Twelfth Amended and Restated Rent Supplement (CREZ Lease) December 31, 2017
Exhibit 10.4
Twelfth Amended and Restated Rent Supplement
(CREZ Lease)
December 31, 2017
This Twelfth Amended and Restated Rent Supplement (this “Twelfth Amended Supplement”) between Sharyland Distribution & Transmission Services, L.L.C. (“Lessor”) and Sharyland Utilities, L.P. (“Lessee”) is executed and delivered on December 31, 2017 to memorialize supplements to the CREZ Lease (as defined below), effective as of January 1, 2018. Capitalized terms used herein that are not otherwise defined will have the meanings assigned to them in the CREZ Lease.
WHEREAS, Lessor and Lessee are Parties to a Fourth Amended and Restated CREZ Lease Agreement dated November 9, 2017 (as amended from time to time in accordance with its terms, the “CREZ Lease”);
WHEREAS, on November 9, 2017 (the “Exchange Transaction Closing Date”), the Parties consummated the Exchange Transaction and executed an Eleventh Amended and Restated Rent Supplement (CREZ Lease) (the “Eleventh Amended Supplement”) to reflect the addition of the Acquired Transmission Assets;
WHEREAS, the Parties wish to amend and restate the Eleventh Amended Supplement pursuant to Section 3.2 of the CREZ Lease; and
WHEREAS, the Parties intend to memorialize in this Twelfth Amended Supplement the Incremental CapEx the Parties expect during 2018.
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties hereto agree to the following:
1. The Eleventh Amended Supplement is hereby amended and restated in its entirety as set forth below.
2. The CREZ Lease, except as supplemented by this Twelfth Amended Supplement, shall remain in full force and effect.
Incremental CapEx:
| 2013 |
$ | 466,424,280 | ||
| 2014 |
$ | 198,982,000 | ||
| 2015 |
$ | 3,493,096 | ||
| 2016 |
$ | 3,906,367 | ||
| 2017 |
$ | 49,475,943 | * | |
| $ | 0 | ** | ||
| (Total 2017) |
$ | 49,475,943 | *** | |
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|
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| 2018 |
$ | 86,778,539 | # | |
| $ | 0 | ## | ||
| (Total 2018) |
$ | 86,778,539 | ### | |
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|
|
* Represents the aggregate amount of Incremental CapEx related to the Panhandle Assets (“Panhandle CapEx”) that the Parties expected to be placed in service in 2017. Rent supplements with respect to this Incremental CapEx were agreed to and memorialized as part of the Xxxxx Xxxxxxx and Restated Rent Supplement (CREZ Lease) dated December 31, 2016 (“Ninth Amended Supplement”). Of the 2017 Panhandle CapEx, $0 was expected to be in service as of the balance sheet date reflected in Xxxxxx’s first 2017 Regulatory Order (“First 2017 CapEx”), an aggregate of $49,475,943 was expected to be in service as of the balance sheet date reflected in Lessee’s second 2017 Regulatory Order (“Second 2017 CapEx”),
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CREZ LEASE
and $0 was expected to be placed in service throughout the remainder of 2017 (“2017 Stub-Year CapEx”) and to be included in the first 2018 Regulatory Order. The Parties expected the First 2017 CapEx, Second 2017 CapEx and 2017 Stub-Year CapEx, collectively, to have a weighted average in-service date of July 1, 2017. Pursuant to the Ninth Amended Supplement, the Parties expected the first 2017 Regulatory Order to be effective on May 1, 2017, the second 2017 Regulatory Order to be effective on March 1, 2018 and the first 2018 Regulatory Order to be effective on June 1, 2018.
** Represents the aggregate amount of Incremental CapEx related to the Acquired Transmission Assets (“Acquired Assets CapEx”) that the Parties expected to be placed in service from the Exchange Transaction Closing Date throughout the remainder of 2017 and included in the first 2018 Regulatory Order. Rent supplements with respect to this Incremental CapEx were agreed to and memorialized as part of the Eleventh Amended Supplement.
*** Represents the total amount of Incremental CapEx that the Parties expected to be placed in service during 2017.
# Represents the aggregate amount of Panhandle CapEx that the Parties expect to be placed in service in 2018. Of the 2018 Panhandle CapEx, an aggregate of $27,181,110 is expected to be in service as of the balance sheet date reflected in Lessee’s first 2018 Regulatory Order (“First 2018 CapEx”), an aggregate of $43,170,873 is expected to be in service as of the balance sheet date reflected in Lessee’s second 2018 Regulatory Order (“Second 2018 CapEx”), and an aggregate of $16,426,556 is expected to be placed in service throughout the remainder of 2018 (“2018 Stub-Year CapEx”) and to be included in the first 2019 Regulatory Order. The Parties expect the First 2018 CapEx, Second 2018 CapEx and 2018 Stub-Year CapEx, collectively, to have a weighted average in-service date of April 1, 2018. The Parties expect the first 2018 Regulatory Order to be effective on June 1, 2018, the second 2018 Regulatory Order to be effective on September 1, 2018 and the first 2019 Regulatory Order to be effective on May 1, 2019.
## Represents the amount of Acquired Assets CapEx that the Parties expect to be placed in service in 2018. Of the 2018 Acquired Assets CapEx, $0 is expected to be in service as of the balance sheet date reflected in Xxxxxx’s first 2018 Regulatory Order, $0 is expected to be in service as of the balance sheet date reflected in Lessee’s second 2018 Regulatory Order, and $0 is expected to be placed in service throughout the remainder of 2018 and included in the first 2019 Regulatory Order.
### Represents the total amount of Incremental CapEx that the Parties expect to be placed in service during 2018.
Lessee CapEx:
| 2013 |
$ | 0 | ||
| 2014 |
$ | 0 | ||
| 2015 |
$ | 0 | ||
| 2016 |
$ | 0 | ||
| 2017 |
$ | 0 | ||
| 2018 |
$ | 0 |
Total Base Rent by Lease Year:
| 2013 |
$ | 21,758,233 | ||
| 2014 |
$ | 67,335,947 | ||
| 2015 |
$ | 68,524,342 | ||
| 2016 |
$ | 66,118,564 | ||
| 2017 |
$ | 70,299,483 | * | |
| 2018 |
$ | 114,548,027 | ** | |
| 2019 |
$ | 117,997,721 | *** | |
| 2020 |
$ | 115,160,684 |
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CREZ LEASE
* The amount of 2017 Base Rent included in the Eleventh Amended Supplement was $70,299,483, including 2017 Base Rent payments of $5,321,692 on the 15th day of each month beginning on March 15, 2017 through June 15, 2017 (with respect to January 2017 through April 2017) and $5,321,692 on the 15th day of each month beginning on July 15, 2017 through December 15, 2017 (with respect to May 2017 through October 2017), with the increase in monthly Base Rent reflecting 2016 Stub-Year CapEx and commencing May 1, 2017, which was the expected effective date of Xxxxxx’s first 2017 Regulatory Order. Lessee is scheduled to make a 2017 Base Rent payment of $7,973,119 on January 15, 2018 and $9,109,445 on February 15, 2018 (with respect to November 2017 and December 2017, respectively), with the increase in monthly Base Rent reflecting the addition of the Acquired Transmission Assets and commencing November 10, 2017, which is the day after the Exchange Transaction Closing Date. Pursuant to the Eleventh Amended Supplement, the Parties estimated the Rate Base of the Acquired Transmission Assets to be $355,389,996 as of the Exchange Transaction Closing Date.
** Lessee will make a monthly 2018 Base Rent payment of $8,912,370 on each of March 15, 2018 and April 15, 2018 (with respect to January 2018 and February 2018). Lessee will then make a monthly 2018 Base Rent payment of $9,316,555 on the 15th day of each month beginning on May 15, 2018 through July 15, 2018 (with respect to March 2018 through May 2018), with the increase in monthly Base Rent reflecting Second 2017 CapEx and commencing March 1, 2018, which is the expected effective date of Lessee’s second 2017 Regulatory Order. Lessee will then make a 2018 Base Rent payment of $9,582,993 on the 15th day of each month beginning on August 15, 2018 through October 15, 2018 (with respect to June 2018 through August 2018), with the increase in monthly Base Rent reflecting 2017 Stub-Year CapEx and First 2018 CapEx and commencing June 1, 2018, which is the expected effective date of Lessee’s first 2018 Regulatory Order. Lessee will then make a 2018 Base Rent payment of $10,006,161 on the 15th day of each month beginning on November 15, 2018 through February 15, 2019 (with respect to September 2018 through December 2018), with the increase in monthly Base Rent reflecting Second 2018 CapEx and commencing September 1, 2018, which is the expected effective date of Lessee’s second 2018 Regulatory Order.
*** Lessee will make a monthly 2019 Base Rent payment of $9,725,743 on the 15th day of each month beginning on March 15, 2019 through June 15, 2019 (with respect to January 2019 through April 2019). Lessee will then make a monthly 2019 Base Rent payment of $9,886,844 on the 15th day of each month beginning on July 15, 2019 through February 15, 2020 (with respect to May 2019 through December 2019), with the increase in monthly Base Rent reflecting 2018 Stub-Year CapEx and commencing May 1, 2019, which is the expected effective date of Lessee’s first 2019 Regulatory Order.
Monthly Transition Costs Payment: $8,662*
* Lessee will make a monthly Transition Costs Payment of $8,662 on the 15th day of each month beginning on January 15, 2018 through December 15, 2019 (with respect to November 2017 through October 2019).
Percentage Rent Rates:
| 2013 |
29.2 | % | ||
| 2014 |
31.6 | % | ||
| 2015 |
31.3 | % | ||
| 2016 |
30.3 | % | ||
| 2017 |
29.5 | % | ||
| 2018 |
28.5 | % | ||
| 2019 |
27.7 | % | ||
| 2020 |
26.8 | % |
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CREZ LEASE
Annual Percentage Rent Breakpoints:
| 2013 |
$ | 21,758,233 | ||
| 2014 |
$ | 67,335,947 | ||
| 2015 |
$ | 68,524,342 | ||
| 2016 |
$ | 66,109,550 | ||
| 2017 |
$ | 63,906,713 | * | |
| 2018 |
$ | 69,176,832 | ** | |
| 2019 |
$ | 73,608,629 | *** | |
| 2020 |
$ | 71,753,695 | *** |
* The 2017 Annual Percentage Rent Breakpoint reflects the assumptions set forth above regarding the timing of the first 2017 Regulatory Order and the second 2017 Regulatory Order, as well as the amount of First 2017 CapEx and Second 2017 CapEx and the Rate Base of the Acquired Transmission Assets as of the Exchange Transaction Closing Date.
** The 2018 Annual Percentage Rent Breakpoint reflects the same assumptions as the 2017 Annual Percentage Rent Breakpoint, in addition to the assumptions set forth above regarding the timing of the first 2018 Regulatory Order and the second 2018 Regulatory Order, as well as the amount of 2017 Stub-Year CapEx, First 2018 CapEx and Second 2018 CapEx.
*** The 2019 and 2020 Annual Percentage Rent Breakpoints reflect the same assumptions as the 2018 Annual Percentage Rent Breakpoint, in addition to the assumptions set forth above regarding the timing of the first 2019 Regulatory Order, as well as the amount of 2018 Stub-Year CapEx.
Revenues Attributable to Lessee CapEx:
| 2013 |
$ | 0 | ||
| 2014 |
$ | 0 | ||
| 2015 |
$ | 0 | ||
| 2016 |
$ | 0 | ||
| 2017 |
$ | 0 | ||
| 2018 |
$ | 0 |
| TCOS Allocation: |
between June 20, 2013 and October 17, 2013: 65.3% |
| between October 17, 2013 and February 25, 2014: 84.8% |
| between February 25, 2014 and May 1, 2014: 83.3% |
| between May 1, 2014 and October 3, 2014: 80.9% |
| between October 3, 2014 and March 31, 2015: 75.8% |
| between April 1, 2015 and October 31, 2015: 72.7% |
| between November 1, 2015 and June 13, 2016: 65.6% |
| between June 14, 2016 and September 22, 2016: 56.8% |
| between September 23, 2016 and April 30, 2017: 49.0% |
| between May 1, 2017 and November 9, 2017: 46.1% |
| between November 10, 2017 and February 28, 2018: 35.9% |
| between March 1, 2018 and May 31, 2018: 36.0% |
| between June 1, 2018 and August 31, 2018: 37.9% |
| starting September 1, 2018: 39.2% |
Allocated Other Revenue: None
Term of Rent Supplement: Expires 12/31/20
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CREZ LEASE
The Parties have executed this Twelfth Amended Supplement to the CREZ Lease as of the date set forth above.
| SHARYLAND UTILITIES, L.P. | ||
| By: | /s/ Xxxx Xxxxx | |
| Name: | Xxxx Xxxxx | |
| Title: | Chief Financial Officer | |
| SHARYLAND DISTRIBUTION & TRANSMISSION SERVICES, L.L.C. | ||
| By: | /s/ Xxxxx Xxxxxxx | |
| Name: | Xxxxx Xxxxxxx | |
| Title: | Chief Financial Officer | |
CREZ LEASE
