20060612Compliance filing.pdf

~~f9~Mark Moench
Senior Vice President and General Counsel
One Utah Center
201 S. Main Street, Suite 2300
Salt Lake Citv. UT 84111
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June 9, 2006
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Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 West Washington
Boise, ill 83702
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Re:Case No. P AC-05-
Joint Application of MidAmerican Energy Holdings Company and PacifiCorp
d/bla Utah Power & Light Company for an Order Authorizing Proposed
Transaction
Dear Ms. Jewell:
Please find enclosed for filing the non-consolidation opinion provided in compliance with
Commitment 134, pursuant to the Idaho Public Utility Commission s Order No. 29998
authorizing the MidAmerican Energy Holdings Company acquisition ofPacifiCorp,
issued March 14, 2006, in the referenced proceeding.
By copy of this letter, other parties to the proceeding are being provided notice ofthis
filing.
Please call if you have any questions regarding this filing.
Sincerely,
enc.
cc:Parties (w/o enc.
I hereby certify that on this 9th day of June, 2006, I caused to be served, via US
mail, a true and correct copy ofPacifiCorp s Compliance Filing (Commitment 134) in
Case No. P AC-05-
Andrea L. Kelley
Vice President, Regulation
ACIFICORP
825 NE Multnomah, Suite 2000
Portland, OR 97232
Mail: andrea.kelly~pacificorp.com
James M. Van Nostrand
James F. Fell
Stoel Rives LLP
900 SW Fifth Ave., Suite 2600
Portland, OR 97204
Mail: imvannostrand~stoel.com
iffell~stoel.com
Douglas L. Anderson
Senior Vice President & General
Counsel
MidAmerican Energy Holdings
Company
302 S. 36th Street, Suite 400
Omaha, NE 68131
Mail: danderson~midamerican.com
.... .......
Eric L. Olsen
Racine, Olson, Nye, Budge & Bailey,
Chartered
20 I E. Center
O. Box 1391
Pocatello, ill 83204-1391
Mail: elo racinelaw.net
Barton L. Kline, Senior Attorney
Monica B. Moen, Attorney II
Idaho Power Company
O. Box 70
Boise, ill 83707
Mail: bkline idaho ower.com
mmoen idaho ower.com
Brad M. Purdy
Attorney at Law
2019 N. 17th Street
Boise, ill 83702
Mail: bm urd hotmail.com
Mark C. Moench
Senior Vice President - Law
MidAmerican Energy Holdings Company
201 S. Main, Suite 2300
Salt Lake City, UT 84111
Mail: mcmoench~midamerican.com
Anthony Yankel
29814 Lake Road
Bay Village, OH 44140
Mail: tony~yankel.net
John R. Gale
Vice President, Regulatory Affairs
Idaho Power Company
O. Box 70
Boise, ill 83707
Mail: r aleCipidaho ower.com
Arthur F. Sandack, Esq.
8 E. Broadway, Suite 510
Salt Lake City, UT 84111
Mail: asandack itower.net
Donald L. Howell, II Terri Carlock
Deputy Attorney General Accounting Supervisor
Idaho Public Utilities Commission Idaho Public Utilities CommissIOn
472 W. Washington (83702)472 W. Washington
O. Box 83720 O. Box 83720
Boise, ill 83720-0074 Boise, ill 83720-0074
Mail: donlhowellCippuc.idaho.gov Mail: terri.carlock~puc.idaho.gov
Randall C. Budge James R. Smith
Racine, Olson, Nye, Budge & Bailey,Monsanto Company
Chartered Highway 34 North
201 E. Center O. Box 816
O. Box 1391 Soda Springs, ill 83726
Pocatello, ill 83204-1391 Mail: iim.r.smithCipmonsanto.com
Mail: rcbCipracinelaw.net
Katie Iverson Alan Herzfeld
Brubaker & Associates Herzfeld & Piotrowski LLP
17244 W. Cordova Court 713 W. Franklin
Surprise 85387 O. Box 2864
, E-Mail: kiverson~consultbai.com Boise, ill 83701
Mail: aherzfeld~hp net
. ........ ..
David Hawk R. Scott Pasley
Director, Energy Natural Resources Assistant General Counsel
R. Simplot Company R. Simplot Company
O. Box 27 O. Box 27
Boise, ill 83702 Boise, ill 83702
Mail: dhawkCipsimplotcom Mail: spasley~simplotcom
Peggy Ryan
Supervisor Regulatory Administration
WILLKIE FARR & GALLAGHERIJP 787 Seventh Avenue
New York, NY 10019-6099
Tel: [phone]
Fax: [phone]
June 7, 2006
TO THE PARTIES LISTED ON EXHffiIT A:
Re:Stock Purchase Agreement by and among Scottish Power PLC, as
Seller Parent, PacifiCorp Holdings, Inc. ("PacifiCoro Holdings ), as
Seller, and MidAmerican Energy Holdings Company ("MEHC ), as
Buyer, for the purchase and sale of all of the common stock, no par
value, ofPacifiCorp, an Oregon corporation, dated as of May 23
2005. as amended as of March 21. 2006 (the "Purchase Agreement"
Ladies and Gentlemen:
We have acted as counsel to MEHC, an Iowa Corporation and PPW Holdings LLC, a
Delaware limited liability company ("PPW") in connection with the purchase ofPacifiCorp, an Oregon
corporation ("PacifiCorp ) and the other transactions (collectively, the "Transaction ) contemplated by
the Purchase Agreement.
In connection with the Transaction, you have requested our opinion as to whether a
bankruptcy court would, on its own or upon proper request by a party in interest, in a case under title
11 of the United States Code, 11 U.C. ~ 101 et seq. (the Bankruptcy Code ), commenced by or
against MEHC, order the substantive consolidation of the assets and liabilities of either PacifiCorp or
PPW with those ofMEHC.
For the purpose of rendering this opinion, we have reviewed solely the Purchase
Agreement and certain documents related thereto (the "Purchase Documents ), and such other
agreements, instruments, certificates, corporate and other records which we are aware of and have been
furnished with, the organizational documents ofPPW and other documents as we have deemed
appropriate for the purpose of rendering this opinion (collectively, the "Documents ), as set forth in
Exhibit B hereto. In connection with the delivery of this opinion, we have made no independent
investigation of the facts referred to herein, except as expressly set forth herein, and have relied on the
accuracy and completeness of all statements, representations, warranties and covenants as to factual
matters contained in the Documents and in the officers' certificates delivered in connection herewith
to the extent such certificates relate to PacifiCorp, PPW and/or MEHC and are material to this opinion.
All capitalized tenns used but not otherwise defined in this opinion shall have the meanings ascribed to
such tenns in the Documents or the Bankruptcy Code, as applicable.
NEW YORK WASHINGTON PARIS LONDON MILAN ROME FRANKFURT BRUSSELS
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In rendering this opinion, we have assumed that:
(a)
(b)
each ofthe Documents has been duly authorized, executed and delivered by all
parties thereto;
the parties to each of the Documents had at all relevant times, and continue to
have, the legal power and authority to act in the capacities in which they have
acted and are to act thereunder;
(c)the Documents constitute the valid and legally binding obligations of the parties
thereto and are enforceable in accordance with their tenDs, except as such
enforceability may be limited by the laws related to bankruptcy, insolvency or
creditors' rights;
(d)none of the Documents will be amended, modified or changed in any respect
material to this opinion;
(e)the Documents submitted to us as originals are authentic and all Documents
submitted to us as copies confonn to the original documents;
(f)
(g)
all signatures on all Documents submitted to us are genuine;
any motion or other proceeding brought to substantively consolidate the assets
and liabilities of either PacifiCorp or PPW with those of MEHC will be actively
opposed by creditors and representatives ofPacifiCorp, PPW or any subsidiary
thereof, and litigated until all appeals are exhausted or time to appeal has
expired;
(h)any ruling upon the issues which are the subject of this opinion will follow
existing applicable legal precedents after hearing a competent presentation and
argument of the relevant facts and law;
(i)all covenants, representations and warranties in the Documents, including,
without limitation, all requirements set forth in the organizational documents of
PPW, have been and will be complied with in all material respects by MERC,
PPW and PacifiCorp insofar as they pertain to the valid existence ofPPW and
PacifiCorp and their separateness from MEHC; provided however.that
notwithstanding anything contained in this opinion or in the Documents to the
contrary, we do not assume that either PPW or PacifiCorp will in the future
remain adequately capitalized or solvent, not become a debtor under the
Bankruptcy Code or have the ability to pay its debts in the future. With regard
to the company procedures and financial effect set out in Section J.D. below, the
relevant provisions (including, but not limited to, provision (j) with respect to
each PPW and PacifiCorp) do not assume that either PPW or PacifiCorp will in
the future remain adequately capitalized or solvent;
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as of the date hereof, except for any outstanding obligations under the IASA (as
defined below) there are no intercompany loans or advances between PacifiCorp
and/or PPW (including their subsidiaries or affiliates) on the one hand, and
MEHC on the other; and
(k)creditors ofPacifiCorp, PPW or any subsidiary thereof are relying on the
separate existence ofMEHC from PPW and PacifiCorp, and any substantive
consolidation of the assets and liabilities ofMEHC with those of either PPW or
PacifiCorp would materially prejudice the rights of the creditors of PPW
PacifiCorp or any subsidiary thereof, as the case may be.
FACTS
The Parties
MEHC is a corporation organized under the laws of the State of Iowa and is the sole
member and manager ofPPW. MEHC has substantial assets other than its interests in the Equity
Interest (as defined herein) and was not formed for the purpose of owning PacifiCorp.
PPW is a special purpose entity and a limited liability company formed under the laws
of the State of Delaware on May 23,2005. Since the date of its formation and through the date hereof
PPW has not engaged in any business activities and it has not incurred any liabilities. PPW is a
wholly-owned subsidiary of MEHC and owns 100% of the Equity Interest.
PacifiCorp is corporation organized under the laws of the State of Oregon. PPW owns
100% of the outstanding common stock ofPacifiCorp. PacifiCorp also has preferred stock outstanding
in an aggregate principal amount of approximately $82.5 million. The preferred stock is comprised of
various classes and series, all of which are publicly registered and held. Certain series of the preferred
stock vote together with the PaciflCorp common stock on all matters. The common stock owned by
PPW represents approximately 99.75% of the outstanding voting power ofPacifiCorp s outstanding
voting securities.
The Transaction
Pursuant to the Purchase Documents, MEHC agreed to purchase from PacifiCorp
Holdings, a corporation organized under the laws of the State of Delaware, and PacifiCorp Holdings
agreed to sell to MEHC or its designee, 100% of the capital stock ofPacifiCorp (the "EQuity Interest
The Purchase Documents contain customary representations, warranties, covenants and events of
default. In addition, a certain Intercompany Administrative Services Agreement has been entered into,
dated as of March 31 2006, by and between PacifiCorp and MEHC (the IASA"), which provides for
the corporate and affiliate cost allocation methodologies between the parties. Also, a certain Tax
Allocation Agreement, effective as of March 21 , 2006, has been entered into by and among Berkshire
Hathaway Inc., MEHC and MEHC's affiliated corporations (the TAA"). Further, the terms and
conditions of the IASA and T AA are intrinsically fair and substantially similar to those available on an
ann length basis with unaffiliated third parties.
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In connection with the approval of the Transaction by the applicable state regulatory
authorities, MEHC and PacifiCorp entered into stipulations (Stipulations ) with certain regulatory
parties from each state in which PacifiCorp serves its retail customers (ie., Utah, Oregon, Wyoming,
Washington, Idaho and California) wherein MEHC and PacifiCorp agreed to undertake and comply
with certain commitments. These commitments are comprised of the following categories: (a)
extensions of existing commitments previously entered into by PacifiCorp and/or Scottish Power pIc
&g., operating restrictions and ring-fencing provisions); (b) new commitments entered into by
PacifiCorp and MEHC applicable to all the states in which PacifiCorp s service territory extends; and
(c) state-specific commitments that apply only to the activities and operations of PacifiCorp and
MEHC within each respective state. Notwithstanding MEHC's agreement to perform under each
Stipulation, MEHC does not guarantee any ofPacifiCorp s financial obligations set forth therein;
although, the Stipulations contain certain financial commitments made solely by MEHC whose
aggregate liability is de minimis in relation to the size of the Transaction.
The Documents also require PPW to comply with certain affirmative and negative
covenants, including covenants restricting the incun-ence of additional indebtedness and prohibiting
PPW ftom acquiring any other property or assets or conducting any business other than as specified in
the organizational documents ofPPW.
Governance Procedures
Pursuant to PPW's limited liability company agreement, dated as of March 15,2006
(the "LLC Agreement ), PPW was formed for the purpose of engaging in the following activities: (a)
to purchase and own the Equity Interest; (b) in connection with the purchase of the Equity Interest, to
negotiate, authorize, execute, deliver and perform under documents, including, but not limited to, that
certain Assignment and Assumption of Stock Purchase Agreement between MEHC and PPW, pursuant
to which MEHC has assigned to PPWall ofMEHC's rights and obligations under the Purchase
Agreement (the "Assignment Agreement"), and any other agreement or document contemplated
thereby; (c) to do such other things and carry on any other activities, and only such things and
activities, which the Board (as defined herein) determines to be necessary, convenient or incidental to
any of the foregoing purposes; and (d) to have and exercise all of the power and rights conferred upon
limited liability companies formed pursuant to the Limited Liability Company Act of the State of
Delaware in furtherance of the foregoing.
The LLC Agreement also provides that the business and affairs of PPW shall be
managed by or under the direction of a board of one or more directors (the Board"
);
provided that
from and after the purchase of the Equity Interest, and for so long as PPW shall own the Equity
Interest, one of the members of the Board shall be an Independent Director. Pursuant to the LLC
Agreement, an Independent Director" shall mean a member of the Board who is not at the time of
initial appointment, at any time while serving on the Board and/or has not been at any time during the
preceding five years: (a) a member, stockholder, director (except as such Independent Director of
PPW), officer, employee, partner, attorney or counsel ofPPW or any affiliate ofPPW; (b) a creditor
customer (other than a consumer), supplier or other person who has derived in anyone of the
preceding five years revenues from its activities with PPW or any affiliate ofPPW (except as such
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Independent Director); (c) a person related to or employed by any person described in clause (a) or
clause (b) above; or (d) a trustee, conservator or receiver for PPW or any affiliate ofPPW.
The LLC Agreement further provides that, for as long as PPW owns or holds the Equity
Interest, neither PPW, MEHC nor the Board shall be authorized or empowered, nor shall they pennit
PPW, without prior unanimous written consent of all of the Board, including the Independent Director
to: (a) consolidate, merge, dissolve, liquidate or sell all or substantially all ofPPW's assets; (b)
institute proceedings to have PPW adjudicated bankrupt or insolvent; (c) consent to the institution
bankruptcy or insolvency proceedings against PPW; (d) file a voluntary petition seeking, or consenting
, reorganization or relief with respect to PPW under any applicable federal or state law relating to
bankruptcy; (e) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of PPW or a substantial part of its property; (t) make any assignment for the
benefit of creditors of PPW; (g) admit in writing PPW's inability to pay its debts generally as they
become due; or (h) to the fullest extent pennitted by Jaw, take any action in furtherance of any such
action. Moreover, the Board may not vote on, or authorize the taking of, any of the foregoing actions
unless there is at least one Independent Director then serving in such capacity.
The LLC Agreement further provides that, for so long as PPW owns or holds the Equity
Interest, MEHC shall cause PPW to have, at all times, at least one person who shall automatically
become a member having 0% economic interest in PPW (the "Springing Member ) upon the
dissolution ofMERC or upon the occurrence of any other event that causes MERC to cease being a
member ofPPW. Upon the occurrence of any such event, PPW shall be continued without dissolution
and the Springing Member shall, without any action of any person or entity, automatically and
simultaneously become a member ofPPW having a 0% economic interest in PPW. The Springing
Member shall not be required to make any capital contributions to PPW and shall not receive any
limited liability company interest in PPW. Prior to its admission to PPW as a member ofPPW, the
Springing Member shall have no interest (economic or otherwise) in, and is not a member of, PPW.
Company Procedures and Financial Effect
Based on the provisions set forth in the Documents, including, without limitation, the
provisions contained in the LLC Agreement, we assume that the following has been and will be true of
PPW at all times since its formation:
(a)The Documents, to the extent they relate to the separateness and valid existence
ofPPW, have been and will continue to be complied with in accordance with the
tenus thereof as of their respective effective dates.
(b)The activities of PPW have been and will continue to be limited to those set
forth in the LLC Agreement. The LLC Agreement has limited and will continue
to limit PPW's activities to those activities set forth therein.
As used in this defmition
, "
affiliate" shall have the meaning given to such tenD under Rule 405 under the
Securities Act of 1933, as amended.
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. (e)
(c)PPW has observed and will continue to observe all material corporate
procedures, as applicable, insofar as such procedures relate to its separateness
and valid existence, as required by the LLC Agreement and applicable law.
(d)The financial records and accounts ofPPW have been, are and will continue to
be prepared and maintained in accordance with the method of accounting
determined by MEHC. The independent auditor for PPW shall be an
independent public accounting firm selected by MEHC.
PPW shall:
maintain its own separate books and records, financial statements and
bank accounts;
ii.except for tax and accounting purposes, at all times hold itself out to the
public as a legal entity separate from MEHC and any other Person and
not identify itself as a division of any other Person;
111.have a Board, the composition of which in sum is unique from that
any other Person;
IV.file its own tax returns, if any, as may be required under applicable law
and pay any taxes required to be paid under applicable law;
not commingle its assets with assets of any other Person;
vi.conduct its business in its own name and hold all of its assets in its own
name;
VlI.pay its own liabilities only out of its own funds;
viii.maintain an arm length relationship with its affiliates, including
MEHC;
ix.from its own funds, pay the salaries of its own employees;
not hold out its credit as being available to satisfy the obligations
others;
xi.maintain its own office and telephone lines separate and apart from its
affiliates, although it may lease space from an affiliate and share phone
lines with an affiliate, having either separate numbers or extensions, and
in furtherance thereof allocate fairly and reasonably any overhead for
shared office space;
Xli.use separate stationery, invoices and checks bearing its own name;
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Xlll.not pledge its assets for the benefit of any other Person;
XlV.correct any known misunderstanding regarding its separate identity;
xv.maintain adequate capital and an adequate number of employees in light
of its contemplated business purposes; and
xvi.not acquire any obligations or securities of MEHC or its affiliates, other
than the Equity Interest.
(f)Assets have not been and will not be transferred to or from PPW from or to
MEHC without fair consideration (except for the Equity Interest pursuant to the
Assignment Agreement and any distribution made in the ordinary course by
PPW, to the extent pennitted by the LLC Agreement and applicable law) or with
the intent to hinder, delay or defraud the creditors ofPPW, MERC or PacifiCorp
and its subsidiaries.
(g)
PPW has not and will not transfer any of its assets in contemplation of
insolvency or with the intent to hinder, delay or defraud any present or future
creditor ofPPW, MEHC or PacifiCorp and its subsidiaries. The Transaction
contemplated by the Purchase Agreement does not create conditions which
would cause such Transaction to be a fraudulent transfer or fraudulent
conveyance under the laws which govern the LLC Agreement.
(h)For so long as PPW holds or owns the Equity Interest, PPW shall not:
become or remain liable, directly or contingently, in connection with any
indebtedness or other liability of any other person or entity, whether by
guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise;
ii.grant or permit to exist any lien, encumbrance, claim, security interest,
pledge or other right in favor of any person or entity in the assets ofPPW
or any interest (whether legal, beneficial or otherwise) in any thereof;
iii.engage, directly or indirectly, in any business other than as permitted to
be perfonned under Section 7 of the LLC Agreement;
iv.make or permit to remain outstanding any loan or advance to, or own or
acquire: (1) indebtedness issued by any other person or entity; or (2) any
stock or securities of or interest in, any person or entity, other than the
Equity Interest;
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enter into, or be a party to, any transaction with any of its affiliates
except: (1) in the ordinary course of business; (2) pursuant to the
reasonable requirements and purposes of its business; and (3) upon fair
and reasonable terms (and, to the extent material, pursuant to written
agreements) that are consistent with market tenDS of any such
transactions entered into by unaffiliated parties; or
vi.make any change to its name or principal business or use of any trade
names, fictitious names, assumed names or "doing business as" names.
(i)PPW believes that: (i) it will not, either as a result of the Transaction
contemplated by the Documents or otherwise, incur debts that are in fact or
which it believes are beyond its ability to payor that would be prohibited by its
organizational documents; and (ii) its assets and cash flow enable it and will
continue to enable it to meet its obligations in the ordinary course of business as
they become due.
Upon the closing of the Transaction, PPW shall not be rendered insolvent or
inadequately capitalized in light of its contemplated business operation and
anticipated payment obligations.
(k)PPW has no present intent to file a voluntary petition (or consent to the filing
an involuntary petition) under the Bankruptcy Code or under any applicable
bankruptcy, insolvency or other similar law.
Based on the provisions set forth in the Documents. including, without limitation, the
provisions contained in the Stipulations, we assume that the following is true ofPacifiCorp all times
since its organization:
(a)The Documents, to the extent they relate to the separateness and valid existence
ofPacifiCorp. have been and will continue to be complied with in accordance
with the terms thereof as of their respective effective dates.
(b)The activities ofPacifiCorp have been and will continue to be limited to those
set forth in the Stipulations and applicable law.
(c)PacifiCorp has observed and will continue to observe all material corporate
procedures, as applicable, insofar as such procedures relate to its separateness
and valid existence, as required by the Stipulations and applicable law.
(d)The financial records and accounts ofPacifiCorp have been, are and will
continue to be prepared and maintained in accordance with the method of
accounting determined by PacifiCorp. The independent auditor for PacifiCorp
shall be an independent public a.ccounting firm selected by PacifiCorp.
(e)PacifiCorp shall:
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vi.
xv.
xvi.
maintain its own separate books and records, financial statements and
bank accounts;
ll.except for tax and accounting purposes, at all times hold itself out to the
public as a legal entity separate from MEHC and any other Person and
not identify itself as a division of any other Person;
iii.have a Board, the composition of which in sum is unique from that of
any other Person;
IV.file its own tax returns, if any, as may be required under applicable law
and pay any taxes required to be paid under applicable law;
not commingle its assets with assets of any other Person;
conduct its business in its own name and hold all of its assets in its own
name;
VII.pay its own liabilities only out of its own funds;
viii.maintain an arm lengfu relationship with its affiliates, including
MEHC;
ix.from its own funds, pay the salaries of its own employees; provided that
to the extent PacifiCorp uses the services of an employee of MEHC (or
vice-versa), an appropriate allocation will be made for such services;
not hold out its credit as being available to satisfy the obligations
others;
Xl.maintain its own office and telephone lines separate and apart from its
affiliates, although it may lease space from an affiliate and share phone
lines with an affiliate, having either separate numbers or extensions, and
in furtherance thereof allocate fairly and reasonably any overhead for
shared office space;
xii.use separate stationery, invoices and checks bearing its own name;
xiii.not pledge its assets for the benefit of any other Person;
XIV.correct any known misullderstanding regarding its separate identity;
maintain adequate capital and an adequate number of employees in light
of its contemplated business purposes; and
not acquire any obligations or securities of MEHC or its affiliates.
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(f)Assets have not been and will not be transferred to or from PacifiCorp from or
to MERC without fair consideration (except as otherwise provided in the
Documents) or with the intent to hinder, delay or defraud the creditors of
PacifiCorp, MEHC or PPW.
(g)
PacifiCorp has not and will not transfer any of its assets in contemplation of
insolvency or with the intent to hinder, delay or defraud any present or future
creditor ofPacifiCorp, MEHC or PPW. The Transaction contemplated by the
Purchase Agreement does not create conditions which would cause such
Transaction to be a fraudulent transfer or fraudulent conveyance under
applicable law.
(h)For so long as PPW holds or owns the Equity Interest, PacifiCorp shall not:
become or remain liable, directly or contingently, in connection with any
indebtedness or other liability of any other person or entity, whether by
guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise;
11.grant or pennit to exist any lien, encumbrance, claim, security interest,
pledge or other right in favor of any ofPacifiCorp s affiliates in the
assets ofPacifiCorp or any interest (whether legal, beneficial or
otherwise) in any thereof;
lll.make or permit to remain outstanding any loan or advance to, or own or
acquire: (1) indebtedness issued by any ofPacifiCorp s affiliates; or (2)
any stock or securities of or interest in, any ofPacifiCorp s affiliates; or
IV.enter into, or be a party to, any transaction with any of its affiliates,
except: (1) in the ordinary course of business; (2) pursuant to the
reasonable requirements and purposes of its business; and (3) upon fair
and reasonable terms (and, to the extent material, pursuant to written
agreements) that are consistent with market terms of any such
transactions entered into by unaffiliated parties.
(i)PacifiCorp believes that: (i) it will not, either as a result of the Transaction
contemplated by the Documents or otherwise, incur debts that are in fact or
which it believes are beyond its ability to payor that would be prohibited by the
Stipulations or applicable law; and (ii) its assets and cash flow enable it and will
continue to enable it to meet its obligations in the ordinary course of business as
they become due.
10-
3144016.
(j)
Upon the closing of the Transaction, PacifiCorp was not rendered insolvent or
inadequately capitalized in light of its contemplated business operation and
anticipated payment obligations.
PacifiCorp has no present intent to file a voluntary petition (or consent to the
f1ling of an involuntary petition) under the Bankruptcy Code or under any
applicable bankruptcy, insolvency or other similar law.
With respect to each PacifiCorp and PPW: (a) since their formation, neither the assets
nor creditworthiness of each PacifiCorp or PPW has been generally held out by it as being available
for the payment of any of the liabilities of any other entity; and (b) in the future, neither the assets nor
creditworthiness of either PacifiCorp or PPW will be generally held out by it as being available for the
payment of any liability of any such other entity.
(k)
With respect to MERC: (a) neither the assets nor the creditworthiness ofMEHC has
been generally held out by it as being available for the payment of any liability of either PacifiCorp or
PPW; and (b) in the future, neither the assets nor the creditworthiness ofMEHC will be generally held
out by it as being available for the payment of any liability of either PacifiCorp or PPW.
Except for their own respective officers and directors, and as otherwise provided in their
respective organizational docwnents or in Section 2 of the Assignment Agreement, neither PacifiCorp
nor PPW has in the past indemnified, presently indemnifies or will in the future indemnify any of the
past, present or future officers or directors ofMEHC (except in their capacities as officers or directors
of either PacifiCorp or PPW) or any of their respective Affiliates (other than PacifiCorp or PPW).
MERC has not in the past indemnified, does not presently indemnify nor will in the future indemnify
any of the past, present or future officers or directors ofPacifiCorp or PPW.
Disclosure of the Transaction
The financial statements of each ofPacifiCorp, PPW and MERC will disclose the
material effects of the Transaction in accordance with Generally Accepted Accounting Principles
consistently applied, and will also disclose that the assets ofPacifiCorp and PPW will not be directly
available to pay creditors ofMEHC or vice versa.
Neither PacifiCorp, PPW nor MEHC has engaged or will engage in any fraud in
connection with the Transaction.
11-
3144016.
II.LEGAL ANAL YSIS
Applicable La
Substantive consolidation is an equitable remedy available in cases under the
Bankruptcy Code and the Bankruptcy Code s predecessor, the Bankruptcy Act of 1898, as amended
(the Bankruptcy Act ). In applying the remedy of substantive consolidation, a court combines the
assets and liabilities of a debtor in a case under the Bankruptcy Code, or Bankruptcy Act, with those of
other debtors, or in some cases, non-debtors? See 910nial Realty.966 F.2d at 58; Union Sav. Bank v.
AugielRestivo Baking Co.. Ltd. (In re AugielRestivo Baking Co.. Ltd.860 F .2d 515, 518 (2d Cir.
As an initial matter, we note that the case law on substantive consolidation developed under the Bankruptcy Code
has not addressed, to our knowledge, the issue of substantive consolidation of a limited liability company.
assume for purposes of this opinion that a Bankruptcy Court considering the issue would apply the general
principles of substantive consolidation that have been developed in cases arising under the Bankruptcy Code, most
of which address consolidating a corporation with a corporation. In this regard, we note that substantive
consolidation has been ordered of: (i) a general partnership with its general partners FDIC v. Colonial Realty Co..
966 F.2d 57, 58 (2d Cir. 1992) (hereinafter "Colonial Realtv ); (ii) a partnership, a corporation and individuals
Holvwell COrD. v. Bank of New York, 59 B.R. 340 (S.D. Fla. 1986), celt denied.488 U.S. 823 (1988); and (Hi)
individuals and corporations. In re Baker & Getty Fin Serv.. Inc..78 B.R. 139 (Bankr. N.D. Ohio 1987). In each
instance, courts employed the same type of analysis utilized when considering whether to order the substantive
consolidation of corporations. For example, the Second Circuit has stated, while applying principles of
substantive consolidation to individual general partners and their general partnership, that "(t)here is simply no
basis, in either these critical factors or in their underlying equitable considerations, for a blanket proscription
their application to the bankruptcy estate of individuals.Colonial Realtv.966 F.2d at 61. Accordingly, we have
relied for our analysis on the general body of substantive consolidation case law and assume, for purposes of this
opinion, that such law would be applicable to the court's determination as to whether to consolidate an entity with
a limited liability company.
Courts disagree on whether the substantive consolidation of a debtor with a non-debtor is permitted. Compare
Morse Operations. Inc. v. Robins LE-COCO. Inc. (In re Lease-Fleet. Inc.141 B.R. 869, 872 (Bankr. B.D. Pa.
1992) (in denying substantive consolidation of debtor s and non-debtor s estates, court stated that "caution must be
multiplied exponentially in a situation where a consolidation ora debtor s case with a non-debtor is attempted"
In re Julien Co..120 B.R. 930, 937-938 (Bankr. W.D. Tenn. 1990) (motion to substantively consolidate assets of
non-debtor with those of debtor is not sufficiently protective of non-debtor and relief therefore must be sought by
adversary proceeding); Goldman v. Haverstraw Assocs. (In re R.N. Realtv COlJl.84 B.R. 356, 358 (Bankr.
Y. 1988) ("To amend the caption so as to add (the non-debtor) as a co-debtor would deprive (the non-
debtor) of the opportunity of contesting the involuntary petition. . . .
);
In re Alpha & Omega Realty. Inc..36 B.
416,417 (Bankr. D. Idaho 1984) (questions jurisdiction and due process requirements necessary for applying the
remedy of substantive consolidation involving a non-debtor); United States v. AAPC. Inc. (In re AAPC. Inc.277
B.R. 785, 791 (Bankr. D. Utah 2002) (same), with Alexander v. Compton an re Bonham).229 F.3d 750, 770 (9th
Cir. 2000) (court orders substantive consolidation where individual debtor commingled her assets with two
corporate non-debtors as part of a Ponzi scheme and all named parties were on notice of the requested relief);
Munford. Inc. v. Toc Retail. Inc. (In re MUnford. Inc., 115 B.R. 390, 398 (Bankr. N.D. Ga. 1990) (ability to file
involuntary petition under section 303 of the Bankruptcy Code did not preclude the use of substantive
consolidation under section 105(a) as an alternative means to bring a non-debtor s assets into a debtor s estate);
re Crabtree.39 B.R. 718, 722 (Bankr. E.D. Tenn. 1984) (pennitting amendment of caption to include non-debtor
because non-debtor was the debtor s alter ego); In re 1438 Meridian Place. N.W. Inc..15 B.R. 89,95 (Bankr.
C. 1981) (fmdingjurisdiction over the subsidiary supports jurisdiction over the parent and no deprivation of
substantive rights existed because all named parties were on notice of the requested relief).
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3144016.
1988) (hereinafter "Augie/Restivo
);
Drabkin v. Midland-Ross Com. (In re Auto-Train Cm:!'.. Inc.
810 F.2d 270, 276 (D.C. Cir. 1987) (hereinafter "Auto-Train
);
Chemical Bank v. Kheel.369 F.
845 847 (2d Cir. 1966) (hereinafter Kheel") (former Banlcruptcy Act case). Substantive
consolidation is employed in cases where the interrelationships of the debtors are hopelessly tangled
and the time and expense required to unscramble them are so substantial as to threaten the realization
of any net assets for all of the creditors. First Nat'l Bf:llk ofBamesville v. Rafoth (In re Baker & Getty
Fin. Serv.. Inc., 974 F.2d 712, 720 (6th Cir. 1992).
The court's power to effect substantive consolidation is not specifically provided for by
the Bankruptcy Code, but arises out of its general powers of equity and common law. See 11 D.
~ 105. See.Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215, 219, 61 S. Ct. 904, 907
(1941); Colonial Realty.966 F.2d at 59; Woburn Assocs. v. Kahn (In re Hemingwav Transport. Inc.
954 F.2d 1 , 11 n.14 (lst Cir. 1992) (citing section 105 of the Bankruptcy Code for the court's power to
substantively consolidate affiliated entities).
The substantive consolidation of two or more entities could have a dramatic impact on
the rights and obligations of creditors and other parties in interest in a case or cases under the
Bankruptcy Code. For example, the substantive consolidation of one entity having little or no assets
with another entity having substantial assets could have a beneficial impact on the creditors of the
former entity at the expense of the creditors of the latter entity. See.Mk Auto-Train.810 F.2d at 276
because every entity is likely to have a different debt-to-asset ratio consolidation almost invariably
redistributes wealth among the creditors of the various entities
);
SMA 935 F.2d at 248 (same); In re
Snider Bros.. Inc., 18 B.R. 230, 234 (Blinkr. D. Mass. 1982) (hereinafter "Snider Bros.) (differing
asset-to-liability ratios prejudice creditors of entity with higher ratio). Another potential impact on
creditors from the substantive consolidation of affiliated entities is the likely elimination of any
intercompany obligations or liabilities among the collBolidated entities. See.
~,
Colonial Realty, 966
2d at 58-59 ("(s)ubstantive consolidation usually results. . . in 'eliminating inter-(entity) claims
(citation omitted); Auto-Train.810 F.2d at 276 ("liabilities of consolidated entities inter ~ are
extinguished by the consolidation
);
Flora Mir Candy COIY. v. R. S. Dickson & Co. (In re Flora Mir
Candy Corp., 432 F.2d 1060, 1063 (2d Cir. 1970) (former Bankruptcy Act case) (hereinafter Flora
Mir ) (substantive consolidation would eliminate corporation s claim against another for
misappropriation of assets). Similarly, a creditor holding a guaranty claim against an entity that is
substantively consolidated with the primary obligor on the guaranteed debt would likely lose the
guaranty claim in favor of a single claim against the consolidated entity. See.In re Manzey Land
As an equitable doctrine, substantive consolidation is to promote fairness to all creditors and, therefore, the
doctrine may be applied to consolidate the estates of corporations, partnerships and individual debtors. See
Colonial Realty.966 F.2d at 58-61 (distinguishing substantive consolidation from doctrine of piercing the
corporate veil and rejecting argwnent that estates of individual debtors should not be consolidated with estate of
partnership). See also In re Nite Lite Inns.17 B.R. 367 (Bankr. S.D. CaI. 1982) (permitting substantive
consolidation of estates of corporations, partnership and individual debtors). The court will apply the same
analysis and evaluate the same factors in determining whether the estates of corporations, partnerships or
individuals should be consolidated. See.EastgrouD Properties v. Southern Motel Assoc.. Ltd. (In re Southern
Motel Assoc.. Ltd.935 F.2d 245, 249-252 (lIth Cir. 1991) (hereinafter SMA") (applying factors to
consolidation of estates of limited partnership and corporation).
13-
3144016.
& Cattle Co., 17 B.R. 332, 338 (Bankr. D.D. 1982) (hereinafter "Manzey ) (unsecured creditor
claim against individual guarantors would be a single unsecured claim against the consolidated estate
of the individuals and the corporation).
In view of such potentially significant consequences from the substantive consolidation
of two or more entities, many courts have stated that this remedy should be granted sparingly. See.
~,
In re Owens Coming.419 F.3d 195,211 (3d Cir. 2005) (hereinafter "Owens
) ("
because
substantive consolidation is extreme. . . and imprecise, this 'rough justice' remedy should be rare and
in any event one oflast resort"
);
Colonial Realty.966 F.2d at 61; Alexander v. Compton (In re
Bonham).229 F.3d 750, 768 (9th Cir. 2000) (hereinafter "Bonham ). Nevertheless, in appropriate
cases, courts will order the substantive consolidation of two or more entities. See SMA, 935 F.2d at
249 (citing In re Murray Indus..119 B.R. 820, 828 (Bankr. M.D. Fla. 1990) (hereinafter "Murray"
(liberal trend in ordering substantive consolidation arises from the increased judicial recognition of
interrelated corporate structures for tax and business planning purposes)).
The issue of whether substantive consolidation would be appropriate is further
complicated because the determination is sui generis - to be decided on a case-by-case basis. See.
Colonial Realty.966 F.2d at 61 (thorough searching of the record is required); Auto-Train.810 F. 2d at
276; In re Coo~er, 147 B.R. 678, 682 (Bankr. D.J. 1992) ("(t)he factors (used in detennining
whether substantive consolidation is warranted) are only sign posts to assist the court's judgment"
Murray, 119 B.R. at 829 ("(t)here is no one set of elements that mandates consolidation
);
Snider
Bros..18 B.R. at 234 (same). Courts generally agree, however, that the determination of whether
substantive consolidation would be appropriate requires a detailed factual analysis. See.Fish v.
114 F.2d 177, 191 (10th Cir. 1940) (former Bankruptcy Act case); In re DRW ProDerty Co., 54
R. 489,495 (Bankr. N.D. Tex. 1985) (hereinafter DRW"
The appropriateness of substantive consolidation is decided based on an evaluation of
one or more of the following three areas of inquiry: (i) the pre-bankruptcy conduct of and
interrelationship between the separate entities; (ii) the balance of the benefits and harms to creditors
and other parties in interest; and (iii) the impact of the substantive consolidation on the bankruptcy
estates. See. e.Fish v. East.114 F .2d at 191 (interrelationship factor analysis); In re Drexel
Burnham Lambert Group. Inc.,138 B.R. 723, 764 (Bankr. S.Y. 1992) (hereinafter "Drexel
(consider interrelationship factors in the larger context of balancing harms and benefits); Manzey.
R. at 338 ("it would be very difficult for these Debtors to reorganize and operate on a stand-alone
basis
).
See also First Nat'l Bank v. Giller (In re Giller).962 F.2d 796 799 (8th Cir. 1992) (utilizes all
three approaches); In re Richton Int'l CO1:p..12 B.R. 555 558 (Bankr. S.Y. 1981) (same)
(hereinafter "Richton ). Each of these three areas of inquiry has been shaped by the courts in a
developing body of case law. See id.
The Second, Ninth, Eleventh and District of Columbia Circuits have each articulated a standard for evaluating the
factors relevant to detennining whether substantive cOJisolidation is warranted. Under the Second Circuit test, the
court must consider whether creditors dealt with the to-be-consolidated entities as a single unit and did not rely on
their separate identities when extending credit, or whether the affairs of the debtor are so entangled that consolidation
will benefit all creditors because disentangling is either impossible or too costly to justifY. See Colonial Realty.966
14-
3144016.
Recently, the Third Circuit articulated a two-prong test for substantive consolidation
similar to the one utilized in the Second Circuit. In Owens.the Third Circuit held that substantive
consolidation would not be granted unless the proponent could prove, with respect to the entities for
which consolidation is being sought, that: "(i) prepetition they disregarded separateness so
significantly their creditors relied on the breakdown of entity borders and treated them as one legal
entity, or (ii) postpetition their assets and liabilities are so scrambled that separating them is prohibitive
and hurts all creditors.Id.at 211. The Third Circuit also stated that "(iJf an objecting creditor relied
on the separateness of the entities, consolidation cannot be justified vis-Ii-vis the claims of that
creditor" even if the benefits of consolidation heavily outweigh the harm. Id.at 210. Indeed, to justify
substantive consolidation based on the hopeless commingling of assets and liabilities between the
entities, the proponent would need to show that "every creditor will benefit from the consolidation" as
the "(mJere benefit to some creditors, or administrative benefit to the Court, falls far short.Id.at 214.
Interrelationship of the Entities
If the pre-bankruptcy conduct of and interrelationship between entities suggest that they
were operated as one enterprise, substantive consolidation may be warranted. See.In re Standard
Brands Paint Co..154 B.R. 563,572 (Bankr. C.D. Cal. 1993) (hereinafter "Standard Brands ) (five
debtor entities always held themselves out as a single c.onsolidated unit); In re I.R.C.. Inc., 105 B.
237,243 (Bankr. S.Y. 1989) (three debtor subsidiaries operated as a single economic unit). The
existence of this fact alone, however, may be insufficient to mandate substantive consolidation. See.
M. Manzey. 17 B.R. at 337 (court found operation as a single unit only one factor to be considered).
Nevertheless, the interrelationship of the entities has become a focal point of analysis in many cases.
See.
~~
Augie/Restivo, 860 F.2d at 519.
The interrelationship inherent between a parent corporation and single purpose
financing subsidiaries was found not to warrant substantive consolidation of such subsidiaries with
their parent corporation in Anaconda Bldg. Materials Co. v. Newland, 336 F .2d 625, 627 (9th Cir.
1964) (former Bankruptcy Act case) (hereinafter Anaconda ) (subsidiaries purchased mortgage loans
from parent with proceeds of debentures). In contrast, similar facts resulted in substantive
consolidation of a parent corporation with its single purpose subsidiary in Hamilton Ridge Lumber
2d at 61; Aue:ielRestivo.860 F.2d at 518. Substantive consolidation should be ordered where the inequalities of
substantive consolidation are outweighed by the practical difficulties of tracing complex transactions between
interrelated entities. Aue:ielRestivo.860 F.2d at 519. The Ninth Circuit has adopted the Second Circuit test
articulated in AugielRestivo See Alexander v. Compton On re Bonham).229 F.3d 750, 766 (9th Cir. 2000).
Under the District of Columbia Circuit test, the proponent of consolidation must show a substantial identity
between the entities to be consolidated, and the necessity of consolidation to avoid some hanD or to realize some
benefit. If these showings have been made, then a preswnption arises that creditors have not relied solely on the
credit of one of the entities involved. At that point, the burden shifts to the party opposing consolidation to show
that at least some creditors: (a) relied on the separate credit of one of the entities to be consolidated; and (b) will
be prejudiced by substantive consolidation. If the party opposing consolidation makes this showing, then the court
may order consolidation only if the court also detennines that the demonstrated benefits of consolidation heavily
outweigh the hanD. See Auto-Train, 810 F.2d at 276. The Eleventh Circuit has adopted the District of Columbia
Circuit test See SMA, 935 F.2d at 249.
15-
3144016.
Sales Com. v. Wilson 25 F.2d 592, 594 (4th Cir. 1928) (fonner Bankruptcy Act case) (ostensible sale
of assets to subsidiary was to secure bank's loan). Compare Morse Ouerations. Inc. v. Robins LE-
COCO. Inc. (In re Lease-Fleet. Inc.141 B.R. 869, 872 (Bankr. E.D. Pa. 1992) and Stone v. Eacho
(In re Tip Top Tailors. Inc.127 F.2d 284, 288 (4th Cir.
),
cert. denied, 317 U.S. 635 (1942) (former
Bankruptcy Act case) (subsidiary of parent which owned and operated a store was a mere "corporate
pocket" or department of the parent's business), with In re Lewellyn, 26 B.R. 246, 251 (Bankr. S.
Iowa 1982) (hereinafter "Lewellyn ) (fact that subsidiary is a "corporate pocket" is not grounds for
substantive consolidation, without other factors).
In analyzing the pre-bankruptcy interrelationships between entities for purposes of
evaluating the appropriateness of substantive consolidation, courts have considered, in varying degrees
of importance, the extent to which many, ifnot all, of the following factors are present:
(a)
(b)
(c)
the parent corporation owns all or a majority of the capital stock of the
subsidiary;
the parent and subsidiary corporations have common directors or officers;
the parent corporation fmances the subsidiary or guarantees loans made to the
subsidiary;
(d)the parent corporation subscribes to all the capital stock of the subsidiary or
otherwise causes its incorporation;
(e)
(f)
the subsidiary has grossly inadequate capital;
the subsidiary has no employees;
(g)
(h)
the parent corporation pays the salaries, expenses or losses of the subsidiary;
the subsidiary has substantially no business except with the parent corporation
or no assets except those conveyed to it by the parent corporation;
(i)in the papers of the parent corporation, and in the statements of its officers, the
subsidiary is referred to as such or as a department or division;
the directors or executives of the subsidiary do not act independently, but take
direction from the parent corporation;
(k)the fonnallegal requirements of the subsidiary as a separate and independent
corporation are not observed;
(1)
(m)
consolidation at a single physical location would provide economic benefit;
assets and business functions of the parent and subsidiary are commingled;
16-
3144016.
(n)segregating and ascertaining individual assets and liabilities of the parent and
subsidiary would be difficult; and
(0)assets were transferred between the entities without observance of corporate
formalities.
See FDIC v. Hogan (In re Gulfco Inv. Corp., 593 F.2d 921 928-29 (lOth Cir. 1979) (former
Bankruptcy Act case) (hereinafter "Gulf co
);
Fish v. East, 114 F.2d at 191; Maule Indus.. Inc. v.
Gerstel.232 Fold 294, 297 (5th Cir. 1956) (former Bankruptcy Act case); Drexel, 138 B.R. at 744
764; In re Vecco Constr. Indus.. Inc., 4 B.R. 407,410 (Bankr. E.D. Va. 1980) (former Bankruptcy Act
case); DRW.54 B.R. at 495.
Extensive guarantees of an affiliate s debt and substantial intercompany debt suggest
the pre-bankruptcy interrelationship warrants substantive consolidation. See.
~,
Drexel.138 B.R. at
766 (presence of interlocking directors and officers, sharing of overhead, management and other
expenses, shifting of funds between entities without observing corporate formalities, intricate network
of intercompany accounts and extensive cross-corporate guarantees were all factors in court granting
substantive consolidation); Richton. 12 B.R. at 558 (consolidation ordered where parent controlled
management and operations of subsidiaries, interlocking officers and directors existed, funds were
regularly shifted among entities resulting in substantial intercompany debt and extensive cross-
corporate guarantees of both trade and bank debt existed); Soviero v. Franklin Nat'l Bank.328 F.
446, 448 (2d Cir. 1964) (evidence that proceeds of affiliates' sales were deposited in parent's account
and that all guarantees given to customers of the affiliates' debts were given solely in name of parent
corporation were factors supporting substantive consolidation). Absent other factors suggesting
operation of the different entities as one enterprise, however, the existence of intercorporate guarantees
and loans alone will not mandate substantive consolidation. For example, in Augie/Restivo, the court
found that a lender that had sought and received a cross-corporate guaranty of a loan to one company
from the other company had operated on the assumption the lender was dealing with separate entities.
860 F.2d at 519. See also In re Donut Queen. Ltd.,41 B.R. 706, 710 (Bankr. E.Y. 1984)
(guarantees by two debtors relative to one specific transaction did not evidence commonality of
business purpose justifying consolidation); Snider Bros.,' 18 B.R. at 239 (despite frequency of
intercorporate guarantees and loans, court denied substantive consolidation where each debtor kept
separate records of the same evidencing lack of severe corporate entanglement).
Similarly, while an entity s lack of employees favors substantive consolidation, it is
only one of many factors in the analysis. See.M.. Murphy v. Stop & Go Shops. Inc. (In re Stop & Go
of America. Inc., 49 B.R. 743, 746 (Bankr. D. Mass. 1985) (hereinafter "Stop & Go ) (in addition to
lack of employees, the court considered debtor corporation s lack of funds, office, income, expenses
and other factors in determining that debtor had no real existence and was mere instrumentality and
alter ego of related entity, thereby warranting substantive consolidation); Kroh Bros. Dev. Co. v. Kroh
Bros. Management Co. (In re Kroh Bros. Dev. Co., 117 B.R. 499, 502 (W.D. Mo. 1989) (in ordering
substantive consolidation of debtor corporation with non-debtor related entity, bankruptcy court
considered, among other things, that non-debtor entity had no employees, offices or separate bank
accounts and "virtually no independent existence
);
Drexel, 138 B.R. at 744 (among many factors
cited by court in granting substantive consolidation were that entities to be consolidated with related
17-
3144016.
debtor lacked employees, failed to publish unconsolidated financial statements, advertise in their own
name or represent themselves to the public as independent entities and that no creditors or customers
ever looked to the independent credit of those entities).
Complete domination or control of one entity by another is another factor supporting
substantive consolidation of the entities. See.
~,
Stop & Go.49 B.R. at 750 (court cited "pervasive
control" in granting substantive consolidation); In re Baker & Getty Fin. Servo Inc., 78 B.R. 139, 142
(Bankr. N.D. Ohio 1987) (while control of individual debtors over corporate debtors was factor in
court determining to consolidate estates, court also considered extensive commingling of assets, use of
corporate funds to purchase individual debtors' assets and failure to observe corporate formalities);
Richton.12 B.R. at 558 (parent's complete control over subsidiaries was significant factor in court'
decision to substantively consolidate debtors; among other factors cited were existence of extensive
cross guarantees, consolidated tax returns and financial statements and apparent lack of prejudice to
any particular group of creditors from a consolidation). However, dominance and control of one entity
by another entity does not automatically lead to substantive consolidation of both entities. See
Nordberg v. Murphy (In re Chase & Sanborn Corp., 55 B.R. 451 452-53 (Bankr. S.D. Fla. 1985)
(application for substantive consolidation of individual debtor with corporate debtors had been denied
notwithstanding fact that the individual debtor "dominated and controlled" each of the corporate
debtors and it would be impossible to reconstruct separate financial records).
Balancing of Benefits and Harms
Inasmuch as substantive consolidation could have a significant impact upon the relative
rights and obligations of creditors and other parties in interest see Auto-Train.810 F .2d at 276, the
interrelationship factors discussed above "must be evaluated within the larger context of balancing the
prejudice resulting from the proposed consolidation against the effect of preserving separate debtor
entities.Drexel.138 B.R. at 764-765. Although the prejudice suffered by the proponent of
substantive consolidation alone may be insufficient to justify substantive consolidation see.SWb
AnaconQib 336 F .2d at 628, the balance of benefits and harms may be sufficient to tip in favor
granting substantive consolidation where the harm to the bulk of the creditors is substantial see.SWb
SMA.935 F.2d at 251.
In considering the impact on creditors, courts also look to the extent that creditors have
relied on the separate credit of each entity. See SMA, 935 F.2d at 251; Auto-Train, 810 F.2d at 276;
Kheel.369 F .2d at 848. "There is also a rule that a creditor who relies on the sole credit of one entity
is entitled to have its claim satisfied out of that entity's assets even if the entity is no more than a
corporate pocket of a parent entity. This rule should control consolidations unless it is clear that the
economic prejudice of continued debtor individuality substantially outweighs the economic prejudice
of consolidation.Lewellvn.26 B.R. at 251 (citations omitted). See also Auto-Train.810 F .2d at 276
(the proponent of substantive consolidation must show a substantial identity of the entities and that
substantive consolidation is necessary to avoid some harm or realize a benefit; the opponent must then
show it relied on the separate credit of one entity and that its rights will be prejudiced; then the court
may order substantive consolidation if the benefits heavily outweigh the harm); Bonham.229 F. 3d at
767 (opponent must overcome presumption that it did not rely on separateness); James Talcott. Inc. v.
Wharton (lnre Continental Vending Mach. Corp., 517 F.2d 997,1001 (2d Cir. 1975), cert. denied,
18-
3144016.
424 u.S. 913 (1976) (former Bankruptcy Act case) (a court need not fmd that "creditors knowingly
deal with the corporations as a unit" to substantively consolidate two or more corporations); Standard
Brands, 154 B.R. at 572 (court found no undue prejudice to creditors from substantive consolidation
where no creditors relied on the separate credit of the debtor s subsidiaries).
Impact on the Estates
Courts also will consider whether substantive consolidation will enhance and facilitate
the debtors' rehabilitation or aid an orderly liquidation. See Manzey, 17 B.R. at 338 ("One of the
policies behind the enactment of (c )hapter 11 is to give the debtor one meaningful and reasonable
chance to rehabilitate. The (c )ourt finds substantive consolidation in this case furthers that intent
Congress.
);
Standard Brands, 154 B.R. at 571 (debtor s plan confmnable so long as court grants
substantive consolidation); Richton, 12 B.R. at 559 (consolidated plan is probably the only alternative
to liquidation). Although there is no established standard for applying this consideration, courts will
focus on several factors, including: (a) the potential savings in costs and time associated with
disentangling the records and accounts of the debtors; (b) the elimination of duplicate claims against
several debtors and the need to adjudicate which debtor is liable; and (c) the fInancial benefit, if any,
from consolidating the operations ofthe debtors. See Kheel.369 F.2d at 847; Drexel 138 B.R. at 765;
In re F. A. Potts & Co.. Inc..23 RR. 569,574 (Bankr. E.D. Pa. 1982); In re Interstate Stores. Inc..
RC. 634 642 (Bankr. S.Y. 1978) (former Bankruptcy Act case). But see DRW.54 B.R. at
496-97 (accounting difficulties alone are not hopeless obscurity which will lead to substantive
consolidation); Gulfco,593 F.2d at 929 ("Although the intercompany transactions were complex, the
record does not indicate that the assets of the entities were hopelessly commingled.
);
Flora Mir 432
2d at 1063 (minimal accounting difficulties).
In.DISCUSSION
As demonstrated above, there is no unifonn standard for analyzing and applying the law
of substantive consolidation to the facts at hand. Moreover, assuming that MEHC were to become a
debtor in a case under the Bankruptcy Code, but PacifiCorp and PPW were not, a significant issue
would exist at the outset as to whether a court's equitable powers were broad enough to apply the law
of substantive consolidation to non-debtors. As discussed below, even ifPacifiCorp or PPW were to
become a debtor in a case under the Bankruptcy Code, the court would not order the substantive
consolidation of either PacifiCorp or PPW with those ofMEHC.
Pre-Bankruptcy Conduct and Interrelationships
With regard to the first area of inquiry i.e..pre-bankruptcy conduct and
interrelationship - many of the factors which weigh in favor of maintaining PacifiCorp and PPW as
separate entities are present. For example, the businesses of each PacifiCorp and PPW have been and
will be operated separately from that of other entities. PacifiCorp and PPW have in the past
maintained, and will at all relevant times in the future maintain, their own separate books, records and
bank accounts. PacifiCorp and PPW have in the past preserved, and will at all relevant times in the
future preserve, their existence as entities duly organized, validly existing and in good standing (if
19-
3144016.
applicable) under the laws of the jurisdiction of their organization or formation, and there will be no
commingling of funds or other assets between either PacifiCorp or PPW and any other entity.
The Documents clearly indicate that PacifiCorp and PPW conduct and will continue to
conduct business with other Affiliates on terms similar to those in an arm length transaction. If
PacifiCorp or PPW utilize the services of the employees ofMEHC or any other entity, or shares office
space with MEHC or any other entity, appropriate allocations for expenses and payments have been
and will be made for such services and space.
As noted above, the Stipulations contain commitments provided by MEHC and
PacifiCorp. However, MEHC is not guarantying any ofPacifiCorp s financial obligations under the
Stipulations or otherwise. Moreover, because the aggregate liability of the financial commitments
made solely by MEHC under the Stipulations is such a small amount, we believe that such liability is
de minimis in relation to the size of the Transaction and, therefore, does not affect our opinions herein.
Balancing of Benefits and Harm to Creditors and Others
In balancing the benefits and harms of substantive consolidation to creditors and interest
holders, a court should consider that each PacifiCorp and PPW has in the past held, and will at all
relevant times in the future hold, itself out to conduct business with third parties as an independent
entity or Person. The court should evaluate the impact of substantive consolidation upon the creditors
of each entity or Person being considered for consolidation, taking into account the expectations of the
creditors when the transactions occurred. Notably, given the separateness of books, records, financial
statements and tax returns, and the manner in which the discussed entities have been conducting and
will conduct themselves, the creditors of the discussed entities should experience no confusion
regarding the identity of the entities with which they transact business. On the other hand, substantive
consolidation may be prejudicial to creditors of one or more of these entities, as each creditor is relying
on the continued separate existence of a particular entity to satisfy its claims. A creditor is unlikely to
have reviewed or considered the asset and liability structure of any entity other than the one to which
extended credit, and may be unfavorably impacted by substantive consolidation. With respect to each
PacifiCorp and PPW: (a) since their formation, neither the assets nor creditworthiness of each
PacifiCorp or PPW has been generally held out by it as being available for the payment of any of the
liabilities of any other entity; and (b) in the future, neither the assets nor creditworthiness of each
PacifiCorp or PPW will be generally held out by it as being available for the payment of any liability
of any such other entity. With respect to MEHC: (y) neither the assets nor the creditworthiness of
MEHC has been generally held out by it as being available for the payment of any liability of either
PacifiCorp or PPW; and (z) in the future, neither the assets nor the creditworthiness ofMEHC will be
generally held out by it as being available for the payment of any liability of either PacifiCorp or PPW.
ImDact on the Estates
Substantive consolidation of either PacifiCorp or PPW with MEHC may be prejudicial
to the creditors of each PacifiCorp and PPW, as the case may be, and result in unintended
consequences to the detriment of such creditors. Further, the substantive consolidation of either
PacifiCorp or PPW with MEHC may not even enhance or facilitate the rehabilitation or liquidation of
20-
3144016.
MEHC to the extent it seeks relief under the Bankruptcy Code. Moreover, in addition to the
considerations discussed above, inasmuch as limited liability company and corporate fonnalities will
be observed, and inasmuch as the discussed entities will maintain separate books, records and assets
(which are not commingled by the discussed entities), there should be minimal or no costs of
disentangling the affairs of the discussed entities from that of any other entity.
IV.CONCLUSION
Based on the foregoing analysis, and relying on the facts, assurances, assumptions and
discussion set forth herein and the law as it currently exists, and there being no reported case law
directly on point, we are of the opinion that ifMEHC were to become a debtor in a case under the
Bankruptcy Code, and if the matter were properly briefed and presented to a court. the court would not
order the substantive consolidation of the assets and liabilities of either PacifiCorp or PPW with those
of MEHC.
We note, however, that, notwithstanding our analysis and conclusions, a court'
decision in detennining whether substantive consolidation should be ordered is based on its own
analysis and interpretation of the factual evidence before it and applicable legal principles.
Accordingly, a court viewing the facts and circumstances at the time of consideration of whether
substantive consolidation is appropriate could reach a different conclusion with which, based on the
foregoing opinions, we would not agree.
The opinions expressed herein are not a guaranty as to what a court would actually hold,
but an opinion as to the decision of a court if the issue were properly presented to it and the court
followed existing legal precedents applicable to the subject matter of the opinion.
OUALIFICA TIONS
This opinion is limited by, subject to and based upon the following qualifications:
(a)We are members of the Bar of the State of New York and do not express any
opinion with respect to the laws of any jurisdiction other than the laws of the
United States of America and the laws of the State of New York.
(b)We express no opinion as to the availability of any remedies with respect to a
default under the Documents.
(c)We express no opinion as to t~e ability or inability ofPacifiCorp, PPW, MERC
or any other entity to dissolve, liquidate, reorganize or merge with any other
entity, or to convey all or substantially all of its properties or assets.
(d)We express no opinion as to events which may have occurred prior to the
Transaction that are not consistent with the representations, warranties and
statements made in the Documents or the impact those events could or would
have on the opinions rendered herein. We note that we have made no
investigation of, and are not aware of, the existence of any such events.
21-
3144016.
(e)Any Bankruptcy Code analysis must recognize that the power of a court
competent jurisdiction with respect to a case, proceeding or matter under the
Bankruptcy Code is extremely broad. For instance, pursuant to the powers
granted in section 105(a) of the Bankruptcy Code
, "
(tJhe court may issue any
order, process, or judgment that is necessary or appropriate to carry out the
provisions of (the Bankruptcy Code)." 11 D.C. ~ 1O5(a). Therefore, the
conclusions reached herein must be considered in light of, and subject to, these
broad statutory and equitable powers of the relevant court over a debtor
property, estate, creditors and equity interest holders.
(f)Except with respect to the opinions set forth above, we do not opine to the
likelihood that any entity will be substantively consolidated with any other
entity or the impact of any such consolidation on the opinions rendered herein.
(g)
Further, we express no opinion as to any matter or law not expressly addressed
herein.
This opinion is rendered for the sole benefit of the addressees hereof and no other
Person or entity is entitled to rely hereon. Copies of this opinion may not be made available to any
other Person or entity and this opinion may not be quoted or referred to in any other document.
The opinions expressed herein are given on the date hereof only and we assume no
obligation to update or supplement such opinions to reflect any fact or circumstance that may hereafter
come to our attention, any amendments or modifications to the Documents or any change in law that
may hereafter occur or become effective.
Very truly yours,
W. & tvJ F (/VV\. ~ lk- LJ=-
Willkie Farr & Gallagher LLP
22-
EXIDBIT A
Utah Public Service Commission
Heber M. Wells Building, 4th Floor
160 East 300 South
Salt Lake City UT 84114
Attention: Julie P. Orchard
Commission Secretary
UPSC Docket No. 05-035-
Idaho Public Utilities Commission
472 West Washington
Boise, ID 83702-5983
Attention: Jean D. Jewell
Commission Secretary
IPUC Docket No. PAC-05-
Oregon Public Utility Commission
550 Capitol Street NE, Suite 215
Salem, OR 97310-2551
Attention: Vickie Bailey-Goggins, Administrator
Regulatory and Technical Support
OPUC Docket No. UM-1209
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102-3298
Attention: Sean Gallagher
Director, Energy Division
CPUC Docket No. A. 05-07-010
Washington Utilities & Transportation Commission
1300 S. Evergreen Park Drive SW
Mail Stop: FY 11/720
Olympia, W A 98504-7250Attention: Carole Washburn
Executive Secretary
WUTC Docket No. DE-051 090
Wyoming Public Service Commission
2515 Warren Avenue, Suite 300
Cheyenne, VVyoming 82002
Attention: Steve Oxley,
Commission Secretary
WPSC Docket No. 20000-EA-226
EXHIBIT
LIST OF DOCUMENTS
Stock Purchase Agreement by and among Scottish Power PLC, as Seller Parent
PacifiCorp Holdings, Inc., as Seller, and MidAmerican Energy Holdings Company, as
Buyer, for the purchase and sale of all of the common stock, no par value, of
PacifiCorp, an Oregon Corporation, dated as of May 23 2005, as amended by
Amendment No., dated March 21 2006.
Assignment and Assumption of Stock Purchase Agreement between MidAmerican
Energy Holdings Company and PPW Holdings LLC, dated as of March 21 , 2006
Certificate of Fonnation ofNWQ, LLC, dated May 23 2005
NWQ, LLC Limited Liability Company Agreement, dated as of May 23, 2005
Certificate of Amendment of Certificate of Formation NWQ, LLC, dated May 27 2005
Certificate of Amendment of Certificate of Formation ofNWQ, LLC, dated July 11
2005
PPW Holdings LLC, Limited Liability Company Agreement, dated as of March 15
2006
Intercompany Administrative Services Agreement by and between PacifiCorp and
MidAmerican Energy Holdings Company, dated as of March 31 6006
Stipulation, dated November 15, 2005, by and among MidAmerican Energy Holdings
Company, PacifiCorp, Utah Division of Public Utilities, Utah Committee of Consumer
Services, Utah Industrial Energy Consumers, UAE Intervention Group, Utah Clean
Energy and Western Resource Advoca~es, annexed to the Report and Order issued by
the Public Service Commission of Utah on January 27, 2006
10.Amendment to Stipulation, dated March 3, 2006, by and among MidAmerican Energy
Holdings Company, PacifiCorp, Utah Division of Public Utilities, Utah Committee of
Conswner Services, Utah Industrial Energy Conswners, UAE Intervention Group, Utah
Clean Energy and Western Resource Advocates, annexed to the Report and Order
issued by the Public Service Commission of Utah on March 14 2006
11.Stipulation, dated December 16 2005, by and among MidAmerican Energy Holdings
Company, PacifiCorp, Idaho Commission Staff, Monsanto Company, Idaho Power
Company, Idaho Irrigation Pwnpers Association, Inc., The Community Action
Partnership Association of Idaho, IBEW Local 57 and J.R. Simplot Company, annexed
to the Order of the Idaho Public Utilities Commission dated February 13 2006
3144016.
12.Amendment to Stipulation, dated March 9, 2006, by and among MidAmerican Energy
Holdings Company, PacifiCorp, Idaho Commission Staff, Monsanto Company, Idaho
Power Company, Idaho Irrigation Pumpers Association, Inc., The Community Action
Partnership Association of Idaho, IBEW Local 57 and l.R. Simplot Company, annexed
to the Order of the Idaho Public Utilities Commission dated March 14 2006
Stipulation, dated December 23, 2005 , by and among MidAmerican Energy Holdings
Company, Pacifi Corp, Staff of the Public Utility Commission of Oregon, the Citizens
Utilities Board, the Industrial Customers of Northwest Utilities, Renewable Northwest
Project, Natural Resources Defense Council, Community Action Directors of Oregon,
Oregon Energy Coordinators Association, League of Oregon Cities, Sherman County
and Pacific Coast Federation ofFisherrnen s Associations, annexed to the Order entered
by the Public Utility Commission of Oregon on February 24, 2006
13.
14.Amendment to Stipulation, dated March 7, 2006, by and among MidAmerican Energy
Holdings Company, PacifiCorp, Staff of the Public Utility Commission of Oregon, the
Citizens' Utilities Board, the Industrial Customers of Northwest Utilities , Renewable
Northwest Project, Natural Resources Defense Council, Community Action Directors of
Oregon, Oregon Energy Coordinators Association, League of Oregon Cities, Sherman
County and Pacific Coast Federation of Fishermen s Associations, annexed to the Order
entered by the Public Utility Commission of Oregon on March 14, 2006
15.Stipulation and Settlement Agreement, dated October 21, 2005, by and among
MidAmerican Energy Holdings Company, PacifiCorp, American Rivers, California
Trout, Inc., Hoopa Valley Tribe, Trout Unlimited, Karuk Tribe of California, Pacific
Coast Federation of Fishermen s Associations, Institute for Fisheries Resources,
Northcoast Environmental Center, Friends of the River, Oregon Natural Resources
Council, Headwaters, Klamath Forest Alliance and Waterwatch of Oregon, annexed to
the Decision Granting Conditional Approval of the Acquisition ofPacifiCorp by
MidAmerican Energy Holdings Company, dated February 16, 2006
Stipulation, dated January 20, 2006, by. and among MidAmerican Energy Holdings
Company, PacifiCorp d/b/a Pacific Power & Light Company, Staff of Washington
Utilities and Transportation Commission, the Public Counsel Section of the Office of
the Attorney General, Industrial Customers of Northwest Utilities and the Energy
Project, annexed to the Order Approving and Adopting Settlement Stipulation by the
Washington State Utilities and Transportation Commission, dated February 22, 2006
16.
17.Amendment to Stipulation, dated March 8, 2006, by and among MidAmerican Energy
Holdings Company, PacifiCorp dlb/a Pacific Power & Light Company, Staffof
Washington Utilities and Transportation Commission, the Public Counsel Section of the
Office of the Attorney General, Industrial Customers of Northwest Utilities and the
Energy Project, annexed to the Order Granting Stipulated Motion to Amend Order 07
by the Washington State Utilities and Transportation Commission, dated March 9, 2006
3144016.
18.Stipulation, dated January 20, 2006, by and among MidAmerican Energy Holdings
Company, PacifiCorp, the Officer ofConsurner Advocate, Wyoming Industrial Energy
Consumers, Wyoming Infrastructure Authority, Utility Workers Union of America
AFL-CIO, Utility Workers Union of America Local 127, Western Resource Advocates
and Basin Electric Power Cooperative, annexed to the Order Approving Application for
Reorganization by the Public Service Commission of Wyoming, dated February 28
2006
19.Order Amending February 28, 2006 Order Approving Application for Reorganization
by the Public Service Commission of Wyoming, dated March 10, 2006
Tax Allocation Agreement, effective as of March 21 2006, by and among Berkshire
Hathaway Inc., MidAmerican Energy Holdings Company ("MEHC") and MEHC'
affiliated corporations
20.
3..
j j
CERTIFICATE OF P ACIFICORP
This certificate (the "Certificate ) is delivered in connection with the execution of the legal
opinion, dated June 7, 2006 (the "Opinion Letter ), delivered by Willkie Farr & Gallagher LLP,
regarding the non-consolidation of assets and liabilities of either PacifiCorp, an Oregon corporation, or
PPW Holdings LLC, a Delaware limited liability company (PPW"), with those of MidAmerican
Energy Holdings Company, an Iowa corporation ("MEHC"), in connection with the transactions
contemplated by the Docwnents (as defined in the Opinion Letter). All capitalized terms used but not
otherwise defined in this Certificate shall have the meanings ascribed to such terms in the Opinion
Letter, the Documents or the Bankruptcy Code, as applicable.
The undersigned hereby certifies, as an officer of PacifiCorp and not in her/his individual
capacity, that he/she: (a) is an officer ofPacifiCorp; (b) is authorized and qualified to sign this
Certificate on behalf ofPacifiCorp; (c) has reviewed the Opinion Letter and the Documents; and Cd)
either has personal knowledge of or has conducted such investigation deemed necessary to verify the
matters set forth herein.
The undersigned further certifies on behalf ofPacifiCorp, and not in her/his individual
capacity, that:
The undersigned is familiar with the transactions contemplated by, and the terms
, the Documents.
The statements set forth in the Facts section of the Opinion Letter, which are
incorporated herein by reference, are, and are intended to remain, true and
correct in all material respects at all relevant times.
From and after the date of the closing of the Transaction, PacifiCorp will not
engage in any transaction with any of its Affiliates, including, without
limitation, MEHC and PPW, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on an
arm length basis with unaffiliated third parties or as otherwise permitted under
the Docwnents.
The undersigned is not aware of any additional material facts that would
materially affect the accuracy, correctness or validity of the facts, statements,
assumptions and conclusions set forth in the Opinion Letter.
From and after the date of the closing of the Transaction, each of the
representations and warranties ofPacifiCorp in the Documents to which it is a
party relating to valid existence and to "separateness" will remain true and
correct in all material respects.
From and after the date of the closing of the Transaction, PacifiCorp will
perfonn in all material respects all covenants and agreements with respect to
I""~ c
valid existence and to "separateness" required under the Documents to which it
is a party to be performed by it for such relevant time.
Notwithstanding MEHC's agreement to perform under each Stipulation, MEHC
does not guarantee any ofPacifiCorp s financial obligations set forth therein;
although, the Stipulations contain certain financial commitments made solely by
MEHC whose aggregate liability is de minimis in relation to the size of the
Transaction.
The undersigned understands that: (a) WilIkie Farr & Gallagher LLP is relying on this
Certificate; (b) this Certificate wiU be attached to the Opinion Letter; and (c) this Certificate will be
relied upon by the persons and entities that are entitled to rely on the Opinion Letter.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of ;1.;1\(.
2006.
PACIFICORP, an Oregon corporation
By:
Nwne: M"oRK.. C-. MtJE::.NLH
Title: ~1i1t.. 1I,c.r&. ~~c
28-
CERTIFICATE OF PPW HOLDINGS LLC
This certificate (the "Certificate ) is delivered in connection with the execution of the legal
opinion, dated June 7, 2006 (the "ODinion Letter ), delivered by Willkie Farr & Gallagher LLP
regarding the non-consolidation of assets and liabilities of either PacifiCorp, an Oregon corporation, or
PPW Holdings LLC, a Delaware limited liability company (PPW"), with those ofMiclAmerican
Energy Holdings Company, an Iowa corporation ("MEHC ), in connection with the transactions
contemplated by the Documents (as defined in the Opinion Letter). All capitalized terms used but not
otherwise defined in this Certificate shall have the meanings ascribed to such terms in the Opinion
Letter, the Documents or the Bankruptcy Code, as applicable.
The undersigned hereby certifies, as an officer ofMEHC and not in her/his individual capacity,
that he/she: (a) is an officer ofMEHC, the managing member ofPPW, and, as a result, is authorized
and qualified to sign this Certificate on behalf ofPPW; (b) has reviewed the Opinion Letter and the
Documents; and (c) either has personal knowledge of or has conducted such investigation deemed
necessary to verify the matters set forth herein. .
The undersigned further certifies on behalf ofMEHC, as the managing member ofPPW, and
not in herlhis individual capacity, that:
The undersigned is familiar with the transactions contemplated by, and the terms
, the Documents.
The statements set forth in the Facts section of the Opinion Letter, which are
incorporated herein by reference, are, and are intended to remain, true and
correct in all material respects at all relevant times.
From and after the date of the closing of the Transaction, PPW will not engage
in any transaction with any of its Affiliates, including, without limitation
MEHC and PacifiCorp, except as expressly permitted in its organizational
documents.
The undersigned is not aware of any additional material facts that would
materially affect the accuracy, correctness or validity of the facts, statements,
assumptions and conclusions set forth in the Opinion Letter.
From and after the date of the closing of the Transaction, each of the
representations and warranties ofPPW in the Documents to which it is a party
relating to valid existence and to "separateness" will remain true and correct in
all material respects.
From and after the date of the closing of the Transaction, PPW will perform in
all material respects all covenants and agreements with respect to valid existence
and to "separateness" required under the Documents to which it is a party to be
performed by it for such relevant time.
d I)
,..
Since the date of its fonnation and through the date hereof, PPW has remained
donnant, it has not engaged in any business activities and it has not incurred any
liabilities.
The undersigned understands that: (a) Willkic Farr & Gallagher LLP is relying on this
Certificate; (b) this Certificate will be attached to the Opinion Letter; and (c) this Certificate will be
relied upon by the persons and entities that are entitled to rely on the Opinion Letter.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of :II/'lL
2006.
PPW HOLDINGS LLC a Delaware limited liability company
By:MIDAMERICAN ,
~~~,
/GS COMPANY, its Managing Member
N /" ~,' '-.,LG:,.
, /
amei' L ..
:;:-.:-/,. "; .
Title:
" "
30-
...
CERTIFICATE OF MIDAMERICAN ENERGY HOLDINGS COMPANY
This certificate (the "Certificate ) is delivered in connection with the execution of the legal
opinion, dated June 7, 2006 (the "Opinion Letter ), delivered by Willkie Farr & Gallagher LLP
regarding the non-consolidation of assets and liabilities of either PacifiCorp, an Oregon corporation, or
PPW Holdings LLC, a Delaware limited liability company (PPW"), with those of MidAmerican
Energy Holdings Company, an Iowa corporation ("MEHC ), in connection with the transactions
contemplated by the Documents (as defined in the Opinion Letter). All capitalized terms used but not
otherwise defined in this Certificate shall have the meanings ascribed to such terms in the Opinion
Letter, the Documents or the Bankruptcy Code, as applicable.
The undersigned hereby certifies, as an officer ofMEHC and not in her/his individual capacity,
that he/she: (a) is an officer ofMEHC; (b) is authorized and qualified to sign this Certificate on behalf
ofMEHC; (c) has reviewed the Opinion Letter and the Documents; and (d) either has personal
knowledge of or has conducted such investigation deemed necessary to verify the matters set forth
herein.
that:
The undersigned further certifies on behalf ofMEHC, and not in her/his individual capacity,
The undersigned is familiar with the transactions contemplated by, and the terms
, the Documents.
The statements regarding MEHC set forth in the Facts section of the Opinion
Letter, which are incorporated herein by reference, are, and are intended to
remain, true and correct in all material respects at all relevant times.
From and after the date of the closing of the Transaction, MEHC will not engage
in any transaction with any of its Affiliates, including, without limitation
PacifiCorp and PPW, except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an arm length
basis with unaffiliated third parties or as otherwise permitted under the
Documents.
The undersigned is not aware of any additional material facts that would
materially affect the accuracy, correctness or validity of the facts, statements,
assumptions and conclusions set forth in the Opinion Letter.
Notwithstanding MEHC's agreement to perform under each Stipulation, MEHC
does not guarantee any ofPacifiCorp s fmancial obligations set forth therein;
although, the Stipulations contain certain financial commitments made solely by
MEHC whose aggregate liability is de minimis in relation to the size of the
Transaction.
Th~ undersigned understands that: (a) Willkic Farr & Gallagher LLP is relying on this
Certificate; (b) this Certificate will be attached to the Opinion Letter; and (c) this Certificate will be
relied upon by the persons and entities that are entitled to rely on the Opinion Letter.
2006.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of Jv"",-
~::
D A jRRJN ~~s CO MP ANY. an Iowa corporalion
Nwn ~4;kk
Title.
32-