20110804Letter of Understanding.pdf

DONOVAN E. WALKER
Lead Counsel
dwalkertãidahopower.com
RE
isIDA""POR~
An 10ACORP Company
August 3, 2011
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 West Washington Street
Boise, Idaho 83720
Re: Case No. IPC-E-06-26
Magic Wind Park LLC - Letter of Understanding and Agreement Relating
to Contract Default, Scheduled Operation Date, and Generator
Interconnection Agreement.
Dear Ms. Jewell:
Enclosed please find a copy of a Letter of Understanding and Agreement
between Idaho Power and Magic Wind Park LLC. Please file the enclosed Letter
Agreement in the contract file for this matter.
Sincerely,
fÇC1u:-
DEW:csb
Enclosure
cc: Dean J. Miler (w/encl.)
Donald L. Howell, ", IPUC (w/encl.)
Rick Sterling, IPUC (w/encl.)
Randy C. Allphin, IPC (w/encl.)
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, 10 83707
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Pursuant to our June 28, 2011 conference call and follow-up communication, and
notwithstanding the foregoing, the partes' mutual understanding and agreement, having the
benefit of consulttin with their own respective counseL, is as follows:
The parties hereby agree that:
(1) Magic Wind has been properly notifed of its default and breach of the FESA as of June
28,2011;
(2) The FESA's requirement to cure said default within a commercially reasonable time
does not delay the requirement to achieve the Operation Date indefinitely;
(3) A commercially reasonable time with which to cure said default by achieving th
reuired Operation Date shall be an additonal one year and two moÒths, to a date certain
of September 30, 2012, by 5:00 p.m. Mountain Standard Time;
(4) The commercially reasonable time period granted to Magic Wind is a fair and
reasonable time with which to cure the default and breach, and Magic Wind shall not bring
any legal or equitable challenge to the same, and by this agreement knowingly and
intellgently waives its rights to bring any possible legal claim relate thereto;
(5) Magic Wind shall post Delay Secunt to secure the Operation Date commitnt in the
amount of $45.00 per kilowatt ("kW') of the project's nameplate capacit ($45 multiplied by
the Maximum Capacity with the Maximum Capaci being measured in kW). This Delay
Security shall be posted no later than September 30, 2011, in a form as describe in
Appendix A attched hereto. If Magic Wind fails to achieve the September 30, 2012,
Operation Date. Idaho Power shall draw the funds from the Delay Sêcurit and the FESA
wil terminate. The partes agree that the damages Idaho Power and its customers incur
due to Magic Wind's failure to achieve it Operation Date are dificult or impossible to
calculate with certainty, and that the Delay Security is an appropriate approximation of such
damages. The stated Delay Liquidated Damages and Delay Security are reasonable, and
Magic Wind shall not bring any leal or equitable challenges to the same, and by this
agreement knowingly and intelligently waives it rights to bring any possible leal claim
related thereto.
(6) Should Magic Wind achieve its Operation Date by or before September 30,2012, Idaho
Power shall release the full amount of the Delay Securit posted hereunder thirt (30) days
after the Operation Date has been achieved;
(7) If Magic Wind does not post the require securi by the date certain of September 30,
2011, by 5:00 p.m. Mountain Standard Time. the FESA will be terminated with no further
notice required nor leal challenges to the termination thereof;
(8) If Magic Wind doe not achieve the Operatin Date on or before September 30, 2012,
by 5:00 p.m. Mountain Standard Time, the FESA will be terminated wit no further notice
required nor leal challenges to the termination thereof.
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(9) Magic Wind shall sign and execute the final Genertor Inte~nnectn Agrement
("GIA") no later than september 30, 2011.
(10) Magic Wind shall pay, or make acceptable credit arrngemnts with Idaho Power topay, the $50,000 Invoice dated May 31, 2011, representing the required construction
deposit pursuant to the Facilit Study and the GIA, which payment was due by June 30,
2011, no later than September 30, 2011.
(11) If it can be reasonably demonstrated that Idaho Power was the wrongful cause of anydelays that would prevent Magic Wind from being completed and operational by the
Operation Date of September 30, 2012, then the Operation Date shall be extende by the
length of such delays or to some other reasonable date as mutually agreed. It is hereby
stipulated by both partes that no such claim that Idaho Power was or is the cause of any
such delays exists as of the date of execution of this Agreement.
(12) The Base Energy Purchase Price table included in paragraph 7.1 of the FESA was
amended on December 26, 200 and the base energy prices were extended four (4) years
to accmmodate the full 20 year term of that amendment. The revisiens herein require that
the Base Energy Purchase Price table be extended one (1) additional year to 2032 to
accommodate the full 20 year term in this Letter of Understanding and Agreement. The
following lines are added to that amendment:
Year Season 1 - (73.5%) Season 2 - (120.0%) Season 3 - (100.0%)2032 68.48 111.79 93.16
(13) Under IV of the FESA, Magic Wind proposed to design, construct, install, own, operate
and maintain a 20 MW wind generating facilit. Th facilty will be a qualifi small power
production facilty under the applicable provisions of the Public Utilities Regulatory Policy
Act of 1978 ("PURPA"). Magic Wind has changed the manufacturer and model of the wind
turbines that it wil construct. Magic Will provide data on the Facilty that Idaho Power wil
use to confirm that, under normal and/or average conditions, generation frm the Facilit
wil not exceed 10 aMW on a monthly basis. Additinally, regardless of turbine model and
or manufacturer, the project's maximum capacity/output is limited to 20 MW.
(14) If Magic does not perform the above by September 30. 2011, then the partes agreethat the FESA wil be therefore immediately terminated and no addïnonal amounts wil be
owed. Both Idaho Power and Magic Wind threfore, shall not bring any legal or equitble
challenge to the same and by this agreement knowingly and intelligently waive their rights to
bring any possible leal claim related thereto against the other part to this agreement.
Each part's signature below, with counsel, indictes that part's accptance of this Letter
of Understanding and Agreement and the averments and contents thereof.
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DATED this ~ day of August, 2011.
~Agre~~KofldahO PowrC rl~
is Grow Donovan E. Walker
nior Vic President, Power Supply Lead Counsel
Idaho Powr Company Idaho Power Company
Z:~~ofM.Wi"d PaÆLLC:~M.~ ~~
Magic Wind Park, LLC Legal Counsel for Magic Wind Park LLC
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APPENDIX A
FORMS OF LIQUID SECURITY
The Seller shall provide Idaho Power with commercially reasonable security instruments
such as Cash Escrow Security, Guarantee or Letter of Credit as those terms are defined
below or other forms of liquid financial security that would provide readily available cash
to Idaho Power to satisfy the Delay Security requirement within the August 2, 2011,
Letter Agreement.
For the purpose of this Appendix A, the term "Credit Requirements" shall mean
acceptable financial creditworthiness of the entity providing the security instrument in
relation to the term of the obligation in the reasonable judgment of Idaho Power,
provided that any guarantee and/or letter of credit issued by any other entity with a
short-term or long-term investment grade credit rating by Standard & Poor's Corporation
or Moody's Investor Services, Inc. shall be deemed to have acceptable financial
creditworthiness.
1. Cash Escrow Security - Seller shall deposit funds in an escrow account
established by the Seller in a banking institution acceptable to both Parties equal
to the Delay Security.
2. Guarantee or Letter of Credit Security - Seller shall post and maintain in an
amount equal to the Delay Security: (a) a guaranty from a party that satisfies the
Credit Requirements, in a form acceptable to Idaho Power at its discretion, or (b)
a Letter of Credit in a form acceptable to Idaho Power, in favor of Idaho Power.
The Letter of Credit wil be issued by a financial institution acceptable to both
parties.
(00065458.DOCX; ll