Tenth Amended and Restated Rent Supplement (ERCOT Transmission Lease), dated December 31, 2018, between Sharyland Distribution & Transmission Services, L.L.C. and Sharyland Utilities, L.P
Exhibit 10.2
Tenth Amended and Restated Rent Supplement
(ERCOT Transmission Lease)
December 31, 2018
This Tenth Amended and Restated Rent Supplement (this “Tenth Amended Supplement”) between Sharyland Distribution & Transmission Services, L.L.C. (“Lessor”) and Sharyland Utilities, L.P. (“Lessee”) is executed and delivered on December 31, 2018, to memorialize supplements to the ERCOT Transmission Lease (as defined below), effective as of January 1, 2019. Capitalized terms used herein that are not otherwise defined will have the meanings assigned to them in the ERCOT Transmission Lease.
WHEREAS, Lessor and Lessee are Parties to a Lease Agreement (ERCOT Transmission Assets) dated December 1, 2014 (as amended from time to time in accordance with its terms, the “ERCOT Transmission Lease”);
WHEREAS, on February 28, 2018, the Parties executed a Ninth Amended and Restated Rent Supplement (ERCOT Transmission Lease) effective as of January 1, 2018 (the “Ninth Amended Supplement”);
WHEREAS, the Parties wish to amend and restate the Ninth Amended Supplement pursuant to Section 3.2(b) of the ERCOT Transmission Lease; and
WHEREAS, the Parties intend to memorialize in this Tenth Amended Supplement the Incremental CapEx the Parties expect during 2019.
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties hereto agree to the following:
1. The Ninth Amended Supplement is hereby amended and restated in its entirety as set forth below.
2. The ERCOT Transmission Lease, except as supplemented by this Tenth Amended Supplement, shall remain in full force and effect.
Incremental CapEx:
| 2014 | $ | 18,470,677 | ||
| 2015 | $ | 22,517,350 | ||
| 2016 | $ | 9,050,252 | ||
| 2017 | $ | 4,217,866 | ||
| 2018 | $ | 759,766 | * | |
| 2019 | $ | 4,861,790 | ** |
| * | Represents the aggregate amount of Incremental CapEx the Parties expected to be placed in service in 2018. Rent supplements with respect to this Incremental CapEx were agreed to and memorialized as part of the Eighth Amended and Restated Rent Supplement (ERCOT Transmission Lease) dated December 31, 2017 (“Eighth Amended Supplement”). Of the 2018 Incremental CapEx, $0 was expected to be in service as of the balance sheet date reflected in Lessee’s first 2018 Regulatory Order (“First 2018 CapEx”), $0 was expected to be in service as of the balance sheet date reflected in Lessee’s second 2018 Regulatory Order (“Second 2018 CapEx”), and an aggregate of $759,766 was expected to be placed in service throughout the remainder of 2018 (“2018 Stub-Year CapEx”) and included in the first 2019 Regulatory Order. The Parties expected the First 2018 CapEx, Second 2018 CapEx and 2018 Stub-Year CapEx, collectively, to have a weighted average in-service date of November 1, 2018. A “Regulatory Order” is defined as either (i) the PUCT’s approval of Lessee’s application for updated wholesale transmission rates or (ii) final resolution or settlement of a rate case applicable to Lessee’s transmission rates. Pursuant to the Eighth Amended Supplement, the Parties expected the first 2018 Regulatory Order to be effective on June 1, 2018, the second 2018 Regulatory Order to be effective on September 1, 2018 and the first 2019 Regulatory Order to be effective on May 1, 2019. The Parties have agreed that any Rent Validation with respect to First 2018 CapEx, Second 2018 CapEx or 2018 Stub-Year CapEx will use the actual effective dates of the applicable Regulatory Order (to the extent known), but will otherwise be determined in accordance with Section 3.2(c) of the ERCOT Transmission Lease. |
| ** | Represents the amount of Incremental CapEx the Parties expect to be placed in service in 2019, with a weighted average in-service date of September 1, 2019 (“2019 CapEx”). |
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ERCOT TRANSMISSION LEASE
Lessee CapEx:
| 2014 | $ | 0 | ||
| 2015 | $ | 0 | ||
| 2016 | $ | 0 | ||
| 2017 | $ | 0 | ||
| 2018 | $ | 0 | ||
| 2019 | $ | 0 |
Base Rent:
| 2014 | $ | 484,276 | ||
| 2015 | $ | 2,477,452 | ||
| 2016 | $ | 4,601,290 | ||
| 2017 | $ | 4,855,027 | ||
| 2018 | $ | 5,056,079 | * | |
| 2019 | $ | 4,974,428 | ** | |
| 2020 | $ | 4,881,768 | ||
| 2021 | $ | 4,708,024 | ||
| 2022 | $ | 4,540,132 |
| * | The amount of 2018 Base Rent included in the Ninth Amended Supplement was $5,056,079, including 2018 Base Rent payments of $421,208 on the 15th day of each month beginning on March 15, 2018 through July 15, 2018 (with respect to January 2018 through May 2018), $421,434 on the 15th day of each month beginning on August 15, 2018 through October 15, 2018 (with respect to June 2018 through August 2018), with the increase in monthly Base Rent reflecting 2017 Stub-Year CapEx and First 2018 CapEx and commencing June 1, 2018, which was the expected effective date of Lessee’s first 2018 Regulatory Order, and $421,434 on the 15th day of each month beginning on November 15, 2018 through February 15, 2019 (with respect to September 2018 through December 2018), with the increase in monthly Base Rent reflecting Second 2018 CapEx and commencing September 1, 2018, which was the expected effective date of Lessee’s second 2018 Regulatory Order. |
| ** | Lessee will make a monthly 2019 Base Rent payment of $406,435 on the 15th day of each month beginning on March 15, 2019 through June 15, 2019 (with respect to January 2019 through April 2019). Lessee will then make a 2019 Base Rent payment of $414,015 on the 15th day of each month beginning on July 15, 2019 through September 15, 2019 (with respect to May 2019 through July 2019), with the increase in monthly Base Rent reflecting 2018 Stub-Year CapEx and commencing May 1, 2019, which was the expected effective date of Lessee’s first 2019 Regulatory Order included in the Eighth Amended Supplement. Lessee will then make a 2019 Base Rent payment of $421,328 on the 15th day of each month beginning on October 15, 2019 through February 15, 2020 (with respect to August 2019 through December 2019). |
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ERCOT TRANSMISSION LEASE
Percentage Rent Percentages:
| 2014 | 35.8 | % | ||
| 2015 | 35.1 | % | ||
| 2016 | 31.1 | % | ||
| 2017 | 28.2 | % | ||
| 2018 | 27.2 | % | ||
| 2019 | 26.2 | % | ||
| 2020 | 25.3 | % | ||
| 2021 | 24.4 | % | ||
| 2022 | 23.5 | % |
Annual Percentage Rent Breakpoints:
| 2014 | $ | 484,276 | ||
| 2015 | $ | 2,477,452 | ||
| 2016 | $ | 4,664,546 | ||
| 2017 | $ | 4,879,227 | ||
| 2018 | $ | 5,056,079 | * | |
| 2019 | $ | 4,937,862 | ** | |
| 2020 | $ | 4,794,596 | ** | |
| 2021 | $ | 4,624,802 | ** | |
| 2022 | $ | 4,460,124 | ** |
| * | The 2018 Annual Percentage Rent Breakpoint reflects the assumptions set forth above regarding the timing of the first 2018 Regulatory Order and the second 2018 Regulatory Order, as well as the amount of First 2018 CapEx and Second 2018 CapEx. |
| ** | The 2019-2022 Annual Percentage Rent Breakpoint reflects the same assumptions as the 2018 Annual Percentage Rent Breakpoint, in addition to the assumptions set forth above regarding the timing of the first 2019 Regulatory Order, as well as the amount of 2018 Stub-Year CapEx and 2019 CapEx. |
Revenues Attributable to Lessee CapEx:
| 2014 | $ | 0 | ||
| 2015 | $ | 0 | ||
| 2016 | $ | 0 | ||
| 2017 | $ | 0 | ||
| 2018 | $ | 0 | ||
| 2019 | $ | 0 | ||
| 2020 | $ | 0 | ||
| 2021 | $ | 0 | ||
| 2022 | $ | 0 |
| TCOS Allocation: | before October 3, 2014: 0% |
between October 3, 2014 and March 31, 2015: 2.1%
between April 1, 2015 and October 31, 2015: 2.1%
between November 1, 2015 and June 12, 2016: 3.6%
between June 13, 2016 and September 22, 2016: 4.1%
between September 23, 2016 and April 13, 2017: 3.6%
between April 14, 2017 and October 25, 2017: 3.6%
between October 26, 2017 and November 9, 2017: 3.7%
between November 10, 2017 and May 31, 2018: 2.9%
between June 1, 2018 and August 31, 2018: 2.9%
between September 1, 2018 and April 30, 2019: 2.8%
between May 1, 2019 and July 31, 2019: 2.7%
starting August 1, 2019: 2.6%
Term of Rent Supplement: Expires 12/31/22
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ERCOT TRANSMISSION LEASE
The Parties have executed this Tenth Amended Supplement to the ERCOT Transmission Lease as of the date set forth above.
| SHARYLAND UTILITIES, L.P. | ||
| By: | /s/ Greg Wilks | |
| Name: | Greg Wilks | |
| Title: | Chief Financial Officer | |
| SHARYLAND DISTRIBUTION & TRANSMISSION SERVICES, L.L.C. | ||
| By: | /s/ Brant Meleski | |
| Name: | Brant Meleski | |
| Title: | Chief Financial Officer | |
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ERCOT TRANSMISSION LEASE
