City of Corona
Staff Report
400 S. Vicentia Ave.
Corona, CA 92882
File #: 22-0426
REQUEST FOR CITY COUNCIL ACTION
DATE: 06/01/2022
TO: Honorable Mayor and City Council Members
FROM: Utilities Department
SUBJECT:
Resolution approving the Consent and Agreement and the form of the Estoppel Certificate for the Renewable Power Purchase Agreement with RE Gaskell West 2, LLC.
EXECUTIVE SUMMARY:
RE Gaskell West 2, LLC will construct a solar photovoltaic electric power generation plant in Kern County, California (“Gaskell West Facility”). In 2021, the Utilities Department entered into a power purchase agreement to procure solar photovoltaic electric generation and battery energy storage system from the Gaskell West Facility. The agreement states that RE Gaskell West 2, LLC has the right to assign this power purchase agreement as collateral for any financing or refinancing of the Facility, and that the Buyers must in good faith work with the Seller to facilitate assigning the Gaskell West power purchase agreement to a financing entity. The Consent and Agreement documents the City’s approval of this collateral financing assignment and the City’s Estoppel Certificate makes certain acknowledgements, representations, and warranties for the benefit of the financing entities, including the City Council’s ratification of the Utility Department’s approval of the Gaskell West Power Purchase Agreement.
RECOMMENDED ACTION:
That the City Council:
a. Adopt Resolution No. 2022-047 approving the Consent and Agreement and the Form of the Estoppel Certificate for the Renewable Power Purchase Agreement with Gaskell West 2, LLC. b. Authorize the City Manager, or his designee, to execute the Consent and Agreement and Estoppel Certificate on behalf of the City.
c. Authorize the City Manager, or his designee, to negotiate, execute and authorize any further contracts, agreements, or certificates which are non-substantive or are otherwise in City of Corona Page 1 of 4 Printed on 5/26/2022
powered by Legistar™
File #: 22-0426
compliance with the City Council’s actions hereunder.
BACKGROUND & HISTORY:
RE Gaskell West 2, LLC (“GW LLC”) is constructing the Gaskell West Facility, a 29-megawatt solar photovoltaic electric power generation plant with an integrated 20-megawatt alternating current/80- megawatt hour battery energy storage system at 23555 Gaskell Road, in Kern County, California.
The Utilities Department joined with the City of Victorville and Industry Public Utilities, and entered into a Power Purchase Agreement (PPA) with GW LLC on October 27, 2021 to purchase the electrical energy output; battery energy storage system (“BESS”); bundled Renewable Energy Credits (“RECs”); and the associated Resource Adequacy (“RA”) value from the Facility. The expected commercial operations date is December 31, 2022, and the contract term is twenty-five years. The Utilities Department’s share is 11-megawatts (MW) of the electric generation and 8 MW of the BESS.
The Gaskell West Facility will be certified as eligible to meet California’s Renewables Portfolio Standard (“RPS”). Further, because the “PPA” term is longer than 10 years, this agreement will also count towards the new requirement beginning in 2021 that at least 65 percent of the Utilities Department RPS procurement for the 2021-2024 RPS Compliance Period come from “long-term” purchases. The Gaskell West Facility and the Alta Mesa Wind Facility are both scheduled to be operational in 2023.
The breakdown below shows the Utilities Department’s forecasted resource mix plan toward its RPS requirements once the Gaskell West Facility and Alta Mesa Wind Facility are operational:
-Hydroelectric: 9%
-Wind: 27%
-Solar: 26%
-System & CAISO Purchases: 38%
ANALYSIS:
As is typical for development projects, GW LLC, the developer, must secure financing for the construction and operation of the Gaskell West Facility. GW LLC will soon enter into a financing agreement with Natixis, New York Branch, a New York corporation (“Natixis”) to act as collateral agent for the benefit of various financial institutions. As collateral for this financing, GW LLC must assign its rights under the Gaskell West PPA to Natixis. The Gaskell West PPA requires that GW LLC obtain the Buyers’ approval for any such financing assignment. The Consent and Agreement by and among the City of Corona, City of Victorville, Industry Public Utilities, Natixis, and GW LLC is included as Attachment “A” to the proposed resolution, and it is the agreement by which the City approves this collateral financing assignment. The City of Victorville and Industry Public Utilities have already approved the attached Consent and Agreement document.
GW LLC is wholly owned by Matrix Renewable US, LLC., a Delaware limited liability company. In addition to the Consent and Agreement, Matrix Renewable US, LLC has entered into an Equity Capital Contribution Agreement (“ECCA”) with BAL Investment & Advisory, Inc., a Delaware corporation, (“BALIA”), where BALIA will make a tax equity investment in the tax equity partnership that will eventually own GW LLC. The ECCA requires that Matrix Renewable US, LLC provide BALIA with an Estoppel Certificate executed by the Buyers making certain acknowledgements, representations, and warranties regarding the Buyers’ obligations to perform under the PPA. One of City of Corona Page 2 of 4 Printed on 5/26/2022
powered by Legistar™
File #: 22-0426
representations, and warranties regarding the Buyers’ obligations to perform under the PPA. One of those representations is that the Gaskell West PPA was duly approved and executed by the Utilities Department. The City of Victorville and Industry Public Utilities have already approved the attached Form of Estoppel Certificate.
The Director of Utilities approved and executed the Gaskell West PPA pursuant to his authority provided for in the Corona Municipal Code Section 3.08.140(G), which authorizes the Director of Utilities to negotiate and execute agreements, on behalf of the City, for the wholesale purchase and sale of natural gas, water, economy energy, replacement energy, replacement capacity, and transmission service to deliver such commodities to the City or other appropriate locations through utilization of the direct purchase of such commodities directly from the competitive open market.
The Estoppel Certificate will not be executed until the Commercial Operation Date of the Gaskell West Facility. The form of the Estoppel Certificate is being presented to the City Council for approval and preparation for final execution by the City Manager upon authorization of the City Council. The form of the Estoppel Certificate is included as Attachment “B” to the proposed Resolution.
The Utilities Department and the City’s special electric legal counsel, Braun Blaising Smith Wynne, P.C. (“Special Electric Legal Counsel”), have reviewed both the Consent and Agreement and the form of the Estoppel Certificate and has determined that they are legally acceptable and has approved them as to form. The City Council’s adoption of Resolution 2022-047 will approve both documents.
FINANCIAL IMPACT:
The forecasted purchase obligation over the 25-year term is $34,190,549. Beginning in Fiscal Year (FY) 2023, the forecasted initial annual obligation is $1,561,769. The Utilities Department’s operating revenues in FY 2021 were $16,484,200. The delivery of the energy and RECs received from the Gaskell West PPA will displace the energy and RECs that would have otherwise been procured to meet customer load requirements and regulatory obligations. Corona will only pay for the metered output that will be delivered each month. The restricted funds collected from customers for the Public Purpose Programs Charge and the Greenhouse Gas Auction proceeds would be available to offset any above-market costs.
ENVIRONMENTAL ANALYSIS:
This action is exempt pursuant to Section 15061(b)(3) of the Guidelines for the California Environmental Quality Act (CEQA), which states that a project is exempt from CEQA if the activity is covered by the commonsense exemption that CEQA applies only to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. This action confirms the right for Gaskell West, LLC to assign its rights under the PPA to Natixis and makes certain acknowledgements, representations, and warranties regarding the City’s obligations to perform under the PPA. This action does not approve or authorize any construction activity or any disturbance of an environmental resource. There is no possibility that adopting Resolution 2022-047 will have a significant effect on the environment.
Therefore, the City Council finds that no further environmental review is required pursuant to CEQA City of Corona Page 3 of 4 Printed on 5/26/2022
powered by Legistar™
File #: 22-0426
and the State CEQA Guidelines.
PREPARED BY: KATIE HOCKETT, ASSISTANT DIRECTOR OF UTILITIES REVIEWED BY: TOM MOODY, DIRECTOR OF UTILITIES
Attachment:
1. Exhibit 1: Resolution No. 2022-047
City of Corona Page 4 of 4 Printed on 5/26/2022
powered by Legistar™