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Frequently Asked Questions - Credit
| 1. |
Q: |
Can you provide the names of banks who are willing to issue the standard form of the Bid Assurance Letter of Credit? |
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A: |
Unfortunately, the individuals at the various banks have not authorized the RFP Manager to release their contact information and the names of banks that have issued the Bid Assurance LOC. |
| 2. |
Q: |
What is the deadline for a winning bidder relying on the creditworthiness of a Guarantor to submit an executed Unconditional Guaranty? |
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A: |
There is no specific date by which a Seller must submit an executed Unconditional Guaranty. However, a winning bidder who relied on the creditworthiness of a guarantor for the purpose of Bidder Qualifications will not be granted any Unsecured Credit until it submits an Unconditional Guaranty. |
| 3. |
Q: |
What should be entered in the Pre-Bid Letter of Credit as the Solicitation Date? |
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A: |
The Solicitation Date for Solicitation #6 is October 5, 2009. |
| 4. |
Q. |
Will PPL Electric consider accepting our proprietary guaranty form in lieu of the standard form of the Unconditional Guaranty? |
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A. |
As stated in Section 4.9 of the RFP Rules ("Alternative Forms of Performance Assurance"), an applicant may propose modifications to the standard form of the Unconditional Guaranty that are nonsubstantive or clarifying in nature as part of its Bidder Qualifications. An applicant proposing modifications to the Unconditional Guaranty must provide three (3) copies of such document, indicating clearly the proposed modifications to the standard form that appears on the RFP Web site at http://www.pplelectric.com/Business+Partners/polr-cbp/Supplier+Documents.htm, by the Bidder Qualifications Due Date.
PPL Electric will not accept changes to the standard form of guaranty unless such changes are nonsubstantive or clarifying in nature, nor will PPL Electric accept entirely different forms of guaranty that do not indicate clearly the proposed modifications to the standard form. |
| 5. |
Q. |
If we post the bid assurance collateral in the form of cash, how can we be certain we will receive these funds back after the PUC decision? Will PPL Electric sign a legal document stating that they promise to return the collateral? |
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A. |
The RFP Rules, which were approved by the PaPUC in Docket No. P-00062227 and to which PPL Electric is bound to adhere, state at Section 5.4.1 that bid assurance collateral in the form of cash will be returned within one (1) business day of either (a) the RFP Bidder being notified that it has not been awarded tranches for a solicitation, or (b) the RFP Bidder executing the Transaction Confirmation forms upon being awarded tranches. PPL Electric has adhered strictly to this policy in all previous solicitations and will continue to do so in this and future solicitations. There is no standalone document governing the return of bid assurance collateral. |
| 6. |
Q. |
If an RFP Bidder has provided an Unconditional Guaranty in a previous solicitation, and that RFP Bidder wins more tranches in a future solicitation, is a new Unsecured Credit Limit granted to that RFP Bidder? |
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A. |
If an entity wins additional tranches in a future solicitation, the entity signs a Transaction Confirmation under the terms of the same SMA. The Unsecured Credit Limit ("UCL") is determined for the Guarantor under the terms of the SMA, not for a single Transaction Confirmation. For example, if an entity is granted a UCL of $20,000,000 in solicitation #3, and wins tranches that require the use of $12,000,000 of that credit, that entity will have $8,000,000 remaining at solicitation #4, and will not be granted a new UCL of $20,000,000. |
| 7. |
Q. |
May we make the change contained in the square brackets to the Unconditional Guaranty?
Amendments. No Modification, amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantor therefrom, will be effective unless made in a writing signed by the [Guarantor and] Buyer... |
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A. |
This change is not acceptable to PPL Electric Utilities. |
| 8. |
Q. |
Under the terms of the SMA, if PPL were to have a credit rating below investment grade, any cash margin posted by a Seller would be held with a Qualified Institution. Is the Qualified Institution the same financial institution where PPL has other bank accounts, and if so, is the account at the Qualified Institution that will hold the cash margin a segregated account holding only cash margin from Sellers? Is it a separate and distinct account from PPL's other bank accounts, i.e., no commingling of margin with PPL's funds? |
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A. |
Any cash margins posted are deposited in a repurchase account at a Qualified Institution under PPL Electric Utilities and are not commingled with any other funds. |
| 9. |
Q. |
We intend to provide Bid Assurance Collateral in the form of cash. What are the wire transfer instructions? |
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A. |
Wire transfer information will be provided only to qualified bidders. Bidders will be notified of their qualification status on September 28, 2009, and wire transfer instructions will be provided to you shortly thereafter. |
| 10. |
Q. |
Would you mind explaining the dollar amount required in Performance Assurance Letter of Credit or better yet how is it determined? I understand the Bid Assurance collateral requirements, but I don’t understand the requirements for Performance Assurance collateral. |
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A. |
The dollar amount of the Performance Assurance Letter of Credit can vary during the term of the Agreement. During the term of the POLR SMA, the Seller will be granted an Unsecured Credit as defined in the POLR SMA and as calculated based on Section 14.3 of the POLR SMA. If during the term of the POLR SMA, the Aggregate Buyer’s Exposure exceeds the Unsecured Credit granted to the Seller by more than $500,000, then the Seller will be required to post performance assurance in the form of cash or a Performance Assurance Letter of Credit in an amount equal to the amount by which the Aggregate Buyer’s Exposure exceeds the Unsecured Credit (rounding upwards to the nearest $100,000).
The Aggregate Buyer’s Exposure is defined as the net of the Buyer’s Exposure under all contracts to which the Supplier is a party with PPL Electric for POLR service or default service. These include the contracts under the PPL Electric Competitive Bridge Plan (POLR SMA and any SMA for Hourly Service) as well as the contracts under the PPL Electric Default Service Procurement Plan (Default Service SMA, Default Service Spot Market SMA, Block SMA, and Alternative Energy Credits SMA). The calculation of Buyer’s Exposure under the POLR SMA is described in Articles 14 and Exhibit E of the POLR SMA. Specifically, “Buyer’s Exposure” during the term of a Transaction is the positive difference between: (i) the MtM Exposure pursuant to a Transaction under this Agreement; less (ii) the sum of any unpaid or unbilled amounts owed by Buyer to Seller pursuant to a Transaction under this Agreement. |
| 11. |
Q. |
Can you provide the contact information for the beneficiary to the Bid Assurance Letter of Credit, including:
Company Name
Full Address
Contact Name
Telephone Number
Fax Number |
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A. |
The contact information for the beneficiary is as follows:
Company Name: PPL Electric Utilities Corporation
Full Address: Two North Ninth Street, Allentown, PA 18101
Contact Name: Douglas R. Stinner
Telephone Number: 610-774-5568
Fax Number: 610-774-5694 |
| 12. |
Q. |
Can you please provide the address to which the Bid Assurance Letter of Credit should be sent? |
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A. |
The Bid Assurance Letter of Credit should be sent only to the RFP Manager at the following address:
NERA / PPL Electric RFP Manager
1835 Market Street, Suite 1205
Philadelphia, PA 19103
(215) 568-0200 |
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