LREC/ZREC Requirements for the Forms and Methods of Providing Performance Assurance NOTE: These requirements apply to Performance Assurance for Low Emission REC (LREC), Medium Zero Emission REC (Medium ZREC), Large Zero Emission REC (Large ZREC) projects selected pursuant to a Request For Proposals (RFP) process as well as Small Zero Emission REC (Small ZREC) projects selected via a Tariff process. (respectively the RFP Process and Tariff Process referenced herein) Consistent with Section 2.6.4.8 of the RFP issued on May 1, 2012 and Section 9.1 of either the Standard Contract or the Tariff Service Agreement, as applicable (each referred to as the Contract ), the Seller is required to provide Performance Assurance in the amount and form set forth in the Contract within fifteen (15) Business Days of the Effective Date of the Contract. Failure to timely provide the Performance Assurance in the form and amount as required by the Contract shall result in the automatic termination of the Contract. (Contract 9.1) Note that, pursuant to the Solicitation Plan approved by the Connecticut Public Utilities Regulatory Authority (PURA), Performance Assurance is not required for projects that UI can verify are online and producing energy at the time of contracting. (See also Q. A20 June 8, 2012 Q&A.) The following are the approved forms of Performance Assurance (details with respect to the proper provision of Performance Assurance are provided in the corresponding sections below): A. Cash B. Letters of Credit C. Surety Bonds D. Checks (cashiers checks or bank checks only) Counterparties that choose to satisfy the Performance Assurance requirement with a Letter of Credit, Surety Bond or Check must send them via overnight certified United States Postal Service (USPS) mail or nationally recognized courier service to: Wholesale Power Contracts The United Illuminating Company MS 1-16F 180 Marsh Hill Road Orange, CT 06477 Phone number 203.499.3982 Letters of Credit, Surety Bonds or Checks sent by overnight certified USPS mail or nationally recognized overnight courier service shall be deemed received on the date delivered. Directions for sending Performance Assurance in the form of cash are provided below.
A. Cash Cash may only be provided pursuant to an automated clearing house ( ACH ) or via a wire transfer in satisfaction of Performance Assurance requirements. Contract counterparties that have chosen to satisfy the Performance Assurance requirement with cash must send the required cash amount to the account numbers and ABA numbers provided in the Contract. RFP Process: For Contracts executed under the RFP process, the LREC/ZREC billing account number of 024291 and the contract number, as included on the Cover Sheet to the Contract, must both be listed on the applicable ACH or wire transfer. Tariff Process: For Contracts executed under the Tariff process, the LREC/ZREC billing account number of 024291 and the Contract Number, as included on the Service Agreement to the Tariff, must both be listed on the applicable ACH or wire transfer. B. Letters of Credit RFP Process: For LREC Contracts, and Large or Medium ZREC Contracts executed under the RFP Process, the contract number, as included on the Cover Sheet to the Contract, must be listed on the applicable Letter of Credit. Tariff Process: For Small ZREC Contracts executed under the Tariff process, the contract number, as included on the Service Agreement, must be listed on the applicable Letter of Credit. Pursuant to the Contract, a Letter(s) of Credit means one or more irrevocable, non-transferable standby letters of credit issued by a Qualified Institution in a form reasonably acceptable to the Buyer. Costs of a Letter of Credit shall be borne solely by the applicant for such Letter of Credit." Attachment 2 to the Contract provides a Form of Letter of Credit acceptable to UI, the form of which is included here for convenience. Form of Letter of Credit IRREVOCABLE LETTER OF CREDIT NO. ISSUE DATE: EXPIRY DATE: APPLICANT [Applicant Name] [Applicant Address] BENEFICIARY [Beneficiary Name] c/o The United Illuminating Company 157 Church Street New Haven, CT 06506-0901 ATTENTION: Ms. Patricia Cosgel - Treasurer EXPIRY DATE: [insert date] CURRENCY AMOUNT
USD $ [insert amount] ASSOCIATED AGREEMENT [Agreement title and date] WE HEREBY ISSUE IN YOUR FAVOR OUR IRREVOCABLE LETTER OF CREDIT NO: [ ] BY ORDER OF AND FOR THE ACCOUNT OF [Applicant Name], [Applicant Address] FOR AN AMOUNT OR AMOUNTS NOT TO EXCEED IN THE AGGREGATE [ ] AND 00/100 UNITED STATES DOLLARS (USD[ ]) AVAILABLE BY YOUR DRAFT(S) AT SIGHT ON [Name of Issuer] ( ISSUER ) LOCATED AT [Issuer Address]. THIS LETTER OF CREDIT IS EFFECTIVE FROM [, 20[ ]] AND SHALL EXPIRE ON [, ] AT OUR COUNTERS, PROVIDED THAT THIS LETTER OF CREDIT SHALL BE DEEMED TO BE AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE (1) YEAR FROM THE EXPIRY DATE HEREOF, OR ANY FUTURE EXPIRY DATE, UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE EXPIRY DATE WE NOTIFY YOU BY REGISTERED MAIL RETURN RECEIPT REQUESTED OR COURIER (WITH DELIVERY CONFIRMED IN WRITING) THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD. UPON RECEIPT BY YOU OF SUCH NOTICE AND IF A SUBSTITUTE LETTER OF CREDIT IN FORM, SUBSTANCE AND AMOUNT ACCEPTABLE TO YOU IS NOT PROVIDED TO YOU BY OR ON BEHALF OF THE APPLICANT AT LEAST THIRTY (30) DAYS PRIOR TO THE THEN CURRENT EXPIRY DATE IN EFFECT AT THE TIME OF NOTICE, THEN YOU MAY DRAW DOWN THIS LETTER OF CREDIT UP TO THE AVAILABLE AMOUNT (i.e., ORIGINAL AMOUNT OF THIS LETTER OF CREDIT NOTED ABOVE REDUCED BY AMOUNT OF PRIOR PAID DRAWINGS). THIS LETTER OF CREDIT IS PRESENTABLE AND PAYABLE AT OUR COUNTERS AND WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT WILL BE HONORED ON PRESENTATION IF ACCOMPANIED BY THE REQUIRED DOCUMENTS PURSUANT TO THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT. THE BELOW MENTIONED DOCUMENT(S) MUST BE PRESENTED ON OR BEFORE THE EXPIRY DATE OF THIS INSTRUMENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT. 1. YOUR SIGNED AND DATED STATEMENT, IN THE FORM OF ANNEX 1 ATTACHED HERETO; AND 2. THIS ORIGINAL LETTER OF CREDIT AND ANY AMENDMENT(S). PRESENTATION OF ANY DRAWING MAY BE MADE BY HAND-DELIVERY, EXPRESS COURIER, OR CERTIFIED MAIL AT THE FOLLOWING ADDRESS: [Issuer] [Issuer s Address] PH: [( ) - ] ATTENTION: [ ] DRAWINGS PRESENTED BY TELEFACSIMILE ( FAX ) TO FAX NO.[ ] ARE ALSO ACCEPTABLE PROVIDED THAT SUCH FAX PRESENTATION IS MADE ON OR BEFORE THE EXPIRY DATE AND THE ORIGINAL DRAWING CERTIFICATES ARE SIMULTANEOUSLY FORWARDED BY OVERNIGHT COURIER SERVICE TO THE ABOVE ADDRESS, BUT THE FAILURE OF THE COURIER SERVICE TO TIMELY DELIVER SHALL NOT AFFECT THE EFFECTIVENESS OF THE FAX PRESENTATION. IF A DRAWING IS MADE BY YOU HEREUNDER AT OR BEFORE 11:00 A.M., NEW YORK TIME, ON A BUSINESS DAY (AS HEREINAFTER DEFINED) IN CONFORMANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, PAYMENT SHALL BE MADE TO YOU IN IMMEDIATELY AVAILABLE FUNDS AT OR BEFORE 4:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING BUSINESS DAY. IF A DRAWING IS MADE BY YOU HEREUNDER AFTER 11:00 A.M., NEW YORK TIME, ON A BUSINESS DAY IN
CONFORMANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, PAYMENT SHALL BE MADE TO YOU IN IMMEDIATELY AVAILABLE FUNDS AT OR BEFORE 3:00 P.M., NEW YORK TIME, ON THE SECOND BUSINESS DAY THEREAFTER. THIS LETTER OF CREDIT MAY BE TERMINATED UPON BENEFICIARY S RECEIPT OF FULL PAYMENT FROM THE APPLICANT AND ISSUER S RECEIPT OF A WRITTEN RELEASE FROM THE BENEFICIARY RELEASING THE ISSUER FROM ITS OBLIGATIONS UNDER THIS LETTER OF CREDIT. THE TERM BUSINESS DAY AS USED HEREIN MEANS ANY DAY OTHER THAN (I) A SATURDAY, (II) A SUNDAY, OR (III) A DAY ON WHICH BANKING INSTITUTIONS LOCATED IN THE CITY OF NEW YORK, NEW YORK ARE REQUIRED OR AUTHORIZED BY LAW TO BE CLOSED. APPLICANT'S FILING OF A BANKRUPTCY, RECEIVERSHIP OR OTHER DEBTOR-RELIEF PETITION, AND/OR APPLICANT'S DISCHARGE THEREUNDER, SHALL IN NO WAY AFFECT THE LIABILITY OF THE ISSUER UNDER THIS LETTER OF CREDIT AND, AS A RESULT, THE ISSUER SHALL ALWAYS REMAIN LIABLE TO THE BENEFICIARY FOR THE FULL AMOUNT OF THIS LETTER OF CREDIT, NOTWITHSTANDING SAID BANKRUPTCY, RECEIVERSHIP, PETITION OR DISCHARGE - NOT TO EXCEED THE AVAILABLE AMOUNT OF THIS LETTER OF CREDIT. ADDITIONAL TERMS AND CONDITIONS: 1. ALL COMMISSIONS AND OTHER BANKING CHARGES WITH RESPECT TO THIS LETTER OF CREDIT WILL BE BORNE BY THE APPLICANT. 2. THIS LETTER OF CREDIT MAY NOT BE TRANSFERRED OR ASSIGNED. 3. THIS LETTER OF CREDIT IS IRREVOCABLE. 4. THE AMOUNT WHICH MAY BE DRAWN BY YOU UNDER THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY REDUCED BY THE AMOUNT OF ANY UNREIMBURSED DRAWINGS HEREUNDER AT OUR COUNTERS. 5. ANY NUMBER OF PARTIAL DRAWINGS ARE PERMITTED FROM TIME TO TIME UNDER THIS LETTER OF CREDIT. 6. THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (1998) OF THE INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590 ( ISP98 ) OR SUCH LATER REVISION (S) OF THE INTERNATIONAL STANDBY PRACTICES AS MAY BE HEREAFTER ADOPTED. AS TO MATTERS NOT GOVERNED BY ISP98, THIS LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, TO THE EXTENT NOT INCONSISTENT WITH ISP98, THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK. THIS LETTER OF CREDIT MAY NOT BE AMENDED, CHANGED OR MODIFIED WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BENEFICIARY AND THE ISSUER. 7. THE BENEFICIARY SHALL NOT BE DEEMED TO HAVE WAIVED ANY RIGHTS UNDER THIS LETTER OF CREDIT, UNLESS THE BENEFICIARY OR AN AUTHORIZED AGENT OF THE BENEFICIARY SHALL HAVE SIGNED A DATED WRITTEN WAIVER. NO SUCH WAIVER, UNLESS EXPRESSLY SO STATED THEREIN, SHALL BE EFFECTIVE AS TO ANY TRANSACTION THAT OCCURS SUBSEQUENT TO THE DATE OF THE WAIVER, NOR AS TO ANY CONTINUANCE OF A BREACH AFTER THE WAIVER. 8. A FAILURE TO MAKE ANY PARTIAL DRAWINGS AT ANY TIME SHALL NOT IMPAIR OR REDUCE THE AVAILABILITY OF THIS LETTER OF CREDIT IN ANY SUBSEQUENT PERIOD OR OUR OBLIGATION TO HONOR YOUR SUBSEQUENT DEMANDS FOR PAYMENT MADE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT.
9. NOTWITHSTANDING ANY PROVISION OF THIS LETTER OF CREDIT TO THE CONTRARY, SHOULD THIS LETTER OF CREDIT EXPIRE OR TERMINATE ON A DATE THAT THE ISSUER'S LOCATION IS CLOSED DUE TO AN INTERRUPTION OF THE ISSUER'S BUSINESS CAUSED BY AN ACT OF GOD, WEATHER-RELATED EVENT, RIOT, CIVIL COMMOTION, INSURRECTION, ACT OF TERRORISM, WAR, DECLARED OR UNDECLARED, OR ANY CAUSE BEYOND THE ISSUER'S CONTROL, THEN THE TERMS OF THIS LETTER OF CREDIT WILL AUTOMATICALLY BE EXTENDED FOR AN ADDITIONAL PERIOD EQUAL TO THE LENGTH OF THE INTERRUPTION OF THE ISSUER'S BUSINESS, WHICH ADDITIONAL PERIOD SHALL NOT BE LESS THAN TEN (10) BUSINESS DAYS OR IN ANY EVENT LONGER THAN THIRTY (30) CALENDAR DAYS, FOLLOWING THE DAY ON WHICH THE ISSUER RESUMES ITS BUSINESS AFTER THE CAUSE OF SUCH INTERRUPTION HAS BEEN REMOVED OR ELIMINATED, AND, AS A RESULT, ANY DRAWING ON THIS LETTER OF CREDIT WHICH COULD PROPERLY HAVE BEEN MADE, BUT FOR SUCH INTERRUPTION, SHALL BE PERMITTED DURING SUCH EXTENDED PERIOD. AUTHORIZED SIGNATURE: TITLE: PLEASE DIRECT ANY WRITTEN CORRESPONDENCE, INCLUDING DRAWING OR INQUIRIES TO: [Issuer] [Issuer Address] PH: [( ) - ] ATTENTION: C. Surety Bonds RFP Process: For Contracts executed under the RFP process, the contract number, as included on the Cover Sheet to the Contract, must be listed on the applicable Surety Bond. Tariff Process: For Contracts executed under the Tariff process, the contract number, as included on the Service Agreement, must be listed on the applicable Surety Bond. The Surety Bond Issuer must satisfy the following criteria: Licensed to do business in Connecticut. Financial Strength Rating by A.M. Best Company of "A minus" or better. Financial Size Category A.M. Best of VIII or larger. The Surety Bond form must satisfy the following criteria: The Surety Bond submitted to UI must provide for payment of the Performance Assurance amount to Buyer in the Event of Default by Seller prior to the In-Service Date. Surety Bond forms similar to the Form of Surety Bond, as determined by UI in its sole discretion, will be acceptable to UI. The following is a Form of Surety Bond that is acceptable to UI:
FORM OF SURETY BOND Bond No. KNOW ALL MEN BY THESE PRESENTS, that we, [ ], as Principal, and, [ ], a corporation organized under the laws of the State of [ ], and duly authorized to transact business in the State of Connecticut, as Surety, are held and firmly bound unto The United Illuminating Company ( Obligee ) in the penal sum of [ ] Dollars ($ ) lawful money of the United States, to the payment of which well and truly to be made we hereby bind ourselves and our heirs, administrators, successors, and assigns, jointly and severally, firmly by these presents. WHEREAS the above bounden Principal has entered into the Standard Contract for the Purchase and Sale of Connecticut Class I Renewable Energy Credits from Low and Zero Emission Projects (the Contract ) with the above named Obligee, effective the day of,, which Contract is hereby referred to and made a part hereof as fully and to the same extent as if copies at length were attached herein. NOW THEREFORE, if the Principal shall comply with and faithfully perform the terms of the Contract up to the In- Service Date, then this bond shall be null and void, otherwise to be in full force and effect. PROVIDED HOWEVER, that this bond is executed by the Surety and accepted by the Obligee subject to the following expressed conditions. 1. Capitalized terms used but not defined in this bond shall have the meanings set forth in the Contract. 2. This bond is for the term beginning as of the Effective Date and ending as of the In-Service Date, as each term is defined in the Contract. 3. If the Contract is terminated due to an Event of Default by Principal prior to the In-Service Date, Obligee will then notify Surety in writing of Obligee s claim and Surety shall immediately pay the amount of such claim to Obligee, subject to the terms of this bond. 4. Neither non-renewal by the Surety, nor failure, nor inability of the Principal to file a replacement bond shall constitute a loss to the Obligee which is recoverable under this bond. 5. Surety s liability under this bond and all continuation certificates issued in connection therewith shall not be cumulative and shall in no event exceed the amount as set forth in this bond or in any additions, riders, or endorsements properly issued by the Surety as supplements thereto. 6. No claim, action, suit or proceeding, except as herein set forth, shall be had or maintained against the Surety on this bond unless same be brought or instituted and process served upon the Surety within six months following the expiration of the original term of this bond, or extended term as provided herein. Signed, sealed and dated this _ day of _,. ATTEST BY Principle ATTEST BY Attorney-in-Fact Seal
D. Checks Performance Assurance in the form of a check constitutes an other form of security and accordingly, pursuant to the Contract must be acceptable to UI in its sole discretion. (Contract 1.50.) A check transfer must satisfy the minimum requirements as to form method of submission, and may be provided only in the form of a cashier s check, also known as a bank check (a Check ). RFP Process: For Contracts executed pursuant to the RFP process, the LREC/ZREC billing account number of 024291 and the contract number, as included on the Cover Sheet to the Contract, must be listed on the Check stub. Tariff Process: For Contracts executed pursuant to the Tariff process, the LREC/ZREC billing account number of 024291 and the contract number, as included on the Service Agreement to the Tariff, must be listed on the Check stub.