HomeMy WebLinkAbout2020-12-17; Clean Energy Alliance JPA; ; Authorize Credit Solution with JPMorgan for Clean Energy Alliance Start-Up and Working CapitalClean Energy Alliance
JOINT POWERS AUTHORITY
Staff Report
DATE: December 17, 2020
TO: Clean Energy Alliance Board of Directors
FROM: Barbara Boswell, Interim Chief Executive Officer
ITEM 8: Authorize Credit Solution with JPMorgan for Clean Energy Alliance Start-Up and Working
Capital
RECOMMENDATION
Authorize Interim Chief Executive Officer to Execute All Documents and take all necessary actions to
secure CEA's financing with JPMorgan, subject to General Counsel approval, for the following amounts,
or other alternatives as determined by the CEA Board:
a)$5,000,000 for start-up and working capital costs;
b)$5,000,000 (subject to credit approval and CEA Board Authorization) for liquidity via Standby
Letters of Credit or cash postings for power contracts;
c)$5,000,000 (subject to credit approval and CEA Board Authorization) available upon launch for
additional working capital or liqudity support for power purchase agreements.
BACKGROUND AND DISCUSSION:
At its regular meeting November 19, 2020, the CEA Board authorized the Interim Chief Executive Officer
to work with JP Morgan and River City Bank for CEA's credit solution to provide funding for start-up
beginning February 2021 and initial working capital.
Actions taken to date related to pursuing a credit solution include:
February 20, 2020 Considered RFP responses for Credit Solution and put selection on hold until June
2020
June 18, 2020 Considered Credit Solution offers from JP Morgan and River City Bank. Directed
staff to reach out to Member Agencies regarding providing guaranty for River
City Bank option for $2.5M of a total $4.0M credit solution.
July 8, 2020 City of Solana Beach City Council approved guaranty up to $175,000
July 14, 2020 City of Carlsbad City Council directed staff to return with to City Council with
potential loan to CEA in lieu of providing guaranty
July 20, 2020 City of Del Mar City Council approved guaranty up to $75,000
July 28, 2020 City of Carlsbad City Council considered loan terms and conditions; did not
approve making loan to CEA.
August 20, 2020 CEA Board approved executing promissory note with Calpine Energy Solutions
for administrative costs through January 2021
December 17, 2020
Credit Solution
Page 2 of 3
Since CEA began its efforts related to identifying its start-up credit solution, activities have progressed in
support of the May 2021 launch, and as a result there is more clarity into the actual energy supply costs
to be incurred prior to launch. Credit needs are detailed below:
Funding Need for Credit Solution
Admin Costs February —June 2021 $540,000
CAISO Deposit 500,000
Deposits 245,000
Energy Supply Costs 3,125,848
Working Capital 589 152
TOTAL FUNDING NEED S5,000,000
CEA has two credit options that have been under consideration, River City Bank and JP Morgan.
River City Bank Option
River City Bank (RCB) currently provides CEA with its operational banking needs, including providing its
future lockbox for CCA activity, and is a leader in the CCA industry when it comes to meeting operational
banking needs. Terms of the credit solution (Attachment A) offered by RCB are summarized below:
River City Bank - $4,000,000
Credit Facility Nonrevolving Line of Credit (NRLOC)/Revolving Line of Credit (RLOC)
Amount $2,500,000 NRLOC
$1,500,000 RLOC
Term 2 years with option to convert both NRLOC and RLOC to term loan for up to an
additional 3 years for total 5-year term
Security $2.5M NRLOC secured by one of the following options:
1)Guarantee from one or all of the JPA Members or other creditworthy
party
2)Cash Collateral for 100% of NRLOC loan amount
3)Combination of guarantees and cash collateral at levels acceptable to RCB
Interest Rate NRLOC - One-month US Treasury Bill yield plus 2.5% subject to a 3.00% floor
RLOC - One-month US Treasury Bill yield plus 3.0% subject to a 3.50% floor
Term Loan — 3-Year US Treasury Note yield plus 3.00% subject to a 3.50% floor
Loan Fees $15,000
In recent conversations with RCB representatives, they have indicated that RCB is willing to reconsider
the required guarantee for the $2.5M Nonrevolving Line of Credit portion due to the financing occurring
closer to CEA's launch date.
Pros of the financing solution with RCB include:
•RCB experience working with CCAs & understanding of industry
•Good experience working with RCB on banking needs
•Favorable Interest Rate
Cons of the financing solution with RCB include:
•Available credit solution short of current funding need
December 17, 2020
Credit Solution
Page 3 of 3
•Limited opportunities for other credit facilities such as letters of credit
JP Morgan Credit Option
While newer to the CCA industry, JP Morgan has experience providing credit support to MCE Clean
Energy and CleanPowerSF. Terms of the JP Morgan option (Attachment B) include:
JP Morgan - $5,000,000 Start-Up & Working Capital
Credit Facility
Revolving Line of Credit (RLOC)
Amount
$5,000,000
Term
Up to 5 Years
Security
CEA only — Nonrecourse to the member agencies
Interest Rate
One-month or three-month LIBOR plus 3.45% (1-month LIBOR was
.15388% last week)
Undrawn Fee
1.95% calculated on the undrawn portion of the $5.0M RLOC
Loan Fees
$50,000
Pros of the JP Morgan Solution:
•Credit facilities available beyond initial start-up and working capital (up to additional $10M)
o $5.0M (subject to credit approval) upon formal request to provide liquidity support
via Standby Letters of Credit or cash posting for power contracts
o $5.0M (subject to credit approval) available after launch for additional working
capital or liquidity for power purchase agreements
•Non-recourse to Member Agencies
Cons of the JP Morgan Solution:
•Covenants includes a rate covenant
o Terms of rate covenant have improved to be limited to rates required to be set to
pay costs not paid from other available sources, and amounts CEA is obligated to
pay by law or contract
•Slightly Higher loan costs
Staff has begun the due diligence activities required for the application process, and JP Morgan has
notified staff that CEA has full credit approval.
Based on the evaluation of the two credit solutions offered, staff recommends moving forward with the
JP Morgan solution.
FISCAL IMPACT
Repayment of the credit solution will come from revenue generated by energy sales. The CEA Pro
Forma anticipate sufficient funds to cover the repayments.
ATTACHMENTS
Attachment A — River City Bank Revised Term Sheet Dated May 26, 2020
Attachment B —JP Morgan Revised Term Sheet Dated November 3, 2020
RiverCityBank
5/26/2020
Attachment A
Barbara Boswell
Interim CEO
Clean Energy Alliance
Re: lst Revision to Credit Proposal for Clean Energy Alliance
Dear Barbara:
In response to the Request for Proposals for Credit and Banking Services issued on January 15, 2020,
River City Bank ("RCB or "Bank") is pleased to provide you this updated expression of interest term
sheet for two credit facilities totaling $4 million, as detailed below:
Credit Facility #1:
Borrower: Clean Energy Alliance ("CEA" or "Borrower")
Loan Type: Non-Revolving Line of Credit ("NRLOC"), with option to convert outstanding
advances to an amortizing Term Loan at Expiration.
Purpose: To provide seed capital prior to launch of commercial operations, anticipated in
May 2021.
Loan Amount: Up to $2,500,000.
Guaranty/Credit The NRLOC will be secured by one of the following options:
Enhancement: i. Any one or all of the JPA members, or other creditworthy parties (subject to
Bank's approval), are required to guarantee the loan on a joint and several
basis.
ii.Cash collateral for an amount equal to 100% of the Loan Amount. Bank will
have a perfected security interest in the funds held at the Bank in a
restricted account.
iii.A combination of guarantees and cash collateral can also be considered at
levels acceptable to Bank.
Note. that Bank is amenable to discuss the release of guaranties/cash collateral
after CEA has successfully launched operations and provided a track record of
operations at to-be-determined levels satisfactory to Bank.
Expiration/Maturity: The NRLOC will have a two year Expiration. Any outstanding cash balances on the
NRLOC at Expiration can be converted, at Borrower's option, to an amortizing term
loan which matures in up to 3 years from the conversion date. As such, the
11 RiverCitYBank
Term Sheet
Page 2 of 7
Maturity Date will be up to 5 years from the date of NRLOC origination.
Interest Rate: NRLOC: Floating at the one (1) month US Treasury Bill yield plus 2.50%, subject to
a floor rate of 3.00%.
As of May 22, 2020 the one month US Treasury bill yield was 0.09% at close of
trading hours, so the Interest Rate would have been 3.00% if set on that day.
Term Loan Option: Fixed for the three (3) year term at the three (3) year US
Treasury note yield plus 3.00%, subject to a floor rate of 3.50%, based on the US
Treasury note yield existing as of the close of normal market trading hours per
www.treasury.gov on the date that the outstanding NRLOC balance converts to a
Term Loan.
Loan Fee:
Bank calculates interest on an actual/360 day basis.
NRLOC: Interest only payments due monthly, with all outstanding principal and
interest due at maturity unless the Term Loan Option is exercised.
Term Loan Option: 36 equal monthly principal and interest payments, on a fully
amortizing basis.
During the NRLOC period, 0.25% of the entire Loan Amount per annum, payable
upon loan closing and at the one year anniversary of the NRLOC. All fees can be
paid from loan proceeds.
River City Bank
Term Sheet
Page 3 of 7
Credit Facility #2:
Borrower:
Loan Type:
Clean Energy Alliance ("CEA" or "Borrower")
Commercial Revolving Line of Credit ("RLOC"), with option to convert outstanding
advances to an amortizing Term Loan at Expiration.
To provide i) funding for lockbox account approx. six (6) months prior to launch of
commercial operations, ii) working capital post launch of commercial operations,
and iii) credit enhancements required for energy purchases in the form of Letters of
Credit.
Purpose:
Loan Amount: Up to $1,500,000.
Guaranty: None
Expiration/Maturity: The RLOC will have a two year Expiration. Any outstanding cash balances on the
RLOC at Expiration can be converted, at Borrower's option, to an amortizing term
loan which matures in up to 3 years from the conversion date. As such, the
Maturity Date will be up to 5 years from the date of RLOC origination.
Letters of Credit issued under the RLOC will have a maximum term of one year
from the date of issuance, with annual auto renewal options available.
Borrower will provide cash collateral equal to 110% of any outstanding Letters of
Credit in the event that any are outstanding at the time of RLOC Expiration.
Interest Rate: RLOC: Floating at the one (1) month US Treasury Bill yield plus 3.00%, subject to a
floor rate of 3.50%.
As of May 22, 2020 the one month US Treasury bill yield was 0.09% at close of
trading hours, so the Interest Rate would have been 3.50% if set on that day.
Term Loan Option: Fixed for the three (3) year term at the three (3) year US
Treasury note yield plus 3.00%, subject to a floor rate of 3.50%, based on the US
Treasury note yield existing as of the close of normal market trading hours per
www.treasury.gov on the date that the outstanding RLOC balance converts to a
Term Loan.
Bank calculates interest on an actual/360 day basis.
Repayment: RLOC: Interest only payments due monthly, with all outstanding principal and
ITaiJ RiveisCify Bank
Term Sheet
Page 4 of 7
interest due at maturity unless the Term Loan Option is exercised.
Term Loan Option: 36 equal monthly principal and interest payments, on a fully
amortizing basis.
Letters of Credit: In the event of a Letter of Credit draw by a beneficiary, Bank will
disperse funds from the RLOC, and Borrower must repay Bank in full within 3
days.
Issuance Fee 2.00% p.a., minimum
$400
Documentation Fee (at issuance) $250 flat
Amendment Fee to increase or
extend 2.00% p.a., min. $400
*Note, Letter of Credit fees are subject to change in accordance with market rates.
During the NRLOC period, 0.25% of the entire Loan Amount ($6,250), per annum,
payable upon loan closing and at the one year anniversary of the RLOC. All fees
can be paid from loan proceeds.
Letter of Credit Fees:
Loan Fee:
Applicable to both Credit Facilities:
Collateral: Perfected security interest in 15t lien position in each of the following:
•Debt Service Reserve Account ("DSRA") in which Borrower will be required
to maintain an amount that represents 10% of aggregate loan amounts
(est. $400,000). DSRA may be funded from loan proceeds.
•A security agreement that covers i) right of set off to all of Borrower's
deposit accounts, and ii) pledge on Borrower revenues not otherwise
encumbered by outside liens, such as the lockbox account.
•Resource Adequacy ("RA") Contracts: Bank shall have a consent to
collateral assignment agreement related to any RA contracts executed prior
to commercial operations (i.e. before May 2021).
No junior liens will be permitted on any Collateral.
Documentation Fee $5,000, payable upon loan closing, plus actual legal costs charged by Bank's
& Legal costs: outside legal counsel (estimated at $10,000 based on similar transactions). All
fees can be paid from loan proceeds.
Bank reserves the right to increase the Documentation Fee if Borrower requires
extensive negotiation of standard loan documents.
RivessCity Bank
Term Sheet
Page 5 of 7
Costs & Expenses:
Legal Opinion:
Third Party Review:
Needs List:
Borrower to pay all out-of-pocket costs and expenses, such as third-party search
and order fees and any applicable legal fees (collectively, the "Costs &
Expenses"). All fees can be paid from loan proceeds.
Prior to loan closing, Borrower to obtain a favorable legal opinion confirming the
enforceability of the loan agreement as well as confirmation of Borrower's entity
formation.
Prior to loan closing, and once the final financial pro-forma projections have
been completed, Bank may engage a third party independent review of the
financial pro-forma at Borrowers cost. All fees can be paid from loan proceeds.
•In addition to the conditions set forth in this letter, additional conditions
precedent to closing will be those which are usual and customary for
transactions of this nature, including but not limited to Bank's receipt, review
and satisfaction with all documents, reports, leases, financial statements,
guarantor information, and other information reasonably requested by Bank.
Subsequent to Bank's receipt of this signed term sheet and Deposit, Bank will
prepare a needs list summarizing such items.
Additional Requirements
•Financial Covenants:
o Minimum earnings before interest, depreciation, and amortization ("EBIDA"): Borrower to
adhere to a minimum EBIDA requirement on a quarterly basis based on —80% of final pro-
forma figures. As of the May 2020 pro-forma prepared by Pacific Energy Advisors, minimum
EBIDA requirements are as follows, based on cumulative year to date figures and Fiscal Year
ending 6/30:
•Fiscal Year ending 6/30/2021: Minimum $72,000
•Quarter ending 9/30/2021: Minimum $3,000,000
•Quarter ending 12/31/2021: Minimum $4,600,000
•Quarter ending 3/31/22: Minimum $4,100,000
•Fiscal Year ending 6/30/22: Minimum $7,100,000
•Quarter ending 9/30/22: Minimum $2,700,000
•Quarter ending 12/31/22: Minimum $3,850,000
•Quarter ending 3/31/23: Minimum $3,600,000
•Fiscal Year ending 6/30/23: Minimum $7,000,000
"EBIDA" is hereby defined as change in net position plus depreciation, amortization, and
interest expense, for the calculated period. Debt Service is defined as interest expense during
the calculated period plus scheduled principal payments during the calculated period.
11 RivesCityBank
Term Sheet
Page 6 of 7
Bank will require a revised pro-forma prior to launch of commercial operations and after
power supply contracts have been finalized. As such, it is anticipated that this covenant will
be updated, but not materially weakened.
o Debt Service Coverage Ratio (For Term Loan Option only). Borrower to maintain a minimum
Debt Service Coverage Ratio ("DSCR") not at any time less than 1.25x, measured annually at
fiscal year-end.
DSCR is calculated as EBIDA at fiscal year-end divided by Debt Service for the calculated
period.
o Minimum Unrestricted Net Position: At levels and on dates to be mutually agreed upon by
Bank and Borrower upon review of the final financial pro-forma.
•RLOC Lock Box Advance Requirements: If Credit Facility #2 is utilized to fund a lockbox advance
prior to commencement of commercial operations, such advance shall not exceed $1,000,000 and
shall not occur earlier than six (6) months prior to scheduled commencement of operations
(estimated in May. 2021). Borrower must provide Bank with sufficient documentation and status
update reports to support the scheduled commercial operation launch date in May, 2021.
•Deposit Relationship. Borrower must maintain all of its deposit accounts exclusively with Bank, with
automatic monthly loan payments deducted from the account. Failure to adhere to this requirement
will result in a 2.00% increase to the Interest Rate so long as this covenant is not satisfied.
•No Additional Indebtedness/Subordination. Aside from obligations arising in the ordinary course of
business which are not delinquent, Borrower shall not incur additional indebtedness without the
prior written consent of Bank. This provision excludes subordinated debt owed to JPA members
with terms (such as interest rate, repayment schedule, subordination, etc.) to be acceptable to
Bank. Additionally, all indebtedness incurred to date from JPA members or third parties (approx.
$450,000) must be subordinated to Bank.
•Ongoing Reporting. During the Term, Borrower will be required to provide:
o Within 180 days after the close of each annual accounting period, CPA audited financial
statements inclusive of a balance sheet, income statement, and cash flows for the period then
ended, prepared in accordance with GAAP and in a form acceptable to Bank.
o Within 45 days after the close of each month end, unaudited financial statements inclusive of a
balance sheet and year-to-date income statement of Borrower for the period then ended,
prepared in accordance with GAAP and in a form acceptable to Bank.
Bank reserves the right to terminate this proposal at any time and this proposal may not be transferred
or assigned without prior written consent of Bank.
Please be advised that this letter does not constitute a binding commitment or impose any obligation on
Bank, but only reflects proposed terms of a transaction which may become acceptable to the parties.
Notwithstanding any other language of agreement that may appear elsewhere in this nonbinding letter
of intent, it is expressly understood and agreed that this letter does not and shall not constitute a
binding agreement between the parties in any manner, except with respect to: Costs & Expenses. The
River CityBank
Term Sheet
Page 7 of 7
undertakings and obligations of Bank with respect to the loan will be subject to, among other things: (i)
credit analysis and approval in accordance with Bank's underwriting standards; (ii) the preparation,
execution and delivery of mutually acceptable loan documentation containing such terms and
conditions as are customary for similar credit facilities; (iii) the accuracy of all representations made and
information furnished by Borrower to Bank, and (iv) the absence of any information or other matter
being disclosed after the date hereof that is inconsistent in a material and adverse manner with any
information or other material disclosed to Bank.
Thank you for considering River City Bank for your financing needs. If you would like us to move forward
on the basis proposed, please sign and date the term sheet below:
Sincerely,
F-6.A.Go•r_O
Stephen Fleming Rosa Cucicea
President & CEO VP & Clean Energy Division Manager
ACKNOWLEDGED AND ACCEPTED BY
Borrower hereby acknowledges and agrees to the presented loan structure, including to any proposed
joint borrowing and/or guaranteeing structure.
By:
Its:
Date
RAVEPCify Bank
STRICTLY PRIVATE AND CONFIDENTIAL
Attachment B
Clean Energy Alliance
JOINT POWERS AUTHORITY
CLEAN ENERGY ALLIANCE
REQUEST FOR PROPOSALS FOR CREDIT AND BANKING SERVICES
April 21, 2020November 3, 2020
J.P.Morgan
CONFIDENTIAL
Disclaimer
This proposal is intended only as an outline of certain indicative terms of the facility described
herein (the "Facility") and does not purport to be an exhaustive or all-inclusive summary of the
conditions, covenants, representations, warranties and other provisions that would be contained
in definitive documentation for the Facility. The final documentation may include terms and
conditions required by JPMorgan Chase Bank, National Association (together with its affiliates,
"JPMorgan") that are not included in this proposal. This proposal is non-binding, is not a
commitment and is subject to final credit approval.
Clean Energy Alliance ("CEA") acknowledges and agrees that: (i) JPMorgan does not have an
advisory or fiduciary relationship with CEA and nothing in this proposal or our services in
connection therewith or otherwise will be deemed to create an advisory or fiduciary relationship
(irrespective of whether JPMorgan or any of its affiliates has provided other services or is
currently providing other services to CEA on other matters); (ii) JPMorgan has no obligations to
CEA with respect to the transaction contemplated hereby unless and except to the extent
expressly stated in this proposal; and (iii) CEA has consulted with and is relying on its own legal,
accounting, tax, financial and other advisors, as applicable, to the extent it has deemed
appropriate.
This proposal from JPMorgan for the Facility is entirely independent from any proposal or other
agreement from any other affiliate of JPMorgan to provide other services.
J.P.Morgan
CONFIDENTIAL
Tatde of contents
Cover Letter 1
2. Overview of the Firm 3
3. Qualifications 5
4. Key Personnel 8
5. Banking Services Proposal 11
6. Credit Proposal 12
7. References 19
IP Morgan
1. Cover Letter
April 21, 2020November 3 2020
Delivery via e-mail
Barbara Boswell
Interim Chief Executive Officer
Email: CEO@TheCleanEnerqvAlliance.orq
Dear Ms. Boswell and Ms. Berkuti,
Marie Berkuti
Interim Treasurer
MBerkuticosb.orq
CONFIDENTIAL
On behalf of JPMorgan Chase Bank, N.A. ("JPMorgan" or the "Bank"), we are pleased to submit
this proposal to Clean Energy Alliance ("CEA" or the "Authority") in response to its solicitation for
a bank credit facility to finance start up costs, working capital and posting of liquidity for power
procurement contracts. Based on our strong familiarity with the California Community Choice
Aggregation ("CCA") space, we are pleased to be able to provide a multi-use Revolving Line of
Credit for up to $15,000,000 and a tenor of up to thrce (3) five (5) years.
Since CEA is at the early stages of its launch, we believe that it will benefit greatly by working
with a firm with direct experience in the CCA financing space, a large and strongly rated balance
sheet (Aa2/A+/AA), clear name recognition for CEA's future partners (power providers,
developers) and a full suite of treasury products and banking services (as further described
under separate cover in the Banking Services response, an independent proposal) all under one
institution. We currently have an aggregate of $115 million of exposure to California CCAs
whiCh include a $40 million three (3) year credit facility to Mann Clean Energy and a $75 million
five (5) year credit facility to CleanPowerSF, San Francisco PUC's CCA program. We believe
that there is great insight gained from our involvement with Mann Clean Energy and
CleanPowerSF and we can provide this direct experience for the benefit of CEA.
Accordingly, based on the Bank's review of the provided financial projections and it's
understanding that each currently committed member plans on committing an additional
—$450,000 to finance start-up costs of CEA, in our proposal herein we have endeavored to
create a structure which we believe will provide the lowest all-in cost to the Authority.
•Strength: We are the largest (by balance sheet) and strongest rated (external bank
ratings) bank responding to this REP. By working with JPM rather than a non-rated bank,
there is no need to wrap any future Standby Letters of Credit and pay superfluous letter
of credit fees for doing so. Furthermore, our strong ratings (Aa2/A+/AA) should further
strengthen any ongoing negotiations CEA is having or will have with PPA providers.
Having a highly rated credit provider will also be important in the future should CEA
seek to get external ratings, similar to Mann Clean Energy and Peninsula Clean Energy,
and ultimately seek to develop standalone renewable resources.
al Size/Flexibility: We are not capital or tenor constrained unlike some of our smaller
colleagues responding to this RFP - our financing approach is designed to grow with the
program and we therefore have the ability to upsize credit exposure overtime. Our
proposal herein includes capacity for start up needs, Letters of Credit, and an option to
upsize when CEA launches to customers. We additionally provide the flexibility to have
up to a 5 year tenor if advantageous in the negotiations with PPA providers. We are
able to provide a full suite of services for credit and banking needs which would
eliminate the need to deal with multiple banks - we are happy to provide banking
services but we are not tying the business to credit. Lastly, we provide flexibility to use
the facility in the future to repay the City's funded start up costs subject to the Bank's
approval.
al Confidence: There are many moving pieces in getting a CCA program up and running.
It starts with the age old conundrum of how do you get customers without power and
1 j.P.Morgan
CONFIDENTIAL
how do you get power without customers. The answer is that CEA procures power first
using a credit facility backed by our strong ratings and strong balance sheet. We
believe it is important for JPMorgan to work with CEA to significantly refine its financing
plan and capital requirements not only now but over time. Because of where CEA is in
its growth cycle, the amount of capital it seeks to obtain at each stage will affect the cost
of that capital much more significantly than when CEA is earning revenue. We have
already met with our credit committee regarding this proposal and have received
preliminary credit approval.
Notwithstanding the foregoing, please note that this proposal is subject to normal due diligence,
formal credit approval, satisfactory documentation and agreement on terms and conditions, and
is not a commitment at this time. Nothing expressed or implied herein constitutes any
commitment of JPMorgan, or any of its affiliates, to lend or provide any other financial services in
connection with the transaction; such obligations would arise only under separate written
agreement(s) mutually acceptable to CEA and JPMorgan. Although this is not a formal
commitment, if JPMorgan is mandated to provide the Facility, we will seek credit approval
promptly and expect to have no issues meeting CEA's anticipated financing timeline.
Yours sincerely,
Ly-fsrli:
Allyson Goetschius, Executive Director
JPMorgan Chase Bank, N.A.
Cc: Will Frymann, Executive Director, JPMorgan Securities LLC
Janice Fong, Associate, JPMorgan Chase Bank, N.A.
Yolanda Mates, Vice President, JPMorgan Chase Bank, N.A.
Sean Haugh, Vice President, JPMorgan Chase Bank, N.A.
William O'Brien, Associate, JPMorgan Chase Bank, N.A.
2 JPMorgan
CONFIDENTIAL
2. Overview of the Firm
a)Provide a brief description of your firm.
JPMorgan has been a market leader in providing public finance issuers with liquidity and
credit products for over 35 years. Our firm's Public Finance Credit Origination Group, which
sits within the Investment Banking Division and the Public Finance Group, currently
manages approximately $283 billion of credit commitments across more than 160 clients of
which $1.46 billion is outstanding to issuers in California and $115 million is outstanding to
CCAs.
b)Provide your firm's total capital and total net assets for 2019, 2018 and 2017 year-
ending.
With more than $264.3 billion in total capital as of September 30, 2019, JPMorgan Chase &•
Co. is one of the largest financial institutions in the world. Below we have outlined our annual
capital position, which demonstrates our strength and stability. Our significant balance sheet
allows the Public Finance Credit Origination Team to provide proposals that our competitors
often cannot match in terms of both size and tenor.
($mm)
JPMorgan Chase & Co.
Q3-2019 Q2-2019 Q1-2019 2018 2017
Total Capital 264,348 263,215 259,837 256,515 255,693
Equity Capital 235,985 236,222 232,844 230,447 229,625
Net Capital
Excess Net
Capital
_* _*
Total Net Assets 264,348 263,215 259,837 256,515 255,693
Source: JPM 10K and 10Q. As of September 30, 2019; *JPMorgan Chase & Co. does not disclose net capital
and excess net capital.
C) Provide your firm's current Long-term and Short-term credit ratings as well as
Outlooks, if available.
As a highly rated credit provider, JPMorgan has the ability to offer a full suite of credit
products including Lines of Credit, Term Loans, Standby Letters of Credit for energy
procurement collateral support, as well as Construction Loans and Tax Equity for
renewable energy projects.
JPMorgan Chase Bank N.A.'s credit ratings and outlooks by Moody's, S&P, and Fitch
are as follows:
Rating Agency
Moody's
s&F.
Fitch
Credit Ratings
Long-Term Short-Term Outlook
Aa2 P-1 Stable
A+ A-1 Stable
AA Fl + Stable
d)Provide your firm's credit rating, if available.
Please reference Section (c).
e)Submittal of Proposals Acknowledgment.
JPMorgan acknowledges California Government Code Section 4552: In submitting a bid to a
public purchasing body, the bidder offers and agrees that if the bid is accepted, it will assign
to the purchasing body all rights, title, and interest in and to all causes of action it may have
under Section 4 of the Clayton Act (15 U.S.C. Sec. 15) or under the Cartwright Act (Chapter
2, commencing with Section 16700, of Part 2 of Division 7 of the Business and Professions
Code), arising from purchases of goods, materials, or services by the bidder for sale. to the
purchasing body pursuant to the bid. Such assignment shall be made and become effective
at the time the purchasing body tenders final payment to the bidder.
3 j. P. Morgan
CONFIDENTIAL
JPMorgan expressly acknowledges that it is aware that if a false claim is knowingly
submitted (as the terms "claim" and "knowingly" are defined in the California False Claims
Act, Cal. Gov. Code, §12650 et seq.), CEA will be entitled to civil remedies set forth in the
California False Claim Act. It may also be considered fraud and the Contractor may be
subject to criminal prosecution.
JPMorgan certifies that it is, at the time of bidding, and shall be throughout the period of the
contract, licensed by the State of California to do the type of work required under the terms
of the Contract Documents. Bidder further certifies that it is regularly engaged in the general
class and type of work called for in the Bid Documents.
4 J.P.Morgan
CONFIDENTIAL
3. Qualifications
a) Provide a description of your firm's experience in the government sector. What, if any,
experience does your firm have with the members of CEA?
JPMorgan is an experienced and well capitalized credit provider with approximately $203
billion of commitments outstanding from the Public Finance credit book including $1.46
billion of credit commitments to California issuers.
Please note the list below is as of February 7, 2020.
Size Pricing Issuer Series Date •
09/07/2011
03/01/2012
05/09/2012
05/23/2012
12/13/2012
12/13/2012
01/16/2013
01/16/2013
02/13/2013
04/02/2013
04/02/2013
04/18/2013
04/18/2013
02/05/2014
02/05/2014
08/19/2014
08/19/2014
08/20/2014
09/30/2015
09/30/2015
11/18/2015
11/18/2015
2/24/2016
03/22/2016
04/20/2016
05/05/2016
05/06/2016
08/03/2016
10/18/2017
10/18/2017
11/08/2017
01/29/2019
6/27/2019
07/30/2019
07/30/2019
08/27/2019
San Diego County Water Authority
San Diego Unified School District
San Diego Unified School District
San Diego County Regional Transportation
Commission
San Diego County Water Authority
San Diego County Water Authority
San Diego County Regional Airport Authority
San Diego County Regional Airport Authority
San Diego County Water Authority
San Diego Unified School District
San Diego Unified School District •
San Diego Unified School District
San Diego Unified School District
San Diego County Regional Airport Authority
San Diego County Regional Airport Authority
County Of San Diego
County Of San Diego
San Diego Association Of Governments
San Diego Unified School District
San Diego Unified School District
San Diego Unified School District
San Diego Unified School District
Carlsbad Municipal School District No. 20
California Public Works Board
San Diego Unified School District
San Diego Unified School District
San Diego Unified School District
San Diego Association Of Governments
San Diego Unified School District
San Diego Unified School District
San Diego Association Of Governments
San Diego County Water Authority
Carlsbad Unified School District
San Diego Association Of Governments
San Diego Association Of Governments
County Of San Diego
JPM
Role
Series 2010A Co
Series 20108 Co
Series 2010C BABs Co
Water Revenue Refunding Bonds, Series
2011A
Series 20116 Co
GO Series 2012R1 Co
2012 General Obligation Bonds Co
Sales Tax Revenue Bonds 2012A Co
Series 2012 Pipeline Bonds
Series 2012 Plant Bonds
Series 2013A (Non AMT)
Series 20136 (AMT)
2013A Water Revenue Refunding
Election of 2012. Series A
Election of 2012. Series B
Election of 2012, A-1 Taxable
Election of 2012, Series C
Series 2014A Bonds
Series 20146 Bonds
2014A
20146
2014 Series A
Series D (Federally Taxable)
Series E
Series F
Series G (Green Bonds)
2016
Lease Revenue Refunding Bonds
(Department of General Services), 2016
Series B (San Diego Office Building Complex)
Series R-5
Series J-2
Series J-1
Sales Tax Revenue Bonds 2016A
2017 GO Bonds Series I
2017 GO Green Bonds Series J
2017 Series A
Series 2019 Pipeline Bonds
2018A
Series 2019A (Green Bonds)
Series 20196 (Green Bonds)
Certificates of Participation, Series 2019
(Justice Facilities Refunding)
(mm)
313.2 09/22/2010 San Diego County Regional Airport Authority
44.1 09/22/2010 San Diego County Regional Airport Authority
215.4 09/22/2010 San Diego County Regional Airport Authority
98.0 07/27/2011 San Diego County Water Authority
94.5
65.4
150.0
420.6
203.2
530.3
107.3
272.3
299.1
52.5
60.5
3.0
414.0
29.4
275.9
91.7
2.1
350.0
75.4
79.0
370.6
100.0
30.0
56.2
126.1
39.4
5.6
325.0
441.0
59.0
194.1
183.2
85.0
210.0
125.0
19.7
Lead
Lead
Co
Co
Lead
Co
Co
Co
Co
Co
Co
Co
Co
Co
Co
Co
Co
Co
Co
Lead
Lead
Lead
Co
Co
Co
Co
Lead
Lead
Lead
Co
Co
Co
On the credit side, JPMorgan has provided a $1.0 million working capital facility to Poseidon
Water LLC, the developer and facility manager of the Claude "Bud" Lewis Carlsbad
Desalination Plant, since 2017.
b) Provide a description of your firm's experience in the CCA sector.
In November 2019, JPMorgan closed on a $40 million three (3) year multi-use revolving line
of credit with Mann Clean Energy. This program provides the flexibility to draw for working
capital and capital expenditures related to development or acquisition of new assets, as well
as to issue Standby Letters of Credit to secure power purchase agreements. Additionally, in
5 IP.Morgan
CONFIDENTIAL
2018, JPMorgan closed on a $75 million five (5) year facility with a similar structure with
CleanPowerSF, San Francisco PUC's CCA program, in support of its Phase 2 expansion
plan. This program is a new enterprise fund for SFPUC and we have currently issued 5
different Standby Letters of Credit to secure power obligations on behalf of CleanPowerSF.
We also initially provided a Standby Letter of Credit ($13.9 million) to the SFPUC under its
Power Enterprise which was used to support CleanPower's Phase 1 expansion plan.
JPMorgan's strong balance sheet gives the Bank flexibility to grow its credit capacity
overtime as a CCA's financing needs increase whether due to customer growth, increased
contracting needs, or a transition to standalone power resources development. Public
Finance also has the ability to provide project level financing for greenfield and brownfield
renewable assets in support of a CCA's transition to power project development and
ownership.
We are keen to continue to expand our footprint in the Community Choice Aggregation
market and the broader renewables space, and have been actively monitoring the
development of CCAs across the U.S. and in California particularly. It is also important to
note that Public Finance Credit Origination and its credit risk team are-extremely familiar with
CCAs and have received credit risk approval to provide credit proposals for .other non-rated
CCAs including San Diego Energy District, Silicon Valley Clean Energy Authority, East Bay
Community Energy Authority, San Jose Community Energy, and Clean Power Alliance.
C) For firms without direct experience in the CCA sector, please provide your experience
in related sectors or with other unrated entities.
Please see (b) above.
d)What assurances can you provide CEA on your firm's ability to transact
organizationally?
Please see (b) above.
e)Provide any other qualifications you believe are relevant to CEA related to the Scope.
JPMorgan's Public Finance Credit Origination team has extensive experience extending
credit to non-rated entities especially in the project finance, infrastructure and high-yield
spaces. Our group has provided non-rated loans for projects in renewable energy,
healthcare and stadium financing. Across all of these transactions, our group has also either
acted as lead arranger or agent bank and in some circumstances construction monitoring
agent.
•$460.0 million bridge loan commitment for a municipal electric utility to
purchase a biomass fired plant
▪$400.0 million line of credit for a non-rated windstorm insurance company
•$300.0 million construction term loan for a non-rated performance venue
•$224.7 million direct purchase of bonds for a managed toll lane project
•$149.7 million term loan for a non-rated wood pellet facility
•$150.0 million working capital facility for a rail transit project
•$125.0 million construction term loan for a non-rated arena financing
•$100.0 million line of credit for a non-rated windstorm insurance company
•$86.6 million exit facility for a formerly bankrupt toll road
▪$81.8 million term loan for a non-rated bridge
•$75.2 million construction loan for a non-rated proton therapy center
•$75.0 million revolving line of credit for a non-rated airport terminal
improvement project
•$40.0 million construction loan for a non-rated arena financing
•$36.5 million construction loan for a non-rated soccer stadium financing
6 .J.P.Morgan
CONFIDENTIAL
P $19.5 million term loan for a non-rated biofuel plant
N $12.1 million term loan for the construction of a gas plant
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CONFIDENTIAL
4. Key Personnel
Bid responses shall identify the lead contact and include a complete list of all key
personnel associated with the RFP. This list must include all key personnel who will
provide services/training to CEA staff and all key personnel who will provide credit and
support services. For each person on the list, the following information shall be included:
a)The person's relationship with the Bidder, including job title and years of
employment with Bidder;
b)The role that the person will play in connection with the RFP;
c)Address, telephone, fax numbers, and e-mail address; and
d)Person's relevant experience, certifications, and/or merits.
Credit Underwriting and Provision of Balance Sheet Support
Allyson Goetschius, Executive Director
383 Madison Avenue, 3rd Floor
New York, NY 10179
Phone: (212) 270-0335
Facsimile: (917) 849-0272
Email: allyson.l.doetschiusipmordan.com
Allyson Goetschius joined JPMorgan in 2010 and has over 10 years of experience in the
financial services industry. Allyson is responsible for originating, structuring, and executing
credit transactions with municipalities and not-for-profit issuers across the U.S. and
specifically focuses on infrastructure, renewables and more structured project finance
transactions. She has worked closely with numerous municipal clients across the country on
direct loan, letter of credit, line of credit, and construction financing facilities. Allyson received
her BS in Economics with Concentrations in Finance, Real Estate and Spanish at The
Wharton School at the University of Pennsylvania.
Allyson will lead the pitching and transaction execution credit process for CEA, including
structuring and documentation.
Janice Fong, Associate
383 Madison Avenue, 3rd Floor
New York, NY 10179
Phone: (212) 270-3762
Facsimile: (917) 464-0884
Email: janice.r.fondipmordan.com
Janice Fong joined JPMorgan in 2013. Janice is primarily responsible for supporting Credit
Origination coverage of municipal and not for profit issuers across the country. Janice
received a B.A. in Economics from Barnard College.
Janice will provide support throughout the life of the credit process with CEA.
8 J.P.IVIorgan.
CONFIDENTIAL
Day to Day Treasury/Banking Services
Yolanda Mates, Vice President
300 S Grand Avenue, 3rd Floor
Los Angeles, CA 90071
Phone: (213) 621-8335
Email: yolanda.a.mates@jpmorgan.com
As a Government Banker in the Pacific-West region, Yolanda coordinates the delivery of the
Bank's treasury management, liquidity and investment management, equipment financing,
credit and merchant services solutions based on the client's goals, priorities and objectives.
Yolanda has 14 years of experience in the financial and banking industry, with 10 years
directly serving Government agencies. Yolanda is an active member of the California
Municipal Treasurers Association, California Society of Municipal Finance Officers, and
Women in Public Finance.
Yolanda will lead CEA's relationship team focusing on the quality and delivery of our treasury
services. She will be responsible for the overall satisfaction of the banking relationship. She
vvill:
•Serve as your primary point of contact for the bank's full treasury services capabilities
•Recommend products and services that meet CEA's needs and goals, including
treasury management and other banking services
•Oversee delivery of products and services including treasury services and other
financial services
•Address your overall satisfaction with the JPMorgan banking relationship
Sean Haugh, Vice President
8181 Communications Parkway
Building B, 6th Floor
Plano, TX 75024
Phone: (214) 965-3186
Email: sean.haugh@jdmorgan.com
Sean Haugh supports public sector entities on the West Coast. He has over 15 years of
diverse experience in the financial industry, focusing on relationship management and
financial strategy. His focus is to deliver solutions to clients across government agencies to
ensure the proper alignment of strategies and credit capacity for all treasury services
products.
Sean holds both a Bachelor of Business Administration in Finance and an MBA in Strategic
Management.
Sean will assist CEA in resolving working capital and efficiency challenges by providing
information and offering ideas from the JPMorgan's Treasury Services team. He will:
•Recommend cash flow optimization strategies, including ways to streamline financial
processes
•Assist CEA in realizing day-to-day operational efficiencies in alignment with your
treasury goals
•Provide targeted information to you about new products, market developments and
industry trends
O Monitor CEA's implementation for successful service delivery
9 J.P Morgan
CONFIDENTIAL
Marilyn Hardney, Senior Client Service Professional
201 North Central Avenue: 21st Floor
Phoenix, AZ 85004
Phone: (602) 221-1036
Facsimile: (866) 917-3954
Email: marilyn.k.hardneyiPmorcan.com
Marilyn Hardney has over 20 years of experience with JPMorgan and has held several
positions across the organization. She is committed to providing value-added service and
has effective problem-solving skills. Additionally; her knowledge of fraud prevention
products will provide you with excellent direction on how best to protect your company.
Marilyn is a graduate of LeTourneau University and holds a bachelor's degree in Business
Management.
Marilyn will serve as the primary point of contact and as a proactive resource for CEA's
banking needs. With her understanding of all aspects of JPMorgan's Treasury Services'
product functionality and technology, Marilyn will facilitate the timely resolution of all service
issues. For day-to-day matters, she will:
•Resolve CEA's inquiries including credit/debit confirmations, Cancellations of
payments, amendments of payment instructions, funds transfer inquiries arid other
treasury services matters
•Identify and resolve operational issues in a timely manner
•Share her specialized knowledge of fraud prevention tools and provide advice on
asset and data protection strategies
•Facilitate the opening of additional accounts
•Marilyn works with a team of client service professionals who will provide
consistent, reliable and timely service support.
Investment Banking Coverage
Will Frynriann, Executive Director
500 Mission Street, 316 Floor
San Francisco, CA 94105
Phone: (415) 315-3901
Facsimile: (415) 692-4653
Email: will.frymannipmorgan.com
Will Frymann works closely with many of JPMorgan's municipal clients throughout the country,
with particular emphasis on public power clients. Will joined JPMorgan's Public Finance
department in September 2015 and has spent more than 12 years working with municipal
water, wastewater, power and gas utility clients throughout the US and has focused
particularly on California.
At JPMorgan, Will works as part of the firm's Infrastructure Group and is focused on power
enterprises, structured financings, project finance and public private partnerships. Prior to
joining JPMorgan, Will was a financial advisor on over $1.5 billion in financings. He has worked
closely with the Los Angeles Department of Water and Power, Metropolitan Water District,
Southern California Public Power Authority, Northern California Power Agency, Anaheim
Public Utilities, San Francisco Public Utilities Commission, CPS Energy, Sacramento
Municipal Utility District, and the City of Redding, among others. Will graduated from UCLA
with a BS in Cognitive Science and from UC Berkeley with an MBA.
10 J.P.Morgan
LU
0
CONFIDENTIAL
5. Banking Services Proposal
Provide a proposal which details the costs, terms and conditions for providing the
Banking services as outlined in the Scope of Services above in the RFP.
Please reference the Banking Services Proposal, sent under the same cover.
Please note that it is an independent proposal and not tied to the credit proposal.
Please note: While the Commercial Bank (see separate Banking Services response)
cannot act as collateral agent — the Investment Bank (credit provider) does have the
ability to act as collateral agent on collateral accounts.
1 1 .1 P. Morgan
CONFIDENTIAL
6. Credit Proposal
Terms and Conditions for a Revolving Line of Credit Proposal
Borrower: Clean Energy Alliance ("CEA"), which currently includes the City of
Solana Beach, the City of Del Mar, and the City of Carlsbad (together,
the "Member Agencies").
Facility Provider: JPMorgan Chase Bank, N.A. ("JPMorgan" or the "Bank").
Facility: Revolving Line of Credit Agreement (the "Revolving Line" or the
"Facility") to be used for general corporate purposes of CEA including
start-up costs and working capital (collectively referred to as the
"Loans") as well as to provide liquidity support and/or collateral
support for energy procurement contracts. Under the Facility, CEA
can request the Bank to issue Standby Letters of Credit ("LOCs") for
power contracts or post cash collateral for power contracts. Loan
amounts repaid may be re-borrowed again prior to the maturity date
of the Facility.
Closing Date: TBD. On or around late June/ early July 2020.
On or around February 1, 2021.
Facility Amount:. Up to $15.0 million total commitment which will be made available
under a 'phase-in' approach as requested by CEA, further detailed
below:
•Up to $10.0 million at financial closing split into two sublimits:
o $5.0 million immediately available for start-up and
working capital costs, and
o $5.0 million to be made available (subject to credit
approval) upon formal request to provide liquidity
support either via Standby Letters of Credit or cash
postings exclusively for power contracts.
•An additional $5.0 million may be made available (subject to
credit approval) upon launch to customers (on or around May
2021) for additional working capital or liquidity support for
power purchase agreements.
Note: The Bank is also open to discussing other sizing amounts with
CEA overtime should it end up adding additional members under the
JPA.
Facility Term:
Security:
The Facility will have a final maturity date that is either one (1), two
(2), er—three (3), four (4), or five (5) years from the Closing Date at
CEA's election (the "Maturity Date"). Loan amounts repaid may be re-
borrowed again prior to the Maturity Date of the Facility.
The Revolving Line will be a special limited obligation of CEA only
and therefore nonrecourse to the (general fund of the) Member
Agencies, or any other members of CEA. The Revolving Line will be
secured by a net revenue pledge of CEA.
The Bank understands the CEA's desire that any initial extension of
credit prior to the estimated May 2021 launch will be unsecured until
revenues are generated/collected. Our ability to meet this desired
structure will require additional due diligence as set forth on Page 13-
14.
12 J.P.Morgan
CONFIDENTIAL
The Revolving Line will be senior to the Member Agencies' or Calpine
Subordinate Loan (the "Subordinate Loan") to CEA of $450,000.
Upfront Fee: None.
Undrawn Fee: CEA agrees to pay to JPMorgan a nonrefundable undrawn fee (the
"Undrawn Fee") during the period from and including the effective
date of the Facility, to and including the Maturity Date or termination
date of the Facility (calculated on the basis of a 360 day year and
actual days elapsed) at a rate per annum equal to the Undrawn Fee
(shown in the table below) on the Undrawn Facility Amount. The
Undrawn Fee shall be payable quarterly in arrears and on the
expiration date or termination date of the Facility.
Undrawn Fee Facility Term
One (1) Year 1.750%
Two (2) Years 1.850%
Three (3) Years 1.950%
Four (4) Years 2.050%
Five (5),Years 2.150%
For clarification — the Undrawn Fee will only be calculated on the
undrawn portion of the initial up to $5 million.
"Undrawn Facility Amount" means the Facility Amount minus the sum
of (a) the aggregate amount of Loans and (b) the aggregate amount
of Letters of Credit issued under the Facility and (c) the aggregate
amount of LOC disbursements, if any.
Prior to the Maturity Date, subject to no Default or Event of Default
having occurred or being then continuing and all representations and
warranties of CEA then being true and correct, all Loans will accrue
interest at a rate per annum equal to the one month or three month, at
the election of CEA, ("Interest Period") LIBO Rate or a successor
reference rate for the Interest Period, subject to availability, plus the
Applicable Margin below.
In the event the LIBO Rate is unavailable for any reason, or if CEA so
elects, the Loans will bear interest at the Base Rate plus the
Applicable Margin set forth in the pricing grid below.
"LIBO Rate" means, for any Interest Period, the London interbank
offered rate as administered by the ICE Benchmark Administration (or
any other Person that takes over the administration of such rate) for
U.S. Dollars for a period equal in length to such Interest Period as
displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that
displays such rate (or, in the event such rate does not appear on the
Reuters pages or screen, on any successor or substitute page on
such screen that displays such rate, or on the appropriate page of
such other information service that publishes such rate from time to
time as selected by the Bank in its reasonable discretion) at
approximately 11:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period, as the rate for dollar
deposits in the London interbank market with a maturity comparable
to such Interest Period. Notwithstanding the foregoing, if the LIBO
Rate shall be less than zero, the LIBO Rate used to calculate interest
for the Loan(s) shall be zero. The LIBO Rate shall adjust upon the
Interest Rate
on Loans:
13 J.P.Morgan
CONFIDENTIAL
expiration of each Interest Period. Libor floor to be discussed. Please
note that the documentation will contain language regarding the
phasing out of LIBOR.
"Base Rate" means, for any given day, the highest of: (i) the Prime
Rate, (ii) the Federal Fund Effective Rate plus 0.5% p.a., or (iii) the
LIBO Rate plus 1.0%. Notwithstanding the foregoing, the Base Rate
shall not be less than zero, plus 0.5% p.a. and (iii) an Adjusted LIBO
Rate plus 1.0% p.a.
The initial Applicable Margin shall correspond to the selected Facility
Term of the Facility as listed below:
Facility Term Applicable Malgin*
One (1) Year 3.250%
Two (2) Years 3.300%
Three (3) Years 3.350%
Four (4) Years 3.400%
Five (51Years 3.450%
Note: As of April 21November 3, 2020 the 1-Month LIBO Rate is
0.4414% bps and the 3-Month LIBO Rate is 0.8422% bps.
CEA agrees to pay the Bank a Standby Letter of Credit ("Standby
LOC") Fee for any issued Standby LOCs (calculated on the basis of a
360 day year and actual days elapsed), at a rate per annum based on
the applicable Standby LOC term listed below. The Standby LOC
Fee shall be payable quarterly in arrears and on the expiration or
termination date of the representative Standby LOC.
The Standby LOC Fee for any issued LOCs will replace the all-in
drawn interest rate under the Facility and not be an additional charge.
Applicable Margin:
Standby Letter
of Credit Fees:
Facilityjerm
One (1) Year
Two (2) Years
Three (3) Years
Four (4) Years
Five (5) Years
Standby LOC Fee
3.250%
3.300%
3.350%
3.400%
3.450%
Standby Letters of
Credit Issuance
•Fees:
Standby LOC
Disbursements:
Pricing Grid:
$500 per issuance of a Standby Letter of Credit.
If the Bank makes a Standby LOC disbursement (a "LOC
Disbursement") with respect to a Standby LOC, CEA shall reimburse
such LOC disbursement immediately on the date such LOC
disbursement is made. If the Borrower fails to reimburse the Bank on
such disbursement date, the unreimbursed amount shall convert to a
LOC Reimbursement Loan, shall bear interest at the applicable rate
for Loans, and be due and payable the earlier of the selected Facility
Term and the Maturity Date, provided that no Default or Event of
Default shall have occurred.
None.
Borrowing CEA must provide written notice at least three (3) business days prior
14 1P.Morgan
CONFIDENTIAL
Notice: to a LIBO Advance.
Repayment Loans shall be due and payable in full, together with all accrued
of Loans: interest thereon, on the Maturity Date of the Facility.
Prepayment None, with respect to Loans if paid on an interest payment date.
Penalty: Standard LIBO Rate breakage provisions would apply to prepayments
made on a date other than the last day of any LIBO Rate interest
period.
Default Rate: If at any time an Event of Default shall have occurred and be
continuing under the Facility, any outstanding LIBO Rate Loans or
Standby LOCs shall immediately bear interest at the Default Rate.
The Default Rate will be calculated at a rate per annum equal to the
applicable LIBO Rate, plus the Applicable Margin, plus 3% in the case
of a LIBO Rate Loan or. the Standby LOG Fee plus 3%. Interest
accruing at the Default Rate shall be payable on demand.
Termination/
Reduction Fee:
Should CEA select. a two (2), er---three (3), four (4), or five (5) year
facility, in the event CEA elects to terminate the Facility or otherwise
permanently reduce the principal amount of the Facility prior to the
date that would be the one (1) year anniversary from the Closing
Date, CEA will be required to pay JPMorgan a termination or
reduction fee equal to the Undrawn Fee which would have accrued on
the full Facility Amount, or in the case of a reduction, the amount
being permanently reduced, from the date of termination or reduction
through the maturity date. All fees and any other amounts owed to the
Bank will be due and payable on or prior to the effectiveness of any
such termination or reduction, as applicable.
Calculation All interest on Loans (calculated by reference to the LIBO Rate) shall
and Payment be calculated on the basis of a year of 360-days and the actual
of Interest: - number of days elapsed and will be payable at the end of each LIBO
Rate interest period and upon repayment of such Advance.
Loans bearing interest with reference to the Base Rate will be
calculated on the basis of the actual number of days elapsed in a 365-
or 366-day year, and shall be payable monthly in arrears and upon
repayment of such Loan (whether at scheduled maturity or otherwise).
Clawback JPMorgan will require the inclusion of a customary clawback provision
Amounts: as protection against the possibility of the interest rate payable on
Loans and exceeding the maximum legal rate payable by CEA. Upon
termination of the Facility, CEA shall pay to the Bank a fee equal to
the amount of all unpaid deferred excess interest.
Extension of A renewal request may be made in writing no more than 120 days
Maturity Date / prior to the then current Maturity Date. A written response will be
Renewal delivered by the Bank within 30 days of receipt of such request. All
Provisions: renewals will be at the sole and absolute discretion of JPMorgan. A
failure of JPMorgan to respond to a request for renewal will constitute
a denial of such request.
Conditions Timely delivery of duly completed request for Loans/Standby LOCs,
Precedent the aggregate outstanding principal amount of the Loans/Standby
to each Loan / LOCs will not exceed the amount of the unutilized commitment, no
Standby LOC: event of default has occurred and is continuing, and the continued
15 IP Morgan •
CONFIDENTIAL
accuracy of all representations and warranties in the revolving credit
agreement as of the date of the borrowing.
Additional
Due Diligence Given the long lead time between the expected financial closing of the
Requirements / Facility and May 2021 launch to customers and the request to provide
Conditions financing on an unsecured basis during that timeframe, the Bank will
Precedent to need to perform additional diligence as detailed below outside of its
Closing of the customary and usual items which will include the following:
Facility:
a due diligence call related to the impacts of COVID-19;
•satisfactory review of a final implementation timeline and
implementation budget (including startup costs, resource
adequacy requirements, etc.);
•receipt/satisfactory review of a near final draw-down schedule
for the implementation budget;
•in-person or virtual meeting with CEA and the Member
Agencies to discuss its commitment to moving forward with
launching CEA in FY2021 and any major risks that could lead
the CEA and the Member Agencies to terminate the program
pre-launch to customers;
•CEA shall have adopted operating rules and regulations
satisfactory to the Bank;
evidence that CEA shall have established policies around the
funding of an operating reserve;
•CEA shall have delivered to the Bank copies of any executed
Power Purchase Agreements;
▪evidence that the Bank has a security interest in the net
revenues, after payments to power providers and O&M
payments;
•completion of satisfactory legal documentation,
•delivery of satisfactory opinions of counsel which will include
counsel to CEA; and
•Board approval of the Facility and definitive documents.
Documentation: Documentation will include inter alia, a Revolving Line of Credit
Agreement (the "Agreement") between JPMorgan and CEA. The
Agreement will include, but not be limited to, the terms and conditions
outlined herein as well as JPMorgan's standard provisions with
respect to representations and warranties, covenants, events of
default, remedies, indemnification (gross negligence standard),
OFAC, anti-terrorism and anti-corruption, exculpation waiver of jury
trial/reference, and full protection against increased costs and
changes in capital adequacy requirements (including, without
limitation, in connection with the Dodd Frank Act and Basel Ill).
Covenants: CEA will be required to comply with the following covenants:
•CEA shall establish an operating reserve sized at a minimum
of 90 days of operating costs which will be funded on a TBD
schedule overtime (to be further discussed upon finalizing the
pro-forma model),
•CEA shall set rates to pay, to the extent not paid from other
available monies, any and all amounts CEA is obligated to
pay or set aside from revenues by law or contract • cover
operating and debt service costs,
•CEA shall be required to maintain a minimum Debt Service
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CONFIDENTIAL
Coverage Ratio of 1.40x, tested quarterly on a rolling last
twelve months basis of which such covenant may be waived
at any time by the Bank,
•CEA may not issue any new during the term of the Facility
other than an upsize of this Facility as referenced in "Facility
Amount" above and/or any additional increments above the
total Facility Amount to be approved by the Bank debt or
other than the Member Agency Subordinate Loans.
"Debt Service Coverage Ratio" or "DSCR" shall be defined as the
ratio of (a) Net Revenues divided by (b) total Debt Service (including
interest and fees on Loans/LOC issuances as well as a five (5)
amortization timeframe for any Loans or LOG Reimbursement Loan).
"Net Revenues" shall be defined as gross revenues less operating
expenses.
As discussed with CEA on November 3, 2020, JPMorgan is open to
discussions about a carve out for a rate subsidy program.
In addition to the delivery of annual.audited financial statements, the
Bank will require delivery of the following:
Quarterly Unaudited Financial Statements: CEA will covenant to
provide quarterly unaudited financial statements prepared by
management within 60 days of the end of the first three (3) fiscal
quarters of each year.
Monthly Unaudited Operating Report: CEA will covenant to provide
monthly operating information within 45 days of the end of the month
which will include customer enrollments, opt-outs and total revenues.
Annual Budget: CEA will covenant to provide its annual operating
•budget for the upcoming fiscal year within 45 days of its adoption but
in no event later than the start of the fiscal year.
Nathan Odem, Partner, from Chapman and Cutler LLP will serve as
bank counsel. Legal fees are estimated at $50,000. His contact
information is below.
Financial
Reporting:
Legal Fees:
Chapman and Cutler LLP
111 West Monroe Street
Chicago, IL 60603
Nathan Odem, Partner
Telephone: (312) 845-3782
Facsimile: (312) 516-1982
Email: naodem@chapman.com
Governing Law: This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of California; provided,
however, that the obligations of the Bank under the Agreement shall
be governed by the laws of the State of New York.
Credit Approval: JPMorgan has received preliminary credit approval to provide the
Facility. Notwithstanding the foregoing, please note that this proposal
is subject to normal due diligence, final credit approval, satisfactory
documentation and agreement on structure, terms, and conditions,
and is not a commitment at this time. Nothing expressed or implied
herein constitutes any commitment of JPMorgan, or any of its
affiliates, to lend or provide any other financial services in connection
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CONFIDENTIAL
Proposal Expiry:
with the transaction; such obligations would arise only under separate
written agreement(s) mutually acceptable to CEA and JPMorgan.
If JPMorgan is mandated to provide the Facility, we will seek
final credit approval promptly within ten (10) business days of
receipt of all necessary information. We expect to close within 4-
5 weeks from formal mandate.
May 21, 2020November 19, 2020, if not accepted by CEA by this
date. Any extensions of this date shall be at the sole and absolute
discretion of JPMorgan.
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7. References
San Francisco Public Utilities Commission, CleanPowerSF
Richard Morales, Debt Manager
525 Golden Gate Avenue
San Francisco, CA 94102
Phone: (415) 551-2973
Email: rmoralessfwater.orq
Mann Clean Energy
.Vicken Kasarjian, Chief Operating Officer
1125 Tamalpais Avenue
San Rafael; CA 94901
Phone: (415) 464-6659 •
Email: vkasarjian@mceCleanEnergy.org
19 J.P.Morgan