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.