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Exhibit 10.26
DATE: September 21, 2000
TO: Astoria Generating Company, L.P.
ATTN: __________________________
FROM: Constellation Power Source, Inc.
RE: Commodity Swap - Cash Settled
REFERENCE NUMBER: ___________
Dear Sir/Madam:
The purpose of this letter ("Confirmation") is to confirm the terms and
conditions of the transaction entered into on the Trade Date specified below
(the "Transaction") between Astoria Generating Company, L.P. ("Counterparty")
and Constellation Power Source, Inc. ("CPS") under the terms and conditions
set forth below. Counterparty and CPS may also hereinafter be referred to
individually as "Party" or collectively as "Parties."
1. MASTER AGREEMENT
CPS and Counterparty have not entered into a 1992 ISDA Master Agreement and the
Parties agree to negotiate in good faith and enter into a 1992 ISDA Master
Agreement with such additions, deletions and modifications thereto as the
Parties may agree. Upon execution and delivery by the Parties of a 1992 ISDA
Master Agreement, this Confirmation shall supplement, form a part of and be
subject to the terms of such 1992 ISDA Master Agreement.
Until such time, this Confirmation shall constitute a "Transaction" under, and
shall be governed by, the terms of the 1992 ISDA Master Agreement (Multicurrency
Cross Border), as published by the International Swaps and Derivatives
Association, Inc. ("ISDA") as if the Parties had executed such agreement on the
Trade Date (provided that (i) the Termination Currency shall be U.S. Dollars,
(ii) the Governing Law shall be the law of the State of New York (without
reference to choice of law doctrine), (iii) for purposes of Section 6(e), Market
Quotation and Second Method shall apply, and (iv) the provisions of Section V.
A. of ISDA's User's Guide to the 1992 Master Agreements shall be included as a
new Section 6(f)) (the "Master Agreement"). This Transaction, together with any
other Specified Transactions entered into by the Parties and together with the
Master Agreement, shall constitute a single agreement between the Parties. All
provisions of the Master Agreement shall govern this Confirmation, except as
expressly modified below.
The definitions and provisions contained in the 1991 ISDA Definitions, the 1993
ISDA Commodity Derivatives Definitions and the 2000 Supplement to the 1993 ISDA
Commodity Derivatives Definitions (all referred to as the "ISDA Definitions")
(as published by ISDA) are incorporated into this Confirmation. In the event of
any inconsistency between this Confirmation and the ISDA Definitions or the
Master Agreement, this Confirmation will govern for purposes of the Transaction.
References herein to a "Transaction" shall be deemed to be references to a "Swap
Transaction" for the purposes of the 1991 ISDA Definitions. Capitalized terms
used in this Confirmation and not defined in this Confirmation or the ISDA
Definitions shall have the respective meanings assigned in the Master Agreement.
Each Party hereto agrees to make payment to the other Party hereto in accordance
with the provisions of this Confirmation and of the Master Agreement.
2. TERMS OF TRANSACTION
The Terms of the Transaction to which this Confirmation relates are as follows:
TRADE DATE: September 21, 2000
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COMMODITY: Electricity
EFFECTIVE DATE: Hour Ending ("HE") 08:00 Eastern Prevailing
Time ("EPT")
November 1, 2000
TERMINATION DATE: HE 23:00 EPT October 31, 2001
NOTIONAL QUANTITY: 3200 MWh for each Commodity Business Day
ON-PEAK HOURS: HE 08:00 EPT through HE 23:00 EPT on any
Commodity Business Day
COMMODITY BUSINESS DAY: Monday through Friday, excluding NERC holidays
CALCULATION PERIOD: Each calendar month from November 1, 2000 through
October 31, 2001
FIXED AMOUNT DETAILS:
FIXED AMOUNT PAYOR: CPS
FIXED AMOUNT: $1,600,000 per Calculation Period
FLOATING AMOUNT DETAILS:
FLOATING PRICE PAYOR: Counterparty
COMMODITY REFERENCE
PRICE (ELECTRICITY): Day Ahead Market LBMP - Zonal for N.Y.C. (Ptid
61761), as published by the New York Independent
System Operator (the "NYISO") on its website
currently located at http://mis.nyiso.com/public/,
or any successor thereto, subject to corrections
and revisions made from time to time in accordance
with the rules of the NYISO. This region is
currently referred to as "Zone J" by the NYISO.
COMMODITY REFERENCE
PRICE (GAS): Midpoint, Citygates, Transco Z6 (NY) for the flow
date that corresponds to a Commodity Business Day,
as published by Financial Times Energy in the
Daily Price Survey section of Gas Daily multiplied
by 1.10
COMMODITY REFERENCE
PRICE (OIL): {[Average of the prices for the flow date that
corresponds to a Commodity Business Day listed
under the headings New York 13.5 RVP, Cargo and
NO6 .3 HP, as published by The McGraw-Hill
Companies in Platt's Oilgram U.S. Marketscan
divided by (6.287 mmBtu/bbl)] multiplied by 1.04}
plus $0.80/mmBtu
GAS HEAT RATE: 11.0 mmBtu/MWh
OIL HEAT RATE: 10.4 mmBtu/MWh
FLOATING PRICE: For each Commodity Business Day of a Calculation
Period:
the greater of:
(a) (i) the unweighted arithmetic mean of the
Commodity Reference Price (Electricity) for
each of the On-Peak Hours of the applicable
Commodity Business Day minus
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(ii) the lesser of (A) the Commodity
Reference Price (Gas) for the applicable
Commodity Business Day multiplied by the
Gas Heat Rate and (B) the Commodity
Reference Price (Oil) for the applicable
Commodity Business Day multiplied by the
Oil Heat Rate; and
(b) zero.
FLOATING AMOUNT: The sum of the Floating Price multiplied by the
Notional Quantity for all Commodity Business Days
of a Calculation Period:
MARKET DISRUPTION EVENTS: The definition of "Market Disruption Event"
applicable to the Confirmation shall refer only to
Price Source Disruption; Trading Suspension; and
Disappearance of Commodity Reference Price. For
the avoidance of doubt, the Parties acknowledge,
that the Commodity Reference Price (Electricity)
is currently subject to a cap imposed by the NYISO
and that any change in this cap shall not
constitute a Market Disruption Event.
DISRUPTION FALLBACKS: The definition of "Disruption Fallback" applicable
to this Confirmation shall refer only to the
Disruption Fallbacks, and in the following order
as the same are described in the relevant portion
of Section 7.5 of the ISDA Commodity Definitions:
(1) Negotiated Fallback; (2) Postponement (with a
Maximum Days of Disruption being five (5)); and
(3) No Fault Termination. In the event of No Fault
Termination, the Parties elect Market Quotation
and Second Method.
SPECIAL PROVISION: Notwithstanding any contrary provision of this
Confirmation, a material change to the identity of
the nodes that determine the calculation of the
Day Ahead Market LBMP for Zone J as of the Trade
Date (the "Current Zone J Nodes") shall constitute
an "Additional Market Disruption Event" to which
the following "Disruption Fallbacks" shall apply
in the following order: (1) Negotiated Fallback;
(2) Postponement (with a Maximum Days of
Disruption being five (5)); and (3) Fallback
Reference Price (with an alternate Commodity
Reference Price equal to the average of the Day
Ahead market prices for each of the Current Zone J
Nodes.
CASH SETTLEMENT TERMS
CASH SETTLEMENT: Applicable
NETTING: Paragraph 2 c (ii) of the Master Agreement will
not apply.
CALCULATION AGENT: CPS
BUSINESS DAY: Any day on which Federal Reserve member banks in
New York City are open for business.
PAYMENT DATE: Twenty-five (25) calendar days following the end
of a Calculation Period, subject to adjustment in
accordance with the Following Business Day
Convention.
ROUNDING: Four Decimal Places.
3. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party as of the date hereof
that:
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a. It has entered into this Agreement in connection with its line of business
(including financial intermediation services) and the terms hereof have been
individually tailored and negotiated at arms length between the Parties.
b. It is an "Eligible Swap Participant" as defined in CFTC Rule 35.1
c. It is not relying upon any representations of the other Party other than
those expressly set forth herein or any written guarantee of the obligations
hereof.
d. It has entered into this Agreement as principal (and not as agent or in any
other capacity, fiduciary or otherwise).
e. It has entered into this Agreement with a full understanding of the material
terms and risks hereof, and it is capable of assuming those risks.
f. It has made its investment and trading decisions (including regarding the
suitability hereof) based upon its own judgment and any advice from such
advisors as it has deemed necessary, and not in reliance upon any view expressed
by the other Party.
g. The other Party is not acting as a fiduciary or an advisor for it, nor has
given to it any assurance or guarantee as to the expected performance or result
of this Agreement.
h. It is a producer, processor, merchant or commercial end user of the commodity
that is the subject of this Transaction and is entering into it solely for
purposes related to said business.
4. MISCELLANEOUS
a. The Parties agree not to contest or assert any defense to the validity or
enforceability of telephonic confirmations under Laws relating to whether
certain agreements are to be in writing or signed by the Party to be thereby
bound, or the authority of any employee of such Party to make such
communication. Each Party consents to the recording of its representatives
telephone conversations without any further notice. All recordings, electronic
communications and any other materials may be introduced into evidence to prove
any oral agreement between the Parties. The Parties further agree that this
Agreement and all transactions performed hereunder shall constitute a Qualified
Financial Contract as defined in New York General Obligations Law, Section
5-701.
b. The terms of this Confirmation are confidential and are not to be disclosed
to any third party without the prior written consent of the non-disclosing
Party; provided that the terms of this confirmation may be disclosed to
governmental agencies with jurisdiction over this matter without prior written
consent.
c. If at any time Counterparty's Net Exposure to CPS under this Transaction
exceeds $10,000,000, then Counterparty shall have the right to require CPS to
provide credit support to Counterparty in an amount equal to such excess, in any
of the following forms: (i) a letter of credit directed to Counterparty from a
commercial bank with long-term debt ratings of "Baa2" or better from Moody's
Investors Service, Inc. ("Moody's") or "BBB" or better from Standard & Poor's
Ratings Group, a division of McGraw Hill, Inc. ("S&P"); (ii) a guaranty from
Constellation Energy Group, Inc. or other affiliate of CPS with long-term debt
ratings of "Baa3" or better from Moody's or "BBB-" or better from S&P; (iii) a
performance bond issued by a surety company with a rating of "B+" or better from
A.M. Best Company; or (iv) such other credit support that is reasonably
acceptable to Counterparty. Such credit support shall constitute a Credit
Support Document with respect to CPS, and if a guaranty is delivered pursuant to
clause (ii), the guarantor thereunder shall be a Credit Support Provider with
respect to CPS. For purposes of the foregoing, "Net Exposure" shall mean the
amount that would be owed by CPS to Counterparty under this Transaction if an
Early Termination Date were to result from an Event of Default on the part of
CPS.
d. For purposes of Section 5(a)(vi) of the Master Agreement: (i) "Cross Default"
shall apply to Counterparty and shall not apply to CPS; (ii) Orion Power New
York, L.P. shall constitute a "Specified Entity;" (iii) "Specified Indebtedness"
shall have the meaning set forth in Section 14 of the Master Agreement; and (iv)
"Threshold Amount" shall be $0.00.
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e. This Agreement constitutes a forward contract and a swap contract for the
purposes of Sections 556 and 560 of the US Bankruptcy Code, respectively.
f. For purposes of Section 12(a) of the Master Agreement:
Addresses for notices or communications to Counterparty:
Address: Orion Power Marketing and Supply
7 East Redwood Street, 11th Floor
Baltimore, Maryland 21202
Attention: Mark Sudbey
Facsimile Number: (410) 230-3502
Telephone Number: (410) 468-0973
Addresses for notices or communications to CPS:
Address: Constellation Power Source, Inc.
111 Market Place, Suite 500
Baltimore, Maryland 21202
Attention: Stu Rubenstein
Facsimile Number: (410) 468-3540
Telephone Number: (410) 468-3430
CONSTELLATION POWER SOURCE, INC.
By: ___________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED:
ASTORIA GENERATING COMPANY, L.P.
By: ___________________________________
Name:
Title:
