February 28, 2009 Merrill Lynch Commodities, Inc. 20 East Greenway Plaza, Suite 700 Houston, Texas 77046 Attn.: Legal Department Merrill Lynch & Co, Inc. 4 World Financial Center New York, New York 10038 Attention: Office of General Counsel Re:...
Exhibit 99.1
Execution
February 28, 2009
Xxxxxxx Xxxxx Commodities, Inc.
00 Xxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn.: Legal Department
00 Xxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn.: Legal Department
Xxxxxxx Xxxxx & Co, Inc.
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Office of General Counsel
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Office of General Counsel
Re: Membership Interest Purchase Agreement
Dear Sirs:
Reference is made to the Credit Sleeve and Reimbursement Agreement dated as of September 24, 2006,
as amended and restated as of August 1, 2007 (as amended to date, the “CSRA”), by and among Reliant
Energy Power Supply, LLC, the Other Reliant Retail Obligors parties thereto, Xxxxxxx Xxxxx
Commodities, Inc., and Xxxxxxx Xxxxx & Co., Inc., the defined terms of which are used herein unless
otherwise defined herein.
This letter sets forth the terms and conditions under which the Xxxxxxx Parties agree to permit
Reliant Parent, RECS, REPS, and the Other Reliant Retail Obligors (collectively, the “Reliant
Parties”) to make the transfers, assignments and consummate certain other transactions, in each
case, for the purposes of the CSRA and the other Transaction Documents in connection with the
execution, delivery, and performance of the LLC Membership Interest Purchase Agreement dated as of
February 28, 2009 (in effect on the date hereof, as the same may be modified from time to time with
the consent of the Xxxxxxx Parties, not to be unreasonably withheld, delayed or conditioned, the
“MIPA”), between Reliant Parent and NRG Retail LLC (“Purchaser”) for the sale of the REPS and the
Other Reliant Retail Obligors to Purchaser. Accordingly, for good and valuable consideration, the
parties hereto agree as follows:
1. Interim Period Public Communications. The Xxxxxxx Parties and Reliant Parent shall
cooperate with each other to coordinate statements and conversations with suppliers and customers
concerning the transaction contemplated by the MIPA and the arrangements of the Xxxxxxx Parties and
the Reliant Parties during the period between the execution of the MIPA and Closing (as such term
is defined in the MIPA), such period being the “Interim Period”). In addition, in no event will
any of the Reliant Parties at any time issue any press release or other public disclosure,
including, without limitation, any prospectus, proxy statement or other materials filed with any
Governmental
Authority, using the name of any of the Xxxxxxx Parties or referring to the CSRA or any of the
transactions contemplated hereby without at least one full Business Day (or such shorter period as
may be practicable in the circumstances) prior notice to the Xxxxxxx Parties and the prior written
consent of the Xxxxxxx Parties (such consent not to be unreasonably withheld, delayed or
conditioned).
2. Removal of RESE from the Ringfence and CSRA. On or before May 1, 2009, the Reliant
Parties shall have caused the equity of RESE to be dividended or otherwise transferred from RERH to
Reliant Parent and contemporaneously therewith (except as otherwise noted):
(a) All supply transactions for RESE shall be assigned or novated from REPS to RES, and,
with respect to supply transactions that are not assigned or novated, REPS at its option
will either close out such transactions or enter into a back to back transaction with RES
under the RES/REPS Power Purchase Agreement to effect the transfer of the remaining supply
for RESE to RES (and in furtherance of the foregoing, (i) REPS agrees to focus efforts to
novate the transfer of supply transactions with Integrys and Credit Suisse, (ii) the
Xxxxxxx Parties agree to novate their supply transactions, (iii) with respect to third
party assignment and novation agreements, the Xxxxxxx Parties agree that assignment and
novation language, including the release language and the third party beneficiary language,
used in connection with the assignment and novation of the Xxxx supply transactions remains
acceptable to the Xxxxxxx Parties and (iv) the parties agree that, except as expressly
covered by this letter agreement, the terms of any payment or other settlement of any
transfer of economic benefit to be made by the Reliant Retail Obligors, shall be subject to
the approval of the Xxxxxxx Parties not to be unreasonably withheld);
(b) With respect to outstanding surety bonds posted to entities listed on Exhibit
A hereto relating to RESE, on or prior to the transfer of RESE contemplated above,
Reliant Parent shall furnish to MLCI cash collateral (“Surety Bond Cash Collateral”) in an
amount equal to the maximum face amount of such surety bonds by wire transfer of
immediately available funds to the account referred to in Schedule 3.07(a) of the
CSRA (provided that in the event that any surety bond is returned to MLCI for cancellation
or otherwise reduced, or the surety company releases MLCI from its indemnity obligations
with respect to such surety bond (or such surety bond or its indemnity with respect thereto
is otherwise terminated in a manner satisfactory to MLCI), MLCI shall promptly remit the
Surety Bond Cash Collateral relating to such surety bond or the amount of such reduction
(net of any Surety Bond Cash Collateral applied by MLCI as reimbursement for any drawings
under such surety bond) to Reliant Parent by wire transfer of immediately available funds
to an account as instructed in writing by Reliant Parent);
(c) Except to the extent the same relate to customers or transactions outside of PJM or
relate to the surety bonds referred to in clause (b) above or relating to the
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Xxxx transactions, all ML Guarantees and all Xxxxxxx Collateral, if any, provided for the
benefit of any C&I Customer in PJM or otherwise relating to RESE shall have been returned
to the Xxxxxxx Parties or all liability of the Xxxxxxx Parties thereunder shall have been
extinguished, and the Xxxxxxx Parties shall have no further obligations to post any
collateral or provide any credit support on behalf of RESE or otherwise relating to PJM;
and
(d) Following the satisfaction of each of the requirements set forth above in this
clause 2, (i) RESE shall be automatically and without further action released from
the CSRA and the other Transaction Documents to which it is a party and the Xxxxxxx Parties
and REPS shall promptly direct the Collateral Trustee to release its liens on the equity
and assets of RESE under the Collateral Trust Agreement by delivering a notice to the
Collateral Trustee, (ii) the Xxxxxxx Parties agree that the Reliant Parties shall not be
obligated to continue to deliver any data under the CSRA that relates to PJM, (iii) the
Xxxxxxx Parties shall have no further obligation to support new transactions in respect of
RESE or any transaction in the PJM Market, (iv) notwithstanding Section 4.5 of the RESE
Contribution Agreement, Reliant Parent and its subsidiaries (other than the Reliant Retail
Obligors) shall not be prohibited from engaging in the Retail Energy Business in the PJM
Market, and (v) the REPS/RESE ISDA shall be terminated and amounts accrued under the
REPS/RESE ISDA shall be liquidated and settled by the obligors thereunder.
3. Certain Payments.
With respect to provisions in this letter agreement for the payment and settlement of
amounts owed under any Transaction Document at the Closing, unless otherwise requested by
Reliant Parent and agreed by MLCI, such amounts shall be deemed due and payable and shall
be paid at Closing to the extent the same would be permitted under the terms and conditions
of Section 6.11(c) of the CSRA as in effect immediately prior to the Closing.
4. Parent Services Agreement and Transition Services Agreement.
(a) At Closing, the Parent Services Agreement shall be terminated (other than in respect
of any indemnities and other similar contingent obligations not then due and payable) and
amounts accrued thereunder through the date of termination shall be liquidated and settled
by the obligors thereunder in accordance with Section 3 above.
(b) At Closing, the Transition Services Agreement (as defined in the MIPA), the Sublease
(as defined in the MIPA) and any other agreement or license between Reliant Parent and any
subsidiary thereof (other than the Reliant Retail Obligors) and any of the Reliant Retail
Obligors shall become collateral under the Collateral Trustee for the Xxxxxxx Xxxxx New
Agreement, and Reliant Parent and any subsidiary thereof (other than the Reliant Retail
Obligors) shall enter into a consent agreement for such purposes in form and substance
reasonably acceptable
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to the Xxxxxxx Parties. In addition to the foregoing, Reliant Parent shall obtain all
necessary third-party consents to permit the Sublease to be subject to a valid and
perfected first priority security interest in favor of the Collateral Trustee for the
Xxxxxxx Xxxxx New Agreement, and with respect to all other agreements and licenses, agrees
to use commercially reasonable efforts to obtain all necessary third-party consents in
connection with the pledge of such agreement or license under the Collateral Trustee for
the Xxxxxxx Xxxxx New Agreement.
5. FPL Upton Wind and XXXX/REPS Power Purchase Agreement.
(a) Except as expressly contemplated herein, further transactions under the XXXX/REPS
Power Purchase Agreement during the Interim Period shall be subject to the consent of the
Xxxxxxx Parties.
(b) If FPL consents, at Closing the existing FPL Upton Wind arrangement shall be novated
from XXXX to REPS, with such guaranties and credit support from Purchaser and the Xxxxxxx
Parties as may be agreed, such agreement with respect to the Xxxxxxx Parties to be in the
sole discretion of MLCI, and, subject to Section 3 above, the XXXX/REPS Power Purchase
Agreement will be terminated and amounts accrued thereunder through the date of termination
shall be liquidated and settled by the obligors thereunder.
(c) If FPL does not consent to such novation, REPS will enter into a back to back
transaction with XXXX on terms mutually agreed between XXXX and MLCI to effect the transfer
of the economics of the existing FPL Upton Wind arrangements from XXXX to REPS for the full
term of the FPL Upton Wind agreement.
(d) Except as expressly in this Section 5, the terms of the new FPL Upton Wind
arrangement, including any payment or other settlement of any transfer of economic benefit
to be made by the Reliant Retail Obligors, shall be subject to the approval of the Xxxxxxx
Parties not to be unreasonably withheld.
6. RES/REPS Power Purchase Agreement.
(a) Except as expressly contemplated herein, further transactions under the RES/REPS Power
Purchase Agreement during the Interim Period shall be subject to the consent of the Xxxxxxx
Parties.
(b) The RES/REPS Power Purchase Agreement and all existing transactions thereunder,
including those transactions entered into pursuant to the Novation Agreement dated October
3, 2008, between the Sleeve Provider, RES, and REPS, shall remain in effect following
Closing, provided that such Credit Support Annex Paragraph 13 shall be amended by RES,
REPS, and the Sleeve Provider to reflect the bilateral collateral thresholds set forth in
Exhibit B (and shall apply to all transactions thereunder, including those
transactions entered into pursuant to such Novation Agreement). In addition, in the event
that REPS is unable to
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successfully novate the Integrys or Credit Suisse RESE supply transactions as contemplated
above, the Xxxxxxx Parties may require that the RES/REPS Power Purchase Agreement be
modified to include the posting by RES of an independent amount to be determined (taking
into account the then current credit quality of RES and the Xxxxxxx Parties standards for
comparable transactions), not to exceed $5,000,000. For the avoidance of doubt, the
RES/REPS Power Purchase Agreement shall continue to be guaranteed by Reliant Parent and
ML&Co., respectively.
7. C&I Transactions. During the Interim Period, the obligations of the Xxxxxxx Parties to
support new transactions with respect to C&I Customers shall be suspended; provided that: (a) the
Xxxxxxx Parties will continue to support fixed price and heat rate triggers under existing index
price contract commitments; (b) the Xxxxxxx Parties will continue to support existing C&I Contracts
that have continued beyond their initial terms into transition terms on a month to month basis as a
result of Customer’s failure to switch away to a new service provider; and (c) the Xxxxxxx Parties
will continue to support new transactions with respect to new and existing customers under the GLO
Contract, embedding Reliant Parent’s then-current incremental market costs of capital, in each
case, taking into account any GLO self-supply arrangements that are then in effect and are
reasonably satisfactory to MLCI (provided that for any period prior to March 31, 2009, the Reliant
Retail Obligors may take into account any potential GLO self-supply arrangements to the extent
reasonably contemplated to be entered into, whether or not such self-supply arrangements are
actually in effect).
8. Certain Other Agreements. Following the Closing and the payment and settlement of
accrued amounts in accordance with the other provisions of this letter agreement and upon the
satisfaction in full of the Reliant Parties obligations hereunder and as contemplated hereby, the
Xxxxxxx Parties agree to enter into (and to permit the Reliant Retail Obligors’ to enter into) a
customary termination and release agreement with respect to the obligations of Reliant Parent and
its Subsidiaries (other than the Reliant Retail Obligors) under the Transaction Documents.
9. Non-Compete. During the period from the Closing until the release and discharge of all
obligations and liabilities of the Xxxxxxx Parties under the Xxxxxxx Xxxxx New Agreement, including
the return of all “Xxxxxxx Collateral” thereunder, Reliant Parent (for itself and on behalf of its
Subsidiaries) agrees with MLCI to comply for the benefit of the Xxxxxxx Parties with the
restrictions set forth in Section 7.18 of the MIPA, as in effect on the date hereof, and such
Section 7.18 is hereby incorporated herein by reference mutatis mutandis for the
benefit of the Xxxxxxx Parties.
10. Confidentiality. The Reliant Parties shall be permitted to share information with
Purchaser (other xxxx Xxxxxxx proprietary commodity and pricing curves, the “CD-Rom”, and the
General Principles in Schedule 1.01(c)) that would otherwise be restricted by the CSRA
confidentiality provisions, provided that Purchaser shall be subject to the same confidentiality
provisions. In addition, Reliant Parent shall, on or prior to the Closing, execute and deliver to
the Xxxxxxx Parties a confidentiality agreement in scope and
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substance substantially similar to Sections 12.02(a) and (c) of the existing CSRA and otherwise
reasonably satisfactory to the Xxxxxxx Parties.
11. Further Assurances. With respect to matters not expressly provided for hereunder, the
Xxxxxxx Parties agree to cooperate with Reliant Parent in good faith and in a commercially
reasonable manner with respect to the Transaction Documents to permit Reliant Parent to effect
execution and delivery of the MIPA, performance of the terms and conditions of the MIPA, and
performance of the transactions contemplated by the MIPA.
12. Certain Fees and Reimbursements.
(a) Upon execution of this letter agreement, RERH Holdings shall pay to the Xxxxxxx
Parties a non-refundable fee of $2,500,000 (the “Upfront Fee”). The Upfront Fee
shall not be refundable in any circumstance.
(b) During the Interim Period, REPS shall pay to the Sleeve Provider an additional “sleeve
fee” equal to $1,000,000 for each month during the Interim Period (“Current
Supplemental Fee”), which amount shall be prorated for the actual number of days in any
partial month during the Interim Period. The Current Supplemental Fee for each month will
be payable on each Monthly Payment Date during the Interim Period and on the Closing, and
shall be in addition to all other fees and amounts payable pursuant to this letter
agreement, the CSRA or any other Transaction Document, and once paid shall not be
refundable in any circumstance.
(c) In addition, at Closing, RERH Holdings shall pay to the Sleeve Provider (i) a further
additional “sleeve fee” in an aggregate amount equal to $2,000,000 for each month during
the Interim Period (“Deferred Supplemental Fee”), which amount shall be prorated
for the actual number of days in any partial month during the Interim Period and (ii) a
completion fee equal to $5,000,000 (the “Completion Fee”). The Deferred
Supplemental Fee and Completion Fee shall be payable only if the Closing occurs, and shall
be in addition to all other fees and amounts payable pursuant to this letter agreement, the
CSRA or any other Transaction Document, and once paid shall not be refundable in any
circumstance.
(d) The Reliant Parties shall promptly upon receipt of each related invoice pay or
reimburse the Xxxxxxx Parties for all reasonable costs and expenses (including of outside
legal counsel and other third party advisors) incurred by the Xxxxxxx Parties related to
the CSRA and related matters, whether or not incurred in connection with this letter
agreement or the MIPA and whether or not the transactions contemplated by the MIPA or this
letter agreement are concluded.
13. Effectiveness. This letter agreement shall become effective upon each of the party’s
countersignatures hereto, provided that this letter agreement shall automatically terminate
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and no party hereto shall have any obligation or liability to any other party under this letter
agreement if, on or prior to 5:00 p.m. on March 2, 2009, the Xxxxxxx Parties have not received (i)
the Upfront Fee and (ii) all invoiced costs and expenses described in the Summary of Outstanding
Expenses dated February 26, 2009 (attached to the email dated February 26, 2009 from Milbank to
Xxxxxxx Xxxxx).
14. Miscellaneous. This letter agreement shall be governed by, and construed in accordance
with, the law of the State of New York. This letter agreement may be executed in counterparts and
such counterparts taken together shall constitute a single instrument. This letter agreement may
be amended, modified, or waived only by an instrument in writing executed by each of the parties
hereto. This letter agreement shall survive the Closing.
The parties agree that except as expressly set forth in this letter agreement, this letter
agreement shall not be deemed or otherwise construed: (i) to be a waiver of, or consent to, or a
modification or amendment of, any other term or condition of the CSRA or of any other Transaction
Document, or constitute consent to any termination of any thereof; (ii) to prejudice any right or
rights that either Xxxxxxx Party or any Reliant Party may now have or may have in the future under
or in connection with the CSRA or any other Transaction Document; or (iii) to be a commitment,
undertaking, or expression of any willingness to engage in any further discussions with respect to
any waiver, amendment, modification, or any other change to the CSRA or any other Transaction
Document or any rights or remedies arising in favor of either Xxxxxxx Party or any Reliant Party
under or with respect to any such documents.
(signatures follow)
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Executed as of the date first above written.
Very truly yours,
RELIANT ENERGY POWER SUPPLY, LLC
/s/ Xxxxx X. Xxxxxxxxxxx
|
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Vice President and Treasurer |
RELIANT ENERGY SOLUTIONS EAST, LLC
/s/ Xxxxx X. Xxxxxxxxxxx
|
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Vice President and Treasurer |
RERH HOLDINGS, LLC
/s/ Xxxxx X. Xxxxxxxxxxx
|
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Assistant Treasurer |
RELIANT ENERGY RETAIL HOLDINGS, LLC
/s/ Xxxxx X. Xxxxxxxxxxx
|
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Assistant Treasurer |
RELIANT ENERGY RETAIL SERVICES, LLC
/s/ Xxxxx X. Xxxxxxxxxxx
|
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Vice President and Treasurer |
RE RETAIL RECEIVABLES, LLC
/s/ Xxxxx X. Xxxxxxxxxxx
|
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Assistant Treasurer |
RELIANT ENERGY, INC.
/s/ X. Xxxxxx Xxxxxxx
|
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Senior Vice President, Strategic Planning and Development |
RELIANT ENERGY CORPORATE
SERVICES, LLC
SERVICES, LLC
/s/ Xxxxxxx X. Xxxxx
|
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Vice President, General Counsel, and Corporate Secretary |
Xxxxxx and accepted as of the date first above written:
XXXXXXX XXXXX COMMODITIES, INC.
By: |
/s/ Xxxxxx Xxxxxxxx |
|||||
Name:
|
Xxxxxx Xxxxxxxx |
|||||
Title:
|
Managing Director, COO | |||||
XXXXXXX XXXXX & CO., INC.
By: |
/s/ Xxxxxxx Xxxxx |
|||||
Name:
|
Xxxxxxx Xxxxx |
|||||
Title:
|
Assistant Treasurer | |||||
Exhibit A
to Waiver and Consent
to Waiver and Consent
Surety Bonds
RELIANT ENERGY SOLUTIONS EAST, LLC — IL Bond Obligations
| CURRENT | ||||||||||||||||
| PRINCIPAL | BOND # | OBLIGEE | AMOUNT | NEW AMOUNT | Notes | |||||||||||
RELIANT ENERGY SOLUTIONS EAST, LLC |
104969660 | STATE OF ILLINOIS | $ | 150,000.00 | $ | 150,000.00 | ||||||||||
RELIANT ENERGY SOLUTIONS EAST, LLC |
104994893 | COMMONWEALTH EDISON COMPANY & ILLINOIS POWER COMPANY D/B/A AMEREN IP |
$ | 16,863,000.00 | $ | 9,780,540.00 | Bond reduction currently in process. | |||||||||
RELIANT ENERGY SOLUTIONS EAST, LLC |
105059367 | COMMONWEALTH EDISON COMPANY |
$ | 1,644,143.00 | $ | 65,766.00 | Bond reduction currently in process. | |||||||||
Exhibit B
to Waiver and Consent
to Waiver and Consent
RES/REPS
Credit Support Annex Paragraph 13
| Rating | Collateral Threshold | |
A/A2 and above |
$60million | |
A-/A3 |
$45 million | |
BBB+/Baa1 to BBB/Baa2 |
$25 million | |
BBB-/Baa3 |
$15 million | |
Below BBB-/Baa3 |
$0 |
