NINA TEXAS 3 LLC and NINA TEXAS 4 LLC, Defendants. THE CITY ...

contractor on the Project, informed CPS Energy that the preliminary estimate for the TotalProject Costs will exceed the Project cost on which CPS Energy’s approved rates are based.Upon information and belief, because of internal lapses in communication within CPS Energy’smanagement team, information about preliminary cost forecasts was not timely or accuratelyrelayed to the CPS Energy Board of Trustees. When these estimates came to light, CPS Energyand its board came under intense public scrutiny and criticism that led to changes in critical CPSstaff and management. For reasons to date undisc!osed to the NINA Companies, CPS Energyhas since failed to make and implement vital decisions regarding funding of project costs andother matters that are necessary for CPS Energy to fulfill its obligations under the Agreementsand that are essential to the continuation of the Project. CPS Energy’s failure to act amounts to abreach and a constructive withdrawal from the Project.17. At all times, CPS Energy has had the affirmative obligation under the terms of theSupplemental Agreement to provide notice to the NINA Companies of its intent to withdrawfrom the Project. (Supplemental Agreement §5.3.) CPS Energy has never formally withdrawnfrom the Project. Instead, CPS Energy remains an ostensible participant in the Project, but isimpeding its progress and threatening its viability. CPS Energy is delaying the Project to avoidincurring additional but essential Project costs while it sorts through the apparent politicalconsequences associated with cost estimates that, based on public comment by city and utilityofficials, exceed CPS Energy’s internal price threshold. The Project continues to remain viablefor the NINA Companies. CPS Energy must get off of the fence and either commit to fulfillingall of its contractual obligations, or withdraw and get out of the way so that the Project canproceed.DEFENDANTS’ ORIGINAL ANSWER TO PLAINTIFF’S ORIGINAL PETITIONAND DEFENDANTS ~ COUNTERCLAIM PA~E 7