Answering Statement and Request for Dismissal by Gainesville ..

Recommendations

Info

Commissioners then voted unanimously to approve the PPA. See Gainesville Regional Utilities, GRU and American Renewables Partner to Bring Biomass Energy to Gainesville (May 7, 2009) (attached as Exhibit 3). GRU’s goals in negotiating the PPA, at a time when natural gas prices were extremely high and unstable, included achieving greater fu el diversity (as it is approximately 85% dependent on fossil fuels), meeting certain se lf-imposed carbon reducti on targets, providing a stable long-term rate structure, and providing a hedge against futu re carbon regulation. As GRU publicly promoted the benefits of the Facility: “By using biomass materials, a local renewable resource, this facility will promote our energy independence, add diversity to our fuel supply and shield customers from anticipated increasing fossil-fuel prices.” See Exhibit 3. The parties also were aware of efforts in the State of Florida to implement a Renewable Portfolio Standard requiring utilities to have a certain percentage of their electric resource portfolio be renewable energy, or purchase Re newable Energy Credits to meet their minimum percentage requirement. GRU ne gotiated to receive all “Envir onmental Attributes,” including Renewable Energy Credits, carbon offsets, and all other “emissions credits or other environmental credits or attributes” associated with the energy generated by the Facility. When negotiating the terms of the PPA, the parties and their advisors also made efforts to structure it in a way to best position the Facility to be eligible for certain benefits under the federal American Recovery and Reinvestment Tax Act of 2009 (the “Recovery Act”), including: (a) a cash grant from the U.S. Treasury Department equal to 30% of the eligible capital cost of the project; (b) a 30% investme nt tax credit; and (c) productio n tax credits (collectively, the “federal incentives”). See Exhibit 2 (listing “Takes Advantage Of New Stimulus Bill Grant Opportunity - January 1, 2014 deadline” among project benefits). GRU knew that GREC would be engaging in a structured financing of the Facility with third party lenders and investors based on the Facility’s expected eligibility for these federal incentives and the resulting benefi ts to the City in terms of th e long-term cost of energy. To assist GREC in this regard, GRU executed an ag reement with a syndicate of banks that lent A/75508616.1 6
hundreds of millions of dollars for the construction of the Facility, consenting to such financing. GREC in fact did share information about the exp ected federal incentives re lated to the Facility with third parties, including potential lenders and investors. GRU also knew that if it (a public, tax-ex empt entity) were to acquire an ownership interest in the Facility prior to the expiration of the recapture period (as defined in the Internal Revenue Code), that interest could render the deprive the Facility of the benefit of the stimul Facility ineligible for the federal incentives, us money, increase the cost of the Facility, and increase the corresponding cost of the energy it produced and th e price GRU would pay. If the Facility were to become inelig ible to receive the federal ince ntives, the rates charged under the PPA would increase significantly, resulting in an approximately $197 million increase in cost to GRU over the life of the agreement. This was a ke y consideration in stru cturing the transaction as a PPA, rather than GRU building and owning the Facility itself. C. The PPA’s Dispute Resolution Provisions. GREC and GRU devoted significant time nego tiating a number of provisions in the PPA to govern potential future disput es related to the Facility. Of particular rele vance to this arbitration are: (1) an arbitration clause for cer tain disputes solely between the parties to the PPA; (2) a process for submitting notice of disputes prior to pursuing a claim to arbitration; (3) a limitation on available remedies; and (4) a waiver and release of claims by GRU against entities other than GREC itself. 1. Arbitration Clause (PPA § 24.2) Section 24.2 of the PPA provides that “[a] ny controversy, dispute or claim between [GREC] and [GRU] arising out of or relating to [the PPA], or the breach thereof, shall be settled finally and conclusively by arbitration accordi ng to the Rules of the American Arbitration Association then in effect, unless the parties mutually otherwise agree.” See PPA § 24.2. A/75508616.1 7
Page 1 and 2: AMERICAN ARBITRATION ASSOCIATION TH
Page 3 and 4: Facility to be ineligible to receiv
Page 5: federal incentives (and hence that
Page 9 and 10: No Recourse; Limited Liability . No
Page 11 and 12: BayCorp, EMI, and Tyr each appointe
Page 13 and 14: The ownership structure of GREC as
Page 15 and 16: operational management today as whe
Page 17 and 18: III. ARGUMENT A. The PPA Precludes
Page 19 and 20: For example, the ROFO provision mak
Page 21 and 22: 3. The Transfer of Tyr’s Interest
Page 23 and 24: 1. GRU Has Not Indicated Any Intere
Page 25 and 26: Seventh Affirmative Defense GRU fai
Page 27 and 28: have any ownership interest in GR E
Page 29 and 30: Facility; and damages from confiden
Page 31: 20. GRU and GREC are engaged in the

Answering Statement and Request for Dismissal by Gainesville ..

Create successful ePaper yourself

Delete template?

Save as template?