HomeMy WebLinkAbout05.5 (Handout) Report on status and schedule delays for existing agreements with Sun Edison, LLCCentral Contra Costa Sanitary District
BOARD OF DIRECTORS
POSITION PAPER
Item 5.5
(Handout)
Board Meeting Date: September 1, 2016
Subject: RECEIVE REPORT ON STATUS AND SCHEDULE DELAYS FOR
EXISTING POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC
FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS; AND
PROVIDE DIRECTION TO STAFF AS MAY BE REQUIRED TO MODIFY
THE EXISTING AGREEMENTS
Submitted By:
Dan Frost, Senior Engineer
Initiating Dept/Div.:
Engineering & Technical Services /
Planning & Development Services
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
D. Gemmell — Planning & Development Svcs. Div. Mgr.
JM. Petit — Director of Engineering & Technical Services
K. Alm
Counsel for the District
1 ••►1 u .1 u:
Roger S. Bailey
General Manager
ISSUE: Board approval or direction is needed to authorize execution o n amendment
for existing power purchase agreements.
BACKGROUND: In February 2015, the District executed power purchase agreements
with SunEdison Government Solutions, LLC for solar power at three District sites: the
Collection System Operations Building, Vehicle Maintenance Shop, and Household
Hazardous Waste Facility.
In March and April 2016, the District received stop notices from one of SunEdison's
subcontractors for payments not received from SunEdison totaling $303,813. On
April 21, 2016 SunEdison, Inc. and some of its subsidiaries filed for Chapter 11
Bankruptcy. Although SunEdison Government Solutions, LLC (with whom the District
executed agreements) was not included in the bankruptcy filing, there have been
significant delays impacting the completion of the District's projects as a result of the
bankruptcy and SunEdison's financial status. Due to continued delays by SunEdison,
mandatory milestones have been missed.
One factor that influences the projected energy savings for the District for these
agreements is eligibility under PG&E's existing Net Metering (NEM) program. The
original project milestones were coordinated such that completion of the project would
occur prior to sunsetting of the existing NEM program. Although the details of the
successor NEM program have not been finalized, it is anticipated that this program will
be less solar friendly than the existing NEM program. The exact timeline for sunsetting
of the NEM program is not firm and is tied to a cap established by state legislature. It is
anticipated that this program cap could be reached as early as November 2016.
SunEdison has been working with several potential investors for transfer of their
projects and agreements. The District's projects are part of a package of projects that
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POSITION PAPER
Board Meeting Date: September 1, 2016
Subject:
RECEIVE REPORT ON STATUS AND SCHEDULE DELAYS FOR
EXISTING POWER PURCHASE AGREEMENTS WITH SUN EDISON, LLC
FOR SOLAR POWER AT THREE DISTRICT -OWNED LOCATIONS; AND
PROVIDE DIRECTION TO STAFF AS MAY BE REQUIRED TO MODIFY
THE EXISTING AGREEMENTS
SunEdison is proposing to transfer to NRG Energy, Inc. The majority of the original
agreements will stay intact; however, some modifications are required by SunEdison as
shown in the attached Draft Amendment provided to District staff on August 26, 2016.
District staff and District counsel are working judiciously to make some modifications to
the attached Draft Amendment with the goal of protecting planned savings as best as
possible and to address liens asserted by subcontractors and suppliers for construction
of the solar panel systems. The price for power ($/kWh) will not be increased as part of
these modifications.
Although securing of the District's sites into the existing NEM program cannot be
guaranteed, expediting the transfer of the power purchase agreements to a new
investor may allow for a quicker timeline for completion that is more likely to allow for
participation in the existing NEM program. Given the urgency in schedule, District staff
is requesting that the Board give the General Manager the authority, with guidance from
District Counsel, to make modifications to the existing power purchase agreements with
SunEdison, LLC.
ALTERNATIVES/CONSIDERATIONS: The Board of Directors may request additional
information to be brought back to the Board, may decline to negotiate and execute
amendments to the agreements, or may provide other direction to staff.
FINANCIAL IMPACTS: Continued delay of the projects may result in a reduction in
planned energy savings, particularly if the District is unable to secure participation under
the existing PG&E NEM program. The exact reduction in savings cannot be determined
at this time; however, it is anticipated that the agreements will still result in lifecycle
savings for the District over the term of the agreements.
COMMITTEE RECOMMENDATION: Due to timing constraints, this item was unable to
go to the Engineering & Operations committee prior to the Board of Directors.
RECOMMENDED BOARD ACTION: Receive the presentation and take one of the
following actions:
1) Authorize the General Manager, with guidance from District Counsel, to negotiate
and execute an amendment, including transfer of ownership, of the existing
power purchase agreements;
2) Direct staff to bring additional information back to the Board; or
3) Provide other direction to staff.
Attached Supoortino Document:
1. Draft Amendment from SunEdison on August 26, 2016
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ATTACHMENT 1
AMENDMENT AND WAIVER AGREEMENT
This AMENDMENT AND WAIVER AGREEMENT (this "Amendment and Waiver"),
dated as of , 2016, is entered into by and among Contra Costa Central Sanitary District, a
Political Subdivision of the State of California (the "Counterparty") and SunE Contra CSOF,
LLC (the "Company" and together with Counterparty, the "Parties" and each, a "Party").
RECITALS
WHEREAS, Counterparty and Company (through assignment from SunEdison
Governmental Solutions, LLC) are parties to that certain Regional Power Purchase Agreement,
dated as of February 19, 2015 (as heretofore amended, restated, supplemented, and modified, the
"Contract");
WHEREAS, Company failed to complete the project Milestones (as defined in the
Contract) on or before the dates specified in the Contract;
WHEREAS, Company has requested that the Milestones be extended as specified below,
and that Counterparty waive any prior defaults arising from Company's failure to achieve the
Milestones (as identified in the Contract), and Counterparty has agreed to provide such extension
and waiver;
WHEREAS, Counterparty acknowledges that NRG Renew, LLC, a Delaware limited
liability company (the "Buyer") intends to acquire 100% of the direct or indirect ownership
interests in the Company and that Buyer is relying on this Amendment in connection with such
acquisition;
WHEREAS, Counterparty acknowledges and approves that PNC Commercial, LLC, as
an investor in the Generating Facility, and any substitute investor or lender providing financing
for the Generating Facility (the "Investor"), is relying on this Amendment in connection with
such financing; and
WHEREAS, Company and Counterparty have agreed to certain other amendments and
waivers with respect to the Contract, as further described herein.
NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements in this Amendment and Waiver, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
AGREEMENT
1. Amendments. Counterparty and Company agree that the Contract is hereby amended as
follows:
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a. Schedule 8 of the Contract (Mandatory Milestones) is deleted in its entirety
and replaced by the following:
Milestone Schedule Date
Design Development Complete
Approved Construction Documents Complete
Notice to Proceed Complete
Mobilization Complete
Substantial Completion 10/31/2016
Commercial Operation 12/31/2016'
b. Termination for Convenience: Schedule 2 ("Early Termination Fee") is
amended with the below fees (where an amount is not below, the original fee
in Schedule 2 applies):
Early Column 1
Termination Early Termination Fee
Occurs in
Year:
1
2 $5.58
3 .$5.55
4 $5.30
5 $5.00
6 $4.77
7 $4.62
8 $4.44
9 $4.24
10 $3.64
11 $3.40
12 $3.19
13 $2.95
14 $2.70
15 $2.43
16 $2.14
17
18
19
20
1 NRG to confirm interim milestone dates.
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c. Non -Appropriation: Section 8.1(d) of the Contract is deleted in its entirety
and replaced by the following:
"Notwithstanding anything to the contrary in this Agreement, due to the constitutional
limitations, Buyer may not be able to appropriate funds for the procurement of any utility
services for Buyer for a particular fiscal year (a "Budgetary Non -Appropriation Event").
During a Budgetary Non -Appropriation Event, if the Buyer does not otherwise have other
funds available to make payments otherwise due under this Agreement, the Buyer is not
obligated to pay for (and the Seller shall not be required to deliver) any services provided
under this Agreement until the Budgetary Non -Appropriation Event has terminated.
Buyer agrees that (i) it shall use its best efforts to seek appropriation for utility services
during the term of this Agreement, and (ii) it shall not seek appropriation for funds or use
appropriated funds to purchase electrical power from any other source except until it has
sufficient funds appropriated and available to pay its obligations under this Agreement as
they come due. If a Budgetary Non- Appropriation Event continues for more than 180
days, Seller (but not Buyer) may terminate, and Buyer shall pay the applicable Early
Termination Fee."
2. Waivers. Counterparty hereby waives any and all defaults and liabilities of Company and
any and all rights and remedies of Counterparty (including, without limitation, any and
all rights to receive damages or to suspend or terminate the Contract), in each case, to the
extent arising from the following:
a. Company's failure to complete the project Milestones (as defined in the
Contract) on or before the dates specified in the Contract.
3. Estoppel. Counterparty hereby represents, warrants and certifies to the Company, to the
Buyer and to the Investor that, subject to the payment of all amounts owing to, and the
release of all mechanics lien claims asserted by, Del Monte Electric, Inc. with respect to
the construction of the Generating Facility (as defined in the Contract), as of the date
hereof:
a. The execution, delivery and performance by Counterparty of the Contract and
this Amendment have been duly authorized by all necessary corporate or other
action on the part of Counterparty and, as of the date hereof, do not require
any approvals, filings with or consents of any entity or person that have not
previously been made or obtained;
b. Counterparty hereby acknowledges that all right, title and interest in and to the
Contract has been transferred and assigned to the Company and agrees to look
solely to the Company as the party under the Contract;
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c. The Contract is in full force and effect and has not been amended,
supplemented or modified since the date of execution of the Contract, other
than as described above, and the Contract has not been assigned by
Counterparty (other than, if applicable, solely collateral assignments to
Counterparty's lenders and sureties);
d. Counterparty is not in default under the Contract and, to the knowledge of the
Counterparty, no default exists under the Contract, and no default, breach,
unsatisfied condition or other events or circumstances exist that constitute or
that, with the giving of notice or the passage of time (including the passage of
time during which a default has occurred and has not yet been cured during
any applicable grace period) or both, would constitute such a default under the
Contract;
e. All representations made by Counterparty in the Contract were true and
correct as of the date the same were made;
f. There are no actions pending against Counterparty under the bankruptcy laws
or any similar laws of the United States or any state;
g.
To the knowledge of Counterparty, there exist no legal proceedings under the
Contract or otherwise between the Counterparty and the Company and there
exist no proceedings pending or threatened against or affecting the
Counterparty in any court or by or before any governmental authority or
arbitration board or tribunal which could reasonably be expected to have a
material adverse effect on the ability of the Counterparty to perform its
obligations under the Contract;
h. The Counterparty is not aware of any event, act, circumstance or condition
constituting an event of force majeure under the Contract;
i. The Company does not owe any indemnity payments to the Counterparty, the
Counterparty has no existing counterclaims, offsets or defenses against the
Company under the Contract, and the Counterparty has not made any
indemnity or warranty payments to the Company under the Contract;
j. All amounts due and payable as of the date hereof under the Contract have
been paid in full;
k. The Premises, Site and/or Project Site (as such terms are defined in the
Contract) are not physically affected by the terms, provisions or conditions of
that certain Lease Agreement which is referenced in, and is the subject of, that
certain Memorandum of Lease dated March 18, 2004 and recorded March 28,
2005 in the Contra Costa County's Recorder's Office as Instrument No. 2005-
0105330-00; and
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1. There exist no defects, deficiencies, or deviations between each Generating
Facility and the most recent version of the as -built drawings approved by the
Counterparty, or any specifications or requirements in the Contract. For the
purposes of this Amendment, the record drawings dated as of June 6, 2016,
shall be deemed to be the most recent version of the as -built drawings.
4. Effectiveness. This Amendment and Waiver shall become effective as of the date first
written above upon the execution hereof by the Parties hereto.
5. Governing Law. This Amendment and Waiver shall be construed in accordance with the
laws of the State of California.
6. Binding Nature and Benefit. This Amendment and Waiver shall be binding upon and
inure to the benefit of each party hereto and their respective successors and permitted
assigns. Nothing in this Amendment and Waiver will provide any benefit to any third
party or entitle any third party to any claim, cause of action, remedy or right of any kind.
7. Counterparts. This Amendment and Waiver may be executed in multiple counterparts,
each of which shall be deemed an original for all purposes, but all of which together shall
constitute one and the same instrument. Delivery of an executed counterpart of a
signature page of this Amendment and Waiver by facsimile or portable document format
("pdf') shall be effective as delivery of a manually executed counterpart of this
Amendment and Waiver.
8. Effect of Amendments and Waivers. The amendments and waivers to the Contract
granted in Section 1 and 2 hereof shall be incorporated into and made a part of the
Contract. Except as expressly provided for herein, the terms and conditions of the
Contract shall continue unchanged and shall remain in full force and effect. Each
amendment and waiver granted herein shall apply solely to the matters set forth herein
and such amendment or waiver shall not be deemed or construed as an amendment or
waiver of or otherwise apply to any other matters.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have executed this Amendment and Waiver
Agreement as of the date first above written.
CENTRAL CONTRA COSTA SANITARY
DISTRICT
By:
Name:
Title:
SUNE CONTRA CSOF, LLC
By:
Name:
Title:
[AMENDMENT AND WAIVER AGREEMENT]
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