LTAEC Contract

As stated in Section 12.10 of the LTAEC SMA:
“Buyer will pay simple interest calculated at the Interest Index on all cash held by Buyer pursuant to this Agreement. Each calendar month, Buyer will prepare a statement of interest amounts due to Seller.  The statement will be sent to Seller within three (3) Business Days after the end of the calendar month via email.  Buyer shall make interest payments on the first Business Day after the 5th day of each calendar month.”

Interest Index is defined in the LTAEC SMA as below –
“Interest Index” – Shall mean the average Federal Funds Effective Rate for the period of time the funds are on deposit. The Federal Funds Effective Rate is published daily on the Federal Reserve website (http://www.federalreserve.gov/releases/h15/update/).

No. The Delivery Period for the LTAEC product is from the Effective Date through May 31, 2046 and not subject to change.

Regarding Credit Exposure under the LTAEC SMA, please see Exhibit C of the LTAEC SMA. The LTAEC SMA is posted here (https://ppldsp.com/long-term-pa-solar-aec-rfp/documents/). We provide the below example for illustrative purposes only:

As stated in Exhibit C of the LTAEC SMA:

Nominal Contract Value ($) = Specified Amount (AECs) x Settlement Price ($/AEC)

Specified Amount is defined in the LTAEC SMA as follows:

“Specified Amount – Shall mean the amount of AECs as set forth in a Transaction Confirmation pursuant to this Agreement, which is equal to the result by multiplying the Annual Contract Quantity by the number of full Annual Time Periods during the Delivery Period. For avoidance of doubt, the number of full Annual Time Periods shall be: i) twenty (20) if the Effective Date is on or before May 31, 2026, or ii) nineteen (19) if the Effective Date falls between June 1, 2026 and May 31, 2027.”

The Delivery Period is from the Effective Date of the transaction through May 31, 2046.

Assume the Effective Date is on July 21, 2025, and the Annual Contract Quantity is 3,000 AECs. The Specified Amount is equal to:

Specified Amount = twenty (20) full Annual Time Periods x the Annual Contract Quantity (3,000 AECs) = 60,000 AECs

Assume the Settlement Price is $10/AEC, the Nominal Contract Value is equal to:

Nominal Contract Value = Specified Amount (60,000 AECs) x Settlement Price ($10/AEC) = $600,000

The Credit Exposure shall be calculated as follows:

If the Seller’s aggregate credit exposure (under the LTAEC SMA and other agreements between Buyer and Seller for supply of AECs or default service supply pursuant to PUC Orders) exceeds the Credit Limit on any Business Day, then Buyer shall have the right to request that Seller post performance assurance in an amount equal to the amount by which Seller’s aggregate exposure exceeds the Credit Limit (rounding upwards by the Rounding Amount), less any performance assurance already posted with Buyer. Rounding Amount shall mean the greater of: $1,000 or such amount designated as “Rounding Amount” in other agreements between Buyer and Seller for supply of AECs or default service supply pursuant to PUC Orders.

Per section 2.1 of the LTAEC SMA, “Seller shall transfer to Buyer a total amount of AECs equal to the Annual Contract Quantity for each Annual Time Period. In the event that Seller fails to transfer the quantity of AECs required to be transferred in any Annual Time Period as provided under this Section, Seller shall pay Buyer an amount equal to the alternative compliance payment required by the AEPS Act for each AEC which Seller fails to transfer to Buyer for such Annual Time Period as liquidated damages.”

For avoidance of doubt, any liquidated damages will be applied to shortfall amounts associated with a full Annual Time Period, but not to a Quarterly Settlement Period. Therefore, if AEC Supplier fails to meet the Delivery obligations in a Quarterly Settlement Period, it may Deliver more AECs than the Quarterly Settlement Amount in a subsequent Quarterly Settlement Period within the same Annual Time Period to cure such shortfall. As long as the Delivery obligation for the Annual Time Period is met in a delivery year, no liquidated damages will be incurred.

The maximum quantity of AECs an AEC Supplier can cumulatively Deliver during the Delivery Period of the LTAEC SMA, and be eligible for payment pursuant to the terms of the LTAEC SMA is the Specified Amount. Specified Amount is defined in the LTAEC SMA as follows:

“Specified Amount – Shall mean the amount of AECs as set forth in a Transaction Confirmation pursuant to this Agreement, which is equal to the result by multiplying the Annual Contract Quantity by the number of full Annual Time Periods during the Delivery Period. For avoidance of doubt, the number of full Annual Time Periods shall be: i) twenty (20) if the Effective Date is on or before May 31, 2026, or ii) nineteen (19) if the Effective Date falls between June 1, 2026 and May 31, 2027.”

Under the terms of the LTAEC SMA, AEC Supplier may, but is not obligated to, Deliver AECs for the partial Annual Time Period ending on the first occurring May 31st after the Effective Date. If AEC Supplier Delivers any AECs during such partial Annual Time Period, such AECs shall be included in the calculation of the quantity of AECs the AEC Supplier can cumulatively Deliver and be eligible for payment.

For example, assume the Effective Date is on July 21, 2025, and the Annual Contract Quantity is 3,000 AECs. The Specified Amount is equal to:

Specified Amount = twenty (20) full Annual Time Periods x the Annual Contract Quantity (3,000 AECs) = 60,000 AECs

If the AEC Supplier Deliver 1,000 AECs during the partial Delivery Period of July 21, 2025 – May 31, 2026, then the maximum quantity of AECs the AEC Supplier can Deliver and be eligible for payment from June 1, 2026 through May 31, 2046 is 60,000 AECs – 1,000 AECs = 59,000 AECs. The LTAEC SMA will terminate once such quantity is Delivered and payment for such quantity is processed.

As stated in Section 12.4(a) of the LTAEC SMA, “For a Seller to be granted an unsecured line of credit, the Seller must be rated by at least two of the following rating agencies: S&P, Moody’s, or Fitch. The methodology for determining the credit rating to use is set forth in Exhibit C of this Agreement. The Maximum Credit Limit to cover the Total Exposure Amount will be determined based on the credit matrix table in Exhibit C of this Agreement.”