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HomeMy WebLinkAboutAgenda Report - April 20, 2011 C-09AGENDA ITEM Cow A% CITY OF LODI ,. COUNCIL COMMUNICATION Im AGENDA TITLE: Adopt Resolution Authorizing the City Managerto Execute Novation Agreement with JP Morgan Ventures Energy and Sempra Energy Trading LLC Transferring Interest in the Power Purchase Sales and Enabling Agreement Dated October 17, 2007 with Administration by the Electric Utility Director MEETING DATE: April 20, 2011 PREPARED BY: Electric Utility Director RECOMMENDEDACTION: Adopt a resolution authorizing the City Manager to execute a Novation Agreement with JP Morgan Ventures Energy and Sempra Energy Trading LLC transferring interest in the Power Purchase Sales and Enabling Agreement dated October 17, 2007 with administration by the Electric Utility Director. BACKGROUND INFORMATION: The City of Lodi and Sempra Energy Trading LLC (Sempra) are parties to a Power Purchaseand Sales Enabling Agreement dated October 17,2007 (Sempra/Lodi Agreement). This agreementwas executed by the Electric Utility Director pursuantto the authority granted by Lodi City Council Resolution No. 2001-34. Sempra is one of the subsidiaries of the parent corporation of San Diego Gas and Electric Company. On December 1,2010, JP Morgan Ventures Energy (JP Morgan) announced the purchase of Sempra's North American power and gas wholesale books. As a result, all outstanding Sempra agreements and transactions are being transferred and assumed by JP Morgan. JP Morgan is rated AA- by Moody's and A+ by Standard & Poors and is advertised as one of the largest financial institutions in the world. Sempra was rated AA- by Moody's and A by Standard & Poors, therefore JP Morgan is a stronger financial partner. In order to formally transfer interest in the Sempra/Lodi Agreement, it has been requested that Lodi execute a Novation Agreement with JP Morgan and Sempra. The Novation Agreement allows JP Morgan to step into the contractual "shoes" of Sempra and undertake all obligations of the Sempra/Lodi Agreement. As background, the Sempra/Lodi Agreement is an "enabling" agreement. This means that it contains the basic terms and conditions affecting any wholesale electric transactions between the parties to the agreement. The specific details of any transaction (typically price, term, delivery point and type of service) will be contained in a subsequent confirmation document. Staff has reviewed the terms and conditions of the Sempra/Lodi Agreement and believes that it is beneficial to continue to have the agreement remain in effect with JP Morgan. There is no obligation to undertake future transactions under the agreement, although it would be in place in the event that a transaction with JP Morgan is deemed to be in the best interest of Lodi. FISCAL IMPACT: There is no financial impact to execution of the proposed Novation Agreement. FUNDING: Not applicable.'iEf lI eth A. Wirkley Electric Utility Director PREPARED BY: Matt Foskett, Rates and Resources Manager EK/MF/Ist APPROVED: Konradt Bartlam, City Manager S5 . ASSUMF ION AND CONSENT GREEMENT THIS ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT (the "AssignmentAgreement') is made and entered into this _ day of , 2011 (the "Execution Date") by and among Sempra Energy Trading LLC ("Assignor"), J.P. Morgan Ventures Energy Corporation, a Delaware corporation ('Assignee") City of Lodi ("Consenting Party") (Assignor, Assignee and Consenting Party are sometimes referred in this Assignment Agreement as a "Party" and collectively as the "Parties"). WHEREAS, Assignor and Consenting Party are parties to certain transactions, as described on Exhibit 1(the "Assigned Transactions"); WHEREAS, Assignee and Consenting Party are parties to transactions which are governedby the WSPP Agreement as amended on April 1,2008 (the "Existing Master"); WHEREAS, Assignor desires to assign and delegate to Assignee, San and after the Effective Time, all of its rigbbs, duties and obligations in the Assigned Transactions, and Assignee desires to accept such assignment and delegation and to assume all such rights, duties and obligations, from and after the Effective Time, in accordance with the terms hereof; WHEREAS, the Assigned Transactions require that Assignor obtain Consenting Party's prior tzritben consent to assign or transfer the Assigned Transactions. Assignor and Assignee desire to obtain such written consent, and Consenting Party desires to grant such consent in accordance with the terms hereof; and WHEREAS, the Parties have entered into this Assignment Agreement subject to the satisfaction of certain conditions precedent, as set forth herein. NOW, THEREFORE, for and in consideration of the premises and the mtsl covenants contained herein, and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the Parties do hereby agree as follows: 1. Assignment. Effective as of the Effective Time, Assignor hereby assigns to Assignee all of its right, title, benefit, privileges and interest in and to the Assigned Transactions that are to be performed or accrue on and after the Effective Time and that do not relate to a calculation period or delivery period (however defined) ending before the Effective Time. For purposes of this Assignment Agreement, "Effective Time" shall mean the beginning of the hour ending 0100 eastern prevailing time on the Novation Date. "Novation Date" shall mean a date to be notified to Consenting Party by Assignor and Assignee, jointly. 2. Assumption, Effective as of the Effective Time, Assignee hereby accepts such assignment and assumes and agrees to observe and perform the Liabilities of Assignor under or relating to the Assigned Transactions, which are to be performed or accrue on and after the Effective Time, to the extent such Liabilities arise from or relate to acts, omissions or events occurring or conditions existing at or after the Effective Time (the "Assumed Liabilities"). All Liabilities other than the Assumed Liabilities (the "Excluded Liabilities"), including but not limited to Liabilities (i) arising frau or relating to acts, omissions or events occurring or City of I d 12011.doc 1 conditions existing prior to the Effective Time but which have not been settled, paid or performed as of the Effective Time; or (ii) due and payable or due to be performed after the Effective Time, but which accrued with respect to or otherwise related to a calculation period or delivery period (however defined) ending prior to the Effective Time, shall remain and be the obligation and responsibility of Assignor, and Assignee shall not assume, discharge, perform or be responsible in any way for any Excluded Liabilities. For purposes of this Assignment Agreement, "Llabilldes" means indebtedness, obligations, duties and other liabilities (including in respect of or arising out of any breach of contract or actual or alleged failure of Assignor to perform any obligation), whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due with respect to the Assigned Transactions. 3. Acceptance by Consenting Party. Effective as of and from the Effective Time, Consenting Party hereby consents to the assignment of the Assigned Transactions and accepts Assignee as the party to perform the Assumed Liabilities of Assignor under the Assigned Transactions. 4. Releases. (a) Effective as of and from the Effective Time, Consenting Party hereby releases and forever discharges Assignor and Assignor's Guarantor(s) if any from any and all further obligations to Consenting Party with respect to the Assumed Liabilities, including any liability of any type as a consequence of, or relating to, the Assigned Transactions, including, without limitation, all manner of action and inaction, cause or causes of action, suits, debts, dues, suns of money, claims and demands whatsoever at law or in equity arising out of, or which are in any way related to, the Assigned Transactions, arovided that, for certainty, the foregoing shall not release or discharge Assignor or Assignor's Guarantor(s) if any in respect of the settlement, payment or performance of any Excluded Liability, and all such Excluded Liabilities shall remain and be the obligation and responsibility of Assignor and shall be paid or performed by Assignor to the Consenting Party in accordance with the terms of the Assigned Transactions as though such agreements had not been assigned. Effective as ofand from the Effective Time, Assignor hereby releases and forever discharges Consenting Party and Consenting Party's Guarantor(s) if any from any and all further obligations to Assignor with respect to the Assigned Transactions and from any and all liability of any type as a consequence of, or relating to, the Assigned Transactions, including, without limitation, all manner of action and inaction, cause or causes of action, suits, debts, dues, sums of money, claims and demands whatsoever at law or in equity, arising out of or which are in any way related to, the Assigned Transactions; provided that. for certainty, the foregoing shall not release or discharge Consenting Party or Consenting Party's Guarantor(s) if any in respect of the settlement, payment or performance of any liabilities or obligations: (i) arising from or relating to acts, omissions or events occurring or conditions existing prior to the Effective Time but which have not been settled, paid or performed as of the Effective Time; or (ii) due and payable or due to be performed after the Effective Time, but which accrued vh respect to or otherwise related to a calculation period or delivery period (however defined) ending prior to the Effective Time (for avoidance of doubt, (i) and (ii) collectively constitute the "Consenting Party Excluded Liabilities'), and all such Consenting Party Excluded Liabilities shall remain and be the obligation and responsibility of Consenting Amity and shall be paid or performed by 2 Consenting Party to the Assignor in accordance with the terms of the Assigned Transactions as though such agreements had not been assigned. (c For clarity it is expressly agreed and acknowledged that any rights, obligations or disputes related to the Excluded Liabilities, whether or not known to one or more of the parties hereto as of the Effective Time, (the "HistoricalMatters") shall solely be between Consenting Party and Assignor (and not Assignee), and in no event shall Consenting Party exercise any termination or others rights under the Assigned Transactions as between Consenting Party and Assignee as a result of any Historical Matters, it being expressly agreed that the Assigned Transactions shall remain in full force and effect as between Consenting Party and Assignee notwithstanding any Historical Matters between Assignor and Consenting Party. 5. Existing Master Agreement. Notwithstanding any provision to the contrary in any confirmation regarding an Assigned Transaction, on and after the Effective Time each Assigned Transaction shall be deemed to be a transaction which was confirmed under the Existing Master that supplements, forms a part of, and is governed by the Existing Master. 6. Further Actions. Each of the Parties hereto covenants and agrees, at its own expense, to execute and deliver, at the request of another Party hereto, such further irsbumts of transfer and assignment, and to take such othw action, as such other Party may reasonably request to more effectively consummate the assignments and assumptions contemplated by this Assignment Agreement. 7. GoverningLow. The validity, interpretation and performance of this Assignment Agreement and each of its provisions shall be governed by the applicable laws of the State of New York. 8. Representation, (a) Each Party hereby represents and warrants to the others as of the Execution Date and as of the Effective Time that; (i) it is duly organized, validly existing and in good standingunder the laws of the jurisdiction of its formation, is duly qualified to do business in those jurisdictions in which it is necessary for the conduct of its business, except for failures which in the aggregate are not material to the other Parties, and has all requisite corporate or other similar power and authority and the legal right to own and operate its properties and to conduct its business as currently conducted; (ii) the execution, delivery, and performance by it of this Assignment Agreement does not require any consent, license, approval or authorization of, or other action by, or any notice or filing with, any governmental entity or any other person other than such as have already been obtained; (iii) the execution, delivery and performance by it of this Assignment Agreement are within its organizational powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing 3 documents or any government rule applicable to it or result in the breach, default or termination of any agreement to which it is a party; (iv) this Assignment Agreement has been duly executed and delivered on its behalf; constitutes its legally valid and binding obligation enforceable against it in accordance with its terms, except where enforceability may be limited or otherwise impacted by bankruptcy, insolvency or other similar laws affecting creditors' rights generally and except where enforceability is subject to the application of equitable principles or remedies; (v)no petition or notice has been presented, no order has been presented, no order has been made and no resolution has been passed for its bankruptcy, liquidation, winding -up or dissolution, and no receiver, trustee, custodian or similar fiduciary has been appointed over the whole or any pert of any of its assets or income, and it has not received any notice that any other person has any plan or intention of, filing, making or obtaining any such petition, notice, order or resolution or of seeking the appointment of a receiver, trustee, custodian or similar fiduciary. (b) Consenting Party hereby represents and warrants to Assignee as of the Execution Date and as of the Effective Time that it is not in breach of or in default under the Assigned Transactions, and no event has occurred which math the passage of time or giving of notice or both would constitute such a default, result in a loss of rights or permit termination, modification or acceleration under, or result in the creation of any lien under the Assigned Transactions and no such event, condition or circumstance would occur or exist as a result of it entering into orperforming its obligationsunder this Assignment Agreement. 9. Entire A egr ement. This Assignment Agreement, and all exhibits and schedules hereto, represents the entire understanding and agreement between the Parties with respect to the subject matter hereof and supersedes all prior oral and written and all contemporaneous oral negotiations, commitments and understandings between the Parties. 10. No Third Party Beneficiaries. This Assignment Agreement is entered into for the sole benefit of the Parties, and except as specificallyprovided herein, no other person shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with, this Assignment Agreement. 11, Counterparts. The Parties agree that this Assignment Agreement may be executed in counterparts and that, when taken together, such counterparts constitute but one agreement. [Signaturepage tofollowl 4 IN WITNESS WHEREOF, the Parties have executed this Assignment Agreement as of the date first above written. Assignor: SEMPRA ENERGY TRADING LLC By: w. Dame:en y e is Title: Ce- rest eil Assignee: MORGANI "1' 1 By. lka�'��a & 07,1JI '�r/a(i EXHIBIT 1 Assigned Transactions City of Lodi 120 1I.doc Exhibit 1 :Transaction Listing This Exhibit maybe amended to reflect additional Assigned Transactions that maybe entered into between the Assignor and the Consenting Party between the date of this Exhibit and the Novation Date Any amended Transaction listing may be sent by email or by hard copy. TICKET BUY -SELL TRADE -DT REC_PRICE DESCRIPTION PAYMENT -DATE NOTIONAL -QUANTITY UNIT START -DATE END -DATE COMMODITY PHYSICAL_ FINANCIAL LOCATION LEGAL -ENTITY -NAME 102060730 SELL 08/26/2008 83.75 USD/MW SELL PHYSELEC-25 MW/PKHR 01/20/2012 -30800 MW 10/01/2011 12/31/2011 ELEC PHYSICAL NP15 CITY OFLODI RESOLUTION NO. 2011-57 A RESOLUTION OF THE LODI CITY COUNCILAUTHORIZING THE CITY MANAGER TO EXECUTEA NOVATION AGREEMENT WITH JP MORGANVENTURES ENERGYAND SEMPRA ENERGYTRADING LLC TRANSFERRING INTEREST INA POWER PURCHASE SALES AND ENABLING AGREEMENT DATED OCTOBER 17,2007, WITH ADMINISTRATION BY THE ELECTRIC UTILITY DIRECTOR WHEREAS, the City of Lodi and Sempra Energy Trading LLC (Sempra) are parties to an October 17,2007, Power Purchase Sales and Enabling Agreement; and WHEREAS, JP Morgan has announced it has purchased Sempra's North American power and gas wholesale books and will be the principal entity under future electric transactions between the City and J P Morgan; and WHEREAS, JP Morgan has requested that the City of Lodi execute a Novation Agreement, which will formally recognize that JP Morgan assumes responsibility for trades previously executed by Sempra; and WHEREAS, staff believes it is beneficial to continue to have the agreement remain in effect with JP Morgan. NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby approve the Novation Agreement and authorize the City Manager or his designee to execute the Agreement and authorize the Electric Utility Director or her designee to administer the Agreement. Dated: April 20, 2011 hereby certify that Resolution No. 2011-57 was passed and adopted by the Lodi City Council of the City of Lodi in a regular meeting held April 20, 2011, by the following vote: AYES: COUNCIL MEMBERS — Hansen, Katzakian, Nakanishi, and Mayor Johnson NOES: COUNCIL MEMBERS —None ABSENT: COUNCIL MEMBERS — Mounce ABSTAIN: COUNCIL MEMBERS — None I JOHL City Clerk 2011-57