COOPERATIVE DEVELOPMENT - DOING THE DEAL
| Jurisdiction | United States |
(Nov 2014)
COOPERATIVE DEVELOPMENT - DOING THE DEAL
Regional Realty Officer
U.S. Bureau of Indian Affairs
Phoenix, Arizona
Western Regional Office
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STAN WEBB is the Realty Officer at the BIA's Western Regional Office in Phoenix, Arizona, a position he has held for most of the last 25 years. He has also worked in the private practice of Federal Indian Law, and at the BIA's Central Office in Washington, D.C., and BIA agencies in Minnesota and Wisconsin. He received undergraduate and law degrees from the University of Kansas, and has a Master in Public Administration degree from Harvard University's Kennedy School of Government. He is a member of the State Bar of Arizona and the Cherokee Nation of Oklahoma, and holds the COM designation awarded by the Commercial-Investment Real Estate Institute.
KRoad/First Solar Moapa Project - BIA Transaction Summary
Option to Lease
An Option to Lease was executed by developer KRoad Moapa ("KRoad") and the Moapa Band's Section 17 Corporation in June 2010. The agreement was later assigned from the Corporation to the Band ("Moapa"), and its term was extended as supporting documentation for the Lease was being completed and various other agreements were being negotiated and re-negotiated.
Lease Supporting Documents
In 2011, a contract appraisal was approved by OST's Office of Appraisal Services and a review of the negotiated economic terms was provided by BIA's Office of Energy and Economic Development; these reviews "approved" the original negotiated terms whereby Moapa was to receive an initial Basic Rent (substantially higher than the BLM combined Basic Rent and Capacity Fee in Clark County, Nevada), adjusted at a rate of 3%/year and made subject to re-appraisal at the end of the 35-year primary term.
The NEPA process was initiated in 2011 (and the Project was subsequently added to the Department's Priority List), culminating in a Record of Decision executed by Secretary Salazar in June 2012, covering both the BIA actions (the approval of a Ground Lease and the issuance of six related Grants of Easement) and a related BLM right-of-way action for a generation tie line.
Power Purchase Agreement and Interconnection Agreement
In late 2012, KRoad successfully completed critical negotiations on a Power Purchase Agreement ("PPA") with the L.A. Department of Water and Power ("LADWP"), whereby the Project would sell 250 mw of power to LADWP, and LADWP would obtain an option to purchase the Project (for a period purportedly beginning in about the eighth year of operations and running through Year 25). The PPA was approved by the City of L.A. in early 2013, and an Interconnection Agreement authorizing the Project to connect to LADWP's transmission grid was approved by the City in July 2013. (See the attached Fact Sheet prepared by KRoad shortly thereafter.)
Pre-Lease Activities
As KRoad's negotiations with LADWP and its Financing Parties were being finalized, various pre-lease, pre-construction activities were being permitted, including authorizations relating to temporary access, geotechnical work, fencing, and the temperature-dependent translocation of desert tortoises to a 6000-acre translocation area set aside by Moapa (in consultation with FWS) about five miles from the Project site.
Ground Lease
The Lease, as approved by the BIA's Western Regional Director in late June 2013, covers approximately 2000 acres, and will run for a maximum term of 50 years (with an annual rent payment to be adjusted by re-appraisal at the end of Lease Year 35, subject to a negotiated cap). As PPA negotiations were being completed, KRoad advised Moapa that the Lease would have to be modified to essentially incorporate a BLM-type rent structure, whereby the initial annual rent would be reduced to just more than half of the amount originally agreed to.
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Outside consulting services were obtained and the parties ultimately agreed to enter into certain "Side Agreements" which would potentially generate the same amount of total consideration (in terms of present value) as the original negotiations, over the primary term of the Lease. The Lease, as approved, incorporates the required changes in the rent structure, and the Side Agreements providing for substantial additional consideration are incorporated in the Lease as exhibits.
Side Agreements
Three "Side Agreements" between KRoad and Moapa were incorporated in the Lease as exhibits: (1) a Tribal Agreement, specifying KRoad's obligations for the payment of tribal taxes and fees, or payments in lieu thereof; (2) a Construction Consulting Agreement, whereby Moapa would receive a substantial payment for certain services during the first two years of the Lease; and (3) a Profit-Sharing Agreement, whereby Moapa would receive a distribution (up to a calculated and agreed-upon maximum amount) from the net proceeds derived from the sale of the Project (projected to occur within the first ten Lease Years, upon the exercise of LADWP's option to purchase).
Grants of Easement and Right-of-Way Agreements
A form Right-of-Way Agreement, as needed to support the Project, was also incorporated in the Lease as an exhibit, including an agreement to provide power to Moapa's nearby Travel Plaza on Interstate 15. Six Right-of-Way Agreements (for water, power, telecommunications, and road purposes, respectively) were then incorporated in six Grants of Easement executed by the Regional Director in late June 2013, in conjunction with the approval of the Lease, These Agreements provide for separate annual payments at negotiated (relatively nominal) rates.
Leasehold Financing and Tribal Ordinances
Prior to the approval and execution of the Lease and the Grants of Easement (which were to have comprised the collateral for Project Financing), the negotiations between KRoad and its Financing Parties required the adoption and approval of three tribal ordinances designed to strengthen the enforceability of all of the Project documents. To that end, the following ordinances were approved by the BIA's Southern Paiute Agency in May-June 2013: (1) a Commercial Transactions Ordinance; (2) a Financial Transactions Ordinance; and (3) a TERO Compliance Plan Ordinance.
To facilitate equity financing and confirm some of the negotiated terms (including certain limitations on Moapa's remedies and the limited amounts of the Letters of Credit being required), waivers of certain [easing regulations were obtained from the Assistant Secretary - Indian Affairs in mid-June 2013. That waiver did not extend to the requirement that debt financing instruments be approved by BIA, and a Leasehold Deed of Trust (naming Deutsche Bank Trust Company Americas as Collateral Agent for various lenders named in a separate Credit Agreement) was submitted for preliminary review prior to the approval of the...
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