ATTACHMENT
L
Creditworthiness
Procedure
1. General
Information:
This provision is applicable to any Transmission
Customer taking Transmission Service under ISO New England Inc.’s Transmission,
Markets and Services Tariff, Section II-Open Access Transmission Tariff
Schedule 21-GMP ("Tariff") and Schedule 20A-GMP of the OATT for Green
Mountain (referred to as “Transmission Service” or “Transmission
Services”). The creditworthiness of each
Transmission Customer must be established prior to receiving Transmission
Service from Green Mountain. A
Transmission Customer will be evaluated at the time its application for
Transmission Service is provided to Green Mountain. A credit review shall be conducted for each
Transmission Customer not less than annually or upon reasonable request by the
Transmission Customer. Green Mountain
shall make this credit review in accordance with procedures based on specific
quantitative and qualitative criteria to determine the level of secured and
unsecured credit required from the Transmission Customer.
The information requested in this Attachment L should
be forwarded to:
Chief Financial Officer/Controller
Green
Mountain Power Corporation
163 Acorn Lane
Colchester, VT 05446
Upon receipt of a Transmission Customer’s
information, Green Mountain will review it for completeness and will notify the
Transmission Customer if additional information is required. Upon completion of an evaluation of a
Transmission Customer under this Creditworthiness Policy, Green Mountain will
forward a written evaluation if the Transmission Customer is required to
provide Financial Assurance.
2. Financial
Information:
Transmission Customers requesting Transmission
Service or requesting interconnection service must submit, if available, the
following:
· All current rating agency reports
of the Transmission Customer issued by Standard and Poor’s (“S&P”), Moody’s
and/or Fitch Ratings.
· Audited financial statements provided by a registered
independent auditor for the two (2) most recent years, on an annual and
quarterly basis if available, or the period of its existence, if shorter than
two (2) years, for the Transmission Customer.
3. Creditworthiness
Requirements
A. Transmission Customers, rated and
un-rated, will be required to meet specific quantitative creditworthiness
requirements, as detailed below:
1. To qualify for unsecured credit, the Transmission
Customer must meet at least one of criteria (a) or (b) as described below:
a) If rated, the Transmission Customer’s
lowest senior unsecured long-term debt rating from the three named rating
agencies (or if the customer does not have a senior unsecured long- term debt
rating, then one rating notch below the
issuer and/or corporate credit rating) of:
· Standard
and Poor’s or Fitch rating of at least a BBB+, or
· Moody’s
rating of at least a Baa1.
b) If un-rated or if rated below BBB+/Baa1,
as stated in a), the Transmission Customer must meet all of the following for
the last four (4) quarters, or the last two (2) years if quarterly information
is not available:
· A Current Ratio of at least 2.0
(current assets divided by all current liabilities);
· A Total Capitalization Ratio of less
that 55% debt, defined as total debt (including all capitalized leases and all
short-term borrowings) divided by the sum of total shareholders’ equity plus
total debt;
· EBITDA-to-Fixed Charge Ratio of at
least 3.0 times, defined as Earnings before interest, taxes, depreciation and
amortization divided by fixed charges (interest on debt as defined in Total
Capitalization Ratio above plus preferred dividends on any outstanding
preferred equity); and
· Unqualified audit opinions in audited
financial statements provided.
2. If the Transmission Customer relies on
the creditworthiness of a parent company or other party reasonably acceptable
to Green Mountain, the Transmission Customer’s parent company or such other
party must meet the criteria set out in (a) or (b) above, and must provide to Green
Mountain a written guarantee that it will be unconditionally responsible for
all financial obligations associated with the Transmission Customer’s receipt
of Transmission Service from Green Mountain.
B. Qualitative Standards for
Creditworthiness Determination:
In conjunction with the
quantitative standards above, Green Mountain will consider qualitative
standards when determining creditworthiness, such as:
1) Years in business: a company in
business fewer than five (5) years will be considered a greater risk.
2) Management’s experience in the
industry: a management team with an average of less than five (5) years
experience will be considered a greater risk.
3) Market risk: consideration of pricing
exposure, credit exposures, and operational exposures.
4) Litigation Risk: a pending legal action
with potential monetary damages approaching 3% of gross revenues will be
considered as significantly increasing Transmission Customer risk.
5) Regulatory Environment (State and
Local): a company subject to significant exposure to regulatory decisions, such
as key planning decisions, shall be considered as having increased risk.
6) Prior payment history with other Transmission
Providers or other vendors: a company with an excellent payment history of
greater than or equal to five (5) years shall be considered a lesser risk.
4. Financial
Assurance:
If the Transmission Customer does not meet the
applicable requirements for Creditworthiness set out in Section 3, then the
Transmission Customer must either:
· Pay in advance for service an amount equal to the lesser
of the total charge for Transmission Service or the charge for three months of
Transmission Service not less than ten (10) business days in advance of the
commencement of service. If the
Transmission Customer pays for service in advance, Green Mountain will pay to
the Transmission Customer interest on the amounts not yet due to Green Mountain,
computed in accordance with the Commission's regulations at 18 CFR §
35.19a(a)(2)(iii); or
· Obtain Financial Assurance in the form of a letter of
credit or corporate guarantee from a parent or other party reasonably
acceptable to Green Mountain with an issuer and/or corporate credit rating no
lower than investment grade from Standard and Poor’s and/or Fitch Ratings
and/or Moody’s in an amount equal to the equivalent of three (3) months of
Transmission Service charges at least one (1) day prior to receiving service. In the event of different ratings from the
rating agencies, the lowest rating will apply.
o Letter
of credit means one or more irrevocable, transferable standby letters of credit
issued by a U.S. commercial bank or a U.S. branch of a foreign bank provided
that such Transmission Customer is not an affiliate of such bank, and provided
that such bank has an issuer and/or corporate credit rating of at least A2 from
Moody’s or A from Standard and Poor’s or Fitch Ratings. In the event of different ratings from the
rating agencies, the lowest rating shall apply.
o Costs
of a letter of credit shall be borne by the Transmission Customer.
o If
the credit rating of the bank issuing the letter of credit falls below the
specified rating, the Transmission Customer shall notify Green Mountain in
writing within five (5) business days of such event and shall have two (2) business
days following written notice to provide other appropriate financial assurance.
5. Credit
Levels
If the Transmission Customer meets the applicable
criteria outlined in Section 3, that Transmission Customer may receive
unsecured credit equivalent to three (3) months of transmission charges or, for
interconnections, the credit equivalent of three (3) months of the annual
facilities charges and other ongoing charges.
Transmission Customers not meeting the Creditworthiness Requirements
above in Sections 3 and 4 may not receive unsecured credit from Green Mountain.
6. Contesting
Creditworthiness Determination.
The Transmission Customer may contest Green Mountain’s
determination of creditworthiness by submitting a written request for
re-evaluation within 20 calendar days of notification of the creditworthiness
determination. Such request should
provide information supporting the basis for a request to re-evaluate a
Transmission Customer’s creditworthiness.
Green Mountain will review and respond to the request within 20 calendar
days.
7. Process
for Changing Credit Requirements.
In the event that Green Mountain plans to revise its
credit level or collateral requirements, as detailed in this Creditworthiness
Policy, the following process shall be followed:
A. General
Notification Process
In the event that Green
Mountain plans to revise its requirements for credit levels or collateral
requirements as detailed in this Attachment L, Green Mountain shall submit such
changes in a filing to the Federal Energy Regulatory Commission (“Commission”)
under Section 205 of the Federal Power Act.
Green Mountain shall follow the notification requirements pursuant to
Section 3.04(a) of the Transmission Operating Agreement and reflected herein.
1) Green Mountain shall provide written
notification to ISO-NE and stakeholders of any filing described above, at least
30 days in advance of such filing.
2) Filing notifications shall include a
detailed description of the filing, including a redlined document containing
revised change(s) to the Creditworthiness Policy.
3) Green Mountain shall consult with
interested stakeholders upon request.
4) Following Commission acceptance of such
filing and upon the effective date, Green Mountain shall revise its Attachment
L Creditworthiness Policy and an updated version of Schedule 21-GMP shall be posted
the ISO-NE website.
B. Transmission
Customer Responsibility
When there is a change in
requirements, it is the responsibility of the Transmission Customer to forward
updated financial information to Green Mountain, to the address noted above,
and indicate whether the change affects the Transmission Customer’s ability to
meet the requirements of the Creditworthiness Policy. In such cases where the Transmission
Customer’s status has changed, the Transmission Customer must take the
necessary steps to comply with the revised requirements of the Creditworthiness
Policy by the effective date of the change.
C. Notification
of Active Customers
·
Active
Transmission Customers are defined as any current Transmission Customer that
has reserved Transmission Service within the last three (3) months.
·
All
Active Transmission Customers will be notified via either e-mail or U.S. mail
that the above posting has been made.
They must follow the steps outlined in this procedure.
8. Posting
Collateral Requirements
A. Changes
in Customer’s Financial Condition:
Each Transmission Customer
must inform Green Mountain, in writing, within five (5) business days of any
material change in its financial condition or the financial condition of a
parent providing a guarantee. A material
change in financial condition may include, but is not limited to, the
following:
· Change in ownership by way of a merger, acquisition or
substantial sale of assets;
· A downgrade of long- or
short-term debt rating by a major rating agency;
· Being placed on a credit watch
with negative implications by a major rating agency;
· A bankruptcy filing;
· Any action requiring filing of a
Form 8-K;
· A declaration of or acknowledgement of insolvency;
· A report of a significant
quarterly loss or decline in earnings;
· The resignation of key
officer(s);
· The issuance of a regulatory
order and/or the filing of a lawsuit that could materially adversely impact
current or future financial results.
B. Change
in Creditworthiness Status:
A Transmission Customer
who has been extended unsecured credit under this Creditworthiness Policy must
comply with the terms of Financial Assurance in Item 4 if one or more of the
following conditions apply:
· The Transmission Customer no longer meets the applicable
criteria for Creditworthiness in Item 3;
· The Transmission Customer exceeds the amount of unsecured
credit extended by Green Mountain, in which case Financial Assurance equal to
the amount of excess must be provided within five (5) business days; or
· The Transmission Customer has missed two or more payments
for any of the Transmission Services offered by Green Mountain in the last 12
months.
9. Ongoing
Financial Review:
Each Transmission Customer is required to submit to Green
Mountain when issued, as applicable:
· Current rating agency report;
· Audited financial statements from a registered independent
auditor; and
· 10-Ks, 10-Q’s and 8-Ks, promptly
upon their issuance.
10. Suspension
of Service:
Green Mountain may immediately suspend Transmission
Service (with notification to Commission) to a Transmission Customer, and may
initiate proceedings with Commission to terminate Transmission Service, if the
Transmission Customer does not meet the terms described in Items 3 through 8 at
any time during the term of Transmission Service or if the Transmission
Customer’s payment obligations to Green Mountain exceed the amount of unsecured
or secured credit to which it is entitled under this Creditworthiness
Policy. A Transmission Customer is not
obligated to pay for Transmission Service that is not provided as a result of a
suspension of Transmission Service.