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Recommendation to Approve the Assignment of the Existing Power Purchase Agreement with Ameresco Half Moon Bay, LLC for the Ox Mountain Landfill Power Plant, to the Lender, HA RNG 1 LENDER LLC, and Delegate Authority to the General Manager of Alameda Municipal Power to Execute the Assignment Agreement. (Alameda Municipal Power 10491900)
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To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
Alameda Municipal Power (AMP) has received a request from Ameresco Half Moon Bay, LLC (Ameresco), the operator of the Ox Mountain Landfill Power Plant (a renewable landfill gas generation plant) in AMP’s portfolio, for the assignment of its existing Power Purchase Agreement (PPA) with AMP to a lender, HA RNG 1 LENDER LLC (Lender), as collateral for a loan. Consistent with the PPA, all requests for assignment require written approval by AMP. As the PPA has a term of 20 years, and City Council must approve AMP agreements with terms longer than 15 years, the City Council must approve of any assignment of the existing PPA. Additionally, the City of Palo Alto, the other public utility that shares participation in the power purchase from the Ox Mountain Landfill Power Plant, also must consent to any assignment, subject to a separate PPA with Ameresco.
Staff and legal counsel have reviewed and negotiated edits to an Assignment Agreement with Ameresco and the Lender to ensure that all AMP’s rights and remedies from the existing PPA are retained. The Public Utilities Board (PUB) and AMP staff recommend approval of the Assignment Agreement to the City Council.
BACKGROUND
On January 24, 2005, the PUB adopted Resolution No. 4656 approving a PPA between Ameresco and AMP, formerly Alameda Power and Telecom, for the purchase of renewable energy from a proposed landfill gas generating project located at the Ox Mountain landfill in Half Moon Bay, CA. The PPA was subsequently approved by the City Council on February 1, 2005, as the agreement had a term of 20 years, and City Council must approve AMP agreements with terms longer than 15 years. The PPA was officially executed on February 2, 2005.
AMP and the City of Palo Alto are the two buyers of the full electricity output from the Ox Mountain landfill gas generator with power production shared equally under the terms of two separate, but essentially identical, PPAs with Ameresco. Both AMP and the City of Palo Alto maintain rights that require approval of any assignment of the agreement with written consent.
The Ox Mountain landfill gas generator has an installed gross capacity of 10.4 megawatts (MW) operating as a baseload energy facility. AMP’s 50 percent project participation share is 5.2 MW of power. The Ox Mountain landfill gas generator became commercially operational in 2009 and will terminate in 2028.
On November 13, 2023, the PUB adopted Resolution No. 5220 recommending City Council approval of the Assignment Agreement with Ameresco and the Lender (Exhibit 1).
DISCUSSION
On August 3, 2023, Ameresco informed AMP staff of their request to assign the PPA to the Lender for use as collateral on a loan for Ameresco’s new business activities. The loan is unrelated to the potential expansion of the Ox Mountain power plant. According to Section 10.1 of AMP’s PPA with Ameresco, attached as Exhibit 2, “The rights and obligations of this Agreement may not be assigned by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed.”
As part of the review of the proposed Assignment Agreement by AMP’s legal counsel, multiple sections were identified that could potentially limit AMP’s rights and remedies contained within the PPA. AMP’s counsel proposed new language that strengthened all such sections, ensuring AMP’s rights and remedies, as well as Assignee’s obligations, would remain with the assignment of the contract. Importantly, AMP also retains the ability to reasonably determine that the Assignee has the technical and financial capability to perform the obligations of the PPA prior to the transfer. In addition, the power plant will revert to the lender only in the case of a default on the loan. The proposed Assignment Agreement is the result of negotiations between AMP, Palo Alto, the Lender, and Ameresco and is attached as Exhibit 1.
ALTERNATIVES
AMP is contractually obligated to not “unreasonably withhold or delay” consent. AMP staff could propose additional edits to the Assignment Agreement to address any areas of concern.
FINANCIAL IMPACT
There is no financial impact from this assignment.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code and Policy Documents.
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Recommendation to approve the assignment of the existing PPA with Ameresco for the Ox Mountain Landfill Power Plant, to the Lender, and delegate authority to the General Manager of AMP to execute the Assignment Agreement.
Respectfully submitted,
Nico Procos, AMP General Manager
By,
Alan Harbottle, Supervisor Energy Resources
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Assignment Agreement
2. Ox Mountain Power Purchase Agreement
3. AMP Administrative Report and Resolution