contract, the Commodity Swaps, the Investment Agreements, the Custodial Agreements, the Receivables Purchase Provisions, the Re-Pricing Agreement, the Electricity Purchase, Sale and Service Agreement, the Funding Agreement and the Master Power Supply Agreement are qualified by reference to bankruptcy laws affecting the remedies for the enforcement of the rights and security provided therein and the effect of the exercise of police and regulatory powers by federal and state authorities.
This Official Statement describes the terms of the Bonds only during the Initial Interest Rate Period and must not be relied upon after interest on the Bonds is converted to another Interest Rate Period.
INVESTMENT CONSIDERATIONS
The purchase of the Bonds involves certain investment considerations discussed throughout this Official Statement. Prospective purchasers of the Bonds should make a decision to purchase the Bonds only after reviewing the entire Official Statement and making an independent evaluation of the information contained herein. Certain of those investment considerations are summarized below. This summary does not purport to be complete, and the order in which the following investment considerations are presented is not intended to reflect their relative significance.
Special and Limited Obligations
The Bonds are special, limited obligations of CCCFA and are payable solely from and secured solely by the Trust Estate pledged pursuant to the Indenture. The Trust Estate includes only the proceeds, revenues, funds and rights related to the Clean Energy Project, as described under “SECURITY FOR THE BONDS — The Indenture” below, and does not include any other revenues or assets of CCCFA. The Bonds are not general obligations of CCCFA, and CCCFA has no taxing power.
Only CCCFA is obligated to pay the Bonds. The Project Participant is not obligated to make payments in respect of the debt service on the Bonds. None of the Electricity Supplier, J. Aron, the Funding Recipient or GSG, is obligated to make debt service payments on the Bonds, and none of them has guaranteed payment of the Bonds.
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15 Structure of the Clean Energy Project
The Master Power Supply Agreement, the Clean Energy Purchase Contract, the Investment Agreements, the Commodity Swaps, the Indenture, the Receivables Purchase Provisions, the Bonds and related agreements have been structured so that, assuming timely performance and payment by the Electricity Supplier, J. Aron, the Funding Recipient, GSG, the Investment Agreement Providers and the Project Participant (or if the Project Participant were to fail to pay, the performance of Project Participant Credit Enhancement (as defined herein)), of their respective contractual obligations, the Revenues available to CCCFA from the Clean Energy Project are sufficient at all times to provide for the timely payment of Operating Expenses and the scheduled Debt Service requirements on the Bonds. During the Delivery Period that corresponds to the Initial Interest Rate Period for the Bonds, these arrangements include:
• The Electricity Supplier is required to deliver Electricity under the Master Power Supply Agreement to CCCFA such that CCCFA can meet its obligations to the Project Participant under the Clean Energy Purchase Contract. In the event the Electricity Supplier fails to deliver sufficient Electricity to meet the Assigned Prepay Value for any reason, including Force Majeure events, it is required to pay certain specified amounts to CCCFA. The Project Participant must make a payment to CCCFA for the Assigned Prepay Quantities actually delivered.
• To the extent that (i) the Assigned Quantity of Electricity delivered to J. Aron pursuant to the Assigned PPAs for any month is less than the Assigned Prepay Quantity for any reason other than Force Majeure or (ii) (x) an Assigned PPA FM Remarketing Event has occurred and is in effect with respect to an Assigned PPA and (y) the Assigned Quantity of Electricity delivered to J. Aron pursuant to the applicable Assigned PPA is less than the Assigned Prepay Quantity for any reason including Force Majeure while such Assigned PPA FM Remarketing Event is in effect, CCCFA will be deemed to have requested the Electricity Supplier to remarket the Assigned Electricity not delivered, and the Electricity Supplier will be obligated to make payment to CCCFA of the applicable APC Contract Price less applicable remarketing fees.
• If the assignment of any Assigned PPA is terminated, and Base Quantities are to be delivered or remarketed, then J. Aron is required to sell and deliver (or remarket on the Electricity Supplier’s behalf) such Base Quantities under the Electricity Purchase, Sale and Service Agreement to the Electricity Supplier so that the Electricity Supplier can meet its obligations to CCCFA under the Master Power Supply Agreement. In the event J. Aron fails to deliver Base Quantities for any reason, including Force Majeure events, it is required to pay certain specified amounts to the Electricity Supplier. The Electricity Supplier may net any amounts due and owing to it by J. Aron against its monthly payments to J. Aron, but J. Aron is not entitled to net any amounts due and owing to it against its monthly payments to the Electricity Supplier.
• The Funding Recipient is required to make scheduled monthly payments under the Funding Agreement which will provide the Electricity Supplier with amounts sufficient to make the payments it is required to make to J. Aron under the Electricity Purchase, Sale and Service Agreement and, in the event Base Quantities are delivered and payments are made under the Commodity Swaps, to the Commodity Swap Counterparty under the Electricity Supplier Commodity Swap.
• The Project Participant has agreed to pay for Electricity tendered for delivery under the Clean Energy Purchase Contract at the Contract Price. The Project Participant is obligated Agenda Page 233 of 570
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16 to pay only for the Assigned Prepay Quantities, actually delivered, as discussed under “THE MASTER POWER SALES AGREEMENT — Assignment of Power Purchase Agreements.”
• In the event that the Project Participant fails to pay when due any amounts owed under the Clean Energy Purchase Contract, CCCFA has covenanted in the Indenture to exercise its right under the Clean Energy Purchase Contract to suspend further deliveries of Electricity to the Project Participant and to give notice to the Electricity Supplier to follow the provisions of the Master Power Supply Agreement with respect to Electricity for which delivery has been suspended.
• In the event that the Project Participant fails to pay when due any amounts owed under the Clean Energy Purchase Contract, the Electricity Supplier may elect to purchase certain Call Receivables relating to such payment default under the Receivables Purchase Provisions.
J. Aron has agreed under the Electricity Purchase, Sale and Service Agreement to purchase any such Call Receivables from the Electricity Supplier, provided that J. Aron has provided its prior written consent to the purchase thereof by the Electricity Supplier. To the extent J. Aron has purchased Call Receivables for amounts owed by the Project Participant under the Clean Energy Purchase Contract for the purchase of Assigned Electricity, J. Aron may transfer all or a portion of such Call Receivables to the relevant PPA Seller to which such non-payment by the Project Participant for the Assigned Electricity delivered under the Clean Energy Purchase Contract relates.
• In the event that the Project Participant fails to pay when due any amounts owed under the Clean Energy Purchase Contract, the Trustee’s ability to withdraw amounts from the Debt Service Reserve Account will be dependent on the Debt Service Reserve Account Investment Agreement Provider’s timely paying amounts due. • In the event that the Project Participant fails to pay when due any amounts owed under the Clean Energy Purchase Contract, the Trustee shall withdraw amounts from the Commodity Reserve Account to make any payments then due to the Commodity Swap Counterparty and withdraw amounts from the Debt Service Reserve Account to make deposits to the Debt Service Account. On the maturity of the Bonds or earlier termination of the Clean Power Project, in the event the Commodity Reserve Account is not funded at a level equal to the Minimum Amount and/or the Debt Service Reserve Account is not funded at a level equal to the Debt Service Reserve Requirement due to the failure of the Project Participant to pay amounts owed, the Trustee is obligated to sell and the Electricity Supplier, as Receivables Purchaser, is obligated to purchase Put Receivables under the Receivables Purchase Provisions. The Electricity Supplier Put Receivables Account is funded in an amount equal to the sum of the Minimum Amount and the Debt Service Reserve Requirement and may be used only to pay any amounts due from the Electricity Supplier under the Receivables Purchase Provisions in respect of Put Receivables. • In the event of a suspension of Electricity deliveries, J. Aron will remarket Electricity pursuant to the Electricity Purchase, Sale and Service Agreement in compliance with the requirements of the Master Power Supply Agreement. The Master Power Supply Agreement requires specified payments for all Electricity remarketed or purchased, less certain applicable fees. In the event that J. Aron fails to remediate any non-qualifying or private business use remarketing sales of Electricity within one year, the Electricity Supplier (acting at the direction of the director of the Electricity Supplier appointed by Agenda Page 234 of 570
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17 CCCFA) may, subject to certain requirements, appoint a third-party remarketing agent to remediate the non-qualifying or private business use sales. • In the event that any non-qualifying use remarketing sales of Electricity are not remediated within two years and exceed certain cumulative limits, a Ledger Event will occur, subject to certain provisions of the Master Power Supply Agreement. If a Ledger Event occurs, J.
Aron will be obligated to pay the Electricity Supplier, and the Electricity Supplier will be obligated to pay CCCFA, scheduled Ledger Event Payments calculated to provide a sum sufficient (together with the interest component of the Scheduled Debt Service Deposits) to enable CCCFA to pay interest on the Bonds at a rate of 8.00% per annum. The Indenture provides that, subject to CCCFA’s receipt of such Ledger Event Payments from the Electricity Supplier, interest on the Bonds will be paid at the Increased Interest Rate after the occurrence of a Ledger Event. [If the Electricity Supplier declares an Electricity Delivery Termination Date as a result of a Ledger Event, J. Aron shall have the option, with the consent of the Electricity Supplier, to pay to the Electricity Supplier the Early Termination Payment, which payment shall constitute a Termination Payment Event under the Master Power Supply Agreement.]
• In the event of a remarketing wherein the Assignment Agreements are terminated, payments will be required to be made pursuant to the Commodity Swaps. If the Commodity Swap Counterparty does not make a required payment under the CCCFA Commodity Swap and such payment remains unpaid after the expiration of any grace period, the Custodian under the terms of the Electricity Supplier Custodial Agreement will pay the amount that the Electricity Supplier paid under the Electricity Supplier Commodity Swap (or in the event of termination of the Electricity Supplier Commodity Swap, the amount that the Electricity Supplier paid into the applicable custodial account as if the Electricity Supplier Commodity Swap were still in effect), which such amount is held in custody, to CCCFA, and such payment will be treated as a Commodity Swap Receipt. • If an Electricity Delivery Termination Date occurs under the Master Power Supply Agreement as the result of an Electricity Delivery Termination Event, the Electricity Supplier is required to pay scheduled monthly amounts to CCCFA in lieu of Electricity deliveries, which amounts are sufficient to enable CCCFA to make the Scheduled Debt Service Deposits required by the Indenture.
• If a Termination Payment Event occurs under the Master Power Supply Agreement, the Electricity Supplier is required to pay the scheduled Termination Payment to CCCFA. • ________________, as the provider of the Debt Service Account Investment Agreement, ____________, as the provider of the Commodity Reserve Account Investment Agreement and _________, as the provider of the Debt Service Reserve Account Investment Agreement (each provider, an “Investment Agreement Provider”), has agreed to the timely payment of scheduled amounts due under each Investment Agreement which, together with other Revenues, provide sufficient monies to CCCFA to pay debt service.
Performance by Others
The ability of CCCFA to pay timely the scheduled debt service on the Bonds depends on the timely performance and payment by (a) the Electricity Supplier under the Master Power Supply Agreement, the Receivables Purchase Provisions, and in the event of a remarketing, the Electricity Supplier Commodity Swap, (b) the Project Participant under the Clean Energy Purchase Contract (or if the Project Participant Agenda Page 235 of 570
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18 were to fail to pay, the performance of Project Participant Credit Enhancement), and (c) the Investment Agreement Providers under the Investment Agreements. The failure by any one or more of such parties to meet such obligations could materially and adversely affect the ability of CCCFA to pay timely the scheduled debt service on the Bonds, and to meet its other obligations under the Indenture, the Master Power Supply Agreement, the Clean Energy Purchase Contract, and the CCCFA Commodity Swap.
The ability of the Electricity Supplier to meet its performance and payment obligations under the Master Power Supply Agreement, the Electricity Purchase, Sale and Service Agreement and the Electricity Supplier Commodity Swap will depend directly and materially on timely payment by the Funding Recipient of the loan repayments due under the Funding Agreement and on timely payment and performance by J. Aron of its obligations under the Electricity Purchase, Sale and Service Agreement. The failure by the Funding Recipient or J. Aron to meet such obligations would materially and adversely affect the ability of the Electricity Supplier to meet its contract obligations to CCCFA, and in turn, the ability of CCCFA to meet its contract obligations, which in the case of the Funding Recipient could impact CCCFA’s ability to pay timely the scheduled debt service on the Bonds. See also “— The Funding Agreement” below for more discussion of the potential impact of nonperformance by the Funding Recipient.
The events and conditions that could result in either or both of (a) a default in the payment of Debt Service on the Bonds or (b) an Early Termination Payment Date under the Master Power Supply Agreement, which will cause the extraordinary mandatory redemption of the Bonds, include items that may be within or outside the control of CCCFA or the Electricity Supplier (or both), such as:
• failure by J. Aron in the timely performance of its obligations under the Electricity Purchase, Sale and Service Agreement to deliver Electricity and to make specified payments for Base Quantities, if any, not delivered or taken to enable the Electricity Supplier to meet its obligations to CCCFA under the Master Power Supply Agreement; • failure of the Funding Recipient to make timely payment of the loan repayments required by the Funding Agreement (see also “— Enforceability of Contracts” herein); • failure by the Electricity Supplier to purchase receivables from CCCFA prior to or at the time of an extraordinary redemption or the final maturity date of the Bonds that resulted from any non-payment by the Project Participant under the Clean Energy Purchase Contract to the extent the Commodity Reserve Account balance is less than the Minimum Amount or the Debt Service Reserve Account balance is less than the Debt Service Reserve Requirement;
• failure by an Investment Agreement Provider to make timely payment of the required amounts due or payable under the respective Investment Agreement, including upon nonpayments by the Project Participant under the Clean Energy Purchase Contract; and • if one or more Assignment Agreements is terminated, such that payments are required to be made pursuant to the Commodity Swaps, failure by the Commodity Swap Counterparty to make timely payment of the amounts due under the CCCFA Commodity Swap or the Electricity Supplier Commodity Swap coupled with a failure in the timely performance and enforcement of (a) the Electricity Supplier Custodial Agreement and (b) the Electricity Supplier Commodity Swap.
The Master Power Supply Agreement will terminate automatically upon the occurrence of a Termination Payment Event. Upon the occurrence of a Termination Payment Event (a) the Electricity Agenda Page 236 of 570
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19 Supplier will be obligated to pay the scheduled Termination Payment on the Early Termination Payment Date and (b) the Bonds will be subject to extraordinary mandatory redemption.
The scheduled amount of the Termination Payment, together with the amounts required to be on deposit in certain Funds and Accounts held by the Trustee, has been calculated to provide CCCFA with an amount at least sufficient to redeem all of the Bonds, assuming that the Electricity Supplier, the Funding Recipient, the Project Participant (or if the Project Participant were to fail to pay, the performance of Project Participant Credit Enhancement) and the Investment Agreement Providers pay and perform their respective contract obligations when due. If the Termination Payment becomes payable, the Bonds are to be redeemed at their Amortized Value regardless of reinvestment rates at the time. See “THE MASTER POWER SUPPLY AGREEMENT — Early Termination” and “THE BONDS — Redemption — Extraordinary Mandatory Redemption.”
Electricity Remarketing
If (a) (i) the quantity of Assigned Electricity delivered in any month during an Assignment Period is less than the Assigned Prepay Quantity for such month (for any reason other than Force Majeure events) or (ii) an Assigned PPA FM Remarketing Event has occurred and is in effect, or (b) the Project Participant does not require or is unable to receive all or any portion of the Assigned Quantities or Base Quantities that it is obligated to purchase during the Delivery Period under the Clean Energy Purchase Contract as a result of (i) decreased demand by its retail customers, (ii) a change in law, or (iii) inability to take delivery of Base Quantities, to the extent Base Quantities are characterized as baseload Electricity but are not EPS Compliant Energy under California law (as is the case currently), it may request CCCFA to arrange for the Electricity Supplier to remarket Assigned Quantities or Base Quantities. Under the Master Power Supply Agreement, the Electricity Supplier has agreed, upon written notice from CCCFA or the Trustee, to use Commercially Reasonable Efforts to remarket or cause to be remarketed, such amounts of Electricity as are identified by CCCFA. To the extent the Electricity Supplier is unable to accomplish such remarketing, the Electricity Supplier must purchase any such Electricity for its own account.
California’s Emissions Performance Standard (“EPS”) regulations, codified as Senate Bill 1368 (2006) (“SB 1368”) prevents all California utilities, both privately and publicly owned, from signing long-term contracts to purchase baseload Electricity other than EPS Compliant Energy. Under current law, “EPS Compliant Energy” is Energy from a specified baseload source with greenhouse gas emissions less than or equal to the emissions of greenhouse gases for combined-cycle natural gas baseload generation per unit of power. For baseload generation procured under contracts, a long-term commitment is a contract of five years or longer. As Base Quantities are characterized as baseload Electricity due to the firm 24x7 quantities to be delivered, but are not from specified sources with qualifying greenhouse gas emissions, Base Quantities would not qualify as EPS Compliant Energy under SB 1368 as it is currently enacted.
In the event of any expiration, termination or anticipated termination of Assigned Rights and Obligations under the Assigned PPAs or a failure to assign any portion of the Initial Assigned Rights and Obligations, the Project Participant may propose to assign Replacement Assigned Rights and Obligations to J. Aron. The Project Participant has a multitude of power purchase agreements pursuant to which it purchases Electricity which can be purchased in compliance with the applicable EPS regulations, and SB 1368, and some wherein its rights and obligations thereunder could be assigned to J. Aron. In addition, the Project Participant expects that future baseload Electricity power purchase agreements will comply with EPS regulations and SB 1368, and can be negotiated to allow the assignment of the Project Participant’s rights and obligations thereunder to J. Aron.
The Project Participant is only obligated to purchase Electricity that has been purchased by J. Aron pursuant to the Assigned PPAs, or future Base Quantities, if such Base Quantities are EPS Compliant Agenda Page 237 of 570
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20 Energy. In the event of any expiration or termination of the Initially Assigned PPAs, wherein the Project Participant does not propose (the Project Participant has a commercially reasonable obligation to propose additional assignments, and is economically incentivized to assign PPAs), or J. Aron does not accept, Replacement Assigned Rights and Obligations under an Assigned PPA, the Electricity Supplier shall be obligated to remarket Base Quantities. Base Quantities are not expected to be delivered or remarketed during the Initial Interest Rate Period.
The Electricity Supplier has agreed to use Commercially Reasonable Efforts to remarket Electricity to Municipal Utilities pursuant to provisions that are intended to maintain the tax-exempt status of interest on the Bonds, but, if the Electricity Supplier cannot do so, the Electricity Supplier is also permitted to remarket Electricity to other governmental entities in Qualified Sales and non-private business use sales, although it is not required to remarket Electricity to any such other governmental entity for a price that is anticipated to be less than the Contract Price. If the Electricity Supplier is unable to remarket Electricity in qualifying sales to Municipal Utilities or to other governmental entities in non-private business use sales, it must purchase the Electricity. Under certain circumstances and upon reaching certain thresholds that are not timely remediated, the remarketing of Electricity to entities other than Municipal Utilities could result in a Ledger Event under the Master Power Supply Agreement.
The Electricity Supplier will depend upon performance by J. Aron under the Electricity Purchase, Sale and Service Agreement to meet its Electricity remarketing obligations under the Master Power Supply Agreement, including particularly the ability of J. Aron to remarket Electricity to Municipal Utilities (as defined in the Master Power Supply Agreement) and to remediate any non-complying sales in order to avoid the occurrence of a Ledger Event under the Master Power Supply Agreement. In the event that there are any non-complying sales that have not been remediated by J. Aron within one year, the Electricity Supplier (acting at the direction of the director of the Electricity Supplier appointed by CCCFA) may appoint a third-party remarketing agent to remediate the outstanding ledger entries instead of J. Aron, subject to certain requirements. In the event that any non-complying remarketing sales of Electricity are not remediated within two years and exceed certain cumulative limits, a Ledger Event will occur, subject to certain provisions of the Master Power Supply Agreement.
If a Ledger Event occurs, J. Aron will be obligated to pay the Electricity Supplier, and the Electricity Supplier will be obligated to pay CCCFA, scheduled Ledger Event Payments calculated to enable CCCFA to pay the Increased Interest Rate on the Bonds at a rate of 8.00% per annum. The Indenture provides that, subject to CCCFA’s receipt of such Ledger Event Payments from the Electricity Supplier, interest on the Bonds will be paid at the Increased Interest Rate after the occurrence of a Ledger Event. [If the Electricity Supplier declares an Electricity Delivery Termination Date as a result of a Ledger Event, J.
Aron shall have the option, with the consent of the Electricity Supplier, to pay to the Electricity Supplier the Early Termination Payment, which payment shall constitute a Termination Payment Event under the Master Power Supply Agreement.] See “THE MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing” and “— Ledger Event,” “THE ELECTRICITY PURCHASE, SALE AND SERVICE AGREEMENT POWER SUPPLY AGREEMENT — J. Aron as Agent” and “— Additional Amounts Payable Following a Ledger Event,” and “THE BONDS — Increased Interest Rate Upon Ledger Event.” The Clean Energy Project is expected to deliver an average of [______]* MWh of Assigned Prepaid Electricity each year to the Project Participant during the Initial Interest Rate Period, assuming the Initially Assigned PPAs remain in effect and there are no State legal or regulatory changes materially affecting such delivery. See “THE MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing.” * Preliminary, subject to change.
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21 Limitations on Exercise of Remedies
The remedies available to CCCFA under the Master Power Supply Agreement are limited to those described herein. CCCFA has no rights to enforce the provisions of the Funding Agreement, the Electricity Purchase, Sale and Service Agreement or the guarantee of J. Aron’s payment obligations under the Electricity Purchase, Sale and Service Agreement provided by GSG to the Electricity Supplier (the “EPSSA Guaranty”). Neither the Trustee nor the Bondholders have any rights to enforce the Funding Agreement, the Electricity Purchase, Sale and Service Agreement or the related EPSSA Guaranty. See “GSG,J. ARON AND THE ELECTRICITY SUPPLIER — The Electricity Supplier — Organization” for a description of certain consent and voting rights of the director appointed by CCCFA to the Electricity Supplier’s board of directors and related covenants of CCCFA.
The remedies available to the Trustee, CCCFA and the Holders of the Bonds upon an Event of Default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory provisions and judicial decisions, the remedies provided in the Indenture may not be readily available or may be limited.
Enforceability of Contracts
The enforceability of the various legal agreements relating to the Clean Energy Project may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the rights of creditors or secured parties generally, by the exercise of judicial discretion in accordance with general principles of equity and by principles of equity, public policy and commercial reasonableness. The Master Power Supply Agreement and other agreements relating to the Clean Energy Project are executory contracts. If CCCFA, the Electricity Supplier, J. Aron, GSG, the Funding Recipient, the Commodity Swap Counterparty, the Project Participant, the Investment Agreement Providers, or any of the parties with which CCCFA has contracted under such agreements (including the Master Power Supply Agreement) is involved in a bankruptcy proceeding, the relevant agreement could be discharged in return for a claim for damages against the party’s estate with uncertain value. In particular, an insolvency event with respect to the Funding Recipient that results in a delay or a reduction in the payments due under the Funding Agreement will result in insufficient amounts being available for the payment of the Bonds, whether on a Bond Payment Date, the Mandatory Tender Date or any extraordinary mandatory redemption date. In the event that CCCFA is involved in an insolvency proceeding, the exercise of the remedies afforded to the Trustee under the Indenture may be stayed, and the availability of the Revenues necessary for the payment of the Bonds could be materially and adversely affected.
No Established Trading Market
The Bonds constitute a new issue with no established trading market. The Bonds have not been registered under the Securities Act of 1933 in reliance upon exemptions contained therein. Although the Underwriters have informed CCCFA that it currently intends to make a market in the Bonds, they are not obligated to do so and may discontinue any such market making at any time without notice. There can be no assurance as to the development or liquidity of any market for the Bonds. If an active public market does not develop, the market price and liquidity of the Bonds may be adversely affected.
Loss of Tax Exemption on the Bonds
As described below, the opinion of Bond Counsel with respect to the exclusion of interest on the Bonds from gross income for federal income tax purposes is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper Agenda Page 239 of 570
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22 treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (the “IRS”) or the courts and is not a guarantee of a result.
The Indenture, CCCFA’s Tax Agreement with respect to the Bonds, the Master Power Supply Agreement and the Clean Energy Purchase Contract contain various covenants and agreements on the part of CCCFA, the Electricity Supplier and the Project Participant that are intended to establish and maintain the tax-exempt status of the Bonds. CCCFA, the Electricity Supplier and the Project Participant have each agreed to abide by the various covenants and agreements designed to protect the tax-exempt status of the Bonds. A failure by CCCFA, the Electricity Supplier and the Project Participant to comply with such covenants and agreements could, directly or indirectly, adversely affect the tax-exempt status of the Bonds.
The IRS has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the IRS, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the IRS will commence an audit of the Bonds. If an audit is commenced, under current procedures the IRS may treat CCCFA as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome.
Any loss of the tax-exempt status of the Bonds could be retroactive to the date of issuance of the Bonds and could cause all of the interest on the Bonds to be includable in gross income for purposes of federal income taxation. The loss of the tax-exempt status of the Bonds is not a termination event under the Master Power Supply Agreement and will not result in a mandatory redemption of the Bonds. See “THE MASTER POWER SUPPLY AGREEMENT — Ledger Event” and “TAX MATTERS.”
SECURITY FOR THE BONDS
The Indenture
The Bonds are secured under the Indenture solely by a pledge of and lien on the “Trust Estate,” which is defined in the Indenture to include (a) the proceeds of the sale of the Bonds, (b) all right, title and interest of CCCFA in, to and under the Clean Energy Purchase Contract (excluding payments related to the Assigned PAYGO Electricity and the right to receive the Administrative Fee), (c) the Revenues, (d) any Termination Payment or the right to receive such Termination Payment, (e) all right, title and interest of CCCFA in, to and under the Receivables Purchase Provisions, including payments received from the Electricity Supplier pursuant thereto, (f) all right, title and interest of CCCFA in, to and under each Interest Rate Swap and the Interest Rate Swap Receipts, and (g) the Pledged Funds (but excluding the Administrative Fee Fund and Rebate Payments held in any Fund or Account), including the investment income, if any, thereof, subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein.
The pledge of and lien on the Trust Estate in favor of the Bonds is subject to (x) the provisions of the Indenture permitting the application of the Trust Estate, the proceeds of the Bonds and the Revenues for the purposes and on the terms and conditions set forth therein, including the first charge on the Revenues to pay the Commodity Swap Payments and the other Operating Expenses of the Clean Energy Project, and (y) a prior lien on and security interest in the Commodity Reserve Account and the amounts and investments on deposit therein in favor of the Commodity Swap Counterparty and Project Participant. Any Additional Termination Payment and the right to receive any Additional Termination Payment that is payable under the Master Power Supply Agreement is not pledged as a part of the Trust Estate.
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23 The term “Revenues” is defined in the Indenture to include (a) all revenues, income, rents, user fees or charges, and receipts derived or to be derived by CCCFA from or attributable or relating to the ownership and operation of the Clean Energy Project, including all revenues attributable or relating to the Clean Energy Project or to the payment of the costs thereof received or to be received by CCCFA under the Clean Energy Purchase Contract and the Master Power Supply Agreement or otherwise payable to the Trustee for the account of CCCFA for the sale and/or transmission of Electricity or otherwise with respect to the Clean Energy Project, (b) interest received or to be received on any moneys or securities (other than moneys or securities held in the Acquisition Account in the Project Fund, moneys or securities held in the Redemption Account in the Debt Service Fund or that portion of moneys in the Operating Fund required for Rebate Payments) held pursuant to the Indenture and paid or required to be paid into the Revenue Fund, (c) any Commodity Swap Receipts received by the Trustee on behalf of CCCFA, and (d) any Subsidy Payments (as defined in APPENDIX C) received by the Trustee, on behalf of CCCFA, in accordance with the terms of the Indenture. The term “Revenues” does not include (i) any amounts received under the Clean Energy Purchase Contract with respect to Assigned PAYGO Electricity, (ii) any Termination Payment or Additional Termination Payment paid pursuant to the Master Power Supply Agreement, (iii) any amounts received from the Electricity Supplier that are required to be deposited into the Remarketing Reserve Fund and into the Debt Service Account pursuant to the terms of the Indenture, (iv) any Assignment Payment (as defined in APPENDIX C) received from the Electricity Supplier, (v) Interest Rate Swap Receipts, (vi) any amounts paid by the Project Participant in respect of the Administrative Fee, (vii) payments received from the Electricity Supplier pursuant to the Receivables Purchase Provisions, (viii) payments received under the Clean Energy Project Operational Services Agreement, and (ix) any Seller Swap MTM Payment payable to CCCFA, all of which are to be deposited pursuant to the provisions of the Indenture. The Revenues are to be applied in accordance with the priorities established under the Indenture, including the prior payment from the Revenues of the Operating Expenses of the Clean Energy Project. See “— Flow of Funds” below.
The term “Operating Expenses” is defined in the Indenture to mean, to the extent properly allocable to the Clean Energy Project: (a) CCCFA’s expenses for operation of the Clean Energy Project, including all Rebate Payments; Commodity Swap Payments; costs, collateral deposits and other amounts (other than Commodity Swap Payments) necessary to maintain the CCCFA Commodity Swap; and payments required under the Master Power Supply Agreement (which may, under certain circumstances, include imbalance charges and other miscellaneous payments) or required to be incurred under or in connection with the performance of CCCFA’s obligations under the Clean Energy Purchase Contract, including any Assigned Product Reimbursement Payment (as defined in APPENDIX C); (b) any other current expenses or obligations required to be paid by CCCFA under the provisions of the Indenture (other than Debt Service on the Bonds, deposits to the Commodity Reserve Account or the Debt Service Reserve Account, any Cost of Acquisition, and any amounts for the repurchase of Call Receivables or Put Receivables) or by law or required to be incurred under or in connection with the performance of CCCFA’s obligations under the Clean Energy Purchase Contract; (c) fees payable by CCCFA with respect to any Remarketing Agreement; (d) the fees and expenses of the Fiduciaries; (e) reasonable accounting, legal and other professional fees and expenses, and all other reasonable administrative and operating expenses of CCCFA, which are incurred by CCCFA with respect to the Bonds, the Indenture, or the Clean Energy Project, including but not limited to those relating to the administration of the Trust Estate and compliance by CCCFA with its continuing disclosure obligations, if any, with respect to the Bonds; and (f) the costs of any insurance premiums incurred by CCCFA, including, without limitation, directors and officers liability insurance; allocable to the Clean Energy Project; provided that, for purposes of the transfers from the Revenue Fund to the Operating Fund described under the subheading “Flow of Funds”, Operating Expenses shall not include any of the foregoing administrative expenses, fees or other costs described in the foregoing clauses (a) through (f) that are paid from funds on deposit in the Administrative Fee Fund. Litigation judgments and settlements and indemnification payments in connection with the payment of any litigation, Agenda Page 241 of 570
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24 judgment or settlement, and Extraordinary Expenses (as defined in APPENDIX C) are not Operating Expenses.
THE BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OR INDEBTEDNESS OF CCCFA, THE
MEMBERS, THE PROJECT PARTICIPANT OR ITS MEMBERS, THE STATE, OR ANY POLITICAL SUBDIVISION OF THE STATE. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF CCCFA PAYABLE SOLELY FROM AND
SECURED SOLELY BY THE TRUST ESTATE, IN THE MANNER AND TO THE EXTENT PROVIDED FOR IN THE INDENTURE. CCCFA HAS NO TAXING POWER.
THE OBLIGATIONS OF THE PROJECT PARTICIPANT TO MAKE PAYMENTS TO CCCFA UNDER THE
CLEAN ENERGY PURCHASE CONTRACT ARE NOT, NOR SHALL THEY BE CONSTRUED AS, A GUARANTY OR ENDORSEMENT OF OR A SURETY FOR, THE BONDS. SUCH OBLIGATIONS OF THE PROJECT PARTICIPANT ARE
NOT GENERAL OBLIGATIONS OF THE PROJECT PARTICIPANT, AND ARE PAYABLE SOLELY FROM THE REVENUES DERIVED FROM THE SALES OF ENERGY TO ITS CUSTOMERS. THE INDENTURE DOES NOT
MORTGAGE THE CLEAN ENERGY PROJECT OR ANY TANGIBLE PROPERTIES OR ASSETS OF CCCFA OR THE PROJECT PARTICIPANT.
See APPENDIX C for definitions of certain terms, and APPENDIX D for a further description of certain provisions of the Indenture.
Flow of Funds
All Revenues are required by the Indenture to be deposited promptly by the Trustee upon receipt thereof into the Revenue Fund. In each calendar month (“Month”) during which there is a deposit of Revenues into the Revenue Fund (but in no case later than the respective dates set forth below), the Trustee is required to credit to or transfer to the required party for deposit in the funds and accounts indicated below, as applicable, and otherwise make payments as appropriate and to the extent available from amounts held in the Revenue Fund, in the following order the amounts set forth below (such application to be made in such a manner so as to assure good funds are available on the respective dates set forth below):
First, to the Operating Fund, not later than the 25th day of such Month, the amount, if any, required so that the balance therein is equal to the amount necessary for the payment of Commodity Swap Payments coming due for such Month;
Second, to the Debt Service Fund, not later than the last Business Day of such Month, for the credit of the Debt Service Account an amount equal to the greater of (a) the Scheduled Debt Service Deposit, as set forth in the Indenture, or (b) the amount necessary to cause an amount equal to the cumulative unpaid Scheduled Debt Service Deposits due through such date to be on deposit therein (without credit for undisbursed Interest Rate Swap Receipts on deposit therein); Third, to the Commodity Reserve Account in the Project Fund, not later than the last Business Day of such Month, the amount, if any, required so that the balance in the Commodity Reserve Account is at least equal to the Minimum Amount; Fourth, to the Debt Service Fund, not later than the last Business Day of such Month, for deposit in the Debt Service Reserve Account, the amount, if any, required so that the balance in such Debt Service Reserve Account shall equal the Debt Service Reserve Requirement related thereto as of the last day of the then current Month;
Fifth, to the Electricity Supplier, not later than the last Business Day of such Month, the amount, if any, required for the repurchase of Call Receivables and Put Receivables, and the Agenda Page 242 of 570
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25 payment of interest on all receivables sold to the Electricity Supplier pursuant to the Receivables Purchase Provisions; and
Sixth, to the Administrative Fee Fund, amounts representing the Administrative Fee.
If, after a scheduled monthly deposit to the Debt Service Account, the balance therein is below the cumulative Scheduled Debt Service Deposits for such month as specified in the Indenture, the Trustee shall immediately notify CCCFA of such deficiency and the Trustee shall (a) if CCCFA has not previously done so, cause CCCFA to suspend all deliveries of all quantities of Electricity under the Clean Energy Purchase Contract if the Project Participant is in default thereunder, and (b) promptly give notice to the Electricity Supplier to follow the remarketing provisions set forth in the Master Power Supply Agreement.
On each [____] 1, commencing [____] 1, 20[__] *, after (a) the deposit of Revenues into the Revenue Fund and (b) making such transfers, credits and deposits as described in the first paragraph of this section “Flow of Funds,” the Trustee is required to credit to the General Reserve Fund the remaining balance in the Revenue Fund. See “Revenues and Revenue Fund” and “Payments into Certain Funds” in APPENDIX D.
As noted above, certain amounts are pledged as a part of the Trust Estate but do not constitute Revenues and are not deposited into the Revenue Fund, including (a) any Termination Payment received under the Master Power Supply Agreement which is to be deposited into the Redemption Account, (b) any payments received from the Electricity Supplier under the Receivables Purchase Provisions, which are to be deposited into the Debt Service Account, the Commodity Reserve Account, the Redemption Account, or the Operating Fund as provided in the Indenture, (c) Ledger Event Payments, which are to be deposited directly into the Debt Service Account as provided in the Indenture, and (d) amounts representing the Administrative Fee, together with any amounts paid by the Project Participant under the Clean Energy Project Operational Services Agreement, shall be paid as received by CCCFA into the Administrative Fee Fund which are to be deposited into the Debt Service Account.
Debt Service Account
The Indenture establishes a Debt Service Account which is held by the Trustee. The amounts deposited into the Debt Service Account under the Indenture are to be held in such Account and applied to the payment of Debt Service payable on each Bond Payment Date and the Interest Rate Swap Payments payable on each payment date therefor. Amounts on deposit in the Debt Service Account will be invested pursuant to the Debt Service Account Investment Agreement (defined below), which will permit scheduled withdrawals to pay debt service on the Bonds and, in the case of extraordinary redemption, to pay the Redemption Price without penalty or market value adjustments.
In the event that, two Business Days next preceding the final Maturity Date of the Bonds, the Trustee determines that (i) the balance in the Commodity Reserve Account is less than the Minimum Amount, and/or (ii) the balance in the Debt Service Reserve Account is less than the Debt Service Reserve Requirement and sufficient funds will not be available to pay the principal of and interest on the Bonds coming due on such final Maturity Date, the Trustee is required to prepare and deliver to the Electricity Supplier and the Master Custodian the Put Option Notice pursuant to the Receivables Purchase Provisions with respect to Put Receivables, provided that the amount of Put Receivables sold pursuant to the Receivables Purchase Provisions are not in excess of the aggregate amount required, when taking into account other available funds under the Indenture, to (iii) restore the balance in the Commodity Reserve Account to an amount equal to the Minimum Amount, and (iv) pay the maturing principal amount of and * Preliminary, subject to change.
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26 interest on the Bonds in full. On or before two Business Days next preceding such final Maturity Date, the Trustee is required to deliver to the Electricity Supplier the bill of sale and certificates required by the Receivables Purchase Provisions. Under the Indenture, the Trustee is authorized to sell the Put Receivables then owed by the Project Participant under the Clean Energy Purchase Contract pursuant to the Receivables Purchase Provisions (as contemplated by the Indenture) and to take all actions on its part necessary in connection therewith. All amounts received by the Trustee pursuant to the Receivables Purchase Provisions in respect of Put Receivables sold pursuant to the Indenture to fund amounts then due under the Commodity Swaps must be deposited in the Commodity Reserve Account, and all amounts received by the Trustee pursuant to the Receivables Purchase Provisions in respect of Put Receivables sold pursuant to the Indenture to fund Debt Service must be deposited in the Debt Service Account and applied to payment of principal of and interest on the Bonds on the final Maturity Date. At all times, the Trustee, but only as directed by CCCFA as described in this paragraph, must cause all amounts on deposit under the Master Electricity Supplier Custodial Agreement in the Electricity Supplier Put Receivables Account (as defined in the section “THE MASTER ELECTRICITY SUPPLIER CUSTODIAL AGREEMENT”) to be invested in Qualified Investments that mature or are payable not later than such times as shall be necessary to provide moneys when needed for payments to be made from the Electricity Supplier Put Receivables Account. Consistent with the requirements for Qualified Investments described immediately above, CCCFA in the Indenture directs the Trustee to cause all such amounts on deposit in the Electricity Supplier Put Receivables Account to be invested in either (i) money market funds meeting the requirements of paragraph (h) under Qualified Investments or (ii) in any other Qualified Investment as may be directed by CCCFA under a Written Direction. To the extent any amounts become due from the Electricity Supplier in respect of any Put Receivables, the Trustee shall notify the Master Custodian pursuant to the terms of the Receivables Purchase Provisions and the Master Electricity Supplier Custodial Agreement of the amounts so due and the account where such amounts should be deposited such that those amounts will be paid directly from the Electricity Supplier Put Receivables Account to the appropriate account under the Indenture.
Debt Service Reserve Account
The Indenture establishes a Debt Service Reserve Account which is held by the Trustee. Amounts in the Debt Service Reserve Account are to be applied only (a) to make required monthly deposits to the Debt Service Account to pay debt service on the Bonds when other available funds are insufficient or (b) in the event of the defeasance of any Bonds, to be held for the payment of the principal or Redemption Price, if applicable, and interest on the Bonds being defeased. Whenever the moneys on deposit in the Debt Service Reserve Account exceed the Debt Service Reserve Requirement, the Trustee is required to transfer such excess to the Revenue Fund.
The Debt Service Reserve Requirement is $[_______]*
, which is approximately equal to 200% of
the maximum monthly deposit to be made to the Debt Service Account during the Initial Interest Rate Period from the amounts payable by the Project Participant under the Clean Energy Purchase Contract. On the date of issuance of the Bonds, CCCFA will deposit from a portion of the proceeds of the Bonds an amount equal to the Debt Service Reserve Requirement into the Debt Service Reserve Account, which amount will be invested pursuant to the Debt Service Reserve Account Investment Agreement. See “ESTIMATED SOURCES AND USES OF FUNDS” above. See also “— Investment of Funds” below. * Preliminary, subject to change.
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27 Commodity Reserve Account
CCCFA will deposit in the Commodity Reserve Account a portion of the proceeds of the Bonds in an amount equal to $[_______]*
(the “Minimum Amount”). Amounts credited to the Commodity Reserve Account shall be applied by the Trustee to (i) the payment of Commodity Swap Payments in the event the amounts on deposit in the Operating Fund are not sufficient to make such payments, and (ii) any Assigned Product Reimbursement Payment, to the extent that the Trustee determines on the Business Day prior to the transfer in any month into the Operating Fund pursuant to the Indenture that, after taking into account amounts to be transferred into the Operating Fund pursuant to the Indenture, there will not be sufficient amounts available in the Operating Fund for payment of such Assigned Product Reimbursement Payment; provided that, (a) any amounts in the Commodity Reserve Account in excess of the Minimum Amount shall be transferred by the Trustee to the Revenue Fund, and (b) any amounts remaining on deposit in the Commodity Reserve Account on the final date for payment of the principal of the Bonds, whether upon maturity, redemption or acceleration, shall be applied to make such payment. The amount deposited in the Commodity Reserve Account will be invested pursuant to the Commodity Reserve Account Investment Agreement. See “THE MASTER POWER SUPPLY AGREEMENT — Receivables Purchase Provisions” and “— Investment of Funds” below.
Redemption Account
All amounts received by the Trustee pursuant to the Receivables Purchase Provisions in respect of Put Receivables sold pursuant to the Indenture to fund the redemption of the Bonds are to be deposited in the Redemption Account and applied to payment of the Redemption Price of and interest on the Bonds on the applicable redemption date. Amounts deposited into the Redemption Account are to be applied by the Trustee to the payment of the Redemption Price of and interest on the Bonds pursuant to the Indenture as described under “THE BONDS — Redemption — Extraordinary Mandatory Redemption.” Administrative Fee Fund
All Administrative Fees, together with any amounts paid by the Project Participant pursuant to a Clean Energy Project Operational Services Agreement, are required to be deposited by the Trustee into the Administrative Fee Fund. The Trustee shall apply amounts on deposit in the Administrative Fee Fund to pay Operating Expenses promptly upon receipt of a Written Request of CCCFA directing such payment.
In the event amounts on deposit in the Administrative Fee Fund are insufficient to make any payments directed in the Written Request of CCCFA, the Trustee is required to promptly notify the Project Participant, at its address shown in the Indenture, of the fact and amount of such deficiency.
Restriction on Additional Obligations
Except as expressly permitted under the terms of the Indenture, for so long as the Bonds are Outstanding, CCCFA shall not, without a Rating Confirmation, issue any bonds, notes, debentures or other evidences of indebtedness of similar nature payable from or secured by a pledge and assignment of the Trust Estate, other than the Bonds and bonds, notes, debentures or other evidences of indebtedness issued to refund Outstanding Bonds, or otherwise incur obligations other than those contemplated by the Indenture, the Master Power Supply Agreement, the Clean Energy Purchase Contract, the CCCFA Custodial Agreement, the Commodity Swaps, the Interest Rate Swap and any documents or agreements relating to any of the foregoing (including, but not limited to, obligations under Qualified Investments), payable out of or secured by a pledge or assignment of, or lien on, the Trust Estate; and, except as expressly permitted under the terms of the Indenture, shall not, without a Rating Confirmation, create or cause to be created any * Preliminary, subject to change.
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28 lien or charge on the Trust Estate except as provided in or contemplated by the Indenture, the Master Power Supply Agreement, the Clean Energy Purchase Contract, the CCCFA Custodial Agreement, the Commodity Swaps, the Interest Rate Swap and any documents or agreements relating to any of the foregoing (including, but not limited to, obligations under Qualified Investments); provided, however, that nothing contained in the Indenture shall prevent CCCFA from entering into or issuing, if and to the extent permitted by law (a) evidences of indebtedness (1) payable out of moneys in the Project Fund as part of the Cost of Acquisition or (2) payable out of or secured by a pledge and assignment of the Trust Estate or any part thereof to be derived on and after such date as the pledge of the Trust Estate provided in the Indenture shall be discharged and satisfied as provided therein, or (b) Commodity Swaps and Interest Rate Swaps upon the terms and conditions set forth in the Indenture.
Amendment of Indenture
CCCFA and the Trustee may, subject to the conditions and restrictions in the Indenture, enter into a Supplemental Indenture or Indentures without the consent of the Bondholders which, for certain purposes may only be accomplished upon receipt of a Rating Confirmation. See “Supplemental Indenture Not Requiring Consent of Bondholders,” “General Provisions” and “Powers of Amendment” in APPENDIX D hereto.
Investment of Funds
Subject to the provisions of the Indenture, amounts on deposit in the Funds and Accounts may be invested in, among other things, guaranteed investment contracts, forward delivery agreements or similar agreements providing for a specified rate of return over a specified time period with providers (or their guarantors) rated (or whose financial obligations to CCCFA receive credit support from an entity rated) at the time the investment is made at least at the same credit rating level as the senior non-preferred credit rating of the Funding Recipient. See APPENDIX C and “Investment of Certain Funds” in APPENDIX D hereto.
On the date of delivery of the Bonds, it is expected that the Trustee will enter into (a) an investment agreement or forward delivery agreement with respect to the Debt Service Account (the “Debt Service Account Investment Agreement”), (b) an investment agreement or forward delivery agreement with respect to the Commodity Reserve Account (the “Commodity Reserve Account Investment Agreement”), and (c) an investment agreement or forward delivery agreement with respect to the Debt Service Reserve Account (the “Debt Service Reserve Account Investment Agreement” and, together with the Commodity Reserve Account Investment Agreement and the Debt Service Account Investment Agreement, the “Investment Agreements”). Each Investment Agreement will have a term coterminous with the Initial Interest Rate Period and is required to meet all of the criteria of a Qualified Investment under the Indenture and is expected to be bid out on the day of Bond pricing to qualified investment providers.
Required qualifications for the initial Investment Agreement providers include: (a) a minimum credit rating requirement for the provider (or its guarantor) of at least the applicable rating of the Funding Recipient, which as of the date of this Official Statement is “[___]” by Moody’s, (b) a requirement that upon a credit rating withdrawal, suspension or downgrade (a “Credit Downgrade”) of the Investment Agreement provider (or its guarantor) below the lower of (i) “[___]” by Moody’s or (ii) the then-current credit rating of the Funding Recipient, the Investment Agreement provider will provide a credit remedy, such as providing credit support, or CCCFA will have the right to terminate such agreement and (c) a requirement that upon a Credit Downgrade of the provider (or its guarantor) below the lower of (i) “[___]” by Moody’s or (ii) the then-current credit rating of the Funding Recipient, CCCFA will have the option to terminate the agreement.
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29 Required qualifications for any initial Investment Agreement that is a forward delivery agreement include: (a) a minimum credit rating requirement for the provider (or its guarantor) of “[__]” by Moody’s, (b) a requirement that upon a Credit Downgrade of the provider (or its guarantor) below the lower of (i) “[___]” by Moody’s or (ii) the then-current credit rating of the Funding Recipient, CCCFA will have the option to terminate the agreement, (c) opinions of counsel, domestic and foreign, where applicable, that the securities delivered in connection with the agreement do not constitute property of the forward delivery agreement provider under bankruptcy or insolvency proceedings, and will not be subject to automatic stay and will not be recoverable as a voidable preference in the event of bankruptcy/insolvency of the provider, and (d) a limitation that the only securities the forward delivery agreement provider is allowed to deliver are non-callable, non-prepayable (i) direct obligations of the United States government or any of its agencies that are unconditionally guaranteed as to principal and interest by the United States of America, or (ii) senior debt obligations of any agency of the United States government.
If an Investment Agreement terminates, all invested funds are returned to the Trustee and a market value adjustment payment is made or received, as applicable.
Each Investment Agreement will provide for a fixed interest rate to be paid on the funds invested.
The Debt Service Account Investment Agreement will provide for scheduled withdrawals in connection with each Bond Payment Date. The Commodity Reserve Account Investment Agreement and Debt Service Reserve Account Investment Agreement will permit (a) withdrawals from the Commodity Reserve Account to make up payment shortfalls to the Commodity Swap Counterparty, and in the event J. Aron fails to make payments due under the Assigned PPAs, and there is a deficiency in the Operating Account, withdrawals to repay the Project Participant under the Clean Energy Purchase Contract and (b) withdrawals from the Debt Service Reserve Account to cure any deficiencies in the Debt Service Account. Upon transaction termination, whether by extraordinary mandatory redemption or final maturity, the funds invested under the Investment Agreements will be used to pay the redemption price or debt service due on the Bonds.
Enforcement of Project Agreements
Clean Energy Purchase Contract. CCCFA has covenanted in the Indenture that it will enforce the provisions of the Clean Energy Purchase Contract, as well as any other contract or contracts entered into relating to the Clean Energy Project, and that it will duly perform its covenants and agreements thereunder.
CCCFA has also covenanted to promptly exercise its right to suspend all Electricity deliveries under the Clean Energy Purchase Contract if the Project Participant fails to pay when due any amounts owed thereunder and to promptly give notice to the Electricity Supplier to follow provisions set forth in the Remarketing Exhibit to the Master Power Supply Agreement for each Month of such suspension with respect to the quantities of Electricity for which deliveries have been suspended.
In the event that the Project Participant makes a Remarketing Election in respect of any Reset Period, then CCCFA will promptly give notice to the Electricity Supplier to follow the provisions set forth in the Remarketing Exhibit to the Master Power Supply Agreement for each month of such Reset Period with respect to any quantities of Electricity that would otherwise have been delivered to the Project Participant. See “THE RE-PRICING AGREEMENT.”
CCCFA has further covenanted that it will not consent or agree to or permit any termination or rescission of, any assignment or novation (in whole or in part) by the Project Participant of, or amendment to, or otherwise take any action under or in connection with the Clean Energy Purchase Contract that will impair the ability of CCCFA to comply during the current or any future year with its covenant regarding the collection of fees and charges pursuant to the Indenture. Under the Indenture, upon the satisfaction of certain conditions, including delivery of a Rating Confirmation from each rating agency then rating the Bonds, CCCFA may agree to amend the Clean Energy Purchase Contract or to an assignment or novation Agenda Page 247 of 570
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30 of all or a portion of the Project Participant’s rights and obligations under the Clean Energy Purchase Contract.
Electricity Remarketing. If, after a scheduled monthly deposit to the Debt Service Account, the balance therein is below the cumulative Scheduled Debt Service Deposits for such month as specified in the Indenture, the Trustee must immediately notify CCCFA of such deficiency, and the Trustee must (a) if CCCFA has not previously done so, cause CCCFA to suspend all deliveries of all quantities of Electricity under the Clean Energy Purchase Contract to the Project Participant, and (b) promptly give notice to the Electricity Supplier to follow the provisions set forth in the Remarketing Exhibit to the Master Power Supply Agreement. While the Electricity Supplier is remarketing Electricity under the Master Power Supply Agreement with advance notice from CCCFA or the Trustee, it is generally obligated to pay to CCCFA the day-ahead price (less a discount, which may vary under certain circumstances) for the point where the Electricity would otherwise be delivered. See “MASTER POWER SUPPLY AGREEMENT — Electricity Remarketing.”
Event of Default; Additional Actions. CCCFA has covenanted that, if an Event of Default has occurred and is continuing under the Indenture, CCCFA will, upon the demand of the Trustee (i) take such additional actions on its part as shall be necessary to cause the Project Participant to make payments of all amounts due under the Clean Energy Purchase Contract to the Trustee, (ii) take such additional actions on its part as shall be necessary to cause the Commodity Swap Counterparty to make payment of all amounts due under a Commodity Swap directly to the Trustee, (iii) take such additional actions on its part as shall be necessary to cause the Interest Rate Swap Counterparty to make payment of all amounts due under the Interest Rate Swap directly to the Trustee, (iv) execute and deliver such additional instruments that may be necessary to establish or confirm CCCFA’s pledge and assignment to the Trustee of its rights and remedies afforded the CCCFA under the Clean Energy Purchase Contract, and (v) pay over or cause to be paid over to the Trustee any Revenues which have not been paid directly to the Trustee as promptly as practicable after receipt thereof. In addition, to secure its obligations under the Indenture, CCCFA has irrevocably pledged and collaterally assigned to the Trustee CCCFA’s rights to issue notices (including notices to direct the remarketing of Electricity) and to take any other actions that CCCFA is required or permitted to take under the Master Power Supply Agreement, the Receivables Purchase Provisions, the Clean Energy Purchase Contract, the Commodity Swaps, and the Interest Rate Swap, and, while an Event of Default has occurred and is continuing under the Indenture, the Trustee is authorized and directed, and has the authority, to take any such actions as it deems necessary under the Master Power Supply Agreement, the Receivables Purchase Provisions, the Clean Energy Purchase Contract and the Interest Rate Swap. Notwithstanding such authorization, CCCFA shall retain, in the absence of any conflicting action by the Trustee while an Event of Default has occurred and is continuing, the right and obligation to exercise any rights which it has pledged and collaterally assigned to the Trustee in accordance with the foregoing; provided, however, if an Event of Default has occurred and is continuing, the Trustee shall have the right to notify CCCFA to cease exercising such rights and, upon receipt of such notice with a copy provided to the Electricity Supplier under the Master Power Supply Agreement and the Project Participant under the Clean Energy Purchase Contract, the Trustee shall have exclusive authority to exercise such rights until such time as the Event of Default has been cured pursuant to the terms of the Indenture or the Trustee issues a subsequent notice otherwise. The Master Power Supply Agreement, the Clean Energy Purchase Contract and the Commodity Swaps may be amended at any time for changes in Delivery Points as provided therein, without the consent of the Bondholders or any parties other than those to the relevant agreement, and without the provision of opinions or other process under the Indenture.
Master Power Supply Agreement. CCCFA has covenanted in the Indenture that it will enforce the provisions of the Master Power Supply Agreement and that it will duly perform its covenants and agreements under the Master Power Supply Agreement.
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31 The Trustee will promptly notify CCCFA of any payment default that has occurred and is continuing on the part of the Electricity Supplier under the Master Power Supply Agreement. CCCFA will provide the Trustee with Written Notice of the Early Termination Payment Date (a) on the date on which a Failed Remarketing (defined below) occurs, and (b) in all other cases, not more than five Business Days after such date is determined.
CCCFA has further covenanted that it will not consent or agree to or permit any assignment of, rescission of, or amendment to or otherwise take any action under or in connection with the Master Power Supply Agreement which will in any manner materially impair or materially adversely affect its rights thereunder or the rights or security of the Bondholders under the Indenture; provided, that the Master Power Supply Agreement may be assigned or amended without Bondholder consent upon receipt of a Rating Confirmation with respect to such assignment or amendment.
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32 SOURCES AND USES OF FUNDS
The sources and uses of funds in connection with the issuance of the Bonds are approximately as follows:
SOURCES:
Par Amount $
Original Issue Premium
Total Sources $
USES:
Deposit to Project Fund1 $
Deposit to Debt Service Account2
Deposit to Debt Service Reserve Account
Deposit to Commodity Reserve Account
Costs of Issuance3
Total Uses $
__________________
1 Includes the prepayment amount and a fee paid to J. Aron. 2 Represents capitalized interest on the Bonds (which will be transferred to the Debt Service Account). 3 Includes management, consulting, underwriting, rating agency, Trustee, municipal advisor, legal and other fees and other expenses related to the issuance of the Bonds and the acquisition of the Clean Energy Project.
THE BONDS
General
The Bonds will mature (subject to redemption as described below) on the dates and in the principal amounts shown on the inside cover page of this Official Statement. The Bonds will be initially issued in denominations of $5,000 and any integral multiples thereof (an “Authorized Denomination”). The Bonds will be initially issued in book-entry only form through the facilities of The Depository Trust Company, New York, New York (“DTC”). See “THE BONDS — Book-Entry System” and APPENDIX G for a description of DTC and its book-entry system.