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HomeMy WebLinkAbout2011/12/06 Additional Information:FOLEY FOLEY & LARDNER LLP VIA E-MAIL AND U.S. MAIL Mr. Joshua H. B. Farkas Dynegy South Bay, LLC 1000 Louisiana Suite 5800 Houston, TX 77002 ~~:~ ~~ ©,~ Wit? MM~ss ; o~'~Illa, uadA~2 ATTORNEYS AT LAW ~~~ November 14, 2011 402 W. BROADWAY, SUITE 2100 SAN DIEGO, CA 921013542 619.234.6655 TEL 619.234.3510 FAX foley.com WRITER'S DIRECT LINE 619.685.4651 vavilaplana@foley.com EMAIL CLIENT/MATTER NUMBER 99910000100 Re: Further Assurances for Demolition of South Bay Power Plant Dear Mr. Farkas: We are counsel for the San Diego Unified Part District (the "Port"). On April 1, 1999, the Port entered into a Lease Agreement (the "Lease") with Duke Energy South Bay, LLC ("DESB"). DESB is now known as Dynegy South Bay, LLC ("Dynegy SB"). Under the Lease, Dynegy SB, as tenant, has certain obligations described as "End of Term Actions" which, in short, require Dynegy SB to decommission, dismantle and remove the South Bay Power Plant. Under section 4.4 of the Lease, Dynegy SB has agreed to provide the Port with such further assurances as the Port may reasonably request with respect to Dynegy SB's ability to carry out the purpose and intent of the Lease and other Transaction Documents as defined in the Lease. In addition, section 7.8 of the Environmental Remediation Agreement dated Apri122, 1999 between the Port and Dynegy SB provides for a similar further assurances obligation on the part of Dynegy SB. In connection with the Reliability Must Run ("RMR").agreements under which Dynegy SB and its predecessors have been collecting revenues derived from San Diego area rate payers, we note that Dynegy SB acknowledged on August 12, 2010, in the Explanatory Statement concerning the Settlement Agreement in FERC Docket ER10-166-000, that it "has previously received substantial contributions to cover the costs of demolition of the plant and remediation of the site, including, and without limitation, approximately $21.5 million held in escrow pursuant to a California state appropriation in 1999, and approximately $32 million in payments received under previous RMR agreements." Further, Dynegy SB acknowledged that it required $8,555,984.00 in demolition and remediation costs from the settlement reached in FERC Docket ER10-166-000 when it filed its initial information filing on October 31, 2009. We note that the final settlement amount provided Dynegy SB with revenues of $36,016,016, well in excess of the funds identified as being required to meet Dynegy SB's demolition and remediation cost obligations. Now, as a result of recent developments involving Dynegy, Inc. ("Dynegy"), Dynegy Holdings, LLC {"DH") and various direct or indirect subsidiaries, the Port's expectations of due BOSTON JACKSONVILLE MILWAUKEE SAN DIEGO SILICON VALLEY BRUSSELS LOS ANGELES NEW YORK SAN DIEGO/DEL MAR TALLAHASSEE CHICAGO MADISON ORLANDO SAN FRANCISCO TAMPA DETROIT MIAMI SACRAMENTO SHANGHAI TOKYO WASHINGTON, D.C. 4845-4422-4014.1 :FOLEY FOLEY & LARDNER LLP Joshua H. B. Farkas November 14, 2011 Page 2 performance by Dynegy SB regarding the End of Term Actions have been materially impaired. These developments include, but are not limited to: A. The escrow created under the Property Escrow Agreement dated April 27, 1999 ("Property Escrow") which contains funds segregated for the specific purpose of carrying out the End of Term Actions has only slightly more than $18 million as of the date of this letter, yet Dynegy SB's current projections of the cost of the End of Term Actions exceeds $60 million; B. As we understand it, Dynegy SB is no longer providing services for which it is receiving ongoing revenues; C. The bankruptcy filings of DH, Dynegy Danskammer, LLC, Dynegy Northeast Generation, Inc., Dynegy Roseton, LLC, and Hudson Power LLC; D. The widely reported insolvency issues related to Dynegy and DH; E. The incurring by certain subsidiaries of Dynegy and DH of debt in the amount of $1.7 billion apparently secured by all of the assets of Dynegy's and DH's direct or indirect subsidiaries; F. The reported guarantee of the $1.1 billion so-called GasCo Term Loan Facility by each existing direct or indirect subsidiaries of Dynegy Power, LLC, including Dynegy SB; G. The lack of any transparent accounting for "approximately $32 million in payments received under previous RMR agreements" that were collected "to cover the costs of demolition of the plant and remediation of the site;" and H. The lack of any transparent accounting for the $8,555,984,00 in revenues received for demolition and remediation costs from the settlement reached in FERC Docket ER1O-166-000. Therefore, the Port hereby demands and requires that Dynegy SB provide it with further assurances of Dynegy SB's ability to perform the End of Term Actions as follows: 1. A balance sheet setting forth, in detail, the financial condition of Dynegy SB; 2. A profit and loss or income statement of Dynegy SB for the years 2007-present and a pro forma through 2014; 3. A copy of any guarantee by Dynegy SB of indebtedness of Dynegy, DH or any of their respective direct or indirect subsidiaries; 4. A copy of any security agreement or mortgage or other agreement by which Dynegy SB encumbered any of its assets to secure payment or performance of any obligations of Dynegy, DH or any of their respective direct or indirect subsidiaries; 4845-4422-4014.1 :FOLEY FOLEY & LARDNER LLP Joshua H. B. Farkas November 14, 2011 Page 3 5. A detailed report of the use of, accounting for, and last four digits of the account number, along with the name of the account holder and the name of the financial institution where the following funds are held: "approximately $32 million in payments received under previous RMR agreements" collected "to cover the costs of demolition of the plant and remediation of the site;" 6. A detailed report of the use of, accounting for, and last four digits of the account number, along with the name of the account holder and the name of the financial institution where the following funds are held: $8,555,984.00 in revenues received for End of Term Actions in demolition and remediation costs from the settlement reached in FERC Docket ER10-166-000. 7. Delivery to the escrow account created under the Property Escrow of all the "approximately $32 million in payments received under previous RMR agreements" collected "to cover the costs of demolition of the plant and remediation of the site;" 8. Delivery to the escrow account created under the Property Escrow of the $8,555,984.00 in revenues received for End of Term Actions in demolition and remediation costs from the settlement reached in FERC Docket ER10-166-000. The Port reserves the right to demand- additional assurances which may be reasonably justified in light of the above information or other developments. Time is of the essence since the funds in the Payment Escrow will be soon exhausted. We therefore look forward to receiving the above assurances as soon as possible. Very truly yours Victo ilap n VAV:ms cc: Ms. Patricia Smith, Duke Capital LLC 4845-4422-4014.1 FOLEY FOLEY & LARDNER LLP Joshua H. B. Farkas November 14, 2011 Page 4 bcc: Duane Bennett 4845-4422-4014.1 ~v+a~ ~.~arw ~~/U/i~ -----Original Message----- From: The White House -Presidential Correspondence [mailto:noreply- WHPC(c~whitehouse.gov] Sent: Wednesday, January 06, 2010 7:08 AM To: ekihano60@cox.net Subject: Thank you for your message Dear Friend: Thank you for contacting me about our obligation to our Nation's veterans. I greatly appreciate hearing from you. When Americans answer the call of duty and serve in our Armed Forces, a sacred trust is forged. Our men and women who have served in the uniform of the United States of America risked their lives to protect our freedoms. Beginning at enlistment, we must do all in our power to support and provide them with the benefits they have earned. Our Nation's first President understood this obligation--as I do--to be "a debt of honor." While we can never fully repay the debt we owe to our veterans, the American Recovery and Reinvestment Act (ARRA) and my proposed 2010 Budget work to fulfill our obligations to them. ARRA creates tax incentives for businesses that hire unemployed veterans and provides one-time payments to eligible veterans totaling $700 million. My Budget includes the largest proposed single-year increase in veterans funding in 30 years. I# expands health care coverage to an additional 500,000 veterans by 2013, implements technology that eases the transition from military care to veterans' care, and enhances screening and treatment services for those suffering from Post-Traumatic Stress Disorder and Traumatic Brain Injury. My Budget would also help implement the Post-9/11 GI Bill and allow us to better combat homelessness amongst our veterans. To read about these and other plans for veterans, visit: www.whitehouse.gov/agenda/veterans. When our servicemen and women return home, America will be there for them- just as they have been there for us. For information on opportunities for veterans out of work, I encourage you to visit: www.hirevetsfirst.gov. To learn more about health care and other benefits, facility locations, and services available to veterans, please visit iris.va.gov or call 1-800-827-1000. Thank you again for writing. Sincerely, Barack Obama Mr. President, I am a Veteran who served our country honorably for 22 years. I retired from the U.S. Navy on December 31, 1999. I moved from Hawaii to Chula Vista, California. In 2000, Congress authorized retro active GI Bill benefits for those on Active duty from 1 April 2000 forward. This omitted me and 100,000 plus who separated honorably or retired before 1 April 2000 with no GI Bill benefits. Today, there is the post 9/11 GI Bill. I applaud Congress for doing what is right for those who voluntarily join the military and are on the front lines fighting in Afghanistan and Iraq. However, there are still those 100,000 plus Veterans who have received zero retro active GI Bill benefits. These 100,000 plus Veterans served in the military during the 1983 Lebanon conflict where we lost over 200 U.S. Marines, during the first Gulf War and during the Iran Hostage crisis. I have a $22,000 student loan to repay after I complete my last upper level class in January 2010 for my Bachelors in Business Administration degree at National University. I also attend day classes at Southwestern Community College which I pay for tuition, books and fees out of my own pocket. No financial aid, no grants or scholarships. If I decide to pursue my Masters Degree that is an additional $20,000 out of my own pocket or through additional loans. Mr. President, there are many members of Congress who talk the talk about supporting our Active Duty military and Veterans. However, Congress did not walk the walk. They omitted 100,000 plus Veterans who should be entitled to GI Bill benefits. That is a broken promise by Congress. When I see earmarks in the federal budget that goes to frivolous items that just deepens the wounds of a broken promise. For the past 10 years I have been educating and informing many people that Congress has broken its promise to Veterans. I have two signed fetters from Congressman Bob Filner dated May 28, 2008 and August 4, 2009 that legislation to improve GI Bill benefits will not address my situation. The thanks I received for serving my country honorably for 22 years is a broken promise by the very people in Congress who publicly stated they will do everything possible to ensure Active Duty and Veterans get the pay and benefits they are entitled to. Why should I trust Congress to have my best interes#s for health care, public safety or education when it has already broken its promise to 100,000 plus Veterans? Elroy K. Kihano CPO, U.S. Navy (Ret)