F2006 Open Call for Power Q&As (1-49)
Questions 1 to 49 from Bidders and BC Hydro's answers to them are posted on this page. Most recent Q&As (from 50 onward) are posted on a separate page.
February 20, 2006
49. We have registered two Projects and each project has more than one generation facility. When filling out the Sellers Plant Description Form should we use just one form per Project and list the descriptions for each generating facility by adding new rows to the Word Table? Or should we attach one form per generation facility identifying the Project at the top of each form?
There should be a single Seller's Plant Description Form for each individual Project. If a Project with multiple generating units is accepted as a successful Tender it will be awarded a single EPA and the completed Seller's Plant Description Form will become an appendix to the EPA. Given the size limitations of CFT Form # 2, you can expand the space in the existing document or provide detailed information for each generating facility in a separate attachment.
48. Sections 8 and 9 of the Seller's Plant Description Form (CFT #2) require information regarding "Water Supply" and "Effluent Disposal".
1. Are the questions in sections 8 and 9 applicable to a run-of-river hydro project?
2. Are sections 8 and 9 intended to cover both the construction and operating phases of a run-of-river project or only the operating phase?
BC Hydro recognizes that sections 8 and 9 of the Seller's Plant Description Form are more applicable to some generation technologies than others. Please complete CFT Form # 2 as fully as possible but indicate "Not Applicable" for those sections which do not apply to your Project.
The information requested in the Seller's Plant Description Form is intended to cover the full Term of the EPA, which includes both the development and operating phases.
47. Company ABC submitted a preliminary interconnection study application for a 20 MW project. Can the bidder tender a project for which the interconnection facilities are sized at 20MW, but the facility being tendered only has a 9.9 MW capacity for the purposes of the F2006 CFT. Would this be considered materially inconsistent with the preliminary interconnection study submitted as described in the mandatory requirements Section 15.2, Page 30 of the F2006 CFT?
Section 15.2 of the CFT states that "Any Project data contained in the Tender that differs from the corresponding information contained in the Bidder's F2006 CFT Preliminary Interconnection Study Application and/or additional information furnished by the Bidder to support the study, and on which the study is based, will be considered materially inconsistent if, in BC Hydro's opinion, the difference, if taken into account in the study, could materially impact the study results." Since the F2006 CFT Preliminary Interconnection Studies are currently in progress, BC Hydro is unable to make this assessment at this time. Determinations regarding the materiality of interconnection differences will be made once Tenders are actually received.
46. Will BC Hydro accept required CFT forms executed using signature by counter party to satisfy the bid requirements for "Original Documents"?
A complete Tender consists of originally signed Tender submissions. Execution of one or more Tender submissions by counterparty signatures may render the Tender a Non-Conforming Tender, with the result that it will be rejected.
Please see section 14.6 of the CFT for Tender signing requirements. However, please note that if the signing formalities described in section 14.6 of the CFT indicate that a number of individuals (i.e. in the case of a general partnership, each partner) are required to sign the Tender Form, the Bid Price/Options Form, and the Project Submission, the Bidder may attach an additional page(s) to the forms to allow sufficient space for all required signatures.
February 17, 2006
45. We have asked BCTC to modify our Preliminary Interconnection Agreement, to increase our Plant Capacity. They have informed us that they will be able to let us know if that is possible at the end of February. We are getting the Seller's Plant Description ready to submit to BC Hydro and section 11 asks for Plant Capacity. As we will only know if we can increase our Plant Capacity for the BCTC Preliminary Interconnection Agreement at the end of February, we want to know if the Seller's Plant Description Form is binding. Alternatively, we are happy to submit 2 Seller's Plant Description Forms for the two plant sizes being considered.
Any information contained in the Seller's Plant Description Form provided to BC Hydro by February 21st can subsequently be updated or amended in the final version of this form which must be submitted as part of the Tender at Tender Closing Time. Accordingly, for section 11 of CFT Form # 2, please provide the Plant Capacity that you are likely to use in your Tender submission. Further guidance regarding changes to information provided in the Seller's Plant Description Form can be found in BC Hydro's response to Question 41 posted on the CFT Website.
44. The "Seller's Plant Description Form" , CFT Form # 2, due 21 February 2006, requires technical information on our project that is not available at this time (e.g. manufacturer make and model for various plant equipment, details on metering facilities). To what extent is it possible to amend the information requested by the CFT Form # 2 at a later date? Would it be permissible to leave blanks where information is not yet available?
It is important that the Seller's Plant Description Form be completed as fully as possible, even if some of the information is preliminary. For example, the metering and other interconnection information requested in section 7 of the form should be consistent with the data contained in the F2006 CFT Preliminary Interconnection Study Application. Any information provided in the pre-Tender submission can be updated or amended in the final Seller's Plant Description Form that must be submitted as part of the Tender at Tender Closing Time. Further guidance regarding changes to Seller's Plant information can be found in BC Hydro's answer to Question 41 posted on the CFT Website. Also, please note that section 6.3 of the Standard Form EPA allows for changes to certain sections of the Seller's Plant Description after the EPA is signed.
43. CFT Form #2 - Seller's Plant Description, due on February 21st, requires information related to the project site. We are currently in negotiations on two mutually exclusive sites for the same project. When filling out the Form, should we include both sites or just the most probable site? Can we change the information in Appendix 5 between Feb 21st and the bid submission deadline?
Only one site may be included in the Seller's Plant Description Form. If you are planning to submit an Alternate Tender, you may use identical or different Seller's Plant Description(s) for each Tender. Bidders may make changes to any section of the final CFT Form # 2 (including site) which must be submitted as part of their Tender at Tender Closing Time. Further guidance regarding changes to information provided in the Seller's Plant Description Form can be found in BC Hydro's response to Question 41 posted on the CFT Website.
42. The Liberal government sponsored Renewable Power Production Incentive (RPPI) and Wind Power Production Incentive (WPPI) must now be questioned under the new Conservative government. How can the F2006 CFT bid process be modified to insulate ratepayers from being exposed to the risk (EPA attrition risk) of bidders bidding prices that reflect all or even some part of a federal incentive program that actually may never be available to those bidders?
If the new federal government has not clarified whether RPPI will proceed prior to BC Hydro's Tender Closing Time (currently April 7) how would BC Hydro like RPPI qualified projects to reflect that uncertainty in their bids?
BC Hydro's CFT states that "Tenders are binding and irrevocable"... "Bidders agree to sign the EPA and provide Performance Security"... "subject to no further negotiation." ... Non-conforming Tenders will be rejected". Does that mean that if someone bids "$75/MW subject to getting WPPI and $85/MW without it" then BC Hydro would reject it as non-conforming?
All three questions deal with the uncertainty and risk associated with the federal Renewable Power Production Incentive (RPPI) and the Wind Power Production Incentive (WPPI) programs. BC Hydro's response below addresses such uncertainty/risk at the Tender, evaluation and post-award phases of CFT.
1. Conditional Tenders
In preparing its Tender, each Bidder is responsible for assessing the economic viability of its Project and the associated risks. Once the Tender is submitted, it constitutes a legally binding offer to enter into an EPA with BC Hydro and to deliver the prescribed Performance Security. Bidders should not condition their Tenders based on the receipt of RPPI or WPPI incentive payments. As outlined in section 14.8 of the CFT, Tenders that do not conform to the CFT requirements in any material respect, as determined by BC Hydro, will be considered Non-Conforming Tenders and will be rejected and given no further consideration. Tenders which have been modified to include conditions and/or contain pricing options other than those provided in the CFT would likely be determined to be materially non-confirming and would not proceed to the Tender assessment and evaluation phase.
2. Risk Assessment
All Conforming Tenders will proceed to the Risk Assessment stage of the evaluation process as described in section 15.3 of the CFT. Part of the purpose of the Risk Assessment is to mitigate the risk of Project attrition by rejecting Tenders that pose a Development Risk and/or Performance Risk that is unacceptable to BC Hydro having regard to its obligations to serve its customers. The Risk Assessment will be conducted using information provided by Bidders in their Project Submissions. Bidders are required to disclose all known facts and circumstances which could have a material and adverse effect on their ability to develop and operate the Project and comply with post-award EPA obligations (see section 3.11.3 of the Project Submission Instructions).
3. Post-Award Obligations and Options
Once an EPA is awarded to a Bidder, there are fairly limited termination rights (see Article 15 of the EPA for Large Projects and Article 14 of the EPA for Small Projects). Bidders awarded an EPA are expected to fulfil their contractual obligations; failure to fulfil such obligations may be a deliberate breach of the EPA and can trigger BC Hydro's termination rights. Small Project proponents may terminate the EPA for any reason prior to the earlier of COD and the first anniversary of the signing the EPA but they are required to make Termination Payments. Under the Large Project EPA, the termination rights for Sellers are largely limited to a failure to obtain Material Permits and do not extend to problems associated with financing or other Project delays. These termination rights were designed to further the objective of the Risk Assessment by ensuring that all Projects that are awarded an EPA in the CFT process are at an appropriate stage of development. This increases the fairness of the process for Bidders and provides additional assurance of development to BC Hydro and its ratepayers.
February 15, 2006
41. In CFT Form # 2 it states information submitted on February 21 in sections 4 and 5 of the form can be updated and amended when the final tender is submitted on April 7, 2006. Are there are any restrictions updating or amending other sections of the document between February 21 and April 7? For example a company may submit the form under its current name on Feb 21 and by April 7 it may have created another legal entity, for business purposes, with which to bid for the EPA. Also access roads my change and interconnection facilities will be studied more and improved upon.
There are no restrictions regarding updating or amending any sections of the Seller's Plant Description Form. As noted in Instruction 4.4 of the Project Submission Instructions, Bidders are required to submit as part of their Tenders a completed CFT Form # 2 (as an exhibit to the Project Submission) and a list of changes, if any, compared to the version submitted on or before February 21, 2006. Bidders are reminded that the information in the Seller's Plant Description Form submitted with each Tender will be reviewed to ensure compliance with the Mandatory Requirements and will be considered in the Risk Assessment to assess the Development Risk and the Performance Risk with respect to the tendered Project. The Risk Assessment process includes an assessment of the likelihood that the tendered Project will be technically and legally capable of performing substantially in accordance with the EPA.
40. Will BC Hydro be using different CPI forecasts for sensitivity analysis during bid review and, if so, can they provide those forecasts? Can BC Hydro provide the parameters it plans to implement for conducting sensitivity analysis of levelized bid price?
Currently, BC Hydro is using 2.1% per year for CPI, and 8.0% per year for the nominal discount rate, as base case assumptions in the computation of the levelized Bid Price. Refer to the response to Question 31 to see how these assumptions are used in the computation of the levelized Bid Price. BC Hydro will advise registered Bidders if these assumptions change prior to the Tender Closing Time. BC Hydro may conduct a sensitivity analysis on these and other parameters as part of the determination of the optimal Large Project portfolio and the optimal Small Project portfolio. The exact nature and type of sensitivity analysis will be determined at the time of the evaluation. A description of any such sensitivity analysis will be provided in the CFT evaluation report that BC Hydro plans to publish after EPA awards are made.
39. Under the rules of the current F2006 CFT, can a registered bidder submit a tender for Project A being greater than 10 MW with an alternate for Project A being under 10 MW (e.g. Project A = 19 MW, Project A- Alternate = 9 MW)?
Section 11 of the CFT does not exclude the possibility of a particular Project being tendered as a Large Project and having an Alternate Tender as a Small Project, or vice versa.
38. At the Bidder's workshop on January 20th, an example of a levelized Bid Price Calculation was provided. Reference PowerPoint slides, 46, 47 and 48. We have been unable to duplicate these calculations (our calculations are attached) and hoped that you could provide your detailed calculations for this example.
The detailed calculation for the levelized Bid Price example used at the Bidders' Workshops can be found on the CFT Website under "Related Documents". It should be noted that the escalation percentage tendered by Bidder represents the portion of the Bid Price that escalates at inflation and not the Bid Price escalated at a percentage of inflation. Therefore, if the tendered escalation percentage is 50% and the Bid Price is $65.00/MWh, then 50% of the Bid Price, or $32.50, would escalate at CPI and the remaining $32.50 would not escalate.
Further clarifications regarding the levelized Bid Price calculation are provided in the answers to Questions 31 and 32.
February 8, 2006
37. Section 7 (Interconnection Facilities) of the Seller's Plant Description Form (CFT Form #2) does not have a tab-able field to enter the date. Will this be rectified?
BC Hydro will be providing an updated Seller's Plant Description Form (Form #2) on the CFT Website to permit data entry of the date field in section 7 of the Form.
36. We ask for a clarification regarding section 7A.7 of the Small Project EPA and the Green Projects section of the BC Hydro F2006 Open Call for Power - Call for Tenders Document (F2006 CFT). Are there annual license fees associated with certification by TerraChoice Environmental Services? Who is responsible for future annual license fees imposed by TerraChoice, in addition to fees paid by the buyer as described in section 7A.7 of the Small Project EPA and the F2006 CFT Green Projects section?
For successful Bidders who have tendered their Green Attributes to BC Hydro, BC Hydro will reimburse annual licensing fees which the Bidder has paid to maintain their EcoLogo M Certification . See Appendix 9, Part A section 7A.7 of the Standard Form Electricity Purchase Agreement - Small Projects.
35. In review of the Project Submission Instructions, we would like to receive clarification on the applicability of the "threshold" for First Nations consultation.
Our currently proposed project is entirely contained on private land and to this point we have not anticipated the requirement for consultation with First Nations. Our understanding is that the consultation process is primarily concerned with works proposed on Crown Land and not private land. This is a consequence of when the Crown intends to either transfer the rights to land or the rights to the resources on the land, they must investigate any competing First Nations claims and/or impacts.
This fact is outlined in the BC Government policy document "Provincial Policy for Consultation with First Nations" produced in October 2002. In this document, it is outlined that consultation would not be required if the land in the area in question is: "presently alienated in fee simple to third parties, and cannot be used for the exercise of aboriginal rights or the enjoyment of aboriginal title as a right of present possession of the land..."
In the development of our project we do not want to perform works that are not required and furthermore, we do not want to engage in a consultative process that may imply a right to First Nations where one does not presently exist.
However, as it was outlined at the Bidder Workshop, we are cognizant of the fact that if we do not provide sufficient information for a Threshold in the Project Submission, we may be severely impairing our chances of being successful in the tender process. Therefore, we are seeking a definitive clarification whether BC Hydro believes First Nations consultation is required for projects on private land.
Generally, the government will require consultation on projects on crown lands before granting regulatory approvals. Projects wholly contained on private lands may still require government approval and, therefore, consultation with First Nations. For example, the Heritage Conservation Act applies to private land that may have known or not previously identified archaeological sites. The extent of consultation required by the government can range from simple notification of the project and information sharing to extensive engagement with the First Nation regarding the impacts of the project. Bidders should seek guidance from the approving authorities and legal counsel on the appropriate level of consultation. Bidders should also note that section 3.5.3(a) requires the Bidder to describe the status of an application for any unissued permit, any known opposition to the issue of a permit, the expected impact on the permitting schedule, and planned mitigation measures. BC Hydro will be issuing updated Project Submission Instructions that contain changes to section 3.7 First Nations Consultation.
34. Large Project Call: In the January 20 workshop it was stated that the Levelized Price Calculation only uses the firm energy cash flow and firm energy flow. If a project has a large quantity of associated non-firm energy at what may be a very attractive price, i.e. at or below the current cost of BC Hydro imported energy, how is this attribute taken into account in the Bid Price Adjustments, Portfolio Assembly and determination of the Optimal Portfolio?
For Large Projects, the price paid for non-firm energy is not a factor in the calculation of the Adjusted Bid Price. The volume of non-firm energy may be considered as a non-price factor in the determination of the optimal portfolio.
33. Under 10 MW Call: In the January 20 workshop it was explained how the Adjusted Bid Price calculation is intended to put all projects on the same basis, i.e. comparing apples with apples. The Adjusted Bid Price includes adjustments for CIFT and non-CIFT network upgrades and transmission losses. Projects are then grouped together for the Portfolio Assembly. Is a detailed network analysis then required by BCTC to determine the optimum portfolio for the small projects, and if yes, are the adjustments further refined as a result of this analysis? If not, is it possible to shorten the time required before announcing the successful under 10 MW projects?
At this time it is not anticipated that BCTC will be doing portfolio studies for Small Projects, although BC Hydro retains the discretion to conduct such studies. It is also possible that there may be transmission-related interdependencies between the Small Project portfolio and the Large Project portfolio. Accordingly, BC Hydro cannot commit to shortening the time frame for announcing the successful portfolio of Small Projects.
32. During the January 20, 2006 Bidders' Workshop BC Hydro provided an 'Example Calc of Adjusted Bid Price' (slide 50). Is the month of COD used in the calculation of the levelized Adjusted Bid Price?
The month of the COD is used in the calculation of the levelized Bid Price because changing this parameter has an impact on the present value part of the calculation. Refer to the Calculation of Levelized Bid Price [MS Excel, 18 Kb] attached in response to Question 31 which shows the formula for calculating the levelized Bid Price for a given set of input parameters. If the month of COD is changed, the calculated result for the levelized Bid Price should also change.
31. During the January 20, 2006 Bidders' Workshop BC Hydro provided an 'Example Calc of Adjusted Bid Price' (slide 50). Please elaborate the calculation of the levelized Bid Price of $50.58. The term levelized implies that it equates to a stream of level payments, but the graph suggests that it is an escalating stream at approximately half the rate of inflation. Is it intended that the rate would be $50.58 level at zero inflation or $50.58 increasing at the rate of 1/2 CPI in nominal dollar terms?
The levelized Bid Price as computed in the F2006 CFT evaluation is "level" in January 1, 2006 constant dollars. When the levelized Bid Price as computed is plotted on a graph in nominal dollars, then that curve will increase at a rate of 100% of the assumed inflation rate. Refer to the Calculation of Levelized Bid Price [MS Excel, 18 Kb] spreadsheet which shows the formula for calculating the levelized Bid Price, for a given set of input parameters.
February 7, 2006
30. Would it not be more transparent to bidders if the Bid Price adjustments were first applied to the nominal Bid Price, then levelize the adjusted nominal Bid Price, as opposed to levelizing the nominal Bid Price first, then applying the Bid Price adjustments? Would not the proposed method of levelizing the pre-adjusted price first, then applying the adjusters, "over-state" the impact of the adjustments and benefit those bidders that by chance happen to have a net adjustment closest to zero? Would the different methods not result in different optimal portfolios?
The reason the Bid Price adjustments are added to the levelized Bid Price rather than to the nominal Bid Price is because the Bid Price adjustments are also expressed in levelized terms, which means they are directly comparable to the levelized Bid Price and hence can be directly added to the levelized Bid Price. Note that the nominal Bid Price structures can vary significantly from one Tender to another (e.g. due to the Two-Part Term Pricing feature), which means that they are not directly comparable to the levelized Bid Price adjustments and hence they can not be directly added to one another.
29. If, for example, we submit a Bid Price of $52 (in 2006 dollars) a COD of Oct 2009 and escalation of 50%, please clarify what the First Year Price would be assuming that the CPI (January 1 2006) = 100 and CPI (January 1 2009) = 106:
(a) calculated as per slide 65 (bidders' workshop) as $53.56 or
(b) $52.00 x 106/100 =55.12
We understand that subsequent to Year 1, prices will be adjusted based on the selected percentage of base price that escalates multiplied by the applicable CPI.
Starting in 2006 (with 2006 being the base year), 0% to 50% of the Bid Price (BPP – Bid Price Percentage, as tendered by you) will escalate at CPI.
In the example as provided by you, the applicable Escalated Bid Price for 2009 (the first calendar year for which the Project is expected sell Energy) is (a) $53.56/MWh.
The Escalated Bid Price (EBP) for 2009 in your example is calculated as follows:
|EBP n||=||BP * [(BPP * CPI January 1 n / CPI January 1 2006) + (1 – BPP)]|
|EBP 2009||=||52 * [(0.5 * 106 / 100) + (1 – 0.5)]|
February 6, 2006
28. Will BC Hydro be announcing those projects that have cancelled their EPA's from the 2003 Power Call to enter them into the F2006 CFT? Similarly, to avoid misrepresentation, will any projects cancelling their 2003 EPA's be removed from the website listed successful projects from the 2003 Call?
No existing EPA holders terminated their respective contracts by the December 20, 2005 deadline.
February 1, 2006
27. Will BC Hydro provide the public with a breakdown of the registered bidders according to geographic location and/or fuel type?
BC Hydro will not be providing a breakdown of the registered Bidders according to geographic location and/or fuel type. Given the short period of time between registration and tendering for the F2006 Open Call For Power, BC Hydro believes sharing the aggregated information is the fairest approach for all Bidders and will deliver the most competitive Tender prices. In aggregate, BC Hydro has received registrations from 48 Bidders for a total of 81 Projects representing potentially 2,800 MW in capacity. The break down by Call stream is 34 Projects representing approximately 2,500 MW in capacity in the Large Project stream and 47 Projects representing approximately 300 MW in capacity in the Small Project stream. Technologies and fuel types of Projects that have registered include biomass, coal, hydro with storage, run-of-river hydro, waste heat and wind.
26. The location of our proposed interconnection to BCTC will technically be able to make available distribution voltage to a local community that currently does not have BC Hydro service.
The community has asked if our proposed connection could be used in the future to provide BC Hydro service to local loads. The assumption here is that the load and generator can be isolated independently. What is BC Hydro's policy on providing service in this type of situation or do we have to become a Utility?
For the purpose of this Call, your submission should not include the possibility of the community receiving supply from BC Hydro. When and if your Project is awarded a Electricity Purchase Agreement, the community, you and BC Hydro can investigate the most appropriate approach to serving this community.
Communities wishing to take service from BC Hydro are dealt with through BC Hydro's extension policy and Uneconomic Extension Allowance or Remote Community Electrification Program. Also, depending on the location of the community, BC Hydro may need a Certificate of Public Convenience and Necessity (CPCN) in order to supply the community.
If BC Hydro were to supply the community, there should be no need for you to become a utility.
25. Section 3.1 - The phrase "and conditions that do not materially alter the price". There will be a concern as to the significance of the word "materially". Does this mean that the BCUC will be able to actually change the price and the bidder will not be able to terminate? Financing will be based on detailed pro formas and any change in bid price could affect the viability of a Project.
All EPAs awarded under the F2006 Call must be filed with the BCUC for acceptance as prescribed by section 71 of the Utilities Commission Act (British Columbia). As noted in section 16 of the CFT, if the BCUC determines that an EPA is not in the public interest, it may make an order declaring the EPA to be unenforceable, in whole or in part, or may make any other order it considers advisable in the circumstances. The BCUC has stated in prior decisions that it cannot directly alter the EPA terms and conditions (including price). However, it can impose non-contractual terms or conditions which may indirectly impact the EPA and contracting parties. Section 3.1 of the EPA provides termination rights to both the successful Bidder and BC Hydro in case of the imposition of such non-contractual terms and conditions by the BCUC has a significant or material impact on the EPA.
January 31, 2006
24. Regarding Project Submission Instructions Sec 3.5 permits, specifically the rezoning requirement.
"Where a project requires rezoning,the submission should establish that a rezoning by-law has received at least first reading by the relevant government." Many local governments have a first reading that is basically just a notification of the projects intentions, our district on the other hand does first,second and third reading at the same time an has told me the requirement is not viable until a contract is awarded because of how involved it is on their side. They have told me that they will gladly draft a letter strongly supporting the project and give their opinion on the expected results of a rezoning bid. Note: This project concept is mentioned in their official "Community Plan" and most of their concerns have already been addressed.
1 - Will this at least meet the threshold mentioned above?
2 - The district asked me if this letter should be addressed to BC Hydro explaining their position or addressed to the project,or to LWBC or?..
3 - Will this letter also address some of the requirements in Sec. 3.6 (b)?
BC Hydro will not provide Bidders with decisions in advance of the Tender Closing Time with respect to the question of whether certain information will or will not result in a Project "passing" the Risk Assessment. Where Bidders are not able to provide information specified in the Project Submission Instructions, including the threshold statements, Bidders should note that fact in their Project Submissions and should provide any relevant information which demonstrates how the Bidder expects to mitigate the risk as the Project proceeds.
23. Question: Commitment with respect to Performance Security
Reference: CFT Project Submission Instructions - section 3.2 Threshold, last sentence, "These commitments should include a commitment from a bank or financial institution meeting the creditworthiness standard set out in the EPA to provide the Performance Security under an Awarded EPA, subject only to conditions which could reasonably be expected to be fulfilled by the time the security must be delivered.
There is some confusion with this "commitment from a bank..." with respect to Performance Security since a Tender Security also has to be part of the Tender Submission. Is it BC Hydro's intention with this "commitment" requirement that Bidders must also incur the cost of obtaining the Performance Security at the time of bidding?
No, a Bidder is not required to deliver the Performance Security for its Project by Tender Closing Time. The threshold statement in Section 3.2 requires delivery with the Tender of a commitment from a creditworthy bank or financial institution to provide the Performance Security at the time required (i.e. if and when an Awarded EPA is signed and delivered). As an example, this commitment could take the form of a letter issued by the creditworthy bank or financial institution that affirms the Bidder's ability to procure a letter of credit for its Performance Security and the willingness of the bank or financial institution to issue it if and when required. This letter of affirmation may be subject to conditions but, as stated in the threshold statement, any conditions should be limited to those that can reasonably be expected to be fulfilled if and when the Performance Security must be delivered.
22. Appendix 7, Section 5(c) - We are concerned that this Section could be read to permit the Buyer to terminate the EPA 30 days after a bankruptcy stay has been lifted whether or not a Facility Lender has delivered an Assumption Notice.
Section 5(c) of the form of Lender Consent Agreement attached as Appendix 7 to the Standard Form EPA for Large Projects (Appendix 6 to the Standard Form EPA for Small Projects) contains some constraints on the right of BC Hydro to terminate the EPA in certain circumstances. It would be inappropriate for BC Hydro to provide legal guidance, Bidders should obtain their own independent legal advice regarding the scope of those constraints.
21. Appendix 7 - Facility Lenders will often require that all amounts owing under the power purchase agreement will be paid into an account specified by the Facility Lender. Is the Buyer willing to agree to such an undertaking?
The form of Lender Consent Agreement attached as Appendix 7 to the Standard Form EPA for Large Projects (Appendix 6 to the Standard Form EPA for Small Projects) does not contain a commitment by BC Hydro to make payments to a specified account. However, BC Hydro will consider such requests on a case by case basis as and when appropriate.
20. Appendix 7 - Facility Lenders will often require a legal opinion from the power purchaser covering, among other things, that the power purchase agreement and consent executed by the power purchaser are the legal, valid and binding obligations of the power purchaser, enforceable in accordance with their terms (subject to customary exceptions). Will Seller be providing such an opinion?
The question asks whether the Seller will be providing an opinion. BC Hydro cannot anticipate what opinions the Seller will be providing. BC Hydro will not be providing any legal opinions to the Seller or to a Facility Lender. Note the provisions of section 3 of Appendix 7 of the Standard Form EPA for Large Projects (Appendix 6 of the Standard Form EPA for Small Projects) will apply if the Buyer, the Seller and the Facility Lender enter into a Lender Consent Agreement.
19. Appendix 7 Section 1(e) - Since the Buyer also has the right to suspend the EPA we presume a Facility Lender will want notice of such circumstance. Is this Section intended to include any such suspension notices given by the Buyer to the Company?
BC Hydro believes the reference to Appendix 7, section 1(e) of the Standard Form EPA for Large Projects in the question is incorrect and the correct reference should be to Appendix 7, section 5 of the Standard Form EPA for Large Projects (Appendix 6, section 5 of the Standard Form EPA for Small Projects). If the Buyer and the Facility Lender enter into a Lender Consent Agreement in the form attached as Appendix 7 to the Standard Form EPA for Large Projects (Appendix 6 to the Standard Form EPA for Small Projects) the Buyer covenants under section 5 of the Lender Consent Agreement to provide certain notices to the Facility Lender before the Buyer exercises certain rights under the EPA. Bidders should obtain their own independent legal advice regarding the scope of the notices required under that section.
18. Appendix 6 - Given that more than one Section of the EPA permits the Buyer to draw on the Performance Certificate, is it possible that the demand specify which Section(s) of the EPA the drawing of the security is being made?
See Section 13.3 of the Standard Form EPA for Large Projects regarding notices to the Seller prior to enforcement of the Performance Security. In terms of the drawing document that is sent to the bank that issues the Performance Security, it is not appropriate for the Buyer to specify the specific reason for the demand. The Buyer's demand under the Performance Security must use the language specified in the letter of credit in order to be accepted by the issuing bank. The specified form for the Performance Security is attached as Appendix 6 to the Standard Form EPA for Large Projects.
17. Appendix I Section 23 - Are repayment of principal, interest, breakage costs, etc. covered by the definition of Development Costs?
The definition of "Development Costs" is set out in Appendix 1 of the Standard Form EPA. It would be inappropriate for BC Hydro to provide legal guidance, Bidders should obtain their own independent legal advice regarding the particular costs associated with their Project to determine whether or not those costs are included in the definition of Development Costs.
16. Appendix I Section 11(e) - If the Facility Lender has sent an Assumption Notice under the Lender Consent will they be permitted additional time to cure ongoing events of default? It is our understanding that generally Facility Lenders traditionally require from power purchasers additional cure periods (120 to 180 days if capable of cure within such period) so that they have the opportunity to declare and event of default under the loan documents, step into the Sellers shoes, investigate the cause of the default under the EPA and then take action to cure such default.
Section 6.1 of the Sample Form Lender Consent Agreement attached as Appendix 7 to the Standard Form EPA for Large Projects (Appendix 6 to the Standard Form EPA for Small Projects) addresses the extent of the Lender's liability for EPA defaults following delivery of an Assumption Notice (as defined in that section). Bidders and their lenders should obtain their own independent legal advice regarding the extent of the Lender's liability for EPA defaults and the cure periods available to a Facility Lender under that section and related EPA sections.
15. Section 20.8 -Is there a provision in the document that allows disclosure to the Buyer's advisors and consultants so long as such advisors and consultants have agreed to keep such information confidential?
The Buyer's confidentiality obligations are set out in section 20.8 of the Standard Form EPA for Large Projects. A number of other provisions in the Standard Form EPA for Large Projects also deals with disclosure of information. It would be inappropriate for BC Hydro to provide legal guidance, Bidders should seek their own independent legal advice regarding the scope of disclosure permitted by the Buyer under those sections.
14. Section 15.5(f) - Are we correct in assuming that when where this Section references the terms available for a replacement EPA as those "which are reasonably expected to be available in the market under a replacement contract for this EPA" that the Section means "available to the Seller" so that the Sellers particular characteristics, including location and the credit profile of the Seller, are factored in as compared to "available to the Buyer"?
BC Hydro believes the reference to subsection 15.5(f) in the question is incorrect and the correct reference should be subsection 15.5(g). Subsection 15.5(g) of the Standard Form EPA for Large Projects describes part of the methodology for determining the Seller's "Gains", "Losses" and "Costs" on a termination of the EPA in certain circumstances. Part of that determination includes a comparison of the EPA price to relevant market prices either quoted by a bona fide arm's length party or which are reasonably expected to be available in the market under a replacement contract for the Awarded EPA. BC Hydro does not believe it is appropriate for it to provide further interpretation at this time of the information that may or may not be considered under subsection 15.5(g) if the Awarded EPA is terminated in circumstances where a Termination Payment is payable.
13. Section 15.5(c) and (d) - Facility Lenders will want to make sure that in the event of a termination payment by the Buyer under the circumstances set forth in Sections 15.5(c) and (d) that the termination payment is sufficient to cover all amounts owing to them (principal, interest, breakage costs (swap and loan), etc.). Is that the intent of the current language set forth in those Sections and if so can it be clarified so that a Facility Lender will not be concerned about the possibility that a termination payment in those situations might not be enough for the Seller to pay-off the Facility Lender?
BC Hydro believes the reference to subsection 15.5(c) in the question is incorrect as no Termination Payment is payable by the Buyer under subsection 15.5(c) of the Standard Form EPA for Large Projects. Subsections 15.5(d) and (e) of the Standard Form EPA for Large Projects determine the amount of the Termination Payment payable by the Buyer in certain circumstances. It would be inappropriate for BC Hydro to provide legal guidance, Bidders should seek their own independent legal advice concerning the amounts payable under those sections.
12. Section 13.6 -Can you identify the mechanics in the document for the payment of the withheld amounts if the Borrower subsequently provides the Performance Security? Also are we correct in assuming that once the amount of withheld payments equals the amount of Performance Security which was to be posted, future payments will be made to the Seller?
The Buyer's obligations with respect to payment of amounts withheld under section 13.6 are set out in that section. It would be inappropriate for BC Hydro to provide legal guidance, Bidders must seek their own independent legal advice regarding the amounts that can be withheld under section 13.6 of the Standard Form EPA for Large Projects.
11. Section 13.5 -Can you elaborate on the need to have the Performance Security replenish so quickly (3 days as compared to maybe 10 days) as we are concerned that giving a lender only 3 days to determine whether to permit replenishment of the Performance Security might limit the ability of Sellers to permit such replenishment The issuer of the Performance Security will want to have time to investigate the circumstances surrounding the draw prior to allowing the Performance Security to replenish and 3 days (as compared to say 10) is a tight timeline?
BC Hydro believes the requirement to replenish the Performance Security within 3 Business Days after enforcement is reasonable in light of the notice provisions in section 13.3 of the Standard Form EPA for Large Projects.
10. Section 13.3 -Can you confirm that Section 13.3 is to work together with Section 20.7 so that if the question of whether Buyer were entitled to draw on the Performance Security or the amount they were entitled to draw was subject to a good faith dispute the Buyer could not draw on such Performance Security with respect to such disputed amounts but instead would have to use the mechanics set forth in Section 20.7 to resolve the dispute?
The circumstances for which the enforcement of the Performance Security can be applied are set out in section 13.3 of the Standard Form EPA for Large Projects (section 12.3 of the Standard Form EPA for Small Projects). The guidelines for how disputes are to be resolved are set out in section 20.7 of the Standard Form EPA for Large Projects (section 19.7 of the Standard Form EPA for Small Projects). It would be inappropriate for BC Hydro to provide legal guidance, Bidders must seek their own independent legal advice regarding the interpretation of these sections.
9. Section 9.5 - Can you confirm that Section 9.5 is to work together with Section 20.7 so that if an amount is subject to a good faith dispute a party could not set off amounts owing by it against such disputed amounts but instead would have to use the mechanics set forth in Section 20.7 to resolve the dispute?
The circumstances in which the payment of amounts, including disputed amounts, are due and owing are set out in sections 9.2, 9.5 and 20.7 of the Standard Form EPA for Large Projects (sections 9.2, 9.5 and 19.7 of the Standard Form EPA for Small Projects). It would be inappropriate for BC Hydro to provide legal guidance, Bidders must seek their own independent legal advice regarding the interpretation of these sections.
8. Section 9.1(b) - 3 years is a long period to determine if there are any disputes with respect to an invoice. Is there something particular to Buyer that would require such a long time frame? We are concerned that Facility Lenders will not be able to rely on amounts paid for 3 years since they will not know if the underlying invoice will be subject to a dispute and some or all of such payment may have to be returned.
BC Hydro believes 36 months is the appropriate length of time to allow either the Seller or the Buyer to give notice under an Awarded EPA of any error, omission or disputed amount on a statement.
7. Section 7.5(c) - In order to mitigate its damages in situations where the Buyer is not accepting delivery of energy (except if such situation is attributable to the Seller) we assume that Seller would want the Buyer to sell power to third-parties. Is our assumption correct and if so does this Section permit such mitigation.
The circumstances in which the Seller is entitled to sell Energy otherwise committed to BC Hydro are set out in section 7.5 of the Standard Form EPA for Large Projects (section 7.4 of the Standard Form EPA for Small Projects). It would be inappropriate for BC Hydro to provide legal guidance, Bidders must seek their own independent legal advice regarding the interpretation of that section.
6. Section 3.2 - It is unclear what constitutes a "reasonable time" for the Seller to file the EPA with the BCUC. Can we presume that the filing will be made within 5 business days, particularly given the 120 requirement in Section 3.1?
BC Hydro elected not to provide a specific deadline for filing the Awarded EPAs with the BCUC so that it has flexibility to address any unforeseen circumstances that might arise with respect to the regulatory filing, recognizing its commitment to file within a reasonable time after the Effective Date.
5. If we submit a bid in which a portion of the Energy will be delivered at no charge to a First Nations, would this result in us being considered a utility. Further, under Section 7.5 of the Dec 8/05 Version Large Project EPA it is made quite clear that: "the Seller shall not at any time during the Term commit, sell or deliver any Energy to any Person, other than the Buyer...". Can this term be waived if we were to deliver Energy to a First Nations?
You have asked two questions:
1.) Whether delivering energy to a First Nation would that make the Project owner a public utility.
This is a matter on which you will have to seek your own legal advice.
2.) Whether or not the term in question under section 7.5 can be waived.
BC Hydro cannot waive section 7.5 of the Standard Form EPA – Large Projects in order for Bidders to deliver Energy to First Nations. One of the Tender options available to Large Project Bidders in the F2006 Call for Tenders is a Split Bid option. If that option is elected the Bidder may sell part of the Project output to BC Hydro and part of the Project output to third parties. In that case, Part I of Appendix 10 would apply and would modify section 7.5 of the EPA to permit sales to third parties. However, in that event, according to the revised section 7.5, BC Hydro will have first priority over the Project output up to the Split Bid Threshold Level. While BC Hydro has some ability to approve Project-specific revisions to the Standard Form EPA, section 13.3 of the CFT limits such changes to those which, in BC Hydro's opinion, do not alter materially the benefit to, or burden upon, BC Hydro under the EPA or give the Bidder an unfair preference over other Bidders. In light of these provisions, BC Hydro is not in a position to approve achange to the priority provisions relating to a Split Bid.
January 11, 2006
4. Will all the registered bidders into the F2006 BC Hydro CFT be published for the public?
BC Hydro has yet to determine if any registered Bidder information will be published. Bidders will be advised of BC Hydro's intentions on January 20, 2006 at the Bidders' Workshop.
January 5, 2006
3. There may be an issue that the name of the project developer registered for the F2006 CFT is different from the name given on the BCTC preliminary study application.
We have registered the ABC Project into the CFT with the developers name as XYZ Corporation. XYZ Corporation is the owner of the generation responding to CFT. However, the BCTC preliminary study application was made by a third party, the Acme Corporation. This is because the ABC Project connects to the Transmission System through the Acme substation, and BCTC will only contract an interconnection study with the party that connects directly to the Transmission System. XYZ would like to maintain the CFT registration of the project under the XYZ Corporation name. Is it possible to keep XYZ Corporation as the developer of the ABC Project for the CFT, while keeping Acme as the developer on the BCTC interconnection studies? XYZ Corporation currently has a separately negotiated development agreement with Acme.
For Projects having an Indirect Interconnection as defined in the F2006 CFT, it is possible for the entity applying for an F2006 CFT Preliminary Interconnection Study to be different from the entity registering in the F2006 CFT as a Bidder for the same Project. Any Tender received for such a Project will need to provide sufficient documentation, in the Project Submission section of the Tender, of the arrangements between the two entities such that BC Hydro is satisfied that the Tender does not pose an unacceptable level of Development Risk or Performance Risk as determined during the Risk Assessment phase of the Tender evaluation.
December 23, 2005
2. In the registration form, bidders must indicate a split bid. We have chosen not to indicate the project as a split bid at this time. However, is it possible to change the designation of a project to a split bid before the Tender closing time?
The information on the Bidder Registration Form is intended to be preliminary and should represent the Bidder's current intention. However, that information, including the selected option on "Split Bids" may be changed when the Tender is submitted.
December 16, 2005
1. Section 7 of the CFT states that if a Bidders submits two or more Tenders, it should submit one registration form per Tender, but that only one registration fee is payable. If a Bidder intends to submit a Tender, and one or more of its Affiliates intend to submit additional Tenders, is one registration fee only payable on registration of the Bidder and its Affiliates in respect of all these Tenders?
Yes, BC Hydro will accept one registration fee for a Bidder and its Affiliates, which register under the CFT, regardless of the number of Tenders they intend to submit. This clarification will be confirmed by Addendum. Bidders should note also that under section 7 of the CFT, a Bidder may assign its registration to an Affiliate, without payment of any additional registration fee. However, Bidders are strongly advised to review carefully the definition of "Affiliate" in the CFT Glossary for the purpose of applying the foregoing. An entity that is not an Affiliate of the Bidder must register and pay its own registration fee, even though the Bidder may have some financial interest in that entity. Also, a Bidder may not assign its registration to an entity that is not an Affiliate of the Bidder. BC Hydro reserves the right to require satisfactory evidence of Affiliate status.
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