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Agenda Report
December 08, 2025
TO: Honorable Mayor and City Council
FROM: Water and Power Department
SUBJECT: AUTHORIZE THE CITY MANAGER TO ENTER INTO A LEASE AGREEMENT WITH GLENARM BESS, LLC; A GUARANTY
AGREEMENT FOR THE BENEFIT OF EAST WEST BANK; AND
CONSENT TO CHANGE OF CONTROL WITH INFINITE GRID CAPITAL,
LLC, FOR THE GLENARM BATTERY ENERGY STORAGE SYSTEM
PROJECT
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RECOMMENDATION:
It is recommended that the City Council:
1) Find that the actions proposed herein are not "projects" subject to the California Environmental Quality Act (CEQA) pursuant to California Public Resources Code Section 21065 and within the meaning of State CEQA Guidelines Section 15378(b); 2) Authorize the City Manager to enter into a Lease Agreement and other related documents regarding the site, with Glenarm BESS, LLC to facilitate their participation in the development of the Glenarm Battery Energy Storage System ("BESS"), located within the City of Pasadena's ("City") Glenarm Power Plant complex ("Power Plant") and to enable them to operate and maintain the BESS; and 3) Authorize the City Manager to enter into a Guaranty Agreement for the benefit of East West Bank, and Consent to Change of Control, along with any other documents related thereto, with Infinite Grid Capital, LLC to facilitate their role in the BESS project.
BACKGROUND:
On June 17, 2024, the Pasadena City Council authorized the City Manager to enter into an Energy Storage Agreement ("ESA") (Contract 32987) with Glenarm BESS, LLC, a Special Purpose Entity created by EPC Energy Inc. exclusively for this project, to provide up to 15 years of utility-scale energy storage services to the City from a BESS to be located inside the Power Plant (Attachment A).
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MFFTtNHHF 12/08/2025AGENDA ITEM NO..1
Lease Agreement, Guaranty Agreement, and Consent to Change of Control for the Glenarm BESS Project December 08, 2025
As part of the initial project approvals, the City Council authorized the City Manager to enter into a License Agreement with Glenarm BESS, LLC to provide the necessary site control to Glenarm BESS, LLC for the installation of the project within the Power Plant.
This License Agreement was intended to support Glenarm BESS, LLC's role in the shared development effort for this project. However, Glenarm BESS, LLC has recently informed the City that, in order to secure additional funding required to complete the project, their lender, East West Bank ("Lender") is now requiring a Lease Agreement (with the City as the lessor and Glenarm BESS, LLC as the lessee) in place of the previously authorized License Agreement, whose major, applicable terms have been incorporated into the Lease Agreement. This change is presented at the insistence of the Lender to satisfy its financing conditions.
The City Attorney believes that the change (from License to Lease) is a material one that should go before the City Council for approval. Because Glenarm BESS, LLC's is dependent on this funding to maintain timely project progress, and obtaining a Lease from the City is instrumental to obtaining such funding, Pasadena Water and Power ("PWP") staff have determined that granting the Lease is in the City's best interest.
The Lease Agreement provides for $1 per year of rent to the City, beginning in the current Fiscal Year. It is entirely possible that the Los Angeles County Tax Assessor may levy an annual property tax upon Glenarm BESS, LLC as a result of this lease. If this occurs, PWP would fully reimburse Glenarm BESS, LLC, as agreed during ESA negotiations. Assuming a 16-year Lease term (allowing for 1 year of construction and testing, plus 15 years of commercial operation under the ESA), this potential tax liability is estimated to range between $207K and $560K in total over the term of the Lease.
The Lease Agreement is necessary to preserve the viability of the ESA and, by extension, the associated benefits to the City from internal energy storage. Regardless of whether the City ultimately elects to purchase the project, the property will continuously remain under the City's ownership, with the City continuing to serve as the landlord throughout the duration of the ESA contract.
In a related development, Glenarm BESS, LLC has notified the City that Infinite Grid Capital, LLC (a minority owner in Glenarm BESS, LLC since its inception) has acquired full ownership ofGlenarm BESS, LLC. This constitutes a Change of Control, which is subject to the City's consent under the ESA. In accordance with the requirements of the ESA, PWP have exercised due diligence in reviewing this Change of Control and recommend the City's consent thereto.
Finally, the Lender has requested that Infinite Grid Capital, LLC obtain assurances from the City regarding construction of the Glenarm BESS Project. The ESA assigns construction responsibility to the City, and the California Energy Commission has awarded the City a financial grant for this purpose. The proposed Guaranty Agreement provides the requested assurances and would support the abovementioned financing to complete this project.
Lease Agreement, Guaranty Agreement, and Consent to Change of Control for the Glenarm BESS Project December 08, 2025
COUNCIL POLICY CONSIDERATION:
Implementation of the actions recommended in this report would promote completion of the Glenarm BESS Project, which supports PWP's further acquisition of renewable energy resources to reduce greenhouse gas emissions, and is consistent with the City's Urban Environmental Accords; specifically, Action 1, Renewable Energy; Action 2, Energy Efficiency; and Action 3, Climate Change, as well as with Resolution 9977, passed by the City Council on January 30, 2023, declaring a climate emergency and setting a goal to source 100% of Pasadena's electricity from carbon-free sources by the end of 2030.
ENVIRONMENTAL ANALYSIS:
CEQA excludes from environmental review, actions that are not "projects" as defined by Public Resources Code Section 21065 and within the meaning of CEQA Guidelines Section 15378(b). Sections 21065 and 15378(b) define a "project" as an action which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Section 15378 excludes from the definition of "project" organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment. The actions proposed herein, authorizing the City Manager to enter into a Lease Agreement, Guaranty Agreement, and Consent to Change of Control - all of which are administrative activities, are therefore not "projects" as defined by CEQA. Since these actions are not projects subject to CEQA, no environmental documents are required.
Lease Agreement, Guaranty Agreement, and Consent to Change of Control for the Glenarm BESS Project December 08, 2025
FISCAL IMPACT:
The cost of the recommended actions is $1 per year of rent and potential tax liability ranging from $13,000-$35,000 per year over the term of the 16-year lease. The Department will utilize existing budgeted appropriations in the Power Fund (401) to support the first year of the lease agreement. Future lease agreement costs will be budgeted as part of the department's annual operating budget. There is no impact to the General Fund.
The Guaranty Agreement and the Consent to Change of Control are not expected to impose any fiscal impacts on the City - whether taken together or taken separately.
Respectfully submitted,
DAVID M. REYES
General Manager
Water and Power Department
Prepared by:
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Kelly Nguyen
Assistant General Manager
Approved by:
^'HMIGU^LMARQUEZ
City Manager
Attachment:
Attachment A: June 17, 2024, Agenda Report to the City Council on the Glenarm BESS