HomeMy WebLinkAbout2014-01-14; Municipal Water District; Resolution 1487EXHIBIT 2
1 RESOLUTION NO. 1487
3
6
9
27
28
2 A RESOLUTION OF THE CARLSBAD MUNICIPAL WATER DISTRICT
(CMWD) BOARD OF DIRECTORS OF CARLSBAD, CALIFORNIA
APPROVING AN AGREEMENT BETWEEN AND AMONG THE CITY OF
4 CARLSBAD (CITY) AND THE CARLSBAD MUNICIPAL WATER
DISTRICT (CMWD), CABRILLO POWER I LLC AND CARLSBAD
5 ENERGY CENTER LLC (COLLECTIVELY, NRG), AND SAN DIEGO GAS
& ELECTRIC (SDG&E), ADDRESSING CITY AND CMWD SUPPORT
FOR A CHANGE IN THE PROPOSED TECHNOLOGY OF THE
7 APPROVED CARLSBAD ENERGY CENTER PROJECT (CECP) PLANT
AND THE SUBMITTAL OF A PETITION TO AMEND (PTA)
8 APPLICATION TO THE CALIFORNIA ENERGY COMMISSION (CEC)
FOR APPROVAL OF THIS TECHNOLOGY CHANGE, CONDITIONED
UPON THE DECOMMISSIONING, DEMOLITION, REMOVAL AND
REMEDIATION OF THE CURRENT ENCINA POWER STATION (EPS)
SITE, AS WELL AS OTHER CHANGES IN CECP PLANT DESIGN,
11 ENERGY INFRASTRUCTURE AND PROPERTY CONSIDERATIONS
BENEFICIAL TO THE RESIDENTS OF CARLSBAD
12
13
WHEREAS, in May of 2012, the California Energy Commission approved NRG's
14
application for certification ofthe Carlsbad Energy Center Project (CECP), That approval was for
15
a 558 Megawatt combined cycle power plant located east ofthe existing Encina Power Station
16 "
17 (EPS), between the railroad tracks and Interstate 5, As a part of that approval, 3 ofthe 5 boiler
18 units at the existing EPS would be decommissioned, with the remaining 2 boiler units
1^ continuing to operate. Consequently, the decommissioning ofthe entire plant (all 5 units) and
20
21
22
23
24 WHEREAS, the City participated as an intervener in the proceedings before the
25 California Energy Commission (CEC) concerning the application for certification of the CECP and
vigorously opposed the approval of said application; and
the demolition and removal ofthe existing EPS structures would not occur unfil an unspecified
and uncertain future date. The CECP is now fully permitted and could proceed to construction
and operation; and
9
10
11
12
13
1 WHEREAS, during the pendency of said proceedings, the City took certain legislative
2 acfions concerning the construction of a new power plant in the Coastal Zone; and
3
WHEREAS, the CEC acknowledged that the CECP would be inconsistent with said
4
legislative actions, including the City's General Plan and related land use ordinances,
5
regulafions and standards, but overrode said inconsistencies and approved the application for
6
7 certification on the grounds that the CECP was required for public convenience and necessity
8 and there were not more prudent and feasible means of achieving public convenience and
necessity; and
WHEREAS, since October of 2012, the energy supply environment in Southern California
has dramatically changed. The San Onofre Nuclear Generation Station (SONGS) ceased
operafion in January 2012. In June 2013, SDG&E and Southern California Edison determined
14 they would not recommence power generation at SONGS, The closure of SONGS has caused an
15 increased and accelerated need for power generation facilities in Southern California, The
California Independent System Operator (CAISO) has determined that additional power
generation capacity is currently needed in the San Diego Region by 2018; and
WHEREAS given the CAISO determination, SDG&E is interested in entering into a Power
Purchase Agreement (PPA) with NRG, but only if NRG is willing to change the proposed
21 technology of the approved CECP from a "combined-cycle configuration" plant to a "peaker
22 configuration" plant and submit a Petition to Amend (PTA) application to the CEC for approval
of this technology change, NRG is interested in submitting a PTA application, but only ifthe City
would be supportive of such an application; and
///
16
17
18
19
20
23
24
25
26
27
28 2-
5^
10
11
12
13
16
17
18
19
20
23
24
25
26
27
28
agreement acceptable to all three parties, supporting a change in the proposed CECP
technology conditioned upon the decommissioning, demolition, and remediation ofthe current
Encina Power Station site, as well as other changes in energy infrastructure and property
1 WHEREAS on December 3, 2013, the City Council adopted Resolution No, 2013-288
2 directing "staff to negotiate with SDG&E and NRG in an attempt to reach a mutually beneficial
3
4
5
6
7 considerations beneficial to the residents of Carlsbad"; and
8 WHEREAS, staff negotiated based on NRG's intention to submit a PTA application to the
^ CEC for an amendment to the existing approval of the CECP which would provide for a
redesigned electrical generating facility that would have a smaller environmental footprint,
lower profile and lower stack heights utilizing a "peaker configuration" and would facilitate
retirement and removal ofthe existing Encina Power Station; and
14 WHEREAS, the three parties reached an agreement on certain non-binding terms and
15 entered into a Memorandum of Understanding (MOU), dated December 20, 2013. The MOU
clarified the intentions and obligations ofthe three parties with respect to the negotiation of a
formal, binding Agreement and set forth the terms that would be included in an Agreement;
and
WHEREAS, City staff, CMWD staff, NRG and SDG&E have drafted an Agreement
21 incorporating the terms from the MOU; and
22 WHEREAS, the Agreement will provide significant benefits to the Carlsbad Municipal
Water District as well as increasing energy supplies to the region. Some of those benefits
include:
• NRG will amend its CECP project, proposing a plant that is more
environmentally friendly, lower profile, utilizing "peaker configuration"
3-
53
2
4
1 technology, with the amount of power generation and hours of operation
capped,
• NRG will immediately begin the process to completely shut down and
3 demolish the Encina Power Stafion structures at no cost to taxpayers and begin
the process to remediate and redevelop the site,
• SDG&E will pursue the relocafion its operations yard ("North Coast Service
5 Center") at NRG's expense and transfer ownership ofthe service center property
(along with the Cannon Park site) from SDG&E to the City, freeing up the service
^ center land for more appropriate uses. If it is not possible to relocate the service
7 center, NRG will pay the city $10 million.
NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District Board of
8
g Directors, as follows:
10 1, The above recitations are true and correct,
11
12
13
14
15 3, That the Vice President of the Board of Directors of the Carlsbad Municipal
16 Water District is authorized to execute the attached agreement with the City of
Carlsbad, Cabrillo Power I LLC, Carlsbad Energy Center LLC, and San Diego Gas & Electric,
i:
2, That it is in the best interests of the Carlsbad Municipal Water District to enter
into the attached agreement (Exhibit A) with the City of Carlsbad, Cabrillo Power I LLC,
Carlsbad Energy Center LLC, and San Diego Gas & Electric,
19
20
21
22 ///
///
///
///
23 ///
24
///
25
III
26
Ill
27
28
s
17
i;
19
20
21
22
23
24
25
26
27
28
AYES: Board Members Packard, Wood, Blackburn,
1 PASSED, APPROVED AND ADOPTED at a Joint Special Meefing of the Carlsbad Municipal
2 Water District Board of Directors and the Carlsbad City Council, held on the 14th day of Januarv
3
2014, by the following vote:
4 "
5
6
7 NOES: None
8 ABSENT: Board Members Hall, Douglas
9
10
11
12 MARK PACKARD, Vice President
ATTEST: 13
14
1^ BARBARA ENGLESON, Smrretary
(SEAL)
SETTLEMENT AGREEMENT
DATED AS OF JANUARY 14,2014
BETWEEN AND AMONG
THE CITY OF CARLSBAD,
CARLSBAD MUNICIPAL WATER DISTRICT,
CABRILLO POWER I LLC,
CARLSBAD ENERGY CENTER LLC
AND
SAN DIEGO GAS & ELECTRIC COMPANY
LIST OF EXHIBITS
Exhibit A Legal Description of the Encina Site
Exhibit B Map of the Encina Site
Exhibit C Area Map of the Encina Site
Exhibit D Form of NRG Support Letter
Exhibit E Form of City Support Letter
Exhibit F Form of Assumption of Obligations Agreement
Exhibit G Form of Amendment
Exhibit H Form of Memorandum of Agreement
Exhibit I Form of Fossil Fuel Deed Restriction
Exhibit J Legal Descripfion of North Coast Services Center Site
Exhibit K Map of North Coast Services Center Site
Exhibit L Legal Description of Parcel 11
Exhibit M Map of Parcel 11
Exhibit N Legal Description of Cannon Park
Exhibit 0 Map of Cannon Park
Exhibit P Legal Descripfion of Agua Hedionda North Shore Bluff Parcel
Exhibit Q Map of Agua Hedionda North Shore Bluff Parcel
Exhibit R Form of Guaranty
Exhibit S Map of Encina Redevelopment Site
Exhibit T Map of CECP Site
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is entered into as of January 14,2014,
by and among the City of Carisbad, a charter city, located in San Diego County (the "City"), and
Carlsbad Municipal Water District ("CMWD"). Cabrillo Power I LLC and Carlsbad Energy
Center LLC (collectively, "NRG"), and San Diego Gas & Electric Company ("SDG&E"). The
City, NRG and SDG&E are sometimes referred to in this Agreement collecfively as the "Parties"
and individually as a "Party", except that SDG&E is a Party solely for purposes of Article 5 and
Article 12. Unless otherwise defined in this Agreement, initially capitalized terms used in this
Agreement shall have the meaning given them in Article 1 below.
The Parties are entering into this Agreement to resolve long-standing disputes between
the City and NRG regarding tiie Carlsbad Energy Center Project ("CECP" or the "Project"), and
to provide for the redevelopment of the site of the Encina Power Station. This Agreement, if and
when it becomes effective according to its terms, provides for, among other things: (i) the
retirement, decommissioning, demolition and removal of the Encina Power Station, (ii) the
remediation and redevelopment of the Encina Redevelopment Site (as defined below), (iii) the
permitting, constmction and development of the CECP, (iv) the relocation and constmction of
the New Service Center (as defined below), and (v) other changes in energy infrastmcture and
property considerafions beneficial to the residents of Carlsbad.
RECITALS
THIS AGREEMENT is made with reference to the following facts and circumstances:
A. WHEREAS, NRG owns real property located in the City, in the County of San
Diego, Califomia, bounded generally by Cannon Road to the south, Interstate 5 to the east, tiie
Agua Hedionda Lagoon to the north, and Carlsbad Boulevard to the west (the "Encina Site"). A
legal description of the Encina Site is attached to this Agreement as Exhibit A. and a map ofthe
Encina Site is attached as Exhibit B. provided that in the event of any inconsistency between the
map and the legal description, the legal description shall control. Also attached, as Exhibit C, is a
map of the area in which the Encina Site is located;
B. WHEREAS, at the Encina Site, NRG operates facihties known as Units 1-5
(individually a "Unit" and collectively the "Units," the "Encina Power Station" or the "Station")
for the purpose of generating and selling electric power. The Encina Power Station is currenfiy
subject to a Resource Adequacy Agreement ("RA Agreement") and a Participating Generator
Agreement ("Participating Generator Agreement") with the Califomia Independent System
Operator ("ISO");
C. WHEREAS, NRG filed an application for the constraction and development of the
CECP with the Califomia Energy Commission (the "Commission") on or about September 2007
(Docket No. 07-AFC-06) (the "Application");
D. WHEREAS, the City conditionally opposed tiiis AppHcation;
E. WHEREAS, from 2007 through 2012 tiie Commission processed this AppHcation
and, in May of 2012, issued its Order (Order No. 12-0531-06) and Decision approving the
constmction and development of the Project subject to the conditions stated therein;
F. WHEREAS, the San Onofre Nuclear Generation Station ("SONGS") ceased
operation January 2012 and in June 2013 Southem Califomia Edison determined that they would
not recommence power generation at SONGS;
G. WHEREAS, tiie early closure of SONGS has caused an increased and accelerated
need for power generation facilities in Southem Califomia, and the ISO has determined that
additional generating capacity is currenfiy needed in the San Diego region;
H. WHEREAS, NRG and SDG&E have represented to the City that tiiey are interested
in entering into a tolling or power purchase agreement ("Proposed PPA") for the Project but only
if (i) SDG&E and NRG are able to come to mutually acceptable terms on the Proposed PPA and
(ii) NRG amends its permits for the Project to allow a change in proposed technology
("Amendment"), and NRG has represented that it would amend its permits only ifthe City would
be supportive of such an Amendment;
I. WHEREAS, tiie Amendment would request approval of a redesigned electrical
generating facility that would have a smaller enviromnental footprint, lower profile, and lower
stack heists, and would facilitate the refirement and removal of the Encina Power Station;
J. WHEREAS, on December 3,2013, the City adopted a resolution that provides:
"That the City Council does hereby direct staff to negotiate with SDG&E and
NRG in an attempt to reach a mutually beneficial agreement acceptable to all
three parties, supporting a change in the proposed CECP technology conditioned
upon the decommissioning, demolition, and remediation of the current Encina
Power Station site, as well as other changes in energy infrastmcture and property
considerations beneficial to the residents of Carlsbad.";
K. WHEREAS, the City, NRG and SDG&E contemplate that SDG&E will relocate its
North Coast Service Center provided that tiie cost of the proposed relocafion and constmction of
the New Service Center be done in a manner which is cost-neutral to SDG&E and its ratepayers;
and
L, WHEREAS, the Parties now wish to fully and finally resolve disputes involving
the CECP and tiie Encina Power Station, by providing for, among other things: (i) the retirement,
decommissioning, demolition, and removal of the Encina Power Station, (ii) the remediation and
redevelopment of the Encina Redevelopment Site (as defined below), (iii) the provisions ofthe
Amendment and the construction and development of the CECP, (iv) the relocation and
constmction ofthe New Service Center, and (v) other changes in energy infrastmcture and
property considerations beneficial to the residents of Carisbad,
AGREEMENT
ACCORDINGLY, to settle long-standing disputes and in consideration of the mutual
covenants and agreements in this Agreement and for other good and valuable consideration, the
receipt and adequacy of which are acknowledged, the Parties agree to the following terms and
conditions:
ARTICLE 1
DEFINITIONS
1.1 Definitions
(a) "Affiliate" means, with respect to a Person, any Person that directly or indirectly
Controls, is Controlled by or is under Common Control with that Person.
(b) "Agreemenf shall have the meaning set forth in the opening paragraph of this
Agreement.
(c) "Amendment" shall have the meaning set forth in Recital H and set forth in
Exhibit G.
(d) "Application" shall have the meaning set forth in Recital C.
(e) "Assumption of Obligations" shall mean the agreement in recordable form
attached as Exhibit F.
(f) "Attorneys' Fees and Costs" means any and all reasonable attorneys' fees, costs,
expenses and disbursements, including, but not limited to, expert witness fees and costs, travel
time and associated costs, transcript preparation fees and costs, document copying, exhibit
preparation, courier, postage, facsimile, long-distance and communications expenses, court costs
and the costs and fees associated with any other legal, administrative or altemative dispute
resolution proceeding, fees and costs associated with execution upon any judgment or order, and
costs on appeal.
(g) "CEQA" means the Califomia Environmental Quality Act.
(h) "CECP" shall have the meaning set forth in the second opening paragraph of this
Agreement.
(i) "CECP Site" shall mean the approximately 30 acre site on which the newly
constmcted CECP will be situated and which is identified in the map attached as Exhibit T.
(j) "City" shall have the meaning set forth in the opening paragraph of this
Agreement.
(k) "Citv Support Letter" shall have the meaning set forth in Section 3.4(b)(i),
(1) "CMWD" shall have the meaning set forth in the opening paragraph of this
Agreement,
(m) "Commission" shall have the meaning set forth Recital C.
(n) "Control" means the power to direct the affairs or management of another Person,
whether by contract, operation of law or otherwise, "Controlled by" and "Controlling" have
correlative meanings. "Common Control" means that two Persons are both Controlled by the
same other Person.
(o) "DOE" mean the United States Department of Energy.
(p) "Effective Date" shall have the meaning set forth in Section 2.3(b).
(q) "Electric Reliability Removal Condifions" means, for one or more Units of the
Station, that:
(i) NRG has not received an order or determination from a federal, state or
local govemmental agency or authority, including, but not limited to, the ISO, with
jurisdiction requiring NRG to confinue operating a Unit or Units at the Station or fmding
that a Unit or Units are necessary for reliability, thereby preventing the shutdown of one
or more Units; and
(ii) NRG has obtained any necessary approvals for the Shutdown, including
from the ISO, the Califomia State Water Resources Control Board, and tiie San Diego
County Air Pollution Control District.
(r) "Encina Power Station" shall have the meaning set forth in Recital B,
(s) "Encina Redevelopment Site" shall mean the area comprising the Encina Site,
excluding, however, the CECP Site. The Encina Redevelopment Site will be subject to futtire
redevelopment and a map of the area is identified on Exhibit S.
(t) "Encina Site" shall mean the entire approximately 95 acre site currently occupied
by the Encina Power Station, exclusive of the SDG&E switchyard, and which is identified on
Exhibits A, B, and C.
(u) "EPC Contract Notice to Proceed" shall have the meaning set forth in Section
(v) "Event of Defauh" shall have the meaning set forth in Article 7.
(w) "Excluded Transfer" shall mean:
(i) any Transfer to an Affiliate of NRG, provided that NRG Energy, Inc.
continues to guarantee performance of NRG's obligations under the Guaranty;
(ii) any Transfer of an easement or license over a portion of the Site, that
would not allow the Transferee to use that portion of the Site to generate electricity with
equipment or machinery that is powered by the combustion of fossil fuels and which
would not otiierwise interfere witii NRG's ability to perform its obligations under this
Agreement;
(iii) After demolition and removal of above-ground stmctures in satisfaction of
Section 6.1, any Transfer of an interest, in addition to an easement or license, over a
portion ofthe Site, provided tiiat such Transfer would not allow the Transferee to use that
portion ofthe Site to generate electricity with equipment or machinery that is powered by
the combustion of fossil fuels and which would not otherwise interfere with NRG's
ability to perform its obligations under this Agreement; and
(iv) any condemnation or exercise of eminent domain authority, whether
whole or partial, by a govemmental authority or otiier entity with statutory authority
under state law to exercise eminent domain authority.
(x) "Existing Deed of Tmst" means any deed of fi-ust securing the Existing Secured
Loan and encumbering the site.
(y) "Existing Secured Loan" means the term loan and revolving credit facility under
the credit agreement, dated as of July 1, 2011 as amended or modified from time to time, among
NRG Energy, Inc., as borrower, the several banks and other financial institutions or entities from
time to time parties to the credit agreement, Morgan Stanley Senior Funding, Inc. as syndication
agents, and CitiCorp North America, as administrative agent and collateral agent, which loan is
secured by the Existing Deed of Tmst.
(z) "Existing Secured Loan Parties" means the several banks and other financial
institutions or entities that are from time to time parties to the existing secured loan, Morgan
Stanley Senior Funding, Inc., as syndication agents, and Morgan Stanley Senior Funding, Inc., as
administrative agent and collateral agent, and any of their successors and assigns, including any
person receiving an interest in the site or the member interests of NRG from any of the foregoing
as a result of their exercise of any of their rights or remedies under the Existing Secured Loan.
(aa) "Feasibilitv Studies" shall have the meaning set forth in Section 5.3(a).
(bb) "FERC" means the Federal Energy Regulatory Commission or any successor.
(cc) "Final Shutdown Date" means the eariier of (a) midnight of December 31, 2017
or (b) the commercial operation date of CECP (as such term is defined under the facility's PPA),
(dd) "Fossil Fuel Restriction" shall have the meaning set forth in Section 3.5,
(ce) "Guaranty" shall have the meaning set forth in Secfion 2.5.
(ff) "Indemnified Parties" means the City (including, but not limited to, all of its
respecfive boards, commissions, departments, agencies and other subdivisions), all Agents ofthe
City, and their respective heirs, legal representatives, successors and assigns, and each of them.
(gg) "Indenmifv" means indemnify, protect, defend and hold harmless.
(bh) "Independent Guaranty Amount" shaU have the meaning set forth in Section
2.5(a).
(ii) "lODs" shall have the meaning set forth in Section 2.4(b).
Oj) "ISO" shall have the meaning set forth in Recital B.
(kk) "ISO Tariff shall mean the tariff of the ISO, as it may be amended, supplemented,
or replaced (in whole or in part) from time to time.
(11) "Laws" shall mean all present and future applicable laws, ordinances, mles,
regulations, permits, authorizations, orders and requirements, whether or not in the
contemplation of the Parties, that may affect or be applicable to the Encina Site or any part ofthe
Encina Site (including, without limitation, any subsurface area), or the use ofthe Encina Site and
the buildings and unprovements on or affixed to the Encina Site, including, without limitation,
all consents or approvals required to be obtained from, and all mles and regulations of, and all
building and zoning laws of, all federal, state, county and municipal governments, and their
departments, bureaus, agencies or commissions, authorities, board of officers, or any other body
or bodies exercising similar functions, having or acquiring jurisdicfion ofthe Encina Site, and
similariy the term "Law" shall be constmed to mean the same as the above in the singular as well
as the plural.
(mm) "Loss" or "Losses" when used with reference to any indemnity means any and all
claims, demands, losses, liabilities, damages (including foreseeable and unforeseeable
consequential damages to the extent arising from third party claims), liens, obligations, interest,
injuries, penalties, fines, lawsuits and other proceedings, judgments and awards and costs and
expenses (including, without limitation, reasonable Attorneys' Fees and Costs, and consultants'
fees and costs) of whatever kind or nature, known or unknown, contingent or otherwise.
(uu) "Memorandum of Agreement" shall have the meaning set forth in Secfion 2.2(a)
of this Agreement.
(oo) "New Service Center" shall refer to the new service center to be constmcted in
connecfion with the North Coast Service Center as set forth in Section 5.1(b).
(pp) "New Service Center Locafion" shall have the meaning as set forth in Section
(qq) "North Coast Service Center" shall refer to the exisfing facility that is owned by
SDG&E and that is located at the current North Coast Service Center Site.
(rr) "North Coast Service Center Site" shall refer to the cun-ent location ofthe Nortii
Coast Service Center located at the comer of Cannon Road and Carisbad Boulevard. A legal
description ofthe current property is attached hereto as Exhibit J. a map ofthe current property is
attached hereto as Exhibit K.
(ss) "North Coast Service Center Redevelopment Site" shall mean the area comprised
of tiie North Coast Service Center Site, Cannon Park, and the Agua Hedionda North Shore Bluff
Parcel.
(tt) "NRG" shall have the meaning set forth in the opening paragraph of Agreement,
(uu) "NRG Support Letter" shall have the meaning set fortii in Section 3.4(a)(n).
(vv) "NSC Cost Cap" shall have the meaning set forth in Section 5.4(a).
(ww) "NSC Costs" shall have the meaning set forth in Section 5,4(a).
(xx) "Official Records" means the official records ofthe City and ofthe County of San
Diego, Cahfomia.
(yy) "Party" or "Parties" shall have the meanings set forth in the opening paragraph of
this Agreement.
(zz) "Person" means any individual, partnership, corporation (including, but not
limited to, any business tmst), limited Habihty company, joint stock company, tmst,
unincorporated association, joint venture or any other entity or association, the United States, or
other federal, state or local govemmental entity.
(aaa) "Petition to Amend" shall have the meaning set forth in Section 6.1.
(bbb) "Proiect" shall have the meaning set forth in the opening paragraph of this
Agreement.
(ecc) "Proposed PPA" shall have the meaning set forth in Recital H,
(ddd) "Pmdent Utility Practices" means tiie practices, methods, standards and acts
engaged in or approved by a significant portion of the applicable segment ofthe electric power
generation industry pertaining to facilities of the type, similar size and location to Encina Power
Station that, in light of the facts that are known, or reasonably should have been known, at the
time a decision was made, would have been expected to accomplish the desired result in a
manner consistent with Laws, permits, codes, standards, equipment manufacturer's
recommendations, reliability, safety, environmental protection, economy, and expedition.
Pmdent Utility Practices are not limited to the optimum practice, method, standard or act to the
exclusion of all others, but rather to those practices, methods, standards and acts generally
acceptable or approved by a significant portion of the applicable segment ofthe electric power
generation industry in the United States.
(eee) "RA Agreemenf shall have the meaning set forth in Recital B.
(fff) "Relocation Guaranty Amount" shall have the meaning set forth in Section 2.5(c).
(ggg) "SDG&E" shall have the meaning set forth in the opening paragraph of this
Agreement.
(hhh) "Shut Down" or "Shutdown" means the permanent and irrevocable cessation of
electricity generation operations at the Encina Power Stafion in accordance with all applicable
laws and regulations, such that the Encina Power Station may no longer be used to generate
electricity or reactive power on any basis (including, but not limited to, any reliabiHty-must-run
or other intermittent or emergency basis) or emit any hazardous materials in conjunction with the
operation of any electrical generation facilities comprising the Encina Power Station. For
purposes of this Agreement, "Shutdovm" does not include any significant hazardous materials
remediation acfivifies on the Site.
(iii) "Shut Down Guaranty Amount" shall have the meaning set forth in Section 2.5(b),
(jjj) "Shutdown Obligation" means tiie obligation of NRG to Shut Down the Encina
Power Station set forth in Section 3.1 (a)(ii),
(kkk) "SONGS" shall have the meaning set forth in Recital F.
(iii) "Station" shall have the meaning set forth in Recital B,
(mmm) "Term" shall have the meaning set forth in Section 2.1.
(unn) "Terminafion Notice" shall have the meaning set forth in Section 5.6(a).
(ooo) "Transfer" means sell, convey, assign, fi-ansfer, alienate or otherwise dispose of
(directiy or indirectiy, by one or more fi-ansactions, and by operation of law or otherwise) (i) all
or any material part of the ownership interest or rights in any portion of the Encina Site and/or
this Agreement, or (ii) all or a Confi-olling portion ofthe member interests in NRG.
Notwithstanding the generality of the foregoing, however, "Transfer" shall exclude (i) an
Excluded Transfer and (ii) any encumbrance executed in connection with a financing undertaken
by NRG for CECP.
(ppp) "Transferee" means a Person to whom a Transfer is made.
(qqq) "Umt" or "Units" shall have the meaning set forth in Recital B.
ARTICLE 2
GENERAL TERMS
2.1 Term of Agreement
The terni of this Agreement (the "Tenn") shall commence on the Effecfive Date (as
defined in Secfion 2.3(b)) and shall remain in effect until the Parties have fiilfilled all of their
obligafions under this Agreement, unless terminated earlier in writing in accordance with the
terms and conditions of this Agreement.
2.2 Covenants Running with the Land
(a) Recordation of Memorandum of Agreement. The City and NRG agree to
execute, acknowledge, and cause a memorandum of this Agreement substantially in the form
attached to this Agreement as Exhibit H (the "Memorandum of Agreemenf) to be recorded in
the Official Records as soon as possible following the Effecfive Date in accordance with
Califomia Civil Code Secfion 1468.
(b) Binding on Successors. Upon recordation of the Memorandum of Agreement as
provided in Section 2.2(a) above, this Agreement shall constitute covenants mnning with the
Encina Site binding on all successors and assigns of NRG; provided, however, this Agreement,
including the covenants on the part of NRG, shall not be binding on the Existing Secured Loan
Parties or any of their successors or assigns.
(c) Termination of Agreement. Upon any termination of this Agreement, the City
shall, at NRG's written request, execute a notice of termination of the Agreement to be recorded
in the Official Records, and this obligation of the City shall survive any such termination of this
Agreement.
2.3 Agreement Approvals and Effective Date
(a) NRG Approval. NRG has obtained all required approvals for it to enter into this
Agreement.
(b) City Approval. Once NRG has signed and delivered this Agreement to the City,
the City shall timely submit this Agreement to the City Council for approval. Notwithstanding
anytiiing in this Agreement to the contrary, NRG understands and agrees that no officer or
employee of tiie City has authority to bind the City to this Agreement unless and unfil the City
Council shall have duly adopted a resolution in its sole and absolute discretion approving this
Agreement. Therefore, any obligations of the Parties under this Agreement are contingent upon
such approval, and this Agreement shall not be effective unless and until such approvals are
obtained in accordance with the City's applicable ordinances and codes. If a City Council
resolution approving this Agreement becomes effective, then the effective date of this
Agreement (the "Effective Date") shall be the same date that such resolution becomes effective.
Notwithstanding the foregoing, if a resolution approving this Agreement does not become
effective by January 31, 2014, then this Agreement shall terminate and shall be of no force and
effect unless the City acting through the City Attomey, and NRG, in their respective sole
discretion, agree in writing to extend such date and such a resolution is duly enacted and
becomes effective on or before such extended date,
(c) SDG&E Approval. SDG&E may be required to obtain certain regulatory
approvals in connection with its obligations under Article 5 of this Agreement, including from
the Califomia Public Utilities Commission. To the extent such approvals are required, SDG&E
will use reasonable efforts to obtain all such required approvals as soon as commercially
practicable. The Parties agree tiiat SDG&E's obligations under this Agreement are contingent on
such approvals, if any.
10
2.4 Improvements
(a) Easements. The City will provide a project description to NRG regarding
easements for the Agua Hedionda Lift Station and the Vista-Carlsbad Interceptor Sewer Pipeline
that coordinates with the Poseidon easement. NRG shall submit an application to the
Commission within 60 days after receipt of project description and NRG will execute easements
within 10 days of Commission approval.
(b) PDP Land Transfers. Within 90 days ofthe Effective Date, NRG agrees to grant
Irrevocable Offers of Dedications ("lODs") for the Hubbs Site Parcel, Bluff Area Parcel, South
Power Plant Parcel, and Fishing Beach Parcel, as described in Planning Commission Resolution
6632, subject to reasonable restrictions and reservations necessary to ensure public safety and the
continuity of power plant operations.
2.5 Guaranty
(a) Independent Guaranty. NRG agrees to deliver to the City a Guaranty from
NRG Energy, Inc. in the form of Exhibit R and in the amount of five million dollars ($5,000,000)
(the "Independent Guaranty Amount") within ten (10) busmess days from the Effective Date.
The City shall release this amount once all obligations under this Agreement have been satisfied
to the City's satisfaction; provided, however, that if the Commission does not issue a final
decision approving the Amendment and NRG notifies the City in writing tiiat it is ending further
development of the CECP, and provided further that NRG does not have any outstanding
liabilities or obligations to the City under this Agreement, the City's consent to such request to
reduce this amount will not be unreasonably withheld.
(b) Shut Down Obligation. Within ten (10) business days after the Final Shut Down
Date, NRG will increase the amount of the Guaranty by twenty milHon dollars ($20,000,000)
(the "Shut Down Guaranty Amount"), bringing the total amount ofthe Guaranty to twenty five
million dollars ($25,000,000). Upon NRG's request, the City shall release tiie Shut Down
Guaranty Amount following NRG's satisfaction of all obligations under Section 6.1. Following
NRG's commencement of demolition and removal of above ground stmctures, and provided that
NRG does not have any outstanding liabilities or obligations to the City under this Agreement at
such time, NRG may request, and the City will reasonably consider, a proportionate reduction in
the Shut Down Guaranty Amount upon the completion of certain key milestones, with such
milestones and reductions to be established by NRG and the City at such time.
(c) Relocation of North Coast Service Center. Witiiin ten (10) business days after
the EPC Contract Notice to Proceed is issued, NRG will increase the amount of the Guaranty by
an additional amount of twenty two million five hundred thousand ($22,500,000) (the
"Relocation Guaranty Amounf) for a total Guaranty amount of forty seven million and five
hundred thousand dollars ($47,500,000). If the credit rafing for Carisbad Energy Center is equal
to or exceeds NRG Energy, Inc.'s credit rating as of the Effective Date, with the consent ofthe
City, which shall not be unreasonably withheld, NRG may elect to substitute a Guaranty from
Carlsbad Energy Center LLC for the Relocation Guaranty Amount. Upon NRG's request, the
City shall release the Relocation Guaranty Amount following NRG's satisfaction of all
obligations under Article 5. At NRG's request, tiie City will reduce the Relocation Guaranty
11
Amount in proportion to NRG's payments made in accordance with Article 5; provided, that if
NRG makes the ten miUion dollar ($10,000,000) payment under Section 5.6(b) following
issuance of the Termination Notice, the City shall release the entire Relocation Guaranty Amount.
ARTICLE 3
POWER STATION SHUTDOWN PROCESS
3.1 Agreement to Permanently Shut Down the Encina Power Station
(a) Shutdown Obligation.
(i) Within thirty (30) days of the Effective Date, NRG shall initiate measures
to Shut Down Units 1-5 of the Encina Power Station. Such measures shall include, but
not be limited to, amending the compliance plan for the Encina Power Station in
connection with the State Water Resource Control Board's regulation addressing the use
of once-through cooling by coastal power plants.
(ii) Subject to the Electiic Reliability Removal Conditions and provided that
(x) the Califomia Pubhc Utilities Commission has issued a final decision approving a
power purchase agreement for CECP and (y) the Conimission has issued a final decision
approving the Amendment, NRG agrees to Shut Down tiie Encina Power Station no later
than the Final Shutdown Date (the "Shutdown Obligation"). Notwithstanding the
foregoing, if NRG issues a final notice to proceed with constmction of CECP without
having received Califomia Public Utilities Commission approval, such condition shall be
deemed satisfied.
(iii) Subject to the provisions of Section 3.3, NRG will dihgentiy apply for and
exercise its best efforts to obtain any regulatory approvals and permits needed to Shut
Down Units 1-5 and to ensure that the Electric Reliability Removal Conditions are
satisfied as soon as reasonably possible. NRG will not, directiy or indirectiy, request that
any regulatory agency with jurisdiction over the Shut Down ofthe Encina Power Station
deny or delay the approvals needed for the Shut Down. Further, NRG will take no action
which is cause for the regulatory agency to deny or delay any approvals or other matters
needed to satisfy the Electric Reliabihty Removal Conditions.
(iv) The Electric Reliability Removal Conditions are solely for the benefit of
NRG. If some, but not all, of the Electiic Reliability Removal Condifions are not
safisfied for reasons other than an Event of Default by NRG or NRG's failure to timely
obtain a needed approval for the Shut Down, then NRG, in its sole and absolute
discretion, may upon not less than ten (10) days' written nofice to the City describing in
reasonable detail the unsafisfied condition(s) either: (x) suspend performance of its
obligation to Shut Down the apphcable Unit or the Encina Power Station only until such
condition is satisfied, or (y) waive the satisfaction of such conditions as NRG may set
forth in its sole and absolute discretion in a written notice to the City.
(v) Notwitiistanding anytiiing in this Agreement to the contrary, if the United
States Department of Energy ("DOE"). ISO or other entity having jurisdiction over NRG
12
or the Encina Power Station orders or decrees it necessary for any Unit or Units to
continue to operate past the Final Shutdown Date, then NRG shall be permitted to operate
the applicable Unit or Units in accordance with such order or decree. Nothing in this
subsection (v) shall relieve either Party from its support obligations under Section 3.4 or
prevent either Party from challenging the effectiveness or legality ofsuch order, provided,
however, each Party shall provide the other Party copies of any such order and any legal
challenges to such order. In the event NRG receives an order under this Section 3.1(a)(v).
NRG and City shall comply with Section 3.4 until such time as the Unit or Units is/are
released from such order.
(vi) Notwithstanding any provision in this Agreement to the contirary, in the
event that CECP becomes commercially operable and the Encina Power Station
continues to operate, NRG will pay the City (on a montiily basis), a liquidated damages
payment equal to $l/kW-mo. multiplied by the greater of (a) the generating capacity of
the Unit or Units (in MW) remaining online past the Final Shutdown Date or (b) 300 MW.
Ifthe Shutdown occurs during a portion of a calendar month, then the monthly payment
shall be pro-rated based on the number of days during which the Unit or Units were
operational and the number of days in that calendar month. Such liquidated damages
shall continue until the Shutdown of the Encina Power Station,
(b) Accelerated Shutdown. Nothing in this Agreement shall prohibit NRG from an
accelerated Shutdown of a Unit or Units, whereby the Shutdown would occur in advance ofthe
Final Shutdown Date.
(c) Post-Shutdown Activities. Within ninety (90) days ofthe Shutdown ofthe
Encina Power Station, NRG (i) shall ensure that the Encina Power Station facilities and
improvements are in a secure, inoperable condition and do not pose a physical or environmental
safety hazard to members of the public or visitors ofthe Encina Site, consistent witii Pmdent
Utility Practices and all applicable regulatory requirements and approvals; (ii) shall seek to
terminate applicable permits and registrations that are no longer needed after the Shutdown of
the Encina Power Station, (iii) shall request terminafion ofthe ISO Participating Generator
Agreement and FERC market-based rate tariff as applicable to the Encina Power Station, and (iv)
shall take appropriate actions in support of those requests, consistent with all applicable legal
requirements,
3.2 Notices Regarding Electric Reliability Removal Conditions
NRG shall prompfiy provide the City with copies of any and all notices, correspondence
or other documents to or from the ISO, FERC or other agency relating to the Electiic Reliability
Removal Conditions; provided, however, that failure to provide copies ofsuch notices shall not
constitute an event of default under Section 7,1,
3.3 Limitation on Future Contracts; No Actions to Prolong Need for Encina Power
Station
With the exception of any contractual arrangements required to be entered into in
connection witii Electric Reliability Removal Conditions, NRG represents, warrants and
13
covenants that its obligation to Shut Down the Encina Power Station under this Agreement shall
not be limited by any existing contracts it has or may in the future have to operate any or all of
the Units on the Encina Site. NRG further agrees not to take any actions that may prolong the
need for the Encina Power Station to continue operating for electric reliability or any other
purposes inconsistent with the terms and conditions of tiiis Agreement; the City nonetheless
acknowledges that NRG has the right, in its sole and absolute discretion so long as consistent
with the terms and conditions of this Agreement, to continue to operate, maintain, repair, replace
and improve the Encina Power Station, in accordance with all applicable laws, regulations, and
permits, until the Final Shutdown Date; provided, however, that NRG may be required to operate,
maintain and repair the Encina Power Station beyond the Final Shutdown Date ifthe Electric
Reliability Removal Conditions have not been met.
3.4 Mutual Support for Shutdown Efforts and NRG's Regulatory Compliance Pending
Shutdown
(a) NRG's Support for Shutdown Efforts.
(i) No later than fifteen (15) business days after approval of the Amendment
by the Commission, NRG shall submit to the ISO a written nofice of intent to retire the
Encina Power Station as of Final Shutdown Date.
(ii) Within five (5) business days of the City's request, NRG shall deliver a
letter (the "NRG Support Letter"), in the forni attached as Exhibit D. to other
govemmental agencies or third parties,
(b) City's Support of NRG's Regulatory Compliance Pending Shutdown. As long
as there is not an Event of Default by NRG under this Agreement, for period beginning with the
Effective Date and ending on the Final Shutdown Date, the City agrees to support any and all
regulatory approvals required for the continued operation of any ofthe Units before Shutdown,
such support to consist of
(i) within five (5) business days of NRG's request tiie City shall submit a
letter from the City Attomey ("City Support Letter"), to the relevant govemmental
agency, in the form attached to this Agreement as Exhibit E. and
(ii) upon reasonable prior notice provided by NRG, the City shall participate
in a reasonable number of meetings with the relevant govemmental agencies, provided
that the City's participation under this subsection 3.4(b)(ii) shall consist of verbally
affirming City's support for the renewal or issuance of the relevant regulatory approval
for the Encina Power Station, as stated in the City Support Letter,
In the event of a dispute between the Parties regarding the City's compliance with its
obligations under subsections 3.4(b)(i)-(ii). and before NRG delivers any Notice of Default under
Article? for noncompHance with these obligations, both Parties shall, upon request of either
Party, meet and confer in good faith to attempt to resolve such dispute over a period often (10)
business days. Further, NRG shall not deliver a Notice of Default under Article 7 for City's
alleged non-compliance with its obligations under Sections 3.4rb)(i)-(ii) before the expiration of
the ten (10) business day period following delivery to the City of written notice ofsuch dispute.
14
Any other actions by the City in support of NRG's regulatory compliance pending Shutdown in
addition to the actions specified under tiiis Section 3.4(b) shall be at the sole discretion ofthe
City. Ifthe City decides to rescind its support on or after the Final Shutdown Date, then the City
may, in its sole discretion, take such acfion as it deems appropriate to oppose or condition tiie
continued operation of tiie Encina Power Station or any portion ofthe Encina Power Station,
including, but not limited to, opposing the extension or renewal of any operating permits and/or
the imposifion by govemmental regulatory authorifies of air and water quality mifigation
measures or other operating requirements or limitations.
3.5 Fossil Fuel Deed Restriction
NRG agrees to limit fossil fuel generation on the Encina Site to the generating capacity
proposed in the current project description (e.g., six LMS 100s) to be proposed in the Petition to
Amend and any black start equipment potentially required by the ISO. NRG agrees that no
flitiire modifications to the CECP shall be undertaken tiiat exceed the environmental envelope,
profile or footprint of CECP as presented in the Amendment. Within ten (10) business days after
the Shut Down, NRG shall record a restrictive covenant for the benefit ofthe City in the Official
Records, in the form attached to this Agreement as Exhibit I, which provides that no portion of
the Encina Site, with the exception of the CECP Site, may be used to generate electricity with
equipment or machinery that is powered by the combustion of fossil fiiels (except the following
used on the Encina Site: ancillary equipment or machinery; back-up generators; or distributed
energy sources approved by the City in a redevelopment plan), all as more particularly set forth
in such exhibit (the "Fossil Fuel Restriction"), Except with respect to the Existing Secured Loan
Parties as provided in Secfion 2.2 of this Agreement, the Fossil Fuel Restriction shall constittite
covenants mnning with the land, binding on successors and assigns of NRG. In the event that an
Existing Secured Loan Party, or its successor or assignee, takes ownership or possession ofthe
Site and fails to assume NRG's obligations and rights under this Agreement under Section 2.2 of
this Agreement, and the Agreement terminates after the Fossil Fuel Restiiction has been recorded,
then following any such termination the City shall, at the written request of NRG or the Existing
Secured Loan Party (or its successor or assignee), execute and cause a quitclaim deed to be
recorded in the Official Records evidencing the termination ofthe Fossil Fuel Restriction; this
obligation ofthe City shall survive any such termination of this Agreement. Notwithstanding the
foregoing, and also as provided in Section 2.2 of this Agreement, the Parties understand and
agree that, in the event of a refinancing of the Existing Secured Loan that provides for fiill
repayment, NRG shall ensure - supported by written evidence reasonably safisfactory to the City
- that this Agreement, including the Fossil Fuel Restriction, has priority over the deed of tmst
securing the refinanced loan and, accordingly, that the Fossil Fuel Restricfion shall thereafter be
binding on all successors and assigns of NRG without excepfion,
ARTICLE 4
AMENDMENTS TO THE CECP PERMITS
4.1 City Support of CECP Permits Amendment Applications
(a) Provided that NRG is not in default under any obhgations to the City under the
Agreement and in substanfial compliance with the provisions ofthe Amendment agreed to by the
15
City, the City agrees not to oppose permits or authorities accommodating the continued operation
ofthe Encina Power Station through the Final Shutdown Date.
(b) The City shall support the Amendment; provided that tiie City has a reasonable
and meaningful opportunity to review and comment on the Amendment prior to filing with the
Commission to confirm that the Amendment is consistent with Exhibit G and the Amendment is
filed with the Commission consistent with the provisions of Exhibit G. The City will issue the
City Support letter, a form of which is set forth in Exhibit E, in connection with the Amendment
and to govemment agencies as requested by NRG. Upon reasonable prior notice provided by
NRG, the City shall also participate in a reasonable number of meetings with the relevant
govemmental agencies, provided that the City's participation under this subsection shall consist
of verbally affirming City's support for the Amendment.
(c) As per the request of the City, NRG will incorporate a provision in the Pefition to
Amend to be filed with the Commission in connection with the Amendment and in any power
purchase agreement for CECP that CECP will not operate between the hours of midnight and 6
am, except to the extent reasonably required for reliability-related purposes or as otherwise
required by the ISO Tariff A decision by the Commission declining to apply this limitation to
the CECP shall not absolve the City of its support obligation set forth in Section 4.1(b),
4.2 Services for CECP
(a) NRG agrees to work with tiie Carlsbad Fire Department in good faith to address
those fire safety concems that were previously raised in connection with the Application in the
Amendment and any other reasonable fire safety concems during the Amendment process,
(b) NRG agrees to reimburse the City for costs incurred in accordance with actual
services performed by the City as contemplated by currently adopted fee and permit schedules,
including applicable and appropriate impact fees, which are not expected to exceed $1 MM.
(c) The City, CMWD and NRG will work together to establish related services to
CECP, including recycled water supply, potable water supply, sanitary sewer service and fire
response.
(d) The City will work with NRG to accommodate gas line service to CECP on the
east side of the railroad tracks.
ARTICLE 5
SDG&E PROVISIONS
5.1 Relocation of the North Coast Service Center
(a) SDG&E has advised tiie City that with tiie early retirement of SONGS and future
closures of plants that use once-through cooling technology, the SDG&E area will be deficient of
electricity generating capacity by 2018, SDG&E has requested that the City support the
Amendment for the development of CECP as set forth in this Agreement
16
(b) In addition and subject to regulatory approvals and other conditions and
agreements specified here, SDG&E has agreed to the relocation of SDG&E's North Coast
Service Center, currenfiy located at the comer of Cannon Road and Carisbad Boulevard ("North
Coast Service Center Site"), with tiie North Coast Service Center Site and certain other
properties to be transferred to the City upon completion and occupancy ofthe newly relocated
North Coast Service Center ("New Service Center").
(c) The New Service Center is to be built at NRG's sole cost, subject to the NSC Cost
Cap (defined below), and to SDG&E's specifications and conditions. NRG will build the New
Service Center, or will cause it to be built, in accordance with such specifications; provided,
however, that the City, in its sole discretion, may elect to build the New Service Center, or to
cause it to be built. The Parties acknowledge and agree tiiat the cost ofthe relocation and the
constmction ofthe New Service Center, and the stiiicture ofthe transaction, will be at no cost to
the City or to SDG&E, and in a manner that is cost-neutral to SDG&E and its ratepayers,
(d) Ifthe City and SDG&E do not proceed with the proposed relocation ofthe New
Service Center, then NRG shall make the payment to the City in accordance with Section 5.6(b)
below.
5.2 Identification of Property for the New Service Center Location
(a) The City and SDG&E will work together to identify a muttially acceptable
altemative location for the New Service Center to be located ("New Service Center Location").
Currently SDG&E and the City may review: (i) the land currentiy owned by SDG&E north of
Cannon Road known as Parcel 11 (a legal description of Parcel 11 is attached hereto as Exhibit L.
a map of Parcel 11 is attached hereto as Exhibit M) or (ii) another site mutually acceptable to
both the City and SDG&E, as determined by each in its respective and sole discretion, provided
that such site shall be made available at no cost to SDG&E. The City shall cooperate on
community outreach and education on the New Service Center Location.
(b) In the event that SDG&E and the City cannot agree on a mutually acceptable New
Service Center Location by March 1, 2016, then either the City or SDG&E may provide the
Termination Notice as set forth in Section 5,6 below.
5.3 Feasibility Studies and Ongoing Coordination Regarding SDG&E Specifications
and Conditions for the New Service Center
(a) Within sixty (60) days after the Effective Date, SDG&E will meet with the City to
identify and cause the environmental, land use, traffic and nodal analysis sttidies associated with
studying the feasibility of the New Service Center ("Feasibilitv Sttidies") to be prepared.
SDG&E shall pay for the Feasibility Sttidies subject to reimbursement for such studies as
provided for below.
(b) As soon as reasonably possible, but by no later than March 31 '\ 2015, SDG&E
will provide all required specifications and conditions for the New Service Center to NRG and
the City. In connection with this SDG&E will provide a budget and cost statement representing
its budget for the NSC Costs (defined below), including, to the extent available, (i) any available
budget or cost estimates for the constraction of the New Service Center; and (ii) a statement or
17
budget of all other costs for the relocation (mcluding the Feasibility Sttidies) ofthe North Coast
Service Center. Such budget will not exceed the NSC Cost Cap as provided in Section 5.4 and
will be prepared such that the New Service Center can be reasonably and pmdently constmcted
for an amount that will not exceed the NSC Cost Cap.
5.4 New Service Center Relocation and Construction Cost Cap: NRG Funding and
Conditions
(a) NRG agrees to fiind up to $22.5 million ($22,500,000) (tiie "NSC Cost Cap")
toward the "all-in" cost of the relocation of the North Coast Service Center according to
SDG&E's specifications and conditions, including the cost of constmction, furniture, fixtures,
equipment, IT infrastmcture, architectural, engineering and consulting costs, all relocafion costs,
reasonable contingencies and the reimbursements for the Feasibility Studies under Section 5.3(a)
(collectively, the "NSC Costs").
(b) NRG's obligation to fimd the NSC Costs is conditioned upon NRG's issuance of
a final notice to proceed under its engineering, procurement and constraction conttact for CECP
(the "EPC Contract Notice to Proceed").
(c) Upon NRG's issuance of the EPC Confi-act Notice to Proceed, NRG, SDG&E and
the City shall meet within thirty (30) days of such final notice to review the projected NSC Costs
in relafion to the NSC Cost Cap and constracfion ofthe New Service Center.
(i) If the projected NSC Costs are less than or equal to the NSC Cost Cap,
and a Terminafion Notice has not been issued under Section 5.6. NRG will build the New
Service Center, or will cause it to be built, in accordance with SDG&E's specifications
and conditions; provided, however, that the City, in its sole discretion, may elect to build
the New Service Center, or to cause it to be built. Subject to the NSC Cost Cap and the
conditions and provisions stated herein, NRG agrees to fiind the NSC Costs. Subject to
the NSC Cost Cap, SDG&E will be reimbursed by NRG for costs associated with the
Feasibility Studies and such reimbursement shall be made as agreed by NRG and
SDG&E; provided, however, that any amounts reimbursed for Feasibility Studies will
reduce the NSC Cost Cap on a dollar-for-dollar basis.
(ii) If the projected NSC Costs exceed the NSC Cost Cap, SDG&E, NRG and
the City shall meet in good faith to consider potential modifications to this Article 5.
including, without reservation, changes to the New Service Center specifications and
condifions, the NSC Cost Cap, or agreements to fiind the costs in excess ofthe NSC Cost
Cap; provided, however, that any subsequent modifications will be strictiy subject to
execution of future binding definitive agreements and obtaining any required regulatory
approvals.
5.5 Conditions to SDG&E's Obligation to Relocate the North Coast Service Center
18
SDG&E's Relocation of the North Coast Service Center is subject to the following
conditions:
(a) Identification of the New Service Center Location in accordance with Section 5.2.
(b) SDG&E obtaining any required regulatory approvals with tiie understanding that
SDG&E will diligenfiy and in good faitii seek all regulatory approvals needed for the relocation
ofthe North Coast Service Center as contemplated in this Agreement.
(c) A Private Letter Ruling, if necessary, satisfactory to SDG&E, issued by the
Litemal Revenue Service confirming the tax fi-eatment ofthe transactions outiined herein.
(d) Constraction of the New Service Center and tumover of the completed and
operational New Service Center to SDG&E.
5.6 Termination of Proposed Relocation of the North Coast Service Center; NRG
Payment
(a) Either the City or SDG&E may issue a notice terminating the obligations and
agreement to relocate the North Coast Service Center (the "Termination Notice") under the
following circumstances:
(i) if the City and SDG&E cannot agree upon a mutually acceptable New
Service Center Location;
(ii) if consttnction of the New Service Center does not commence before the
third (3rd) anniversary of the commercial operation date for CECP;
(iii) if the projected cost of relocation of the North Coast Service Center cannot
be accomplished within the NSC Cost Cap, and SDG&E, NRG and the City are unable to
agree upon subsequent modifications pursuant to Section 5.4(c)(ii): or
(iv) if SDG&E and the City jointly elect not to proceed with the relocafion of
the North Coast Service Center.
(b) Within 30 days of receipt of the Termination Notice, NRG shall pay the City of
Carisbad the sum of $10 million ($10,000,000); provided, however, that NRG will owe this
amount only if CECP achieves commercial operation, in which case NRG shall make the
payment within 30 days of commercial operation or the Termination Notice, whichever is later.
Thus, ifthe New Service Center does not proceed and NRG does not fund the costs ofthe New
Service Center, NRG shall be responsible for the payment as provided in this Section 5.6(b),
(c) Notwithstanding any other provision in this Agreement, the City's issuance of a
Termination Notice will not affect NRG's remaining obligations under this Agreement, except to
the extent expressly set forth in this Article 5.
5.7 Transfer of SDG&E Property upon the Relocation of the North Coast Service
Center
19
upon tiie completion and occupancy of the New Service Center, SDG&E shall transfer (i)
tiie existing North Coast Services Center Site and buildings, (ii) Caimon Park (a legal description
of Cannon Park is attached hereto as Exhibit N, a map of Cannon Park is attached hereto as
Exhibit O). and (ni) the Agua Hedionda North Shore Bluff Parcel (APN 206-070-16) (a legal
description of the Agua Hedionda North Shore Bluff Parcel is attached hereto as Exhibit P, a
map ofthe Agua Hedionda Nortii Shore Bluff Parcel is attached hereto as Exhibit O), to the City
in fee simple, free and clear of all financial Habilities and financial liens, simultaneously with
SDG&E receiving tifie to the New Service Center, SDG&E will be responsible for remediating
preexisting environmental conditions to applicable industrial standards pursuant to applicable
law. The City and SDG&E will determine if such remediation shall be conducted before or after
the transfer of title. If tiie site is to be remediated prior to the transfer, SDG&E shall commence
the remediation within sixty (60) days after occupancy of the New Service Center, shall proceed
in a diligent and timely manner to remediate the site and shall then transfer the properties under
this Section 5.7 upon completion of the remediation. If the remediation is to occur following the
transfer, tiie City will provide at least one-hundred twenty (120) days notice that SDG&E is to
commence remediation of the site and the remediation shall proceed in a diligent and timely
manner to completion.
5.8 Long-Term Plan for Substation Improvements and Expansions
The Parties acknowledge that SDG&E has recently undertaken certain improvements and
upgrades ofthe Encina Power Station substation. The City has asked SDG&E to consider
relocating the Encina Power Station substation away from tiie Encina Site. SDG&E has agreed
that as part of a long-term plan, and contingent upon execution and regulatory approval ofthe
Proposed PPA, and subject to any otiier required regulatory approvals, it will work in good faitii
with the City to identify and ultimately permit a site, such tiiat any future material improvements
or expansions to the transmission system, beyond those needed for the CECP, be made at the
altemate site in lieu of the existing Encina Power Station. SDG&E will update the City at least
annually on the status of the long-term plan as it relates to the identification and permitting of
such a site. The City acknowledges and agrees that the substation design at the altemate site and
any associated transmission design will be based on SDG&E design standards and specificafions.
The altemate site witi be subject to a feasibility review by SDG&E to ensure a constmctible site.
Any design enhancements requested by the City that are not part of SDG&E's customary design
standard and specificafions will be paid for by the City unless SDG&E and City otherwise agree.
ARTICLE 6
REDEVELOPMENT PROCESS
6.1 Demolition and Removal of Above-Ground Structures
(a) Provided that (i) tiie Califomia Public UtiHties Commission has issued a final
decision approving a power purchase agreement for CECP and (ii) the Commission has issued a
final decision approving the Amendment, NRG agrees to fund at its sole cost the physical
demolition and removal of the above-ground stractures of the Encina Power Station in
accordance with Laws and the milestones set forth below. Notwithstanding the foregoing, if
NRG issues a final nofice to proceed with constmcfion of CECP without having received
20
Califomia Public Utilifies Conimission approval, such condition shall be deemed satisfied.
Details regarding the demolition and removal of the Encina Power Station will be incorporated
into the petition to amend ("Petition to Amend") the Commission-issued license for CECP in
which NRG seeks authority to consttiict CECP as reflected in Exhibit G, and following tiie
issuance of a decision by the Commission approving such Petition to Amend, NRG will obtain
all additional permits, if any, consistent with the schedule outlined below,
(b) Provided that (i) the Califomia Pubhc Utilities Conimission has issued a fmal
decision approving a power purchase agreement for CECP and (ii) the Commission has issued a
final decision approving the Amendment, NRG shall commence physical demolition and
removal ofthe above-ground stractures of the Encina Power Station witiiin one (1) year after
Shut Down. NRG will also use good faith efforts to identify opportunities to begin and
implement decommissioning prior to such date, including the removal of unused tanks.
Notwithstanding the foregoing, if NRG issues a final notice to proceed with constraction of
CECP without having received Califomia Public Utilities Conimission approval, such condition
shall be deemed satisfied,
(c) Provided that (i) the Califomia Public Utilities Commission has issued a final
decision approving a power purchase agreement for CECP and (ii) tiie Conimission has issued a
final decision approving the Amendment, NRG agrees to complete physical demolition and
removal ofthe above-ground stractures of the Encina Power Station witiiin two (2) years ofthe
commencement of demolition activities. Notwithstanding the foregoing, if NRG issues a final
notice to proceed with constraction of CECP without having received Califomia Public Utilities
Commission approval, such condition shall be deemed satisfied,
6.2 Redevelopment and Remediation
(a) The City and NRG acknowledge that they have a mutual interest in the producfive
reuse of the Encina Redevelopment Site. The City staff and NRG will work in good faith to
address the redevelopment of the Encina Redevelopment Site in the pending General Plan update.
(b) Ifthe City takes fee title to the North Coast Service Center Site, as contemplated
by Article 5 of this Agreement, the City and NRG work in good faith to consider a joint
development sfi-ategy for the Encina Redevelopment Site and the North Coast Service Center
Redevelopment Site, comprising basic principles to be idenfified in a subsequent binding
agreement.
(c) NRG shall present an initial proposed strategy for redevelopment of the Encina
Redevelopment Site to City of Carlsbad staff within one-hundred eighty (180) days ofthe
Effective Date of this Agreement.
(d) With the exception of any remediation required under a Conimission decision
approving the Amendment or applicable law, remediation of the Encina Redevelopment Site
shall be undertaken in conjunction with redevelopment of the Encina Redevelopment Site.
(e) The City and NRG shall work in good faith to determine a mutually acceptable
and appropriate alignment for the Coastal Rail Trail; provided, however, that failure to reach
21
agreement on the alignment for tiie Coastal Rail Trail shall not impact performance ofthe
obligations established in this Agreement.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Defaults by NRG
Each of the following shall constittite an "Event of Defaulf by NRG under this
Agreement:
(a) NRG fails to perform any of its obligations set forth in this Agreement, which
failure is not a separate Event of Default, and which continues without cure for a period of thirty
(30) days following the date the City provides written notice specifying the nature ofsuch failure;
provided, however, if a longer period of time than thirty (30) days is reasonably necessary to
effect such cure, then no Event of Default shall exist as long as NRG commences such cure
within such thirty (30) day period and then proceeds diligenfiy in the prosecution ofsuch cure to
completion.
(b) NRG fails to perform its obligation to permanentiy Shut Down the Encina Power
Station by the Final Shutdown Date (except solely as expressly provided in Section 3,1(a)).
(c) NRG fails to (i) timely perfonn its obligations under Section 6.1. or (ii) fails to
make payment under Section 5.6(b). provided such failure to pay is not cured within five
business days.
(d) Any representation made by NRG to the City contained in this Agreement proves
to be false or misleading in any material respect at the time that such representation was made.
(e) NRG files a petifion for relief, or an order for relief is entered against NRG in any
case under applicable bankmptcy or insolvency law that is now or later in effect, whether for
liquidation or reorganization, and this Agreement has been rejected or deemed rejected by the
debtor in such case.
(f) NRG attempts to Transfer this Agreement, any portion ofthe Encina Site, or both,
to a Transferee without the prior written consent ofthe City.
(g) A Transferee, not including an Existing Secured Loan Party, fails to execute an
Assumption of Obligations and does not comply with the Shutdown Obligation,
7.2 Defaults by the City
The following shall constitute an Event of Default by the City under this Agreement:
(a) The City fails to perform any of its obhgations set forth in tiiis Agreement, which
failure continues without cure for a period of thirty (30) days following the date NRG provides
written notice specifying tiie nature of such failure; provided, however, if a longer period of time
22
than thirty (30) days is reasonably necessary to effect such cure, then no Event of Default shall
exist as long as the City commences such cure within such thirty (30) day period and then
proceeds diligenfiy in the prosecution of such cure to completion.
(b) Any representation made by the City to NRG contained in this Agreement proves
to be false or misleading in any material respect at the time that such representation was made.
ARTICLE 8
REMEDIES
8.1 Remedies of the City
(a) Specific Performance.
(i) If an Event of Default by NRG occurs, then the City shall have the right to
bring an action for specific performance or other equitable relief, or any other remedy
authorized by applicable law,
(ii) In the event that a Transferee, with the exception of an Existing Secured
Loan Party, fails to execute an Assumption of Obligations and does not comply with the
Shutdown Obligation, the City shall have the right of specific performance against the
Transferee to require it to comply with the Shutdown Obligation.
(b) Suspension of Performance. Notwithstanding anything to the contt-ary in tiiis
Agreement, if at any time an Event of Default by NRG occurs before the Shutdown, then the
City shall, in addition to its other remedies under this Section 8.1. have the right to suspend
performance of its obligations under this Agreement until such Event of Default is cured by
NRG.
(c) NRG's Consent to Specific Performance and Waiver of Rights.
(i) In any action by the City for specific performance or injunctive relief
under Article 3, Article 4. and Section 6.1 and Section 6.2 of this Agreement, NRG
hereby consents to tiie City's right to seek specific performance of tiie Agreement.
Further, NRG agrees that the City is fiilly entitled to seek a preliminary or permanent
injunction to prevent fiirther breach of the Agreement; to compel performance in aid of a
decree of specific performance; or where the further breach may render specific
performance meaningless or otherwise impair the City's ability to obtain performance of
the Agreement. In connection with such requests for specific performance or injunctive
relief, NRG acknowledges and agrees that:
a. Specific performance may be compelled to compel performance of
the following provisions of this Agreement: Article 3. Article 4. and Article 6;
b. Monetary damages are not an adequate remedy at law for the
breach of these provisions. Further and notwithstanding tiie liquidated damages
provided for under Section 3.1 (a)(vi) and the fact tiiat tiiis liquidated damage provision is
23
damages do not constimtes an adequate remedy at law such as to deny entry of a decree
of specific performance of the Agreement or eitiier a preliminary or permanent
injunction;
c. The Agreement is fair and reasonable to NRG and the failure to
specifically enforce the Agreement would effectively deny the City the rights bargained
for under this Agreement;
d. NRG's breach ofthe Agreement, as well as the continued or
threatened breach of tiie Agreement, will cause great and irreparable injury to the City
tiiat can only be remedied by specific performance of tiie Agreement and issuance of a
preliminary and/or permanent injunction;
e. Specific performance and issuance of a preliminary and/or
permanent injunction cannot be denied based on tiie argument that there is a need for
continuous supervision by the court or lack of mutuality or any other equitable defense or
objection;
f In connection witii the request for a preluninary and/or permanent
injunction which constittites a mandatory injunction compelling NRG's performance
under tiie Agreement, NRG acknowledges that this extraordinary form of relief is
appropriate and proper under tiie unique circumstances of this Agreement and that a
mandatory injunction should issue if the City demonstrates that it will incur irreparable
injury if performance is not compelled. NRG fiirther agrees that in the event of a
mandatory injunction compelling performance that such injunction shall not by stayed by
any appeal of the injunctive order;
g. NRG waives any otiier equitable defense to the entry of the
injunction;
h. NRG waives any requirement that tiie city post a bond or any other
security in connection with such injunctive rehef; and
i. The remedies here shall be in addition to any and all other legal or
equitable remedies that maybe available to the City under this agreement.
Initials of NRG <J72.
8.2 Remedies of NRG
(a) Specific Performance. If an Event of Default by the City occurs, tiien NRG shall
have the right to bring an action for specific performance or otiier equitable relief, or any other
remedy authorized by applicable law, subject to the limitation set forth in Section8.3.
(b) Suspension of Performance. Notwithstanding anything to tiie contrary in this
Agreement, if at any time an Event of Default by the City occurs before tiie Shutdown, then
NRG shall, in addition to its other remedies under tiiis Section 8.2. have the right to suspend
24
(a) Specific Performance. If an Event of Default by the City occurs, then NRG shall
have the right to bring an action for specific performance or other equitable relief, or any other
remedy authorized by apphcable law, subject to the limitation set forth in Section 8.3.
(b) Suspension of Performance. Notwithstanding anything to the contrary in this
Agreement, if at any time an Event of Default by the City occurs before the Shutdown, then
NRG shall, in addition to its other remedies under this Section 8.2. have the right to suspend
performance of its obligations under this Agreement until such Event of Default is cured by the
City.
(c) Consent to Specific Performance and Waiver of Rights by the City. In any
action by NRG for specific performance or injunctive relief under this Agreement, City hereby
consents to NRG's right to seek specific performance of the Agreement. Further, City agrees that
NRG is fully entitled to seek a preliminary or permanent injunction to prevent further breach of
the Agreement; to compel performance in aid of a decree of specific performance; or where the
further breach may render specific performance meaningless or otherwise impair NRG's ability
to obtain performance ofthe Agreement. In connection with such requests for specific
performance or injunctive relief. City acknowledges and agrees that:
(i) Specific performance may be compelled to compel performance of the
provisions of this Agreement;
(ii) Monetary damages are not an adequate remedy at law for the breach of
these provisions;
(iii) The Agreement is fair and reasonable to City and the failure to specifically
enforce the Agreement would effectively deny NRG tiie rights bargained for under this
Agreement;
(iv) City's breach of the Agreement, as well as the continued or threatened
breach ofthe Agreement, will cause great and irreparable injury to NRG that can only be
remedied by specific performance of the Agreement and issuance of a preliminary and/or
permanent injuncfion;
(v) Specific performance and issuance of a preliminary and/or permanent
injunction cannot be denied based on the argument tiiat there is a need for continuous
supervision by the court or lack of mutuahty or any other equitable defense or objection;
(vi) In connection with the request for a preliminary and/or permanent
injunction which constitutes a mandatory injunction compelling City's performance
under the Agreement, City acknowledges that tiiis extraordinary form of relief is
appropriate and proper under the unique circumstances of this Agreement and that a
mandatory injunction should issue if NRG demonstrates that it will incur irreparable
inj ury if performance is not compelled. City fiirther agrees that in the event of a
mandatory injunction compelling performance that such injunction shall not by stayed by
any appeal of the injunctive order;
(vii) City waives any other equitable defense to tiie entry of the injunction;
25
(viii) City waives any requirement that NRG post a bond or any other security
in connection with such injunctive relief; and
(ix) The remedies here shall be in addition to any and all other legal or
equitable remedies that maybe available to NRG under this agreement.
hiitials of City IAA^
8.3 Limitations of Liability
(a) Direct Monetary Damages: No Consequential or Incidental Damages. The
City and NRG agree that they may be held liable for any monetary or Hquidated damages arising
directiy out of a breach of the obligations of this Agreement or any Event of Default.
Notwithstanding this, neither the City nor NRG shall be liable for, and the City and NRG each
waive any claim for, any incidental or consequential damages, arising out of any Event of
Default on the part of NRG or the City.
(b) No Individual Liability. NRG agrees that no member, commissioner, official,
advisor, agent or employee of the City will be personally liable to NRG, or any successor in
interest, due to an Event of Default by the City. The City agrees that no directors, officers,
shareholders, members, employees, advisers or agents of NRG or of its Affiliates will be
personally liable to the City, due to an Event of Default by NRG,
8.4 LIQUIDATED DAMAGES
(a) IN THE EVENT THAT CECP BECOMES COMMERCIALLY OPERABLE
AND THE ENCINA POWER STATION CONTINUES TO OPERATE, NRG HAS AGREED
TO MAKE THE LIQUIDATED DAMAGE PAYMENT AS PROVIDED BY SECTION 3 1(A)
(VI).
(b) NRG AND THE CITY HAVE AGREED TO THE DAMAGE PROVISION SET
FORTH IN SECTION 3.1(A) (VI). NRG AND THE CITY ACKNOWLEDGE AND AGREE
THAT THIS PROVISION APPLIES SOLELY TO CONTINUED OPERATION OF THE
ENCINA POWER PLANT AS SET FORTH IN SECTION 3.1(A) (VI) AND FURTHER
ACKNOWLEDGE THAT THIS PROVISION IS REASONABLE AT THE TEVIE OF THE
AGREEMENT AS THAT TERM IS USED IN CALIFORNIA CIVIL CODE SECTION 1671
TO THE EXTENT NECESSARY TO SUPPORT THE STATEMENT THAT THIS
PROVISION IS REASONABLE AT THE TIME OF THE AGREEMENT: (I) NRG
ACKNOWLEDGES, AGREES AND UNDERSTANDS THAT THE CITY WOULD INCUR
DAMAGES IN THE EVENT THAT ENCINA POWER STATION CONTINUED TO
OPERATE AFTER THE DATE THAT CECP BECAME COMMERCL\LLY OPERABLE
BUT THAT THOSE DAMAGES AND COMPENSATION TO THE CITY WILL BE
EXTREMELY DIFFICULT AND IMPRACTICAL TO ASCERTAIN IN PART DUE TO THE
FACT THAT THE CONTINUED OPERATION HAS AN IMPACT ON THE CITY AND ITS
RESIDENTS AND THE QUANTIFICATION OF THOSE POTENTIAL DAMAGES
CANNOT BE DONE AT THIS TIME; (II) NRG ADMITS THAT THIS IS A REASONABLE
PROVISION GIVEN THE DIFFICULTY OF QUANTIFYING THESE DAMAGES AND THE
26
AMOUNT OF REASONABLE COMPENSATION TO THE CITY IN THE EVENT THAT
THE ENCINA POWER PLANT CONTINUES IN OPERATION.
(c) THE LIQUIDATED DAMAGES SO IMPOSED ARE NOT ESITENDED AS A
FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE
SECTIONS 3275 OR 3369, BUT ARE INTENDED TO CONSTITUTE LIQUIDATED
DAMAGES TO THE CITY AS PROVIDED BY CALIFORNIA CIVIL CODE SECTIONS
1671(b). NRG AGREES, ACKNOWLEDGES AND REPRESENTS THAT THE
LIQUIDATED DAMAGES SET FORTH HEREIN ARE REASONABLE AT THE TIME OF
THIS AGREEMENT AND ARE NOT A PENALTY OR FORFEITURE AND NRG IS
ESTOPPED FROM ARGUflsJG THAT THE LIQUIDATED DAMAGE PROVISION IS
UNENFORCEABLE OR CONSTITUTES A PENALTY.
(d) NOTWITHSTANDESTG THE IMPOSITION AND PAYMENT OF SUCH
LIQUIDATED DAMAGES, NRG ACKNOWLEDGES AND AGREES THAT THE CITY
MAINTAINS ITS RIGHTS TO SEEK SPECIFIC PERFORMANCE OF THE AGREEMENT
AS PROVIDED FOR IN SECTION 8.1(C), ACKNOWLEDGES THAT THE LIQUIDATED
DAMAGES DO NOT CONSTITUTE AN ADEQUATE REMEDY AT LAW AND AGREES
THAT SUCH LIQUIDATED DAMAGES DO NOT IMPAIR OR PREVENT THE CITY
FROM SEEKDMG SPECIFIC PERFORMANCE OF ARTICLE 3 (OR ANY OTHER
PROVISION OF THIS AGREEMENT) OR ESfJUNCTIVE RELIEF IN CONNECTION WITH
THE ENFORCEMENT OF THIS AGREEMENT.
Initials of NRG c^g.
Initials of City
ARTICLE 9
INDEMNITY
9.1 Indemnification of the City
Subject to the terms, conditions and limitations set forth below and to the extent
permitted by law, NRG agrees to and shall Indemnify the Indemnified Parties from and against
ariy and all Losses (including, vdthout limitation, any judgments, settlements, consent decrees,
stipulated judgments or other partial or complete terminations of any actions or proceedings that
require any ofthe Indemnified Parties to take any action) imposed upon, incurred by or asserted
agamst any ofthe Indemnified Parties in connection with the occurrence or existence of any of
the following arising as a result of this Agreement: (i) any accident, injury to or death of any
Person or loss or damage to property occurring on the Encina Site; (ii) any accident, injury to or
death of any person or loss or damage to property occurring near or around the Encina Site and
that shall be directiy or indirecfiy caused by tiie negligent act or omission or willfiil misconduct
of NRG or its agents, tenants or invitees; (iii) any development, consttoiction, operation, use,
occupation, management, marketing, leasing, condition, financing or refinancing, sale or
Transfer ofthe Encina Site; (iv) non-compliance with applicable Laws, including, but not limited
to. Laws relating to hazardous materials, disabled access (including, witiliout limitation, the
27
American with Disabilities Act) and unreinforced masonry buildings; (v) any tiiird-party
contracts entered into by or on behalf of NRG with respect to the Encina Site; (vi) any civil
rights acfions or other legal acfions or suits initiated by any occupant or invitee ofthe Encina Site;
and (vn) any claim that NRG and the City are joint venturers. Notwithstanding the foregoing,
NRG shall not be required to Lidemnify the Indemnified Parties against Losses if such Losses
are caused by the negligence or willful misconduct of the City or the Agency or their respective
directors, officers, employees, agents, successors and assigns, including the negligence or willfiil
misconduct ofthe Indemnified Parties (or failing to act) or in the City's regulatory capacity in
the exercise of its police powers.
9.2 Terms and Conditions
The foregoing indemnity is subject to the following terms and conditions.
(a) Immediate Obligation to Defend. NRG specifically acknowledges that it has an
immediate and independent obligafion to defend the Indemnified Parties from any claim that is
actually or potentially within the scope of the indemnity provisions of Section 9.1. even if such
claim is or may be groundless, fraudulent or false. Such obligafion arises at the time such claim
is tendered to NRG by an Indemnified Party and continues at all times after such tender.
(b) Notice. The hidemnified Parties agree to give notice to NRG with respect to any
suit or claim initiated against the Indemnified Parties, Such notice shall be given at the address
for notices of NRG set forth in this Agreement, and in no event later than the earlier of (i) ten (10)
days after valid service of process as to any suit or (ii) fifteen (15) days after receiving written
nofification ofthe filing of such suit or the assertion ofsuch claim, which the City has reason to
believe is likely to give rise to a claim for indemnity under this Article. If notice is not given to
NRG in a timely manner as provided in this Article, then, except as provided below, NRG's
liability shall terminate as to the matter for which such notice is not given, provided that failure
to notify NRG shall not affect the rights of the Indemnified Parties or the obligations of NRG
under this Article unless NRG is materially prejudiced by such failure, and then only to the
extent of such prejudice,
(c) Defense. NRG shall, at its option but subject to tiie reasonable consent and
approval ofthe Indemnified Parties, be entitied to contt-ol the defense, compromise or settlement
of any such matter through counsel of NRG's own choice; provided, however, in all cases the
Indenmified Parties shall be entitled to participate in such defense, compromise, or settlement at
their respective expense. If NRG shall fail, however, in the Indemnified Party's reasonable
judgment, within a reasonable fime following notice from the Indemnified Parties alleging such
failure, to take reasonable and appropriate action to defend, compromise or settle such suit or
claim, the Indemnified Parties shall have the right promptly to hire counsel at NRG's sole
expense to cany out such defense, compromise or settlement, which expense shall be
immediately due and payable to the Indemnified Parties upon receipt by NRG of a property
detailed invoice; provided that NRG must consent in wrifing to any proposed compromise or
settlement, which consent shall not be unreasonably withheld.
(d) Insurance. The indemnity contained in Section 9.1 shall not be limited by any
insurance carried by NRG.
28
(e) Survival. The indemnity contained in this Section shall survive any termination
of this Agreement as to matters or Losses that arise during the term of this Agreement,
(f) No Limitation on Other Obligations. The agreement to Indemnify set forth
above is in addition to, and in no way shall be constmed to limit or replace, any other obligations
or liabilities that NRG may have to the City under any other permits, approvals or agreements
with the City, at common law or otherwise.
(g) Limitation. NRG has no duty under Section 9.1 regarding any claim against any
Indemnified Parties directly related to the existence, interpretation and/or enforcement of this
Agreement,
ARTICLE 10
SETTLEMENT
10.1 Negotiated Settlement
The discussions that have produced this Agreement have been conducted with the explicit
understanding that they are privileged under Califomia Evidence Code section 1152 and Federal
Rule of Evidence 408, and that such discussions shall be without prejudice to the position of any
party and may not be used in any manner in any proceeding or otherwise, except as may be
necessary to enforce this Agreement or as otherwise required by law.
ARTICLE 11
RESERVED
11.1 Reserved
ARTICLE 12
GENERAL
12.1 Notices
Except as otherwise expressly provided in this Agreement, all notices, demands,
approvals, consents and other formal communications between the Parties required or permitted
under this Agreement shall be in writing and shall be deemed given and effecfive upon the date
of receipt (i) if given by personal delivery on a business day (or the next business day if
delivered personally on a day that is not a business day), (ii) if sent for next-business-day
delivery (with all expenses prepaid) by a reliable ovemight delivery service, with receipt of
delivery, or (iii) if mailed by United States registered or certified mail, first class postage prepaid,
to the Party at their respective addresses for notice designated below. For convenience ofthe
Parties, copies of notices may also be given by facsunile to the facsimile number set forth below
or such other number as may be provided from time to time by notice given in the manner
required under this Agreement; however, neither Party may give official or binding notice by
29
facsimile. The effective time of a notice shall not be affected by the receipt, before receipt ofthe
original, of a facsimile copy of the notice.
(a) In the case of a notice or communication to the City:
Celia A. Brewer, Esq.
City Attomey for City of Carlsbad
General Counsel for Carlsbad Municipal Water District
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Celia.Brewer@carlsbadca.gov
Stephen C. Hall, Esq.
Troutman Sanders LLP
805 SW Broadway, Suite 1560
Portland, OR 97205
stephen.hall@troutmansanders.com
Fletcher W. Paddison, Esq.
Troutman Sanders LLP
11682 El Camino Real
Suite 400
San Diego, CA 92130-2092
fletcher,paddison@troutmansanders.com
(b) And in the case of a notice or communication sent to NRG or NRG:
Sean Beatty
West Region General Counsel
NRG Energy, Inc.
P.O. Box 192
Pittsburg, CA 94565
sean.beatty@nrgenergy. com
(c) And in the case of a notice or communication sent to SDG&E:
Diana Day
Assistant General Counsel
SDG&E
101 Ash Street,
HQll
San Diego, CA 92101
dday@semprautilities. com
Every notice given to a Party to this Agreement, under the terms of this Agreement, must
state (or must be accompanied by a cover letter that states) substantially tiie foUowing:
30
(i) the Section of this Agreement under which the notice is given and the
action or response required, if any;
(ii) if applicable, the period of time within which the recipient ofthe notice
must respond;
(iii) if approval is being requested, shall be cleariy marked "Request for
Approval under the Settlement Agreemenf;
(iv) if a notice of a disapproval or an objection that is subject to a
reasonableness standard, shall specify with particularity the reasons for the disapproval or
objection; and
(v) if applicable, that the failure to object to the notice within the stated time
period will be deemed to be the equivalent of the recipient's approval of or consent to the
request for approval that is the subject matter of the notice.
If a request for approval states a period of time for approval that is less than the time
period provided for in this Agreement for such approval, the time period stated in this Agreement
shall be the controlling time period.
In no event shall a recipient's approval of or consent to the subject matter of a notice be
deemed to have been given by its failure to object to such notice if such notice (or the
accompanying cover letter) does not comply with the requirements of this Section.
Any mailing address or facsimile number may be changed at any time by giving written
notice ofsuch change in the manner provided above at least ten (10) days before the effective
date of the change.
12.2 Relationship of Parties: No Joint Venture or Partnership
The subject of this Agreement is an agreement for the Shutdown ofthe Encina Power
Station and for a private development, with neither Party acting as the agent ofthe other Party in
any respect. None ofthe provisions in this Agreement is intended to or shall be constmed or
deemed to render the City or SDG&E a partner in NRG's business, or joint venttirer or member
in any development or joint enterprise witii NRG, including, but not limited to, the development
or reuse ofthe Encina Site. NRG shall Indemnify the City against any Losses relating to any
claim of any such joint venture as provided in Section 9.1. Nothing in this Agreement is intended
to or shall be constmed to create any principal-agent relationship between SDG&E, NRG and the
City. Nothing in tiiis Agreement is intended or shall be constraed as to create any obligation
between SDG&E and NRG to enter into the Proposed PPA.
12.3 Conflict of Interest
No member, official or employee of the City may have any personal interest, direct or
indirect, in this Agreement, nor shall any such member, official or employee participate in any
decision relating to this Agreement tiiat affects her or his personal interest or the interests of any
corporation, partnership or association in which she or he is interested directiy or indirectly.
31
12.4 Time of Performance
(a) Expiration. All performance dates (including cure dates) expire at 5:00 p.m.,
Carlsbad, Califomia time, on the performance or cure date, unless otherwise provided in this
Agreement.
(b) Weekends and Holidays. A performance date that falls on a Saturday, Sunday
or City holiday (or official City furlough day) is deemed extended to the next City working day.
(c) Days for Performance. All periods for performance specified in this Agreement
in terms of days shall be calendar days, and not business days, unless otherwise expressly
provided in this Agreement.
(d) Time of the Essence. Time is of the essence for each and every provision of this
Agreement.
12.5 Interpretation of Agreement
(a) Words of Inclusion. The use of the terms "including," "such as" or words of
similar import when following any general term, statement or matter shall not be constraed to
limit such term, statement or matter to the specific items or matters set forth, whether or not
language of non-limitation is used with reference to such items or matters. Rather, such terms
shall be deemed to refer to all other items or matters that could reasonably fall within the
broadest possible scope of such statement, term or matter.
(b) No Presumption Against Drafter. This Agreement has been negotiated at arm's
length and between Persons sophisficated and knowledgeable in the matters dealt with in this
Agreement. In addifion, experienced and knowledgeable legal counsel has represented each
Party. Accordingly, this Agreement shall be interpreted to achieve the intents and purposes of the
Parties, without any presumption against the Party responsible for drafting any part of this
Agreement.
(c) Costs and Expenses. The Party on which any obligafion is imposed in this
Agreement shall be solely responsible for paying all costs and expenses incurred in the
performance of such obligation, unless the provision imposing such obligation specifically
provides to the conttary.
(d) Agreement References. A reference to any provision, term or matter "in this
Agreement," "herein" or "hereof," or words of similar import shall be deemed to refer to any and
all provisions of this Agreement reasonably related in the context of such reference, unless such
reference refers solely to a specific numbered or lettered Article, Section or paragraph of this
Agreement or any specific subdivision of this Agreement.
(e) Approvals and Consents. Unless this Agreement otherwise expressly provides,
all approvals, consents or determinations to be made by or on behalf of the City under this
Agreement shall be made by the City Attomey, or his or her designee. Unless otherwise provided
in this Agreement, whenever approval, consent or satisfaction is required of a Party under this
Agreement, it shall not be unreasonably withheld or delayed. Except with respect to matters that
32
a Party is expressly entitied to determine in its sole and absolute discretion, the reasons for
disapproval shall be stated in reasonable detail in writing. Approval by NRG or the City to or of
any act or request by the other shall not be deemed to waive or render uimecessary approval to or
of any similar or subsequent acts or requests.
(f) Recitals. The Recitals in this Agreement are included for convenience of
reference only and are not intended to create or imply covenants under this Agreement. In the
event of any conflict or inconsistency between the Recitals and the terms and conditions of this
Agreement, the terms and conditions of this Agreement shall control.
(g) Captions. The captions preceding the articles and Sections of this Agreement
have been inserted for convenience of reference only. Such captions shall not define or limit the
scope or intent of any provision of this Agreement.
(h) Exhibits. Whenever an "Exhibit" is referenced, it means an attachment to this
Agreement unless otherwise specifically identified. All such Exhibits are incorporated in this
Agreement by reference.
12.6 Successors and Assigns
This Agreement is binding upon and will inure to the benefit of the successors and
assigns ofthe City and NRG, except as expressly provided in this Agreement,
12.7 No Third Party Beneficiaries
This Agreement is made and entered into for the sole protection and benefit ofthe Parties
and their successors and assigns, except as expressly provided in this Agreement.
12.8 Counterparts
This Agreement may be executed in counterparts and by facsimile or e-mailed signatures,
each of which is deemed to be an original, and all such counterparts shall constitute one and the
same instmment.
12.9 Entire Agreement
This Agreement, including the attached Exhibits, consfitutes the entire agreement
between the Parties with respect to the subject matter of this Agreement and supersedes all
negotiations or previous conditions mentioned in or incidental to this Agreement (including, but
not limited to, any term sheets relating to any of the subject matters of this Agreement). No parol
evidence of any prior draft of this Agreement or any other agreement shall be permitted to
contt-adict or vary the terms of this Agreement,
12.10 Governing Law
33
The laws of the State of Califomia shall govem the interpretation and enforcement of this
Agreement. As part of the consideration for the City's entering into this Agreement, all Parties
agree that all actions or proceedings arising directiy or indirectly under tiiis Agreement may, at
the sole option of the City, be litigated in courts located within the State of Califomia, in the City
of Carlsbad, County of San Diego, and the Parties expressly consent to the jurisdiction of any
such local, state or federal court, and consents that any service of process in such action or
proceeding may be made by personal service upon the Parties wherever the Parties may then be
located, or by certified or registered mail directed to the Parties at the address set forth in this
Agreement for the delivery of notices.
12.11 Extensions by the City
Upon the request of NRG or SDG&E, the City Attomey or his or her designee may, by
written instmment and in the City Attomey's sole and absolute discretion, extend the time for
NRG's or SDG&E's performance of any term, covenant or condition of this Agreement or
permit the curing of any default upon such terms and conditions as he or she determines
appropriate, including but not limited to, the time within which NRG or SDG&E shall agree to
such terms or conditions, provided, however, any such extension for more than thirty (30) days
or the permissive curing of any particular material default will be subject to approval of the City
Council by resolution and in no event will operate to release any of NRG's or SDG&E's
obligations nor constitute a waiver of the City's rights regarding any other term, covenant or
condition of this Agreement or any other default in, or breach by NRG or SDG&E of, this
Agreement or otherwise affect comphance with the otiier dates for performance under this
Agreement.
12.12 Further Assurances
The Parties agree to execute and acknowledge such other and further documents as may
be necessary or reasonably required to effectuate the terms of this Agreement. The City Attomey
is authorized to execute on behalf of the City any closing or similar documents and any contracts,
agreements, memoranda or similar documents with State, regional or local entities or other
Persons that are necessary or proper to achieve the purposes and objectives of this Agreement
and do not materially increase the obligations of the City under this Agreement, if the City
Attomey determines that the document is necessary or proper, consistent with the purposes of
this Agreement and in the City's best interests. The City Attomey's signature of any such
document shall conclusively evidence such a determination by him or her.
12.13 Severability
If any provision of this Agreement, or its application to any Person or circumstance, is
held invalid by any court, the invalidity or inapplicability of such provision shall not affect any
other provision of this Agreement or the appUcation of such provision to any other Person or
circumstance, and the remaining portions of this Agreement shall continue in full force and
effect, unless enforcement of this Agreement as so modified by and in response to such
invalidation would be grossly inequitable under all of the circumstances, or would frustrate the
fundamental purposes of this Agreement.
34
12.14 Amendments; Corrections of Technical Errors
Neither this Agreement nor any of its terms may be terminated, amended or modified
except by a written instmment executed by the Parties. Any material amendment of this
Agreement shall be subject to approval of the City Council by resolufion. If by reason of
inadvertence, and contrary to the intention of the Parties, errors are made in this Agreement in
the legal description or the reference to or within any Exhibit with respect to a legal description,
in the boundaries of any parcel in any map or drawing that is an Exhibit, or in the typing of this
Agreement or any of its Exhibits, the Parties by mutual agreement may correct such error by
written memorandum executed by them without the necessity of amendment of this Agreement.
The City Attomey may execute any such written memorandum on behalf of the City.
12.15 Representations, Warranties and Covenants
(a) NRG Representation, Warranties and Covenants. NRG represents, warrants,
and covenants to the City that as of the Effective Date, each of the following statements is
accurate and complete:
(i) Valid Existence; Good Standing. NRG represents that both Cabrillo
Power I LLC and Carlsbad Energy Center LLC are Delaware limited liability companies
duly organized, validly existing and in good standing under the laws of the State of
Califomia. NRG represents that each entity has all requisite power and authority to own
its property and conduct its business as presently conducted.
(ii) Authority. NRG represents that each of Cabrillo Power I LLC and
Carlsbad Energy Center LLC has all requisite power and authority to execute and deliver
this Agreement and to carry out and perform all of its duties and obligations under this
Agreement, Without limiting the foregoing, NRG has obtained any and all required
approvals. NRG will provide as a condition of the City's obligations under this
Agreement (x) written resolutions from Cabrillo Power I LLC and Carlsbad Energy
Center LLC authorizing the execution of and performance their obUgations under this
Agreement and (y) a written resolution from NRG Energy, Inc., in its role at Guarantor,
authorizing NRG Energy, Inc. to guarantee the prompt and complete performance of
NRG's obligations under this Agreement.
(iii) No Limitation on Ability to Perform. Neither limited liability company
agreements, nor any other agreement or Law prohibits or materially limits or otherwise
affects the right or power of NRG to enter into and perform all of the terms and
covenants of this Agreement. Neither NRG nor any of its members are party to or bound
by any contract, agreement, indenture, tmst agreement, note, obligation or other
instmment that prohibits or materially limits or otherwise affects the same. Except as
expressly stated in this Agreement, no consent, authorization or approval of, or other
acfion by, and no nofice to or filing with, any govemmental authority, regulatory body or
any other Person is required for the due execution, delivery and performance by NRG of
this Agreement or any of the terms and covenants contained in this Agreement (or if
required, any such consent, authorization or approval has been obtained, any such action
has occurred, and any such notice has been given). There are no pending or threatened
35
suits or proceedings or undischarged judgments affecting NRG before any court,
govermnental agency, or arbitrator that, if determined adversely to NRG, might
materiaUy adversely affect the enforceability of this Agreement or the ability of NRG to
perform its obligations under this Agreement.
(iv) Valid Execution. The execution and delivery of this Agreement (and the
agreements contemplated in tiiis Agreement) by NRG have been duly and validly
authorized by all necessary action on the part of NRG. Upon its execution and deUvery
by all Parties and City Council approval under Section 2.3(b), this Agreement will be a
legal, valid, binding and enforceable obUgation of NRG.
(v) Business Licenses. To NRG's knowledge, NRG has obtained all licenses
required to conduct business in City and it is not in default of any fees or taxes due to the
City,
(vi) Financial Matters. (1) NRG is not in default under, and has not received
notice asserting that it is in default under, any agreement for borrowed money, (2) NRG
has not filed a pefifion for relief under any chapter of the U.S. Bankmptcy Code and has
no present intenfion to petition for relief under any chapter of the U.S. Bankraptcy Code,
(3) to NRG's knowledge, no involuntary petition naming NRG as debtor has been filed
under any chapter of the U.S. Bankmptcy Code, and (4) NRG has the financial
wherewithal to perform all of its financial and other obligations under this Agreement.
For purposes of the foregoing representations and warranties, whenever a statement is
qualified by reference to NRG's knowledge or lack of knowledge, such reference is intended to
refer to, and be limited to, matters within the actual knowledge of, or which should be discovered
upon a reasonably diligent inquiry by, those officers of NRG who are most knowledgeable with
NRG's business dealings with the Encina Site.
(b) City Representations, Warranties, and Covenants. The City represents,
warrants, and covenants to NRG that as of the Effective Date, each of the following statements is
accurate and complete:
(i) Authority. The City has all requisite power and authority to execute and
deliver this Agreement and to carry out and perform all of its duties and obligations under
this Agreement.
(ii) Valid Execution. The execution and delivery of this Agreement (and the
agreements contemplated in this Agreement) by the City have been duly and validly
authorized by all necessary action on the part of the City. Upon its execution and delivery
by all Parties and City Council approval under Section 2.3(b). this Agreement will be a
legal, vahd, binding and enforceable obligation of the City, The City has provided (or
upon written request will provide) to NRG a written resolution of the City authorizing the
execution of and performance by the City of its obligations under this Agreement,
(iii) Defaults. The execution, delivery and performance of this Agreement do
not and will not violate or result in a violation of, contravene or conflict with, or
36
constitute a default under (A) any agreement, document or insttiiment to which the City
is a party or (B) any applicable law, statute, ordinance or regulation.
For purposes ofthe foregoing representations and warranties, whenever a statement is
qualified by reference to the City's knowledge or lack of knowledge, such reference is intended
to refer to, and be limited to, matters within tiie actual knowledge of, or which should be
discovered upon a reasonably diligent inquiry by employees of the City Attomey who are most
knowledgeable with this Agreement.
12.16 Cooperation and Non-interference
In connection with this Agreement, the Parties shall reasonably cooperate with one
another to achieve tiie objectives and purposes of this Agreement. In so doing, the Parties shall
each refrain from doing anything that would render its performance under this Agreement
impossible and each shall do everything that this Agreement contemplates that tiie Party shall do
to accomplish the objectives and purposes of this Agreement. In all situations arising out of this
Agreement, the Parties shall each attempt to avoid and minimize the damages resulting from the
conduct ofthe other and shall take all reasonably necessary measures to achieve the provisions
of this Agreement.
12.17 Attorneys' Fees and Costs
NRG shall pay to City on demand any and all Attorneys' Fees and Costs incurred or paid
by City in enforcing NRG's obligations under this Agreement. City shall pay to NRG on
demand any and all Attorneys' Fees and Costs incurred or paid by NRG in enforcing City's
obligations under this Agreement.
12.18 Transfer
NRG acknowledges and agrees that during the term of the Agreement any Transfer ofthe
Agreement, any portion of the Encina Site, or both, requires the prior written consent ofthe City,
which will not be unreasonably withheld, conditioned, or delayed, provided that the Transferee
(i) has the financial capability of performing NRG's obligafions under this Agreement, as
reasonably detennined by the City in its sole discretion; provided, however, that a Transferee
with a credit rating equal to or higher than NRG Energy, hic. from a nationally-recognized credit
rating agency shall be deemed to meet this condition, and (ii) enters into an Assumption of
Obligations Agreement set forth in Exhibit F,
12.19 Survival
Notwithstanding anything to the contrary in this Agreement, the following provisions
shall survive the expiration of the Term or any other termination of this Agreement: (i) any
obligation that arises and was not satisfied before termination shall survive any termination of
this Agreement except to the extent otherwise provided in tiiis Agreement; (ii) the releases and
mdemnities set forth in Article 9 and Article 10 of this Agreement shall continue as set forth in
those articles, and (iii) and any provision expressly stated in this Agreement to survive in whole
or in part following a termination of this Agreement.
37
12.20 Exhibits
The attached Exhibits A-T are made a part of this Agreement.
38
IN WITNESS WHEREOF, the City of Carlsbad, Carlsbad Municipal Water District,
Cabrillo Power I LLC, Carlsbad Energy Center LLC, and San Diego Gas & Electric Company
have caused this Agreement to be executed on the date first written above.
CABRILLO POWER I LLC
By:
Title: PRC-Cip 6 r
CARLSBAD ENERGY CENTER LLC
By: eta-- '
Title: P 6-N T
CITY OF CARLSBAD
AND
CARLSBAD MUNICIPAL WATER
DISTRICT
By:
Title: 1AU,LIOV fxo A/ei\A -City of Carlsbad
Vice Preident - Carlsbad Municipal Water
District
Solely with respect to Article 5 and
Article 12
SAN DIEGO GAS & ELECTRIC
By:
Title:
IN WITNESS WHEREOF, the City of Carlsbad, Carlsbad Municipal Water District,
Cabrillo Power I LLC, Carlsbad Energy Center LLC, and San Diego Gas & Electiic Company
have caused this Agreement to be executed on the date first written above.
CABRILLO POWER I LLC
By:
Titie:
CARLSBAD ENERGY CENTER LLC
By:
Title:
CITY OF CARLSBAD
AND
CARLSBAD MUNICIPAL WATER
DISTRICT
By:
Titie:
Solely with respect to Article 5 and
Article 12
SAN DIEGO GAS & ELECTRIC
Title:
39
Exhibit A – 1
EXHIBIT A
Legal Description of the Encina Site
[INSERTED ON THE FOLLOWING PAGE]
Exhibit A – 2
Exhibit A – 3
Exhibit B – 1
EXHIBIT B
Map of the Encina Site
Exhibit C – 1
EXHIBIT C
Area Map of the Encina Site
Exhibit D – 1
EXHIBIT D
Form of NRG Support Letter
Re: Cabrillo Power I LLC’s Support of the Shutdown of the Encina Power Station
Dear __________________:
In response to longstanding concerns and disputes related to the operation of the Encina
Power Station, Cabrillo Power I LLC (NRG) and the City of Carlsbad (City) have entered into a
Settlement Agreement dated as of January 14, 2014, to permanently shut down the Encina Power
Station on the earlier of the commercial operation of the Carlsbad Energy Center or December
31, 2017, provided that the Encina Power Station is no longer needed for electric reliability as set
forth in the Settlement Agreement.
NRG fully supports the shutdown of the Encina Power Station as soon as it is not needed
for reliability. More particularly, NRG does not intend to operate the Encina Power Station after
commercial operation of the Carlsbad Energy Center or December 31, 2017, whichever is earlier,
and accordingly is committed to working with the California Independent System Operator and
the City to achieve the permanent shutdown of the Encina Power Station by the earlier of those
milestones.
Very truly yours,
CABRILLO POWER I LLC
[signed by authorized officer or officers]
Exhibit E – 1
EXHIBIT E
Form of City Support Letter
Re: City's Support of the Approvals Needed for Licensing and Operation of the Carlsbad
Energy Center and Interim Operation of the Encina Power Station
Dear __________________:
Consistent with the terms of the Settlement Agreement dated as of January 14, 2014,
among multiple parties, including Carlsbad Energy Center LLC, Cabrillo Power I LLC and the
City of Carlsbad (City), I write this letter to indicate the support of the City for the issuance of
the permit or license for the operation of the Carlsbad Energy Center.
City further supports renewal of any permits or licenses necessary for the interim
operation of the Encina Power Station. Under the Settlement Agreement, Cabrillo Power I LLC
has agreed to shut down the Encina Power Station on the earlier of commercial operation of the
Carlsbad Energy Center or December 31, 2017, provided it is released from reliability
requirements by the California Independent System Operator (ISO). Accordingly, the City
supports the renewal of the permits for the Encina Power Station until the earlier of commercial
operation of the Carlsbad Energy Center or December 31, 2017.
A representative of the City is authorized to meet in person with your agency to
communicate the support referenced in this letter.
Very truly yours,
City Attorney
City of Carlsbad
Exhibit F – 1
EXHIBIT F
Form of Assumption of Obligations Agreement
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
(Space above this line for Recorder’s use only)
ASSUMPTION OF OBLIGATIONS AGREEMENT
This Assumption of Obligations (this “Assumption”) dated as of ___________, 2014, is by
Cabrillo Power I LLC and Carlsbad Energy Center LLC (collectively the “Assignor”),
____________________________________________, a
___________________________________ (the “Assignee”), and the City of Carlsbad, a charter
city located in San Diego County (the “City”).
Factual Background
A. The Assignor owns real property located in the City, in the County of San Diego,
California, bounded generally by Cannon Road to the south, Interstate 5 to the east, the Agua
Hedionda Lagoon to the north, and Carlsbad Boulevard to the west (the “Site”).
B. The Assignor and the City entered into that certain Settlement Agreement dated for
reference purposes as of January 14, 2014 (the “Agreement”). Capitalized terms not defined in
this Assumption have the meanings given them in the Agreement.
C. The Assignor wishes to convey to the Assignee its entire right, title and interest in
and to that portion of the Site, as more particularly described in Exhibit A attached to the
Agreement (the “Transferred Property”) and its rights under the Agreement to the extent pertaining
to the Transferred Property. In connection therewith, Assignee has agreed to assume [certain/all]
of Assignor’s unfulfilled and/or continuing obligations under the Agreement, all as set forth in this
Assignment.
Exhibit F – 2
Agreement
Therefore, the City, the Assignor and the Assignee agree as follows:
(1) Reaffirmation of Obligations. The Assignor reaffirms all of its obligations
under the Agreement (to the extent such obligations remain unfulfilled as of the date this
instrument is executed), and the Assignor acknowledges that to its knowledge, [except for
________] the City is presently not in default of any of its obligations under the Agreement. The
City reaffirms all of its obligations under the Agreement (to the extent such obligations remain
unfulfilled as of the date this instrument is executed), and the City acknowledges that to its
knowledge, [except for ________] the Assignor is presently not in default of any of its
obligations under the Agreement.
(2) Effective Date. Effective as of ___________ (the “Effective Date”) Assignor
assigns to Assignee all of its right, title and interest in and to the Agreement [to the extent
pertaining to the Transferred Property].
(3) Assumption. The Assignee assumes and agrees to faithfully perform for the
benefit of the City all obligations of the Assignor under, and to be bound by all of the provisions
of, the Agreement that remain unfulfilled as of the Effective Date; provided, however, the
Assignee shall not assume the following obligations:___________________________________.
Upon this Assumption becoming effective, the Assignor shall have no further obligations to the
City, and the City shall have no further obligations to the Assignor, with respect to the
obligations of the Assignor under the Agreement assumed by and the rights of the Owner under
the Agreement assigned to the Assignee.
(4) Representations and Warranties of Assignor. The Assignor represents and
warrants to the City as follows:
(A) No Event of Default on the part of Assignor, or to Assignor’s knowledge,
no event or condition that, with notice or lapse of time or both, would constitute an Event of
Default on the part of Assignor, exists under the Agreement.
(B) The execution, delivery, and performance by the Assignor of this
Assignment (x) will not contravene any legal requirements applicable to the Assignor or the
Transferred Property, and (y) will not conflict with, breach or contravene any other
agreement binding upon the Assignor or the Transferred Property.
(5) Representations and Warranties of Assignee: The Assignee represents and
warrants to the Agency and the City as follows:
(A) The Assignee has reviewed the Agreement and is familiar with its terms
and provisions.
(B) The Assignee makes for itself all representations, agreements and
warranties of the Assignor set forth in Section 12.15(a) of the Agreement, effective as of the
date hereof [to the extent applicable to the Transferred Property], subject to the following
modifications: ________________________________________.
Exhibit F – 3
(C) The Assignee has obtained all consents in connection with its assumption
of the obligations provided in this Assumption and for its acquisition of the Transferred
Property that may be required by any agreement to which it is a party. Other than the
consents so obtained, no consent to the acquisition of the Transferred Property is required
under any agreement to which Assignee is a party.
(D) The execution, delivery, and performance by the Assignee of this
Assumption and any other documents required under this Assumption (x) will not
contravene any legal requirements applicable to the Assignee, and (y) will not conflict with,
breach or contravene any other agreement binding upon the Assignee.
(E) To the knowledge of Assignee, there are no actions, suits or proceedings
at law or in equity or by or before any governmental authority now pending against the
Assignee, or threatened against or affecting the Assignee, in which there is a reasonable
possibility of an adverse determination and that are reasonably likely individually or in the
aggregate, if adversely determined, have a material adverse effect on the ability of the
Assignee to perform such obligations under the Agreement as are being assumed by the
Assignee.
(6) Address for Notices. All notices to the Assignee shall be sent to the following
addresses:
Attention: ______________________________
Facsimile: ______________________________
Telephone: ______________________________
(7) No Prejudice. This Agreement shall not prejudice any rights or remedies of
the City under the Agreement.
(8) Integration. This Assumption contains the entire agreement of the parties with
respect to the matters contemplated in this Assumption and supersedes all prior negotiations.
(9) Modification. This Assumption may be amended or modified only in a
writing signed by the parties.
(10) Counterparts. This Assumption may be executed in any number of
counterparts which together shall be deemed the same instrument.
(11) Unenforceability. If any provision of this Assumption shall be determined
by a court of competent jurisdiction to be invalid, illegal or unenforceable, then that portion shall
be deemed severed and the remaining parts shall remain in full force as though the invalid,
illegal, or unenforceable portion had not been a part of this Assumption.
(12) Governing Law. The parties agree that this Assumption shall be construed
and interpreted in accordance with the laws of the State of California.
Exhibit F – 4
IN WITNESS WHEREOF, the Assignor, the Assignee and the City have caused this
Agreement to be duly executed.
ASSIGNOR: CABRILLO POWER I LLC AND
CARLSBAD ENERGY CENTER LLC
By:
CITY: CITY OF CARLSBAD
By:
ASSIGNEE:
By:
Exhibit G – 1
EXHIBIT G
Form of Amendment
Carlsbad Energy Center Project Amendment
In accordance with Section 4.1(b) of the Agreement, this Exhibit G sets forth certain
provisions of NRG’s proposed Petition to Amend (defined below) and Amendment (defined
below), which provisions are a material part of the City’s consideration for entering into the
Agreement; provided, however, that the Commission’s failure to adopt the midnight to 6:00 a.m.
operating limitation shall not absolve the City of its support obligation set forth in the
Agreement. Unless otherwise defined in this Exhibit G, initially capitalized terms used in this
Exhibit G shall have the meaning given them in Article I of the Agreement. In the event of any
conflict or inconsistency between Exhibit G and the terms and conditions of the Agreement, the
terms and conditions of the Agreement shall prevail.
Carlsbad Energy Center LLC (“NRG”) intends to modify the Carlsbad Energy Center
Project (“CECP”) to replace the currently licensed combined-cycle configuration with a peaker
configuration. To accomplish this modification, NRG will submit a Petition to Amend (“PTA”)
to the California Energy Commission (“Commission”) requesting that the Commission amend its
May 2012 Final Decision in Docket 07-AFC-06 in which it granted the Application for
Certification of the CECP (the “Final Decision” and such Commission amendment, the
“Amendment”). The CECP PTA will demonstrate the extraordinary circumstances that have
arisen, including those associated with the premature closure of the San Onofre Nuclear
Generating Station, and that necessitate changes to the Final Decision. The PTA will also include
certain NRG obligations from the Agreement relating to the Final Shutdown, decommissioning,
demolition, and removal of the Encina Power Station, which are set forth below.
The Project Description for the CECP PTA will address the following:
1. Site Preparation and Tank Farm Demolition. NRG will demolish the following existing
facilities to enable construction of the amended CECP as well as creation of associated
laydown areas:
a. Aboveground Fuel Oil Storage Tanks 4-7 located east of the railroad tracks and
west of Interstate 5. The footprint of the amended CECP will occupy the current
location of Tanks 4-7.
b. Aboveground Fuel Oil Storage Tanks 1 and 2 located west of the railroad tracks.
The footprint of those tanks will be used for construction laydown.
c. Site grading including removal of internal berms within the tank farm basin and
preparation of ingress/egress routes.
2. Construction of Supporting Facilities.
a. Industrial water supply interconnection from City supplied reclaim water source
at Cannon Road, if available (preferred) or from Ocean Water Purification System
(small desalination plant if needed).
Exhibit G – 2
b. Ocean Water Purification System (if needed).
c. Natural gas line interconnection from Cannon Road (preferred, if feasible;
interconnect with existing infrastructure, if not) and gas metering and
compression systems.
d. Fire Prevention Systems and hydrants east of the railroad tracks; commission/test
associated back up diesel power pump to support Fire Prevention Systems.
e. Water and Aqueous Ammonia Storage Tanks.
f. Administration Building/Control Room.
g. Operations and Maintenance Building.
h. Stormwater management systems.
i. Industrial waste discharge interconnections.
3. Construction of no more than six General Electric LMS100s.
a. Construction of no more than six General Electric LMS100s and supporting
equipment (transformers, air cooled condensers, lubricating systems, selective
catalytic reduction (“SCR”) for emissions control, etc).
b. Construction of the LMS100s will be below grade to minimize the visual profile
of the units, stacks, and associated equipment.
c. Construction of black start, diesel powered generation equipment (anticipated to
be 1-2 MWs) to be located on east side of railroad tracks (if needed by the ISO).
d. Interconnect into the 138 and 230 kV switchyards located on west side of the
railroad tracks and appurtenant to SDG&E utilities and structures supporting the
transmission of electricity to and from the switchyards.
e. Interconnect with constructed reclaimed or CECP desalination water supplies and
natural gas supply, including associated gas metering and gas compression
equipment.
f. Conduct commissioning of units, including installation and testing of SCR and
continuous emissions monitoring systems (“CEMS”) for the respective units.
g. Conduct commissioning of black start unit (if needed by the ISO).
4. Environmental Characteristics. Environmental characteristics will include the following:
a. Reduced criteria air pollutants compared to the permitted CECP.
b. Reduced greenhouse gas emissions compared to the permitted CECP.
c. Elimination of the use of ocean water for plant use (unless the City is not able to
provide reclaimed water).
d. Reduced noise levels compared to the permitted CECP.
e. No operation between midnight and 6:00 am, except to the extent reasonably
required for reliability-related purposes or as otherwise required by the ISO
Tariff.
f. Lower plant profile and visibility.
Exhibit G – 3
g. Removal of all aboveground oil storage tanks (see 1 a and b).
h. Demolition and removal of the Encina Power Station in a time certain unless
required by the ISO or other agency for system reliability (see 5 below).
i. Revised vegetation and screening plan developed in cooperation with the City
j. Resolution of City fire safety concerns.
k. Development of the Coastal Rail Trail in a manner agreed to with the City.
5. Final Shutdown Date, Shut Down, decommissioning, demolition and removal. The PTA
and the Amendment will incorporate the following requirements from the Agreement
relating to the Final Shutdown Date, Shut Down, decommissioning, demolition and
removal of the Encina Power Station, all of which requirements are expressly subject to
the terms and conditions of the Agreement:
a. NRG will permanently Shut Down the Encina Power Station on the earlier of the
commercial operation date of CECP or December 31, 2017 (i.e., the Final
Shutdown Date).
b. Within ninety (90) days of the Shutdown of the Encina Power Station, NRG shall
ensure that the Encina Power Station facilities and improvements are in a secure,
inoperable condition and do not pose a physical or environmental safety hazard to
members of the public or visitors of the Encina Site, consistent with Prudent
Utility Practices and all applicable regulatory requirements and approvals.
c. NRG shall commence physical demolition and removal of the above-ground
structures of the Encina Power Station within one (1) year after Shut Down.
d. NRG and its contractor(s) will use commercially reasonable efforts to sequence
the work to complete demolition and removal in the most timely and efficient
manner, taking into consideration any hourly fieldwork restrictions/constraints at
the site. The demolition scope of work will include the following:
i. Demolition to existing grade of Encina Power Station power block
building and stack, including removal of steam boilers and associated
equipment and removal of the combustion turbine (e.g., the black start
unit). Removal of buildings, structures, equipment, and remaining storage
tanks at the Encina Power Station (i.e., administrative building,
operations/maintenance/warehouse buildings, industrial wastewater
management system, intake/discharge structures not otherwise assumed by
Poseidon).
ii. The overall project objective is to decontaminate and demolish the Site in
a safe, cost-effective and environmentally safe manner, and in compliance
with all applicable laws.
iii. NRG’s contractor will prepare an updated hazardous materials survey.
NRG’s contractor shall properly handle, manage or remove and dispose of
Exhibit G – 4
all hazardous materials and wastes in accordance with all local, state and
federal regulations.
iv. NRG and its contractors will develop, implement and maintain a storm
water pollution prevention and sediment and soil erosion control plan in
accordance with all local, state and federal regulations.
v. Site restoration activities after demolition: grading/backfilling to match
existing surrounding grade. Surrounding grade may include existing
concrete/asphalt surfaces. Clean, suitable fill material reused from the site
or from offsite will be utilized to support back filling operation.
vi. Site grading and drainage will match the current site contours. Existing
stormwater management systems would be utilized west of the railroad
tracks. Erosion controls shall be installed and maintained during
demolition site activities.
e. NRG agrees to complete physical demolition and removal of the above-ground
structures of the Encina Power Station within two (2) years of the commencement
of demolition activities.
f. NRG agrees to limit fossil fuel generation on the Encina Site to the generating
capacity proposed in the current project description (e.g., six LMS100s) proposed
in the Amendment and any black start equipment potentially required by the ISO.
g. NRG agrees that no future modifications to the CECP shall be undertaken that
exceed the environmental envelope, profile or footprint of CECP as presented in
the PTA and Amendment.
Anticipated Amendment Approval Schedule
Subject to processing and approval by applicable regulatory agencies (e.g., CEC, California
Public Utilities Commission, San Diego County Air Pollution Control District, U.S.
Environmental Protect Agency, San Diego Regional Water Quality Control Board), the
following is the anticipated permitting/approval schedule for the Amendment:
1. March 2014 - File CECP PTA with the Commission.
2. March 2014 – File Air Permit Applications with San Diego County Air Pollution Control
District (“SDAPCD”).
3. June 2014 – Commission Site Informational Work Shop and Initial Data Requests.
4. October 2014 – SDAPCD Preliminary Determination of Compliance.
5. December 2014 – Commission Preliminary Staff Assessment and Workshop.
6. April 2015 – Commission Final Staff Assessment Report.
7. June 2015 – Commission Evidentiary Hearings
8. August 2015 – Commission Presiding Member’s Proposed Decision on CECP PTA.
9. September 2015 – Commission Decision on CECP PTA.
Exhibit H – 1
EXHIBIT H
Form of Memorandum of Agreement
RECORDING REQUESTED BY AND)
WHEN RECORDED MAIL TO: )
)
City Clerk )
CITY OF CARLSBAD )
1200 Carlsbad Village Drive )
Carlsbad, California 92008-1989 )
Space above this line for Recorder’s use
Assessor’s Parcel Number CLICK HERE
Project Number and Name CLICK HERE
NOTICE OF RESTRICTION ON SALE OR CONVEYANCE OF REAL PROPERTY
The real property located in the City of Carlsbad, County of San Diego, State of
California which is described on Exhibit “A” attached hereto (the “Property”).
Pursuant to Government Code Section 27281.5(a), Notice is hereby given that the
owner of the Property as set forth below is hereby restricted from conveying, transferring or
granting the Property to any other party, except as provided under the Settlement Agreement
(described below) and this restriction is imposed by the City of Carlsbad on the Property.
This Notice shall be recorded in the County Recorder’s Office for the County of San
Diego which recordation is permitted pursuant to the provisions of Government Code Section
27281.5(a). Upon recordation, this Notice provides constructive notice of the restriction on the
conveyance or transfer of the Property.
This Notice is provided pursuant to that certain Settlement Agreement, Dated as of
January 14, 2014, Between and Among the City of Carlsbad, Carlsbad Municipal Water District,
Cabrillo Power I LLC, Carlsbad Energy Center LLC and San Diego Gas & Electric Company,
approved by the City of Carlsbad pursuant to City Of Carlsbad Resolution No. 2014-010, A
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA,
APPROVING AN AGREEMENT BETWEEN AND AMONG THE CITY OF CARLSBAD (CITY)
Exhibit H – 2
AND THE CARLSBAD MUNICIPAL WATER DISTRICT (CMWD), NRG ENERGY, INC. (NRG),
AND SAN DIEGO GAS & ELECTRIC (SDG&E), ADDRESSING CITY AND CMWD SUPPORT
FOR A CHANGE IN THE PROPOSED TECHNOLOGY OF THE APPROVED CARLSBAD
ENERGY CENTER PROJECT (CECP) PLANT AND THE SUBMITTAL OF A PETITION TO
AMEND (PTA) APPLICATION TO THE CALIFORNIA ENERGY COMMISSION (CEC) FOR
APPROVAL OF THIS TECHNOLOGY CHANGE, CONDITIONED UPON THE
DECOMMISSIONING, DEMOLITION, REMOVAL AND REMEDIATION OF THE CURRENT
ENCINA POWER STATION (EPS) SITE, AS WELL AS OTHER CHANGES IN CECP PLANT
DESIGN, ENERGY INFRASTRUCTURE AND PROPERTY CONSIDERATIONS BENEFICIAL
TO THE RESIDENTS OF CARLSBAD, approved by the City of Carlsbad on January 14, 2014.
A copy is on file at the City of Carlsbad Planning Division.
OWNER: APPROVED AS TO FORM:
Owner’s Name
CITY OF CARLSBAD
Signature
DON NEU,
City Planner
Print name and title
Date
Signature
CELIA A. BREWER, City Attorney
City Attorney
Print name and title
By:
Assistant City Attorney
Date
Date
Exhibit H – 3
(Proper notarial acknowledgment of execution by Contractor must be attached.)
(Chairman, president or vice-president and secretary, assistant secretary, CFO or assistant
treasurer must sign for corporations. Otherwise, the corporation must attach a resolution
certified by the secretary or assistant secretary under corporate seal empowering the officer(s)
signing to bind the corporation.)
(If signed by an individual partner, the partnership must attach a statement of partnership
authorizing the partner to execute this instrument).
Exhibit H – 2
Exhibit I – 1
EXHIBIT I
Form of Fossil Fuel Deed Restriction
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
(Space above this line for Recorder’s use only)
DECLARATION OF ENVIRONMENTAL RESTRICTION REGARDING USE
This Declaration Of Environmental Restriction Regarding Use (this “Declaration”) is
made as of __________________, _____, by NRG Cabrillo Power I LLC and Carlsbad
Energy Center LLC (collectively “NRG”), in favor of the City of Carlsbad, a charter city,
located in San Diego County (the “City”). NRG and the City are sometimes collectively referred
to below as the “Parties.”
Recitals
THIS DECLARATION is made with reference to the following facts and circumstances:
A. NRG owns real property located in the City, in the County of San Diego, California,
bounded generally by Cannon Road to the south, Interstate 5 to the east, the Agua
Hedionda Lagoon to the north, and Carlsbad Boulevard to the west (the “Site”). A legal
description of the Site is attached to this Declaration as Exhibit A. If there is any conflict
or inconsistency between the general description of the Site and the attached legal
description, the attached legal description shall control.
B. At the Site, NRG previously operated facilities known as Units 1-5 (individually a “Unit”
and collectively the “Units,” the “Encina Power Station”) for the purpose of generating
and selling electric power.
C. On or about January 14, 2014, NRG and the City entered into a Settlement Agreement
(the “Settlement Agreement”), under which the Parties agreed to resolve certain
outstanding disputes. All capitalized terms in this Declaration not defined in this
Declaration shall have the meaning given to them in the Settlement Agreement.
Exhibit I – 2
D. Before the date of this Declaration, NRG permanently shut down the operation of the
Encina Power Station in accordance with requirements and procedures described in the
Settlement Agreement. The final shutdown date of the Encina Power Station was
__________, 20__.
E. In accordance with NRG’s obligations under into the Settlement Agreement, NRG now
wishes to record this Declaration describing certain permanent restrictions on the use of
the Site following the shutdown of the Plant. The Parties intend that this Declaration
have priority over any mortgage, deed of trust or similar instrument now or later
encumbering any or all of the Site.
Agreement
ACCORDINGLY, NRG, on behalf of itself and its successors and assigns, its and their licensees
and invitees, and all persons claiming by and through them, covenants to and agrees with the
City, for the benefit of the City and the City’s Property, as follows:
1. Restriction Regarding Use of Fossil Fuels. From and after the date this Declaration is
recorded in the Official Records of San Diego County, California, and except solely for
the limited purposes provided in section 2 below, the Site shall not be used for the
generation of electricity by any plant, facility, machinery or other equipment that is
powered by the combustion of Fossil Fuels. “Fossil Fuels” means petroleum or any
petroleum product, coal or any coal-based product, natural gas, or other hydrocarbon-
based fuel. The Parties intend that this restriction run with the Site in perpetuity. The
purpose of this restriction is to protect human health and safety and the environment.
2. Exceptions. The restriction set forth in section 1 above shall not apply to: (i) the
operation of the Carlsbad Energy Center Project (“CECP”) in the configuration described
in Exhibit G to the Settlement Agreement which is located on the Site; provided that
changes to the configuration of the CECP that do not exceed the environmental envelope,
profile or footprint of CECP as reflected in Exhibit G are permitted; (ii) ancillary
equipment or machinery; (iii) back-up generators; (iv) distributed energy sources
approved by the City in a redevelopment plan; or (v) any Existing Secured Loan Party, as
set forth in Section 2.2 of the Settlement Agreement.
3. Enforcement. The City may, in its sole discretion, rely on this Declaration to enforce any
of its covenants or restrictions. The City, but not the general public, shall have all rights
and remedies available at law or in equity to enforce the covenants and restrictions set
forth in this Declaration. All rights and remedies available to the City under this
Declaration or at law or in equity shall be cumulative and not alternative, and invocation
of any such right or remedy shall not constitute a waiver or election of remedies with
respect to any other available right or remedy. In the event of any breach of the
covenants or restrictions by NRG under this Declaration, the City shall be entitled to
recover all attorneys’ fees and costs in connection with City’s enforcement activities and
actions.
Exhibit I – 3
4. Notice and Cure Rights. Before taking enforcement actions under section 3 above, the
City shall provide written notice to NRG of any actual or alleged violation of the
covenants or restrictions set forth in this Declaration. Such notices shall be given to NRG
at the address last furnished by NRG in writing to the City. NRG shall have a period of
ten (10) days after receipt of such notice to cure such violation; provided, however, if the
violation is not capable of cure within such ten (10) day period, NRG shall have such
additional time as shall be reasonably required to complete a cure so long as NRG
promptly undertakes action to commence the cure within the ten (10) day period and then
diligently prosecutes the same to completion. The time in which NRG may cure is
referred to in this Declaration as the “Cure Period,” and the City shall not exercise any
legal or equitable remedies during the Cure Period so long as NRG is diligently pursuing
such cure. Notwithstanding anything to the contrary in this section, in no event shall the
Cure Period exceed six (6) months.
5. Covenants Running with the Land; Binding on Successors. This Declaration, including
the covenants set forth above, constitute covenants running with the land in perpetuity
and shall bind and burden NRG and any successor owner or occupier.
6. Constructive Notice and Acceptance. Every person or entity who now or later owns or
acquires any right, title or interest in or to all or any portion of the Site is, and shall be,
conclusively deemed to have consented to and agreed to every covenant, condition,
restriction contained in this Declaration, whether or not any reference to this Declaration
is contained in the instrument by which such person or entity acquired such interest.
7. Injunctive Relief. Notwithstanding anything to the contrary contained in this
Declaration, and without limiting section 3 above, the City may seek and obtain
injunctive relief in any court of competent jurisdiction to restrain NRG from any conduct
in breach of this Declaration that causes or threatens to cause immediate and irreparable
harm to the extent such equitable relief is otherwise available.
8. No Waiver. No waiver by the City (including, without limitation, any of its boards,
commissions, officers, employees or agents) of any violation under this Declaration shall
be effective or binding unless and to the extent expressly made in writing by the City, and
no such waiver may be implied from any failure by the City to take action with respect to
such violation. No express written waiver of any violation shall constitute a waiver of
any subsequent violation in the performance of the same or any other provision of this
Declaration.
9. Severability. Should any provision or portion of this Declaration be declared invalid or
in conflict with any law, the validity of all remaining provisions shall remain unaffected
and in full force and effect.
10. Governing Law; Venue. The laws of the State of California shall govern the interpretation
and enforcement of this Declaration. As part of the consideration for the City’s entering
into Settlement Agreement and this Declaration, NRG agrees that all actions or proceedings
arising directly or indirectly under this Declaration may, at the sole option of the City, be
litigated in courts located within the State of California, in the County of San Diego, and
Exhibit I – 4
NRG expressly consents to the jurisdiction of any such local, state or federal court, and
consents that any service of process in such action or proceeding may be made by personal
service upon NRG wherever NRG may then be located, or by certified or registered mail
directed to NRG at the address set forth in this Declaration for the delivery of notices.
11. Notices. Except as otherwise expressly provided in this Declaration, all notices, demands,
approvals, consents and other formal communications between the Parties required or
permitted under this Declaration shall be in writing and shall be deemed given and effective
upon the date of receipt (i) if given by personal delivery on a business day (or the next
business day if delivered personally on a day that is not a business day), (ii) if sent for next-
business-day delivery (with all expenses prepaid) by a reliable overnight delivery service,
with receipt of delivery, or (iii) if mailed by United States registered or certified mail, first
class postage prepaid, to the Party at their respective addresses for notice designated below.
For convenience of the Parties, copies of notices may also be given by facsimile to the
facsimile number set forth below or such other number as may be provided from time to
time by notice given in the manner required under this Declaration; however, neither Party
may give official or binding notice by facsimile. The effective time of a notice shall not be
affected by the receipt, before receipt of the original, of a telefacsimile copy of the notice.
(a) In the case of a notice or communication by NRG to the City:
Celia A. Brewer, Esq.
City Attorney for City of Carlsbad
General Counsel for Carlsbad Municipal Water District
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Celia.Brewer@carlsbadca.gov
(b) And in the case of a notice or communication sent by the City to NRG:
Sean Beatty
West Region General Counsel
NRG Energy, Inc.
P.O. Box 192
Pittsburg, CA 94565
sean.beatty@nrgenergy.com
Every notice given to a Party to this Declaration, under the terms of this Declaration, must
state (or must be accompanied by a cover letter that states) substantially the following: the
section of this Declaration under which the notice is given and the action or response
required, if any; and if applicable, the period of time within which the recipient of the
notice must respond.
In no event shall a recipient’s approval of or consent to the subject matter of a notice be
deemed to have been given by its failure to object to such notice if such notice (or the
accompanying cover letter) does not comply with the requirements of this Section.
Exhibit I – 5
Any mailing address or number may be changed at any time by giving written notice of
such change in the manner provided above at least ten (10) days before the effective date of
the change.
IN WITNESS WHEREOF, NRG has duly executed this Declaration as of the date first written
above.
NRG ENERGY, INC. ON BEHALF OF ITSELF
AND ITS SUBSIDIARIES, INCLUDING
CABRILLO POWER I LLC
By:
Name:
Title:
Exhibit I – 6
EXHIBIT A
TO
DECLARATION OF ENVIRONMENTAL RESTRICTION REGARDING
USE
Legal Description of the Site
[INSERTED ON THE FOLLOWING PAGE]
Exhibit I – 7
Exhibit I – 8
Exhibit J – 1
EXHIBIT J
Legal Description of North Coast Services Center Site
[INSERTED ON NEXT PAGE]
Exhibit J – 2
Exhibit K – 1
EXHIBIT K
Map of North Coast Services Center Site
Exhibit K – 2
Exhibit K – 3
Exhibit K – 4
Exhibit K – 5
Exhibit K – 6
Exhibit K – 7
Exhibit K – 8
Exhibit N – 1
EXHIBIT N
Legal Description of Cannon Park
[INSERTED ON NEXT PAGE]
Exhibit N – 2
Exhibit O – 1
EXHIBIT O
Map of Cannon Park
Exhibit O – 2
Exhibit O – 3
Exhibit O – 4
Exhibit O – 5
Exhibit O – 6
Exhibit O – 7
Exhibit P – 1
EXHIBIT P
Legal Description of Agua Hedionda North Shore Bluff Parcel
[INSERTED ON NEXT PAGE]
Exhibit P – 2
Exhibit Q – 1
EXHIBIT Q
Map of Agua Hedionda North Shore Bluff Parcel
Exhibit Q – 2
Exhibit Q – 3
Exhibit Q – 4
Exhibit Q – 5
Exhibit Q – 6
Exhibit Q – 7
Exhibit Q – 8
Exhibit Q – 9
Exhibit Q – 10
Exhibit R – 1
EXHIBIT R
FORM OF GUARANTY
Exhibit R – 2
Independent Guaranty Amount
This Guaranty is executed and delivered as of this _____ day of --------------------, 2014
by NRG Energy, Inc., a Delaware corporation (“Guarantor”), in favor of the City of Carlsbad, a
charter city, located in San Diego County (“City”), in connection with the performance by
Cabrillo Power I LLC, a limited liability company, and Carlsbad Energy Center LLC, a limited
liability company (collectively (“Owner”) of a Settlement Agreement dated January 14, 2014
between Owner and City (the “Settlement”).
- RECITALS -
A. WHEREAS, the Owner operates facilities known as Units 1-5 (individually a
“Unit” and collectively the “Units,” the “Encina Power Station” or the “Station”) for the purpose
of generating and selling electric power;
B. WHEREAS, the Owner intends to build and operate new facilities known as the
Carlsbad Energy Center Project (“CECP”) for the purpose of generating and selling electric
power, and the City has historically opposed such project;
C. WHEREAS, the Parties have entered the Settlement to fully and finally resolve
disputes involving the CECP and the retirement and removal of the Encina Power Station, by
providing for, among other things: (i) the retirement, decommissioning, and removal of the
Encina Power Station, (ii) the remediation and redevelopment of the Encina Power Station site,
(iii) the provisions of the Amendment and the construction and development of the CECP, (iv)
the relocation and construction of the new North Coast Service Center, and (v) other changes in
energy infrastructure and property considerations beneficial to the residents of Carlsbad.
D. WHEREAS, Owner is controlled by Guarantor. Guarantor expects to derive
material benefits from the performance of the Settlement by Owner and City. To induce City to
enter into the Settlement and undertake the obligations as set out in the Settlement, Guarantor has
agreed to guarantee the obligations of Owner as provided in this Guaranty.
NOW, THEREFORE, in consideration of the foregoing, Guarantor agrees as follows:
- AGREEMENT -
1. Guaranty. Subject to the provisions of this Guaranty, Guarantor hereby
absolutely, irrevocably, unconditionally, and fully guarantees to City the due, prompt, and
complete observance, performance, and discharge of each and every obligation, including
without limitation obligations that are financial or that require specific performance, of Owner
under the Settlement, whether incurred before or after the date of delivery of this Guaranty (the
“Obligations”). This is a guaranty of payment, not of collection, and as such, City shall not be
required to institute, pursue, or exhaust any remedies against Owner before instituting suit,
obtaining judgment, and executing thereon against Guarantor under this Guaranty.
2. Rights of City. Guarantor hereby grants to City, in City’s discretion and without
the need to notify or obtain any consent from Guarantor, and without termination, impairment, or
any other effect upon Guarantor’s duties hereunder, the power and authority from time to time:
Exhibit R – 3
(a) to renew, compromise, extend, accelerate, or otherwise change, substitute,
supersede, or terminate the terms of performance of any of the Obligations, in each case in
accordance with the Settlement;
(b) to grant any indulgences, forbearances, and waivers, on one or more
occasions, for any length of time, with respect to Owner’s performance of any of the
Obligations; and
(c) to accept collateral, further guaranties, and/or other security for the
Obligations, and, if so accepted, then to impair, exhaust, exchange, enforce, waive, or release any
such security.
3. Performance. If any of the Obligations are not performed according to the tenor
thereof, and any applicable notice and cure period provided by the Settlement has expired
(“Default”), Guarantor shall immediately upon receipt of written demand by City (a) perform or
cause Owner to perform the Obligation in Default, and (b) pay, reimburse, and indemnify City
against any liabilities, damages, and related costs (including attorneys’ fees) incurred by City as
a result thereof up to but not to exceed a maximum cumulative amount of five million dollars
($5,000,000), all in such manner and at such times as City may reasonably direct.
4. Satisfaction. Satisfaction by Guarantor of any duty hereunder incident to a
particular Default or the occurrence of any other Default shall not discharge Guarantor except
with respect to the Default satisfied, it being the intent of Guarantor that this Guaranty be
continuing until twenty (20) years after the execution date of this Guaranty or such time as all of
the Obligations have irrevocably been discharged in full, whichever is sooner, at which time this
Guaranty shall automatically terminate. If at any time the performance of any Obligation by
Owner or Guarantor is rescinded or voided under the federal Bankruptcy Code or otherwise, then
Guarantor’s duties hereunder shall continue and be deemed to have been automatically
reinstated, restored, and continued with respect to that Obligation, as though the performance of
that Obligation had never occurred, regardless of whether this Guaranty otherwise had
terminated or would have been terminated following or as a result of that performance.
5. Notice of Acceptance. Guarantor waives and acknowledges notice of acceptance
of this Guaranty by City.
6. Waivers by Guarantor. Guarantor hereby waives and agrees not to assert or take
advantage of:
(a) all set-offs, counterclaims, and, subject to Section 3 above, all
presentments, demands for performance, notices of non-performance, protests, and notices of
every kind that may be required by Applicable Laws;
(b) any right to require City to proceed against Owner or any other person, or
to require City first to exhaust any remedies against Owner or any other person, before
proceeding against Guarantor hereunder;
(c) any defense based upon an election of remedies by City;
Exhibit R – 4
(d) any duty of City to protect or not impair any security for the Obligations;
(e) the benefit of any laws limiting the liability of a surety;
(f) any duty of City to disclose to Guarantor any facts concerning Owner, the
Settlement, or any other circumstances, that would or allegedly would increase the risk to
Guarantor under this Guaranty, whether now known or hereafter learned by City, it being
understood that Guarantor is capable of and assumes the responsibility for being and remaining
informed as to all such facts and circumstances; and
(g) until all Obligations in Default have been fully paid and/or performed, any
rights of subrogation, contribution, reimbursement, indemnification, or other rights of payment
or recovery for any payment or performance by it hereunder. For the avoidance of doubt, if any
amount is paid to Guarantor in violation of this provision, such amount shall be held by
Guarantor for the benefit of, and promptly paid to, City.
7. Cumulative Remedies. The rights and remedies of City hereunder shall be
cumulative and not alternative to any other rights, powers, and remedies that City may have at
law, in equity, or under the Settlement. The obligations of Guarantor hereunder are independent
of those of Owner and shall survive unaffected by the bankruptcy of Owner. City need not join
Owner in any action against Guarantor to preserve its rights set forth herein.
8. Representations and Warranties. Guarantor represents and warrants to City as
follows:
(a) Guarantor is a corporation, duly organized, validly existing, and in good
standing under the laws of the state of its incorporation. Owner is a direct or indirect wholly-
owned subsidiary of Guarantor. Guarantor has all necessary corporate power and authority to
execute and deliver this Guaranty and to perform its obligations hereunder.
(b) The execution, delivery and performance of this Guaranty has been duly
and validly authorized by all corporate proceedings of Guarantor and is not in violation of any
law, judgment of court or government agency. This Guaranty has been duly and validly
executed and delivered by Guarantor and constitutes a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms.
9. Collection Costs. Guarantor hereby agrees to pay to City, upon demand, all
reasonable attorneys’ fees and other expenses which City may expend or incur in enforcing the
Obligations against Owner and/or enforcing this Guaranty against Guarantor, whether or not suit
is filed, including, without limitation, all attorneys’ fees, and other expenses incurred by City in
connection with any insolvency, bankruptcy, reorganization, arrangement, or other similar
proceedings involving Owner that in any way affect the exercise by City of its rights and remedies
hereunder.
10. Severability. Should any one or more provisions of this Guaranty be determined
to be illegal or unenforceable, all other provisions nevertheless shall be effective.
11. Waiver or Amendment. No provision of this Guaranty or right of City hereunder
can be waived, nor can Guarantor be released from Guarantor’s duties hereunder, except by a
Exhibit R – 5
writing duly executed by City. This Guaranty may not be modified, amended, revised, revoked,
terminated, changed, or varied in any way whatsoever except by the express terms of a writing
duly executed by City.
12. Successors and Assigns. This Guaranty shall inure to the benefit of and bind the
successors and assigns of City and Guarantor.
13. Governing Law. This Guaranty shall be governed by and construed in accordance
with the laws of the State of California without regard to the principles of conflicts of law thereof.
14. Notices. All notices, requests, claims, demands, and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in the manner contemplated by the Settlement, addressed as follows:
(a) if to City as provided in the Settlement
(b) if to Guarantor:
Sean Beatty
West Region General Counsel
NRG Energy, Inc.
P.O. Box 192
Pittsburg, CA 94565
sean.beatty@nrgenergy.com
or to such other address(es) as the person to whom notice is given may have previously furnished
to the others in writing in the manner set forth above.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and
delivered to City as of the day written above.
NRG Energy, Inc.
By:
Name:
Title:
Exhibit R – 6
STATE OF By:_____________________________________
Name:
Title:
)
) ss.
COUNTY OF _____________________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________, 20__, by _____________________________, as _____________________ of
_____________________.
Witness my hand and official seal.
My commission expires: ______________________________.
Notary Public: _______________________________________
(S E A L)
(space above reserved for recording information)
Exhibit R – 7
Shut Down Guaranty Amount
This Guaranty is executed and delivered as of this _____ day of _________, 20__ by
NRG Energy, Inc., a Delaware corporation (“Guarantor”), in favor of the City of Carlsbad, a
charter city, located in San Diego County (“City”), in connection with the performance by
Cabrillo Power I LLC, a limited liability company, and Carlsbad Energy Center LLC, a limited
liability company (collectively (“Owner”) of a Settlement Agreement dated January 14, 2014
between Owner and City (the “Settlement”).
- RECITALS -
A. WHEREAS, the Owner operates facilities known as Units 1-5 (individually a
“Unit” and collectively the “Units,” the “Encina Power Station” or the “Station”) for the purpose
of generating and selling electric power;
B. WHEREAS, the Owner intends to build and operate new facilities known as the
Carlsbad Energy Center Project (“CECP”) for the purpose of generating and selling electric
power and the City has historically opposed such project;
C. WHEREAS, the Parties have entered the Settlement to fully and finally resolve
disputes involving the CECP and the retirement and removal of the Encina Power Station, by
providing for, among other things: (i) the retirement, decommissioning, and removal of the
Encina Power Station, (ii) the remediation and redevelopment of the Encina Power Station site,
(iii) the provisions of the Amendment and the construction and development of the CECP, (iv)
the relocation and construction of the new North Coast Service Center, and (v) other changes in
energy infrastructure and property considerations beneficial to the residents of Carlsbad.
D. WHEREAS, Owner is controlled by Guarantor. Guarantor expects to derive
material benefits from the performance of the Settlement by Owner and City. To induce City to
enter into the Settlement and undertake the obligations as set out in the Settlement, Guarantor has
agreed to guarantee the obligations of Owner as provided in this Guaranty.
NOW, THEREFORE, in consideration of the foregoing, Guarantor agrees as follows:
- AGREEMENT -
1. Guaranty. Subject to the provisions of this Guaranty, Guarantor hereby
absolutely, irrevocably, unconditionally, and fully guarantees to City the due, prompt, and
complete observance, performance, and discharge of each and every obligation under Section 6.1
of the Settlement, including without limitation obligations that are financial or that require
specific performance, of Owner, whether incurred before or after the date of delivery of this
Guaranty (the “Obligations”). This is a guaranty of payment, not of collection, and as such, City
shall not be required to institute, pursue, or exhaust any remedies against Owner before
instituting suit, obtaining judgment, and executing thereon against Guarantor under this
Guaranty.
2. Rights of City. Guarantor hereby grants to City, in City’s discretion and without
the need to notify or obtain any consent from Guarantor, and without termination, impairment, or
any other effect upon Guarantor’s duties hereunder, the power and authority from time to time:
Exhibit R – 8
(a) to renew, compromise, extend, accelerate, or otherwise change, substitute,
supersede, or terminate the terms of performance of any of the Obligations, in each case in
accordance with the Settlement;
(b) to grant any indulgences, forbearances, and waivers, on one or more
occasions, for any length of time, with respect to Owner’s performance of any of the
Obligations; and
(c) to accept collateral, further guaranties, and/or other security for the
Obligations, and, if so accepted, then to impair, exhaust, exchange, enforce, waive, or release any
such security.
3. Performance. If any of the Obligations are not performed according to the tenor
thereof, and any applicable notice and cure period provided by the Settlement has expired
(“Default”), Guarantor shall immediately upon receipt of written demand by City (a) perform or
cause Owner to perform the Obligation in Default, and (b) pay, reimburse, and indemnify City
against any liabilities, damages, and related costs (including attorneys’ fees) incurred by City as
a result thereof up to but not to exceed a maximum cumulative amount of twenty million dollars
($20,000,000), which is in addition to the Independent Guaranty Amount, all in such manner and
at such times as City may reasonably direct.
4. Satisfaction. Satisfaction by Guarantor of any duty hereunder incident to a
particular Default or the occurrence of any other Default shall not discharge Guarantor except
with respect to the Default satisfied, it being the intent of Guarantor that this Guaranty be
continuing until such time as all of the Obligations have irrevocably been discharged in full, at
which time this Guaranty shall automatically terminate. If at any time the performance of any
Obligation by Owner or Guarantor is rescinded or voided under the federal Bankruptcy Code or
otherwise, then Guarantor’s duties hereunder shall continue and be deemed to have been
automatically reinstated, restored, and continued with respect to that Obligation, as though the
performance of that Obligation had never occurred, regardless of whether this Guaranty
otherwise had terminated or would have been terminated following or as a result of that
performance.
5. Notice of Acceptance. Guarantor waives and acknowledges notice of acceptance
of this Guaranty by City.
6. Waivers by Guarantor. Guarantor hereby waives and agrees not to assert or take
advantage of:
(a) all set-offs, counterclaims, and, subject to Section 3 above, all
presentments, demands for performance, notices of non-performance, protests, and notices of
every kind that may be required by Applicable Laws;
(b) any right to require City to proceed against Owner or any other person, or
to require City first to exhaust any remedies against Owner or any other person, before
proceeding against Guarantor hereunder;
(c) any defense based upon an election of remedies by City;
Exhibit R – 9
(d) any duty of City to protect or not impair any security for the Obligations;
(e) the benefit of any laws limiting the liability of a surety;
(f) any duty of City to disclose to Guarantor any facts concerning Owner, the
Settlement, or any other circumstances, that would or allegedly would increase the risk to
Guarantor under this Guaranty, whether now known or hereafter learned by City, it being
understood that Guarantor is capable of and assumes the responsibility for being and remaining
informed as to all such facts and circumstances; and
(g) until all Obligations in Default have been fully paid and/or performed, any
rights of subrogation, contribution, reimbursement, indemnification, or other rights of payment
or recovery for any payment or performance by it hereunder. For the avoidance of doubt, if any
amount is paid to Guarantor in violation of this provision, such amount shall be held by
Guarantor for the benefit of, and promptly paid to, City.
7. Cumulative Remedies. The rights and remedies of City hereunder shall be
cumulative and not alternative to any other rights, powers, and remedies that City may have at
law, in equity, or under the Settlement. The obligations of Guarantor hereunder are independent
of those of Owner and shall survive unaffected by the bankruptcy of Owner. City need not join
Owner in any action against Guarantor to preserve its rights set forth herein.
8. Representations and Warranties. Guarantor represents and warrants to City as
follows:
(a) Guarantor is a corporation, duly organized, validly existing, and in good
standing under the laws of the state of its incorporation. Owner is a direct or indirect wholly-
owned subsidiary of Guarantor. Guarantor has all necessary corporate power and authority to
execute and deliver this Guaranty and to perform its obligations hereunder.
(b) The execution, delivery and performance of this Guaranty has been duly
and validly authorized by all corporate proceedings of Guarantor and is not in violation of any
law, judgment of court or government agency. This Guaranty has been duly and validly
executed and delivered by Guarantor and constitutes a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms.
9. Collection Costs. Guarantor hereby agrees to pay to City, upon demand, all
reasonable attorneys’ fees and other expenses which City may expend or incur in enforcing the
Obligations against Owner and/or enforcing this Guaranty against Guarantor, whether or not suit
is filed, including, without limitation, all attorneys’ fees, and other expenses incurred by City in
connection with any insolvency, bankruptcy, reorganization, arrangement, or other similar
proceedings involving Owner that in any way affect the exercise by City of its rights and remedies
hereunder.
10. Severability. Should any one or more provisions of this Guaranty be determined
to be illegal or unenforceable, all other provisions nevertheless shall be effective.
11. Waiver or Amendment. No provision of this Guaranty or right of City hereunder
can be waived, nor can Guarantor be released from Guarantor’s duties hereunder, except by a
Exhibit R – 10
writing duly executed by City. This Guaranty may not be modified, amended, revised, revoked,
terminated, changed, or varied in any way whatsoever except by the express terms of a writing
duly executed by City.
12. Successors and Assigns. This Guaranty shall inure to the benefit of and bind the
successors and assigns of City and Guarantor.
13. Governing Law. This Guaranty shall be governed by and construed in accordance
with the laws of the State of California without regard to the principles of conflicts of law thereof.
14. Notices. All notices, requests, claims, demands, and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in the manner contemplated by the Settlement, addressed as follows:
(a) if to City as provided in the Settlement
(b) if to Guarantor:
Sean Beatty
West Region General Counsel
NRG Energy, Inc.
P.O. Box 192
Pittsburg, CA 94565
sean.beatty@nrgenergy.com
or to such other address(es) as the person to whom notice is given may have previously furnished
to the others in writing in the manner set forth above.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and
delivered to City as of the day written above.
NRG Energy, Inc.
By:
Name:
Title:
Exhibit R – 11
STATE OF By:_____________________________________
Name:
Title:
)
) ss.
COUNTY OF _____________________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________, 20__, by _____________________________, as _____________________ of
_____________________.
Witness my hand and official seal.
My commission expires: ______________________________.
Notary Public: _______________________________________
(S E A L)
(space above reserved for recording information)
Exhibit R – 12
Relocation Guaranty Amount
This Guaranty is executed and delivered as of this _____ day of ___________, 20___
by NRG Energy, Inc., a Delaware corporation (“Guarantor”), in favor of the City of Carlsbad, a
charter city, located in San Diego County (“City”), in connection with the performance by
Cabrillo Power I LLC, a limited liability company, and Carlsbad Energy Center LLC, a limited
liability company (collectively (“Owner”) of a Settlement Agreement dated January 14, 2014
between Owner and City (the “Settlement”).
- RECITALS -
A. WHEREAS, the Owner operates facilities known as Units 1-5 (individually a
“Unit” and collectively the “Units,” the “Encina Power Station” or the “Station”) for the purpose
of generating and selling electric power;
B. WHEREAS, the Owner intends to build and operate new facilities known as the
Carlsbad Energy Center Project (“CECP”) for the purpose of generating and selling electric
power and the City has historically opposed such project;
C. WHEREAS, the Parties have entered the Settlement to fully and finally resolve
disputes involving the CECP and the retirement and removal of the Encina Power Station, by
providing for, among other things: (i) the retirement, decommissioning, and removal of the
Encina Power Station, (ii) the remediation and redevelopment of the Encina Power Station site,
(iii) the provisions of the Amendment and the construction and development of the CECP, (iv)
the relocation and construction of the new North Coast Service Center, and (v) other changes in
energy infrastructure and property considerations beneficial to the residents of Carlsbad.
D. WHEREAS, Owner is controlled by Guarantor. Guarantor expects to derive
material benefits from the performance of the Settlement by Owner and City. To induce City to
enter into the Settlement and undertake the obligations as set out in the Settlement, Guarantor has
agreed to guarantee the obligations of Owner as provided in this Guaranty.
NOW, THEREFORE, in consideration of the foregoing, Guarantor agrees as follows:
- AGREEMENT -
1. Guaranty. Subject to the provisions of this Guaranty, Guarantor hereby
absolutely, irrevocably, unconditionally, and fully guarantees to City the due, prompt, and
complete observance, performance, and discharge of each and every obligation under Article 5
of the Settlement, including without limitation obligations that are financial or that require
specific performance, of Owner, whether incurred before or after the date of delivery of this
Guaranty (the “Obligations”). This is a guaranty of payment, not of collection, and as such, City
shall not be required to institute, pursue, or exhaust any remedies against Owner before
instituting suit, obtaining judgment, and executing thereon against Guarantor under this
Guaranty.
2. Rights of City. Guarantor hereby grants to City, in City’s discretion and without
the need to notify or obtain any consent from Guarantor, and without termination, impairment, or
any other effect upon Guarantor’s duties hereunder, the power and authority from time to time:
Exhibit R – 13
(a) to renew, compromise, extend, accelerate, or otherwise change, substitute,
supersede, or terminate the terms of performance of any of the Obligations, in each case in
accordance with the Settlement;
(b) to grant any indulgences, forbearances, and waivers, on one or more
occasions, for any length of time, with respect to Owner’s performance of any of the
Obligations; and
(c) to accept collateral, further guaranties, and/or other security for the
Obligations, and, if so accepted, then to impair, exhaust, exchange, enforce, waive, or release any
such security.
3. Performance. If any of the Obligations are not performed according to the tenor
thereof, and any applicable notice and cure period provided by the Settlement has expired
(“Default”), Guarantor shall immediately upon receipt of written demand by City (a) perform or
cause Owner to perform the Obligation in Default, and (b) pay, reimburse, and indemnify City
against any liabilities, damages, and related costs (including attorneys’ fees) incurred by City as
a result thereof up to but not to exceed a maximum cumulative amount of twenty-two million
five hundred thousand dollars ($22,500,000), all in such manner and at such times as City may
reasonably direct; provided that such maximum cumulative amount shall be reduced in
proportion to Owner’s payments made in accordance with Article 5.
4. Satisfaction. Satisfaction by Guarantor of any duty hereunder incident to a
particular Default or the occurrence of any other Default shall not discharge Guarantor except
with respect to the Default satisfied, it being the intent of Guarantor that this Guaranty be
continuing until such time as all of the Obligations have irrevocably been discharged in full, at
which time this Guaranty shall automatically terminate. If at any time the performance of any
Obligation by Owner or Guarantor is rescinded or voided under the federal Bankruptcy Code or
otherwise, then Guarantor’s duties hereunder shall continue and be deemed to have been
automatically reinstated, restored, and continued with respect to that Obligation, as though the
performance of that Obligation had never occurred, regardless of whether this Guaranty
otherwise had terminated or would have been terminated following or as a result of that
performance.
5. Notice of Acceptance. Guarantor waives and acknowledges notice of acceptance
of this Guaranty by City.
6. Waivers by Guarantor. Guarantor hereby waives and agrees not to assert or take
advantage of:
(a) all set-offs, counterclaims, and, subject to Section 3 above, all
presentments, demands for performance, notices of non-performance, protests, and notices of
every kind that may be required by Applicable Laws;
(b) any right to require City to proceed against Owner or any other person, or
to require City first to exhaust any remedies against Owner or any other person, before
proceeding against Guarantor hereunder;
Exhibit R – 14
(c) any defense based upon an election of remedies by City;
(d) any duty of City to protect or not impair any security for the Obligations;
(e) the benefit of any laws limiting the liability of a surety;
(f) any duty of City to disclose to Guarantor any facts concerning Owner, the
Settlement, or any other circumstances, that would or allegedly would increase the risk to
Guarantor under this Guaranty, whether now known or hereafter learned by City, it being
understood that Guarantor is capable of and assumes the responsibility for being and remaining
informed as to all such facts and circumstances; and
(g) until all Obligations in Default have been fully paid and/or performed, any
rights of subrogation, contribution, reimbursement, indemnification, or other rights of payment
or recovery for any payment or performance by it hereunder. For the avoidance of doubt, if any
amount is paid to Guarantor in violation of this provision, such amount shall be held by
Guarantor for the benefit of, and promptly paid to, City.
7. Cumulative Remedies. The rights and remedies of City hereunder shall be
cumulative and not alternative to any other rights, powers, and remedies that City may have at
law, in equity, or under the Settlement. The obligations of Guarantor hereunder are independent
of those of Owner and shall survive unaffected by the bankruptcy of Owner. City need not join
Owner in any action against Guarantor to preserve its rights set forth herein.
8. Representations and Warranties. Guarantor represents and warrants to City as
follows:
(a) Guarantor is a corporation, duly organized, validly existing, and in good
standing under the laws of the state of its incorporation. Owner is a direct or indirect wholly-
owned subsidiary of Guarantor. Guarantor has all necessary corporate power and authority to
execute and deliver this Guaranty and to perform its obligations hereunder.
(b) The execution, delivery and performance of this Guaranty has been duly
and validly authorized by all corporate proceedings of Guarantor and is not in violation of any
law, judgment of court or government agency. This Guaranty has been duly and validly
executed and delivered by Guarantor and constitutes a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms.
9. Collection Costs. Guarantor hereby agrees to pay to City, upon demand, all
reasonable attorneys’ fees and other expenses which City may expend or incur in enforcing the
Obligations against Owner and/or enforcing this Guaranty against Guarantor, whether or not suit
is filed, including, without limitation, all attorneys’ fees, and other expenses incurred by City in
connection with any insolvency, bankruptcy, reorganization, arrangement, or other similar
proceedings involving Owner that in any way affect the exercise by City of its rights and remedies
hereunder.
10. Severability. Should any one or more provisions of this Guaranty be determined
to be illegal or unenforceable, all other provisions nevertheless shall be effective.
Exhibit R – 15
11. Waiver or Amendment. No provision of this Guaranty or right of City hereunder
can be waived, nor can Guarantor be released from Guarantor’s duties hereunder, except by a
writing duly executed by City. This Guaranty may not be modified, amended, revised, revoked,
terminated, changed, or varied in any way whatsoever except by the express terms of a writing
duly executed by City.
12. Successors and Assigns. This Guaranty shall inure to the benefit of and bind the
successors and assigns of City and Guarantor.
13. Governing Law. This Guaranty shall be governed by and construed in accordance
with the laws of the State of California without regard to the principles of conflicts of law thereof.
14. Notices. All notices, requests, claims, demands, and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in the manner contemplated by the Settlement, addressed as follows:
(a) if to City as provided in the Settlement
(b) if to Guarantor:
Sean Beatty
West Region General Counsel
NRG Energy, Inc.
P.O. Box 192
Pittsburg, CA 94565
sean.beatty@nrgenergy.com
or to such other address(es) as the person to whom notice is given may have previously furnished
to the others in writing in the manner set forth above.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and
delivered to City as of the day written above.
NRG Energy, Inc.
By:
Name:
Title:
Exhibit R – 16
STATE OF By:_____________________________________
Name:
Title:
)
) ss.
COUNTY OF _____________________ )
The foregoing instrument was acknowledged before me this _____ day of
_____________, 20__, by _____________________________, as _____________________ of
_____________________.
Witness my hand and official seal.
My commission expires: ______________________________.
Notary Public: _______________________________________
(S E A L)
(space above reserved for recording information)
Exhibit S – 1
EXHIBIT S
Map of Encina Redevelopment Site
Exhibit T – 1
EXHIBIT T
Map of CECP Site