<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ------------------
Commission File Number 1-13434
Edison Mission Energy
(Exact name of registrant as specified in its charter)
California 95-4031807
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18101 Von Karman Avenue
Irvine, California 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 752-5588
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [_]
Number of shares outstanding of the registrant's Common Stock as of
November 11, 1999: 100 shares (all shares held by an affiliate of the
registrant).
<PAGE>
TABLE OF CONTENTS
Item Page
- ---- ----
PART I - Financial Information
1. Financial Statements.............................................. 1
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 18
PART II - Other Information
1. Legal Proceedings................................................. 30
6. Exhibits and Reports on Form 8-K.................................. 31
PART III
Signatures........................................................ 32
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------- ----------------------------------------
1999 1998 1999 1998
----------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Operating Revenues
Electric revenues $ 434,534 $ 132,398 $ 850,059 $ 475,597
Equity in income from energy projects 82,672 81,174 178,671 146,966
Equity in income from oil and gas 9,486 3,155 19,246 13,582
Operation and maintenance services 10,416 10,755 28,260 30,557
--------- --------- ---------- ---------
Total operating revenues 537,108 227,482 1,076,236 666,702
--------- --------- ---------- ---------
Operating Expenses
Fuel 116,700 36,817 244,347 126,529
Plant operations 94,201 30,855 175,590 93,324
Operation and maintenance services 7,102 7,725 21,115 22,004
Depreciation and amortization 58,338 20,773 118,081 65,933
Administrative and general 38,059 27,928 107,123 85,090
--------- --------- ---------- ---------
Total operating expenses 314,400 124,098 666,256 392,880
--------- --------- ---------- ---------
Income from operations 222,708 103,384 409,980 273,822
--------- --------- ---------- ---------
Other Income (Expense)
Interest and other income (expense) (2,290) 9,483 18,294 32,254
Interest expense (107,472) (46,930) (230,864) (137,815)
Dividends on preferred securities (7,010) (3,304) (14,388) (9,905)
--------- --------- ---------- ---------
Total other income (expense) (116,772) (40,751) (226,958) (115,466)
--------- --------- ---------- ---------
Income before income taxes 105,936 62,633 183,022 158,356
Provision for income taxes 19,331 17,855 33,006 57,290
--------- --------- ---------- ---------
Income before change in accounting
principle $ 86,605 $ 44,778 $ 150,016 $ 101,066
Cumulative effect on prior years of
change in accounting for start-up costs - - (13,840) -
--------- --------- ---------- ---------
Net Income $ 86,605 $ 44,778 $ 136,176 $ 101,066
========= ========= ========== =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
1
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
1999 1998 1999 1998
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net Income $ 86,605 $44,778 $136,176 $101,066
Other comprehensive income, net of tax:
Foreign currency translation
adjustments, net of income tax
benefit (expense) of $(2,171) and
$(272) for the three months and $623
and $(1,172) for the nine months
ended September 30, 1999 and 1998,
respectively 47,311 6,895 5,654 7,633
-------- ------- -------- --------
Comprehensive Income $133,916 $51,673 $141,830 $108,699
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
---------------- ---------------
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 450,777 $ 459,178
Accounts receivable - trade 153,810 74,403
Accounts receivable - affiliates 25,994 13,871
Inventory 182,052 13,000
Prepaid expenses and other 67,960 46,864
----------- ----------
Total current assets 880,593 607,316
----------- ----------
Investments
Energy projects 1,903,208 1,163,597
Oil and gas 69,851 62,949
----------- ----------
Total investments 1,973,059 1,226,546
----------- ----------
Property, Plant and Equipment 8,279,324 3,125,747
Less accumulated depreciation and amortization 366,721 250,934
----------- ----------
Net property, plant and equipment 7,912,603 2,874,813
----------- ----------
Other Assets
Goodwill 298,662 308,051
Restricted cash and other 124,167 141,390
----------- ----------
Total other assets 422,829 449,441
----------- ----------
Total Assets $11,189,084 $5,158,116
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1999 1998
-------------------- --------------------
Liabilities and Shareholder's Equity
<S> <C> <C>
Current Liabilities
Accounts payable - affiliates $ 14,124 $ 8,339
Accounts payable and accrued liabilities 296,673 99,062
Accrued incentive compensation 142,800 112,652
Interest payable 94,045 56,708
Short-term obligations 489,474 -
Current maturities of long-term obligations 255,891 194,586
----------- ----------
Total current liabilities 1,293,007 471,347
----------- ----------
Long-Term Obligations Net of Current Maturities 5,104,988 2,396,360
----------- ----------
Long-Term Deferred Liabilities
Deferred taxes and tax credits 1,491,091 613,009
Deferred revenue 531,330 490,471
Other 177,822 79,369
----------- ----------
Total long-term deferred liabilities 2,200,243 1,182,849
----------- ----------
Total Liabilities 8,598,238 4,050,556
----------- ----------
Preferred Securities of Subsidiaries:
Company-obligated mandatorily redeemable security of
partnership holding solely parent debentures 150,000 150,000
----------- ----------
Subject to mandatory redemption 157,536 -
----------- ----------
Not subject to mandatory redemption 118,054 -
----------- ----------
Commitments and Contingencies (Note 6)
Shareholder's Equity
Common stock, no par value; 10,000 shares
authorized; 100 shares issued and outstanding 64,130 64,130
Additional paid-in capital 1,695,406 629,406
Retained earnings 370,387 234,345
Accumulated other comprehensive income 35,333 29,679
----------- ----------
Total Shareholder's Equity 2,165,256 957,560
----------- ----------
Total Liabilities and Shareholder's Equity $11,189,084 $5,158,116
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30,
--------------------------------------
1999 1998
------------------ -----------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 136,176 $ 101,066
Adjustments to reconcile net income to net cash provided
by operating activities
Equity in income from energy projects (178,671) (146,966)
Equity in income from oil and gas (19,246) (13,582)
Distributions from energy projects 108,363 97,452
Distributions from oil and gas 7,613 19,537
Depreciation and amortization 118,081 65,933
Deferred taxes and tax credits 13,596 44,447
Cumulative effect on prior years of change in accounting for
start-up costs 13,840 -
(Increase) decrease in accounts receivable (91,960) 33,838
(Increase) decrease in inventory (35,212) 193
Increase in prepaid expenses and other (691) (182)
Increase (decrease) in accounts payable and accrued liabilities 232,509 (7,039)
Increase (decrease) in interest payable 37,337 (11,320)
Other, net 27,232 (10,885)
---------- ---------
Net cash provided by operating activities 368,967 172,492
---------- ---------
Cash Flows From Financing Activities
Borrowings on long-term obligations 2,831,975 66,016
Payments on long-term obligations (181,447) (72,224)
Short-term financing, net 485,045 -
Capital contribution from parent 1,066,000 -
Issuance of preferred securities 277,632 -
---------- ---------
Net cash provided by (used in) financing activities 4,479,205 (6,208)
---------- ---------
Cash Flows From Investing Activities
Investments in energy projects (32,789) (9,450)
Loans to energy projects (44,442) (42,289)
Purchase of generating stations (3,959,011) -
Purchase of common stock of acquired companies (635,301) (4,109)
Capital expenditures (196,388) (62,725)
Decrease in restricted cash 30,654 34,169
Other, net (22,376) 1,527
---------- ---------
Net cash used in investing activities (4,859,653) (82,877)
---------- ---------
Effect of exchange rate changes on cash 3,080 (716)
---------- ---------
Net increase (decrease) in cash and cash equivalents (8,401) 82,691
Cash and cash equivalents at beginning of period 459,178 585,883
---------- ---------
Cash and cash equivalents at end of period $ 450,777 $ 668,574
========== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1. GENERAL
All adjustments, including recurring accruals, have been made that are
necessary to present fairly the consolidated financial position and results of
operations for the periods covered by this report. The results of operations for
the nine months ended September 30, 1999, are not necessarily indicative of the
operating results for the full year.
Edison Mission Energy's (EME) significant accounting policies are described
in Note 2 to EME's Consolidated Financial Statements as of December 31, 1998 and
1997, included in its 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 31, 1999. EME follows the same accounting
policies for interim reporting purposes, with the exception of the American
Institute of Certified Public Accountants Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities", which became effective in
January 1999. SOP 98-5 requires that certain costs related to start-up
activities be expensed as incurred and that certain previously capitalized costs
be expensed and reported as a cumulative change in accounting principle. This
quarterly report should be read in connection with such financial statements.
Certain prior period amounts have been reclassified to conform to the
current period financial statement presentation.
NOTE 2. INVENTORY
Inventory is stated at the lower of weighted average cost or market.
Inventory at September 30, 1999 and December 31, 1998 consisted of the
following:
<TABLE>
<CAPTION>
(In thousands)
1999 1998
-------- -------
<S> <C> <C>
Coal and fuel oil $126,007 $ --
Spare parts, materials and supplies 56,045 13,000
-------- -------
Total $182,052 $13,000
======== =======
</TABLE>
6
<PAGE>
NOTE 3. INVESTMENTS
The following table presents summarized financial information of the
investments in energy projects and oil and gas accounted for by the equity
method:
<TABLE>
<CAPTION>
(In thousands)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
1999 1998 1999 1998
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Energy Projects
Operating Revenues $743,765 $478,516 $1,506,356 $1,200,618
Income from Operations 243,649 188,294 485,750 343,069
Net Income 180,482 162,535 378,985 265,549
Oil and Gas
Operating Revenues $108,232 $ 49,232 $ 201,769 $ 155,180
Income from Operations 29,807 8,430 53,094 37,112
Net Income 18,920 6,664 38,164 27,770
</TABLE>
NOTE 4. ACQUISITIONS
On March 18, 1999, EME Homer City Generation L.P. (EME Homer City), an
indirect, wholly owned affiliate of EME, completed a transaction with GPU,
Inc., New York State Electric & Gas Corporation and their respective affiliates
to acquire the 1,884-megawatt (MW) Homer City Electric Generating Station and
certain facilities and other assets associated therewith (collectively, Homer
City).
Consideration for Homer City consisted of a cash payment of approximately $1.8
billion, which was partially financed by $1.5 billion of new loans, combined
with corporate revolver borrowings and cash (see Note 5).
On May 14, 1999, Edison Mission Energy Taupo Ltd. (EME Taupo), an indirect,
wholly owned affiliate of EME, completed a transaction with the New Zealand
government to acquire 40% of the shares of Contact Energy Ltd. (Contact). The
remaining 60% of Contact Energy's shares were sold in a public offering
resulting in widespread ownership among the citizens of New Zealand and offshore
investors. These shares are publicly traded on stock exchanges in New Zealand
and Australia. Contact owns and operates hydroelectric, geothermal and natural
gas-fired power generating plants primarily in New Zealand with a total current
generating capacity of 1,930 MW.
Consideration for Contact consisted of a cash payment of approximately $635
million (1.2 billion New Zealand dollars), which was financed by $120 million of
preferred stock issued by Edison Mission Energy Global Management, Inc., an
indirect, wholly owned affiliate of EME, a $214 million (400 million New
Zealand dollars) credit facility issued
7
<PAGE>
by EME Taupo, a $300 million equity contribution from Edison International and
cash (see Note 5).
On July 19, 1999, Edison First Power Limited (EFPL), an indirect, wholly
owned affiliate of EME, completed a transaction with PowerGen UK plc, to acquire
the Ferrybridge and Fiddler's Ferry coal-fired electric generating plants
(Ferrybridge and Fiddler's Ferry) located in the United Kingdom. Ferrybridge,
located in West Yorkshire, and Fiddler's Ferry, located in Warrington, each have
a generating capacity of approximately 2,000 megawatts. In connection with the
acquisition, EFPL has committed to certain construction costs arising from plant
modification totaling $142 million and has executed a multi-year coal supply
agreement.
Consideration for the acquisition of Ferrybridge and Fiddler's Ferry
consisted of approximately $2.0 billion (1.3 billion pounds Sterling) for the
two plants. The purchase price may be increased up to additional $33.8 million
in the event that the environmental authority in the United Kingdom allows for
an increase in emissions from the plants. The acquisition was funded primarily
with a combination of net proceeds from the Edison First Power Limited
Guaranteed Secured Variable Rate Bonds (Edison First Power Bonds) issued on July
19, 1999 and due 2019, cash and a $500 million equity contribution from Edison
International. The Edison First Power Bonds were issued to a special purpose
entity formed by Merrill Lynch International (MLI SPE). MLI SPE sold the
variable rate coupons portion of the bonds to a special purpose entity that
borrowed $1.3 billion (830 million pounds Sterling) under a Term Loan Facility
to finance the purchase (see Note 5).
These acquisitions were accounted for utilizing the purchase method. EME's
consolidated statement of income for the three and nine months ended September
30, 1999 reflects the operations of Homer City beginning March 18, 1999, Contact
beginning May 1, 1999, and Ferrybridge and Fiddler's Ferry beginning July 19,
1999.
NOTE 5. FINANCIAL INSTRUMENTS AND EQUITY CONTRIBUTIONS
EME Financings and Edison International Equity Contributions
In March 1999, EME entered into a $700 million, 364-day interest only
revolving credit facility, structured on a recourse, unsecured basis.
In May 1999, Edison Mission Energy Global Management, Inc. (EME Global) issued
$120 million of Flexible Money Market Cumulative Preferred Stock. The stock
issuance consists of (1) 600 Series A Shares and (2) 600 Series B Shares, both
with liquidation preference of $100,000 per share and a dividend rate of 5.74%
until May 2004.
EME entered into a Support Agreement that requires EME to make capital
contributions to EME Global in order for it to maintain a positive net worth and
to provide sufficient funds for payment of declared dividends on preferred stock
and any
8
<PAGE>
redemption price in respect of the preferred stock. EME's maximum obligation
would be limited to either (1) an amount equal to twice the sum of (a) the
liquidation preference of the preferred stock (currently approximately $240
million) and (b) the liquidation preference on all outstanding preferred stock
of EME Global without any precedence over the preferred stock (currently zero)
or (2) the amount that EME could lawfully distribute to Edison International
under the General Corporation Law of the State of California.
In June 1999, EME issued $600 million, 7.73% Senior Notes due 2009. The
Notes are senior unsecured obligations of EME, which will be used for general
corporate purposes.
For the year ended September 30, 1999, EME has received $1.1 billion in
equity contributions from Edison International. The contributions were used to
finance acquisitions and to pay down EME's short-term obligations.
Financing of Homer City
In March 1999, Edison Mission Holdings Co. (EM Holdings), parent company of
EME Homer City, closed a $1.1 billion financing. The EM Holdings financing
consists of (1) an $800 million, 364-day interest only term loan, (2) a $250
million, five-year interest only construction term loan and (3) a $50 million,
five-year interest only revolving loan. These loans are structured on a limited-
recourse basis, in which the lenders look primarily to the cash generated by EM
Holdings and its subsidiaries to repay the debt and have taken a security
interest in the assets of EM Holdings and its subsidiaries. The proceeds of EM
Holdings' $800 million loan and EME's $700 million loan (described above),
combined with cash and corporate revolver borrowings totaling approximately $300
million were used to finance the acquisition of Homer City.
In May 1999, EM Holdings completed an $830 million bond financing. The
financing consists of (1) $300 million, 8.137% Senior Secured Bonds due 2019 and
(2) $530 million, 8.734% Senior Secured Bonds due 2026. These bonds are non-
recourse to EME apart from the Credit Support Guarantee and Debt Service Reserve
Guarantee entered into by EME. The Credit Support Guarantee requires EME to
guarantee the payment and performance of the obligations of EM Holdings to the
bond holders, banks and other secured parties which financed the acquisition of
Homer City in an aggregate amount not to exceed approximately $42 million. This
guarantee is to remain in place until December 31, 2001. In addition, to satisfy
the requirements under the EM Holdings financing to have a Debt Service Reserve
Requirement in an amount equal to six months' debt service projected to be due
following the payment of a distribution, EME agreed to guarantee the payment and
performance of the obligations of EM Holdings in the amount of approximately $35
million pursuant to the Debt Service Reserve Guarantee. The proceeds of the $830
million bonds were used primarily to repay EM Holdings' $800 million, 364-day
interest only term loan.
9
<PAGE>
Financing of Contact Energy
The acquisition of Contact was financed by borrowings under the $214
million (400 million New Zealand dollars) credit facility, issuance of $120
million of EME Global preferred stock (described above), cash and a $300 million
equity contribution from Edison International.
From June through September 30, 1999, EME Taupo issued $158 million (305
million New Zealand dollars) of Retail Redeemable Preference Shares, the
proceeds of which were used to repay a portion of the EME Taupo $214 million
credit facility. EME entered into two Deeds of Covenant comprised of a Facility
Agreement and a Subscription Agreement. The Facility Agreement requires EME to
provide funds to EME Taupo (1) of up to $13 million New Zealand dollars annually
in order for EME Taupo to meet its interest and dividend payment obligations to
Credit Suisse First Boston and (2) to ensure that EME satisfies certain
financial ratios. The Subscription Agreement requires EME to provide funds to
the Preferred Stock Subscriber to compensate for any shortfall in attaching tax
imputation credits to the dividends on the preferred stock.
Financing of Ferrybridge and Fiddler's Ferry
In July 1999, Edison First Power Limited issued Edison First Power Bonds
due 2019. The bonds are guaranteed by Maplekey UK Limited, a wholly-owned
subsidiary of EME. The Edison First Power Bonds were issued to a special purpose
entity formed by Merrill Lynch International (MLI SPE). MLI SPE sold the
variable rate coupons portion of the bonds to a special purpose entity that
borrowed $1.3 billion (830 million pounds Sterling) under a Term Loan Facility
to finance the purchase. The Term Loan Facility accrues interest at LIBOR plus
1.50 to 1.90 and is repaid in semi-annual installments over a 12 year period
beginning December 1999. EME has consolidated the Term Loan Facility under
Emerging Issues Task Force D-14, "Transactions Involving Special Purpose
Entities".
EME has entered into various undertakings to support financial commitments
of its affiliates related to the acquisition of Ferrybridge and Fiddler's Ferry,
including (1) a guaranty of EFPL's Purchase Price Adjustment obligation of up to
$33.8 million in the event that the environmental authority in the United
Kingdom allows for an increase in emissions from the plants; (2) a guaranty of a
letter of credit facility of $228.8 million entered into by EME Finance UK
Limited (EME Finance), an indirect, wholly-owned affiliate of EME, to support
EFPL's commitments: (a) to make certain construction costs arising from plant
modifications, and (b) under a multi-year coal supply agreement; and (3)
issuance of a $85.4 million letter of credit under its corporate revolving
credit line to serve as a debt service reserve account to support debt service
payments under the Guaranteed Secured Variable Rate Bonds due 2019.
10
<PAGE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
Firm Commitments for Asset Purchases
<TABLE>
<CAPTION>
Projects U.S. ($ in millions)
- -------- --------------------
<S> <C>
Commonwealth Edison Co. (i) $ 5,000
</TABLE>
(i) A wholly owned subsidiary of EME executed an Asset Sale Agreement to
purchase the fossil-fuel generating assets of Commonwealth Edison Co.,
totaling 9,510 MW located in the midwestern United States. The closing of
the transaction is subject to receipt of various state and federal
regulatory approvals and is expected to be completed by year end 1999.
Firm Commitments to Contribute Project Equity
<TABLE>
<CAPTION>
Projects Local Currency U.S. ($ in millions)
- --------- -------------- --------------------
<S> <C> <C>
ISAB (i) 244 billion Italian Lira $ 135
EcoElectrica (ii) 34
Tri Energy (iii) 25
</TABLE>
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under
construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
EME owns a 49% interest. Equity will be contributed at commercial
operation, which is currently scheduled for late 1999.
(ii) EcoElectrica is a 540-MW liquefied natural gas combined-cycle
cogeneration facility under construction in Penuelas, Puerto Rico. A
wholly owned subsidiary of EME owns a 50% interest. Equity will be
contributed at commercial operation, which is currently scheduled for
late 1999.
(iii) Tri Energy is a 700-MW gas-fired power plant under construction in the
Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a
25% interest. Equity will be contributed at commercial operation, which
is currently scheduled for mid-2000.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
11
<PAGE>
Contingent Obligations to Contribute Project Equity
<TABLE>
<CAPTION>
Projects U.S. ($ in millions)
- -------- --------------------
<S> <C>
Paiton (i) $ 141
Tri Energy (ii) 20
Doga (ii) 7
All Other 17
</TABLE>
(i) Contingent obligations to contribute additional project equity (Contingent
Equity) would be based on events principally related to insufficient cash
flow to cover interest on project debt and operating expenses, project cost
overruns during the plant construction, certain partner obligations or
events of default. In any and all circumstances, EME's obligation to
contribute Contingent Equity will not exceed $141 million.
As more fully described below under the caption "Other Commitments and
Contingencies", PT Persahaan Listrik Negara (PLN), the main source of
revenue for the project, has failed to pay the project in respect of its
last five invoices and paid only a portion of another invoice. In addition,
as more fully described below under the caption "Litigation", PLN has filed
a lawsuit, which is currently suspended, contesting the validity of its
agreement to purchase electricity from the project.
In response to PLN's failure to pay, Paiton entered into an interim
agreement (the "Interim Agreement") with its lenders which modified the
Contingent Equity provisions of the Paiton debt documents during the agreed
interim period, which extends from October 15, 1999 through July 31, 2000.
The Interim Agreement provides, among other things, that Contingent Equity
from EME and the other Paiton shareholders shall be contributed from time
to time as needed to enable Paiton to pay "Interim Project Costs". Interim
Project Costs include interest on project debt and operating costs which
become due and payable during the term of the Interim Agreement and other
costs related to the construction of the project, provided that in the
latter case no more than an aggregate of $30 million of Contingent Equity
can be used for this purpose. The Interim Agreement provides that a portion
of unfunded Contingent Equity in the original amount of $206 million (of
which EME's current unfunded share is $85 million) will become due and
payable by the shareholders in the event that certain events of default
(other than those specifically waived pursuant to the Interim Agreement)
occur. The Interim Agreement further provides that all unfunded Contingent
Equity in the original amount of $300 million (of which EME's current
unfunded share is $124 million) will become due and payable by the
shareholders in the event that Paiton fails to make any interest payment
during the pendency of the Interim Agreement. To date, Paiton's
shareholders have contributed to Paiton $36 million of Contingent Equity
(of which EME's share is $17 million).
The Contractor and Paiton continue to discuss the final amount to be paid
the Contractor. Items claimed by the Contractor include retention, costs
relating to a dispute involving a slope adjacent to the Paiton site and
other cost overruns related to
12
<PAGE>
delays in the completion of the construction of the project. Paiton has
counterclaims against Contractor for deficiencies which would be offset
against the amount owing the Contractor. As these discussions continue, it
is not possible to say with certainty the final amount which will be owing
the Contractor by Paiton. As noted above, however, the shareholders'
obligation to contribute Contingent Equity to Paiton to enable it to pay
Contractor for the finally agreed amount is limited to $30 million.
Paiton's obligations to the Contractor may exceed this amount. The
shortfall, if any, will be considered as part of the renegotiation of the
PPA and the Project's debt agreements, as more fully discussed under the
caption, "Other Commitments and Contingencies."
EME's Contingent Equity obligations for the Paiton project are to be
cancelled (if unused) as of the later of the date of term financing by the
Export-Import Bank of the United States and August 1, 2000. Term financing
by the Export-Import Bank of the United States is the subject of a
comprehensive set of conditions. The obligation of the Export-Import Bank
of the United States to provide term financing was initially scheduled to
terminate on October 15, 1999. The conditions to the term financing were
not satisfied by such date and the Export-Import Bank of the United States
agreed to extend the term financing commitment until December 15, 1999.
Based on present projections, the Project does not expect to complete the
conditions by December 15, 1999, and is seeking a further extension of the
time to achieve term completion. As of the date hereof, the Project does
not have any commitment from the Lenders as to such further extension.
(ii) Contingent obligations to contribute additional equity to the project would
be based on events principally related to capital cost overruns during
plant construction, certain EME or partner obligations or events of
default.
Other than as noted above, management is not aware, at this time, of any
other contingent obligations or obligations to contribute project equity.
Other Commitments and Contingencies
Certain of EME's subsidiaries entered into indemnification agreements whereby
the subsidiaries agreed to repay capacity payments to the projects' power
purchasers, in the event the projects unilaterally terminate their performance
or reduce their electric power producing capability during the term of the power
contract. Obligations under these indemnification agreements as of September
30, 1999, if payment were required, would be $233 million. Management has no
reason to believe that the projects will either terminate their performance or
reduce their electric power producing capability during the term of the power
contracts.
Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
Indonesia. A wholly owned subsidiary of EME owns a 40% interest and has a $388
million investment at September 30, 1999. The tariff is higher in the early
years and steps down over time. The tariff for the Paiton project includes
infrastructure to be used in common by other
13
<PAGE>
units at the Paiton complex. The plant's output is fully contracted with the
state-owned electricity company, PT Perusahaan Listrik Negara (PLN). Payments
are in Indonesian Rupiah, with the portion of such payments intended to cover
non-Rupiah project costs (including returns to investors) indexed to the
Indonesian Rupiah/U.S. dollar exchange rate established at the time of the Power
Purchase Agreement (PPA) in February 1994. The project received substantial
finance and insurance support from the Export-Import Bank of the United States,
The Export-Import Bank of Japan, the U.S. Overseas Private Investment
Corporation and the Ministry of International Trade and Industry of Japan. PLN's
payment obligations are supported by the Government of Indonesia. The projected
rate of growth of the Indonesian economy and the exchange rate of Indonesian
Rupiah into U.S. dollars have deteriorated significantly since the Paiton
project was contracted, approved and financed. The Paiton project's senior debt
ratings have been reduced from investment grade to speculative grade based on
the rating agencies' perceived increased risk that PLN might not be able to
honor the electricity sales contract with Paiton. The Government of Indonesia
has arranged to reschedule sovereign debt owed to foreign governments and has
entered into discussions about rescheduling sovereign debt owed to private
lenders. Certain events (including those discussed in the paragraph below)
which, with the passage of time or upon notice, may mature into defaults of the
Project's debt agreements have occurred. On October 15, 1999, the Project
entered into an interim agreement with its lenders pursuant to which the Lenders
waived such defaults until July 31, 2000. However, such waiver may expire on an
earlier date if additional defaults (other than those specifically waived) or
certain other specified events occur.
In May 1999, Paiton notified PLN that Unit 7 of Paiton achieved Commercial
Operation under terms of the PPA and that Unit 8 of Paiton achieved Commercial
Operation under the terms of the PPA in July 1999. Because of the economic
downturn, PLN is experiencing low electricity demand and PLN has therefore
dispatched the Paiton plant to zero; however, under the terms of the PPA, PLN
is required to continue to pay for capacity and fixed operating costs once each
unit and the Plant achieve Commercial Operation. An invoice for these charges
for May in the amount of $7.8 million was submitted to PLN. The project and PLN
met to review the invoice and a partial payment of $2.5 million was subsequently
received. The primary reason for the payment shortage was the use of an
arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450 Indonesian Rupiah
to one U.S. dollar by PLN. The use of this exchange rate is not in agreement
with the Power Purchase Agreement, but is the exchange rate on which PLN
payments to other independent power producers in Indonesia have been based.
Invoices for capacity charges and fixed operating costs for June, July, August
and September in an aggregate amount of $164.1 million were later submitted to
PLN. PLN has yet to make any payments in respect of such latter invoices. In
addition, as more fully described below under the caption "Litigation", PLN has
filed a lawsuit contesting the validity of its agreement to purchase electricity
from the Project. The lawsuit is currently suspended and the Project and PLN
have commenced discussions to renegotiate the PPA, however, it is not yet known
what form the renegotiation may take. Any material modifications of the PPA
could also require a renegotiation of the Paiton project's debt agreements. The
impact of any such renegotiations with PLN, the Government of Indonesia or the
project's creditors on EME's expected return on its investment in Paiton is
uncertain at
14
<PAGE>
this time, however, management believes that it will ultimately recover its
investment in the project.
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in
Brooklyn, New York. A wholly owned subsidiary of EME owns 50% of the project.
In February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted
general monetary claims against the contractor. In connection with a $407
million non-recourse project refinancing in 1997, EME agreed to indemnify BNY
and its partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders. EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.
Litigation
On October 7, 1999, PLN announced that it had filed a lawsuit in the Central
Jakarta District Court against the Paiton project company seeking to annul the
PPA, notwithstanding that the Paiton project company continued to seek a
negotiated basis on which to operate the plant for an interim period during
which the parties could discuss longer term remedies for the effect on the
project of the current financial crisis affecting Indonesia. The terms of the
PPA provide that any disputes with respect thereto must be submitted to
arbitration in Stockholm, Sweden and cannot be brought in the courts of any
country. Accordingly, immediately following the filing of PLN's lawsuit, the
Paiton project company commenced an arbitration in accordance with the terms of
the PPA in order to confirm the validity of the agreement and to protect the
interests of the Paiton project company shareholders, lenders and other credit
support providers. In accordance with Indonesian procedures applicable to PLN's
lawsuit, the Paiton project company was served with PLN's complaint on October
22, 1999. In its complaint, PLN has generally alleged that the PPA was the
result of corruption, cronyism and nepotism and is "one-sided and against the
public interest". The first court hearing was held on October 25, at which
procedural matters were discussed, including the possibility of the court
granting a stay of up to thirty days to give the parties time to reach an out of
court settlement. On November 1, a second hearing was held at which the court
granted a fourteen day suspension of the proceedings until November 15, 1999, to
allow the parties to pursue a negotiated settlement. The Paiton project company
agreed to suspend any proceedings in the arbitration initiated by the Paiton
project company for an equivalent period. The Paiton project company intends to
contest the jurisdiction of the Indonesian courts, based on the PPA's provision
for binding arbitration, and otherwise will vigorously contest the allegations
made in PLN's complaint.
EME is routinely involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based on advice of counsel, does not believe that the
final outcome of any pending litigation will have a material adverse effect on
EME's financial position or results of operations.
15
<PAGE>
Environmental Matters
EME is subject to environmental regulation by federal, state and local
authorities in the U.S. and foreign regulatory authorities with jurisdiction
over projects located outside the U.S. EME believes that it is in substantial
compliance with environmental regulatory requirements and that maintaining
compliance with current requirements will not materially affect its financial
position or results of operations.
EME completed a partial review of its sites in 1995 and does not believe that
a material liability exists as of September 30, 1999. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these expenses are not expected to have a material impact on EME's
financial position or results of operations.
NOTE 7. BUSINESS SEGMENTS
EME operates predominately in one line of business, electric power
generation, with reportable segments organized by geographic region: Americas,
Asia Pacific, and Europe, Central Asia, Middle East and Africa. EME's plants
are located in different geographic areas, which mitigates the effects of
regional markets, economic downturns or unusual weather conditions. These
regions take advantage of the increasing globalization of the independent power
market. Intercompany transactions have been eliminated in the following segment
information.
16
<PAGE>
<TABLE>
<CAPTION>
Europe,
(In millions) Central Asia,
Three Months Ended Asia Middle East Corporate/
September 30, 1999 Americas Pacific and Africa Other(i) Total
------------------ ------------- --------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 253.8 $ 57.7 $ 225.6 $ -- $ 537.1
Net income (loss) 75.2 (2.6) 31.3 (17.3) 86.6
Total assets 3,318.5 3,289.7 4,580.9 -- 11,189.1
September 30, 1998
------------------
Operating revenues $ 92.5 $ 50.8 $ 84.2 $ -- $ 227.5
Net income (loss) 27.4 2.2 20.4 (5.2) 44.8
Total assets 950.7 1,625.1 2,459.0 -- 5,034.8
<CAPTION>
Europe,
(In millions) Central Asia,
Nine Months Ended Asia Middle East Corporate/
September 30, 1999 Americas Pacific and Africa Other(i) Total
------------------ ------------- -------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 461.0 $ 164.0 $ 451.2 $ -- $ 1,076.2
Net income (loss) 121.9 (15.3) 62.8 (33.2) 136.2
Total assets 3,318.5 3,289.7 4,580.9 -- 11,189.1
September 30, 1998
------------------
Operating revenues $ 180.8 $ 158.1 $ 327.8 $ -- $ 666.7
Net income (loss) 59.9 (1.6) 59.4 (16.6) 101.1
Total assets 950.7 1,625.1 2,459.0 -- 5,034.8
</TABLE>
(i) Includes corporate net interest expense.
NOTE 8. SUBSEQUENT EVENTS
During October 1999, EME completed the acquisition of the remaining 20
percent of the 220 MW natural gas-fired Roosecote project located in England.
Consideration for the remaining 20% consisted of a cash payment of approximately
$16.0 million (9.6 million pounds Sterling). The acquisition was funded with
existing cash.
On November 1, 1999, EME completed the sale of a portion of its interest in
Four Star Oil & Gas Company (Four Star) to a company that it holds a 50%
interest. Net proceeds from the sale of a portion of this investment were $20.5
million. EME expects to record a pre-tax gain on sale of its investment of
approximately six million dollars. EME's net ownership interest in Four Star was
reduced from 50% to 34% as a result of the transaction.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q includes certain forward-looking
statements, the realization of which may be affected by certain important
factors discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" thereunder and elsewhere herein.
GENERAL
- -------
Edison Mission Energy (EME) is a leading global power producer. Through its
subsidiaries, EME is engaged in the business of developing, acquiring, owning
and operating electric power generation facilities worldwide. EME's current
investments include 64 projects totaling 18,936 megawatts (MW) of generation
capacity, of which 16,443 are in operation and 2,493 are under construction. In
addition, 12 operating projects totaling 9,510 MW of generating capacity are
pending acquisition.
EME's operating revenues are derived primarily from electric revenues and
equity in income from energy projects. Operating revenues also include equity
in income from oil and gas investments and revenue attributable to operation and
maintenance services.
Electric revenues are derived from consolidated results of operations of
one domestic and several international entities. Equity in income from energy
projects relates to EME's ownership interest of 50% or less voting stock in
projects. The equity method of accounting is generally used to account for the
operating results of entities over which EME has a significant influence but in
which it does not have a controlling interest. With respect to entities
accounted for under the equity method, EME recognizes its proportional share of
the income or loss of such entities.
ACQUISITIONS
- ------------
On March 18, 1999, EME Homer City Generation L.P. (EME Homer City), an
indirect, wholly owned affiliate of EME, completed a transaction with GPU,
Inc., New York State Electric & Gas Corporation and their respective affiliates
to acquire the 1,884-MW Homer City Electric Generating Station and certain
facilities and other assets associated therewith (collectively, Homer City).
Consideration for Homer City consisted of a cash payment of approximately
$1.8 billion, which was partially financed by $1.5 billion of new loans,
combined with corporate revolver borrowings and cash.
On May 14, 1999, Edison Mission Energy Taupo Ltd. (EME Taupo), an indirect,
wholly owned affiliate of EME, completed a transaction with the New Zealand
government to acquire 40% of the shares of Contact Energy Ltd. (Contact). The
remaining 60% of Contact Energy's shares were sold in a public offering
resulting in widespread ownership among the citizens of New Zealand and offshore
investors. These
18
<PAGE>
shares are publicly traded on stock exchanges in New Zealand and Australia.
Contact owns and operates hydroelectric, geothermal and natural gas-fired power
generating plants primarily in New Zealand with a total current generating
capacity of 1,930 MW.
Consideration for Contact consisted of a cash payment of approximately $635
million (1.2 billion New Zealand dollars), which was financed by $120 million of
preferred stock issued by Edison Mission Energy Global Management, Inc., a $214
million (400 million New Zealand dollars) credit facility issued by EME Taupo, a
$300 million equity contribution from Edison International and cash.
On July 19, 1999, Edison First Power Limited (EFPL), an indirect, wholly
owned subsidiary of EME, completed a transaction with PowerGen UK plc, to
acquire the Ferrybridge and Fiddler's Ferry coal-fired electric generating
plants (Ferrybridge and Fiddler's Ferry) located in the United Kingdom.
Ferrybridge, located in West Yorkshire, and Fiddler's Ferry, located in
Warrington, each have a generating capacity of approximately 2,000 megawatts. In
connection with the acquisition, EFPL has committed to certain construction
costs arising from plant modification totaling $142 million and has executed a
multi-year coal supply agreement.
Consideration for Ferrybridge and Fiddler's Ferry consisted of
approximately $2.0 billion (1.3 billion pounds Sterling) for the two plants. The
purchase price may be increased up to additional $33.8 million in the event that
the environmental authority in the United Kingdom allows for an increase in
emissions from the plants. The acquisition was funded primarily with a
combination of net proceeds from the Edison First Power Limited Guaranteed
Secured Variable Rate Bonds (Edison First Power Bonds) issued on July 19, 1999
and due 2019, cash and a $500 million equity contribution from Edison
International. The Edison First Power Bonds were issued to a special purpose
entity formed by Merrill Lynch International (MLI SPE). MLI SPE sold the
variable rate coupons portion of the bonds to a special purpose entity that
borrowed $1.3 billion (830 million pounds Sterling) under a Term Loan Facility
to finance the purchase.
These acquisitions were accounted for utilizing the purchase method. EME's
consolidated statement of income for the three and nine months ended September
30, 1999 reflects the operations of Homer City beginning March 18, 1999, Contact
beginning May 1, 1999, and Ferrybridge and Fiddler's Ferry beginning July 19,
1999.
RESULTS OF OPERATIONS
- ---------------------
OPERATING REVENUES Operating revenues increased $309.6 million and $409.5
million for the third quarter and nine months ended September 30, 1999,
respectively, compared with the corresponding periods of 1998, resulting
primarily from increases in electric revenues and equity in income from energy
projects. Electric revenues increased $302.1 million and $374.5 million for the
third quarter and nine months ended September 30, 1999, respectively, compared
with the corresponding periods of 1998, primarily due to revenues from Homer
City acquired in March 1999 and Ferrybridge and Fiddler's Ferry acquired in July
1999. Equity in income from energy projects increased $31.7
19
<PAGE>
million during the nine months ended September 30, 1999, compared with the
corresponding period of 1998. The increase for the nine month period was
primarily the result of higher revenues from several cogeneration projects due
to a final settlement on energy pricing for prior years and a gain on sale of a
power sales agreement.
Due to warmer weather during the summer months, electric revenues generated
from Homer City is principally higher during the third quarter of each year. In
addition, EME's third quarter revenues from energy projects are materially
higher than other quarters of the year due to a significant number of EME's
domestic energy projects located on the West Coast which generally have power
sales contracts that provide for higher payments during summer months.
OPERATING EXPENSE Operating expenses increased $190.3 million and $273.4 million
for the third quarter and nine months ended September 30, 1999, respectively,
compared with the same prior year periods. These increases are due to higher
fuel, plant operations, depreciation and amortization and administrative and
general expenses. The increases in fuel expense, plant operations and
depreciation and amortization are primarily the result of expenses at Homer City
acquired in March 1999 and Ferrybridge and Fiddler's Ferry acquired in July
1999. The administrative and general expense increase is primarily related to
increased project development/acquisition costs.
OTHER INCOME (EXPENSE) Interest expense increased $60.5 million and $93 million
for the third quarter and nine months ended September 30, 1999, respectively,
compared with the same prior year periods. The increase was primarily the
result of additional debt financing of the Homer City and Ferrybridge and
Fiddler's Ferry acquisitions.
PROVISION FOR INCOME TAXES EME recorded an effective tax provision rate of 18%
for the nine months ended September 30, 1999, compared with a 36% rate for the
same prior year period. The decrease in the 1999 effective tax rate was
primarily due to lower foreign income taxes that result from the permanent
reinvestment of earnings from foreign affiliates located in different foreign
tax jurisdictions.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP) 98-
5, "Reporting on the Costs of Start-Up Activities", which became effective in
January 1999. The Statement requires that certain costs related to start-up
activities be expensed as incurred and that certain previously capitalized costs
be expensed and reported as a cumulative change in accounting principle. The
impact of adopting SOP 98-5 on EME's net income was $13.8 million, after-tax.
LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 1999,
net cash provided by operating activities increased to $369 million from $172.5
million for the same period in 1998. The increase in working capital was
primarily due to increased accounts payable and accrued liabilities related to
the Company's acquisitions of Ferrybridge and Fiddler's Ferry and Homer City and
commercial operations of Doga.
20
<PAGE>
Net working capital at September 30, 1999 was ($412.4) million compared to $136
million at December 31, 1998. Net working capital decreased primarily as a
result of utilizing short-term capacity under a commercial paper facility to
finance a portion of the Homer City project. The Company expects to re-finance
the short-term borrowings during the next year with a combination of new or
extended short-term borrowings and issuance of long-term EME debt.
At September 30, 1999, EME had cash and cash equivalents of $450.8 million
and had available $353 million of borrowing capacity under a $500 million
revolving credit facility that expires in 2001 and $266 million of borrowing
capacity under a $700 million commercial paper facility that expires in 2000.
This borrowing capacity under the revolving credit facility may be reduced by
borrowings for firm commitments to contribute project equity and to fund capital
expenditures and construction costs of its project facilities.
Net cash provided by financing activities totaled $4,479.2 million during
the first nine months of 1999, compared to $6.2 million used in 1998 for the
same prior year period. The 1999 increase is primarily due to financing of $1.3
billion (830 million pounds Sterling) related to the Ferrybridge and Fiddler's
Ferry project, the Edison Mission Holding Co., parent company of EME Homer City,
$830 million senior secured bonds, EME financing of $700 million, EME Senior
Notes of $600 million, borrowings of $59 million under Edison Mission Energy
Taupo Limited (EME Taupo) credit facility, Edison International $1,066 million
equity contribution, Edison Mission Energy Global Management, Inc. $120 million
Flexible Money Market Cumulative Preferred Stock and EME Taupo $158 million
Retail Redeemable Preference Shares.
Net cash used in investing activities increased to $4,859.7 million for the
nine months ended September 30, 1999 from $82.9 million for the nine months
ended September 30, 1998. The increase is primarily due to the purchase of
Ferrybridge and Fiddler's Ferry, Homer City and Contact.
Firm Commitments for Asset Purchases
<TABLE>
<CAPTION>
Projects U.S. ($ in millions)
- -------- --------------------
<S> <C>
Commonwealth Edison Co. (i) $ 5,000
</TABLE>
(i) A wholly owned subsidiary of EME executed an Asset Sale Agreement to
purchase the fossil-fuel generating assets of Commonwealth Edison Co.,
totaling 9,510 MW located in the midwestern United States. The closing of
the transaction is subject to receipt of various state and federal
regulatory approvals and is expected to be completed by year end 1999.
21
<PAGE>
Firm Commitments to Contribute Project Equity
<TABLE>
<CAPTION>
Projects Local Currency U.S. ($ in millions)
- -------- -------------- --------------------
<S> <C> <C>
ISAB (i) 244 billion Italian Lira $135
EcoElectrica (ii) 34
Tri Energy (iii) 25
</TABLE>
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under
construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
EME owns a 49% interest. Equity will be contributed at commercial
operation, which is currently scheduled for late 1999.
(ii) EcoElectrica is a 540-MW liquefied natural gas combined-cycle cogeneration
facility under construction in Penuelas, Puerto Rico. A wholly owned
subsidiary of EME owns a 50% interest. Equity will be contributed at
commercial operation, which is currently scheduled for late 1999.
(iii) Tri Energy is a 700-MW gas-fired power plant under construction in the
Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
interest. Equity will be contributed at commercial operation, which is
currently scheduled for mid-2000.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
Contingent Obligations to Contribute Project Equity
<TABLE>
<CAPTION>
Projects U.S. ($ in millions)
- ------------------ --------------------
<S> <C>
Paiton (i) $141
Tri Energy (ii) 20
Doga (ii) 7
All Other 17
</TABLE>
(i) Contingent obligations to contribute additional project equity (Contingent
Equity) would be based on events principally related to insufficient cash
flow to cover interest on project debt and operating expenses, project cost
overruns during the plant construction, certain partner obligations or
events of default. In any and all circumstances, EME's obligation to
contribute Contingent Equity will not exceed $141 million.
As more fully described below under the caption "Other Commitments and
Contingencies", PT Persahaan Listrik Negara (PLN), the main source of
revenue for the project, has failed to pay the project in respect of its
last five invoices and paid only a portion of another invoice. In addition,
22
<PAGE>
PLN has filed a lawsuit, which is currently suspended, contesting the
validity of its agreement to purchase electricity from the project.
In response to PLN's failure to pay, Paiton entered into an interim
agreement (the "Interim Agreement") with its lenders which modified the
Contingent Equity provisions of the Paiton debt documents during the agreed
interim period, which extends from October 15, 1999 through July 31, 2000.
The Interim Agreement provides, among other things, that Contingent Equity
from EME and the other Paiton shareholders shall be contributed from time
to time as needed to enable Paiton to pay "Interim Project Costs". Interim
Project Costs include interest on project debt and operating costs which
become due and payable during the term of the Interim Agreement and other
costs related to the construction of the project, provided that in the
latter case no more than an aggregate of $30 million of Contingent Equity
can be used for this purpose. The Interim Agreement provides that a portion
of unfunded Contingent Equity in the original amount of $206 million (of
which EME's current unfunded share is $85 million) will become due and
payable by the shareholders in the event that certain events of default
(other than those specifically waived pursuant to the Interim Agreement)
occur. The Interim Agreement further provides that all unfunded Contingent
Equity in the original amount of $300 million (of which EME's current
unfunded share is $124 million) will become due and payable by the
shareholders in the event that Paiton fails to make any interest payment
during the pendency of the Interim Agreement. To date, Paiton's
shareholders have contributed to Paiton $36 million of Contingent Equity
(of which EME's share is $17 million).
The Contractor and Paiton continue to discuss the final amount to be paid
the Contractor. Items claimed by the Contractor include retention, costs
relating to a dispute involving a slope adjacent to the Paiton site and
other cost overruns related to delays in the completion of the construction
of the project. Paiton has counterclaims against Contractor for
deficiencies which would be offset against the amount owing the Contractor.
As these discussions continue, it is not possible to say with certainty the
final amount which will be owing the Contractor by Paiton. As noted above,
however, the shareholders' obligation to contribute Contingent Equity to
Paiton to enable it to pay Contractor for the finally agreed amount is
limited to $30 million. Paiton's obligations to the Contractor may exceed
this amount. The shortfall, if any, will be considered as part of the
renegotiation of the PPA and the Project's debt agreements, as more fully
discussed under the caption, "Other Commitments and Contingencies."
EME's Contingent Equity obligations for the Paiton project are to be
cancelled (if unused) as of the later of the date of term financing by the
Export-Import Bank of the United States and August 1, 2000. Term financing
by the Export-Import Bank of the United States is the subject of a
comprehensive set of conditions. The obligation of the Export-Import Bank
of the United States to provide term financing was initially scheduled to
terminate on October 15, 1999. The conditions to the term financing were
not satisfied by such date and the Export-Import Bank of the United States
agreed to extend the term financing commitment until December 15, 1999.
Based on
23
<PAGE>
present projections, the Project does not expect to complete the conditions
by December 15, 1999, and is seeking a further extension of the time to
achieve term completion. As of the date hereof, the Project does not have
any commitment from the Lenders as to such further extension.
(ii) Contingent obligations to contribute additional equity to the project would
be based on events principally related to capital cost overruns during
plant construction, certain EME or partner obligations or events of
default.
Other than as noted above, management is not aware, at this time, of any
other contingent obligations or obligations to contribute project equity.
Other Commitments and Contingencies
Certain of EME's subsidiaries entered into indemnification agreements
whereby the subsidiaries agreed to repay capacity payments to the projects'
power purchasers, in the event the projects unilaterally terminate their
performance or reduce their electric power producing capability during the term
of the power contract. Obligations under these indemnification agreements as of
September 30, 1999, if payment were required, would be $233 million. Management
has no reason to believe that the projects will either terminate their
performance or reduce their electric power producing capability during the term
of the power contracts.
Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
Indonesia. A wholly owned subsidiary of EME owns a 40% interest and has a $388
million investment at September 30, 1999. The tariff is higher in the early
years and steps down over time. The tariff for the Paiton project includes
infrastructure to be used in common by other units at the Paiton complex. The
plant's output is fully contracted with the state-owned electricity company, PT
Perusahaan Listrik Negara (PLN). Payments are in Indonesian Rupiah, with the
portion of such payments intended to cover non-Rupiah project costs (including
returns to investors) indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the Power Purchase Agreement (PPA) in February 1994.
The project received substantial finance and insurance support from the Export-
Import Bank of the United States, The Export-Import Bank of Japan, the U.S.
Overseas Private Investment Corporation and the Ministry of International Trade
and Industry of Japan. PLN's payment obligations are supported by the Government
of Indonesia. The projected rate of growth of the Indonesian economy and the
exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated
significantly since the Paiton project was contracted, approved and financed.
The Paiton project's senior debt ratings have been reduced from investment grade
to speculative grade based on the rating agencies' perceived increased risk that
PLN might not be able to honor the electricity sales contract with Paiton. The
Government of Indonesia has arranged to reschedule sovereign debt owed to
foreign governments and has entered into discussions about rescheduling
sovereign debt owed to private lenders. Certain events (including those
discussed in the paragraph below) which, with the passage of time or upon
notice, may mature into defaults of the Project's debt agreements have occurred.
On October 15, 1999, the Project entered into an interim
24
<PAGE>
agreement with its lenders pursuant to which the Lenders waived such defaults
until July 31, 2000. However, such waiver may expire on an earlier date if
additional defaults (other than those specifically waived) or certain other
specified events occur.
In May 1999, Paiton notified PLN that Unit 7 of Paiton achieved Commercial
Operation under terms of the PPA and that Unit 8 of Paiton achieved Commercial
Operation under the terms of the PPA in July 1999. Because of the economic
downturn, PLN is experiencing low electricity demand and PLN has therefore
dispatched the Paiton plant to zero; however, under the terms of the PPA, PLN
is required to continue to pay for capacity and fixed operating costs once each
unit and the Plant achieve Commercial Operation. An invoice for these charges
for May in the amount of $7.8 million was submitted to PLN. The project and PLN
met to review the invoice and a partial payment of $2.5 million was subsequently
received. The primary reason for the payment shortage was the use of an
arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450 Indonesian Rupiah
to one U.S. dollar by PLN. The use of this exchange rate is not in agreement
with the Power Purchase Agreement, but is the exchange rate on which PLN
payments to other independent power producers in Indonesia have been based.
Invoices for capacity charges and fixed operating costs for June, July, August
and September in an aggregate amount of $164.1 million were later submitted to
PLN. PLN has yet to make any payments in respect of such latter invoices. In
addition, PLN has filed a lawsuit contesting the validity of its agreement to
purchase electricity from the Project. The lawsuit is currently suspended and
the Project and PLN have commenced discussions to renegotiate the PPA, however,
it is not yet known what form the renegotiation may take. any material
modifications of the PPA could also require a renegotiation of the Paiton
project's debt agreements. The impact of any such renegotiations with PLN, the
Government of Indonesia or the project's creditors on EME's expected return on
its investment in Paiton is uncertain at this time, however, management believes
that it will ultimately recover its investment in the project.
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in
Brooklyn, New York. A wholly owned subsidiary of EME owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted general
monetary claims against the contractor. In connection with a $407 million non-
recourse project refinancing in 1997, EME agreed to indemnify BNY and its
partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders. EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.
EME and its subsidiaries may incur additional obligations to make equity
and other contributions to projects in the future. EME believes that it will
have sufficient liquidity on both a short- and long-term basis to fund pre-
financing project development costs, make equity contributions to partnerships,
pay corporate debt obligations and pay other administrative and general expenses
as they are incurred from (1) distributions from energy projects and dividends
from investments in oil and gas, (2) proceeds from the
25
<PAGE>
repayment of loans to energy projects and (3) funds available from EME's
revolving credit facility.
CHANGES IN INTEREST RATES, CHANGES IN ELECTRICITY POOL PRICING, FOREIGN CURRENCY
FLUCTUATIONS AND OTHER CONTRACTUAL OBLIGATIONS Changes in interest rates,
changes in electricity pool pricing and fluctuations in foreign currency
exchange rates can have a significant impact on EME's results of operations.
Interest rate changes affect the cost of capital needed to construct and finance
projects. EME has mitigated a portion of the risk of interest rate fluctuations
by arranging for fixed rate financing or variable rate financing with interest
rate swaps or other hedging mechanisms for the majority of its project
financing. Interest expense included $19.1 million and $15.6 million for the
nine months ended September 30, 1999, and 1998, respectively, as a result of
interest rate swap and collar agreements. EME has entered into several interest
rate swap and collar agreements whereby the maturity date of the swaps and
collars occurs prior to the final maturity of the underlying debt. EME does not
believe that interest rate fluctuations will have a material adverse effect on
its financial position or results of operations.
Projects in the U.K. sell their electric energy and capacity through a
centralized electricity pool, which establishes a half-hourly clearing price
(also referred to as the "pool price") for electric energy. The pool price is
extremely volatile and can vary by as much as a factor of ten or more over the
course of a few hours, due to the large differentials in demand according to the
time of day. First Hydro and Ferrybridge and Fiddler's Ferry mitigate a portion
of the market risk of the pool by entering into contracts for differences
(electricity rate swap agreements), related to either the selling or purchasing
price of power, whereby a contract specifies a price at which the electricity
will be traded, and the parties to the agreement make payments, calculated based
on the difference between the price in the contract and the pool price for the
element of power under contract. These contracts are sold in various
structures. These contracts act as a means of stabilizing production revenues
or purchasing costs by removing an element of their net exposure to pool price
volatility. On July 29, 1998, the Director General of Electricity Supply
proposed to the Minister for Science, Energy and Industry that the current
structure of contracts-for-differences and compulsory trading via the pool at
half-hourly clearing prices bid a day ahead be abolished. He proposed in its
place, among other things, the establishment of voluntary forwards and futures
markets, organized by independent market operators and evolving in response to
demand; a short-term bilateral market operating from 24 to 4-hours before a
trading period; a balancing market to enable the system operator to balance
generation and demand and resolve any transmission constraints; a settlement
process for recovering imbalances between contracted and metered volumes with
stronger incentives for being in balance; and a Balancing and Settlement Code
Panel to oversee governance of the short-term bilateral and balancing markets.
The Minister for Science, Energy and Industry has recommended that the proposal
be implemented by April 2000. Further definition of the proposal will be
required before the effects of the changes can be evaluated. Implementation of
the proposal may also require legislation.
26
<PAGE>
Electric power generated at Homer City is sold under bilateral
arrangements with domestic utilities and power marketers under short-term
contracts (two years or less) or to the Pennsylvania-New Jersey-Maryland Power
Interconnection (PJM) or the New York Power Pool (NYPP). The PJM pool has a
market which establishes an hourly clearing price. Homer City is situated in
the PJM Control Area and is physically connected to high-voltage transmission
lines serving both the PJM and NYPP markets. Power can also be transmitted to
the midwestern United States. EME has developed risk management policies and
procedures which, among other matters, address credit risk. It is EME's policy
to sell to investment grade counterparties or counterparties that have an
investment grade guarantor. EME intends on hedging a portion of the electric
output of the plant in order to lock in desirable outcomes. It plans to manage
the "spark spread" or margin, that is the spread between electric prices and
fuel prices when deemed appropriate. It plans to use forward contracts, swaps,
futures, or options contracts to achieve those objectives.
Loy Yang B sells its electric energy through a centralized electricity pool
(the National Electricity Market) which provides for a system of generator
bidding, central dispatch and a settlements system based on a clearing market
for each half-hour of every day. The Victorian Power Exchange, operator and
administrator of the pool, determines a system marginal price each half-hour.
To mitigate exposure to price volatility of the electricity traded into the
pool, Loy Yang B has entered into a number of financial hedges. From May 8,
1997 to December 31, 2000, approximately 53% to 64% of the plant output sold is
hedged under "Vesting Contracts" with the remainder of the plant capacity hedged
under the "State Hedge" described below. Vesting Contracts were put into place
by the State Government of Victoria, Australia (State), between each generator
and each distributor, prior to the privatization of electric power distributors
in order to provide more predictable pricing for those electricity customers
that were unable to choose their electricity retailer. Vesting Contracts set
base strike prices at which the electricity will be traded, and the parties to
the agreement make payments, calculated based on the difference between the
price in the contract and the half-hourly pool clearing price for the element of
power under contract. These contracts are sold in various structures. These
contracts are accounted for as electricity rate swap agreements. The State
Hedge is a long-term contractual arrangement based upon a fixed price commencing
May 8, 1997, and terminating October 31, 2016. The State guarantees SECV's
obligations under the State Hedge.
EME's electric revenues were decreased by $3.4 million for the nine months
ended September 30, 1999, compared to an increase of $87.6 million for the nine-
month period ended September 30, 1998, as a result of electricity rate swap
agreements and other hedging activities.
The electric power generated by EME's domestic operating projects,
excluding Homer City, is generally sold to electric utilities pursuant to long-
term (typically, 15 to 30-year) power sales contracts and is expected to result
in consistent cash flow under a wide range of economic and operating
circumstances. To accomplish this, EME structured its power sales contracts so
that fluctuations in fuel costs would produce
27
<PAGE>
similar fluctuations in electric and/or steam revenues and entered into long-
term fuel supply and transportation agreements.
Fluctuations in foreign currency exchange rates can affect, on a U.S.
dollar equivalent basis, the amount of EME's equity contributions to, and
distributions from, its foreign projects. As EME continues to expand into
foreign markets, fluctuations in foreign currency exchange rates can be expected
to have a greater impact on EME's results of operations in the future. At times,
EME has hedged a portion of its current exposure to fluctuations in foreign
exchange rates where it deems appropriate through financial derivatives,
offsetting obligations denominated in foreign currencies and indexing underlying
project agreements to U.S. dollars or other indices reasonably expected to
correlate with foreign exchange movements. In addition, EME has used statistical
forecasting techniques to help assess foreign exchange risk and the
probabilities of various outcomes. There can be no assurance, however, that
fluctuations in exchange rates will be fully offset by hedges or that currency
movements and the relationship between certain macro economic variables will
behave in a manner consistent with historical or forecasted relationships.
ENVIRONMENTAL MATTERS EME is subject to environmental regulation by federal,
state and local authorities in the U.S. and foreign regulatory authorities with
jurisdiction over projects located outside the U.S. EME believes that it is in
substantial compliance with environmental regulatory requirements and that
maintaining compliance with current requirements will not materially affect its
financial position or results of operations.
EME completed a partial review of its sites in 1995 and does not believe
that a material liability exists as of September 30, 1999. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these expenses are not expected to have a material impact on EME's
financial position or results of operations.
YEAR 2000 ISSUE EME has a comprehensive program in place to remediate potential
Year 2000 impacts from critical systems. EME divided its Year 2000 Issue
activities into five phases: inventory, impact assessment, remediation,
documentation and certification. A critical system was defined as those
applications and systems, including embedded processor technology, which if not
appropriately remediated might have had a significant impact on customers, the
revenue stream, regulatory compliance, or the health and safety of personnel.
With respect to critical systems, EME has achieved Year 2000 readiness as of
July 1999.
Assurances from third party operated plants have been received indicating
aggressive Year 2000 remediation programs. Monitoring of these efforts is
ongoing. Plants under construction have obtained assurances from new
construction and development contractors, who have been requested to ensure this
is part of their goals. General warranty of plants would likely include any
equipment issues that may arise regarding Year 2000 in the current year.
28
<PAGE>
The other essential component of the EME Year 2000 readiness program was to
identify and assess vendor products and business partners for Year 2000
readiness. EME put a process in place to identify and contact vendors and
business partners to determine their Year 2000 status, and has evaluated the
responses. EME's general policy requires that all newly purchased products be
Year 2000 ready or otherwise designed to allow EME to determine whether such
products present Year 2000 issues.
Plant contingency plans have been developed and reviewed for any
significant issues and to schedule appropriate testing and/or training. Such
contingency plans include developing strategies for dealing with Year 2000-
related processing failures or malfunctions due to EME's internal systems or
from external parties. EME's contingency plans evaluate reasonably likely worst
case scenarios or conditions. EME does not expect the Year 2000 issue to have a
material adverse effect on its results of operations or financial position.
However, if not effectively remediated, negative effects from Year 2000 issues,
including those related to external systems, vendors, business partners, the
independent system operator, the power exchange or customers, could cause
results to differ.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which,
as amended, will be effective in January 2001. The Statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. A derivative's gains and losses for qualifying hedges offset related
results on the hedged item in the income statement and a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. The impact of adopting Statement 133 on EME's financial
statements has not been quantified at this time.
ACQUISITIONS PENDING In March 1999, EME entered into agreements to acquire the
fossil-fuel generating assets of Commonwealth Edison Co. (ComEd), totaling 9,510
MW. EME will operate the plants, which are located in the midwestern United
States. The closing of the transaction is subject to various state and federal
regulatory approvals and is expected to be completed by year end 1999. EME
plans to finance the approximately $5 billion acquisition with a combination of
debt secured by the project, corporate debt, cash and funding from Edison
International. In connection with the acquisition, it is expected that a
subsidiary of EME will enter into transaction contracts with ComEd, whereby
ComEd will retain power purchase agreements with EME, enabling ComEd access to
certain amounts of plant output for the next five years to serve its customers.
29
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
P. T. Perusahaan Listrik Negara - One of EME's subsidiaries, MEC Indonesia,
-------------------------------
B.V. (MEC Indonesia), owns a 40% interest in P. T. Paiton Energy, (formerly
known as Paiton Energy Company), an Indonesian limited liability company ("PE").
PE constructed a 1,230 MW coal-fired power project in East Java, Indonesia (the
"Paiton Project"). The Paiton Project has achieved commercial operation. In
1994, PE entered into a Power Purchase Agreement ("PPA") with Indonesia's state-
owned electricity company, P. T. Perusahaan Listrik Negara ("PLN"), pursuant to
which PLN is obligated to purchase the capacity and energy of the Paiton
Project.
On October 7, 1999, PLN announced that it had filed a lawsuit in the
Central Jakarta District Court against PE seeking to annul the PPA,
notwithstanding that PE continued to seek a negotiated basis on which to operate
the plant for an interim period during which the parties could discuss longer
term remedies for the effect on the project of the current financial crisis
affecting Indonesia. The terms of the PPA provide that any disputes with respect
thereto must be submitted to arbitration in Stockholm, Sweden and cannot be
brought in the courts of any country. Accordingly, immediately following the
filing of PLN's lawsuit, PE commenced an arbitration in accordance with the
terms of the PPA in order to confirm the validity of the agreement and to
protect the interests of PE's shareholders, lenders and other credit support
providers. In accordance with Indonesian procedures applicable to PLN's lawsuit,
PE was served with PLN's complaint on October 22, 1999. In its complaint, PLN
has generally alleged that the PPA was the result of corruption, cronyism and
nepotism and is "one-sided and against the public interest". The first court
hearing was held on October 25, at which procedural matters were discussed,
including the possibility of the court granting a stay of up to thirty days to
give the parties time to reach an out of court settlement. On November 1, a
second hearing was held at which the court granted a fourteen day suspension of
the proceedings until November 15, 1999, to allow the parties to pursue a
negotiated settlement. PE agreed to suspend any proceedings in the arbitration
initiated by PE for an equivalent period. PE intends to contest the jurisdiction
of the Indonesian courts, based on the PPA's provision for binding arbitration,
and otherwise will vigorously contest the allegations made in PLN's complaint.
30
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.64 Coal and Capex Facility Agreement, dated July 16, 1999 between
EME Finance UK Limited; Barclays Capital and Credit Suisse
First Boston; The Financial Institutions named as Banks; and
Barclays Bank PLC as Facility Agent.
10.65 Guarantee by EME dated July 16, 1999 supporting the Coal and
Capex Facility Agreement (Facility Agreement) issued by
Barclays Bank PLC to secure EME Finance UK Limited obligations
pursuant to the Facility Agreement.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The registrant filed the following reports on Form 8-K during the quarter
ended September 30, 1999.
<TABLE>
<CAPTION>
Date of Report Date Filed Item Reported
-------------- ---------- -------------
<S> <C> <C>
July 19, 1999 August 2, 1999 2
July 19, 1999 September 30, 1999 7
</TABLE>
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Edison Mission Energy
--------------------------
(Registrant)
Date: November 11, 1999 /s/ KEVIN M. SMITH
- ----------------------- -------------------------
KEVIN M. SMITH
Senior Vice President and
Chief Financial Officer
32
<PAGE>
EXHIBIT 10.64
CONFORMED COPY
Dated 16 July 1999
EME FINANCE UK LIMITED
as Borrower
BARCLAYS CAPITAL
and
CREDIT SUISSE FIRST BOSTON
as Arrangers
THE FINANCIAL INSTITUTIONS
named as Banks
and
BARCLAYS BANK PLC
as Facility Agent
____________________________________
COAL AND CAPEX
FACILITY
___________________________________
Shearman & Sterling
London
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. INTERPRETATION........................................................ 1
2. THE FACILITIES........................................................ 14
3. PARTICIPATION OF BANKS................................................ 16
4. CONDITIONS PRECEDENT.................................................. 16
5. DRAWDOWN.............................................................. 17
6. INTEREST.............................................................. 20
7. REPAYMENT AND CASH COLLATERAL......................................... 22
8. PREPAYMENT............................................................ 22
9. CANCELLATION.......................................................... 23
10. FEES.................................................................. 23
11. TAXES AND OTHER DEDUCTIONS............................................ 24
12. CHANGE IN CIRCUMSTANCES............................................... 27
13. PAYMENTS.............................................................. 31
14. REPRESENTATIONS AND WARRANTIES........................................ 32
15. POSITIVE COVENANTS.................................................... 34
16. NEGATIVE COVENANTS.................................................... 36
17. EVENTS OF DEFAULT..................................................... 37
18. THE FACILITY AGENT.................................................... 40
19. ASSIGNMENTS AND TRANSFERS............................................. 45
20. PRO RATA PAYMENTS, RECEIPTS AND SET OFF............................... 48
21. NOTICES, CONFIDENTIALITY AND CERTIFICATES............................. 50
22. AMENDMENTS, WAIVERS AND CONSENTS...................................... 52
23. INDEMNITIES........................................................... 53
24. PARTIAL INVALIDITY.................................................... 56
25. GOVERNING LAW......................................................... 56
26. COUNTERPARTS.......................................................... 56
</TABLE>
<PAGE>
THIS FACILITY AGREEMENT is made on 16 July, 1999
BETWEEN:
(1) EME FINANCE UK LIMITED (the "Borrower");
(2) BARCLAYS CAPITAL and CREDIT SUISSE FIRST BOSTON as arrangers (the
"Arrangers");
(3) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as original banks (the
"Original Banks"); and
(4) BARCLAYS BANK PLC as Facility Agent.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires the following
expressions shall have the following meanings:
"Additional Costs Rate"
means, in relation to an Advance or unpaid sum:
(a) the cash ratio and special deposit requirements of the Bank of England
and/or the banking supervision or other costs imposed by the Financial
Services Authority, as determined in accordance with Schedule 4
(Additional Costs Rate); and
(b) any reserve asset requirements of the European Central Bank.
"Advance"
means a Coal Advance or a Capex Advance.
"Affiliate"
of a person means any subsidiary or holding company of that person, or any
subsidiary of any such holding company.
1
<PAGE>
"Applicable Margin"
means the rate calculated in accordance with Clause 6.6 (Margin).
"Arrangers' Fee Letter"
means the letter from the Arrangers to the Borrower dated on or about the
date of this Agreement setting out details of certain fees payable by the
Borrower to the Arrangers referred to in Clause 10.3 (Arrangement Fees).
"Authorisation"
includes an authorisation, consent, approval, resolution, licence,
exemption, filing, registration, notarisation or enrolment by or with any
Competent Authority or any other relevant person.
"Availability Period"
means the period commencing on the date of this Agreement and ending on the
Final Repayment Date for the Coal Facility or the Capex Facility, as the
case may be.
"Available Capex Amount"
means, as at any date:
(a) Capital Costs incurred up to that date; less
(b) Capex Drawings on that date.
"Available Coal Amount"
means, as at any date:
(a) the Stockpile Increase; less
(b) Coal Drawings,
on that date.
"Available Commitments"
2
<PAGE>
means, at any time, the Total Commitments under the Coal Facility or the
Capex Facility less the aggregate principal amount of the outstanding
Advances (including Deemed Advances) under the relevant Facility, at that
time.
"Bank"
means the Original Banks and any Transferee to whom rights and/or
obligations are assigned or transferred in accordance with Clause 19
(Assignments and Transfers) (until, in each case, its entire participation
in the Facility has been assigned or transferred to a Transferee in
accordance with Clause 19 (Assignments and Transfers)) (collectively the
"Banks").
"Business Day"
means a day, excluding Saturdays and Sundays, on which commercial banks and
foreign exchange markets are generally open for business in London.
"Capex Advance"
means the principal amount of each advance made or to be made (including
each Deemed Advance) under the Capex Facility in each case as from time to
time reduced by repayment or prepayment or consolidated in accordance with
Clause 6.1(e) (Interest Periods).
"Capex Drawings"
means, as at any date, the aggregate principal amount of Capex Advances
made on or before that date (whether or not repaid or prepaid).
"Capex Facility"
means the (Pound Sterling)223,000,000 sterling letter of credit and loan
facility to be made available to the Borrower by the Banks pursuant to
Clause 2.2 (Capex Facility).
"Capex Letter of Credit"
means a letter of credit to be issued by the Banks to the Project Company
during the L/C Availability Period in the form, or substantially in the
form, of Schedule 6 (Letters of Credit).
"Capex Utilisation"
3
<PAGE>
means a drawing under the Capex Letter of Credit.
"Capital Costs"
means the costs incurred by the Project Company after the date of the
Agreement:
(a) in developing and constructing the Capital Investments including:
(i) fees and costs of the Project Company's engineering, legal and
other advisers engaged in respect of the design, construction
and commissioning of, and contracts for, the Capital
Investments and application for relevant authorisations;
(ii) fees, costs and expenses payable in relation to any relevant
authorisations; and
(iii) fees, costs and expenses incurred in testing and commissioning
the Capital Investments;
(b) in paying legal, accounting, technical and other professional fees and
related disbursements incurred by the Project Company in connection
with the negotiation and entry into all of the documents and contracts
which relate to the Capital Investments,
but excluding any amounts payable to the Guarantor or any Affiliate of the
Guarantor or the Project Company.
"Capital Investments"
means the rebuilding of one of the stacks at the power station known as
Ferrybridge "C", Yorkshire and the fitting of appropriate emission
abatement equipment to the Power Stations as set out in the Project
Company's capital expenditure programme in the agreed form.
"Cash Collateral"
means, at any time, the amount (if any) provided to the Facility Agent by
the Borrower as cash collateral for contingent liabilities under either
Letter of Credit.
"Coal"
means coal purchased by the Project Company under the Coal Supply
Agreements.
4
<PAGE>
"Coal Advance"
means the principal amount of each advance (including each Deemed Advance)
made or to be made under the Coal Facility in each case as from time to
time reduced by repayment or prepayment or consolidated in accordance with
Clause 6.1(e) (Interest Periods).
"Coal Drawings"
means, as at any date, the aggregate principal amount of Coal Advances made
on or before that date (whether or not repaid or prepaid).
"Coal Facility"
means the (Pound Sterling)136,200,000 sterling letter of credit and loan
facility to be made available to the Borrower by the Banks pursuant to
Clause 2.1 (Coal Facility).
"Coal Letter of Credit"
means a letter of credit to be issued by the Banks to the Project Company
during the L/C Availability Period in the form, or substantially in the
form, of Schedule 6 (Letters of Credit).
"Coal Supply Agreements"
means each of the coal supply agreements dated 30 April 1999 and made
between the Project Company and PowerGen UK plc as amended by a deed of
amendment dated on or about the date of this Agreement.
"Coal Utilisation"
means a drawing under the Coal Letter of Credit.
"Commitment"
means:
5
<PAGE>
(a) in relation to an Original Bank, the amount in Sterling set opposite
its name in Schedule 1 under the heading "Coal Commitment", in the
case of the Coal Facility, or under the heading "Capex Commitment", in
the case of the Capex Facility and, in each case, the amount of any
other Bank's Commitment relating to the relevant Facility acquired by
it under Clause 19 (Assignments and Transfers); and
(b) in relation to a Bank which becomes a Bank after the date of this
Agreement, the amount of any other Bank's Commitment relating to the
relevant Facility acquired by it under Clause 19 (Assignments and
Transfers),
to the extent not cancelled, reduced or transferred under this Agreement.
"Competent Authority"
means any local, national or supranational agency, authority, department,
inspectorate, minister, official, court, tribunal or public or statutory
person (whether autonomous or not) of the United Kingdom or the European
Community.
"Deemed Advance"
means the Advance deemed to be made in the amount of, and on the date of,
any Utilisation.
"Drawdown Date"
means, in relation to an Advance, the date for the making of the Advance as
specified by the Borrower in the relevant Request or, in relation to a
Deemed Advance, the date of the corresponding Utilisation.
"Event of Default"
means any of the events specified in Clause 17.1 (Events of Default).
"Facilities"
means the Coal Facility and the Capex Facility.
"Facility Agent"
means Barclays Bank PLC acting in its capacity as facility agent for the
Banks or such other agent for the Banks as shall be appointed pursuant to
Clause 18.9 (Resignation of Facility Agent).
6
<PAGE>
"Facility Agent's Fee Letter"
means the letter from the Facility Agent to the Borrower dated on or about
the date of this Agreement setting out details of certain fees payable by
the Borrower to the Facility Agent referred to in Clause 10.2 (Agency
Fees).
"Final Repayment Date"
means:
(a) in the case of the Coal Facility, the date falling 54 months after the
date of this Agreement; and
(b) in the case of the Capex Facility, the date falling 60 months after
the date of this Agreement.
"Finance Documents"
means:
(a) this Agreement;
(b) the Coal Letter of Credit;
(c) the Capex Letter of Credit;
(d) the Facility Agent's Fee Letter;
(e) the Arrangers' Fee Letter;
(f) the Guarantee;
(g) each Transfer Certificate; and
(h) any other document designated as such by the Facility Agent and the
Borrower.
"Finance Parties"
means the Arrangers, the Facility Agent and each Bank.
7
<PAGE>
"Guarantee"
means a guarantee in the agreed form, given, or to be given, by the
Guarantor in favour of the Facility Agent.
"Guarantor"
means Edison Mission Energy, a company incorporated in the State of
California.
"Indebtedness"
has the meaning given to it in the Guarantee.
"Information Memorandum"
means the information memorandum relating to this Agreement to be
distributed by the Arrangers at the request of the Borrower.
"Interest Period"
means a period by reference to which interest is calculated and is payable
on an Advance or overdue sum.
"Issue Date"
means, in relation to a Letter of Credit the date of issue of that Letter
of Credit.
"L/C Availability Period"
means the period commencing on the date of this Agreement and ending 7 days
after the date of this Agreement.
"L/C Exposure"
means, at any time, the maximum amount of the Coal Letter of Credit or
Capex Letter of Credit at that time less the Coal Drawings or Capex
Drawings, as the case may be, at that time.
"L/C Proportion"
8
<PAGE>
means, for any Bank, the proportion borne from time to time by the relevant
Available Commitment of such Bank to the total of the relevant Available
Commitments for all the Banks.
"L/C Request"
means a request for a drawing under the Coal Letter of Credit or the Capex
Letter of Credit.
"Lending Office"
means, in relation to a Bank, the office through which it is acting for the
purposes of this Agreement.
"Letters of Credit"
means the Coal Letter of Credit and the Capex Letter of Credit.
"LIBOR"
means, in relation to an Advance or unpaid sum, the rate per annum of the
offered quotation for deposits in sterling in an amount equal or comparable
to such Advance or unpaid sum for the duration of the relevant Interest
Period which appears on page 3750 of the Telerate Service at or about 11.00
a.m. on the applicable Rate Fixing Day or, if no such offered quotation
appears on that page, then:
(a) the arithmetic mean (rounded up, if necessary, to the nearest four
decimal places) of the respective rates (as quoted to the Facility
Agent at its request) offered by the Reference Banks to leading banks
in the London interbank market at or about 11.00 a.m. on the
applicable Rate Fixing Day for deposits in the relevant currency in an
amount equal or comparable to such Advance or unpaid sum for the
duration of the relevant Interest Period; or
(b) if any Reference Bank does not provide a quote as contemplated by
paragraph (a) above, the relevant arithmetic mean determined on the
basis of the quotations supplied by the remaining Reference Banks; or
(c) if no (or only one) Reference Bank supplies a quote as contemplated by
paragraph (a), above the provisions of Clause 12.4 (Change in Market
Conditions) shall apply.
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<PAGE>
"Majority Banks"
means, at any time:
(a) Banks whose Commitments aggregate more than 66 2/3 per cent. of the
Total Commitments; or
(b) if the Total Commitments have been reduced to zero, Banks whose
Commitments aggregated more than 66 2/3 per cent. of the Total
Commitments immediately before the reduction.
"Obligors"
means the Borrower and the Guarantor.
"Party"
means a party to this Agreement.
"Potential Event of Default"
means any event which, with the giving of notice, passage of time or
satisfaction of any condition, in each case as specified in Clause 17
(Events of Default) would constitute an Event of Default.
"Power Stations"
means the power stations known as Ferrybridge C, Yorkshire and Fiddler's
Ferry, Cheshire.
"Project Company"
means Edison First Power Limited.
"Qualifying Person"
has the meaning given to it in Clause 11.7 (Exceptions).
"Rate Fixing Day"
means, in relation to an Advance, the first day of an Interest Period
relating thereto.
"Reference Banks"
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<PAGE>
means the principal London offices of Barclays Bank PLC, The Royal Bank of
Scotland plc and Bayerische Hypo-und Vereinsbank AG or, if any such Bank
ceases to be a Reference Bank, such other Bank as the Facility Agent shall
select after consultation with the Borrower.
"Relevant Tax"
means any Tax imposed by any Competent Authority of a jurisdiction in which
the Borrower is incorporated, or resident, or from or through which it
makes any payments under the Finance Documents.
"Request"
means a notice requesting a Letter of Credit or an Advance in the form set
out in Schedule 3 (Form of Request).
"Senior Creditors' Security Trustee" means Barclays Bank PLC in its
capacity as such or any successor under an intercreditor agreement dated on
or about the date of this Agreement.
"Stockpile Increase"
means, as at any date:
(a) the total cost of Coal purchased by the Project Company; less
(b) the total cost of Coal consumed or sold, and paid for, by the Project
Company (on the assumption that Coal is consumed on a first in, first
out basis),
from the date of this Agreement to the date of calculation.
"Tax"
means any present or future tax, levy, impost, duty, charge, fee, deduction
or withholding in the nature of tax whatsoever called and whether imposed,
levied, collected, withheld or assessed (and any penalty or interest
payable in connection with any failure to pay or any delay in paying the
same).
"Taxes Act" means the Income and Corporation Taxes Act 1988.
11
<PAGE>
"Total Commitments"
means the aggregate, from time to time, of the Commitments under the Coal
Facility or the Capex Facility, as the case may be.
"Transfer Certificate"
means a certificate substantially in the form set out in Schedule 5 (Form
of Transfer Certificate).
"Transfer Date"
means, in relation to any Transfer Certificate, the date for the making of
the transfer as specified in such Transfer Certificate.
"Transferee"
means a person to whom a Bank seeks to transfer all or part of its rights,
benefits and obligations hereunder.
"UK GAAP"
means generally accepted accounting principles and practices in the United
Kingdom.
"Utilisation"
means a Coal Utilisation or a Capex Utilisation.
1.2 Construction
Any reference in this Agreement to:
an "agency" of a state is a reference to any political sub-division
thereof, and any ministry, department or authority thereof and any company
or corporation which is controlled by one or more of such agencies;
an "asset" of any person means all or any part of its business,
undertaking, property, assets, revenues (including any right to receive
revenues) and uncalled capital, wherever situated;
a figure being "indexed" means adjusted to reflect the change in the Retail
Prices Index as published for the month in which the Capex Letter of Credit
and the Coal Letter of Credit are issued to the published Retail Prices
Index immediately prior to the relevant calculation hereunder;
12
<PAGE>
a "holding company" of a company or corporation shall be construed as a
reference to any company or corporation of which the first mentioned
company or corporation is a subsidiary.
"includes" or "including" shall be construed without limitation;
"in the agreed form" means in the form agreed between the Facility Agent
and the Borrower and initialled by or on behalf of each of them for the
purposes of identification;
a "month" means a period starting on one day in a calendar month and ending
on the numerically corresponding day in the next calendar month provided
that if:
(a) any such period would otherwise end on a day which is not a Business
Day, it shall end on the next Business Day in the same calendar month
or, if none, on the preceding Business Day; and
(b) a period starts on the last Business Day in a calendar month or if
there is no numerically corresponding day in the month in which that
period ends, that period shall end on the last Business Day in that
later month,
(and references to "months" shall be construed accordingly);
a "person" shall be construed as a reference to any person, firm, company,
corporation, government, state, agency of a state or any association or
partnership (whether or not having separate legal personality) of two or
more of the foregoing;
a "subsidiary" of a person shall be construed as a reference to any person
(a) which is controlled, directly or indirectly, by the first-mentioned
person, (b) more than half the issued share capital of which is
beneficially owned, directly or indirectly, by the first-mentioned person,
or (c) which is a subsidiary of another subsidiary of the first-mentioned
person;
"Tax on overall net income" of a person shall be construed as a reference
to Tax (other than Tax deducted or withheld from any payment) imposed on
that person by the jurisdiction in which its principal office (and/or, in
the case of a Bank, its Lending Office) is located by reference to (a) the
net income, profits or gains of that person worldwide or (b) such of its
net income, profits or gains as arise in or relate to that jurisdiction;
the "winding-up", "dissolution" or "administration" of a company shall be
construed so as to include any equivalent or analogous proceedings under
the laws of any relevant jurisdiction in which such company is incorporated
or any relevant jurisdiction in which such company carries on business.
1.3 References to documents and statutes
Save where the contrary is indicated, any reference in this Agreement to:
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<PAGE>
(a) any Finance Document or any other agreement or document shall be
construed as a reference to such Finance Document or other agreement
or document as the same may have been, or may from time to time be,
amended, varied, novated or supplemented; and
(b) a statute shall be construed as a reference to such statute as the
same may have been, or may from time to time be, amended or re-enacted
and all instruments, orders, regulations, by-laws, permissions and
directions at any time made thereunder.
(c) the Facility Agent or the Senior Creditors' Security Trustee is a
reference to the department, unit or persons within the Facility Agent
or Senior Creditors' Security Trustee who are carrying out the
functions of the Facility Agent or Senior Creditors' Security Trustee,
as the case may be, and have day to day responsibility for these
functions.
1.4 Time
Save where the contrary is indicated, any reference in this Agreement to a
time of day shall be construed as a reference to London time.
1.5 Change of Currency
Any references in this Agreement to a Business Day, the convention for the
calculation of the number of days in a year for interest calculation
purposes or other convention (whether for the calculation of interest,
determination of payment dates or otherwise) will, with effect from and
after the first day on which the UK becomes a participating member state in
the euro currency, to the extent that the Facility Agent specifies to be
necessary after consultation with the Borrower, be amended to comply with
any generally accepted conventions and market practice applicable to euro-
denominated obligations in the London interbank market.
1.6 Barclays Capital
Any reference in this Agreement to Barclays Capital shall be a reference to
the investment banking division of Barclays Bank PLC.
2. THE FACILITIES
2.1 Coal Facility
(a) The Banks agree, on the terms and subject to the conditions of this
Agreement, to issue the Coal Letter of Credit during the L/C
Availability Period and to make available Coal Advances to the
Borrower during the Availability Period.
14
<PAGE>
(b) The aggregate amount of all outstanding Coal Advances shall not exceed
the Total Commitments under the Coal Facility.
(c) No Bank is obliged to lend if it would cause the aggregate amount of
its participations in the Coal Advances to exceed its Commitment under
the Coal Facility.
2.2 Capex Facility
(a) The Banks agree, on the terms and subject to the conditions of this
Agreement, to issue the Capex Letter of Credit during the L/C
Availability Period and to make available Capex Advances to the
Borrower during the Availability Period.
(b) The aggregate amount of all outstanding Capex Advances shall not
exceed the Total Commitments under the Capex Facility.
(c) No Bank is obliged to lend if it would cause the aggregate amount of
its participations in the Capex Advances to exceed its Commitment
under the Capex Facility.
2.3 Purpose
(a) Each Coal Advance or Coal Utilisation shall be paid by the Banks to
the Project Company or at the Project Company's direction either:
(i) to fund amounts payable under the Coal Supply Agreements which
have become due and payable from time to time;
(ii) to reimburse the Project Company from time to time for amounts
paid under the Coal Supply Agreement.
(b) Each Capex Advance or Capex Utilisation shall be paid by the Banks to
the Project Company or at the Project Company's direction either:
(i) to meet the obligations of the Project Company in relation to
Capital Costs where funds in the revenues account of the
Project Company are insufficient to pay such costs; or
(ii) to reimburse the Project Company from time to time for amounts
in relation to Capital Costs paid by it.
(c) No Finance Party shall be obliged to enquire as to the use or
application of amounts raised under the Finance Documents.
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<PAGE>
2.4 Direction to Facility Agent
The Borrower irrevocably authorises the Facility Agent to pay the proceeds
of each Advance to the Project Company.
3. PARTICIPATION OF BANKS
3.1 Basis of Participation
(a) Each Bank hereby authorises the Facility Agent to sign the Coal Letter
of Credit and the Capex Letter of Credit on its behalf.
(b) Subject to the other provisions of this Agreement, each Bank will
participate in each Advance and each Utilisation in the proportion
which its Commitment under the relevant Facility bears to the Total
Commitments under the relevant Facility as at the Drawdown Date for
that Advance or the date of that Utilisation.
3.2 Lending Office
Each Bank will participate in each Advance and each Utilisation through its
Lending Office. If any Bank changes its Lending Office for the purpose of
this Agreement, that Bank will notify the Facility Agent, the Borrower and
the Senior Creditors' Security Trustee promptly of such change.
3.3 Rights and Obligations of Finance Parties
The rights and obligations of each of the Finance Parties under the Finance
Documents are several and the total amounts outstanding at any time under
the Finance Documents constitute separate and independent debts. Failure of
a Finance Party to observe and perform its obligations under any Finance
Document shall neither:
(a) result in any other Finance Party incurring any liability whatsoever;
nor
(b) relieve the Borrower or any other Finance Party from their respective
obligations under the Finance Documents.
3.4 Banks' Acknowledgement
Each Bank acknowledges that no Non-Recourse Person (as defined in the
Guarantee) shall have any responsibility or liability for the Obligations
(as defined in the Guarantee).
4. CONDITIONS PRECEDENT
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<PAGE>
4.1 Initial conditions precedent
(a) The Banks shall not be under any obligation to issue either Letter of
Credit nor to make any Advance available to the Borrower under this
Agreement unless the Facility Agent has received each of the documents
specified in Schedule 2 (Conditions Precedent) in form and substance
satisfactory to the Facility Agent.
(b) When the Facility Agent is satisfied that the conditions specified in
this Clause 4.1 have been fulfilled, it will promptly notify the
Borrower, the Senior Creditors' Security Trustee and the Banks.
5. DRAWDOWN
5.1 Delivery of Requests
In order to request the issue of a Letter of Credit or to borrow an
Advance, the Borrower must deliver to the Facility Agent a duly completed
Request:
(a) in the case of the issue of the Letter of Credit, on the proposed
Issue Date; and
(b) in the case of an Advance, not later than l0.00 a.m. on the proposed
Drawdown Date.
5.2 Completion of Requests
A Request will not be regarded as being duly completed unless it specifies:
(a) in the case of each Letter of Credit:
(i) the proposed Issue Date (which must be a Business Day falling
within the L/C Availability Period);
(ii) the amount of the Letter of Credit (which must not exceed the
Available Commitments under the Coal Facility or the Capex
Facility, as the case may be); and
(iii) the termination date of the Letter of Credit (which must be a
Business Day and no later than the Final Repayment Date for
the Coal Facility or the Capex Facility, as the case may be);
and
(b) in the case of an Advance:
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<PAGE>
(i) the proposed Drawdown Date (which must be a Business Day
falling within the Availability Period for the Coal Facility
or the Capex Facility, as the case may be);
(ii) the amount of the Advance requested, which must be a minimum
of (Pound Sterling)5,000,000 in the case of a Coal Advance and
(Pound Sterling)10,000,000 in the case of a Capex Advance and
a multiple of (Pound Sterling)1,000,000 in the case of a Coal
Advance and (Pound Sterling)5,000,000 in the case of a Capex
Advance and must not exceed the lower of:
(A) the Available Commitments for the Coal Facility or the
Capex Facility, as the case may be); and
(B) the Available Capex Amount or the Available Coal Amount,
as the case may be; and
(iii) the first Interest Period for the Advance (which must comply
with Clause 6.1(b) (Interest Periods)).
5.3 Accompanying documents
(a) In the case of a Coal Advance (other than a Deemed Advance), the
Request must be accompanied by:
(i) a certificate signed by a Director of the Project Company
certifying the aggregate expenditure on Coal since the date of
this Agreement; and
(ii) a certificate signed by a Director of the Project Company
certifying the aggregate cost of Coal consumed or sold, and
paid for, by the Project Company (on the assumption that Coal
is consumed on a first in, first out basis) since the date of
this Agreement.
(b) In the case of a Capex Advance (other than a Deemed Advance), the
Request must be accompanied by a certificate signed by a Director of
the Project Company certifying the Capital Costs incurred since the
date of this Agreement.
5.4 Request Irrevocable
A Request once given may not be withdrawn or revoked.
5.5 Notice to the Banks of proposed Letter of Credit and Advances
The Facility Agent will promptly give each Bank details of each Request
received and of the amount of the Bank's participation in the relevant
Letter of Credit or Advance.
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<PAGE>
5.6 Making of Advances and Utilisations
(a) Subject to the provisions of this Agreement, each Bank will make
available to the Facility Agent its participation in any Advance
properly requested under this Agreement on the relevant Drawdown Date.
(b) Without prejudice to their obligations under (c) below, the Banks
shall be under no obligation to make any Advance available to the
Borrower unless, on both the date of the Request and the relevant
Drawdown Date:
(i) the representations set out in Clause 14 (Representations and
Warranties) stipulated as being repeated on that date are true
and accurate in each case by reference to the facts and
circumstances then subsisting, and will remain true and
accurate immediately after the Advance is made; and
(ii) no Event of Default or Potential Event of Default has occurred
and is continuing or will occur as a result of making the
Advance.
(c) Each of the Banks agrees that it will make each Utilisation available:
(i) in accordance with the terms of the Letter of Credit; and
(ii) regardless of whether the representations set out in Clause 14
(Representations and Warranties) are true and accurate as at
the date of the Request and of the relevant Utilisation or
whether an Event of Default or Potential Event of Default has
occurred and is continuing or will occur as a result of making
the Utilisation.
5.7 Number of Advances
No more than five Advances (excluding Deemed Advances) may be outstanding
under each Facility at any time.
5.8 Utilisations
On the date of each Utilisation, a Deemed Advance shall be deemed to have
been made to the Borrower under the Coal Facility or the Capex Facility, as
the case may be (with a first Interest Period ending on the next succeeding
date for the payment of interest in relation to a Coal Advance or a Capex
Advance, as the case may be) and the Available Commitments under the Coal
Facility or the Capex Facility, as the case may be, shall automatically be
reduced accordingly.
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<PAGE>
6. INTEREST
6.1 Interest Periods
(a) Interest shall be calculated and payable on each Advance by reference
to Interest Periods.
(b) The period for which an Advance is outstanding shall be divided into
successive Interest Periods, each of which (other than the first,
which shall begin on the day such Advance is made) shall start on the
last day of the preceding such period.
(c) The duration of each Interest Period shall be one, three or six
months, or such other period as the Facility Agent may from time to
time agree (with the consent of all the Banks where the period is more
than six months), as specified in the relevant Request (for the first
Interest Period relating to an Advance) or as the Borrower may by
notice to the Facility Agent not later than 10.00 a.m. on the first
day of an Interest Period select (in the case of each other Interest
Period relating to an Advance). If the Borrower fails to give notice
of its selection, such Interest Period shall be three months or a
shorter period ending on the Final Repayment Date for the relevant
Facility.
(d) Each Interest Period must end on or before the Final Repayment Date
for the Coal Facility or the Capex Facility, as the case may be.
(e) If Interest Periods for more than one Advance end on the same day, all
such Advances will be consolidated and treated as one Advance at close
of business on that day.
6.2 Interest Rate
The rate of interest applicable to an Advance for an Interest Period shall
be the rate per annum determined by the Facility Agent to be the sum of:
(a) the Additional Costs Rate;
(b) the Applicable Margin; and
(c) the applicable LIBOR,
for that Advance for that Interest Period.
Interest will accrue daily and will be calculated on the basis of a 365 day
year.
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<PAGE>
6.3 Notification of Terms and Rates
The Facility Agent shall promptly notify the Borrower and the Banks of the
duration of each Interest Period and the rate of interest applicable to
such Interest Period.
6.4 Payment of Interest
On the last day of an Interest Period (and, if such Interest Period is
longer than 6 months, on the last day of each 6 monthly interval during
that Interest Period), the Borrower shall pay the unpaid interest accrued
on the Advance to which such Interest Period relates.
6.5 Default Interest
If the Borrower fails to pay any sum (including any sum payable pursuant to
this Clause 6.5) under any Finance Document on its due date (an "unpaid
sum"), the Borrower will pay default interest on such unpaid sum from its
due date to the date of actual payment (as well after as before judgment)
at a rate determined by the Facility Agent to be 1 per cent. per annum
above:
(a) where the unpaid sum is principal which has fallen due prior to the
last day of the relevant Interest Period, the rate applicable to such
principal immediately prior to the date it so fell due (but only for
the period from such due date to the last day of the relevant Interest
Period); or
(b) in any other case (including principal falling within paragraph (a)
above after the relevant Interest Period), the rate which would be
payable if the unpaid sum was an Advance made for a period equal to
the period of non-payment divided into successive periods of such
duration of 3 months or less as shall be selected by the Facility
Agent (each a "Default Interest Period").
Default interest will be payable on demand by the Facility Agent and will
be compounded at the end of each Default Interest Period.
6.6 Margin
The Applicable Margin for any Advance and any Interest Period shall be the
rate set out in column 3 which corresponds to the lowest credit rating of
the Guarantor from either Standard & Poor's Rating Services (as set out in
column 1) or Moody's Investor Services, Inc. (as set out in column 2) for
each day of the Interest Period. Any change in the Applicable Margin shall
have immediate effect on the interest rate applicable to Advances and the
Facility Agent shall promptly notify the Borrower and the Banks thereof.
21
<PAGE>
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3
- -------- -------- --------
<S> <C> <C>
GuarantorAs credit rating from Standard GuarantorAs credit rating from Applicable Margin
& Poor's Rating Services Moody's Investor Services, Inc.
A- or above A3 or above 0.75 per cent. per annum
BBB+ Baa1 0.875 per cent. per annum
BBB Baa2 1.000 per cent. per annum
BBB- Baa3 1.250 per cent. per annum
Lower than BBB- Lower than Baa3 2.250 per cent. per annum
</TABLE>
7. REPAYMENT AND CASH COLLATERAL
(a) Any Coal Advances remaining outstanding on the Final Repayment Date
for the Coal Facility or Capex Advances remaining outstanding on the
Final Repayment Date for the Capex Facility, as the case may be, shall
be repaid in full by the Borrower on that date.
(b) Cash Collateral required under Clause 12.1 (Illegality) or Clause 12.2
(Increased Costs) or Clause 17.12 (c) (Cancellation and repayment)
will be provided by the Borrower on such terms as the Majority Banks,
acting reasonably, may specify.
8. PREPAYMENT
8.1 Prepayment
(a) The Borrower may prepay an Advance or any part thereof at any time
provided that the Facility Agent has received not less than 5 Business
Days' notice from the Borrower of the proposed date and amount of the
prepayment.
(b) Any partial prepayment of an Advance will be in a minimum amount
of (Pound Sterling)5,000,000 and an integral multiple of
(Pound Sterling)1,000,000.
(c) The Borrower may prepay any Bank's participation in the Advance at any
time provided that the Facility Agent has received not less than 10
days notice from the Borrower of the proposed date of the prepayment
if:
(i) the Borrower is obliged or will become obliged to make any
additional payments under Clause 11.2 (Grossing-up of
Payments) in respect of payments to that Bank; or
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<PAGE>
(ii) that Bank has notified the Borrower that Clause 12.2
(Increased Costs) applies or will apply to that Bank.
(d) Each prepayment will be made together with accrued interest on the
Advance to be prepaid and any amount payable under Clause 23.4
(General Indemnity).
(e) Any notice of prepayment under this Agreement is irrevocable. The
Facility Agent shall notify the Banks promptly of receipt of any such
notice.
9. CANCELLATION
(a) The Total Commitments for each Facility will be cancelled on the Final
Repayment Date for the Coal Facility or the Capex Facility, as the
case may be.
(b) Before the first Issue Date, the Borrower may cancel the Total
Commitments for each Facility in whole (but not in part) by giving a
notice in writing to the Facility Agent, not less than 2 Business
Days' prior to the proposed date of cancellation.
(c) The Total Commitments for a Facility will be cancelled in an amount
equal to the amount of, and at the same time as, any reduction in the
L/C Exposure of the Letter of Credit issued under that Facility, which
reduction is requested by the Project Company.
(d) No amount of the Total Commitments cancelled under this Agreement may
subsequently be reinstated.
(e) Any notice of cancellation under this Agreement is irrevocable. The
Facility Agent shall notify the Banks promptly of receipt of any such
notice.
10. FEES
10.1 Letter of Credit Commission
(a) The Borrower shall pay to the Facility Agent for the account of each
Bank, Letter of Credit commission on the Coal Letter of Credit and on
the Capex Letter of Credit in sterling computed at the rate of the
Applicable Margin for each day during the calculation period on the
L/C Exposure for each Letter of Credit until the Final Repayment Date
for the Coal Facility or the Capex Facility, as the case may be.
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<PAGE>
(b) Accrued Letter of Credit commission is payable for each Letter of
Credit quarterly in arrear from its Issue Date to the Final Repayment
Date for the Coal Facility or the Capex Facility, as the case may be,
or on any earlier date on which the L/C Exposure under the relevant
Letter of Credit is reduced to zero.
10.2 Agency Fees
The Borrower will pay to the Facility Agent for its own account agency fees
at the times and otherwise as specified in the Facility Agent's Fee Letter.
10.3 Arrangement Fees
The Borrower will pay to the Arrangers on the date of signing of this
Agreement the fee specified in the Arrangers' Fee Letter.
10.4 VAT
All fees payable under the Finance Documents are exclusive of any value
added tax or other similar Tax chargeable upon or in connection with such
fees. If any value added tax or other similar Tax is or becomes properly
chargeable such Tax will be added to the fee concerned at the appropriate
rate and will be paid by the Borrower at the same time as the fee itself is
paid (subject to being provided with a valid Tax invoice for such Tax).
11. TAXES AND OTHER DEDUCTIONS
11.1 Payments to be free and clear
All sums payable by the Borrower under this Agreement shall be paid (a)
free of any restriction or condition (b) free and clear of and (except to
the extent required by law) without any deduction or withholding for or on
account of any Tax and (c) without deduction or withholding (except to the
extent required by law) on account of any other amount whether by way of
set-off, counter-claim or otherwise.
11.2 Grossing-up of Payments
If the Borrower or any other person is required by law to make any
deduction or withholding on account of any Relevant Tax or other amount
from any sum paid or payable by the Borrower to any Finance Party under the
Finance Documents:
(a) the Borrower shall notify the Facility Agent of any such requirement
or any change in any such requirement as soon as the Borrower becomes
aware of it;
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<PAGE>
(b) the Borrower shall pay any such Relevant Tax or other amount before
the date on which penalties attach thereto, such payment to be made
for its own account unless that liability is imposed on any other
party in which case it shall be made on behalf of and in the name of
that party;
(c) the sum payable by the Borrower in respect of which the relevant
deduction or withholding of Relevant Tax is required shall be
increased to the extent necessary to ensure that, after the making of
that deduction or withholding, that Finance Party receives on the due
date and retains (free from any liability in respect of any such
deduction or withholding) a net sum equal to the sum which it would
have received and so retained had no such deduction or withholding
been required or made; and
(d) within 30 days after paying any sum from which it is required by law
to make any deduction or withholding, and within 30 days after the due
date of payment of any Relevant Tax or other amount which it is
required by paragraph (b) above to pay, the Borrower shall deliver to
the Facility Agent evidence satisfactory to the other affected parties
of such deduction or withholding and of the remittance of such payment
to the relevant taxing or other authority.
11.3 Indemnity
Without prejudice to Clauses 11.1 (Payments to be free and clear) and 11.2
(Grossing-up of Payments), if any Finance Party (or any person on its
behalf) is required to make any payment on account of any Relevant Tax as a
direct result of the failure of the Borrower to comply with its obligations
under Clause 11.2 (Grossing-up of Payments) or any liability in respect of
any such Relevant Tax is assessed, levied, imposed or claimed against any
Finance Party (or any person on its behalf), the Borrower shall, on demand
by the Facility Agent, forthwith indemnify that Finance Party (or such
person) against such payment or liability, and any costs, charges and
expenses (including, without limitation, penalties) payable or incurred in
connection therewith.
11.4 Tax Credits
If and to the extent that any of the Finance Parties is able, in its sole
opinion, to apply or otherwise take advantage of any offsetting tax credit
or other similar tax benefit arising out of or in conjunction with any
deduction, withholding or payment which gives rise to an obligation on the
Borrower to pay any additional amount pursuant to Clause 11.2 (Grossing-up
of Payments) or 11.3 (Indemnity) that Finance Party shall, to the extent
that in its sole opinion it can do so without prejudice to the retention of
the amount of such credit or benefit and without any other adverse tax
consequences for that Finance Party, reimburse to the Borrower, at such
time as such tax credit or benefit shall have actually been received by
that Finance Party such amount as that Finance Party shall, in its sole
opinion, have determined to be attributable to the relevant deduction,
withholding or
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payment and as will leave it in no better or worse position in respect of
its worldwide tax liabilities than it would have been in if the payment of
such additional amount had not been required. Such reimbursement (if any)
shall be conclusive evidence of the amount due to the Borrower, and shall
be accepted by the Borrower, in full and final settlement of any claim for
reimbursement under this Clause 11.4.
11.5 Tax Affairs
Nothing herein contained shall oblige any of the Finance Parties to
disclose to the Borrower or any other person any information regarding its
tax affairs or tax computations or interfere with the right of any Finance
Party to arrange its tax affairs in whatsoever manner it thinks fit and, in
particular, no Finance Party shall be under any obligation to claim relief
from its corporate profits or similar tax liability in credits or
deductions available to it (and, if it does claim, the extent, order and
manner in which it does so shall be at its absolute discretion).
11.6 Collecting Agent Rules
Each Bank represents to the Facility Agent that, on the date it becomes a
party to this Agreement, it is:
(a) either:
(i) not resident in the United Kingdom for United Kingdom tax
purposes; or
(ii) a bank as defined in Section 840A of the Taxes Act and
resident in the United Kingdom; and
(b) beneficially entitled to the principal and interest payable by the
Facility Agent to it under this Agreement;
and, if it is able to make these representations on the date on which it
becomes party to this Agreement, shall forthwith notify the Facility Agent
if either representation ceases to be correct.
11.7 Exceptions
No additional amount will be payable to a Finance Party under Clause 11.2
(Grossing-up of Payments) as a result of any deduction or withholding or
payment of United Kingdom Taxes to the extent that at the time such payment
falls due such Finance Party is not a Qualifying Person and such payment
would not have fallen due had such Finance Party been a Qualifying Person
unless the reason such Finance Party is not a Qualifying Person is a change
(after the date of this
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Agreement or in the case of a Finance Party which became a party to this
Agreement after the date of this Agreement the date on which it became a
party) in any law or directive or in the interpretation or application
thereof or in any practice or concession of the United Kingdom Inland
Revenue.
For this purpose "Qualifying Person" means at any time:
(a) a bank as defined in the Section 840A of the Taxes Act for the
purposes of Section 349 of the Taxes Act which is within the charge to
United Kingdom corporation tax as regards any interest payable or paid
to it under this Agreement; or
(b) (in the case of a person which has its Lending Office outside the
United Kingdom) a person to whom payments under the Finance Documents
may be made without deduction or withholding for or on account of
United Kingdom Taxes by reason of an applicable taxation treaty
between the United Kingdom and the country in which that person is, or
is treated as, resident or carrying on business and pursuant to which
there is a valid and extant claim of such person.
11.8 Treaty Claims
Each Finance Party which is a Qualifying Person by virtue of paragraph (b)
of the definition thereof shall as soon as reasonably practicable make the
necessary claim under the relevant double taxation treaty for exemption
from United Kingdom Taxes and shall take all other steps as may be
necessary to facilitate the obtaining of a direction from the Inland
Revenue that payments may be made to that Finance Party by the Borrower
without withholding or deduction in respect of such Taxes.
12. CHANGE IN CIRCUMSTANCES
12.1 Illegality
If at any time, as a result of the introduction of or any change in, or in
the interpretation or application or administration of any law or (whether
or not having the force of law but, if not having the force of law, being
one with which it is the practice of banks in the relevant jurisdiction to
comply) any directive of any agency of any state, it is or will become
unlawful or contrary to any such directive for any Bank to allow all or
part of its Commitment to remain outstanding and/or to make, fund or allow
to remain outstanding all or part of its share of any Advance or
Utilisation and/or to carry out all or any of its other obligations under
this Agreement:
(a) upon that Bank notifying the Borrower, its Commitment shall be
cancelled;
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(b) the Borrower shall provide Cash Collateral for that Bank's L/C
Proportion of the L/C Exposure under the Coal Letter of Credit and the
Capex Letter of Credit or procure that the contingent liability of
that Bank under that Letter of Credit is reduced by such an amount to
the satisfaction of the Facility Agent; and
(c) the Borrower shall prepay that Bank's portion of each such Advance as
that Bank shall certify to be necessary to comply with the relevant
law or directive, with accrued interest thereon and any other sum then
due to that Bank under this Agreement on the last day of the then
current Interest Period for that Advance or such earlier date as that
Bank shall certify to be necessary to comply with the relevant law or
directive.
12.2 Increased Costs
(a) If, as a result of the introduction of or any change in, or in the
interpretation or application or administration of, any law or
(whether or not having the force of law but, if not having the force
of law, being one with which it is the practice of banks in the
relevant jurisdiction to comply) any directive of any agency of any
state including, any law or directive relating to taxation, reserve
asset, special deposit, cash ratio, liquidity or capital adequacy
requirements or other forms of banking, fiscal, monetary, or
regulatory controls (and including any change in the risk weighting
applied to any amount):
(i) the cost to any Bank of maintaining all or any part of its
Commitment and/or of making, maintaining or funding all or any
part of its share of any Advance or Letter of Credit or
overdue sum is increased; and/or
(ii) any sum received or receivable by any Finance Party under the
Finance Documents or the effective return to it under the
Finance Documents is reduced; and/or
(iii) any Finance Party makes any payment or foregoes any interest
or other return on or calculated by reference to the amount of
any sum received or receivable by it under the Finance
Documents;
the Borrower shall indemnify that Finance Party against that increased
cost, reduction, payment or foregone interest or other return and,
accordingly, shall from time to time on demand (whenever made) pay to
the Facility Agent for its own account or for the account of that
Finance Party the amount certified by it to be necessary so to
indemnify it.
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(b) The Borrower will not be obliged to compensate any Finance Party
pursuant to paragraph (a) above in respect of any increased cost,
reduction, payment, foregone interest or other return:
(i) compensated for by payment of the Additional Costs Rate;
(ii) attributable to a change in the Tax on the overall net income
of that Finance Party or compensated for under Clause 11
(Taxes and other Deductions); or
(iii) attributable to a breach of, or default in compliance with,
any law or directive by that Finance Party.
(c) To the extent that any holding company of any Finance Party suffers a
cost which would have been recoverable by that Finance Party under
this Clause 12.2 had that cost been imposed on that Finance Party,
that Finance Party shall be entitled to recover that amount under this
Clause 12.2 on behalf of the relevant holding company.
(d) If the Borrower is required to compensate any Finance Party pursuant
to paragraph (a) above in respect of any increased cost, reduction,
payment, forgone interest or other return then it may:
(i) prepay that Bank's portion of any Advance upon not less than
10 days' notice with accrued interest thereon and any other
sum then due to that Bank under this Agreement; and
(ii) provide Cash Collateral for that Bank's L/C Proportion of the
L/C Exposure under the Coal Letter of Credit or the Capex
Letter of Credit or procure that the contingent liability of
that Bank under that Letter of Credit is reduced by such an
amount to the satisfaction of the Facility Agent.
12.3 Mitigation
If in respect of any Bank, circumstances arise which would, or would upon
the giving of notice, result in:
(a) an obligation to make any payment or the cancellation of its
Commitment under Clause 11 (Taxes and Other Deductions); or
(b) an obligation to provide Cash Collateral or to make payment or the
cancellation of its Commitment under Clause 12.1 (Illegality); or
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(c) a demand for compensation under Clause 12.2 (Increased Costs);
then, without in any way limiting, reducing or otherwise qualifying the
obligations of the Borrower under those Clauses, upon the request of the
Borrower, such Bank, in consultation with the Facility Agent and the
Borrower, shall take such reasonable steps as may be open to it (including
the transfer by the relevant Bank of its Commitment and participations in
outstanding Advances to a bank or financial institution acceptable to the
Borrower) to mitigate the effects of such circumstances, on terms mutually
acceptable to the Facility Agent, that Bank and the Borrower, provided that
the Bank concerned will not be obliged to take any action if to do so would
or might in the opinion of the Bank have an adverse effect upon its
business, operations or financial condition or cause it to incur
liabilities or obligations (including tax liabilities) which, in its
opinion, are material or cause it to incur any costs or expenses for which
it has not been indemnified to its satisfaction by the Borrower.
12.4 Change in Market Conditions
(a) If in relation to any Interest Period:
(i) no or only one Reference Bank supplies a quotation in
accordance with the definition of LIBOR; or
(ii) on the basis of notifications from Banks whose Commitments
exceed 50% of the Total Commitments under the Coal Facility or
the Capex Facility, as the case may be, the Facility Agent
determines that (a) matching deposits are not available in the
London Inter-Bank Market at or about 11 a.m. on the Rate
Fixing Day for that Interest Period in sufficient amounts to
fund their respective shares of the amount to which that
Interest Period relates during that Interest Period or (b) the
quotations supplied do not accurately reflect the cost to the
Banks of obtaining such deposits,
the Facility Agent shall promptly notify the Borrower and the Banks.
(b) The Facility Agent (on behalf of and after consultation with the
Banks) shall then negotiate with the Borrower with a view to agreeing
an alternative basis for calculating the interest payable on the
Advance(s) to which that Interest Period relates. Any alternative
basis agreed in writing by the Facility Agent (on behalf of and with
the consent of all the Banks) and the Borrower within 10 Business Days
of the Facility Agent's notification of the event in question shall
take effect in accordance with its terms. If an alternative basis is
not so agreed, each Bank's share of such Advance(s) shall during that
Interest Period bear interest at the rate per annum equal to the sum
of (i) the Applicable Margin and (ii) the cost to that Bank (as
certified by it to the Borrower within 10 Business Days of the end of
that 10 Business Day period and expressed as a rate per annum) of
funding its share during that
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Interest Period by whatever means that Bank determines (acting
reasonably) to be most appropriate (which shall include Additional
Costs).
13. PAYMENTS
13.1 By Banks
(a) On each date on which an Advance or Utilisation is to be made, each
Bank shall make its share of that Advance or Utilisation available to
the Facility Agent in the place for payment to the Borrower by
payment in Sterling and in immediately available cleared funds to
such account as the Facility Agent shall specify.
(b) The Facility Agent shall make the amounts so made available to it
available to the Borrower, the Project Company or such other person
as specified in the relevant Request or L/C Request before close of
business in the place of payment on that date by payment in the same
currency and funds as received by the Facility Agent to such account
of the Borrower , the Project Company or other person as shall have
been specified in the Request or L/C Request. If any Bank makes its
share of any Advance or Utilisation available to the Facility Agent
later than required by paragraph (a) above, the Facility Agent shall
make that share available to the Borrower, the Project Company or
other person as soon as practicable thereafter.
13.2 By the Borrower
(a) On each date on which any sum is due from the Borrower, it shall make
that sum available to the Facility Agent in the place for payment by
payment in the currency in which that sum is due and in immediately
available cleared funds to such account as the Facility Agent shall
specify.
(b) The Facility Agent shall make available to each Finance Party before
close of business in that place on that date its pro rata share (if
any) of any sum so made available to the Facility Agent in the same
currency and funds as received by the Facility Agent to such account
of that Finance Party with such bank in that place as it shall have
specified to the Facility Agent. If any sum is made available to the
Facility Agent later than required by paragraph (a) above, the
Facility Agent shall make each Bank's share (if any) available to it
as soon as practicable thereafter.
13.3 Refunding of Payments
The Facility Agent shall not be obliged to make available to any person
any sum which it is expecting to receive for the account of that person
until it has been able to establish that
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it has received that sum. However, it may do so if it wishes. If and to
the extent that it does so but it transpires that it had not then received
the sum which it paid out:
(a) the person to whom the Facility Agent made that sum available shall
on request refund it to the Facility Agent; and
(b) the person by whom that sum should have been made available or, if
that person fails to do so the person to whom that sum should have
been made available, shall on request pay to the Facility Agent the
amount (as certified by the Facility Agent) which will indemnify the
Facility Agent against any funding or other cost, loss, expense or
liability sustained or incurred by it as a result of paying out that
sum before receiving it.
13.4 Non-Business Days
(a) If an Interest Period would otherwise end on a day which is not a
Business Day, it shall instead end on the succeeding Business Day or,
if that Business Day falls in a new calendar month, the preceding
Business Day.
(b) Subject to paragraph (a) above, any payment to be made by the
Borrower on a day which is not a Business Day shall instead be due on
the next Business Day.
14. REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties
The Borrower, having made all reasonable enquiries, makes the
representations and warranties set out in this Clause 14 to each of the
Finance Parties.
14.2 Due incorporation
(a) It is a limited liability company, duly incorporated and validly
existing under the laws of the jurisdiction of its incorporation.
(b) It has the power to own its assets and carry on its business as it is
being conducted.
14.3 Due execution
(a) It has the power to execute, deliver and perform, and has taken all
necessary action to authorise the execution, delivery and performance
of its obligations under, each Finance Document to which it is a
party.
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(b) No limitation on its powers to borrow or give guarantees or security
will be exceeded as a result of borrowings or creation of security
under the Finance Documents.
14.4 Valid obligations
Subject to the reservations in the legal opinions to be provided pursuant
to Clause 4.1(a) (Initial Conditions Precedent), each Finance Document to
which it is or will be a party constitutes its valid, legally binding and
enforceable obligations.
14.5 Authorisations
All Authorisations required to be obtained by it in connection with the
entry into, performance, validity and enforceability of the Finance
Documents and the transactions contemplated by the Finance Documents have
been obtained or effected and are in full force and effect.
14.6 Pari passu ranking
Its obligations under the Finance Documents will be direct, general and
unconditional obligations and, to the extent not secured, rank at least
pari passu with all its other present and future unsecured and
unsubordinated obligations, with the exception of any obligations which
are mandatorily preferred by law and not by contract.
14.7 No conflict with other documents
The execution and delivery of, the performance of its obligations under,
and compliance with the provisions of, the Finance Documents to which it
is a party do not and will not:
(a) contravene any existing applicable law, statute, rule or regulation
or judicial or official order, decree or Authorisation to which it is
subject; or
(b) conflict with any provision of its memorandum and articles of
association; or
(c) conflict with, or result in any breach of any of the terms of, or
constitute a default under, any agreement or other instrument to
which it is a party or is subject or by which it or any of its
property is bound.
14.8 No insolvency or creditors' process
It has not taken any steps and is not aware of any steps having been or
are being taken for its winding-up, dissolution, administration or
reorganisation or similar event or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer
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of it or any or all of its assets or revenues and no petition, execution,
attachment or any similar process has been levied or enforced against its
assets or revenues.
14.9 No prior business
The Borrower is a single purpose vehicle and it has not previously
conducted any business, entered into any contracts, given any security,
incurred any liabilities or acquired any assets.
14.10 Application of Advances and Utilisations
The proceeds of each Advance and each Utilisation will be applied for the
purpose set out in Clause 2.3 (Purpose).
14.11 Times for making Representations and Warranties
The representations and warranties set out in this Clause 14 are made by
the Borrower on the date of this Agreement. The representations in Clauses
14.2 (Due Incorporation) to 14.4 (Valid Obligations) (inclusive) and
Clause 14.10 (Application of Advances and Utilisations) are deemed to be
repeated by the Borrower on the date of a Request and the first day of
each Interest Period with reference to the facts and circumstances then
existing.
15. POSITIVE COVENANTS
15.1 Positive covenants
The Borrower undertakes with the Finance Parties, that, except with the
prior written consent of the Facility Agent, it shall comply with the
covenants set out in this Clause 15.
15.2 Authorisations
The Borrower shall obtain, or cause to be obtained, maintain and comply
with the terms of any Authorisations required by it, and promptly
following a request by the Facility Agent to do so, supply certified
copies of material Authorisations to the Facility Agent, to authorise or
in connection with:
(a) the execution, delivery, validity, enforceability or admissibility in
evidence of each Finance Document to which it is a party;
(b) the performance by it of its obligations and the enforcement of its
rights under each Finance Document to which it is a party.
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15.3 Compliance with laws
The Borrower shall, in all material respects do, or cause to be done, all
acts and things which may from time to time be required under any
applicable law or regulation for the due performance of all of its
obligations under each Finance Document to which it is a party.
15.4 Pari passu ranking
The Borrower will ensure that its obligations under each of the Finance
Documents are direct, general and unconditional obligations and to the
extent not secured, rank and will at all times rank at least pari passu in
right and priority of payment with all its other present and future
unsecured and unsubordinated indebtedness (actual or contingent) with the
exception of any obligations which are mandatorily preferred by law and
not by contract.
15.5 Financial information
(a) The Borrower shall supply in sufficient copies for each of the Banks,
to the Facility Agent as soon as the same become available, but in
any event within 120 days after the end of each of its financial
years (beginning with the current financial year), a copy of its
audited, financial statements for such financial year together with
the Auditors' report and management letter accompanying such
financial statements (the "Audited Accounts").
(b) The Borrower shall procure that the financial statements delivered
pursuant to paragraph (a) above shall include such financial
statements as are required by the Companies Act 1985 and UK GAAP and
save as stated in the notes thereto, were prepared and audited in
accordance with UK GAAP consistently applied and together with those
notes, give a true and fair view of its state of affairs, profits and
financial condition as at that date and for the financial year then
ended.
15.6 Notification of Events of Default
The Borrower will notify the Facility Agent of the occurrence of any Event
of Default or Potential Event of Default promptly upon becoming aware of
it, together with details of what action (if any) is being taken or
proposed to be taken to remedy the Event of Default or Potential Event of
Default.
15.7 Further information
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The Borrower shall promptly supply to the Facility Agent on request such
information in relation to its business, financial condition and
operations as the Facility Agent may reasonably request.
15.8 Notification of other events
As soon as practicable after becoming aware of the occurrence of the same,
the Borrower will inform the Facility Agent in writing of:
(a) the commencement, or threat of commencement, of any material legal or
administrative proceedings against the Borrower or the Guarantor;
(b) the receipt of any adverse legal, Tax or governmental regulatory
notice which is significant;
together with, in each case, where appropriate, details of the proposed
response or remedial action (including regular updates of the remedial
action, as reasonably requested by the Facility Agent).
15.9 Taxes
The Borrower shall promptly pay all Taxes when due, unless and to the
extent that the Taxes are being contested in good faith by the Borrower.
15.10 Special purpose vehicle
Save with the consent of the Majority Banks (such consent not to be
unreasonably withheld), the Borrower shall remain a special purpose
vehicle and shall not conduct any business, enter into any contracts, give
any security, incur any liabilities or acquire any assets other than in
relation to the Finance Documents and anything incidental thereto.
16. NEGATIVE COVENANTS
16.1 Negative covenants
The Borrower undertakes with the Finance Parties that, except with the
prior written consent of the Facility Agent, it shall comply with the
covenants set out in this Clause 16.
16.2 Amendments to Memorandum and Articles of Association
The Borrower will not amend or permit any amendment to or variation of its
Articles of Association and/or its Memorandum of Association except for an
amendment or variation which does not adversely affect the interests of
the Finance Parties and which is promptly notified to the Facility Agent.
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16.3 Restriction on mergers
The Borrower will maintain its corporate existence and will not enter into
any amalgamation, demerger, merger or reconstruction.
17. EVENTS OF DEFAULT
17.1 Events of Default
Each of the events or circumstances as set out in this Clause 17 is an
Event of Default.
17.2 Non-Payment of Obligations
An Obligor shall default in the payment when due under any Finance
Document (and such default shall continue unremedied for a period of five
Business Days).
17.3 Breach of Warranty
Any representation or warranty of an Obligor made or deemed to be restated
or remade in any Finance Document or any other writing or certificate
furnished by or on behalf of an Obligor to the Facility Agent or any Bank
for the purposes of or in connection with any Finance Document is or shall
be incorrect when made or deemed made in any material respect.
17.4 Non-Performance of Certain Covenants and Obligations
The Guarantor shall default in the due performance and observance of any
of its obligations under Clause 4.2 (Negative Covenants) of the Guarantee
(other than Clauses 4.2.3 (Financial Condition) and 4.2.7 (Transactions
with Affiliates)).
17.5 Non-Performance of Other Covenants and Obligations
An Obligor shall default in the due performance and observance of any
covenant or agreement (other than those where such default is an Event of
Default under Clause 17.4 (Non-Performance of Certain Covenants and
Obligations)) contained in any Finance Document and such default shall
continue unremedied for a period of 30 days after written notice thereof
shall have been given to the relevant Obligor by the Facility Agent.
17.6 Default on Other Indebtedness
A default shall occur in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any Indebtedness
of an Obligor or a default shall occur in the performance or observance of
any obligation or condition with respect to such Indebtedness if the
effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such
Indebtedness, or any trustee or agent for such holders, to cause such
Indebtedness to become
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due and payable prior to its expressed maturity, in either case, such
default having a principal amount, individually or in the aggregate, in
excess of US$20,000,000 (other than Indebtedness described in Clause 17.2
(Non-Payment of Obligations) above).
17.7 Judgments
Any judgment or order for the payment of money in excess of US$20,000,000
(taking into account any insurance proceeds payable under a policy where
the insurer has accepted coverage without reservation) shall be rendered
against an Obligor and either:
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or
(b) there shall be any period of fifteen (15) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
17.8 Pension Plans
Any of the following events shall occur with respect to any Pension Plan
(as that term is defined in the Guarantee):
(a) the institution of any steps by an Obligor, any member of its
Controlled Group (as that term is defined in the Guarantee) or any
other Person to terminate a Pension plan if, as a result of such
termination, the Guarantor or any such member could be required to
make a contribution to such Pension Plan, or could reasonably expect
to incur a liability or obligation to such Pension Plan, in excess of
US$20,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien (as that term is defined in the
Guarantee) under Section 302(f) of ERISA (as that term is defined in
the Guarantee).
17.9 Control of an Obligor
(a) Any Change in Control (as that term is defined in the Guarantee)
shall occur; or
(b) The Borrower is not or ceases to be the wholly owned subsidiary of
the Guarantor.
17.10 Bankruptcy, Insolvency
An Obligor shall:
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(a) become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver, administrator, administrative receiver, liquidator,
sequestrator or other custodian for that Obligor or a substantial
portion of its property, or make a general assignment for the benefit
of creditors;
(c) in the absence of such application, consent or acquiescence, permit
or suffer to exist the appointment of a trustee, receiver,
administrator, administrative receiver, liquidator, sequestrator or
other custodian for that Obligor or for a substantial part of its
property, and such trustee, receiver, administrator, administrative
receiver, liquidator, sequestrator or other custodian shall not be
discharged within 60 days, provided that nothing in the Finance
Documents shall prohibit or restrict any right the Facility Agent or
any Bank may have under applicable law to appear in any court
conducting any relevant proceeding during such 60 day period to
preserve, protect and defend its right under the Finance Documents
(and that Obligor shall not object to any such appearance);
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganisation, debt arrangement, administration or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of that
Obligor and, if any such case or proceeding is not commenced by that
Obligor, such case or proceeding shall be consented to or acquiesced
in by that Obligor or shall result in the entry of an order for
relief or shall remain for 60 days undismissed, provided that nothing
in the Finance Documents shall prohibit or restrict any right the
Facility Agent or any Bank may have under applicable law to appear in
any court conducting any such case or proceeding during such 60 day
period to preserve, protect and defend its rights under the Finance
Documents (and that Obligor shall not object to any such appearance);
or
(e) take any corporate action authorising, or in furtherance of, any of
the foregoing.
17.11 Guarantee
(a) The Guarantee is not or ceases to be, for any reason, the valid,
legally binding and enforceable obligation of the Guarantor; or
(b) This Agreement is not or ceases to be, for any reason, the valid,
legally binding and enforceable obligation of the Borrower.
17.12 Cancellation and repayment
At any time after the occurrence of an Event of Default (and whilst the
same is continuing) the Facility Agent may, and will if so directed by the
Majority Banks, by written notice to the
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Borrower do all or any of the following in addition and without prejudice
to any other rights or remedies which it or any other Finance Party may
have under this Agreement or any of the other Finance Documents:
(a) declare all Advances, accrued interest thereon and any other sum then
payable under this Agreement and any of the other Bank Finance
Documents to be immediately due and payable, whereupon such amounts
shall become so due and payable; and/or
(b) declare all Advances to be payable on demand whereupon the same shall
become payable on demand; and/or
(c) require the Borrower to provide Cash Collateral for the L/C Exposure
of each Letter of Credit (less the aggregate of any remaining Cash
Collateral provided under Clause 12.1 (Illegality) or Clause 12.2
(Increased Costs)) whereupon the Borrower shall provide such Cash
Collateral.
18. THE FACILITY AGENT
18.1 Authorisation
(a) Each Bank hereby appoints and authorises the Facility Agent to take
such action as agent on its behalf and to exercise such powers and
discretions under the Finance Documents as are delegated to the
Facility Agent by the terms of the Finance Documents together with
such other powers and discretions as are reasonably incidental
thereto.
(b) The Facility Agent will act solely as agent for the Banks in carrying
out its functions as agent under the Finance Documents. The Facility
Agent shall not have, nor be deemed to have, assumed any obligations
to, or trust or fiduciary relationship with, the other Finance
Parties or the Obligors other than those for which specific provision
is made by the Finance Documents.
18.2 Facility Agent's Duties
The Facility Agent shall:
(a) promptly send to each Bank each notice received by it from an Obligor
under any of the Finance Documents except in the case of any notice
relating to a particular Bank which shall be sent to that Bank only;
(b) (subject to those provisions of the Finance Documents which require
the consent of all the Banks) act in accordance with any instructions
from the Majority Banks or, if so instructed
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by the Majority Banks, refrain from exercising a right, power or
discretion vested in it under any of the Finance Documents;
(c) have only those duties, obligations and responsibilities expressly
specified in the Finance Documents; and
(d) without prejudice to Clause 18.7 (Information) promptly notify each
Bank if it becomes aware of the occurrence of any Event of Default or
Potential Event of Default.
18.3 Facility Agent's Rights
The Facility Agent may:
(a) perform any of its duties, obligations and responsibilities under
this Agreement or any of the other Finance Documents by or through
its personnel or agents;
(b) refrain from exercising any right, power or discretion vested in it
under the Finance Documents until it has received instructions from
the Majority Banks as to whether (and, if it is to be, the way in
which) it is to be exercised and shall in all cases be fully
protected when acting, or (if so instructed) refraining from acting,
in accordance with instructions from the Majority Banks;
(c) treat (i) the Bank which makes available any portion of an Advance as
the person entitled to repayment of that portion unless the Facility
Agent has received a Transfer Certificate in relation to all or part
of it in accordance with Clause 18 (Assignments and Transfers); and
(ii) the office notified to the Facility Agent on or before the date
of this Agreement (or, in the case of a Transferee, specified at the
end of the Transfer Certificate to which it is a party as Transferee)
as its Lending Office unless the Facility Agent has received from
that Bank a notice of change of Lending Office and may act on any
such notice until it is superseded by a further such notice;
(d) refrain from doing anything which would or might in its opinion be
contrary to any law, regulation or judgment of any court of any
jurisdiction or any directive of any agency of any state or otherwise
render it liable to any person and may do anything which is in its
opinion necessary to comply with any such law, regulation, judgment
or directive;
(e) assume that no Event of Default or Potential Event of Default has
occurred unless an officer of the Facility Agent, while active on the
account of either Obligor acquires actual knowledge to the contrary;
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(f) refrain from taking any step (or further step) to protect or enforce
the rights of any Bank under the Finance Documents until it has been
indemnified and/or secured to its satisfaction against any and all
costs, losses, expenses or liabilities (including legal fees) which
it would or might sustain or incur as a result;
(g) rely on any communication or document believed by it to be genuine;
(h) rely, as to any matter of fact which might reasonably be expected to
be within the knowledge of an Obligor, on a statement by or on behalf
of such Obligor;
(i) obtain and pay for such legal or other expert advice or services as
may to it seem necessary or desirable and rely on any such advice;
(j) retain for its own benefit and without liability to account any fee
or other sum receivable by it for its own account; and
(k) accept deposits from, lend money to, provide any advisory or other
services to or engage in any kind of banking or other business with
any party to the Finance Documents, or any Affiliate of any party
(and, in each case, may do so without liability to account).
18.4 Exoneration of Facility Agent
Neither the Facility Agent nor any of its personnel or agents will:
(a) be responsible for the adequacy, accuracy or completeness of any
representation, warranty, statement or information in any Finance
Document or any notice or other document delivered under any Finance
Documents (including the Information Memorandum);
(b) be responsible for the execution, delivery, validity, legality,
adequacy, enforceability or admissibility in evidence of any Finance
Document;
(c) be responsible for the collectability of amounts payable under any
Finance Document;
(d) be obliged to enquire as to the occurrence or continuation of an
Event of Default or Potential Event of Default; or
(e) be liable for anything done or not done by it or any of them under or
in connection with any Finance Document save in the case of its own
or their own negligence or wilful misconduct.
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18.5 Facility Agent as a Finance Party
The Facility Agent shall have the same rights and powers with respect to
its participation in the Finance Documents as any other Finance Parties
and may exercise those rights and powers as if it were not also acting as
Facility Agent.
18.6 Non-Reliance on Facility Agent
Each of the Finance Parties confirms that it has itself been, and will at
all times continue to be, solely responsible for making its own
independent investigation and appraisal of the business, financial
condition, creditworthiness, status and affairs of the Borrower and its
related entities and has not relied, and will not at any time rely, on the
Facility Agent:
(a) to provide it with any information relating to the business,
financial condition, creditworthiness, status or affairs of the
Borrower, whether coming into its possession before or after the
making of any Advance (save as provided in Clause 18.2 (Facility
Agent's Duties)); or
(b) to check or enquire into the adequacy, accuracy or completeness of
any information provided by the Borrower under or in connection with
any Finance Document (whether or not such information has been or is
at any time circulated to it by the Facility Agent); or
(c) to assess or keep under review the business, financial condition,
creditworthiness, status or affairs of the Borrower.
18.7 Information
(a) The Facility Agent shall promptly forward to the person concerned the
original or a copy of any document which is delivered to the Facility
Agent for that person.
(b) Except where this Agreement specifically provides otherwise, the
Facility Agent is not obliged to review or check the accuracy or
completeness of any document it forwards to another party to this
Agreement.
(c) Except as provided above, the Facility Agent has no duty:
(i) either initially or on a continuing basis to provide any Bank
with any credit or other information concerning the financial
condition or affairs of the Borrower or its related entities,
whether coming into its possession before, on or after the
date of this Agreement; or
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(ii) unless specifically requested to do so by a Bank in accordance
with a Finance Document to request any certificates or other
documents from the Borrower.
18.8 Indemnity to Facility Agent
To the extent that the Borrower does not do so on demand or is not obliged
to do so, each Bank shall on demand indemnify the Facility Agent in the
proportion borne by its Commitments to the Total Commitments at the
relevant time (or, if no Commitments are then outstanding, in the
proportion borne by its Commitments to the Total Commitments at the last
time there were any) against any cost, expense or liability mentioned in
Clause 23 (Indemnities) or sustained or incurred by the Facility Agent in
complying with any instructions from the Majority Banks or otherwise
sustained or incurred by it in connection with the Finance Documents or
its duties, obligations and responsibilities under the Finance Documents
except to the extent that they are sustained or incurred as a result of
the negligence or wilful misconduct of the Facility Agent or any of its
personnel or agents.
18.9 Resignation of Facility Agent
The Facility Agent may resign its appointment hereunder at any time
without assigning any reason therefor by giving not less than thirty days'
prior written notice to that effect to the Borrower and each of the other
Finance Parties provided that no such resignation shall be effective until
a successor for the Facility Agent is appointed in accordance with this
Clause 18.9. If the Facility Agent gives notice of its resignation then
any reputable and experienced bank or other financial institution with
offices in London may after consultation with the Borrower be appointed as
a successor to the Facility Agent by the Majority Banks during the period
of such notice but, if no such successor is so appointed, the Facility
Agent may appoint a successor itself after consultation with the Borrower.
If a successor to the Facility Agent is so appointed, then (i) the
retiring Facility Agent shall be discharged from any further obligation
hereunder but shall remain entitled to the benefit of the provisions of
this Clause 18 and (ii) its successor and each of the other parties hereto
shall have the same rights and obligations amongst themselves as they
would have had if such successor had been an original party hereto.
18.10 Payments to Finance Parties
(a) The Facility Agent will account to the other Finance Parties for
their respective due proportions of all sums received by the Facility
Agent for such Finance Parties, whether by way of repayment of
principal or payment of interest, commitment commission, fees or
otherwise.
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(b) The Facility Agent may retain for its own use and benefit, and will
not be liable to account to the other Finance Parties for all or any
part of any sums received by way of agency or arrangement fee or by
way of reimbursement of expenses incurred by it.
18.11 Change of Office of Facility Agent
The Facility Agent may at any time and from time to time in its sole
discretion by written notice to the Borrower and each of the other Finance
Parties designate a different office from which its duties as Facility
Agent will be performed.
19. ASSIGNMENTS AND TRANSFERS
19.1 Successors
This Agreement shall be binding upon and enure to the benefit of each
party hereto and its or any subsequent successors, Transferees and
assigns.
19.2 Assignments and Transfers by the Borrower
The Borrower shall not be entitled to assign or transfer all or any of its
rights, benefits and obligations hereunder.
19.3 Transfer by Banks
(a) Subject to paragraph (b) below, a Bank (the "Existing Bank") may at
any time transfer any of its rights and obligations under the Finance
Documents to another bank or financial institution (the "New Bank").
An Existing Bank shall transfer its rights and obligations to a New
Bank where the credit rating of the Existing Bank has fallen below A-
as rated by Standard & Poor's or A3 by Moody's Investor Services Inc.
unless the Existing Bank is able to provide cash collateral for all
its obligations under the Letters of Credit to the satisfaction of
the Project Company. The prior consent of the Borrower and of the
Guarantor is required for any such transfer (unless such transfer is
to an Affiliate or to a New Bank which was already a Bank), but will
not be unreasonably withheld or delayed.
(b) Subject to paragraph (c) below, no Bank may assign, transfer, novate
or dispose of, or any interest in, rights and/or obligations under
the Finance Documents other than in accordance with Clause 19.4
(Procedure for Transfer).
(c) Nothing in this Agreement restricts the ability of a Bank to sub-
contract an obligation if that Bank remains liable under this
Agreement for that obligation.
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(d) On each occasion an Existing Bank transfers any of its rights and
obligations under the Finance Documents, the New Bank shall, on the
date the transfer takes effect, pay to the Facility Agent for its own
account a fee of (Pound Sterling)1,000 (indexed).
(e) An Existing Bank is not responsible to a New Bank for:
(i) the execution, genuineness, validity, enforceability or
sufficiency of any Finance Document or any other document;
(ii) the collectability of amounts payable under any Finance
Document; or
(iii) the accuracy of any statements (whether written or oral) made
in or in connection with any Finance Document.
(f) Each New Bank confirms to the Existing Bank and the other Finance
Parties that it:
(i) has made its own independent investigation and assessment of
the financial condition and affairs of the Obligors and its
related entities in connection with its participation in this
Agreement and has not relied exclusively on any information
provided to it by the Existing Bank in connection with any
Finance Documents; and
(ii) will continue to make its own independent appraisal of the
creditworthiness of the Obligors and its related entities
while any amount is or may be outstanding under this Agreement
or any Commitment is in force.
(g) Nothing in any Finance Document obliges an Existing Bank to:
(i) accept a re-transfer from a New Bank of any of the rights and
obligations transferred under Clause 19.4 (Procedure for
Transfers); or
(ii) support any losses incurred by the New Bank by reason of the
non-performance by an Obligor of its obligations under the
Finance Documents or otherwise.
(h) Any reference in a Finance Document to a Bank includes a New Bank,
but excludes a Bank if no amount is or may be owed to or by that Bank
under the Finance Documents and its Commitment has been cancelled or
reduced to zero.
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19.4 Procedure for Transfer
(a) A transfer is effected if the Existing Bank and the New Bank deliver
to the Facility Agent and to the Project Company a duly completed
certificate, substantially in the form of Schedule 5 (Form of
Transfer Certificate) (a "Transfer Certificate"). Such delivery shall
take place at least 5 Business Days prior to the date specified
therein.
(b) Each Party (other than the Existing Bank and the New Bank)
irrevocably authorises the Facility Agent to execute any duly
completed Transfer Certificate on its behalf.
(c) To the extent that they are expressed to be the subject of the
transfer in the Transfer Certificate:
(i) the Existing Bank and the other Parties (the "existing
Parties") will be released from their obligations to each
other (the "discharged obligations");
(ii) the New Bank and the existing Parties will assume obligations
towards each other which differ from the discharged
obligations only insofar as they are owed to or assumed by the
New Bank instead of the Existing Bank;
(iii) the rights of the Existing Bank against the existing Parties
and vice versa (the "discharged rights") will be cancelled;
and
(iv) the New Bank and the existing Parties will acquire rights
against each other which differ from the discharged rights
only insofar as they are exerciseable by or against the New
Bank instead of the Existing Bank,
on the date specified in the Transfer Certificate.
(d) A transfer will only be effective if the proportion of the Existing
Bank's Commitments, L/C Exposures and outstanding Advances the
subject of the Transfer Certificate are the same.
(e) A Bank transferring all or part of its Commitment and outstanding
Advances under either Facility must transfer all or a corresponding
part of its Commitments and outstanding Advances under the other
Facility.
19.5 Disclosure of Information
Any Bank may disclose to any person:
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(a) to (or through) whom such Bank assigns or transfers (or may
potentially assign or transfer) all or any of its rights, benefits
and obligations hereunder; or
(b) with (or through) whom such Bank enters into (or may potentially
enter into) any sub-participation in relation to, or any other
transaction under which payments are to be made by reference to, the
Finance Documents or the Borrower,
such information about the Borrower or the Finance Documents as the Bank
shall consider appropriate provided that such person has first entered
into a confidentiality agreement with the Borrower on the terms of Clause
21.3 (Confidentiality).
20. PRO RATA PAYMENTS, RECEIPTS AND SET OFF
20.1 Pro rata payments
(a) If any amount owing by an Obligor under any Finance Document to a
Bank (the "Recovering Bank") is discharged by payment, set-off or any
other manner other than through the Facility Agent in accordance with
Clause 13 (Payments) (such amount being referred to in this Clause
20.1 as a "Recovery") then:
(i) within 2 Business Days of receipt of the Recovery the
Recovering Bank shall pay to the Facility Agent an amount
equal (or equivalent) to such Recovery;
(ii) the Facility Agent shall treat such payment as if it were part
of the payment to be made by the Borrower to the Banks
rateably in accordance with their respective entitlements; and
(iii) (save for any receipt by the Recovering Bank as a result of
the operation of paragraph (ii) above) as between the Borrower
and the Recovering Bank the Recovery shall be treated and
deemed as not having been paid.
(b) Each Bank will notify the Facility Agent promptly of any such
Recovery by that Bank other than by payment through the Facility
Agent. If any Recovery subsequently has to be wholly or partly
refunded by the Recovering Bank which paid an amount equal thereto to
the Facility Agent under paragraph (a) above, each Bank to which any
part of that amount was distributed will, on request from the
Recovering Bank, repay to the Recovering Bank such Bank's pro rata
share of the amount which has to be refunded by the Recovering Bank.
(c) Each Bank will on request supply to the Facility Agent such
information as the Facility Agent may from time to time request for
the purpose of this Clause 20.1.
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(d) Each party to this Agreement agrees to take all steps required of it
pursuant to paragraph (a) above and to use its reasonable endeavours
to obtain any consents or authorisations which may at any relevant
time be required in respect of any payment to be made by it pursuant
to this Clause 20.1.
(e) The provisions of this Clause 20.1 shall not, and shall not be
construed so as to, constitute a charge by any Bank over all or any
part of any sum received or recovered by it under any of the
circumstances mentioned in this Clause 20.1.
20.2 Receipts
If any sum paid or recovered in respect of the liabilities of the Borrower
under any of the Finance Documents is less than the amount then due, the
Facility Agent shall apply that sum against amounts outstanding under the
Finance Documents in the following order:
(a) first to any unpaid fees and reimbursement of unpaid expenses of the
Facility Agent under the Finance Documents;
(b) second to any unpaid fees and reimbursement of unpaid expenses of the
Banks due under the Finance Documents;
(c) third to unpaid interest;
(d) fourth to unpaid principal; and
(e) fifth to other amounts due under the Finance Documents,
in each case (other than (a)) pro rata to the outstanding amounts owing to
the Finance Parties under the Finance Documents taking into account any
applications under this Clause 20.2.
20.3 Set-Off
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(a) After an Event of Default has occurred and for so long as it is
continuing each Finance Party is hereby authorised at any time and
from time to time (without notice to the Borrower) to set-off or
otherwise apply any and all deposits (irrespective of the terms
applicable to such deposits) at any time held and other indebtedness
at any time owing by such Finance Party to or for the account of the
Borrower (in any such case whether or not then matured or due)
against any indebtedness of the Borrower to the relevant Finance
Party under the Finance Documents which is due and unpaid. Nothing in
this Clause 20.3 shall be effective to create a security interest.
(b) The rights of each Finance Party under this Clause 20 are in addition
to other rights and remedies (including, without limitation, other
rights of set-off) that such Finance Party may have.
(c) A Finance Party may exercise such rights notwithstanding that the
amounts concerned may be expressed in different currencies and each
Finance Party is authorised to effect any necessary conversions at a
market rate of exchange selected by it.
21. NOTICES, CONFIDENTIALITY AND CERTIFICATES
21.1 Notices
(a) Any notice or other communication to be served under or in connection
with this Agreement shall, unless otherwise stated, be made in
writing and served by letter or facsimile to the relevant party at
its address or facsimile number notified to the Facility Agent on or
before the date on which it became a party to this Agreement or such
other address or number notified by it to the Facility Agent by not
less than 5 Business Days notice (or in the case of a notice to the
Facility Agent, to its address or facsimile number specified below)
and, in the case of any Finance Parties, marked for the attention of
the person or department there specified.
(b) Any notice or other communication served by post will, unless
otherwise stated, be deemed served 48 hours after posting or on
delivery if delivered personally or by courier. A notice or other
communication sent by facsimile transmission will, unless otherwise
stated, be deemed served at the time of transmission unless served on
a day which is not a Business Day or after 5 pm London time in which
case it will be deemed served at 9 am on the following Business Day
provided that any notice or communication served on any Finance
Parties will only be deemed served on receipt by the relevant party.
(c) In proving service of any notice or other communication it will be
sufficient to prove:
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(i) in the case of a letter, that such letter was properly stamped
or franked, addressed and placed in the post or in the case of
personal delivery, was left at the correct address; and
(ii) in the case of a facsimile transmission, that such facsimile
was duly transmitted to the telex or facsimile number, as
appropriate, of the addressee referred to in paragraph (a)
above.
(d) The address and facsimile number of the Facility Agent as at the date
of this Agreement are:
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London
E14 4BB
Attn: Mike Clarke
Fax: 0171 773 6807
(e) The address and facsimile number of the Project Company as at the
date of this Agreement for the purposes of Clause 19.4 (Procedure for
Transfer) are:
Lansdowne House
Berkeley Square
London
W1X 5DH
Attn: The General Counsel
Edison First Power Limited
Fax: 0171 312 4000
21.2 Certificates
Any certificate, determination, notification or opinion of any Finance
Parties or group of Finance Parties as to any rate of interest or any
other amount payable under any Finance Document will set out in reasonable
detail the basis of computation of the amount claimed and will be prima
facie evidence of the matters to which it relates.
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21.3 Confidentiality
Subject to Clause 19.5 (Disclosure of Information), the parties will keep
confidential the Finance Documents and all information which they acquire
under or in connection with the Finance Documents save that such
information may be disclosed:
(a) if so required by law or regulation or, if requested by any regulator
with jurisdiction over any Finance Party or any Affiliate of any
Finance Party;
(b) if (but only to the extent that) it comes into the public domain
(other than as a result of a breach by that party of this Clause
21.3);
(c) to auditors, professional advisers (provided such advisers are under
a professional duty of confidentiality) or rating agencies; or
(d) in connection with any legal proceedings.
The provisions of this Clause 21.3 shall supersede any undertakings with
respect to confidentiality previously given by any Finance Party in favour
of the Borrower or any Affiliate of the Borrower.
22. AMENDMENTS, WAIVERS AND CONSENTS
22.1 Banks
(a) Subject to paragraphs (b) and (c) below, any provision of this
Agreement or any of the other Finance Documents may be amended,
waived, varied or modified and all consents hereunder may be given
with the agreement of the Facility Agent, the Majority Banks, the
Borrower and the Guarantor.
(b) Any amendment, waiver, variation, modification or consent shall
require the unanimous agreement of all of the Banks if it results in:
(i) any change in the Commitment of any Bank;
(ii) any reduction in the Applicable Margin (save as expressly
contemplated by Clause 6.6 (Margin Adjustment));
(iii) any change in any Availability Period or any Repayment Date or
any other date for payment of any sum due, owing or payable to
any Bank;
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(iv) any reduction in the amount or currency of any payment of
principal, interest, fees, commissions or any other amount
payable under the Finance Documents to any Bank;
(v) any amendment, variation or modification to this Clause
22.1(b), Clause 18 (The Facility Agent), Clause 20.1 (Pro-Rata
payments), Clause 20.3 (Set-Off), , Clause 19.2 (Assignments
and Transfers by the Borrower) or to the definition of
Majority Banks;
(vi) any amendment to Clause 2 of the Guarantee or any release of
the Guarantee.
(c) Any matter which by the terms of the Finance Documents as at the date
hereof is stated to be subject to the consent of all Banks shall not
be waived, amended, varied or modified save with the consent of all
the Banks.
22.2 No Implied Waivers
(a) No failure or delay by any Finance Party in exercising any right,
power or privilege under any of the Finance Documents will operate as
a waiver thereof nor will any single or partial exercise of any
right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(b) The rights and remedies provided in the Finance Documents are
cumulative and not exclusive of any rights and remedies provided by
law and all such rights and remedies howsoever arising will, save
where expressly provided to the contrary therein, be available to the
Finance Parties severally.
(c) A waiver given or consent granted by the Finance Parties under the
Finance Documents will be effective only if given in writing and then
only in the instance and for the purpose for which it is given.
23. INDEMNITIES
23.1 Ongoing Expenses
The Borrower will pay and reimburse to the Facility Agent all reasonable
and documented costs and expenses (including legal fees and other out-of-
pocket expenses and any value added tax or other similar tax thereon to
the extent that in the reasonable opinion of the Facility Agent such value
added tax or similar tax is or will not be recoverable or creditable
against any obligation of the Facility Agent to account for value added
tax or similar tax) incurred by the Facility Agent in connection with:
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(a) any variation, amendment, restatement, waiver, consent or suspension
of rights (or any proposal for any of the same) relating to any of
the Finance Documents which is requested by or on behalf of the
Borrower or which becomes necessary as a result of circumstances
affecting the Borrower (except insofar as the same relates to any
assignment or transfer by a Bank); and
(b) the investigation of any Event of Default or Potential Event of
Default.
23.2 Enforcement Expenses
The Borrower will on demand pay and reimburse to each Finance Party all
costs and expenses (including legal fees and other out of pocket expenses
and any value added tax or other similar tax thereon) incurred by such
Finance Party in connection with the preservation, enforcement or the
attempted preservation or enforcement of any of such Finance Party's
rights under any of the Finance Documents except to the extent that the
same are found in a final judgment by a court of competent jurisdiction to
have been incurred in an attempt to enforce rights and remedies that were
pursued by a Finance Party in bad faith and without any reasonable basis
in fact or law.
23.3 Stamp Duties etc
The Borrower will pay and on demand indemnify each Finance Party from and
against any liability for any stamp duty, documentary or registration
taxes or notarial fees which are or may hereafter become payable in
connection with the entry into, performance, execution or enforcement of
any of the Finance Documents (other than a Transfer Certificate) or to
which any of the Finance Documents (other than a Transfer Certificate) may
otherwise be or become subject or give rise. The Borrower will in addition
on demand indemnify each of the Finance Parties from and against any
losses or liabilities which they incur as a result of any delay or
omission by the Borrower to so pay any such duties, taxes or fees.
23.4 General Indemnity
The Borrower will on demand indemnify each of the Finance Parties against
any funding or other cost, loss, expense or liability (including, without
limitation, loss of profit) sustained or incurred by it as a result of:
(a) an Advance not being made by reason of non-fulfilment of any of the
conditions in Clauses 4.1 (Initial Conditions Precedent) or 4.2
(Additional Conditions Precedent);
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(b) any sum payable by the Borrower under the Finance Documents not being
paid when due (but credit shall be given to the Borrower for any
interest paid when due);
(c) the occurrence of any Event of Default;
(d) the accelerated repayment of the Advances under Clause 17.12
(Cancellation and Repayment); or
(e) the receipt or recovery by any Finance Party (or the Facility Agent
on its behalf) of all or part of any Advance or overdue sum (whether
due to prepayment or otherwise) which is not on the last day of an
Interest Period relating to that Advance or overdue sum.
23.5 Currency Indemnity
Without prejudice to Clause 23.4 (General Indemnity), if:
(a) any amount payable by the Borrower under or in connection with any
Finance Document is received by any Finance Party (or by the Facility
Agent on behalf of any Finance Party) in a currency (the "Payment
Currency") other than that agreed in the relevant Finance Document
(the "Agreed Currency"), whether as a result of any judgment or order
or the enforcement thereof, the liquidation of the Borrower or
otherwise and the amount produced by converting the Payment Currency
so received into the Agreed Currency is less than the relevant amount
of the Agreed Currency; or
(b) any amount payable by the Borrower under or in connection with any
Finance Document has to be converted from the Agreed Currency into
another currency for the purpose of (i) making or filing a claim or
proof against the Borrower, (ii) obtaining an order or judgment in
any court or other tribunal or (iii) enforcing any order or judgment
given or made in relation to any Finance Document,
then the Borrower will, as an independent obligation, indemnify the
relevant Finance Party for the deficiency and any loss sustained as a
result. Any conversion required will be made at such prevailing rate of
exchange on such date and in such market as is determined by the relevant
Finance Party as being most appropriate for the conversion. The Borrower
will, in addition pay the costs of the conversion.
23.6 Waiver
The Borrower waives any right it may have in any jurisdiction to pay any
amount under any Finance Document in a currency other than that in which
it is expressed to be payable in the relevant Finance Document.
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24. PARTIAL INVALIDITY
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect in any jurisdiction, that shall not affect
the legality, validity or enforceability of the remaining provisions in
that jurisdiction or that or any other provision in any other
jurisdiction.
25. GOVERNING LAW
This Agreement (and any dispute, controversy, proceedings or claims of
whatever nature arising out of or in any way relating to this Agreement)
shall be governed by and construed in all respects in accordance with
English law.
26. COUNTERPARTS
This Agreement may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS whereof the parties hereto have caused this Agreement to be duly
executed on the date first written above.
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SCHEDULE 1
THE BANKS
<TABLE>
<CAPTION>
Banks Coal Commitment Capex Commitment
(Pound Sterling) (Pound Sterling)
<S> <C> <C> <C>
1. Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
Tel: 0171 773 1157
Fax: 0171 773 1803
Attn: Nichola Weber 9,080,000 14,869,375
2. Credit Suisse First Boston
Five Cabot Square
London E14 4QR
Tel: 0171 888 5233
Fax: 0171 888 8390
Attn: Ronnie Hawkins - Project 9,080,000 14,869,375
Finance
3. Bank of Montreal
700 Louisana
Suite 4400
Houston
Texas 77002
U.S.A.
Tel: 001 713 546 9750
Fax: 001 713 223 4007
Attn: Cahal Carmody 9,080,000 14,866,250
4. The Governor and Company of the
Bank of Scotland
Corporate Banking Division
Orchard Brae House
30 Queensferry Road
Edinburgh EH4 2UG
Tel: 0131 343 7136
Fax: 0131 343 7026
Attn: Ian Garden/Steven Lowry 9,080,000 14,866,250
</TABLE>
57
<PAGE>
<TABLE>
<S> <C> <C> <C>
5. Bankgesellschaft Berlin AG, London
Branch
1 Crown Court
Cheapside
London EC2V 6LR
Tel: 0171 572 9357
Fax: 0171 572 9326
Attn: Philip Nias/Marco Buffoni 9,080,000 14,866,250
6. Bayerische Hypo-und Vereinsbank AG
41 Moorgate
London EC2R 6PP
Tel: 0171 873 8313
Fax: 0171 573 8352
Attn: Neil Edmonds 9,080,000 14,866,250
7. Bayerische Landesbank Girozentrale-
London Branch
Bavaria House
13/14 Appold Street
London EC2A 2NB
Tel: 0171 955 5731
Fax: 0171 955 5129
Attn: Tim Hall/Sonke Petersen 9,080,000 14,866,250
8. Credit Lyonnais
PO Box 81, Broadwalk House
5 Appold Street
London EC2A 2JP
Tel: 0171 214 5233
Fax: 0171 214 6850
Attn: Louise Ellis 9,080,000 14,866,250
</TABLE>
58
<PAGE>
<TABLE>
<S> <C> <C> <C>
9. Dexia Project and Public Finance
International Bank
55 Tufton Street
Westminster
London SW1P 3QF
Tel: 0171 470 7343
Fax: 0171 976 0976
Attn: Victoria Derby 9,080,000 14,866,250
10. Dresdner Bank AG London Branch
PO Box 18075
Riverbank House
2 Swan Lane
London EC4R 3UX
Tel: 0171 623 8000
Fax: 0171 475 8976
Attn: Steve Moon/Dexter Maitland 9,080,000 14,866,250
11. ING Bank N.V.
HE 0201 Power Finance
Bijlmerplein 888
1102 MG Amsterdam
The Netherlands
Tel: 00 31 20 563 5654
Fax: 00 31 20 563 5164
Attn: Johan de Mandt/Han Wetzelaar 9,080,000 14,866,250
12. KBC Bank N.V. London Branch
7/th/ Floor
Exchange House
Primrose Street
London EC2A 2HQ
Tel: 0171 256 4807
Fax: 0171 256 4846
Attn: Lisa Taylor 9,080,000 14,866,250
</TABLE>
59
<PAGE>
<TABLE>
<S> <C> <C> <C>
13. The Royal Bank of Scotland plc.
Waterhouse Square
138-142 Holborn
London EC1N 2TH 9,080,000 14,866,250
Tel: 0171 427 9554
Fax: 0171 427 9989
Attn: Brian McInnes
14. Societe Generale London Branch
41 Tower Hill
London EC3N 4SG
Tel: 0171 676 6157
Fax 0171 680 9951
Attn: Duncan Irvine 9,080,000 14,866,250
15. The Toronto-Dominion Bank
Triton Court
14-18 Finsbury Square
London EC2A 1DB
Tel: 0171 920 0272
Fax: 0171 628 1042
Attn: Richard Palmer 9,080,000 14,866,250
--------------- ---------------
136,200,000 223,000,000
</TABLE>
60
<PAGE>
SCHEDULE 2
DOCUMENTARY CONDITIONS PRECEDENT
1. Documentation of Obligors
(a) Copies, certified to be true, complete and up to date copies by a
director or company secretary of each Obligor, of the memorandum and
articles of association or other constitutional documents of each
Obligor.
(b) Copies, certified to be true, complete and up to date copies by a
director or company secretary of each Obligor, of resolutions of the
board of directors of each Obligor approving the execution, delivery
and performance of each of the Finance Documents to which that Obligor
is a party and the terms thereof.
(c) A certificate of a director or company secretary of each Obligor
setting out the names and signatures of the persons authorised to sign
on behalf of that Obligor each of the Finance Documents to which it is
a party and any other document to be delivered pursuant thereto.
2. Guarantee
A duly executed original of the Guarantee.
3. Fee Letters
A duly executed original of the Facility Agent's Fee Letter and the
Arrangers' Fee Letter.
4. Legal Opinions
Legal opinions from:
(a) Shearman & Sterling, English legal advisers to the Banks; and
(b) The Guarantor's in-house counsel and Morgan Lewis and Boeckius, legal
advisers to the Guarantor.
5. Accounts
The audited accounts of the Guarantor, certified as being true, complete
and up to date by a director or company secretary of the Guarantor.
61
<PAGE>
6. Senior Creditors' Security Trustee
A certificate of the Senior Creditors' Security Trustee setting out the
names and signatures of each of the persons authorised to sign Letter of
Credit Requests and any other related documents on behalf of the Senior
Creditors' Security Trustee.
7. Project Company's capital expenditure programme
Provision of the Project Company's capital expenditure programme.
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<PAGE>
SCHEDULE 3
Form of Request
To: [ ]
(as Facility Agent for the Banks)
Attention:
Date:
From: EME FINANCE UK LIMITED
Dear Sirs,
Coal and Capex Facility Agreement dated [ ] (the "Facility Agreement")
We request [the issue of the [Coal Letter of Credit]/[Capex Letter of Credit] in
the form of Schedule 6 (Letters of Credit) of the Facility Agreement]/[an
Advance] as follows:
[Letter of Credit]
1. Amount:
2. Name of Beneficiary: Edison First Power Limited
3. Issue Date:
4. Termination date:
[Advance]
1. Amount:
2. Drawdown Date:
3. Interest Period:
Such Advance should be paid to [give details of Project Company's revenues
account].
We confirm that:
(i) the representations and warranties made in Clause 14 (Representations and
Warranties) of the Facility Agreement stipulated as being made or repeated
on the date hereof and on the relevant [Issue Date]/[Drawdown Date] are
true and accurate as if made with respect to the facts and circumstances
existing on such date; and
(ii) no Event of Default or Potential Event of Default has occurred and is
continuing or will occur as a result of the [issue of the Letter of
Credit]/[proposed Advance] being made.
63
<PAGE>
We attach the documents required by Clause 5.3 (Accompanying Documents) of the
Facility Agreement.
Terms defined in the Facility Agreement shall have the same meanings when used
in this request.
...................
[Authorised Signatory]
for and on behalf of
EME Finance UK Limited
64
<PAGE>
SCHEDULE 4
Additional Costs Rate
1. The Additional Costs Rate is in addition to the interest rate to compensate
Banks for the cost of compliance with the requirements of the Bank of
England and/or the Financial Services Authority (or, in either case, any
other authority which replaces all or any of its functions).
2. On the first day of each Interest Period (or as soon as possible
thereafter) the Facility Agent shall calculate, as a percentage rate, a
rate (the "Additional Costs Rate") for each Bank, in accordance with the
formulae set out below. The Additional Costs Rate will be calculated by the
Facility Agent as a weighted average of the Banks' additional costs rates
(weighted in proportion to the percentage participation of each Bank in the
relevant Advance) and will be expressed as a percentage rate per annum.
3. The additional cost rate for each Bank will be calculated by the Facility
Agent as follows:
AB + C(B-D) + E x 0.01 per cent. per annum
----------------------
100 - (A + C)
Where:
A is the percentage of eligible liabilities (assuming these to be in
excess of any stated minimum) which that Bank is from time to time
required to maintain as an interest free cash ratio deposit with the
Bank of England to comply with cash ratio requirements.
B is the percentage rate of interest (excluding the Applicable Margin
and the Additional Costs Rate) payable for the relevant Interest
Period on the Advance.
C is the percentage (if any) of eligible liabilities which the Bank is
required from time to time to maintain as interest bearing special
deposits with the Bank of England.
D is the percentage rate per annum payable by the Bank of England to
the Facility Agent on interest bearing special deposits.
E is the rate of charge payable by that Bank to the Financial Services
Authority pursuant to the Fees Regulations (but, for this purpose,
ignoring any minimum fee required pursuant to the Fees Regulations)
and expressed in pounds per (Pound Sterling)1,000,000 of the Fee Base
of that Bank.
4. For the purposes of this Schedule:
(a) "eligible liabilities" and "special deposits" have the meanings given
to them from time to time under or pursuant to the Bank of England Act
1998 (as may be appropriate) by the Bank of England;
65
<PAGE>
(b) "Fee Regulations" means the Banking Supervision (Fees) Regulations
1998 or such other law or regulation as may be in force from time to
time in respect of the payment of fees for banking supervision; and
(c) "Fee Base" has the meaning given to it, and will be calculated in
accordance with, the Fees Regulations.
5. In application of the above formulae, A, B, C and D will be included in the
formulae as percentages (i.e. 5 per cent, will be included in the formula
as 5 and not as 0.05). A negative result obtained by subtracting D from B
shall be taken as zero. The resulting figures shall be rounded to four
decimal places.
6. Each Bank shall supply any information required by the Facility Agent for
the purpose of calculating the above formulae. In particular, but without
limitation, each Bank shall supply the following information in writing on
or prior to the date on which it becomes a Bank:
(a) its jurisdiction of incorporation and the jurisdiction of its Facility
Office; and
(b) such other information that the Agent may reasonably require for such
purpose.
Each Bank shall promptly notify the Agent in writing of any change to the
information provided by it pursuant to this paragraph.
7. The percentages or rates of charge of each Bank for the purpose of A, C and
E above shall be determined by the Facility Agent based upon the
information supplied to it pursuant to paragraph 6 above and on the
assumption that, unless a Bank notifies the Facility Agent to the contrary,
each Bank's obligations in relation to cash ratio deposits, special
deposits and the Fee Regulations are the same as those of a typical bank
from its jurisdiction of incorporation with a Lending Office in the same
jurisdiction as its Lending Office.
The Facility Agent shall have no liability to any person if such
determination results in an additional costs rate which over or under
compensates any Bank and shall be entitled to assume that the information
provided by any Bank pursuant to paragraph 6 above is true and correct in
all respects.
8. The Facility Agent shall distribute the additional amounts received as a
result of the Additional Costs Rate to the Banks on the basis of the
additional costs rate for each Bank, in accordance with the above formulae
and based on the information provided by each Bank pursuant to paragraph 6
above.
9. Any determination by the Facility Agent pursuant to this Schedule in
relation to a formula, the Additional Costs Rate or any amount payable to a
Bank shall, in the absence of manifest error, be conclusive and binding on
all of the parties to this Agreement.
10. The Facility Agent may from time to time, after consultation with the
Borrower and the Banks, determine and notify to all parties any amendments
which are required to be made to any of the formulae set out above in order
to comply with any change in law, regulation or any requirements from time
to time imposed by the Bank of England or the Financial Services Authority
(or, in
66
<PAGE>
either case, any other authority which replaces all or any of its
functions) and any such determination shall, in the absence of manifest
error, be conclusive and binding on all the parties to this Agreement.
67
<PAGE>
SCHEDULE 5
FORM OF TRANSFER CERTIFICATE
To: [ ] as Facility Agent
and
Edison First Power Limited
Lansdowne House, Berkeley Square
London
W1X 5DH
as beneficiary under the Coal Letter of Credit and Capex Letter of Credit
From: [Existing Bank] and [New Bank] Date: [ ]
EME Finance UK Limited - Coal and Capex Facility Agreement dated [ ], 1999
(the "Facility Agreement")
We refer to Clause 19.4 (Procedure for Transfer) of the Facility Agreement and
to the Coal Letter of Credit and the Capex Letter of Credit. Terms defined in
the Facility Agreement shall have the same meaning when used in this Transfer
Certificate.
1. We [ ] (the "Existing Bank") and [ ] (the "New Bank")
agree to the Existing Bank and the New Bank transferring all the Existing
Bank's rights and obligations referred to in the Schedule in accordance
with Clause 19.4 (Procedure for Transfer) of the Facility Agreement and
with the terms of the Coal Letter of Credit and the Capex Letter of Credit.
2. The specified date for the purposes of Clause 19.4 (a) and (c) (Procedure
for Transfer) of the Facility Agreement and paragraph 8 of each of the Coal
Letter of Credit and the Capex Letter of Credit is [date of transfer].
3. The Facility Office and address for notices of the New Bank for the
purposes of Clause 21.1 (Notices) of the Facility Agreement are set out in
the Schedule.
4. This Transfer Certificate is governed by English law.
68
<PAGE>
THE SCHEDULE
Rights and obligations to be transferred
[Details of the rights and obligations of the Existing Bank to be transferred
under the Coal Facility and Coal Letter of Credit and Capex Facility and Capex
Letter of Credit.]
[New Bank]
[Lending Office] [Address for notices]
[Existing Bank] [New Bank] [Facility Agent]
By: By: By:
Date: Date: Date:
Payment Instructions:
Administrative details:
69
<PAGE>
SCHEDULE 6
FORM OF LETTERS OF CREDIT
To: Edison First Power Limited
Lansdowne House
Berkeley Square
London
W1X 5DH
Attention: [ ]
[ ] 1999
Dear Sirs
1. The Banks listed in Schedule A (the "Original Banks") hereby issue an
irrevocable letter of credit in your favour at the request of EME Finance UK
Limited for the aggregate amount equal to the L/C Amount (as defined below)
expiring at [ ] p.m. on [ ].
2. This Letter of Credit is given in connection with a facility agreement dated
[ ] 1999 and made between EME Finance UK Limited as Borrower,
Barclays Capital and Credit Suisse First Boston as Arrangers, the Banks as
defined therein and Barclays Bank PLC as facility agent (the "Facility
Agent") (the "Facility Agreement"). In this Letter of Credit:
"Advance" shall mean the principal amount of each advance made under the
[Coal]/[Capex] Facility (but excluding any Advance deemed made as a
consequence of a drawing being made under this Letter of Credit) notified by
the Facility Agent to you as having been made;
"Banks" means the Original Banks and each New Bank (as defined in paragraph
7) which becomes a party to this Letter of Credit;
"Capex Facility" means the (Pound Sterling)223,000,000 loan and letter of
credit facility made available by the Banks pursuant to the Facility
Agreement;
"Coal Facility" means the (Pound Sterling)136,200,000 loan and letter of
credit facility made available by the Banks pursuant to the Facility
Agreement;
"Commitment" means:
(a) in relation to an Original Bank, the amount set against the name of
that Bank in Schedule A under the heading "Commitment" and the amount
of any other Bank's Commitment acquired by it; and
70
<PAGE>
(b) in relation to a Bank which becomes a Bank after the date of this
Letter of Credit, the amount of any other Bank's Commitment acquired
by it under paragraph 7 hereof,
to the extent not cancelled, reduced or transferred under this Letter of
Credit;
"L/C Amount" means, at any time, (Pound Sterling)[223,000,000]/
(Pound Sterling)[136,200,000] less the aggregate of:
(a) all drawings under this Letter of Credit;
(b) Advances; and
(c) Reductions.
"Reduction" means the amount of each reduction of the L/C Amount by you
pursuant to paragraph 10 below;
"Senior Creditors' Security Trustee" means Barclays Bank PLC in its
capacity as security trustee under a secured creditors' security trust and
intercreditor deed dated [ ];
3. A drawing may be requested by you, and will be paid by us, upon
presentation of a request (an "L/C Request") to the Facility Agent in the
form of Schedule B. If the L/C Request is presented by 10.00 a.m. London
time on a London business day then payment will be made on the date of
presentation in immediately available funds to your account with Barclays
Bank PLC number [ ]. Any L/C Request presented after 10.00 a.m. London
time on a London business day will be treated as having been presented by
10.00 a.m. London time on the following London business day. The amount
each Bank is obliged to make available to you, through the Facility Agent,
on presentation of an L/C Request, is the proportion of the amount
requested which its Commitment bears to the total of the Commitments. The
maximum amount which may be drawn by you at any time under this Letter of
Credit shall be the L/C Amount at that time.
4. All payments which fall to be made by the Banks hereunder will be made by
the Banks free and clear of and without deduction for, or on account of,
any set-off or counterclaim.
5. This Letter of Credit is signed by the Facility Agent solely as agent for
each of the Banks and the Facility Agent makes no representation or
warranty, express or implied, concerning, and accepts no responsibility for
the legality, validity, effectiveness, adequacy or enforceability of, this
Letter of Credit or concerning its power to enter into this Letter of
Credit on behalf of any Bank and, accordingly, it will not be held liable
for any cost, loss or expense sustained or incurred by you as a result of
any present or future total or partial invalidity, illegality or
unenforceability affecting this Letter of Credit or the failure by any Bank
to be bound hereby.
6. You may assign or transfer all or any of your rights, benefits and
obligations hereunder to the Senior Creditors' Security Trustee.
71
<PAGE>
7. (a) A Bank (the "Existing Bank") may at any time transfer any of its
rights and obligations under this Letter of Credit to another bank or
financial institution (the "New Bank"). An Existing Bank shall
transfer its rights and obligations to a New Bank where the credit
rating of the Existing Bank has fallen below A- as rated by Standard &
Poors Rating Services ("Standard & Poors") or A3 by Moody's Investor
Services Inc. ("Moody's") unless the Existing Bank is able to provide
cash collateral for all its obligations under this Letter of Credit to
your satisfaction. Your prior consent is required for any such
transfer (unless such transfer is to an affiliate of such Existing
Bank which has a credit rating of A- or above as rated by Standard &
Poors or A3 or above as rated by Moody's or to a New Bank which is
already a Bank), but will not be unreasonably withheld or delayed
where such New Bank has a credit rating of A- or above as rated by
Standard & Poors or A3 or above as rated by Moody's.
(b) A transfer is effected if the Existing Bank and the New Bank deliver
to you, with a copy to the Facility Agent, a duly completed
certificate, substantially in the form of Schedule C (a "Transfer
Certificate"). Such delivery shall take place at least 5 Business Days
prior to the date specified therein.
(c) Each party to this Letter of Credit (other than the Existing Bank and
the New Bank) irrevocably authorises the Facility Agent to execute any
duly completed Transfer Certificate on its behalf.
(d) To the extent that they are expressed to be the subject of the
transfer in the Transfer Certificate:
(i) the Existing Bank and the other parties to this Letter of
Credit (the "existing Parties") will be released from their
obligations to each other (the "discharged obligations");
(ii) the New Bank and the existing parties to this Letter of Credit
will assume obligations towards each other which differ from
the discharged obligations only insofar as they are owed to or
assumed by the New Bank instead of the Existing Bank;
(iii) the rights of the Existing Bank against the existing Parties
and vice versa (the "discharged rights") will be cancelled; and
(iv) the New Bank and the existing Parties will acquire rights
against each other which differ from the discharged rights only
insofar as they are exerciseable by or against the New Bank
instead of the Existing Bank,
on the date specified in the Transfer Certificate.
8. This Letter of Credit shall be governed by, and construed in accordance
with, English law.
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<PAGE>
9. The rights and obligations of the Banks under this Letter of Credit are
several. Failure of a Bank to observe and perform its obligations under
this Letter of Credit shall not result in any other Bank or the Facility
Agent incurring any liability whatsoever.
10. You may, at any time, reduce the L/C Amount by written notice to us which
has been countersigned by the Senior Creditors' Security Trustee.
11. This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.
-------------------------------------
Barclays Bank PLC as Facility Agent
for and on behalf of the Original Banks
73
<PAGE>
Schedule A
THE BANKS
Bank Commitment
(Pound Sterling)
Total [(Pound Sterling)136,200,000] / [(Pound Sterling)223,000,000]
74
<PAGE>
Schedule B
Letter of Credit Request
To: [Barclays Bank PLC]
[Address]
[Date]
Dear Sirs
[Coal]/[Capex] Letter of Credit dated
- ------------------------------------------
Please be advised that we wish to make a drawing under the above mentioned
Letter of Credit as follows:
(a) Amount:
(b) Date of drawing:
(c) Account to which payment should be made:
----------------------------------------
[Authorised Signatory]
for and on behalf of
Edison First Power Limited
[AND/OR]
[Senior Creditors' Security Trustee]
75
<PAGE>
Schedule C
FORM OF TRANSFER CERTIFICATE
To: [ ] as Facility Agent
and
Edison First Power Limited
Lansdowne House, Berkeley Square
London
W1X 5DH
as beneficiary under the Coal Letter of Credit and Capex Letter of Credit
From: [Existing Bank] and [New Bank] Date: [ ]
EME Finance UK Limited - Coal and Capex Facility Agreement dated [ ], 1999
(the "Facility Agreement")
We refer to Clause 19.4 (Procedure for Transfers) of the Facility Agreement and
to paragraph 7 of the Coal Letter of Credit and the Capex Letter of Credit.
Terms defined in the Facility Agreement shall have the same meanings when used
in this Transfer Certificate.
1. We [ ] (the "Existing Bank") and [ ] (the "New Bank")
agree to the Existing Bank and the New Bank transferring all the Existing
Bank's rights and obligations referred to in the Schedule in accordance
with Clause 19.4 (Procedure for Transfer) of the Facility Agreement and
paragraph 7 of the Coal Letter of Credit and the Capex Letter of Credit.
2. The specified date for the purposes of Clause 19.4 (a) and (c) (Procedure
for Transfer) of the Facility Agreement and paragraph 7 of each of the Coal
Letter of Credit and the Capex Letter of Credit is [date of transfer].
3. The Facility Office and address for notices of the New Bank for the
purposes of Clause 21.1 (Notices) of the Facility Agreement are set out in
the Schedule.
4. This Transfer Certificate is governed by English law.
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<PAGE>
THE SCHEDULE
Rights and obligations to be transferred
[Details of the rights and obligations of the Existing Bank to be transferred
under the Coal Facility and Capex Facility.]
Coal Letter of Credit and Capex Letter of Credit: Amount of Commitment
transferred: (Pound Sterling)[ ]
[New Bank]
[Lending Office] [Address for notices]
[Existing Bank] [New Bank] [Facility Agent]
By: By: By:
Date: Date: Date:
Payment Instructions:
Administrative details:
77
<PAGE>
The Borrower
EME FINANCE UK LIMITED
By: S.G. BRETT
Name:
Title:
The Arrangers
BARCLAYS CAPITAL
By: PAUL SIMS
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By: PETER FIRMIN and TOM MULLIGAN
Name:
Title:
The Original Banks
BARCLAYS BANK PLC
By: PAUL SIMS and ANDREW VINE
Name:
Title:
78
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: PETER FIRMIN and TOM MULLLIGAN
Name:
Title:
BANK OF MONTREAL
By: JENNIFER RICHARDS
Name:
Title:
THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND
By: IAN CAMPBELL GARDEN
Name:
Title:
BANKGESELLSCHAFT BERLIN A.G., LONDON BRANCH
By: H.VAN WYK and PHILIP NIAS
Name:
Title:
BAYERISCHE HYPO-UND VEREINSBANK AG
By: GARY LANSTON and NEIL EDMONDS
Name:
Title:
79
<PAGE>
BAYERISCHE LANDESBANK GIROZENTRALE LONDON BRANCH
By: TIMOTHY HALL and ANTHONY MALTBY
Name:
Title:
CREDIT LYONNAIS
By: MARGARET STEWART
Name:
Title:
DEXIA PROJECT AND PUBLIC FINANCE INTERNATIONAL BANK
By: NICOLAS SOUCHE
Name:
Title:
DRESDNER BANK AG LONDON BRANCH
By: W.A. PEDDER By: DEXTER E.W. MAITLAND
Name: Name:
Title: Title:
ING BANK N.V., LONDON BRANCH
By: B.L. WIJNEN and P.H.M. STAAL
Name:
Title:
80
<PAGE>
KBC BANK N.V., LONDON BRANCH
By: LISA TAYLOR and MICHAEL BROOM
Name:
Title:
THE ROYAL BANK OF SCOTLAND plc.
By: RAJA S. HUSSAIN
Name:
Title:
SOCIITI GINIRALE, LONDON BRANCH
By: DAVID THOMAS
Name:
Title:
THE TORONTO-DOMINION BANK
By: GRAEME FRANCIS
Name:
Title:
The Agent
BARCLAYS BANK PLC
By: ANDREW VINE
Name:
Title:
81
<PAGE>
Exhibit 10.65
CONFORMED COPY
--------------
Guarantee
dated 16 July 1999
EDISON MISSION ENERGY
and
BARCLAYS BANK PLC
as Facility Agent for the Banks
parties to the Facility Agreement defined herein
LINKLATERS & PAINES
One Silk Street
London EC2Y 8HQ
Tel: (+44) 171 456 2000
<PAGE>
This Guarantee is made as a deed on 16 July 1999 between
(1) Edison Mission Energy, a California corporation registered in the State of
California whose principal place of business is at 18101 Von Karman Avenue,
Suite 1700, Irvine, California 92715, United States of America (the
"Guarantor"); and
(2) Barclays Bank PLC, as facility agent for the financial institutions defined
as Banks (the "Banks") in the Facility Agreement defined below (the
"Facility Agent", which expression includes any successor or replacement
Facility Agent appointed pursuant to Clause 18.9 (Resignation of Facility
Agent) of the Facility Agreement).
The Banks have agreed to enter into the coal and capex facility agreement
of even date (the "Facility Agreement") with EME Finance UK Limited (the
"Borrower") on various conditions, one of which is that the Guarantor gives
this Guarantee.
1 Interpretation
1.1 In this Guarantee terms defined and references construed in the Facility
Agreement shall have the same meaning and construction and, except to the
extent that the context requires otherwise:
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility
for administering, any Pension Plan or Welfare Plan). A Person shall be
deemed to be "controlled by" any other Person if such other Person
possesses, directly or indirectly, power to direct or cause the direction
of the management and policies of such Person whether by contract or
otherwise.
"Authorised Representative" means, relative to the Guarantor, those of its
officers and employees whose signatures and incumbency shall have been
certified to the Facility Agent and the Banks pursuant to Clause 4.1(a)
(Initial Conditions Precedent) of the Facility Agreement.
"Business Day" has the meaning given to it in the Facility Agreement.
"Capitalised Lease Liabilities" of any Person means all monetary
obligations of such Person under any leasing or similar arrangement which,
in accordance with US GAAP, would be classified as capitalised leases, and,
for purposes of this Guarantee, the amount of such obligations shall be the
capitalised amount thereof, determined in accordance with US GAAP.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after
such time, issued or guaranteed by the United States Government or an
agency thereof; or
(b) other investments in securities or bank instruments rated at least "A"
by S&P and "A2" by Moody's or "A-1" by S&P and "P-1" by Moody's and
with maturities of less than 366 days; or
- --------------------------------------------------------------------------------
<PAGE>
(c) other securities as to which the Guarantor has demonstrated, to the
satisfaction of the Facility Agent, adequate liquidity through
secondary markets or deposit agreements.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means the failure of Edison International to own,
directly or indirectly, at least 50.1% of the outstanding shares of voting
stock of the Guarantor (or any successor pursuant to Clause 4.2.5(iii)), on
a fully diluted basis.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise
to invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other
than by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon the shares
of any other Person. The amount of any Person's obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount of the debt, obligation or
other liability guaranteed thereby; provided, however, that if the maximum
amount of the debt, obligation or other liability guaranteed thereby has
not been established, the amount of such Contingent Liability shall be the
maximum reasonably anticipated amount of the debt, obligation or other
liability; provided further, however, that any agreement to limit the
maximum amount of such Person's obligation under such Contingent Liability
shall not, of and by itself, be deemed to establish the maximum reasonably
anticipated amount of such debt, obligation or other liability.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or
not incorporated) under common control which, together with the Guarantor,
are treated as a single employer under Section 414(b) or 414(c) of the Code
or Section 4001 of ERISA.
"Debt Rating" means a rating of the Guarantor's long-term debt which is not
secured or supported by a guarantee, letter of credit or other form of
credit enhancement. If Moody's or S&P shall have changed its system of
classifications after the date hereof, the Guarantor's Debt Rating shall be
considered to be at or above a specified level if it is at or above the new
rating which most closely corresponds to the specified level under the old
rating system.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Effective Date" means the date on which the Facility Agent gives the
notification under Clause 4.1(b) (Initial Conditions Precedent) of the
Facility.
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"Environmental Laws" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to Hazardous Materials
and/or to public health and protection of the environment, including the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and the Resource Conservation and Recovery Act, as
amended.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" has the meaning given to it in the Facility Agreement.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months ending
on December 31; references to a Fiscal Year with a number corresponding to
any calendar year (e.g. - the "1999 Fiscal Year") refer to the Fiscal Year
ending on December 31 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"Hazardous Material" means:
(a) any "hazardous substance", as defined by any Environmental Law;
(b) any "hazardous waste", as defined by any Environmental Law;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any
Environmental Law.
"Indebtedness" of any Person means, without duplication:
(a) all indebtedness for borrowed money;
(b) all obligations issued, undertaken or assumed as the deferred purchase
price of property or services which purchase price is due more than
six months from the date of incurrence of the obligation in respect
thereof or is evidenced by a note or other instrument, except trade
accounts arising in the ordinary course of business;
(c) all reimbursement obligations with respect to surety bonds, letters of
credit (to the extent not collateralised with cash or Cash Equivalent
Investments) bankers" acceptances and similar instruments (in each
case, whether or not matured);
(d) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either
case with respect to
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property acquired by the Person (even though the rights and remedies
of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property);
(f) all Capitalised Lease Liabilities;
(g) all net obligations with respect to sales of foreign exchange options;
(h) all indebtedness referred to in clauses (a) to (g) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness; and
(i) all Contingent Liabilities.
For all purposes of this Guarantee, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Investment" means, relative to any Person:
(a) any loan or advance made by such Person to any other Person (excluding
commission, travel and similar advances to officers and employees made
in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in any other
Person.
The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon (and without
adjustment by reason of the financial condition of such other Person) and
shall, if made by the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal
to the fair market value of such property.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), charge against or interest in property, in each case of any
kind, to secure payment of a debt or performance of an obligation.
"Loan Documents" means the Facility Agreement and this Guarantee.
"Material Adverse Effect" means any event, development or circumstance that
has had or could reasonably be expected to have a material adverse effect
on the ability of the Guarantor to perform its payment obligations under
this Guarantee.
"Moody's" means Moody's Investor Service, a division of Dun & Bradstreet
Corporation, and its successors and assigns.
"Net Tangible Assets" means, as of the date of any determination thereof,
the total amount of all assets of the Guarantor and its Subsidiaries
(determined on a consolidated basis in accordance with US GAAP), less the
sum of (a) the consolidated current liabilities of the Guarantor and its
Subsidiaries (determined on a consolidated basis in accordance
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with US GAAP) and (b) assets properly classified as "intangible assets" in
accordance with US GAAP.
"Non-Recourse Debt" means Indebtedness which the Guarantor is not directly
or indirectly obligated to repay.
"Non-Recourse Persons" means the Affiliates of the Borrower, including The
Mission Group, Edison International and Southern California Edison Company,
and the officers, directors, employees, shareholders, agents, Authorised
Representatives and other controlling persons of the Borrower of any of its
Affiliates, provided that in no event shall the Borrower be deemed to be a
Non-Recourse Person.
"Obligations" means all obligations (monetary or otherwise) of the
Guarantor arising under or in connection with the Guarantee.
"Organic Document" means, relative to the Guarantor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts
and similar arrangements applicable to any of its authorised shares or
capital stock.
"Partnership" means a general partnership, limited partnership, joint
venture or similar entity in which the Guarantor or a Subsidiary is a
partner, joint venturer or equity participant.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which
the Guarantor or any corporation, trade or business that is, along with the
Guarantor, a member of a Controlled Group, has any liability, including any
liability by reason of having been a substantial employer within the
meaning of Section 4063 of ERISA at any time during the preceding five
years, or by reason of being deemed to be a contributing sponsor under
Section 4069 of ERISA.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental
agency or any other entity, whether acting in an individual, fiduciary or
other capacity.
"Pricing Grid" means the pricing grid in Clause 6.6 (The Margin) of the
Facility Agreement.
"S&P" means Standard & Poor's Ratings Services and its successors and
assigns.
"Subsidiary" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power
to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
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"Tangible Net Worth" means the net worth of the Guarantor and its
Subsidiaries (determined on a consolidated basis in accordance with US
GAAP) after subtracting therefrom the aggregate amount of any intangible
assets of the Guarantor and its Subsidiaries (determined on a consolidated
basis in accordance with US GAAP), including goodwill, franchises,
licences, patents, trademarks, trade names, copyrights, service marks and
brand names.
"Taxes" or "Tax" means any present or future tax, levy, impost, duty,
charge, fee deduction or withholding in the nature of tax whatever called
and wherever imposed and whether imposed, levied, collected, withheld or
assessed (and any penalty or interest payable in connection with any
failure to pay or delay in paying the same) income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes or taxes imposed on or measured by any Bank's net
income, in each case, imposed as a result of a connection between the Bank
and the jurisdiction imposing the tax (other than a connection arising
solely from the Bank having executed, delivered or performed its
obligations or received a payment under, or enforced, this Guarantee), and
the Banks will use reasonable efforts to minimise, to the extent possible,
any such applicable taxes; provided, however, that such Taxes does not
include franchise taxes, receipts, net worth or shareholders' capital.
"Total Commitments" has the meaning given to it in the Facility Agreement.
"US GAAP" means generally accepted accounting principles in effect in the
United States.
"Welfare Plan" means a "welfare plan" as such term is defined in Section
3(1) of ERISA.
"Year 2000 Problem" means any significant risk that computer hardware,
software or equipment containing embedded microchips essential to the
businesses or operations of the Guarantor and its Subsidiaries will not, in
the case of dates or time periods occurring after 31 December 1999,
function at least as effectively as in the case of dates or time periods
occurring prior to 1 January 2000.
1.2 Headings shall be ignored in construing this Guarantee.
1.3 Unless otherwise specified, all accounting terms used in this Guarantee
shall be interpreted, all accounting determinations and computations
hereunder or thereunder shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be prepared in
accordance with US GAAP applied in the preparation of the financial
statements referred to in Clause 3.1.5 except that quarterly financial
statements are not required to contain footnotes.
2 Guarantee
2.1 The Guarantor unconditionally and irrevocably guarantees that, if for any
reason, the Borrower does not pay any sum payable by it under the Facility
Agreement by the time, on the date and otherwise in the manner specified in
the Facility Agreement (whether on the normal due date, on acceleration or
otherwise), the Guarantor will pay that sum within 5 Business Days of
demand by the Facility Agent.
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2.2 The Guarantor's liability under this Guarantee shall remain in force
notwithstanding any act, omission, neglect, event or matter whatsoever
(whether or not known to the Facility Agent, any Bank or the Guarantor)
other than the irrevocable payment to the Banks of all amounts payable
hereunder. Nothing shall impair or discharge the Guarantor's liability or
obligations under this Guarantee and this shall apply, without limitation,
in relation to:
2.2.1 anything which would have discharged the Guarantor (wholly or in
part) whether as surety, co-obligor or otherwise or which would have
afforded the Guarantor any legal or equitable defence; or
2.2.2 the existence or validity or the taking or renewal of any other
guarantee or security taken by the Banks in relation to the Facility
Agreement, or any enforcement of or failure to enforce or the
release or waiver of any such guarantee or security; or
2.2.3 any amendment to or variation of the Facility Agreement, or any
security or other document relating to the Facility Agreement, or
any assignment thereof or any waiver or departure from their
respective terms or any such security or document in any such case
with or without the consent of the Guarantor; or
2.2.4 any release of, or granting of time or any other indulgence to, the
Borrower or any other person; or
2.2.5 any winding up, dissolution, reconstruction, arrangement or
reorganisation, legal limitation, disability, incapacity or lack of
corporate power or authority or other circumstances of, or any
change in the constitution or corporate identity or loss of
corporate identity by, the Borrower or any other person (or any act
taken by the Guarantor or the Borrower in relation to any such
event); or
2.2.6 any other circumstances which might render void or unenforceable the
obligations, commitments and undertakings of the Borrower under the
Facility Agreement, or which might affect the Banks' ability to
recover amounts from the Borrower thereunder; or
2.2.7 any defence or counterclaim which the Borrower may be able to assert
against the Banks.
2.3 Any amounts payable under this Guarantee shall be paid in full without any
deduction or withholding whatsoever (whether in respect of set-off,
counterclaim, duties, charges, Taxes or otherwise) unless such deduction or
withholding is required by law. If such a deduction or withholding is
required the Guarantor shall forthwith pay to the Facility Agent an
additional amount calculated to ensure that the net amount received by the
Banks (taking into account any deduction or withholding required on the
additional amount) will equal the full amount which would have been
received by it had no such deduction or withholding been made.
2.4 As a separate, additional continuing and primary obligation, the Guarantor,
unconditionally and irrevocably, undertakes to indemnify the Banks on
demand by the Facility Agent (without requiring the Facility Agent to first
take steps against the Borrower or any other person) against any loss
suffered or incurred by the Banks should the amounts which would otherwise
be due under Clause 2.1 above not be recoverable for any reason whatsoever,
including (but not limited to) the Facility Agreement being or
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becoming void, voidable or unenforceable, the amount of that loss being the
amount expressed to be payable by the Borrower in respect of the relevant
sum.
2.5 Demands may be made by the Facility Agent under this Guarantee from time to
time and irrespective of whether any demands, steps or proceedings are
being or have been taken against the Borrower or any other person.
2.6 The Guarantor's obligations under this Guarantee are and will remain in
full force and effect by way of continuing security until no sum remains to
be lent under the Facility Agreement and the Finance Parties have received
or recovered all sums payable under the Facility Agreement.
2.7 So long as any sum remains to be lent or remains payable under the Facility
Agreement, the Guarantor shall not, after a claim has been made or by
virtue of any payment or performance by it under this Guarantee for or on
account of the liabilities of the Borrower:
2.7.1 be subrogated to any rights, security or moneys held, received or
receivable by the Facility Agent or any of the other Finance Parties
or be entitled to any right of contribution or indemnity in respect
of any payment made or monies received on account of the Guarantor's
liability under this Guarantee;
2.7.2 claim, rank, prove or have the benefit of any payment, distribution
or security from or on account of the Borrower or exercise any right
of set-off as against the Borrower
unless the Facility Agent otherwise directs.
3 Representations and Warranties
3.1 The Guarantor represents and warrants to and for the benefit of the
Facility Agent (on behalf of itself and each Bank) as follows:
3.1.1 Organisation; Power; Compliance with Law and Contractual
Obligations: It (i) is a corporation validly organised and existing
and in good standing under the laws of the state of its
incorporation, (ii) is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the
nature of its business requires such qualification, (iii) has all
requisite corporate power and authority and holds all material
requisite governmental licences, permits and other approvals to
enter into and perform its Obligations under this Guarantee and to
conduct its business substantially as currently conducted by it and
(iv) is in compliance with all laws, governmental regulations, court
decrees, orders and Contractual Obligations applicable to it,
except, with respect to Clause 3.1.1(ii) to (iv) to the extent that
the failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect.
3.1.2 Due Authorisation; Non-Contravention: The execution, delivery and
performance by the Guarantor of this Guarantee is within the
Guarantor's corporate powers, has been duly authorised by all
necessary corporate action, and does not:
(i) contravene the Guarantor's Organic Documents;
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(ii) contravene any law, governmental regulation, court decree or
order or material Contractual Obligation binding on or
affecting the Guarantor; or
(iii) result in, or require the creation or imposition of, any Lien
on any of the Guarantor's properties.
3.1.3 Governmental Approval; Regulation:
(i) No authorisation, consent, approval, licence, exemption of or
filing or registration with any court or governmental
authority or regulatory body ("Governmental Approval") is
required for the Guarantor to execute and perform its
obligations under this Guarantee, except for those which have
been duly obtained or effected. No material Governmental
Approval is required for the Guarantor to carry on its
business, except for those which have been duly obtained or
effected.
(ii) The Guarantor is not subject to any regulation as an
"investment company" subject to the U.S. Investment Company
Act of 1940, as amended, or as a "holding company" or a
"subsidiary company" or an "affiliate" of a "holding company"
subject to the U.S. Public Utility Holding Company Act of
1935, as amended ("PUHCA"), except that the Guarantor is a
"subsidiary company" of Edison International which is a
"holding company" that is exempt from all regulation under
PUHCA (except Section 9(a)(2) thereof) pursuant to Section
3(a) thereof. The Guarantor is not otherwise subject to any
regulation as a "public utility" under any other applicable
law, rule or regulation, which would have Material Adverse
Effect.
3.1.4 Validity: This Guarantee constitutes the legal, valid and binding
obligations of the Guarantor enforceable in accordance with its
terms (except as may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights
generally and general principles of equity).
3.1.5 Financial Information: The consolidated balance sheets of the
Guarantor (as at 31 December 1997 and 31 December 1998, and the
related consolidated statements of income and cash flows of the
Guarantor, copies of which have been furnished to the Facility
Agent, have been prepared in accordance with US GAAP consistently
applied, and present fairly the consolidated financial condition of
the Guarantor and its Subsidiaries as at the dates thereof and the
results of their operations for the periods then ended.
3.1.6 No Material Adverse Change: There has not occurred any event or
condition having a Material Adverse Effect since 31 December 1998.
3.1.7 Litigation: There is no pending or, to the knowledge of the
Guarantor, threatened litigation, action, proceeding, or labour
controversy affecting the Guarantor, or any of its properties,
businesses, assets or revenues, which, if adversely determined
(taking into account any insurance proceeds payable under a policy
where the insurer has accepted coverage without any reservations),
would have a Material
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Adverse Effect or which purports to affect adversely the legality,
validity or enforceability of this Guarantee.
3.1.8 Ownership of Properties: The Guarantor owns good and marketable
title to, or a valid leasehold interest in or other enforceable
interest in all properties and assets, real and personal, tangible
and intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights) purported to
be owned, leased or held by it, free and clear of all Liens, charges
or claims (including infringement claims with respect to patents,
trademarks, copyrights and the like) except as permitted pursuant to
Clause 4.2.2.
3.1.9 Taxes: The Guarantor has filed all tax returns and reports required
by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such
taxes or charges which are being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with US GAAP shall have been set aside on its books.
3.1.10 Pension and Welfare Plans: During the consecutive 12 month period
prior to the date of the execution and delivery of this Guarantee
and prior to the Issue Date (as defined in the Facility Agreement),
no steps have been taken to terminate any Pension Plan, and no
contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA. No
condition exists or event or transaction has occurred with respect
to any Pension Plan which could reasonably be expected to result in
the incurrence by the Guarantor or any member of the Controlled
Group of any material liability (other than liabilities incurred in
the ordinary course of maintaining the Pension Plan), fine or
penalty. Neither the Guarantor nor any member of the Controlled
Group has any contingent liability with respect to any post-
retirement benefit under a Welfare Plan which could reasonably be
expected to have a Material Adverse Effect, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
3.1.11 Environmental Warranties:
(i) All facilities and property owned or leased by the Guarantor
or any of its Subsidiaries or Partnerships have been, and
continue to be, owned or leased by the Guarantor, its
Subsidiaries or Partnership, as the case may be, in
compliance with all Environmental Laws, except where the
failure so to comply would not have, or be reasonably
expected to have, a Material Adverse Effect.
(ii) There are no pending or, to the knowledge of the Guarantor,
threatened:
(a) material claims, complaints, notices or requests for
information received by the Guarantor from governmental
authorities with respect to any alleged violation by the
Guarantor of any Environmental Law; or
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(b) material complaints, notices or inquiries to the
Guarantor from governmental authorities regarding
potential liability under any Environmental Law.
(iii) There have been no Releases (as defined under any
Environmental Law) of Hazardous Materials at, on or under any
property now or previously owned or leased by the Guarantor
that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect.
(iv) The Guarantor has obtained and is in compliance with all
permits, certificates, approvals, licences and other
authorisations relating to environmental matters and
necessary for the Guarantor's business, except where the
failure to obtain, maintain or comply with such permits,
certificates, approvals, licences or other authorisations
would not have, or be reasonably expected to have, a Material
Adverse Effect.
(vi) No property now or previously owned or leased by the
Guarantor is listed or proposed for listing (with respect to
owned property only) on the U.S. National Priorities List
pursuant to any Environmental Law, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-
up.
(vi) No conditions exist at, on or under any property now or
previously owned or leased by the Guarantor which, with the
passage of time, or the giving of notice or both, would give
rise to liability under any Environmental Law which liability
would have, or may reasonably be expected to have, a Material
Adverse Effect.
3.1.12 Regulations T, U and X: The Guarantor is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Advances will be used for a purpose
which violates, or would be inconsistent with, F.R.S. Board
Regulation T, U or X. Terms for which meanings are provided in
F.R.S. Board Regulation T, U or X or any regulations substituted
therefor, as from time to time in effect, are used in this Clause
3.1.12 with such meanings.
3.1.13 Accuracy of Information: All factual information heretofore or
contemporaneously furnished by the Guarantor in writing to the
Facility Agent or any Bank for purposes of or in connection with
this Guarantee or any transaction contemplated hereby is, and all
other such written factual information hereafter furnished by the
Guarantor in writing to the Facility Agent or any Bank will be, true
and materially accurate in every material respect on the date as of
which such information is dated or certified and as of the date of
execution and delivery of this Guarantee by the Facility Agent and
such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make
such information not materially misleading.
3.1.14 The Obligations: The Obligations are senior, unsecured Indebtedness
of the Guarantor ranking at least pari passu with all other senior,
unsecured Indebtedness of the Guarantor.
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3.1.15 Year 2000 Matters: The Guarantor has reviewed its operations and
those of its Subsidiaries with a view to assessing whether its
businesses or the businesses of any of its Subsidiaries will, in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilisation of data, be vulnerable to a Year
2000 Problem or will be vulnerable to the effects of a Year 2000
Problem suffered by any of the Guarantor's or any of its
Subsidiaries' major commercial counterparties. Based on such review
the Guarantor has no reason to believe that a Material Adverse
Effect will occur with respect to its businesses or operations or
the businesses or operations of any of its Subsidiaries resulting
from a Year 2000 Problem.
3.2 The representations and warranties set out in Clause 3.1 shall be deemed to
be repeated on the date of drawdown of each Advance (unless stated to
relate solely to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date). The
representations and warranties set out in Clause 3.1.1 to 3.1.5 (inclusive)
shall be deemed to be repeated by the Guarantor on the first day of each
Interest Period with reference to the facts and circumstances then
existing.
4 Covenants
4.1 Affirmative Covenants: The Guarantor agrees with the Facility Agent (on
behalf of itself and each Bank) that, until the Total Commitments have
terminated and all obligations of the Borrower under the Facility Agreement
have been paid and performed in full, the Guarantor will perform the
obligations set forth in this Clause 4.1.
4.1.1 Financial Information, Reports, Notices: The Guarantor will furnish,
or will cause to be furnished, to the Facility Agent copies of the
following financial statements, reports, notices and information:
(i) as soon as available and in any event within 60 days after
the end of each of the first 3 Fiscal Quarters of each Fiscal
year of the Guarantor, consolidated balance sheets of the
Guarantor and its Subsidiaries as of the end of such Fiscal
Quarter and consolidated statements of income and cash flows
of the Guarantor and its Subsidiaries for such Fiscal Quarter
and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter,
certified by an Authorised Representative with responsibility
for financial matters;
(ii) as soon as available and in any event within 120 days after
the end of each Fiscal Year of the Guarantor, a copy of the
annual audit report for such Fiscal Year for the Guarantor
and its Subsidiaries, including therein consolidated balance
sheets of the Guarantor and its Subsidiaries as of the end of
such Fiscal Year and consolidated statements of income and
cash flows of the Guarantor and its Subsidiaries for such
Fiscal Year, and accompanied by the unqualified opinion of
Arthur Andersen & Co. or other internationally recognised
independent auditors selected by the Guarantor which report
shall state that such consolidated financial statements
present fairly in all material respects the financial
position for the periods
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indicated in conformity with US GAAP applied on a basis
consistent with prior periods;
(iii) concurrently with the delivery of the financial statements
referred to in Clause 4.1.1(i) a certificate, executed by the
controller, treasurer or chief financial officer of the
Guarantor, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to
the Facility Agent) compliance with the financial covenant
set forth in Clause 4.2.3;
(iv) as soon as possible and in any event within 5 Business Days
after any Authorised Representative obtains knowledge of the
occurrence of each Default, a statement of such Authorised
Representative setting forth details of such Default or
default and the action which the Guarantor has taken and
proposes to take with respect thereto;
(v) as soon as possible and in any event within 5 Business Days
after (1) the occurrence of any material adverse development
with respect to any litigation, action, proceeding, or labour
controversy of the type described in Clause 3.1.7 or (2) the
commencement of any labour controversy, litigation, action,
proceeding of the type described in Clause 3.1.7, notice
thereof and, upon request of the Facility Agent, copies of
all non-privileged documentation relating thereto;
(vi) promptly after the sending or filing thereof, copies of all
reports and registration statements which the Guarantor files
with the Securities and Exchange Commission or any national
securities exchange;
(vii) immediately upon becoming aware of the institution of any
steps by the Guarantor or any other Person to terminate any
Pension Plan (other than a standard termination under ERISA
Section 4041(b)), or the failure to make a required
contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under Section 302(f) of
ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Guarantor
furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any
Pension Plan which could result in the incurrence by the
Guarantor or any member of the Controlled Group of any
material liability (other than liabilities incurred in the
ordinary course of maintaining the Pension Plan), fine or
penalty, or any increase in the contingent liability of the
Guarantor with respect to any post-retirement Welfare Plan
benefit which has a Material Adverse Effect, notice thereof
and copies of all documentation relating thereto; and
(viii) as soon as known, any changes in Guarantor's Debt Rating by
Moody's or S&P or any other rating agency which maintains a
Debt Rating on the Guarantor which is used in the Pricing
Grid.
4.1.2 Compliance with Laws: The Guarantor will comply in all material
respects with all applicable law, rules, regulations and orders,
such compliance to include the
- --------------------------------------------------------------------------------
<PAGE>
payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its
property (except to the extent such assignments and charges are
being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with US GAAP shall
have been set aside on its books).
4.1.3 Maintenance of Properties: The Guarantor will, and will use
reasonable efforts to cause each of its Subsidiaries and
Partnerships to, maintain, preserve, protect and keep its property
and equipment in good repair, working order and condition (ordinary
wear and tear excepted), and make necessary and proper repairs,
renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times unless
the Guarantor determines in good faith that the continued
maintenance of any of its properties or equipment is no longer
economically desirable and except where the failure so to do would
not have a Material Adverse Effect.
4.1.4 Insurance: The Guarantor will maintain or cause to be maintained
with responsible insurance companies insurance with respect to its
properties and business against such casualties and contingencies
and of such types and in such amounts as is customary in the case of
similar businesses.
4.1.5 Books and Records: The Guarantor will, and will cause each of its
active Subsidiaries to, keep books and records which accurately
reflect all of its business affairs and transactions and permit the
Facility Agent and each Bank or any of their respective
representatives (at the Facility Agent's or such Bank's expense), at
reasonable times and intervals upon reasonable prior notice, to
visit all of its offices, to discuss its financial matters with its
officers and independent public accountant. The Guarantor will at
any reasonable time and from time to time upon reasonable prior
notice, permit the Facility Agent and the Banks or any of their
respective agents or representatives to examine and make copies of
and abstracts from the records and books of account of the
Guarantor; provided that by virtue of this Clause 4.1.5 the
Guarantor shall not be deemed to have waived any right to
confidential treatment of the information obtained, subject to the
provisions of applicable law or court order.
4.1.6 Environmental Covenant: The Guarantor will, and will use best
efforts to cause each of its Subsidiaries and Partnerships to:
(i) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licences and other
authorisations relating to environmental matters in effect
and remain in material compliance therewith, and handle all
Hazardous Materials in material compliance with all
applicable Environmental Laws, in each case where the failure
to do so may reasonably be expected to have a Material
Adverse Effect;
(ii) promptly cure and have dismissed to the reasonable
satisfaction of the Facility Agent any actions and
proceedings relating to compliance with Environmental Laws
where such action or proceeding may reasonably be
- --------------------------------------------------------------------------------
<PAGE>
expected to have a Material Adverse Effect; provided that the
Guarantor or such Subsidiary or Partnership may postpone such
cure and dismissal during any period in which it is
diligently pursuing any available appeals in such action or
proceeding so long as such postponement would not be
reasonably likely to have a Material Adverse Effect; and
(iii) provide such non-privileged information as the Facility Agent
may reasonably request from time to time to evidence
compliance with this Clause 4.1.6.
4.1.7 Conduct of Business and Maintenance of Existence: The Guarantor will
continue to engage in business of the same type as now conducted by
it and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all
material rights, privileges and franchises necessary or desirable in
the normal conduct of its business, except, in each case, as
otherwise permitted by Clause 4.2.5.
4.1.8 Year 2000 Matters: The Guarantor will, and will use best efforts to
cause each of its Subsidiaries and Partnerships to assure that its
computer based systems are able to effectively process data
including dates on or after 1 January 2000.
4.1.9 L/C Reductions: The Guarantor will procure that the L/C Amount (as
defined in the Capex Letter of Credit) is reduced at the time and to
the extent permitted under the financing documents to which the
Project Company is a party.
4.2 Negative Covenants: The Guarantor agrees with the Facility Agent (on behalf
of itself and each Bank) that, until the Total Commitments] have terminated
and all obligations of the Borrower under the Facility Agreement have been
paid and performed in full, the Guarantor will, and will cause each of its
Subsidiaries and Partnerships, as applicable, to perform the obligations
set forth in this Clause 4.2:
4.2.1 Restrictions on Secured Indebtedness: The Guarantor will not create,
incur, assume or suffer to exist any secured Indebtedness other
than:
(i) Capitalised Lease Liabilities and other secured Indebtedness
of any kind whatsoever (including, without limitation,
Indebtedness secured by a pledge of the stock of a Subsidiary
not otherwise permitted under Clause 4.2.1(ii)) at any time
outstanding not exceeding an aggregate principal amount equal
to 10% of Net Tangible Assets; provided that any Indebtedness
exceeding such amount may be secured pursuant to Clause
4.2.2(vi) and
(ii) Non-Recourse Debt with respect to which the Guarantor has
pledged the stock of a Subsidiary in order to secure initial
project financing obtained or being obtained after the
Effective Date by such Subsidiary (or the Partnership in
which such Subsidiary is a partner).
4.2.2 Liens: The Guarantor will not create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets, whether
now owned or hereafter acquired, except:
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<PAGE>
(i) Liens granted to secure payment of Indebtedness of the type
permitted and described in Clause 4.2.1(ii);
(ii) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable
without penalty or which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with US GAAP shall have been set aside
on its books;
(iii) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for
sums not overdue or which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with US GAAP shall have been set aside
on its books;
(iv) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(v) judgment Liens in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a
customary deductible) by insurance maintained with
responsible insurance companies;
(vi) Liens upon any property at any time directly owned by the
Guarantor to secure any Indebtedness of the nature described
in Clause 4.2.1(i) in excess of the amount otherwise
permitted thereby, provided that the Guarantor's Obligations
shall be equally and rateably secured with any and all such
Indebtedness and with any other Indebtedness similarly
entitled to be equally and rateably secured; and
(vii) any Lien existing on the property of the Guarantor on the
Effective Date.
In the event that the Guarantor shall propose to create, incur,
assume or suffer to exist any Lien upon any property at any time
directly owned by it to secure any Indebtedness as contemplated by
Clause 4.2.2(vi) above, the Guarantor will give prior written notice
thereof to the Facility Agent, who shall give notice to the Banks,
and the Guarantor will, prior to or simultaneously with the creation
of such Lien, effectively secure the Guarantor's Obligations equally
and rateably with such Indebtedness.
4.2.3 Financial Condition: The Guarantor will not permit its Tangible Net
Worth to be less than $400,000,000 plus 25% of the Guarantor's and
its Subsidiaries' consolidated net income earned (without
subtracting net losses) in each Fiscal Quarter commencing with the
quarter ending after 30 September 1992.
4.2.4 Investments: The Guarantor will not, and will not permit any of its
Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
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<PAGE>
(i) Investments existing on the Effective Date;
(ii) Cash Equivalent Investments provided, however, that any
Investment which when made complies with the requirements of
the definition of the term "Cash Equivalent Investment" may
continue to be held notwithstanding that such Investment if
made thereafter would not comply with such requirements;
(iii) without duplication, Investments permitted as Indebtedness
pursuant to Clause 4.2.1;
(iv) otherwise in the ordinary course of business; and
(v) Investments permitted pursuant to Clause 4.2.5(ii).
4.2.5 Consolidation Merger: The Guarantor will not, and will not permit
any of its Subsidiaries to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or
otherwise acquire all or substantially all of the assets of any
Person (or of any division thereof) except:
(i) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Guarantor or any other
Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Guarantor or any other
Subsidiary;
(ii) so long as no Default (by reason of the violation of Clause
4.2.3) has occurred and is continuing or would occur after
giving effect thereto, the Guarantor or any of its
Subsidiaries may purchase all or substantially all of the
assets of any Person, or (in the case of any such Subsidiary)
acquire such person by merger; and
(iii) provided that no Default has occurred and is continuing or
would occur after giving effect thereto (including, without
limitation, a Change in Control), the Guarantor may
consolidate with or merge into any other Person, or convey,
transfer or lease its properties and assets substantially as
an entirety to any person, or permit any Person to merge into
or consolidate with the Guarantor if the Guarantor is the
surviving corporation or the surviving corporation or
purchaser or lessee is a corporation incorporated under the
laws of the United States of America or Canada and assumes
the Guarantor's Obligations.
4.2.6 Asset Dispositions: The Guarantor will not, and will not permit any
of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with
respect to, all or any substantial part of its assets (including
accounts receivable and capital stock of Subsidiaries) to any
Person, unless:
(i) such sale, transfer, lease, contribution or conveyance is the
ordinary course of its business; or
(ii) the net book value of such assets, together with the net book
value of all other assets sold, transferred, leased,
contributed or conveyed otherwise
- --------------------------------------------------------------------------------
<PAGE>
than in the ordinary course of business by the Guarantor or
any of its Subsidiaries pursuant to this Clause 4.2.6(ii)
during the most recent 12 month period since the Effective
Date, does not exceed 10% of Net Tangible Assets computed as
of the end of the most recent quarter preceding such sale;
provided, however, that any such sales shall be disregarded
for purposes of the limitation of this Clause 4.2.6(ii) if
the proceeds are invested in assets in similar or related
lines of business of the Guarantor, and provided further,
that the Guarantor may sell or otherwise dispose of assets in
excess of such 10% if the proceeds from such sales or
dispositions, which are not so reinvested, are retained by
the Guarantor as cash or Cash Equivalent Investments.
4.2.7 Transactions with Affiliates: The Guarantor will not enter into, or
cause, suffer or permit to exist any arrangement or contract with
any of its Affiliates unless such arrangement or contract is fair
and equitable to the Guarantor and is an arrangement or contract of
the kind which would be entered into by a prudent Person in the
position of the Guarantor with a Person which is not one of its
Affiliates.
4.2.8 Restrictive Agreements: The Guarantor will not, and will not permit
any of its Subsidiaries to, enter into any agreement (excluding any
Loan Document and any agreement governing any Indebtedness permitted
by Clause 4.2.1(ii) as to the assets financed with the proceeds of
such Indebtedness) prohibiting:
(i) the ability of the Guarantor to amend or otherwise modify any
Loan Document; or
(ii) the ability of any Subsidiary to make any payments, directly
or indirectly, to the Guarantor by way of dividend, advances,
repayments of loans or advances, reimbursements of management
and other intercompany charges, expenses and accruals or
other returns on investments, or any other agreement or
arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to
the Guarantor where such prohibition or restriction has a
Material Adverse Effect.
4.3 ERISA: The Guarantor will not engage in any prohibited transactions under
Section 406 of ERISA or under Section 4975 of the Internal Revenue Code,
which would subject the Guarantor to any tax, penalty or other liabilities
having a Material Adverse Effect.
5 Invalidity
If any provision of this Guarantee is held to be invalid or unenforceable,
then such provision shall (so far as it is invalid or unenforceable) be
given no effect and shall be deemed not to be included in this Guarantee
but without invalidating any of the remaining provisions of this Guarantee.
The parties shall then use all reasonable endeavours to replace the invalid
or unenforceable provision with a valid provision the effect of which is as
close as possible to the intended effect of the invalid or unenforceable
provision.
- --------------------------------------------------------------------------------
<PAGE>
6 Notices
6.1 Any notice or other communications to be given under, or in connection
with, this Guarantee shall be in writing and signed by or on behalf of the
party giving it. It shall be served by sending it by fax to the number set
out in Clause 6.2 (provided that it is also sent by delivery by hand or
first class post on the same day), or delivering it by hand, or sending it
by pre-paid recorded delivery, special delivery or registered post, to the
address set out in Clause 6.2 and in each case marked for the attention of
the relevant party set out in Clause 6.2 (or as otherwise notified from
time to time in accordance with the provisions of this Clause 6). Any
notice so served by hand, fax or post shall be deemed to have been
received:
6.1.1 in the case of delivery by hand, when delivered;
6.1.2 in the case of fax, at the time of transmission;
6.1.3 in the case of pre-paid recorded delivery, special delivery or
registered post, at 10:00 a.m. on the second Business Day following
the date of posting,
provided that in each case where delivery by hand or by fax occurs after
6.00 p.m. on a Business Day or on a day which is not a Business Day,
service shall be deemed to occur at 9.00 a.m. on the next following
Business Day.
References to time in this clause are to local time in the country of the
addressee.
6.2 The addresses and fax number of the parties for the purpose of Clause 6.1
are as follows:
The Facility Agent:
Address 5 The North Colonnade
Canary Wharf
London E14 4BB
For the attention of: Mike Clarke
Fax: 0171 773 6807
Guarantor:
Address: Lansdowne House
Berkeley Square
London
W1X 5DH
For the attention of: General Counsel
Fax: 0171 312 4041
6.3 A party may notify the other for a change to its name, relevant addressee,
address or fax number for the purposes of this Clause 6, provided that such
notice shall only be effective on:
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<PAGE>
6.3.1 the date specified in the notice as the date on which the change is
to take place; or
6.3.2 if no date is specified or the date specified is less than five New
York Business Days after the date on which notice is given, the date
following five New York Business Days after notice of any change has
been given.
6.4 In proving such service it shall be sufficient to prove that the envelope
containing such notice was properly addressed and delivered either to the
address shown thereon or into the custody of the postal authorities as a
pre-paid recorded delivery, special delivery or registered post letter, or
that the facsimile transmission was made after obtaining, in person or by
telephone, appropriate evidence of the capacity of the addressee to receive
the same, as the case may be.
7 Assignment
No person shall be entitled to assign, transfer, charge, declare trusts over or
otherwise deal in any way whatsoever with the benefit or burden of this
Guarantee (in whole or in part) or any right, benefit or obligation arising
under this Guarantee or with any income or benefit derived or to be derived from
this Guarantee or agree to do any such matter; Provided that a Bank may assign
the benefit of this Guarantee to any person to whom it transfers its rights and
obligations under the Facility Agreement.
8 Variation
No variation of any of the terms of this Guarantee shall be valid unless it is
made in accordance with Clause 22 of the Facility Agreement. The expression
"variation" shall include any variation, supplement, deletion or replacement
however effected.
9 Waiver
9.1 Any delay by a Bank or the Facility Agent or the Guarantor in exercising,
or any failure to exercise, any right or remedy under this Guarantee shall
not constitute a waiver of the right or remedy or a waiver of any other
rights or remedies and no single or partial exercise of any rights or
remedy under this Guarantee or otherwise shall prevent any further exercise
of the right or remedy or the exercise of any other right or remedy.
9.2 The rights and remedies of the parties under or pursuant to this Guarantee
are cumulative and are in addition to any rights or remedies provided under
general law.
10 Governing Law and Jurisdiction
10.1 Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of England.
10.2 English Courts: The Facility Agent (on behalf of itself and each Bank)
irrevocably agrees that the courts of England are to have jurisdiction to
settle any disputes which may arise out of or in connection with this
Guarantee and that, accordingly, any legal action or proceedings arising
out of or in connection with this Guarantee ("Proceedings") may be brought
in those courts and the Guarantor irrevocably submits to the jurisdiction
of those courts.
- --------------------------------------------------------------------------------
<PAGE>
This Guarantee has been executed as a Deed on the date stated at the beginning.
EXECUTED and DELIVERED as a DEED by
EDISON MISSION ENERGY
acting by a duly authorised officer
in the presence of: PAUL GRACEY
JEREMY STOKELD
One Silk Street
London
EXECUTED as a DEED by
Andrew Vine on behalf of
BARCLAYS BANK PLC
pursuant to a power of attorney dated
for the Banks party to the Facility Agreement ANDREW VINE
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EDISON
MISSION ENERGY AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 450,777
<SECURITIES> 0
<RECEIVABLES> 153,810
<ALLOWANCES> 0
<INVENTORY> 182,052
<CURRENT-ASSETS> 880,593
<PP&E> 8,279,324
<DEPRECIATION> 366,721
<TOTAL-ASSETS> 11,189,084
<CURRENT-LIABILITIES> 1,293,007
<BONDS> 5,104,988
307,536
118,054
<COMMON> 64,130
<OTHER-SE> 2,101,126
<TOTAL-LIABILITY-AND-EQUITY> 11,189,084
<SALES> 0
<TOTAL-REVENUES> 878,319
<CGS> 0
<TOTAL-COSTS> 441,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 245,252
<INCOME-PRETAX> 183,022
<INCOME-TAX> 33,006
<INCOME-CONTINUING> 150,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (13,840)
<NET-INCOME> 136,176
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
