HomeMy WebLinkAboutStaff Report 2887 (2)
City of Palo Alto (ID # 2887)
Finance Committee Staff Report
Report Type: Action ItemsMeeting Date: 10/2/2012
Summary Title: Renewable Energy Contract for Solar Power
Title: Utilities Advisory Commission Recommendation to Adopt a Resolution
Approving a Power Purchase Agreement with Brannon Solar LLC for the
Purchase of Electricity over 25 Years at a Cost Not to Exceed $91 Million
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the Finance Committee
recommend that the City Council:
1. Adopt a resolution approving a Power Purchase Agreement with Brannon Solar LLC, a
California limited liability company, for the acquisition of up to 52,000 megawatt-hours
(MWh) per year of energy over twenty-five years at a cost not to exceed $91 million;
and
2. Waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do
business with the City.
Executive Summary
As part of ongoing efforts to procure renewable resources to meet the City’s Renewable
Portfolio Standard (RPS) of at least 33% of sales from renewable resources by 2015, staff issued
a request for proposals (RFP) in the fall of 2011 and evaluated the proposals based on price,
value, viability and compatibility with the City’s needs. The Brannon Solar proposal had the
best score as well as the lowest price.
The Brannon Solar project would provide about five percent of the City’s annual energy needs.
The Brannon Solar project is proposed by Brannon Solar LLC, a California limited liability
company, formed by the San Jose based development office of Trina Solar Limited, a vertically
integrated Chinese solar panel manufacturer.
The price for the Brannon Solar project over the 25-year term of the agreement is
$77.00/MWh, a rate that is less than the rates for the last four renewable energy contracts that
were approved by the Council.
Background
Per the Council-approved Long-term Electric Acquisition Plan (LEAP) Objectives, Strategies and
Implementation Plan, updated in April 2012 (Staff Report 2710), the City’s current RPS target is
to procure at least 33% of its retail sales volume from qualifying renewable resources by 2015,
and to continue procuring renewable resources as long as the cumulative rate impact of all of
the City’s renewable resources is not more than 0.5 cents per kilowatt-hour (¢/kWh).
Current Status of Renewable Resources in Electric Portfolio
The City has executed five Power Purchase Agreements (PPAs) for energy generated from new
renewable resources which are currently delivering energy to Palo Alto. An additional three
PPAs and a Northern California Power Agency (NCPA) Third Phase Agreement have been
executed for four projects that are under construction. Basic information for all nine
committed RPS resources is shown in Table 1 below.
Table 1 – Existing Renewable Energy Contracts
Project Supplier Technology Date Contract
Executed
Actual or
Estimated
Online Date
Annual
Energy
(GWh)
High Winds Iberdrola Wind Nov. 2004 Dec. 2004 48.9
Shiloh Iberdrola Wind Oct. 2005 Jun. 2006 71.4
Santa Cruz Ameresco Landfill Gas Nov. 2004 Feb. 2006 11.2
Half Moon Bay Ameresco Landfill Gas Jan. 2005 Apr. 2009 40.7
Keller Canyon Ameresco Landfill Gas Aug. 2005 Aug. 2009 11.8
Subtotal – Operating 184.0
Johnson Canyon Ameresco Landfill Gas Aug. 2009 Nov. 2012 10.4
Crazy Horse Ameresco Landfill Gas May 2010 Sep. 2013 21.6
San Joaquin Ameresco Landfill Gas May 2010 Apr. 2013 30.3
Western Geo Ram Geothermal Apr. 2011 Jun. 2014 33.1
Subtotal – Under Construction 95.4
Total – All Executed Contracts 279.4
In addition, through its contract with the Western Area Power Administration, the City receives
hydroelectric energy that includes a small amount of energy from “small” hydroelectric projects
that qualify under the state’s standard for renewable energy. The City also receives a share of
the New Spicer Meadow qualifying small hydroelectric output as part of the Calaveras
Hydroelectric Project. These resources count towards meeting the City’s RPS and together
account for about 1% of the City’s sales in normal water years.
Lastly, Palo Alto Clean Local Energy Accessible Now (CLEAN), a local solar photovoltaic (PV)
feed-in tariff program, was approved by Council on March 5, 2012 (Staff Report 2548), and was
launched in April 2012. The Palo Alto CLEAN program may provide up to 1.9% of Palo Alto’s
electric energy needs by 2015. Together, when all of the committed facilities reach commercial
operating status, and assuming Palo Alto CLEAN provides 1.9% of the City’s total energy supply,
the City’s RPS will be about 29.8% of Palo Alto’s total energy supply needs by 2015 as shown in
Figure 1 below.
Figure 1 – Palo Alto’s Renewable Resources
0
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GW
h
p
e
r
Y
e
a
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Palo AltoCLEAN
WesternGeoPower
Crazy Horse
San Joaquin
JohnsonCanyon
Short-term
Renewables
KellerCanyon
Half Moon
Bay
Santa Cruz
Shiloh Wind
High Winds
Small Hydro
33% RPS
Minimum Target
Actual Projected
Figure 1 shows actual deliveries through 2011 and estimated deliveries after 2011.
“Green Premium” Calculation
To conform to the rate impact limitation of 0.5 ¢/kWh on average, staff compares the total cost
of each renewable resource to the wholesale market price of non-renewable energy at the time
that the contract for the resource is executed. The limit is converted into an annual premium
“budget” for qualifying renewables. For example, for 2015, the annual premium is calculated
by multiplying the annual energy sales (approximately 1,038,000 MWh per year) by the
premium (0.5 ¢/kWh, or $5/MWh) to get a green premium budget of approximately $5.2
million/year.
For each resource the levelized1 cost impact ($/year) is calculated based on the renewable
energy cost plus transmission charges, minus any system or local capacity value provided, and
1 Levelizing is a process of taking nominal cash flows, discounting them to present value, summing the
present values, and amortizing the present value into uniform annual payments like a mortgage. The
discounting and the amortizing are both performed with the user’s discount rate or time value of
money.
minus the wholesale market price quote for non-renewable energy (or “brown power”) plus
transmission charges [Green Premium = (PPA cost + transmission charges – local capacity value)
– (brown power cost + transmission charges)].
Table 2 below shows the amount of the green premium budget that has been used up with the
committed RPS resources. As shown, the contracts that were executed in 2004 and 2005 were
priced very near the brown energy market price. Prices for the last four contracts were
significantly higher than the brown energy market price. As shown in Table 2, for the nine
existing renewable contracts, the total green premium that is expected to be paid annually
once all projects are generating (expected in 2014) is $3.0 million, which corresponds to a rate
impact of about 0.29 ¢/kWh. This means that there is still room (up to $2.19 million per year)
to acquire additional renewable energy within the 0.5 ¢/kWh rate impact limit.
Table 2 – Green Premium for Existing Renewable Energy Contracts
Date Contract
Executed
Annual
Energy
(GWh)
Levelized
Project
Cost
($/MWh)
Adjusted *
Brown
Market Cost
($/MWh)
Green
Premium
($/MWh)
Green
Premium
($1000/yr)
Small Hydro N/A 10.0 N/A N/A 0 0
High Winds Nov. 2004 48.9 57.6 55.0 2.6 125
Shiloh Wind Oct. 2005 71.4 63.0 69.5 (6.5) (464)
Santa Cruz Nov. 2004 11.2 62.3 59.3 3.0 33
Ox Mountain Jan. 2005 40.7 59.0 67.5 (8.5) (348)
Keller Canyon Aug. 2005 11.8 70.8 83.9 (13.0) (154)
Johnson Canyon Aug. 2009 10.4 123.6 67.3 56.3 586
San Joaquin May 2010 30.3 118.1 75.6 42.4 1,286
Crazy Horse May 2010 21.6 107.6 69.3 38.3 826
Western Geo Apr. 2011 33.1 113.0 79.5 33.5 1,107
Total - All Committed Contracts 289.4 2,998
* Brown Market Costs are levelized across the project’s contract period, and adjusted for
the comparison project’s monthly and daily delivery profile, local and system capacity
value, transmission costs and losses.
Discussion
The Market for Renewable Resources in California
With the arrival of RPS goals for investor owned utilities (IOUs) and publicly owned utilities
(POUs) plus the potential for still higher RPS goals as suggested by the Governor, the developers
of renewable power have been bullish on the pricing prospects for their products. However,
low cost solar panels and low cost natural gas have disrupted some of that bullishness, at least
temporarily. Proposals for even higher future RPS requirements, California in-state renewable
energy quotas, elimination of out of state biogas counting for RPS, and carbon cap-and-trade
mechanisms continue to drive the bullishness of renewable energy project developers in the
longer term.
In the meantime, the California Public Utilities Commission’s (CPUC) Market Price Referent
(MPR) has lost some of its impact on renewable energy prices. The MPR is published by the
CPUC periodically and establishes benchmark prices above which renewable projects proposed
to IOUs would face additional CPUC scrutiny. For 25-year baseload energy contracts with
delivery starting in 2014, the current levelized MPR is $100.81/MWh.
Results of Palo Alto’s Renewable Resource Request for Proposals (Fall 2011 RFP)
The City seeks new renewable energy supplies through several activities. The most successful
method to date has been to issue RFPs for renewable power, the most recent of which was
released last fall.
The City issued an RFP for renewable energy resources in September 2011 and received 64
proposals representing a total capacity of 1,200 MW and 3,400 gigawatt-hours per year
(GWh/year) of energy from a variety of technologies. The 64 projects proposed included 46
solar PV projects, 9 wind projects, 4 landfill-gas-to-energy projects, 3 biomass/biogas projects,
one geothermal project and one small hydro project.
The proposals were evaluated for responsiveness to the RFP, price and value, project/contract
viability, and compatibility with Palo Alto’s electric portfolio. The Brannon Solar proposal
scored the best at meeting the price value criteria and the overall criteria.
In evaluating the price and value of different offers staff takes into account:
The daily and seasonal shape of the energy output;
The location of the output;
The structure of the output in terms of meeting legislated criteria (i.e., satisfying
limitations on the use of the three types, or “buckets,” of renewable resources defined
by the state’s RPS law);
The likely capacity value of the output;
The likely interconnection cost to get the output onto the grid;
The proposed start date; and
The green premium, which is calculated for each proposal as the proposal cost minus
the cost of buying the equivalent amount of non-renewable resource output.
Further, the viability of each proposed project was evaluated in terms of accomplished and
remaining development steps along with the financial standing and development experience of
the project developer.
Staff found that all projects on the short-list of most attractive projects were in the planning,
permitting, and development process and still had significant milestones to accomplish before
reaching commercial operation. Staff contracted with Navigant Consulting to perform an
evaluation of the viability of the top scoring proposals and they found that the Brannon Solar
proposal had reasonable viability. Navigant noted that Brannon Solar proposed to utilize panels
from Trina Solar, which are considered to be among the highest quality panels in the solar
industry.
The Brannon Solar proposal had the lowest green premium ($18.97/MWh, based on brown
market prices as of August 15, 2012) among the 64 proposals. Figure 2 is a scatter plot of green
premiums vs. project start date for the proposals received from the RFP. The green-premium
associated with the Council-approved Palo Alto CLEAN program is provided for illustrative
purposes.
Figure 2 – Green Premiums and Project Start Dates of RFP Proposals
Comparison of Greenhouse Gas Emissions of Various Qualifying Renewables
Navigant Consulting also evaluated the relative greenhouse gas emissions from various
qualifying renewable energy sources including: wind, solar, landfill gas, and other bio-energy
sources. Navigant found that, ignoring differences in the embodied energy required to
manufacture and install the different energy conversion devices associated with the different
sources, wind-powered and solar-powered sources produce approximately zero net
greenhouse gas emissions.
Palo Alto’s Renewable Resource Portfolio with the Brannon Solar Project
The City has made commitments to renewable resources projected to provide 27.9% of its
energy from qualified renewable resources by 2015 not including any output associated with
the Palo Alto CLEAN program. If the Brannon Solar PPA is added, Palo Alto’s renewable
resources would increase to about 32.7% of total sales in 2015, or about 0.3% short of the 33%
minimum RPS target. If the City procures 4 MW of local solar installations per year for four
years through the CLEAN program in addition to the Brannon Solar project, renewable
resources would provide 34.6% of total sales in 2015 and 35.3% of total sales in 2016. Figure 3
illustrates the renewable resources already in the portfolio plus the Brannon Solar project and
the anticipated CLEAN Program participation. Figure 3 also shows a reference line indicating
the level of renewables that would produce a carbon neutral electric portfolio (after any
emissions associated with the renewables were zeroed out2). This reference line indicates
there is substantial space in the portfolio available to accommodate the output from additional
renewable projects.
Figure 3 – Palo Alto’s Renewable Resources with Brannon Solar
0
100
200
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400
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600
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3
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Palo Alto
CLEAN
Brannon
Solar
WesternGeoPower
Crazy Horse
San Joaquin
Johnson
Canyon
Short-term
Renewables
KellerCanyon
Half Moon
Bay
Santa Cruz
Shiloh Wind
High Winds
Small Hydro
CarbonNeutral
Portfolio
33% RPS
Minimum Target
Actual Projected
100% Carbon Neutral
Portfolio through
Renewables
The Brannon Solar PV Project Proposal
The price for the Brannon Solar project PPA is $77.00/MWh over the entire 25-year term of the
contract. Table 3 shows a summary of renewable energy supplies available assuming all
contracted projects are built and that 12 MW (3 times the first year limit) of Palo Alto CLEAN
resources are built by 2015. As shown in the table, the annual green premium for 50.7
GWh/year of the Brannon Solar project is $962,000. If Council approves the Brannon Solar PPA,
there would still be approximately $165,000 per year of remaining green premium even with
the Palo Alto CLEAN subscribed at 12 MW (or $1.23 million per year remaining without any Palo
2 Anthropogenic, or man-made, greenhouse gas emissions are associated with geothermal projects and, therefore,
would need to be zeroed out in a carbon neutral portfolio.
Alto CLEAN installations). This indicates that more renewable resources (from Palo Alto CLEAN,
external RFPs, NCPA, or other venues) can be pursued within the 0.5 ¢/kWh rate impact limit.
Table 3 – Summary of Current Renewable Energy Supplies and Brannon Solar
Delivery
Begins
Annual
Generation
(GWh)
Levelized
Price
($/MWh)
Adjusted
Brown
Market
Price
($/MWh)
Green
Premium
($/MWh)
Total
Annual
Green
Premium
($1000)
Small Hydro Before 2000 10.0 N/A N/A 0 0
High Winds Dec. 2004 48.9 57.6 55.0 2.6 125
Shiloh Wind Jun. 2006 71.4 63.0 69.5 (6.5) (464)
Santa Cruz Feb. 2006 11.2 62.3 59.3 3.0 33
Ox Mountain Apr. 2009 40.7 59.0 67.5 (8.5) (348)
Keller Canyon Aug. 2009 11.8 70.8 83.9 (13.0) (154)
Johnson Canyon Nov. 2012 10.4 123.6 67.3 56.3 586
San Joaquin Sep. 2013 30.3 118.1 75.6 42.4 1,286
Crazy Horse Apr. 2013 21.6 107.6 69.3 38.3 826
Western Geo Jun. 2014 33.1 113.0 79.5 33.5 1,107
Total Committed Projects 289 Total Committed Green Premium 2,998
Brannon Solar Aug. 2014 50.7 77.0 58.0 19.0 962
Total with Brannon 340 Total Green Premium with
Brannon 3,960
PA CLEAN 2013-2015 20.0 140.0 86.7 53.3 1,065
Total with Brannon & CLEAN 360
Total Green Premium
with Brannon & CLEAN 5,025*
*Annual green premium associated with a rate impact of 0.5 ¢/kWh is equal to $5.2 million
The Brannon Solar PV Contract Structure and Associated Risks
Like all of Palo Alto’s other renewable PPAs, the Brannon Solar agreement is structured so that
the City only pays for metered output from the project after the output has been delivered
each month. This structure minimizes the City’s exposure to operational, maintenance and
counterparty default risks in these contracts. If, however, the project output is reduced or
stops and the City decides to procure replacement volumes, there is a risk that the market price
for the replacement volumes is more expensive.
The pricing is known and fixed for the 25-year term of the contract at $77.00/MWh. While the
price is known, the value of each MWh of output fluctuates with market conditions. Thus the
City has price risk in that the fixed price paid for the contract may, over the life of the contract,
be more or less attractive compared to future alternatives that may become available from
other providers for the remaining term of the contract.
Since the City has experienced renewable project commitments that either do not materialize
or are delayed, for the Brannon Solar PPA, the City negotiated the inclusion of development
and performance assurance deposits in the PPA. A development deposit of $400,000 (in the
form of a letter of credit or escrow account) would be available to the City, and withheld from
the developer, if the project misses the commercial operation timing milestone. The
development deposit provides an incentive to the developer to complete the project on time.
It also provides compensation to the City should the project be late or not materialize. After
the start of commercial operations, the developer would provide a $400,000 performance
assurance deposit (in the form of a letter of credit or escrow account), which will be available to
the City, and withheld from the operator, if certain performance measures are not met. The
performance assurance deposit provides an added incentive for the operator to maintain the
project output and provides compensation to the City should performance be less than
expected.
Creditworthiness Review
The Brannon Solar agreement is with a small Limited Liability Company (LLC). Brannon Solar
LLC is supported by its parent company, Trina Solar Limited (TSL), a New York Stock Exchange
traded company. TSL has solar PV panel making operations around the globe and is venturing
into the project development business. This type of vertically integrated operation appears to
be bringing economies to the project development business. Due to the recent turmoil in the
solar PV panel manufacturing industry, TSL bonds issued in China have been trading at high
yields, indicating a credit rating of below investment grade. As a result, TSL has agreed to
provide letters of credit or escrow accounts for $400,000 each to the City as development and
performance assurance deposits.
The Energy Risk Manager assessed the expected default frequency (EDF) of TSL using a Moody’s
credit measure tool which extracts credit signals by combining information from the company’s
financial statements, the equity markets, and the company’s debt profile from the bond
market. This analysis yielded an EDF of 15 percent, meaning that there is an estimated one in
six chance of default by TSL in the next year. This high EDF is mitigated by several factors, the
most important of which is that the City will not pay for power until it is received. Moreover,
energy deliveries will be provided by a specific generator and at a specific location so a physical
asset is assuring delivery of a product in contrast to market energy contracts, whose deliveries
are often backed by the financial strength of company.
The chief risk to the City of entering into the proposed Brannon Solar PPA is that the supplier
will default or not perform according to the terms of the contract. If this occurs, the City would
be forced to buy renewable energy from another supplier, or on the short-term markets, if
required to meet its RPS obligations under State law or to meet the City’s RPS goals. These risks
are minimized by the following terms of the proposed PPA:
The City is not at risk for paying for output that is not delivered. The City will make no
payments under the PPA until and unless energy from the project is delivered to the City
and the City will only pay for energy after it is delivered.
The supplier’s $400,000 letter of credit or escrow account for a development deposit
provides some degree of certainty that the project will actually be built. If it does not, then
the City will access the $400,000 to cover the risk of buying replacement renewable energy
supplies and to help offset the cost of negotiating the contract and issuing a new RFP for
replacement supplies.
Once the project becomes operational, the balance of the development deposit is returned
to Brannon Solar. Also, at that time, a new performance assurance deposit of $400,000
development deposit will be made by Brannon Solar and can be used by the City to cover
operational and performance risk. Staff believes this amount is sufficient to cover these
risks as, after a solar project is constructed, its operating costs are much lower than its
operating revenue so project owners tend to keep the project operating.
Under the terms of the proposed PPA, if the project does not come to fruition in a timely
manner, or if the supplier defaults at any time during the term of the agreement, the City can
access the $400,000 letter of credit or escrow account. For these reasons, staff recommends
that the Council waive the investment-grade credit requirement for public agency contracts
required under Section 2.20.340 (d) of the Palo Alto Municipal Code. This conforms to Council
action on prior renewable resource contracts with similar characteristics (CMR:461:04,
CMR:100:05, CMR:350:05, CMR:343:09, and CMR:226:10). This waiver is intended to benefit
only renewable energy companies providing energy, which is paid for by the City only after its
delivery under power purchase agreements.
Commission Review and Recommendation
On June 6, 2012, staff presented a recommendation to the UAC to recommend Council
approval of a PPA with Brannon Solar LLC with a price of $72/MWh. The UAC unanimously
recommended that Council approve the Brannon Solar PPA. At that time, negotiations were
still ongoing, but after the UAC’s meeting, Brannon Solar advised the City that the impacts of
the U.S. Department of Commerce’s decision to impose import tariffs on Chinese solar cells
would make the project untenable without a price increase. Further negotiations resulted in a
final price of $77/MWh for the PPA. The notes from the UAC’s June 6, 2012, meeting are
provided as Attachment C.
Staff returned to the UAC on September 5, 2012, with the recommendation for the UAC to
recommend Council approval of a PPA with Brannon Solar LLC with a price of $77/MWh.
Although commissioners expressed disappointment that the price had increased, the UAC
unanimously recommended that Council approve the Brannon Solar PPA. The draft notes from
the UAC’s September 5, 2012, meeting are provided as Attachment D.
Resource Impact
The cost of renewable energy supplies from the Brannon Solar PPA is expected to be up to
$91.0 million over the 25-year term of the agreement. The annual expected cost is up to $3.91
million, which includes a green premium over the cost of brown power of about $0.96 million
per year. In the contract, the City has an option for a 5-year extension, at the same price, to be
exercised by Council by the end of the 24th year of the contract. Approval of the Brannon Solar
PPA would result in a retail rate impact from all contracted renewable resources of 0.38 ¢/kWh,
which is within the 0.5 ¢/kWh rate impact limit.
Policy Implications
Approval of the Brannon Solar PPA is in conformance with the City’s Long-term Energy
Acquisition Plan (LEAP), specifically the City’s Renewable Portfolio Standard to meet at least
33% of the electric sales from renewable energy by 2015.
Environmental Review
Execution of this agreement does not meet the definition of a project, pursuant to section
21065 of the California Environmental Quality Act (CEQA). However, the City intends to receive
output from projects that will constitute a project for the purposes of CEQA. Project
developers will be responsible for acquiring necessary environmental reviews and permits on
projects to be developed.
Attachments:
Attachment A: 00710092A RESO Brannon Solar LLC PPA (PDF)
Attachment B: Power Purchase Agreement with Brannon Solar LLC (PDF)
Attachment C: Excerpted Final Minutes of the June 6, 2012 UAC Meeting (PDF)
Attachment D: Excerpted Draft Minutes of the September 5, 2012 UAC Meeting (PDF)
Prepared By: Tom Kabat, Manager
Department Head: Valerie Fong, Director
City Manager Approval: ____________________________________
James Keene, City Manager
Not Yet Approved
120919 dm 00710092 1
Resolution _________
Resolution of the Council of the City of Palo Alto
Approving the Long Term Power Purchase Agreement
(Solar Power) with Brannon Solar LLC for the Purchase
of Electricity Generated by Solar Electric Generating
Facilities
A. On April 16, 2012, the City approved electric portfolio planning and
management guidelines to guide the development and management of the City’s long-
term electricity acquisition plan; one of the guidelines is to reduce the carbon intensity of
the electric portfolio by pursuing a minimum level of renewable purchases of at least 33% of
retail sales by 2015.
B. The City is interested in purchasing power generated by renewable
resources for the benefit of its electric customers.
C. By purchasing renewable energy resources, the City will help reduce the
production of greenhouse gases and assist in reducing volatile organic compound
emissions.
D. Brannon Solar LLC (“Brannon”) though its parent company, Trina Solar
LLC, has proposed its project in response to the City’s Request for Proposals 143383
(“RFP”) in November 2011; its proposal is competitive with other RFP respondent
proposals.
E. The execution of a power purchase agreement (“PPA”) with Brannon is
anticipated to enable the City to meet a five-percent portion of its goal of sourcing 33%
of its energy needs from renewable electric energy.
F. The City is allocated a 100 percent share of the power from the solar
project located in Fresno County, California, which yields approximately 20 megawatts
of plant net output.
G. The PPA will allow the City to extend the agreement at the City’s sole
option for an additional five-year term after the initial twenty-five-year term.
H. The County of Fresno will be the lead agency for the purposes of
compliance with the requirements of the California Environmental Quality Act.
The Council of the City of Palo Alto does resolve as follows:
SECTION 1. The Council approves the power purchase agreement between
Brannon Solar LLC, as seller, and the City of Palo Alto, as buyer. The delivery term of
the agreement is twenty five (25) years, commencing upon the commercial operation
date of the planned electric generation facility. The City will receive a 100 percent share
Not Yet Approved
120919 dm 00710092 2
of the facility’s net output. Spending authority under the agreement shall not to exceed
ninety one million dollars ($91,000,000). The Council delegates to the City Manager
the authority to sign on behalf of the City the agreement with Brannon Solar LLC, and
any confirmations executed in connection with the agreement.
SECTION 2. With respect to the Council’s award of the power purchase
agreement referred to in Section 1 above, the Council waives the creditworthiness
requirements of Palo Alto Municipal Code section 2.30.340(c), as that requirement may
apply to Brannon Solar LLC.
SECTION 3. The Council finds that the adoption of this resolution does not
constitute a project under the California Environmental Quality Act and no
environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST: APPROVED:
_____________________________ _____________________________
City Clerk Mayor
APPROVED AS TO FORM: _____________________________
City Manager
_____________________________
Senior Asst. City Attorney _____________________________
Director of Utilities
_____________________________
Director of Administrative
Services
Draft 9.18.12
Confidential Draft
120401 dm 0073744
POWER PURCHASE AGREEMENT
This Power Purchase Agreement (the “Agreement”), dated as of
________________, 2012 (the “Effective Date”), is entered into by and between the
City of Palo Alto, a California chartered municipal corporation (“Buyer”), and Brannon
Solar, LLC, a Delaware limited liability company (“Seller”) (individually, a “Party” and,
collectively, the “Parties”).
RECITALS:
1. Seller intends to develop, finance, build, own and operate a solar photovoltaic
electric generating facility (the “Plant”), to be located at the Site.
2. Buyer is engaged in the procurement and supply of electricity to residential and
commercial customers in Palo Alto, California.
3. Buyer wishes to purchase the Output of the Plant and intends to resell related
Energy to its residential and commercial customers.
4. Buyer is willing to purchase, and Seller is willing to sell, the Output of the Plant,
on the terms and conditions and at the prices set forth in this Agreement.
5. Buyer is purchasing this Output to meet Buyer’s needs at a known price and
timing.
NOW THEREFORE, in consideration of the recitals above and the following
covenants, terms and conditions, the Parties agree:
AGREEMENT:
ARTICLE I - DEFINITIONS
The following initially capitalized terms, whenever used in this Agreement, have the
meanings set forth below, unless the context of their use otherwise indicates. The terms
“includes” and “including” mean to include and including, “without limitation.”
AC: Alternating current
Agreement: This Power Purchase Agreement, including all exhibits, as may be
amended from time to time.
Buyer: The City of Palo Alto and any successor or permitted assignee.
110911 gk 0073627 2
CAISO: The California Independent System Operator Corporation, or its functional
successor.
Calculation Period: The twenty-four (24) month period immediately preceding each
anniversary of the Commercial Operation Date, commencing at the second anniversary
of the Commercial Operation Date.
Change in Law: The enactment or issuance of any new law or regulation, the
amendment, alteration, modification or repeal of any existing law or regulation or any
authoritative interpretation of any existing law or regulation issued by a competent court,
tribunal or Governmental Authority contrary to the existing official interpretation thereof,
in each case coming into effect after the date of this Agreement and which must be
complied with in order for the Plant to be constructed and operated lawfully.
Commercial Operation: The condition of the Plant, whereupon it (a) is certified by
Seller to be complete in accordance with manufacturers’ recommendations except for
punch list items and (b) has passed the performance test set forth in Exhibit E, while it is
synchronized with the LDC System or CAISO transmission grid.
Commercial Operation Date: The date upon which Commercial Operation first occurs.
Seller shall notify Purchaser, in writing, within ten (10) days of the Commercial
Operation Date.
Contractual Obligations: As to Seller, any material agreement, instrument or
undertaking to which Seller is a party or by which it or any of its property is bound.
Development Assurance: The amount of not less than four hundred thousand dollars
($400,000), [as may be increased pursuant to Section 4.3 of this Agreement,] to be
posted or deposited by Seller in accordance with Article IX of this Agreement.
EA Agency: Any local, state or federal entity, or any other Person, that has
responsibility for or jurisdiction over a program involving transferability of Environmental
Attributes, including, without limitation, the Clean Air Markets Division of the United
States Environmental Protection Agency (the “EPA”), the California Energy Resources
Conservation and Development Commission (the “CEC”), the California Public Utilities
Commission (the “CPUC”), and any successor agency thereto.
Emergency: Any condition or situation which (i) endangers life or property or (ii) affects
Buyer's physical ability to maintain safe, adequate, and continuous electric power and
energy to Buyer's customers.
Energy: The electricity generated by the Plant and delivered to Buyer by the Seller,
pursuant to this Agreement, at the Point of Interconnection, as expressed in units of
kilowatt-hours (kWh) or megawatt-hours (MWh), including Test Energy.
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Environmental Attributes: Any and all credits, benefits, emissions reductions, offsets,
and allowances, howsoever entitled, attributable to the generation from the Plant or
Expansion Plant(s), as the case may be, and its displacement of conventional energy
generation. Environmental Attributes include, without limitation: (1) any avoided
emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen
oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of
carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs) that have
been determined by the United Nations Intergovernmental Panel on Climate Change to
contribute to the actual or potential threat of altering the Earth’s climate by trapping heat
in the atmosphere; and (3) the reporting rights to these avoided emissions such as
Green Tag Reporting Rights. “Green Tag Reporting Rights” are the right of a “Green
Tag” purchaser to report the ownership of accumulated Green Tags in compliance with
federal or state law, if applicable, and to a federal or state agency or any other party at
the Green Tag purchaser’s discretion, and include without limitation those Green Tag
Reporting Rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and
any present or future federal, state, or local law, regulation or bill, and international or
foreign emissions trading program. Green Tags are accumulated on kWh basis and one
Green Tag represents the Environmental Attributes associated with one (1) MWh of
energy. Environmental Attributes do not include (i) any energy, capacity, reliability or
other power attributes from the Plant or Expansion Plant(s) or (ii) tax credits associated
with the construction or operation of the Plant, Expansion Plant(s), or any other
associated contract or right, and other financial incentives in the form of credits, rebates,
reductions, or allowances associated with the Plant, Expansion Plant(s), or any other
associated contract or right, that are applicable to a state or federal income taxation
obligation.
Environmental Attributes Reporting Rights: All rights to report ownership of the
Environmental Attributes to any person or entity, under Section 1605(b) of the Energy
Policy Act of 1992 or otherwise.
Environmental Laws: Any and all federal, state and local laws, including statutes,
regulations, rulings, orders, administrative interpretations and other governmental
restrictions and requirements relating to the discharge of air pollutants, water pollutants
or process waste water or otherwise relating to the environment or hazardous
substances, as amended from time to time.
Expansion Plant: Any expansion of the Plant from its Initial Capacity, or any other
electricity generating facility owned or controlled by Seller or its affiliate(s), located at
the Site. Each such expansion of the Plant or additional facility shall be deemed to be
an “Expansion Plant.”
Expansion Plant Output: All capacity, energy, associated Environmental Attributes,
ancillary services, contributions towards resource adequacy or reserve requirements (if
any) and any other reliability or power attributes produced by Seller at any Expansion
Plant.
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Expected Annual Net Energy Production: For each twelve-month period,
commencing one day after the Commercial Operation Date, it is the value of the
expected annual net energy production in AC Megawatthours, including the effects of
first year 2.5% panel performance degradation and subsequent 0.7% panel annual
performance degradation as represented in Exhibit H.
FERC: The Federal Energy Regulatory Commission and its successor organization, if
any.
Force Majeure Event: Any act or event that delays or prevents a Party from timely
performing obligations under this Agreement or from complying with conditions required
under this Agreement to the extent that such act or event is reasonably unforeseeable
and beyond the reasonable control of and without the fault or negligence of the Party
relying thereon as justification for such delay, nonperformance, or noncompliance.
Force Majeure Events typically include: (i) acts of God or the elements, extreme or
severe weather conditions, explosion, fire, epidemic, landslide, mudslide, sabotage,
lightning, earthquake, flood or similar cataclysmic event, acts of public enemy, war,
blockade, civil insurrection, riot, civil disturbance or strike or other labor difficulty caused
or suffered by a Party; (ii) any restraint or restriction imposed by law or by rule,
regulation or other acts or omissions of governmental authorities, whether federal, state
or local which by exercise of due diligence and in compliance with applicable law a
Party could not reasonably have been expected to avoid and to the extent which, by
exercise of due diligence and in compliance with applicable law, has been unable to
overcome (so long as the affected Party has not applied for or assisted such act by a
governmental authority); and (iii) electric transmission interruptions or curtailments (not
including any such event that results from discretionary non-emergency curtailment of
Buyer or a failure by Buyer to obtain firm transmission or similar rights or otherwise to
make congestion-related payments) provided that the term “Force Majeure Event” does
not include (a) economic conditions that render a Party’s performance of this Agreement
at the Price unprofitable or otherwise uneconomic (including Buyer’s ability to buy
Energy or Environmental Attributes at a lower price, or Seller’s ability to sell Energy or
Environmental Attributes at a higher price, than the Price), (b) a governmental act by
Buyer that delays or prevents Buyer from timely performing its obligations under this
Agreement, (c) a Plant Outage, except, in any case, if caused by an event or
circumstance that meets the requirements set forth in this ”Force Majeure” definition
(other than as described in (iii) above), (d) failure or delay in grant of Permits, except, in
any case, if caused by an event or circumstance that meets the requirements set forth
in this ”Force Majeure” definition or (e) failures or delays by the LDC or the CAISO in
entering into all agreements with Seller contemplated by this Agreement.
Full Capacity Deliverability Status: The CAISO term (inclusive of any successor
designation) for interconnection arrangements made to provide regional improvements
to the grid allowing other projects to deliver energy and capacity so that the capacity
from the applicable site can be deemed fully deliverable and can count toward system
and local capacity requirements, if any, of the Buyer.
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GAAP: Generally Accepted Accounting Principles.
Governmental Authority: Any federal or state government, or political subdivision
thereof, including, without limitation, any municipality, township or county, or any entity
or authority exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, any corporation or
other entity owned or controlled by any of the foregoing.
Initial Capacity: The installed capacity of the Plant, determined as of the Commercial
Operation Date, which shall not to be less than 19 MW AC or more than 21 MW AC (net
at the Point of Interconnection).
Incentives: Any and all tax credits, deductions, allowances, depreciation and
exemptions applicable to federal, state and local taxes and any other payment, credit,
deduction, benefit, grant or monetary incentive provided by any federal, state or local
governmental authority or any Person, whether now in effect or arising in the future, in
each case arising from the activities contemplated by this Agreement, including any
“Renewable Energy Production Incentive Payments” from the U.S. Department of
Energy and any “Energy Investment Tax Credit” described in Section 48 of the Internal
Revenue Code of 1986, as it may be amended or supplemented from time to time.
Notwithstanding the foregoing, Incentives shall not include anything that qualifies as
Output as defined herein (including any Environmental Attributes).
Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
Interconnection Agreement: The agreement between Seller, the LDC and CAISO,
dated April 12, 2012, pursuant to which Seller, the LDC and CAISO set forth the terms
and conditions for Interconnection of the Plant to the LDC System, as amended from
time to time.
Interconnection Facilities: All of the facilities installed for the purpose of
interconnecting the Plant to the LDC System, including, without limitation, transformers
and associated equipment, relay and switching equipment and safety equipment.
LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
LDC: Pacific Gas and Electric Company, a California corporation.
LDC System: The electric power generation, transmission, substation and distribution
facilities owned, operated and/or maintained by the LDC, which shall include, without
limitation, after construction and installation, the circuit reinforcements, extensions, and
associated terminal facility reinforcements or additions required to interconnect the
LDC’s facilities with the Plant.
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Lender(s): Any Person(s) providing money or extending credit (including any capital
lease) to Seller for (i) the construction of the Plant, (ii) the term or permanent financing
of the Plant, or (iii) working capital or other ordinary business requirements for the Plant.
“Lender(s)” shall not include any trade creditor(s) of Seller.
Monthly LD Amount: The product of $1,667.00 per MW AC and the Initial Capacity
specified under Section 4.2(h) (net at the Point of Interconnection).
MW: Megawatt.
MWh: Megawatt-hour.
NCPA: The Northern California Power Agency, a California joint powers agency.
Outage: A physical state in which all or a portion of the Plant is unavailable to provide
Energy to the Point of Interconnection, or in which any portion of the LDC System is
unavailable to receive Energy, to the extent that the unavailability affects the LDC
System’s ability to accept delivery of Energy at the Point of Interconnection, whether
planned or unplanned.
Output: All actual capacity of the Initial Capacity and associated Energy, as well as the
following, as associated with the Initial Capacity and/or associated Energy:
Environmental Attributes; ancillary services; contributions towards resource adequacy
or reserve requirements (if any) and any other reliability or power attributes.
Parties: Buyer and Seller, and their respective successors and permitted assignees.
Participating TO or Participating Transmission Owner: Pacific Gas and Electric
Company, a California corporation, or any successor thereto acting as transmission
provider from the Site to the CAISO grid.
Party: Buyer or Seller, and each such Party’s respective successors and permitted
assignees.
Performance Assurance: The amount of four hundred thousand dollars ($400,000),
which shall be posted or deposited in accordance with Article IX of this Agreement.
Permits: All material federal, state or local authorizations, certificates, permits, licenses
and approvals required by any Governmental Authority for the construction, ownership,
operation and maintenance of the Plant.
Person: An individual, partnership, corporation (including a business trust), limited
liability company, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity.
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Plant: The power generation facilities described in the Recitals to be constructed and
owned by Seller and located on the Site for the generation and delivery of electricity,
including the step-up transformer, revenue quality meter and all other facilities up to the
Point of Interconnection, but not including any Expansion Plant.
Point of Interconnection: The point on the electrical system where the Plant is
physically interconnected with the LDC System, which is anticipated to be at the high
side of Seller’s step-up transformers at the Plant.
Prudent Utility Practice: Those practices, methods and equipment, as changed from
time to time, that:
(i) when engaged in are commonly used in the United States of America in
prudent electrical engineering and operations to operate solar photovoltaic
plant generation electric equipment and related electrical equipment
lawfully and with safety, reliability, efficiency and expedition; or
(ii) in the exercise of reasonable judgment considering the facts known, when
engaged in could have been expected to achieve the desired result
consistent with applicable law, safety, reliability, efficiency and expedition.
Prudent Utility Practices are not limited to an optimum practice, method, selection of
equipment or act, but rather are a range of acceptable practices, methods, selections of
equipment or acts.
REC: A renewable energy credit for compliance with California’s Renewables Portfolio
Standard (“RPS”) is a certificate of proof, issued through WREGIS, that one megawatt-
hour of electricity was generated by an RPS-eligible renewable energy resource and
delivered for consumption by California end-use retail customers. A REC includes all
renewable and environmental attributes associated with the production of electricity
from the eligible renewable energy resource, including any avoided emission of
pollutants to the air, soil or water; any avoided emissions of carbon dioxide, methane,
nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, or any other
greenhouse gases that have been determined by the United Nations Intergovernmental
Panel on Climate Change, or otherwise by law, to contribute to the actual or potential
threat of global climate change; and the reporting rights to these avoided emissions,
such as Green Tag reporting rights.
A REC does not include any energy, capacity, reliability or other power attributes of the
generation; any tax credits or other financial incentives in the form of credits, reductions,
or allowances associated with the generation that are applicable to a state or federal
income taxation obligation.
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The electricity underlying a REC must be delivered for consumption by California end-
use retail customers, in accordance with the definition of delivery implemented by the
CEC.
No REC may be created based on any electricity generated pursuant to any contract
with a California retail seller or a local publicly owned electric utility executed before
January 1, 2005, unless the contract contains explicit terms and conditions specifying
the ownership or disposition of the RECs. A REC may not be created based on any
electricity generated pursuant to a contract with a qualifying facility pursuant to the
Public Utility Regulatory Policies Act of 1978 that was executed after January 1, 2005.
A REC cannot be created with respect to electricity generated by an eligible renewable
energy resource attributable to the use of nonrenewable fuels, beyond a de minimus
quantity as determined by the CEC.
Requirements of Laws: Collectively, any federal or state law, treaty, franchise, rule,
regulation, order, writ, judgment, injunction, decree, award or determination of any
arbitrator or a court or other Governmental Authority, in each case applicable to or
binding upon Seller or Buyer or any of its property or to which Seller or Buyer or any of
its respective properties are subject.
Scheduling Coordinator: NCPA or any agent or successor thereof, or such other
scheduling coordinator as may be designated in accordance with this Agreement.
Section 45 Credits: Those tax credits available under Section 45 of Subtitle A, Chap.
1A, Part IV of the Internal Revenue Code of 1986, as amended, or any other similar
state, federal or local tax credits, deductions, payments or benefits arising from the
generation and sale of electricity using qualifying renewable resources, not including
any Environmental Attributes.
Section 48 Credits: Those tax credits available under Section 48(a)(3)(A)(i) and
48(a)(5) of the Internal Revenue Code of 1986, as amended, or any other similar state,
federal or local tax credits, deductions, payments or benefits arising from the investment
in qualifying energy properties, not including any Environmental Attributes.
Seller: Brannon Solar, LLC, a California limited liability company, and any successor or
permitted assignee.
Site: The real property on which the Plant is to be built and located at the intersection
of Davidson Avenue and W. Ballard Avenue, Firebaugh, Fresno County, California as
more particularly described in Exhibit A, or such other real property selected by Seller to
which Buyer consents in writing which consent shall not be unreasonably withheld
Site Control: The point at which Seller satisfies one or more of the following
conditions: (1) Seller is (a) the lessee under a lease, or (b) the grantee under an
exclusive easement, with the owner (or its subsidiary) of the Site that allows Seller to
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construct and operate the Plant at the Site during the Term in accordance with this
Agreement; (2) Seller has a fee ownership of the Site; or (3) any other form of site
control acceptable to Buyer, acting in the reasonable exercise of its discretion.
Station Service Power: The energy used by Seller to operate the Plant.
Test Energy: Energy and Output to the extent available generated by the Plant and
delivered to the Point of Interconnection prior to the Commercial Operation Date.
Two Year Minimum Production Threshold: The minimum volume of Output that
Seller must provide to Buyer during each two year rolling period calculated each
anniversary of the Commercial Operation Date starting with the second anniversary
thereof. The Two Year Minimum Production Threshold volume in MWh is shown in
Exhibit H in the applicable column for each prospective racking configuration in for each
two year period of the Term.
WREGIS: The Western Renewable Energy Generation Information System, an
independent, renewable energy tracking system for the region, administered by the
Western Electricity Coordinating Council (“WECC”). WREGIS tracks renewable energy
generation from units that register in the system using verifiable data and creates RECs
for this generation. WREGIS was developed through a collaborative process between
the Western Governors’ Association, the Western Regional Air Partnership, and the
CEC.
ARTICLE II
TERM, PURCHASE AND SALE
2.1 Term
This Agreement shall be effective upon its execution by authorized
representatives of the Parties and, unless earlier terminated pursuant to an
express provision of this Agreement, shall continue until the 25th anniversary of
the Commercial Operation Date (“Initial Term”). Buyer shall have the option to
extend the term of this Agreement for up to five years from the 25th anniversary
of the Commercial Operation Date (“Extension Term”). Buyer shall exercise the
option to extend the Term by a written notice delivered to Seller by not later than
three hundred sixty-five (365) days prior to the end of the Initial Term. The Initial
Term, together with any Extension Term, is referred to herein as the “Term.”
2.2 Purchase and Sale of the Output
(a) Commencing on the Commercial Operation Date and continuing during
the Term, Seller shall sell and deliver at the Point of Interconnection, and Buyer
shall purchase, accept from Seller at the Point of Interconnection and pay for, the
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Output produced during the Term pursuant to the terms of this Agreement. Prior
to the Commercial Operation Date, Buyer shall purchase and accept from Seller
at the Point of Interconnection and pay for, the Output relating to any Test
Energy pursuant to the terms of this Agreement; provided that the decision to
produce and deliver Test Energy hereunder shall be at the sole discretion of the
Seller. All Test Energy shall be scheduled in accordance with the procedures set
forth in Exhibit D. Seller shall not sell to any other party, and Buyer may claim
credit for, the Output, as may be available to Buyer from time to time.
(b) During the Term, Seller shall sell and transfer to Buyer, and Buyer shall
purchase and receive from Seller, all right, title and interest in and to the
Environmental Attributes associated with the Output, if any, whether now existing
or subsequently generated or acquired (other than by direct purchase from a
third party) by Seller, or that hereafter come into existence, during the Term, as a
component of the Output purchased by Buyer from Seller hereunder. Seller
agrees to transfer and make such Environmental Attributes available to Buyer
immediately to the fullest extent allowed by applicable law upon
Seller’s production or acquisition of the Environmental Attributes. Seller shall not
assign, transfer, convey, encumber, sell or otherwise dispose of all or any portion
of the Environmental Attributes to any Person other than Buyer. Seller makes no
written or oral representation or warranty, either express or implied, regarding the
current or future existence of any Environmental Attributes.
(c) During the Term, Seller shall not report to any person or entity that the
Environmental Attributes granted hereunder to Buyer belong to anyone other
than Buyer, and Buyer may report under any program that such Environmental
Attributes purchased hereunder belong to it.
(d) Seller will document the production of Environmental Attributes under this
Agreement by delivering with each invoice to Buyer an attestation for
Environmental Attributes produced by the Plant and purchased by Buyer in the
preceding calendar month. The form of attestation is set forth as Exhibit B.
Exhibit B shall be updated or changed by the Parties, as necessary, to ensure
that Buyer receives full and complete title to, and the ability to record with any EA
Agency as its own, all of the Environmental Attributes purchased hereunder. At
Buyer’s request, the Parties, each at their own expense, shall execute all such
documents and instruments in order to transfer the Environmental Attributes,
specified in this Agreement, to Buyer or its designees, as Buyer may reasonably
request. In the event of the promulgation of a scheme involving Environmental
Attributes administered by an EA Agency, upon notification by an EA Agency that
any transfers contemplated by this Agreement will not be recorded, the Parties
shall promptly cooperate in taking all reasonable actions necessary so that such
transfer can be recorded. Each Party shall promptly give the other Party copies
of all documents it submits to the EA Agency to effectuate any transfers.
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2.3 Price
Subject to any performance related adjustments under the provisions of Article
IX, during the Initial Term, Buyer shall pay Seller $0.077 per kWh of Energy
(“Price”) delivered or tendered to Buyer at the Point of Interconnection. The Price
shall be the total compensation owed by Buyer for the Output delivered or
tendered to Buyer during the Initial Term. During the Extension Term, Buyer shall
pay Seller the Price in effect during the 25th anniversary year.
2.4 Tax Credits and Incentives
Buyer agrees and acknowledges that all Incentives shall be owned by Seller.
Buyer shall not claim Incentives. Buyer agrees to cooperate with Seller, as may
be necessary to allow maximization of the value of, and realization of, and all
Incentives; provided that Buyer shall not be required to incur additional costs or
accept any diminution in value of its rights under this Agreement or of the Output
purchased hereunder. In addition, Buyer shall not take any action (except as
otherwise permitted under this Agreement), that would in any way reduce or
eliminate the availability to Seller of any Incentives, including the Section 48
Credits, and Buyer shall forego any credits or benefits available to it (other than
Environmental Attributes), including rights to purchase of Test Energy, to the extent
necessary to allow Seller to obtain the full benefit of the Incentives, but in no event
shall Buyer be required to forego receipt of Output after the Commercial Operation
Date.
2.5 Right of First Refusal for Expansion Plant and Expansion Plant Output
(a) During the Term, Seller may, in exercising its sole discretion, determine,
from time to time, to develop, finance, construct and/or operate an Expansion
Plant. Each time such a determination is made, Seller shall notify Buyer of such
determination and shall offer, in writing, to sell to Buyer the Expansion Plant
Output to Buyer. The offer shall include the price to be paid by Buyer for the
Expansion Plant Output, the term of the proposed power purchase agreement,
and the other principal terms and conditions of the proposed sale. If Buyer
wishes to accept such offer to purchase all (but not less than all) of the
Expansion Plant Output, Buyer shall so notify Seller within sixty (60) days of its
receipt of such offer. Buyer and Seller shall promptly thereafter enter into good
faith negotiation of a definitive power purchase agreement, incorporating the
terms of such offer. Until a power purchase agreement for an Expansion Plant is
executed, Seller’s proposal, accepted by Buyer (including any modifications
agreed upon in writing by both parties), shall control all dealings between the
Parties relating to the Expansion Plant. Should any issue arise that is not
covered by such documentation, the terms of this Agreement shall apply.
(b) If Buyer does not accept Seller’s offer to purchase the Expansion Plant
Output within sixty (60) days of receipt of Seller’s offer, Seller shall be
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deemed authorized to offer to sell that portion of the Expansion Plant
Output to one or more third parties at a price and on other terms and
conditions which, taken as a whole, are at least as favorable to Seller as
the price and other terms and conditions set forth in Seller’s offer to Buyer.
If Seller offers to disaggregate the Expansion Plant Output for the purpose
of selling the same to multiple independent buyers, Seller shall notify
Buyer, in writing, of the terms and conditions of such offers, and Buyer
shall again have the right of first refusal consistent with the terms set forth
above for each of the lesser amounts being offered to the third parties. If
Buyer does not purchase the Expansion Plant Output and Seller sells
such Expansion Plant Output to a third party, Seller shall promptly certify,
in writing, to Buyer that the terms and conditions of sale of such
Expansion Plant Output to such third party, taken as a whole, are at least
as favorable to Seller as the price and other terms and conditions set forth
in Seller’s offer to Buyer, and Seller shall provide the relevant final
contract and any other supporting documentation for such certification.
Upon the sale of such Expansion Plant Output in compliance with this
Agreement, Buyer shall have no further rights to be offered or to purchase
such Expansion Plant Output. Buyer’s refusal, in writing, of the Expansion
Plant Output from one Expansion Plant shall not affect Buyer’s right to
purchase the Expansion Plant Output from a subsequently developed
Expansion Plant under the terms of this Agreement. Seller shall not sell or
provide the Expansion Plant Output to any third party, unless Seller can
do so without compromising in any material way its ability to provide the
Output to Buyer hereunder. The materiality of any such impact shall be
determined by Buyer, acting in its reasonable discretion.
2.6 Refurbishment of Plant up to Initial Capacity
During the Term, Seller may propose to refurbish the Plant, alter components of
the Plant, replace components of the Plant, add additional solar modules, or
replace solar modules with more powerful modules, etc. in order to increase the
Plant estimated peak AC capability up to the lesser of the the Initial Capacity or
to the amount allowed by the Interconnection Agreement. If such refurbishment
is proposed to increase capacity no higher than the expected production volume
level per applicable year of Exhibit H, then upon consent of Buyer, not to be
unreasonably withheld, Seller may make such refurbishment. Buyer has the right,
in its sole discretion, to accept or decline to permit any such refurbishment that
may increase estimated Output above the expected production volume levels
shown for the applicable years in Exhibit H.
ARTICLE III
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METERING AND BILLING
3.1 Metering Requirements
The transfer of Energy from Seller to Buyer shall be measured by revenue quality
metering equipment at the Point of Interconnection. Such metering equipment,
including any equipment required for communicating meter data (e.g., a
dedicated data line) to Buyer or the CAISO, shall be selected, provided, installed,
owned, maintained and operated, at Seller’s sole cost and expense, by Seller or
its designee in accordance with applicable CAISO rules. Seller shall exercise
reasonable care in the maintenance and operation of any such metering
equipment, and shall test and verify the accuracy of each meter at least annually.
Seller shall inform Buyer in advance of the time and date of these tests, and shall
permit Buyer to be present at such tests and to receive the results of such tests.
Subject to Buyer paying the cost of any update or upgrade to such metering
equipment pursuant to a new requirement of the CAISO, the LDC or any other
Governmental Authority, adopted after the Commercial Operation Date, each of
Seller’s meters shall be accurate to the metering specifications then in effect for
CAISO meter accuracy. Seller shall further install and maintain all equipment and
data circuits necessary to transmit all monitored real time supervisory control and
data acquisition (“SCADA”) system data and real time data from the CAISO
meter to the CAISO and NCPA, while adhering to both CAISO and NCPAs’
communications protocols. Seller shall provide Buyer with a copy of each
certificate of compliance issued by CAISO, if any.
Buyer and NCPA shall be provided access to all monitored SCADA points to be
used at their discretion in real time monitoring. Buyer, at its sole cost and
expense, may install and maintain check meters and all associated measuring
equipment necessary to permit an accurate determination of the quantities of
Energy delivered under this Agreement, provided the referenced equipment does
not interfere with Seller’s metering equipment. Seller shall permit Buyer or NCPA
or its agent access to Seller’s Plant for the purpose of installing and maintaining
such check meters. Seller shall submit to the CAISO, or allow the CAISO to
retrieve, any meter data required by the CAISO related to the Plant output in
accordance with the CAISO’s settlement and billing protocol and meter data
tariffs. Buyer shall have reasonable access to relevant meters and associated
facilities, as well as real time access to all meter data, as is necessary for Buyer
or NCPA or its agent to perform its duties as scheduling coordinator and comply
with the requirements of the CAISO Tariff.
3.2 Billing
Seller shall read the meter at the end of each calendar month of the Term, and
provide to Buyer on or before the tenth (10th) day of the following month an
invoice based upon the meter data for Energy delivered in such calendar month
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and the corresponding attestation pursuant to Section 2.2(d). Such invoice may
be transmitted by e-mail to settlements@ncpa.com, or to any other e-mail
address designated, in writing, by Buyer, with a copy to be delivered in the mail
of the United States Postal Service or other entity to the notice address
designated below. Should either Seller or Buyer determine at a later date, but in
no event later than two (2) years after the original invoice date, that the invoice
amount was incorrect, that Party shall promptly notify, in writing, the other Party
of the error. If the amount invoiced was lower than the amount that should have
been invoiced, then Buyer shall, upon receiving verification of the error and
supporting documentation from Seller, pay any undisputed portion of the
difference within thirty (30) days of receipt of verification. If the amount invoiced
was higher than the amount that should have been invoiced, then Seller shall,
upon receiving verification of the error and supporting documentation from Buyer,
pay any undisputed portion of the difference within thirty (30) days of receipt of
verification. Any such adjusted amount owing by Seller or Buyer shall be subject
to the interest rate as designated in Section 3.3, running from the original due
date of payment.
3.3 Payment
For Energy delivered to Buyer pursuant this Agreement, Buyer or its agent shall
pay Seller by electronic transfer of funds by the later of the 20th day of the month
or the 10th business day after the invoice is received in accordance with Section
3.2. If such due date falls on a weekend or legal holiday, such due date shall be
the next day which does not fall on a weekend or legal holiday. Payments made
after the due date shall be considered late and shall bear interest on the unpaid
balance at an annual rate equal to two percent (2%) plus the average daily prime
rate as determined from the "Money Rates" section of The Wall Street Journal for
the days of the late payment period multiplied by the number of days elapsed
from and including the day after the due date, to and including the payment date.
Interest shall be computed on the basis of a 365-day year. In the event this index
is discontinued or its basis is substantially modified, the Parties shall agree on a
substitute equivalent index. Should Buyer in good faith dispute the amount of an
invoice, Buyer or its agent may withhold such disputed amounts until the dispute
is resolved by mediation, arbitration or other permissible method. Such disputed
amounts shall bear interest at the interest rate described above. Failure of Buyer
or its agent to withhold any amount shall not constitute a waiver of Buyer’s right
to challenge such amount. Both Parties shall maintain all records relating to the
other Party or this Agreement for a minimum of two (2) years after the expiration
or earlier termination of the Term, and shall permit the other Party, upon
reasonable notice, to inspect and audit such records as the requesting Party
deems reasonably necessary to protect its rights.
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ARTICLE IV
SELLER'S OBLIGATIONS
During the Term, Seller agrees to perform the following affirmative obligations:
4.1 Development, Finance, Construction and Operation of the Plant
During the Term, Seller shall:
(a) Develop, finance and construct the Plant.
(b) Provide Buyer with access to a “real time” Plant monitoring system (which,
at a minimum, shall provide “real time” information regarding the net output of the
Plant) that is anticipated to be internet protocol-based and include alarms.
(c) Seek, obtain, maintain, comply with and, as necessary, renew and modify
from time to time, all Permits, certificates or other authorizations, which are
required by any Requirements of Law or Governmental Authority as prerequisites
to engaging in the activities required of Seller by the Agreement and to meeting
Seller's obligation to operate the Plant consistently with the terms of the
Agreement.
(d) Operate, maintain, and repair the Plant in accordance with this
Agreement, all Requirements of Law applicable to Seller or the Plant, Contractual
Obligations, Permits and in accordance with Prudent Utility Practice, including
with respect to efforts to maintain availability of the Initial Capacity subject to
normal system wear-and-tear and panel degradation factor.
(e) Obtain and maintain the policies of insurance in amounts and with
coverages as set forth in Exhibit C.
(f) Operate and maintain in a manner consistent with Prudent Utility Practice
the facilities it will own and otherwise cooperate with the LDC in the physical
interconnection of the Plant to the LDC System in accordance with the
Interconnection Agreement.
(g) By October 1st of each year of the Term, provide each of Buyer and
NCPA with an annual projection of scheduled Outages for the following calendar
year. Should Seller make any changes to such projection, it will notify Buyer and
NCPA of such changes at least fourteen (14) days in advance of any newly
scheduled or rescheduled Outage. If Buyer requests a change to the scheduled
date of any Outage (including to a date set forth in a change notice from Seller),
Seller shall consider such request in good faith and notify Buyer of its decision
within seven (7) days of receipt of Buyer’s request. In no instance other than
Saturdays, Sundays and federal holidays during the period of reliability
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accounting (initially the period between June 1st and September 30th but subject
to changes selected at Buyer’s discretion for conforming to CAISO availability
assessment) will Seller schedule Outages of more than twenty-four (24) hours
during the Term. In connection with any Outage, whether a scheduled or
unscheduled Outage, Seller shall notify Buyer and NCPA, as soon as
practicable, of the percentage of Plant (based on percentage Energy loss)
expected to be out of service and how long the Outage is expected to last. If the
Outage is total and is due to failure of the Plant rather than the transmission and
distribution system beyond the Point of Interconnection, Seller shall give Buyer
and NCPA at least four (4) hours’ prior notice before re-energizing the Plant. In
addition, Seller will comply with NCPA’s scheduling protocols, as may be
changed from time to time. A copy of the current version of NCPA’s scheduling
protocols, which the Parties agree are reasonable, is attached as Exhibit D;
provided, during the Term, Buyer shall provide Seller with any revised scheduling
protocols to the extent NCPA provides the same to Buyer.
(h)
(1) Negotiate and enter into an Interconnection Agreement with the LDC to
enable Buyer to transmit Energy received at the Point of
Interconnection through the CAISO-controlled grid. Seller shall be
responsible for and pay all initial non-recurring costs and charges
arising under the Interconnection Agreement (even if not actually
incurred) prior to the Commercial Operation Date in compliance with
the Interconnection Agreement and associated rules and requirements
in place as of the Commercial Operation Date.
(2) All other out-of-pocket costs and charges related to interconnection,
other than these initial non-recurring costs and charges, will be
reimbursed by Buyer. During the Term and prior to any Expansion
Plant becoming available for commercial service, Buyer will reimburse
Seller for any out-of-pocket costs and charges under the
Interconnection Agreement paid or required to be paid by Seller to the
LDC or its successor; provided, however, Buyer shall be responsible
for such out-of-pocket costs and charges under the Interconnection
Agreement only to the extent Buyer has approved, in writing, in its sole
discretion, the Interconnection Agreement, including any amendments
to the Interconnection Agreement (which shall not include changes in
relevant tariffs) from time to time. Seller shall cooperate with Buyer to
minimize any such costs as are to be reimbursed by Buyer.
If Buyer chooses in its sole discretion to pursue Full Capacity Deliverability Status for
the Plant and its associated Output during the Term, Seller shall provide Buyer with
reasonable assistance in obtaining such upgrades if requested by Buyer; provided that
the costs associated with any optional upgrades (including reasonable expenses of
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Seller) to enable Full Capacity Deliverability Status for the Plant shall be the
responsibility of Buyer.
(i) Negotiate and enter into a Participating Generator Agreement and a Meter
Service Agreement for CAISO Metered Entities with the CAISO, the load control
area operator for the LDC System, to which the Plant is interconnected. Buyer
shall pay for or reimburse Seller for any such costs or charges associated with
these agreements, except to the extent such cost or charge is required to be paid
by Seller under this Agreement in Sections 3.1 and 4.1(h). Seller shall cooperate
with Buyer to minimize any such costs as are to be reimbursed by Buyer.
(j) Coordinate all Plant start-ups and shut-downs, in whole or in part, with
Buyer in accordance with CAISO scheduling protocols and the reasonable
protocols established by Buyer that are not inconsistent with the CAISO Tariff
and CAISO procedures.
(k) Fund and maintain the Development Assurance to assure Seller’s timely
development of the Plant, including the performance of all construction tasks,
and fund and maintain the Performance Assurance to assure Seller’s delivery of
the Output to Buyer in accordance with Article IX.
4.2 General Obligations
(a) Seller shall obtain in its own name and at its own expense any and all
pollution or environmental credits or offsets necessary to operate the Plant in
compliance with the Environmental Laws.
(b) Seller shall keep complete and accurate operating and other records and
all other data for the purposes of proper administration of the Agreement,
including such records as may be required by any Governmental Authority or
Prudent Utility Practice.
(c) Seller shall continue to (i) preserve, renew and keep in full force and effect
its organizational existence and good standing, and take all reasonable action to
maintain all applicable Permits, rights, privileges, licenses and franchises
necessary or desirable in the ordinary course of its business; and (ii) comply with
all Contractual Obligations and Requirements of Law applicable to Seller or the
Plant.
(e) Seller shall provide to Buyer such other information regarding the
permitting, engineering, construction or operations of the Plant as Buyer may
from time to time reasonably request, subject to licensing or other restrictions of
Seller or a third party with respect to confidentiality, disclosure or use; provided,
nothing herein will limit Buyer’s right to agree to confidentiality or sign a
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confidentiality agreement in connection therewith before acquiring knowledge of
such information.
(f) Seller shall enter into any agreements with the CAISO required by the
CAISO for generators delivering power into the CAISO-controlled grid. Except for
such costs and charges as are expressly identified in this Agreement as Seller’s
costs, Buyer shall reimburse Seller for all costs and charges under such
agreements. Seller shall cooperate with Buyer to minimize any such costs as are
to be reimbursed by Buyer.
(g) Seller shall provide to Buyer a copy of Seller’s ultimate corporate parent’s
most current annual audited financial statements, prepared in accordance with
GAAP, by no later than four (4) months after the end of such accounting year of
such entity. Seller shall also provide, on a quarterly basis, an unaudited financial
statement in the form of Exhibit F, prepared in accordance with GAAP
consistently applied for Seller and for Seller’s ultimate corporate parent. Such
financial statements shall be certified by an officer of Seller as fairly presenting
the financial condition of Seller subject only to what would typically be included in
year-end audit adjustments and footnotes. If, from time to time, an audited year-
end financial statement is prepared for Seller, Seller shall provide it to Buyer no
later than four (4) months after the end of Seller’s accounting year.
(h) Within fifteen (15) days of the later of (i) obtaining the authority to
construct for the Plant from the applicable Governmental Authority or (ii) Seller’s
receipt of the system impact and facility cost studies from the LDC, but in no
event later than the date set forth in Section 4.3(b)(ii), Seller shall specify the
Initial Capacity of the Plant (which shall be subject to the limits contained in the
definition of Initial Capacity). At that time, Seller shall provide to Buyer a letter
stating the Initial Capacity of the Plant in MW AC and the panel racking design
chosen to be either a fixed tilt system or a single axis tracking system.
4.3 Construction Milestones
(a) The Parties agree that time is of the essence in the performance of
Seller’s obligations under this Agreement and certain milestones (“Milestones”)
for the development, financing and construction of the Plant must be achieved in
a timely fashion or Buyer shall suffer damages which are difficult to estimate with
reasonable certainty. Seller shall provide Buyer with documentation satisfactory
to Buyer, acting in the reasonable exercise of its discretion, to support the
achievement of Milestones by the dates set forth below.
(b) The following events are all of the Milestones:
(i) By the date ninety (90) days following the Effective Date, Seller
shall obtain Site Control.
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(ii) By the date twenty (20) months following the Effective Date, Seller
shall (a) obtain all Permits necessary, in final form, to commence
construction of the Plant, and (b) enter into an Interconnection Agreement.
(iii) By the date two (2) months (or such longer period pursuant to
Section 7.6(b)) following the later of (a) the finalization of all necessary
Permits, described in Section 4.3(b)(ii) and (b) entering into an
Interconnection Agreement, Seller shall arrange for the financing of the
construction of the Plant or otherwise make funds available to commence
and complete construction.
(iv) By the date twelve (12) months following the later of (a) the
finalization of all necessary Permits, described in Section 4.3(b)(ii) and (b)
entering into an Interconnection Agreement, Seller shall have commenced
construction of the Plant.
(v) By the earlier of August 1, 2014 or the date eighteen (18) months
following the arrangement of financing or availability of funds for
construction, Seller shall achieve Commercial Operation.
(c) Starting on the Effective Date, Seller shall provide to Buyer monthly
progress reports concerning the progress towards completion of the Milestones. In
addition, within five (5) business days of the completion of each Milestone, Seller shall
provide a certification to Buyer (along with any supporting documentation),
demonstrating Seller’s achievement or satisfaction of the Milestone. Seller shall provide
to Buyer additional information concerning Seller’s progress towards, or confirmation of,
achievement of the Milestones, as Buyer may reasonably request from time to time.
(d) Upon becoming aware that it will, or is reasonably likely to, fail to achieve
a Milestone by the required date, for any reason including Force Majeure Event, Seller
shall so notify Buyer, in writing, as soon as is reasonably practical. Such notice shall
provide information regarding the cause of the delay, provide a revised date for
achievement of the Milestone(s), and otherwise describe Seller’s plan for meeting the
Milestone(s). Seller’s notice will also explain any impact such delay may or will have on
any other Milestone, and measures to be taken to mitigate such impact.
(e) In the event that (1) a Force Majeure Event causes any delay to the
achievement of the Milestones set forth in Sections 4.3(b) (ii), (iii), (iv), or (v), or (2) a
failure to achieve all necessary Permits or complete interconnection (through no fault of
Seller) causes delay to achievement of the Milestones set forth in Sections 4.3(b)(ii),
(iii), (iv), or (v), any such Milestone’s deadline may be extended, together with any
Force Majeure Event extensions for other Milestones, for a period not to exceed six (6)
months. The extension of the deadline for any Milestone shall extend the deadline for all
subsequent Milestones, provided that in no event shall the combined extensions for
Force Majeure Events or for a failure to achieve all necessary Permits or complete
interconnection (through no fault of Seller) for any or all of the Milestones exceed six (6)
months.
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(f) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(i) for any reason, Buyer may terminate this Agreement, without liability of either
Party to the other, by giving notice to Seller, in writing, of such termination at any time
prior to Seller curing its failure. Such option to terminate shall be Buyer’s sole remedy
for any failure to meet the Milestone set forth in Section 4.3(b)(i).
(g) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(ii) (as may be extended per Section 4.3(e)) for any reason, Buyer may terminate
this Agreement, without liability of either Party to the other, within ten (10) business
days after the Milestone date by giving notice of termination, in writing, to Seller. If
Seller meets the Milestone set forth in Section 4.3(b)(ii) prior to Buyer giving written
notice of termination, this Agreement shall remain in full force and effect. If Buyer does
not terminate this Agreement within ten (10) business days after the Milestone date,
Seller shall continue to pursue satisfaction of the relevant Milestone and Buyer must
give Seller sixty (60) days’ prior written notice of termination of this Agreement, during
which period, if Seller cures such defect and achieves the relevant Milestone, the notice
of termination shall be deemed void, and this Agreement shall remain in full force and
effect. The option to terminate shall be Buyer’s sole remedy for any failure by Seller to
meet the Milestone set forth in Section 4.3(b)(ii).
(h) Should Seller fail to satisfy the Milestone set forth in Section 4.3(b)(iv) for
more than twelve (12) months, Buyer may terminate this Agreement upon written notice
to Seller of such termination. Upon such termination, Seller will pay to Buyer, within
thirty (30) days of receipt of the notice of termination, an amount equal to the LD
Amount minus any Monthly LD Amounts, if any, previously paid to Buyer as liquidated
damages. Such Seller’s escrow option, Buyer’s option to terminate, and liquidated
damages shall be Buyer’s sole remedy for any failure of Seller to meet the Milestones
set forth in Section 4.3(b) (iv).
(i) Seller covenants that it will diligently pursue to completion all Milestones
as set forth Section 4.3(b).
(j) In the event that any of the approvals described in Section 4.3(b)(ii) are
not obtained by the date specified in Section 4.3(b)(ii) for satisfaction of the relevant
Milestone or are obtained on a basis not reasonably satisfactory to Seller, Seller may
terminate this Agreement without liability of either Party to the other by giving notice to
Buyer, in writing, of such termination; provided that such notice must be given not later
than fourteen (14) days following the earlier of (a) the date on which a given approval, in
writing, not satisfactory to Seller is received, or (b) the date specified in Section 4.3(b)(ii)
for satisfaction of the relevant Milestone as may be extended per Section 4.3(e); further
provided, that such notice and such termination shall not be effective if Buyer, by written
notice to Seller within ninety (90) days following such notice from Seller, agrees (i) to
pay Seller with the first invoice following the Commercial Operation Date the reasonable
all-inclusive costs (including reasonable broker fees, if any) to purchase all such offsets
sufficient to operate the Plant at Expected Annual Net Energy Production for the Term,
and (ii) to adjust equitably the price payable under Section 2.3 of this Agreement and
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within ninety (90) days thereafter agrees with Seller, in writing, (each in their sole
discretion) to an amendment of this Agreement revising such price. Failure to provide
notice of termination by the date specified above shall constitute a waiver of the right to
terminate this Agreement as provided in this Section 4.3(j). In the event that Seller
exercises such termination right, Buyer shall have a right of first refusal to purchase the
Output of any electricity generating facility owned or controlled by Seller or its affiliate(s)
located at the Site. Such right of first refusal shall conform to the provisions of Section
2.5. The provisions of this Section 4.3(j) shall survive termination of this Agreement
under this Section 4.3(j) for a period of five (5) years from such termination.
(k) Seller may terminate this Agreement without liability of either Party to the
other by giving notice of termination to Buyer, in writing, in the event that any of the
commitments and contractual rights to receive all equity, debt, tax equity and other
financing described in Section 4.3(b)(iii) are not obtained by the date specified in
Section 4.3(b)(iii) for satisfaction of the relevant Milestone or cannot be obtained in such
form and from such parties as is satisfactory to Seller and as Seller determines
necessary to develop, construct, operate and maintain the Plant over its useful life, or
the conditions precedent to the effectiveness of any and all such financings have not
been satisfied or waived. In the event that Seller exercises such termination right, and
Seller or its affiliate(s) subsequently enters into or seeks to enter into any other
agreement to sell energy from a generating facility at the Site, then Buyer shall have a
right of first refusal to purchase the Output of any electricity generating facility owned or
controlled by Seller or its affiliate(s) located at the Site. Such right of first refusal shall
conform to the provisions of Section 2.5. The provisions of this Section 4.3(j) shall
survive termination of this Agreement under this Section 4.3(j) for a period of five (5)
years from such termination.
4.4 Obligation to Schedule and Deliver
(a) Scheduling. During the Term, Buyer shall provide (or cause to be
provided), at its own expense, Scheduling Coordinator services for the Plant. Seller
shall sign and deliver documentation, if any, that are required to:
(i) designate and otherwise verify that Buyer or its designee is
Scheduling Coordinator for the Plant; and
(ii) allow Buyer to perform its various Scheduling Coordinator duties,
including, but not limited to, scheduling Plant output in accordance
with CAISO’s Participating Intermittent Resource Program (“PIRP”)
or successor programs.
Buyer reserves the right to substitute NCPA or any other entity as Scheduling
Coordinator for the Plant upon reasonable advance notice to Seller.
(b) Participating Intermittent Resource Program
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(i) The Parties acknowledge and agree that, following the execution
and delivery of all applicable CAISO documents referred to in
Section 4.4(a) and this Section 4.4(b), and following the certification
by CAISO (if necessary), the Plant will participate in CAISO’s
PIRP, or its successor program. Seller shall sign and deliver any
documentation necessary to allow the Plant to participate in the
PIRP or successor program during the Term.
(ii) If the PIRP is modified or altered in a manner that would result in
the imposition of materially different costs or obligations on Seller or
Buyer, compared to costs or obligations imposed as of the
Effective Date, the Parties shall meet and negotiate in good faith
equitable changes to the Agreement. In the event the Parties are
unable to mutually agree upon a mutually acceptable solution,
either Party may, upon written notice to the other, request that the
matter be referred to senior executive management with express
authority to resolve the issue. Such representatives shall meet at
least once to negotiate in good faith a mutual resolution within ten
(10) business days of the delivery of such written notice. If such
representatives cannot reach a mutual resolution, then the issue
shall be submitted to non-binding mediation within thirty (30) days
of a written request of a Party served on the other Party. The
Parties acknowledge that the implementation of the CAISO’s
current draft PIRP proposals, as of the Effective Date, for a
successor program to the PIRP shall not constitute a modification
or alteration to the PIRP that imposes materially different costs or
obligations on Seller or Buyer for the purposes of this Section.
(c) Buyer Curtailment Requirements.
(i) General. Seller shall reduce delivery amounts as directed by the
CAISO, Buyer, LDC, or any successor thereof as the Participating
TO during any Dispatch Down Period (as defined in the CAISO
Tariff).
(ii) Order and Limit. Buyer may require Seller to curtail deliveries of
Energy from the Plant to the Delivery Point by delivering a Dispatch
Notice to Seller, provided that (A) such curtailments shall be limited
to a quantity of not more than 2,600 MWh cumulatively in each
calendar year; and (B) the Dispatch Notice shall be consistent with
the operational characteristics set forth in Exhibit D (“Economic
Dispatch Down”). Buyer shall pay Seller, on the date payment
would otherwise be due in respect of the month in which any such
Economic Dispatch Down occurred, an amount equal to the product
of (1) the amount of Energy that Seller could reasonably have
delivered to Buyer but for such Economic Dispatch Down and (2)
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the Price. Seller shall reduce the Project’s Delivered Energy by the
amount and for the period set forth in the Dispatch Notice.
(iii) Failure to Comply. If Seller fails to comply with a Dispatch Notice
that meets the requirements of Economic Dispatch Down, then, for
the amount of Output that the Plant delivered in contradiction to the
Dispatch Notice, Seller shall pay Buyer the greater of: (A) 200% of
the Price for such hours plus any penalties or other charges
actually incurred resulting from Seller’s failure to comply with the
Dispatch Notice; and (B) the absolute value of the CAISO’s Real-
Time Market (as defined in the CAISO Tariff) price for the
applicable PNode for such hours plus any penalties or other
charges actually incurred resulting from Seller’s failure to comply
with the Dispatch Notice.
(d) Forecast Fee. The Parties acknowledge that PIRP or its successor
program, by means of a contract with a forecasting service (the “Forecasting
Service”) develops high quality forecasts for Day-Ahead and/or Hour Ahead
scheduling for CAISO operations. Buyer, or Scheduling Coordinator, shall bear
forecast fees imposed by CAISO for use of the Forecasting Service, up to
$0.10/MWh. If fees exceed this amount, the Parties will negotiate in good faith
using the process in Section 4.4(b)(ii).
With respect to the Energy to be sold under this Agreement:
(i) If requested, Seller agrees to provide the Forecasting Service with
sufficient data to support a reasonably accurate and unbiased
forecast; and
(ii) Buyer, as part of its Scheduling Coordinator services, will use the
forecasts developed by the Forecasting Service, which are most
applicable to the Facility as the Facility’s “Energy Schedule” for the
CAISO Day-Ahead and/or Hour-Ahead markets.
ARTICLE V
BUYER’S OBLIGATIONS
5.1 Delivery and Transmission
Except for Seller’s obligations pursuant to Sections 3.1 and 4.1(h), Buyer shall be
solely responsible for paying costs and charges associated with the receipt of
Energy, under this Agreement, at the Point of Interconnection and for the
transmission and delivery of Energy from the Point of Interconnection to any
other point downstream of the Point of Interconnection (including, without
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limitation, transmission costs and charges, competition transition charges,
applicable control area service charges, transmission congestion charges,
inadvertent energy flows, any other CAISO charges related to the transmission of
such Energy by the CAISO and any charge assessed or collected in the future
pursuant to any utility tariff or rate schedule, however defined, for transmission or
transmission-related service rendered by or for any transmission-owning or
operating entity). Buyer shall be responsible for the scheduling coordinator
function. The NCPA, acting on behalf of Buyer, shall be scheduling coordinator
for the transmission of Energy from the Plant in accordance with applicable
CAISO rules. Buyer’s duties as scheduling coordinator shall be limited to those
duties as are specifically required of scheduling coordinators in the CAISO Tariff
and the CAISO protocols. Commercial arrangements for such transmission and
delivery services will be coordinated and settled by the Scheduling Coordinator
directly with the CAISO or other third parties. At the option of Buyer, the Plant
may be included within NCPA’s metered sub-system in connection with the
scheduling of power over the CAISO grid and related functions; provided that
such inclusion shall have no adverse effect on the Plant’s operations or Seller (or
any such effect shall be fully mitigated by Buyer). Seller will do all things
reasonably needed to allow Buyer to comply with any obligations, and minimize
any potential liability, under the CAISO Tariff; provided, that if such actions
require any actions beyond the giving of notice provided by Buyer, then Buyer
shall reimburse Seller for all reasonably incurred out-of-pocket costs and charges
of such actions. If and to the extent that Seller fails to comply with the notice
provision in Section 4.1(g) concerning Outages or with its obligations as outlined
in the previous sentence, Seller shall be wholly responsible for all imbalances,
deviations, or any other CAISO charges or penalties associated with such
Outage or CAISO Tariff obligation. Buyer may replace NCPA as Scheduling
Coordinator for the Plant. If NCPA ceases to be Scheduling Coordinator for the
Plant and Buyer is unable, upon receipt of fourteen (14) days’ notice from Seller,
to appoint jointly a replacement Scheduling Coordinator, Seller shall have the
right to appoint a replacement Scheduling Coordinator on Buyer’s behalf, and
Buyer shall enter into all reasonable and appropriate agreements with such
replacement Scheduling Coordinator at its own cost.
5.2 Taxes
Buyer shall pay and be fully responsible for any sales, use, gross receipts, utility
or other taxes, assessments or fees, if any, incurred or imposed on the sale or
transfer of Output from Seller to Buyer under this Agreement. Buyer shall not be
responsible for any taxes measured on the net income of Seller or ad valorem
taxes paid by Seller that are associated with Seller’s rights and privileges relating
to the Site.
5.3 Notification of Transmission Outages
110911 gk 0073627 25
Buyer will exercise reasonable efforts to provide Seller with as much advance
notice as practicable of any Outage on the LDC System or other transmission or
delivery facilities which may adversely affect the delivery of Energy to Buyer.
ARTICLE VI
FORCE MAJEURE
6.1 Force Majeure Events
It is understood that at times unavoidable delays or interruptions in construction,
delivery or performance may result from Force Majeure Events. The performance
of each Party under this Agreement may be subject to interruptions or reductions
due to a Force Majeure Event. Both Parties shall in good faith use such effort as
is reasonable under all the circumstances known to that Party affected by the
Force Majeure Event at the time to remove or remedy the cause(s) and mitigate
the inability to perform. However, the obligation to use such reasonable efforts
shall not be interpreted to require resolution of labor disputes by acceding to
demands of the opposition when such course is inadvisable in the discretion of
the Party having such difficulty.
6.2 Remedial Action
Subject to the limitation on extensions of Milestones set forth in Section 4.3(e), a
Party shall not be liable to the other Party if the Party is prevented from
performing its obligations hereunder due to a Force Majeure Event. The Party
rendered unable to fulfill an obligation by reason of a Force Majeure Event shall
take all action necessary to remove such inability with all due speed and
diligence. The non-performing Party shall be prompt and diligent in attempting to
remove the cause of its failure to perform, and nothing herein shall be construed
as permitting that Party to continue to fail to perform after said cause has been
removed. Notwithstanding the foregoing, the existence of a Force Majeure Event
shall not excuse any Party from its obligations to make payment of amounts due
hereunder.
6.3 Notice
In the event of any delay or nonperformance resulting from a Force Majeure
Event, the Party suffering the Force Majeure Event shall, as soon as practicable
under the circumstances, notify the other Party, in writing, of the nature, cause,
date of commencement thereof and the anticipated extent of any delay or
interruption in performance.
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6.4 Termination Due To Force Majeure Event
Subject to Section 4.3(e), if a Party is prevented from performing its material
obligations under this Agreement due to a Force Majeure Event for a period of
twelve (12) consecutive months or longer, the unaffected Party may terminate
this Agreement, without liability of either Party to the other, upon thirty (30) days’
prior written notice at any time during the Force Majeure Event.
ARTICLE VII
DEFAULT/REMEDIES/TERMINATION
7.1 Events of Default by Buyer
(1) The following shall each constitute an “Event of Default” by Buyer, if Buyer
fails to cure within the period of time set forth in clause (2) below:
(a) Buyer breaches any material obligation (other than one covered by
Section 7.1(b) or (c) of this Agreement) and fails to cure such breach within thirty
(30) days after written notification of breach by Seller or if the breach cannot be
cured within thirty (30) days such longer period as may be necessary to cure
such breach as long as Buyer is exercising diligent efforts to cure such default.
(b) Buyer fails to make any payment due under this Agreement within thirty
(30) days after written notice that such payment is due.
(c) The initiation of an involuntary proceeding against Buyer under the
bankruptcy or insolvency laws, which involuntary proceeding remains unresolved
for sixty (60) consecutive days, or in the event of the initiation by Buyer of a
voluntary proceeding under the bankruptcy or insolvency laws.
(2) Time for Cure. Nothing described in Section 7.1(1)(a) above shall
constitute an Event of Default if Buyer cures the event, failure or circumstance
within (30) days after written notification by Seller or if the breach cannot be
cured within thirty (30) days, such longer period as may be necessary to cure as
long as Buyer is exercising diligent efforts to cure.
7.2 Events of Default by Seller
(1) The following shall each constitute an “Event of Default” by the Seller if
Seller does not cure within the time set forth in clause (2), below:
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(a) Seller breaches any material obligation (other than ones covered by
Sections 7.2(b), (c), (d), (e) or (f) of this Agreement or for which a remedy is
specified) and fails to cure such breach within thirty (30) days after written
notification of breach by Buyer or if the breach cannot be cured with thirty (30)
days such longer period as may be necessary to cure such breach as long as
Seller is exercising diligent efforts to cure such default.
(b) Seller fails to make any payment due under this Agreement within thirty
(30) days after written notice that such payment is due.
(c) The initiation of an involuntary proceeding against Seller under the
bankruptcy or insolvency laws, which involuntary proceeding remains unresolved
for sixty (60) consecutive days, or in the event of the initiation by Seller of a
voluntary proceeding under the bankruptcy or insolvency laws.
(d) Seller sells or transfers the Output (or any individual component thereof)
or Expansion Plant Output (or any individual component thereof) or the right to
the Output (or any individual component thereof) or Expansion Plant Output (or
any individual component thereof), to the extent that such Expansion Plant
Output is purchased by Buyer, to any Person other than Buyer.
(e) Seller fails to comply with the terms of Buyer’s right of first refusal as
described in Sections 2.5 and 4.3 of this Agreement.
(f) Subject to Section 7.4(c), Seller fails, for any reason other than an
unauthorized act or omission by Buyer, to achieve the Commercial Operation
Date by the applicable Milestone deadline as set forth in Section 4.3(b)(v), as
such deadline may be extended in accordance with Section 4.3(e).
(2) Time for Cure. Nothing described in Section 7.2(1)(a) above shall
constitute an Event of Default if Seller cures the event, failure or circumstance
within (30) days after written notification by Buyer or if the breach cannot be
cured within thirty (30) days such longer period as may be necessary to cure as
long as Seller is exercising diligent efforts to cure.
7.3 Termination for Default
(a) In the event the defaulting Party fails to cure the Event of Default within
the period for curative action under Sections 7.1 or 7.2, as applicable, the non-
defaulting Party may terminate the Agreement by notifying the defaulting Party in
writing of (i) the decision to terminate and (ii) the effective date of the termination.
(b) Upon termination of the Agreement by Buyer pursuant to Section 7.3(a)
due to an Event of Default by Seller, (i) Buyer shall have no future or further
obligation to purchase the Output of the Plant or to make any payment
whatsoever under this Agreement, except for payments for obligations arising or
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accruing prior to the effective date of termination, and (ii) Seller shall, if Buyer
has paid for interconnection capital costs arising under the Interconnection
Agreement pursuant to Section 4.1(h), either (A) reimburse Buyer pro rata for
any such costs paid for by Buyer (assuming twenty-five (25) years of Plant
operations) or (B) transfer to Buyer title to any such interconnection assets paid
for by Buyer. To the extent Buyer has paid CAISO or PG&E for Full Capacity
Deliverability Status related interconnection costs and those costs are
reimbursable by CAISO or PG&E, the reimbursements from CAISO or PG&E
must be forwarded to Buyer. Upon termination of the Agreement by Seller
pursuant to Section 7.3(a) due to an Event of Default by Buyer, Seller shall not
have any additional obligation to deliver the Output of the Plant to Buyer or to
satisfy any other obligation of this Agreement, except for payments or other
obligations arising or accruing prior to the effective date of termination. After the
effective date of termination, the Agreement shall not be construed to provide
any residual value to either Party or any successor or any other Person, for rights
to, use of or benefits from the Plant to any Person; provided, however, Buyer
shall have a right of first refusal to purchase the Output of any electricity
generating facility owned or controlled by Seller or its affiliate(s) located at the
Site. Such right of first refusal shall conform to the provisions of Section 2.5. The
provisions of Section 7.3 shall survive termination of this Agreement under
Section 7.3 for a period of five (5) years from such termination.
7.4 Damages
(a) For all claims, causes of action and damages the Parties shall be entitled
to the recovery of actual damages allowed by law unless otherwise limited by the
Agreement. Neither the enumeration of Events of Default in Sections 7.1 and 7.2,
nor the termination of this Agreement by a non-defaulting Party pursuant to
Section 7.3(a), shall limit the right of a non-defaulting Party to rights and
remedies available at law, including, without limitation, claims for breach of
contract or failure to perform by the other Party and for direct damages incurred
by the non-defaulting Party as a result of the termination of this Agreement.
(b) Except as otherwise specifically and expressly provided in the Agreement,
neither Party shall be liable to the other Party under this Agreement for any
indirect, special or consequential damages, including, without limitation, loss of
use, loss of revenues, loss of profit, interest charges, cost of capital or claims of
its customers or members to which service is made. Except as set forth in Article
IX and except to the extent Seller violates its undertaking not to provide or sell
rights to part or all of the Output to a party other than Buyer, Seller shall not be
liable to Buyer for failure to provide any specific amount of Output hereunder.
(c) In the event that Seller fails to meet the Commercial Operation Date by
the applicable Milestone deadline, Seller shall liable to Buyer for liquidated
damages as set forth in Article IX.
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(d) The Parties agree that the liquidated damages set forth in Sections
[4.3(h)] and Article IX are reasonable and represent a fair and genuine estimate
of the damages that Buyer will suffer upon the failure of Seller to achieve
Commercial Operation by the agreed upon date(s). The Parties acknowledge
that it would be impracticable or extremely difficult to fix Buyer’s actual damages,
and therefore they have deemed the liquidated damages set forth above to be
the amount of damage sustained by Buyer upon the occurrence of such a failure.
The Parties further agree that payment of such amount shall be as and for
liquidated damages and not as a penalty, and is therefore not subject to
avoidance under California Civil Code section 1671.
7.5 Indemnification
Each Party agrees to defend, indemnify, and hold the other Party, and its
respective elected and appointed officials, officers, directors, employees and
agents, harmless from and against all claims, demands, losses, liabilities, and
expenses (including reasonable attorneys' fees) (collectively, "Damages") for
personal injury or death to persons and damage to each other's physical property
or facilities or the property of any other Person to the extent arising out of,
resulting from, or caused by the negligent or intentional and wrongful acts, errors,
or omissions of the indemnifying Party. This indemnification obligation shall apply
notwithstanding any negligent or intentional acts, errors or omissions of the
indemnified Party, but the indemnifying Party's liability to pay Damages to the
indemnified Party shall be reduced in proportion to the percentage by which the
indemnified Party’s negligent or intentional acts, errors or omissions caused the
Damages. Neither Party shall be indemnified for its Damages resulting from its
sole negligence or willful misconduct. This indemnification obligation shall be
subject to the limitation on damages set forth in Section 7.4(b) hereof. These
indemnity provisions shall not be construed to relieve any insurer of its obligation
to pay claims consistent with the provisions of a valid insurance policy.
7.6 Buyer’s Right to Operate
(a) If Seller (i) fails to maintain Seller’s Two Year Minimum Production Threshold
or (ii) fails to generate Energy for sixty (60) consecutive days, then Buyer or
its designee may, but shall not be obligated to, assume operational control of
the Plant from Seller; provided that Buyer shall not be permitted to take
control so long as Seller or any of Seller’s Lenders are using commercially
reasonable efforts to remedy the failures described in (i) or (ii) above. Buyer,
its officers, employees, agents, contractors and designees shall have the
unrestricted right to enter the Plant to the extent necessary to operate the
Plant. Upon the exercise of this right, Buyer or its designee shall at all times
operate the Plant, using Prudent Utility Practice, and shall comply, to the
extent commercially practicable, with the terms of this Agreement.
Notwithstanding the foregoing, Seller shall not be excused from any obligation
or remedy available to Buyer as a result of Buyer’s [operation of, or] election
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not to operate, the Plant. Buyer shall pay Seller the applicable rate for Output
provided hereunder, less any costs incurred by Buyer to operate the Plant.
Buyer shall indemnify and hold Seller harmless from any liability to third
parties arising out of Buyer’s failure to operate the Plant using Prudent Utility
Practice. Upon Buyer’s satisfaction that Seller has the ability to operate the
Plant in accordance with this Agreement, Seller shall resume operational
control.
(b) Should Seller’s Lender(s) refuse to finance the Plant, or materially
condition such financing, solely as a result of this Section 7.6, and Seller
gives Buyer reasonable prior written notice of such refusal to finance, Buyer
shall have the following options: (1) renegotiate this Section 7.6 with Seller
and Lender(s) in a manner mutually acceptable; (2) arrange for financing for
the Plant under materially equivalent terms and conditions as the Lender(s)
were prepared to provide but for this Section 7.6; (3) delete this Section 7.6 in
its entirety (which deletion will not require Seller’s additional consent); or (4)
terminate this Agreement without liability of one Party to the other. If Buyer
fails to elect and complete one of these options within sixty (60) days of
written notice from Seller, Seller shall have the right to terminate this
Agreement without liability of one party to the other. To the extent that Seller
fails to accomplish financing pursuant to the milestone set forth at Section
4.3(b)(iii), and such delays are attributable to the discussion and negotiation
with Lender(s) of this Section 7.6, then Seller shall be entitled to such
reasonable time to arrange for the financing of the Plant upon final resolution
of matters related to this Section 7.6.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Seller’s Representations and Warranties
Seller represents and warrants to Buyer that as of the Effective Date:
(i) Seller is duly organized and validly existing as a limited liability company
under the laws of Delaware, and has the lawful power to engage in the
business it presently conducts and contemplates conducting in this
Agreement, and Seller is duly qualified in California and each jurisdiction
wherein the nature of the business transacted by it makes such
qualification necessary;
(ii) Seller has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder; all such actions have
been duly authorized by all necessary proceedings on its part. As of the
Effective Date, (a) the Plant shall on the Commercial Operation Date be a
"qualifying small power production facility" as that term is defined in
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Section 3(17)(C) of the Federal Power Act, and will possess all of the
exemptions from regulation provided in 18 CFR Sections 292.601(c) and
292.602; and (b) no approval (except with respect to "qualifying small
power production facility" status) with respect to this Agreement is
required from FERC. In the event that the Plant is not a "qualifying small
power production facility" on the Commercial Operation Date or any date
thereafter, Seller shall make appropriate filings under the Federal Power
Act within sixty (60) days so as to comply with applicable law, subject at all
times to the provisions of Section 10.15 of this Agreement;
(iii) The execution, delivery and performance of this Agreement by Seller will
not conflict with its governing documents, any applicable laws, or any
covenant, agreement, understanding, decree or order to which Seller is a
party or by which it is bound or affected;
(iv) This Agreement has been duly and validly executed and delivered by
Seller and, as of the Effective Date, constitutes a legal, valid and binding
obligation of Seller, enforceable in accordance with its terms against
Seller, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally or by general principles of equity;
and
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Seller, threatened, in writing, against Seller, at law or in
equity, before any Governmental Authority, which individually or in the
aggregate are reasonably likely to have a materially adverse effect on the
business, properties or assets or the condition, financial or otherwise, of
Seller, or to result in any impairment of Seller’s ability to perform its
obligations under this Agreement. Buyer hereby acknowledges the
antidumping duty case (ITA case number A-570-979 & ITC case number
731-TA-1190) and countervailing duty case (ITA case number C-570-979
& ITC case number 701-TA-481) filed at the International Trade
Commission and Department of Commerce alleging unfair trade practices
with regards to Chinese origin solar cells and solar modules, including any
other regulatory action that imposes import duty, taxes or fees in addition
to the current levels for the importation of Chinese origin solar cells or
solar modules as defined by the International Trade Administration or U.S.
Customs and Border Protection.
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8.2 Buyer Representations and Warranties
Buyer represents and warrants to Seller that as of the Effective Date:
(i) Buyer is a municipal corporation, duly organized and validly existing, and
has the lawful power to engage in the business it presently conducts and
contemplates conducting in this Agreement;
(ii) Buyer has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder and all such actions
have been duly authorized by all necessary proceedings on its part;
(iii) The execution, delivery and performance of this Agreement by Buyer will
not conflict with its governing documents, any applicable laws or any
covenant, agreement, understanding, decree or order to which Buyer is a
party or by which it is bound or affected;
(iv) This Agreement has been duly and validly executed and delivered by
Buyer and, as of the Effective Date, constitutes a legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms against
Buyer, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally or by general principles of equity;
and
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Buyer, threatened, in writing, against Buyer, at law or in
equity, before any Governmental Authority, which individually or in the
aggregate are reasonably likely to have a materially adverse effect on the
business, properties or assets or the condition, financial or otherwise, of
Buyer, or to result in any impairment of Buyer’s ability to perform its
obligations under this Agreement.
ARTICLE IX
DEVELOPMENT AND PERFORMANCE ASSURANCE
9.1 Forms of Assurance.
Seller shall maintain the Development Assurance and the Performance Assurance as
follows:
(a) The Development Assurance shall be deposited by electronic transfer to
Buyer’s designated account with Wells Fargo NT & SA or posted in the
form of a letter or credit or escrow account (in substantially the form of
agreements set forth on Exhibit G-1 and G-2 hereto) with Wells Fargo NT
& SA or such other banking institution reasonably acceptable to Buyer, as
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security for the timely development of the Plant. The transfer or posting
shall occur within thirty (30) days after the Effective Date, and the
Development Assurance will be maintained to and including the
Commercial Operation Date.
110911 gk 0073627 34
(b) The Performance Assurance shall be deposited by electronic transfer to
Buyer’s designated account with Wells Fargo NT & SA or otherwise
posted in the form of a letter or credit or escrow account (in substantially
the form of agreements set forth on Exhibit G-1 and G-2 hereto) with Wells
Fargo NT & SA or other banking institution reasonably acceptable to
Buyer, as security for the performance of the Seller to meet its obligations
during the period commencing one day after the Commercial Operation
Date and ending at the expiration of the Term. The Performance
Assurance shall be deposited or posted within thirty (30) days of the
Commercial Operation Date and shall be maintained until the end of the
Term.
9.2 Managing Assurances.
Within ten (10) days of the occurrence of the Commercial Operation Date Buyer
shall notify the banking institution that the Development Assurance (which shall
be the full amount of the Development Assurance, plus interest under the
applicable account, less any liquidated damages incurred under this Agreement)
shall be returned to Seller. Buyer may either make, or request the applicable
banking institution to make, withdrawals from the Development Assurance and
Performance Assurances in accordance with this Agreement and, if applicable,
the terms of the letter of credit or escrow agreement. Seller shall provide
additional funds (or availability thereof) in order to maintain such account at
$400,000.00 at all times during the existence of the Development Assurance and
Performance Assurance, as applicable. Such additional deposits or availability
shall occur within fifteen (15) days of any withdrawals from such accounts
causing the account balance to become less than $400,000.00. Within thirty (30)
days after the expiration or earlier termination of this Agreement, Buyer will return
to Seller any undisputed amount of the Performance Assurance.
9.3 Development Liquidated Damages.
110911 gk 0073627 35
In the event that Seller fails to meet the Commercial Operation Date by the
applicable Milestone deadline, as set forth in Section 4.3(b)(v), as such deadline
may be extended in accordance with Section 4.3(e), Seller shall be liable for
liquidated damages in the amount, per month, equal to the Monthly LD Amount
for each full month (with parts of a month pro rated) that Seller is late in satisfying
the Milestone. So long as Seller is paying such liquidated damages on a monthly
basis, Buyer shall not be permitted to terminate this Agreement for up to twelve
(12) months. If after twelve (12) months following the relevant Milestone deadline
(as such Milestone may have been extended per Section 4.3(e)) Seller has failed
to achieve Commercial Operation, or if for any reason Seller fails to pay, or
discontinues paying, the monthly liquidated damages provided for above, Buyer
may terminate this Agreement by written notice to Seller. This twelve (12) month
period shall not be further extended as a result of a Force Majeure Event. Upon
such termination, Seller shall pay Buyer, within thirty (30) days of the termination
notice, a lump sum equal to the LD Amount minus any Monthly LD Amounts, if
any, previously paid to Buyer. No other damages or remedy shall be available to
Buyer on the basis of such failure to meet the Milestone set forth in Section
4.3(b)(v) or termination of this Agreement based on failure to achieve
Commercial Operation within twelve (12) months of that Milestone deadline.
9.4 Performance Liquidated Damages.
Seller shall pay or credit Buyer for any shortfalls of Output volume below the Two
Year Minimum Production Threshold in accordance with this Section 9.4. If
Seller fails to provide Output volume equaling or exceeding the Two Year
Minimum Production Threshold, then Seller may cure its failure to meet its Two
Year Minimum Production Threshold during any Calculation Period by paying or
crediting Buyer an amount equal to (i) the product of the shortfall amount of
Output below the Two Year Minimum Production Threshold per exhibit H in
Megawatt-hours and (ii) the Price in this Agreement multiplied by a factor of 1.2.
Except as otherwise expressly stated in Sections 6.4 and 7.6, the foregoing shall
be Buyer’s sole remedy for any shortfall of or failure to produce the Output or
failure to maintain any specified Two Year Minimum Production Threshold.]
ARTICLE X
MISCELLANEOUS
10.1 Assignment
110911 gk 0073627 36
The rights and obligations of this Agreement may not be assigned by either Party
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, Seller may use
subcontractors without Buyer’s consent to comply with the terms of this
Agreement, provided that notwithstanding the use of those subcontractors, Seller
shall remain responsible for all of its obligations under this Agreement. Buyer
may furthermore use any agent it so designates for scheduling and billing
purposes, so long as Buyer remains responsible for all of its obligations under
this Agreement. Any purported assignment of this Agreement in the absence of
the required consent, except as provided in 10.2, shall be void.
10.2 Financing
Notwithstanding Section 10.1, Seller may, without the consent of Buyer,
collaterally assign its rights under this Agreement to Lender(s) as collateral
security in connection with any financing of the purchase or operation of the
Plant, provided that such Lender(s) or its designee agree(s), in writing, that upon
assuming any of Seller’s prospective rights under this Agreement, such
Lender(s) also shall be bound by all of Seller’s prospective obligations under this
Agreement. Notwithstanding any such assignment, Seller’s obligations under this
Agreement shall continue in their entirety in full force and effect and Seller shall
remain fully liable for all of its obligations under or relating to this Agreement.
Each such collateral assignment and any purchaser or transferee shall be
subject to Buyer’s rights and defenses hereunder and under applicable law.
Seller shall provide prior written notice to Buyer at least ten (10) business days
prior to any such collateral assignment.
In order to facilitate the obtaining of financing of the Plant, Buyer shall execute,
upon request, a commercially reasonable consent to assignment, with respect to
a collateral assignment hereof to Lenders in connection with the documentation
of the financing or refinancing for the Plant. Any assignment in violation of this
Agreement shall be void, ab initio. Buyer shall consider in good faith any
amendments to this Agreement proposed by Seller which relate to financing of
the Plant or other amendments requested by Seller in order to receive or
maintain financing from Lenders.
10.3 Notices
Any notice, demand, request, or communication required or authorized by this
Agreement shall be delivered either by hand, facsimile, overnight courier or
mailed by certified mail, return receipt requested with postage prepaid, to:
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City of Palo Alto
250 Hamilton Avenue, 8th Floor
Palo Alto, CA 94301
Attention: Senior Assistant City Attorney / Utilities
Telecopier: (650) 329-2646
on behalf of Buyer;
with a copy to:
City of Palo Alto
250 Hamilton Avenue, 3rd Floor
Palo Alto, CA 94301
Attention: Director of Utilities
Telecopier: (650) 329-2946
and to:
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678-6411
Attention: Power Contracts Administrator
Telecopier: (916) 783-7693
and to:
Brannon Solar, LLC
100 Century Center Court, Suite 340
San Jose, CA 95112
Attention: Randy Wu, Director of Project Development
Email: randy.wu@trinasolar.com
Telephone: (408) 459-6699
with a copy to:
Brannon Solar, LLC
100 Century Center Court, Suite 340
110911 gk 0073627 38
San Jose, CA 95112
Attention: Victor Contract, US Legal Director
Email: victor.contract@trinasolar.com
Telephone: (408) 459-6703
on behalf of Seller.
The designation and titles of the person to be notified or the address of
such person may be changed at any time by written notice delivered in the
manner set forth in this Section 10.3. Any such notice, demand, request, or
communication shall be deemed received (i) if delivered by hand by a Party or
sent by facsimile or email or (ii) upon receipt by the receiving Party if sent by
courier or U.S. mail.
10.4 Captions
All titles, subject headings, section titles and similar items are provided for the
purpose of reference and convenience and are not intended to be inclusive,
definitive or to affect the meaning of the contents or scope of the Agreement.
10.5 No Third Party Beneficiary
No provision of the Agreement is intended to, nor shall it in any way, inure to the
benefit of any customer, property owner or any other third party, so as to
constitute any such Person a third party beneficiary under the Agreement, or of
any one or more of the terms hereof, or otherwise give rise to any cause of action
in any Person not a Party hereto.
10.6 No Dedication
No undertaking by one Party to the other under any provision of the Agreement
shall constitute the dedication of that Party's system or any portion thereof to the
other Party or to the public or affect Seller as an independent entity and not a
public utility.
10.7 Entire Agreement; Integration
This Agreement, together with all exhibits and Appendices attached hereto,
constitutes the entire agreement between the Parties and supersedes any and all
prior oral or written understandings. No amendment, addition to or modification of
any provision hereof shall be binding upon the Parties, and neither Party shall be
deemed to have waived any provision or any remedy available to it, unless such
amendment, addition, modification or waiver is made, in writing, and signed by a
duly authorized officer or representative of the Parties.
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10.8 Applicable Law
The Agreement is made in the State of California and shall be interpreted and
governed by the laws of the State of California and/or the laws of the United
States, as applicable.
10.9 Venue
The Parties hereby submit to the exclusive jurisdiction of the federal courts for
the Northern District of the State of California; provided, however, that if such
federal courts sitting in the Northern District of the State of California refuse
jurisdiction, the Parties agree to the exclusive jurisdiction of the state courts
sitting in the County of Santa Clara, State of California.
10.10 Nature of Relationship
The duties, obligations and liabilities of the Parties are intended to be several and
not joint or collective. The Agreement shall not be interpreted or construed to
create an association, joint venture, fiduciary relationship or partnership between
Seller and Buyer or to impose any partnership obligation or liability or any trust or
agency obligation or relationship upon either Party. Seller and Buyer shall not
have any right, power or authority to enter into any agreement or undertaking for,
or act on behalf of, or act as or be an agent or representative of or otherwise bind
the other Party.
10.11 Good Faith and Fair Dealing; Reasonableness
The Parties agree to act reasonably and in accordance with the principles of
good faith and fair dealing in the performance of this Agreement. Unless
expressly provided otherwise in this Agreement, (i) wherever the Agreement
requires the consent, approval or similar action by a Party, such consent,
approval or similar action shall not be unreasonably withheld or delayed, and (ii)
wherever the Agreement gives a Party a right to determine, require, specify or
take similar action with respect to matters, such determination, requirement,
specification or similar action shall be reasonable.
110911 gk 0073627 40
10.12 Severability
Should any provision of the Agreement be or become void, illegal or
unenforceable, the validity or enforceability of the other provisions of the
Agreement shall not be affected and shall continue in full force and effect. The
Parties will, however, use their best endeavors to agree on the replacement of
the void, illegal, or unenforceable provision(s) with legally acceptable clauses
which correspond as closely as possible to the sense and purpose of the affected
provision.
10.13 Confidentiality
All information disclosed by Seller, including, without limitation, all engineering
documents, designs, specifications and financial information, shall be kept
confidential to the extent consistent with applicable laws, and shall not be
disclosed to any third party except as provided in this Section 10.13 or as
permitted or authorized by applicable laws. Buyer acknowledges Seller’s request
to hold all information regarding this Agreement confidential. Buyer shall disclose
such information to third parties only to the extent required by California law
(including, without limitation, the California Constitution, the California Public
Records Act and the Brown Act). Notwithstanding the foregoing, either Party may
disclose this Agreement to Pacific Valley, LLC or its representatives, Trina Solar
US Development LLC or its representatives (or any wholly-owned affiliate thereof
under the common control of Trina Solar Limited), the Northern California Power
Agency or its representatives, or to any Lender(s) or potential Lender(s) or their
representatives; provided that prior to such disclosure, the recipient shall agree,
in writing, to keep the material confidential under terms no less stringent than as
set forth in this Section 10.13. Buyer also shall be permitted to disclose this
Agreement and related information to the City Council of Palo Alto for the
express purpose of obtaining approval to execute this Agreement; provided that
in connection with such disclosure Buyer shall only disclose such information to
the extent required by California law (including, without limitation, the California
Constitution, the California Public Records Act and the Brown Act). Each Party
shall be bound by its obligations of confidentiality hereunder for a period of two
(2) years from the expiration or earlier termination of this Agreement.
Notwithstanding anything to the contrary in this Section 10.13, nothing shall
restrict any Party from using or disclosing confidential information in any manner
it chooses which (i) is or becomes generally available to the public other than as
a result of a disclosure directly or indirectly by the disclosing Party or its
representative; (ii) was within the using or disclosing Party’s possession prior to it
being furnished hereunder, provided that such information is not subject to
another confidentiality agreement with, or other contractual, legal or fiduciary
obligation of confidentiality to, any other party with respect to such information;
(iii) is rightfully obtained by a Party from third parties authorized to make such
disclosure without restriction; or (iv) is legally required to be disclosed by judicial
or other governmental action as determined by such Party’s attorney acting in
110911 gk 0073627 41
good faith (including, but not limited to, the California Constitution, the California
Public Records Act and the Brown Act), provided that prompt notice of the
judicial or other governmental action shall have been given to the non-disclosing
Party and that the non-disclosing Party shall, at its sole cost and expense, be
afforded the opportunity (consistent with the legal obligations of the disclosing
Party) to exhaust all reasonable legal remedies to maintain the confidential
information in confidence.
10.14 Cooperation
The Parties agree to reasonably cooperate with each other in the implementation
and performance of the Agreement. Such duty to cooperate shall not require
either Party to act in a manner inconsistent with its rights under the Agreement.
10.15 No Change to Rates, Terms or Conditions (Mobile Sierra Doctrine)
The Parties intend that the standard of review for changes to any rate, charge,
classification, term or condition of this Agreement at FERC shall be the most
stringent standard permissible under applicable law. As to the Parties, it is
understood that the standard is the “Mobile-Sierra public interest” standard of
review, as stated by the United States Supreme Court in Morgan Stanley Capital
Group Inc. v. Public Utility District No. 1 of Snohomish County, 554 U.S. 1164
(2008). As to all other persons it is intended that the same standard, as may be
made applicable to other than the Parties, apply, as stated by FERC in Modesto
Irrigation District, Docket No. EL03-159-004, 125 FERC ¶ 61,174, para. 15
(Order Denying Rehearing, November 14, 2008).
10.16 Counterparts
This Agreement may be executed in two or more counterparts and by different
Parties on separate counterparts, all of which shall be considered one and the
same agreement and each of, which shall be deemed an original.
[signature page follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the day and year first above written.
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SELLER
BRANNON SOLAR, LLC
By:
Name: Randolph Wu
Title: General Manager, Development –
Americas
Date:
By:
Name: Victor Contract
Title: US Legal Director
Date:
BUYER
CITY OF PALO ALTO
APPROVAL AS TO FORM:
By:
Name: Grant Kolling
Title: Senior Assistant City Attorney
Date:
CITY OF PALO ALTO
APPROVAL BY ADMINISTRATIVE
SERVICES DIRECTOR
By:
Name: Lalo Perez
Title: Administrative Services Director
Date:
CITY OF PALO ALTO
APPROVAL BY UTILITIES DIRECTOR
By:
Name: Valerie Fong
Title: Utilities Director
Date:
CITY OF PALO ALTO
APPROVAL BY CITY MANAGER
By:
Name: James Keene
Title: City Manager
Date:
CITY OF PALO ALTO
APPROVAL BY MAYOR:
By:
Name:
Title: Mayor
Date:
Draft 9.18.12
Confidential Draft
120401 dm 0073744
EXHIBIT A-1
PLANT SITE DESCRIPTION
[INSERT LEGAL DESCRIPTION / MAP HERE]
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EXHIBIT A-2
SITE DRAWINGS
Seller shall provide to Buyer final Site Drawings prior to the Commercial Operation
Date.
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EXHIBIT B
Environmental Attribute Transfer from Seller to Buyer
Participation in the Western Renewable Energy Generation Information System Western
Renewable Energy Generation Information System. Seller shall, at its sole expense take
all actions and execute all documents or instruments necessary to ensure that all WREGIS
Certificates associated with all Renewable Energy Credits corresponding to all Delivered
Energy are issued and tracked for purposes of satisfying the requirements of the California
Renewables Portfolio Standard and transferred in a timely manner to Buyer for Buyer’s
sole benefit. Seller shall comply with all Laws, including, without limitation, the WREGIS
Operating Rules, regarding the certification and transfer of such WREGIS Certificates to
Buyer and Buyer shall be given sole title to all such WREGIS Certificates. Seller shall be
deemed to have satisfied the warranty in EXHIBIT B (viii); provided that Seller fulfills its
obligations under EXHIBIT B (i) through (vii) below. In addition:
(i) Prior to the Initial Energy Delivery Date, Seller shall register
the Project with WREGIS and establish an account with WREGIS (“Seller’s WREGIS
Account”), which Seller shall maintain until the end of the Delivery Term. Seller shall
transfer the WREGIS Certificates using “Forward Certificate Transfers” (as described in
the WREGIS Operating Rules) from Seller’s WREGIS Account to the WREGIS account(s)
of Buyer or the account(s) of a designee that Buyer identifies by Notice to Seller (“Buyer’s
WREGIS Account”). Seller shall be responsible for all expenses associated with
registering the Project with WREGIS, establishing and maintaining Seller’s WREGIS
Account, paying WREGIS Certificate issuance and transfer fees, and transferring
WREGIS Certificates from Seller’s WREGIS Account to Buyer’s WREGIS Account.
(ii) Seller shall cause Forward Certificate Transfers to occur on a
monthly basis in accordance with the certification procedure established by the WREGIS
Operating Rules. Since WREGIS Certificates will only be created for whole MWh amounts
of Energy generated, any fractional MWh amounts (i.e., kWh) will be carried forward until
sufficient generation is accumulated for the creation of a WREGIS Certificate.
(iii) Seller shall, at its sole expense, ensure that the WREGIS
Certificates for a given calendar month correspond with the Delivered Energy for such
calendar month as evidenced by the Project’s metered data.
(iv) Due to the ninety (90) day delay in the creation of WREGIS
Certificates relative to the timing of invoice payment under Article 3, Buyer shall make an
invoice payment for a given month in accordance Article 3 before the WREGIS Certificates
for such month are formally transferred to Buyer in accordance with the WREGIS
Operating Rules and this EXHIBIT B. Notwithstanding this delay, Buyer shall have all right
and title to all such WREGIS Certificates upon payment to Seller in accordance with Article
3.
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(v) A “WREGIS Certificate Deficit” means any deficit or shortfall in
WREGIS Certificates delivered to Buyer for a calendar month as compared to the
Delivered Energy for the same calendar month (“Deficient Month”). If any WREGIS
Certificate Deficit is caused, or the result of any action or inaction, by Seller, then the
amount of Delivered Energy in the Deficient Month shall be reduced by the amount of the
WREGIS Certificate Deficit for the purposes of calculating Buyer’s payment(s) to Seller
under Article 3 and the Guaranteed Energy Production for the applicable Performance
Measurement Period. Any amount owed by Seller to Buyer because of a WREGIS
Certificate Deficit shall be made as an adjustment to Seller’s next monthly invoice to Buyer
in accordance with Article 3, and Buyer shall net such amount against Buyer’s subsequent
payment(s) to Seller pursuant to Article 3.
(vi) Without limiting Seller’s obligations under this EXHIBIT B, if a
WREGIS Certificate Deficit is caused solely by an error or omission of WREGIS, the
Parties shall cooperate in good faith to cause WREGIS to correct its error or omission.
(vii) If WREGIS changes the WREGIS Operating Rules after the
Execution Date or applies the WREGIS Operating Rules in a manner inconsistent with this
EXHIBIT B after the Execution Date, the Parties promptly shall modify this EXHIBIT B as
reasonably required to cause and enable Seller to transfer to Buyer’s WREGIS Account a
quantity of WREGIS Certificates for each given calendar month that corresponds to the
Delivered Energy in the same calendar month.
(viii) 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.
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EXHIBIT C
INSURANCE COVERAGES
At its own expense, Seller shall secure and maintain during the Term the following
insurance with the coverage amounts indicated for occurrences during and arising out
of Seller’s performance of this Agreement. Such insurance shall be placed with
responsible and reputable insurance companies in compliance with Requirements of
Law applicable to Seller.
1. Workers’ Compensation/Employer’s Liability. Seller shall maintain
Workers’ Compensation Insurance and Employer’s Liability Insurance
which comply with Requirements of Law applicable to Seller.
2. Automobile Liability. Seller shall maintain Automobile Liability Insurance in
compliance with Requirements of Law applicable to Seller, including
coverage for owned, non-owned and hired automobiles for both bodily
injury (including death) and property damage, including automobile liability
contractual endorsement and uninsured/underinsured motorist protection
endorsements.
3. Third Party Liability. Seller shall maintain third party liability insurance in
compliance with Requirements of Law applicable to Seller on a project-specific
basis covering against legal responsibility to others as a result of bodily injury,
property damage and personal injury arising from the operation and maintenance
of the Plant. Such policy shall be written with a limit of liability not less than
$10,000,000 and a deductible not to exceed $10,000. Such liability may be in any
combination of primary and excess/umbrella. Coverage shall include, but not be
limited to, premises/operations, explosion, collapse, underground hazards, broad
form property damage and personal injury liability. Such coverage shall not
contain exclusions for punitive or exemplary damages.
4. Property Insurance. Seller shall maintain third party property insurance on a
project-specific basis covering cost of repairing Plant and or Interconnection equipment
to operational condition. Such policy shall be written with coverage sufficient to replace
and rebuild the Plant. Coverage shall include, but not be limited to, fire, storm damage,
equipment failure, damage to equipment precluding operation under prudent utility
practice, premises/operations, explosion, collapse, underground hazards, broad form
property damage. (you need to run this by Sandra Blanch)
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EXHIBIT D
SCHEDULING PROTOCOLS
[Attached]
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EXHIBIT E
PERFORMANCE TEST
[TRINA TO REVIEW]
The Seller shall coordinate and schedule with Buyer a Performance Test after
completion of all equipment startup and commissioning activities. This performance test
may be performed before completing punch list items. Buyer shall be permitted to
witness the Performance Test, including access to and copies of control room logs,
control system display screens, and instrumentation data for a reasonable period of
time before, during and after the Performance Test, and may also concurrently conduct
a site inspection of the Plant and associated facilities, systems and equipment. Seller
shall supply a written copy of the Performance Test results to Buyer within five (5)
business days following the conclusion of the test.
The Performance Test shall continue for one hundred twenty (120) consecutive hours
(the “Test Period”) to demonstrate the following:
1) Net Plant Output: The power output for each inverter shall be recorded for the Test
Period to verify the net initial capacities. This Performance Test shall be performed for
all units simultaneously and will be considered successful if the average net output for
the Test Period is equal to eighty percent (80%) of [____________] designated in this
Agreement. All power measurements shall be based on a power factor of 0.90.
2) Compliance: The Performance Test shall also demonstrate the ability of the Plant to
comply with all material safety, system reliability, environmental, and other requirements
of its permits, this Agreement, and any interconnection agreements.
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EXHIBIT F
SELLER’S SAMPLE QUARTERLY FINANCIAL STATEMENT
[TRINA TO REVIEW]
Balance Sheets
December 31, _____
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Prepaid and other current assets
Total current assets
Other assets:
Project assets, net
Due from member
Debit issuance costs, net
Total other assets
LIABILITY AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable
Accrued expenses
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion
Deferred tax liabilities
Total long-term liabilities
Member’s equity
Draft 9.18.12
Confidential Draft
120401 dm 0073744
Statements of Operations
Years Ended December 31, _____
Revenues:
Electricity Sales
Costs of revenue:
Operation and maintenance
Depreciation of project assets
Gross profit (loss)
Operating expenses:
Selling, general and administrative
Operating income (loss)
Interest and other financing costs
Income (loss) before tax benefit (provision)
Income tax benefit (provision)
Net income (loss)
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Statements of Cash Flows
Years Ended December 31, ______
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred issuance costs
Deferred taxes
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable
Prepaid expenses
Accounts payable
Due to (from) member
Net cash provided by operating activities
Cash flows from investing activities:
Accounts payable relating to construction activity
Accrued expenses relating to construction activity
Purchase of project assets
Net cash used in investing activities
Cash flows from financing activities:
Increase in restricted cash
Capital contributions
Distributions to member
Proceeds from debt issuance
Debt issuance costs
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest
Income taxes
Supplemental disclosure of non-cash transactions:
Accrued purchases of project assets
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EXHIBIT G
PERFORMANCE ASSURANCE
Exhibit G-1
Form of Letter of Credit
[FORM UNDER REVIEW BY WELLS FARGO AND PALO ALTO]
Exhibit G-2
Form of Escrow Agreement
ESCROW AGREEMENT
This Escrow Agreement dated this ___ day of _________________, ______ (the
“Escrow Agreement”), is entered into by and among Brannon Solar, LLC, a
California limited liability company (“Brannon Solar”), the City of Palo Alto, a
California chartered municipal corporation (“Palo Alto” and together with Brannon
Solar, the “Parties,” and individually, a “Party”), and Wells Fargo Bank, National
Association, as escrow agent (“Escrow Agent”).
RECITALS
A. The Parties have entered into a Power Purchase Agreement, dated
_______________, 2012, (as amended, the “PPA”) which provides for
[Development Assurance] [Performance Assurance] (as defined therein) in the
amount of $400,000.00 to be posted by Brannon Solar for the benefit of Palo Alto.
B. Brannon Solar agrees to place in escrow certain funds and the Escrow Agent
agrees to hold and distribute such funds in accordance with the terms of this
Escrow Agreement and the PPA.
In consideration of the promises and agreements of the Parties and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties and the Escrow Agent agree as follows:
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ARTICLE 1
ESCROW DEPOSIT
Section 1.1. Receipt of Escrow Property. Upon execution hereof, Brannon Solar
shall deliver to the Escrow Agent the amount of $400,000.00 (the “Escrow
Property”) in immediately available funds.
Section 1.2. Investments.
(a) The Escrow Agent is authorized and directed to deposit, transfer, hold
and invest the Escrow Property and any investment income thereon as set forth in
Exhibit A hereto, or as set forth in any subsequent written instruction signed by
_____________. Any investment earnings and income on the Escrow Property
[shall become part of the Escrow Property, and shall be disbursed in accordance
with Section 1.3 or Section 1.5 of this Escrow Agreement] [or] [shall not become
part of the Escrow Property and shall be disbursed to __________________, as
directed in writing by _________________].
(b) The Escrow Agent is hereby authorized and directed to sell or redeem
any such investments as it deems necessary to make any payments or distributions
required under this Escrow Agreement. The Escrow Agent shall have no
responsibility or liability for any loss which may result from any investment or sale
of investment made pursuant to this Escrow Agreement. The Escrow Agent is
hereby authorized, in making or disposing of any investment permitted by this
Escrow Agreement, to deal with itself (in its individual capacity) or with any one or
more of its affiliates, whether it or any such affiliate is acting as agent of the Escrow
Agent or for any third person or dealing as principal for its own account. The
Parties acknowledge that the Escrow Agent is not providing investment supervision,
recommendations, or advice.
Section 1.3. Disbursements. The Escrow Agent shall disburse the Escrow Property
(A) in accordance with the written instructions of an authorized representative of
Palo Alto, with a copy to Brannon Solar, identifying the PPA section under which
such disbursement is authorized and (B) upon the conclusion of the Term, in
accordance with the joint written instructions of the Parties.
Section 1.4. Income Tax Allocation and Reporting.
(a) The Parties agree that, for tax reporting purposes, all interest and
other income from investment of the Escrow Property shall, as of the end of each
calendar year and to the extent required by the Internal Revenue Service, be
reported as having been earned by Brannon Solar (or an affiliate thereof designated
by Brannon Solar), whether or not such income was disbursed during such calendar
year.
(b) Prior to closing, the Parties shall provide the Escrow Agent with
certified tax identification numbers by furnishing appropriate forms W-9 or W-8 and
such other forms and documents that the Escrow Agent may request. The Parties
110911 gk 0073627 56
understand that if such tax reporting documentation is not provided and certified to
the Escrow Agent, the Escrow Agent may be required by the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder, to withhold a
portion of any interest or other income earned on the investment of the Escrow
Property.
(c) To the extent that the Escrow Agent becomes liable for the payment of
any taxes in respect of income derived from the investment of the Escrow Property,
the Escrow Agent shall satisfy such liability to the extent possible from the Escrow
Property. The Parties, jointly and severally, shall indemnify, defend and hold the
Escrow Agent harmless from and against any tax, late payment, interest, penalty or
other cost or expense that may be assessed against the Escrow Agent on or with
respect to the Escrow Property and the investment thereof unless such tax, late
payment, interest, penalty or other expense was directly caused by the gross
negligence or willful misconduct of the Escrow Agent. The indemnification provided
by this Section 1.4(c) is in addition to the indemnification provided in Section 3.1
and shall survive the resignation or removal of the Escrow Agent and the
termination of this Escrow Agreement.
Section 1.5. Termination. This Escrow Agreement shall terminate on [February 1,
2016] [___________], or such earlier times as the Parties agree in writing, at
which time the Escrow Agent is authorized and directed to disburse the Escrow
Property in accordance with Section 1.3 and this Escrow Agreement shall be of no
further force and effect except that the provisions of Sections 1.4(c), 3.1 and 3.2
hereof shall survive termination.
ARTICLE 2
DUTIES OF THE ESCROW AGENT
Section 2.1. Scope of Responsibility. Notwithstanding any provision to the
contrary, the Escrow Agent is obligated only to perform the duties specifically set
forth in this Escrow Agreement, which shall be deemed purely ministerial in nature.
Under no circumstances will the Escrow Agent be deemed to be a fiduciary to any
Party or any other person under this Escrow Agreement. The Escrow Agent will not
be responsible or liable for the failure of any Party to perform in accordance with
this Escrow Agreement. The Escrow Agent shall neither be responsible for, nor
chargeable with, knowledge of the terms and conditions of any other agreement,
instrument, or document other than this Escrow Agreement, whether or not an
original or a copy of such agreement has been provided to the Escrow Agent; and
the Escrow Agent shall have no duty to know or inquire as to the performance or
nonperformance of any provision of any such agreement, instrument, or document.
References in this Escrow Agreement to any other agreement, instrument, or
document are for the convenience of the Parties, and the Escrow Agent has no
duties or obligations with respect thereto. This Escrow Agreement sets forth all
matters pertinent to the escrow contemplated hereunder, and no additional
obligations of the Escrow Agent shall be inferred or implied from the terms of this
Escrow Agreement or any other agreement.
110911 gk 0073627 57
Section 2.2. Attorneys and Agents. The Escrow Agent shall be entitled to rely on
and shall not be liable for any action taken or omitted to be taken by the Escrow
Agent in accordance with the advice of counsel or other professionals retained or
consulted by the Escrow Agent. The Escrow Agent shall be reimbursed as set forth
in Section 3.1 for any and all compensation (fees, expenses and other costs) paid
and/or reimbursed to such counsel and/or professionals. The Escrow Agent may
perform any and all of its duties through its agents, representatives, attorneys,
custodians, and/or nominees.
Section 2.3. Reliance. The Escrow Agent shall not be liable for any action taken or
not taken by it in accordance with the direction or consent of the Parties or their
respective agents, representatives, successors, or assigns. The Escrow Agent shall
not be liable for acting or refraining from acting upon any notice, request, consent,
direction, requisition, certificate, order, affidavit, letter, or other paper or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, without further inquiry into the person’s or persons’
authority. Concurrent with the execution of this Escrow Agreement, the Parties
shall deliver to the Escrow Agent authorized signers’ forms in the form of Exhibit B-
1 and Exhibit B-2 to this Escrow Agreement.
Section 2.4. Right Not Duty Undertaken. The permissive rights of the Escrow Agent
to do things enumerated in this Escrow Agreement shall not be construed as duties.
Section 2.5. No Financial Obligation. No provision of this Escrow Agreement shall
require the Escrow Agent to risk or advance its own funds or otherwise incur any
financial liability or potential financial liability in the performance of its duties or the
exercise of its rights under this Escrow Agreement.
ARTICLE 3
PROVISIONS CONCERNING THE ESCROW AGENT
Section 3.1. Indemnification. The Parties, jointly and severally, shall indemnify,
defend and hold harmless the Escrow Agent from and against any and all loss,
liability, cost, damage and expense, including, without limitation, attorneys’ fees
and expenses or other professional fees and expenses which the Escrow Agent may
suffer or incur by reason of any action, claim or proceeding brought against the
Escrow Agent, arising out of or relating in any way to this Escrow Agreement or any
transaction to which this Escrow Agreement relates, unless such loss, liability, cost,
damage or expense shall have been finally adjudicated to have been directly caused
by the willful misconduct or gross negligence of the Escrow Agent. The provisions of
this Section 3.1 shall survive the resignation or removal of the Escrow Agent and
the termination of this Escrow Agreement.
Section 3.2. Limitation of Liability. THE ESCROW AGENT SHALL NOT BE LIABLE,
DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES
ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES,
LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE
DIRECTLY RESULTED FROM THE ESCROW AGENT’S GROSS NEGLIGENCE OR
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WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT
LIMITATION LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM
OF ACTION.
Section 3.3. Resignation or Removal. The Escrow Agent may resign by furnishing
written notice of its resignation to the Parties, and the Parties may remove the
Escrow Agent by furnishing to the Escrow Agent a joint written notice of its removal
along with payment of all fees and expenses to which it is entitled through the date
of termination. Such resignation or removal, as the case may be, shall be effective
thirty (30) days after the delivery of such notice or upon the earlier appointment of
a successor, and the Escrow Agent’s sole responsibility thereafter shall be to safely
keep the Escrow Property and to deliver the same to a successor escrow agent as
shall be appointed by the Parties, as evidenced by a joint written notice filed with
the Escrow Agent or in accordance with a court order. If the Parties have failed to
appoint a successor escrow agent prior to the expiration of thirty (30) days
following the delivery of such notice of resignation or removal, the Escrow Agent
may petition any court of competent jurisdiction for the appointment of a successor
escrow agent or for other appropriate relief, and any such resulting appointment
shall be binding upon the Parties.
Section 3.4. Compensation. The Escrow Agent shall be entitled to compensation
for its services as stated in the fee schedule attached hereto as Exhibit C, which
compensation shall be paid by Brannon Solar. The fee agreed upon for the services
rendered hereunder is intended as full compensation for the Escrow Agent's
services as contemplated by this Escrow Agreement; provided, however, that in the
event that the conditions for the disbursement of funds under this Escrow
Agreement are not fulfilled, or the Escrow Agent renders any service not
contemplated in this Escrow Agreement, or there is any assignment of interest in
the subject matter of this Escrow Agreement, or any material modification hereof,
or if any material controversy arises hereunder, or the Escrow Agent is made a
party to any litigation pertaining to this Escrow Agreement or the subject matter
hereof, then the Escrow Agent shall be compensated for such extraordinary services
and reimbursed for all costs and expenses, including reasonable attorneys’ fees and
expenses, occasioned by any such delay, controversy, litigation or event. If any
amount due to the Escrow Agent hereunder is not paid within thirty (30) days of
the date due, the Escrow Agent in its sole discretion may charge interest on such
amount up to the highest rate permitted by applicable law. The Escrow Agent shall
have, and is hereby granted, a prior lien upon the Escrow Property with respect to
its unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights,
superior to the interests of any other persons or entities and is hereby granted the
right to set off and deduct any unpaid fees, non-reimbursed expenses and
unsatisfied indemnification rights from the Escrow Property.
Section 3.5. Disagreements. If any conflict, disagreement or dispute arises
between, among, or involving any of the parties hereto concerning the meaning or
validity of any provision hereunder or concerning any other matter relating to this
Escrow Agreement, or the Escrow Agent is in doubt as to the action to be taken
110911 gk 0073627 59
hereunder, the Escrow Agent may, at its option, retain the Escrow Property until
the Escrow Agent (i) receives a final non-appealable order of a court of competent
jurisdiction or a final non-appealable arbitration decision directing delivery of the
Escrow Property, (ii) receives a written agreement executed by each of the parties
involved in such disagreement or dispute directing delivery of the Escrow Property,
in which event the Escrow Agent shall be authorized to disburse the Escrow
Property in accordance with such final court order, arbitration decision, or
agreement, or (iii) files an interpleader action in any court of competent
jurisdiction, and upon the filing thereof, the Escrow Agent shall be relieved of all
liability as to the Escrow Property and shall be entitled to recover attorneys’ fees,
expenses and other costs incurred in commencing and maintaining any such
interpleader action. The Escrow Agent shall be entitled to act on any such
agreement, court order, or arbitration decision without further question, inquiry, or
consent.
Section 3.6. Merger or Consolidation. Any corporation or association into which the
Escrow Agent may be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer all or substantially all of its corporate trust
business and assets as a whole or substantially as a whole, or any corporation or
association resulting from any such conversion, sale, merger, consolidation or
transfer to which the Escrow Agent is a party, shall be and become the successor
escrow agent under this Escrow Agreement and shall have and succeed to the
rights, powers, duties, immunities and privileges as its predecessor, without the
execution or filing of any instrument or paper or the performance of any further act.
Section 3.7. Attachment of Escrow Property; Compliance with Legal Orders. In the
event that any Escrow Property 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
order affecting the Escrow Property, the Escrow Agent is hereby expressly
authorized, in its sole discretion, to respond as it deems appropriate or to comply
with all writs, orders or decrees so entered or issued, or which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without jurisdiction.
In the event that the Escrow Agent obeys or complies with any such writ, order or
decree it shall not be liable to any of the Parties or to any other person, firm or
corporation, should, by reason of such compliance notwithstanding, such writ, order
or decree be subsequently reversed, modified, annulled, set aside or vacated.
Section 3.8 Force Majeure. The Escrow Agent shall not be responsible or liable for
any failure or delay in the performance of its obligation under this Escrow
Agreement arising out of or caused, directly or indirectly, by circumstances beyond
its reasonable control, including, without limitation, acts of God; earthquakes; fire;
flood; wars; acts of terrorism; civil or military disturbances; sabotage; epidemic;
riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software) or communications services; accidents; labor disputes; acts of civil or
military authority or governmental action; it being understood that the Escrow
Agent shall use commercially reasonable efforts which are consistent with accepted
110911 gk 0073627 60
practices in the banking industry to resume performance as soon as reasonably
practicable under the circumstances.
ARTICLE 4
MISCELLANEOUS
Section 4.1. Successors and Assigns. This Escrow Agreement shall be binding on
and inure to the benefit of the Parties and the Escrow Agent and their respective
successors and permitted assigns. No other persons shall have any rights under this
Escrow Agreement. No assignment of the interest of any of the Parties shall be
binding unless and until written notice of such assignment shall be delivered to the
other Party and the Escrow Agent and shall require the prior written consent of the
other Party and the Escrow Agent (such consent not to be unreasonably withheld).
Section 4.2. Escheat. The Parties are aware that under applicable state law,
property which is presumed abandoned may under certain circumstances escheat to
the applicable state. The Escrow Agent shall have no liability to the Parties, their
respective heirs, legal representatives, successors and assigns, or any other party,
should any or all of the Escrow Property escheat by operation of law.
Section 4.3. Notices. All notices, requests, demands, and other communications
required under this Escrow Agreement shall be in writing, in English, and shall be
deemed to have been duly given if delivered (i) personally, (ii) by facsimile
transmission with written confirmation of receipt, (iii) by overnight delivery with a
reputable national overnight delivery service, or (iv) by mail or by certified mail,
return receipt requested, and postage prepaid. If any notice is mailed, it shall be
deemed given five business days after the date such notice is deposited in the
United States mail. If notice is given to a party, it shall be given at the address for
such party set forth below. It shall be the responsibility of the Parties to notify the
Escrow Agent and the other Party in writing of any name or address changes. In
the case of communications delivered to the Escrow Agent, such communications
shall be deemed to have been given on the date received by the Escrow Agent.
If to Brannon Solar:
___________________________________
___________________________________
Attention:
Telephone:
Facsimile:
If to Palo Alto:
___________________________________
___________________________________
Attention:
Telephone:
Facsimile:
If to the Escrow Agent:
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Wells Fargo Bank, National Association
___________________________________
___________________________________
Attention: ____________; Corporate, Municipal and Escrow Solutions
Telephone:
Facsimile:
Section 4.4. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of California.
Section 4.5. Entire Agreement. This Escrow Agreement sets forth the entire
agreement and understanding of the parties related to the Escrow Property.
Section 4.6. Amendment. This Escrow Agreement may be amended, modified,
superseded, rescinded, or canceled only by a written instrument executed by the
Parties and the Escrow Agent.
Section 4.7. Waivers. The failure of any party to this Escrow Agreement at any
time or times to require performance of any provision under this Escrow Agreement
shall in no manner affect the right at a later time to enforce the same performance.
A waiver by any party to this Escrow Agreement of any such condition or breach of
any term, covenant, representation, or warranty contained in this Escrow
Agreement, in any one or more instances, shall neither be construed as a further or
continuing waiver of any such condition or breach nor a waiver of any other
condition or breach of any other term, covenant, representation, or warranty
contained in this Escrow Agreement.
Section 4.8. Headings. Section headings of this Escrow Agreement have been
inserted for convenience of reference only and shall in no way restrict or otherwise
modify any of the terms or provisions of this Escrow Agreement.
Section 4.9. Counterparts. This Escrow Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an original,
and such counterparts shall together constitute one and the same instrument.
[The remainder of this page left intentionally blank.]
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IN WITNESS WHEREOF, this Escrow Agreement has been duly
executed as of the date first written above.
BRANNON SOLAR, LLC
By: _________________________
Name:_________________________
Title: _________________________
CITY OF PALO ALTO
By: _________________________
Name:_________________________
Title: _________________________
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Escrow Agent
By: _________________________
Name:_________________________
Title: _________________________
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EXHIBIT G-2-A
Agency and Custody Account Direction
For Cash Balances
Wells Fargo Money Market Deposit Accounts
Direction to use the following Wells Fargo Money Market Deposit Accounts for
Cash Balances for the escrow account or accounts (the “Account”)
established under the Escrow Agreement to which this Exhibit A is attached.
You are hereby directed to deposit, as indicated below, or as I shall direct
further in writing from time to time, all cash in the Account in the following
money market deposit account of Wells Fargo Bank, National Association:
Wells Fargo Money Market Deposit Account (MMDA)
I understand that amounts on deposit in the MMDA are insured, subject to
the applicable rules and regulations of the Federal Deposit Insurance
Corporation (FDIC), in the basic FDIC insurance amount of $250,000 per
depositor, per insured bank. This includes principal and accrued interest up
to a total of $250,000.
I acknowledge that I have full power to direct investments of the Account.
I understand that I may change this direction at any time and that it shall
continue in effect until revoked or modified by me by written notice to you.
[_________________________]
Authorized Representative [Authorized Representative]
[PARTY 1] [PARTY 2]
[ ]
Date [Date]
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EXHIBIT G-2-B-1
Certificate as to Authorized Signatures
The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as authorized representatives of
[PARTY 1] and are authorized to initiate and approve transactions of all types
for the escrow account or accounts established under the Escrow Agreement
to which this Exhibit B-1 is attached, on behalf of [PARTY 1].
Name / Title Specimen Signature
______________________________
Name
______________________________
Title
_____________________________
Signature
______________________________
Name
______________________________
Title
_____________________________
Signature
______________________________
Name
______________________________
Title
_____________________________
Signature
_______________________________
Name
_______________________________
Title
_____________________________
Signature
110911 gk 0073627 65
EXHIBIT G-2-B-2
Certificate as to Authorized Signatures
The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as authorized representatives of
[PARTY 2] and are authorized to initiate and approve transactions of all types
for the escrow account or accounts established under the Escrow Agreement
to which this Exhibit B-2 is attached, on behalf of [PARTY 2].
Name / Title Specimen Signature
______________________________
Name
______________________________
Title
_____________________________
Signature
______________________________
Name
______________________________
Title
_____________________________
Signature
______________________________
Name
______________________________
Title
_____________________________
Signature
_______________________________
Name
_______________________________
Title
_____________________________
Signature
Draft 9.18.12
Confidential Draft
120401 dm 0073744
EXHIBIT G-2-C
FEES OF ESCROW AGENT
EXHIBIT H
ESTIMATED OUTPUT AND PERFORMANCE THRESHOLDS
EXHIBIT H
Brannon Solar Plant Estimated Output and Performance Thresholds
Fixed Angle System
Single Axis Tracking
System
Peak AC MW 20 20
Est. annual full
production hours
2,109 2,537
First year expected degradation 2.5% 2.5%
Remaining years expected degradation 0.7% 0.7%
70% 70%
A B C D E F G H
C:\Users\jstack\AppData\Local\Temp\MinuteTraq\paloaltocityca@paloaltocityca.IQM2.com\Work\Attachments\6258.doc
110911 gk 0073627 67
Year
ending
Contract
flow
year
Estimated
production
factor
Estimated
peak AC
Estimated
production
volume
Two year
minimum
performance
Threshold*
Estimated
production
volume
Two year
minimum
performance
Threshold*
MW MWh/year
MWh /
two years MWh/year
MWh /
two years
7/31/2015 1 1.000 20.0 42,188 50,737
7/31/2016 2 0.993 19.9 41,893 58,856 50,382 70,783
7/31/2017 3 0.986 19.7 41,599 58,444 50,029 70,288
7/31/2018 4 0.979 19.6 41,308 58,035 49,679 69,796
7/31/2019 5 0.972 19.4 41,019 57,629 49,331 69,307
7/31/2020 6 0.965 19.3 40,732 57,226 48,986 68,822
7/31/2021 7 0.959 19.2 40,447 56,825 48,643 68,340
7/31/2022 8 0.952 19.0 40,164 56,427 48,302 67,862
7/31/2023 9 0.945 18.9 39,883 56,032 47,964 67,387
7/31/2024 10 0.939 18.8 39,603 55,640 47,629 66,915
7/31/2025 11 0.932 18.6 39,326 55,251 47,295 66,447
7/31/2026 12 0.926 18.5 39,051 54,864 46,964 65,982
7/31/2027 13 0.919 18.4 38,778 54,480 46,635 65,520
7/31/2028 14 0.913 18.3 38,506 54,099 46,309 65,061
7/31/2029 15 0.906 18.1 38,237 53,720 45,985 64,606
7/31/2030 16 0.900 18.0 37,969 53,344 45,663 64,153
7/31/2031 17 0.894 17.9 37,703 52,970 45,343 63,704
7/31/2032 18 0.887 17.7 37,439 52,600 45,026 63,258
7/31/2033 19 0.881 17.6 37,177 52,231 44,711 62,816
7/31/2034 20 0.875 17.5 36,917 51,866 44,398 62,376
7/31/2035 21 0.869 17.4 36,658 51,503 44,087 61,939
7/31/2036 22 0.863 17.3 36,402 51,142 43,778 61,506
7/31/2037 23 0.857 17.1 36,147 50,784 43,472 61,075
7/31/2038 24 0.851 17.0 35,894 50,429 43,168 60,648
7/31/2039 25 0.845 16.9 35,643 50,076 42,865 60,223
* Equals Seller's Energy Delivery Obligation
First year production is displayed after performance degradation of by 2.5%.
Subsequent years have 0.7% performance degradation
Excerpted Final Minutes of the June 6, 2012 UAC Meeting
ITEM 3: ACTION: Power Purchase Agreement for Brannon Solar Project Output
No presentation.
Commissioner Keller – Noted the report was easy to read and understand and that Figure 2 showed
multiple proposals. Commissioner Keller asked if we are considering any of the other proposals at this time.
Senior Resource Originator Kabat responded that we are not considering other proposals at this time and
very soon we plan to issue another RFP.
Commissioner Hall mentioned that Figure 3 shows volumes of renewable contract deliveries falling over
time and asked about the trend. Kabat replied that even though they are long term contracts lasting 20
years, they do end in the decades shown on the graph.
Commissioner Melton asked if, in our prior experience, any contracts failed to result in operational projects.
Kabat answered that the Butte County Landfill Gas Power contract was cancelled by the developer.
Commissioner Eglash asked what the risks are, particularly completion risks related to the Brannon project.
Commissioner Eglash mentioned it looks consistent with the PV market, where there is occasionally a
much lower priced contract such as this one. He asked why this price is so low and whether the project is
likely to be completed. He also asked, whether this low price means that there is a greater likelihood that
the project will fail. Kabat replied that the market has changed rapidly. The last time we received
proposals from an RFP, solar projects were the most expensive, but this time, they were the lowest price.
PV panel prices have fallen precipitously. Another reason is bidders find Palo Alto, with our Triple A credit
rating, to be an attractive counterparty and also find negotiations with us are more efficient than negotiating
with an investor owned utility. Also vertically integrated companies may be offering a low price to get
contract volume. The risk of project failure is that we would have to purchase replacement energy, and the
market could be at a higher price than it is now.
Commissioner Eglash noted that the best and cheapest solar panels come from China, and that the US has
imposed tariffs. Commissioner Eglash asked how this impacts prices. Kabat replied that the Brannon LLC
and Trina Solar have agreed to absorb the cost of any tariffs. Kabat noted that by the time we were in
negotiations, Trina Solar and Brannon Solar were very aware of the likelihood of tariffs. Commissioner
Eglash asked whether we could negotiate a clause in the PPA to get a price discount representing a share
of reduced tariffs to the extent the Chinese government is appealing application of the tariffs. Kabat replied
that he can try to negotiate it.
Vice Chair Cook offered congratulations on getting such a good offer and asked how the option to extend
the term for 5 extra years works. Kabat answered that the City can extend the term at its sole option and
that the City should exercise it if it’s attractive in the 24th year. If it’s unattractive the City does not have to
act and the contract ends after the 25th year.
Vice Chair Cook asked if Trina Solar has built any other projects in California. Mr. Kabat answered that
Trina is in the process, but has not yet completed a project in California.
Vice Chair Cook asked if Trina Solar has built any projects of this size anywhere in the world. Kabat
answered that he believes there are other projects elsewhere in the state, the country and the world that
are ahead of this one and more in the pipeline behind it.
Vice Chair Cook asked if there are development milestones that allow us to measure whether progress has
been made. Kabat indicated that there are intermediate milestones such as execution of interconnection
agreements, obtaining permits, etc.
Commissioner Hall asked what happens if Brannon does not achieve its milestones. Kabat noted that
missing a milestone creates a default and starts a cure period. The developer can cure the defaut within
the cure period and not be in breech of contract. However if not cured in time, the contract can be
terminated by the City.
Commissioner Hall mentioned that the Brannon proposal looks like a good deal, and asked how we get the
performance deposit money. Kabat answered that it will be in the form of a Letter of Credit or a deposit in
an escrow account and that the form is still in negotiation.
Commissioner Eglash remarked that the solar resource provides a welcomed diversity to a renewable
portfolio dominated by wind.
ACTION:
Chair Foster made a motion that the UAC recommend that the City Council:
1) Approve a Power Purchase Agreement with Brannon Solar LLC, a California limited liability company, for
the acquisition of up to 52,000 Megawatt-hours (MWh) per year of energy over twenty-five years with a
price of $72 dollars per MWh at a cost not to exceed $94 million; and
2) Waive the application of the investment-grade credit rating requirement of Section 2.30.340(d) of the
Palo Alto Municipal Code, which applies to energy companies that do business with the City.
Commissioner Hall seconded the motion. The motion passed unanimously (6-0) with Commissioner
Waldfogel absent.
Excerpted Draft Minutes of the September 5, 2012 UAC Meeting
ITEM 4: ACTION: Recommendation on Approval of Re-priced Power Purchase Agreement with Brannon
Solar, LLC for up to 52,000 Megawatt-hours per Year of Energy Over Twenty-five Years at a Cost Not to
Exceed $91.0 Million
Vice Chair Foster stated that the report provided a good summary, which is that the original price was
increased due to the impact of import tariffs on solar panels. Commissioner Eglash stated that even the
higher price is quite good. Vice Chair Foster agreed that the new price was still attractive. Commissioner
Waldfogel added that he hopes that this re-price will be the last re-price for this contract.
Senior Resource Originator Tom Kabat presented slides showing the charts and tables provided in the
report.
Commissioner Eglash stated that, while this price is still attractive, the re-pricing of the contract should not
be taken lightly and is disappointing. We take the initial prices seriously and no bidder should think that
renegotiation should be a normal business practice.
Vice Chair Foster summarized the history of the project which started at $72/MWh with a public declaration
that any impact of import tariffs would not change the price, but now the supplier is coming back with a
higher price after blaming the impact of the tariffs. This calls into question the very process by which the
City competitively solicits proposals and negotiates contracts. The City chose to negotiate with Trina Solar
on the Brannon project and to not pursue other proposals based on the bid price and, now, the bid price is
not being honored. Vice Chair Foster said it is not appropriate behavior for a company to adjust a quoted
price and added that with that adjustment behind us we look forward to working with Trina Solar on this
project.
Milo Terzich, representing Trina Solar, replied that Trina Solar was surprised by cost developments related
to the ripple effects of the tariffs and consequently needed to raise the price to make the project
financeable.
Commissioner Waldfogel asked if we need to move forward or if we have re-engaged with any other
bidders. Kabat replied that since the Trina Solar Brannon price is still more attractive than the prices of
other bidders staff has not re-engaged other bidders for price updates. Kabat added that all bidders have a
chance to provide their bids in the fall 2012 RFP that is currently open.
Commissioner Hall asked if Trina Solar or staff was aware of anything that could further increase the price.
Trina Solar Development Manager Milo Terzich replied that he did not see anything that would require
further price adjustments. Kabat replied that he saw nothing in the text of the agreement that contemplates
price increases.
ACTION:
Commissioner Eglash moved staff recommendation. Commissioner Hall seconded the motion. The motion
passed unanimously (4-0).