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On February 22, 2010, Cleco Evangeline LLC
(“Evangeline”), an indirect wholly owned subsidiary of Cleco Corporation
(“Cleco”), and J.P. Morgan Ventures Energy Corporation (“JPMVEC”) entered
into a Purchase, Sale and Restructuring Agreement (“Evangeline
Restructuring Agreement”) whereby the parties agreed to (i) terminate the
existing Capacity Sale and Tolling Agreement between the parties
(“Evangeline Tolling Agreement”) which was set to expire in 2020 and (ii)
enter into a new Capacity, Sale and Tolling Agreement effective March 1,
2010. The other significant terms of the Evangeline
Restructuring Agreement are:
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The
new tolling agreement is an exclusive, market-based tolling agreement for
Evangeline’s generating Units 6 and 7, expiring on December 31,
2011,
with an option for JPMVEC to extend the
term of the agreement through December 31, 2012. The agreement
also gives Evangeline the right to
terminate its Unit 6 obligations prior
to the expiration of the term;
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$126.6
million of Evangeline’s 8.82% Senior Secured Bonds due 2019 (the
“Evangeline Bonds”) owned by JPMVEC were transferred to
Evangeline
and subsequently retired by Evangeline;
and $5.3 million of accrued interest associated with the Evangeline Bonds
transferred to Evangeline was
eliminated;
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JPMVEC
paid Evangeline $56.7 million; and
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JPMVEC
returned Cleco’s $15.0 million letter of credit issued under the
Evangeline Tolling Agreement and the letter of credit was
terminated.
The termination of the Evangeline Tolling Agreement
was considered a termination of an operating lease and a triggering event
requiring an asset impairment analysis. The $56.7 million cash
payment from JPMVEC was treated as partially a settlement of the $26.9
million operating lease asset that represented the straight line
recognition of a fixed escalation. Management is currently
evaluating the asset impairment analysis on Evangeline’s assets which as
of January 31, 2010 had a carrying value of $182.8 million.
In accordance with the terms of the Evangeline
Restructuring Agreement, Evangeline issued an irrevocable redemption
notice to call the remaining $35.2 million of outstanding Evangeline
Bonds, and to pay the debt holders $1.5 million of accrued interest and
approximately a $10.0 million make-whole payment at the redemption
date. As a result of the debt retirement, Evangeline will
expense $2.2 million in unamortized debt issuance costs associated with
the Evangeline Bonds. The Evangeline Bonds were non-recourse to
Cleco and redemption of the Evangeline Bonds is permitted under Cleco’s
revolving credit facility. Upon the redemption of the remaining
Evangeline Bonds $30.1 million of restricted cash will be released to
Evangeline.
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