To: Honorable Public Utilities Board Submitted by: /s/ Janet Oppio

Transcription

1 AGENDA ITEM NO.: 6.B.1 MEETING DATE: 06/27/2011 ADMINISTRATIVE REPORT NO.: To: Honorable Public Utilities Board Submitted by: /s/ Janet Oppio AGM Energy Resource Planning From: Janet Oppio AGM - Energy Resource Planning Approved by: /s/ Girish Balachandran General Manager Subject: Approving the Amendment to the Power Purchase Agreement between Alameda Municipal Power and Ameresco Butte County LLC RECOMMENDATION By resolution, approve amendment to the Power Purchase Agreement (PPA) between Ameresco Butte County LLC (Ameresco), a limited liability subsidiary of Ameresco Incorporated and Alameda Municipal Power (AMP) for the purchase of 2.0 net megawatts (MW) of renewable power and capacity; and authorize the General Manager to execute the amendment. The PPA, as amended, provides for the delivery of electricity produced from a landfill gas-to-energy facility for a 15-year term beginning upon the project s commercial operation date (COD). BACKGROUND PPA Approval - On October 27, 2010, the Public Utilities Board (Board) approved a 15-year term PPA with Ameresco for the purchase of renewable power and associated capacity attributes from a proposed landfill gas-to-energy project (Project) located at the Butte County Landfill (Butte) in Paradise, California. The PPA calls for Ameresco to finance, develop, own, and operate a renewable energy facility at the landfill site with an expected net capacity of 1.9 net megawatts (MW). The size of the Project was based on estimates of recoverable methane gas provided by Butte, the landfill owner, net of parasitic load. Under the terms of the PPA, AMP would receive 100% of the Project s energy and capacity at a price of $87.00 per Megawatt-hour (MWh), escalating at 1.5 % per year over the initial term of the contract plus any term extensions. AMP would also make a one-time payment of $1.075 million to cover that portion of Ameresco s interconnection costs that exceeded its 2008 estimate for this project payable within 30 days of the Project s COD. Should the Project be expanded to include a second engine, AMP would have a right of first refusal (ROFR) for the expansion output. AMP would also have the right to unilaterally extend the contract for two consecutive five-year terms subject to approval of the City Council. AMP is obligated to pay Ameresco only for the amount of energy that is actually delivered. At the time of approval, the average annual

2 AGENDA ITEM NO.: 6.B.2 MEETING DATE: 06/27/2011 ADMINISTRATIVE REPORT NO.: cost of the PPA was approximated $1.441 million, with a total 15-year contract cost of about $ million. A more complete history of the development of the PPA is provided by Administrative Report NO: dated 10/26/2010. The Need for an Amendment - In accordance with Section 4.2 part (d) of the PPA, AMP must approve the Landfill Gas Purchase agreement (LGA), as amended, between Ameresco and Butte. During AMP s review of the amended LGA on December 12, 2010, AMP identified terms therein that appeared to compromise AMP s contractual rights to purchase the output of the Project under certain circumstances under Article VII, Section 7.6, Buyers Right to Operate. AMP notified Ameresco that these issues must be addressed in order for AMP to approve the LGA. Since Ameresco would not support further negotiations with Butte to amend the LGA, AMP staff and Ameresco agreed to negotiate an amendment to the PPA to mitigate the potential risks posed by the terms contained in the LGA as well as to secure additional benefits for AMP. DISCUSSION Status of the Project - To date, Ameresco has secured all of the permits and authorizations necessary to construct the Project. The company holds Authority to Construct permits from the Butte County Air Quality Management District and has entered into the LGA and the Site Lease Agreement (Lease) with Butte. In addition, Ameresco has finalized its Interconnection Agreement (IA) with PG&E. All major equipment for the project has been ordered, plant design is complete, and Ameresco is now engaged in the construction bid selection process. In accordance with the provisions of a previous power purchase agreement between AMP and Ameresco approved on October 21, 2008 and terminated on September 10, 2010, AMP had performed an initial review of the LGA and conveyed its approval by letter to Ameresco dated April 28, Ameresco subsequently amended the LGA due to the reduced methane availability at the landfill and Butte approved the amendment on October 26, Following approval of the PPA on October 27, 2010 AMP reviewed the amended LGA. During this second review staff identified terms in the LGA, under Article XVII, that gave Butte the option to purchase the Project under certain circumstances; specifically, in the event Ameresco abandoned the Project or terminated the LGA for reasons other than the default of Butte. In these circumstances, the LGA provided Butte with the option to purchase Ameresco s interest in the Project upon 90 days advance written notice and payment of fair market value (as defined in the LGA). Ameresco could then transfer its interest in the Project to Butte. At issue is that the option to purchase the Project does not recognize AMP s rights to purchase power from the Project under the terms of the PPA nor to step in and operate the Project in the event of Ameresco s default, as provided in the PPA. At the time of the second LGA review staff also requested and was allowed to review the Lease, as amended, and identified terms therein referencing Article XVII of the LGA. Specifically, Section 7, Use, Improvements and Equipment, part C, provided that upon expiration or earlier termination of the Lease, Butte would have the right to purchase the Project pursuant to the provisions of Article XVII of the LGA. Further, the Lease provided Ameresco 180 days from the

3 AGENDA ITEM NO.: 6.B.3 MEETING DATE: 06/27/2011 ADMINISTRATIVE REPORT NO.: date of termination of the Lease to remove from the site any improvements (as defined therein) and to restore the site to the condition existing on the effective date of the Lease should Butte decide not to exercise the purchase option. Again the provision is problematic because it does not recognize AMP s rights under the PPA. In the context of the LGA and Lease, certain risks to AMP under the PPA became apparent including: Non-recovery of the one-time payment of $1.075 Million under certain circumstances, but most importantly in the event of a default by Ameresco, which could potentially result in a loss of site control and a forced sale of the Project to Butte under the terms of the LGA and Lease, or a failure or loss of fuel supply from Butte; Lack of ability by AMP to terminate the PPA in the event of a default by Ameresco that resulted in a loss of control of the site and/or of the fuel supply; Ambiguity regarding AMP s right to operate the Project under Article VII of the PPA; Lack of proper notice of events that could affect AMP s rights under the PPA or that would require AMP s action to preserve such rights; and Other more minor issues. AMP notified Ameresco in December 2010 that it would not approve the LGA as amended given the issues identified above and given Ameresco s constraint on further amendments to either the LGA or Lease, the parties agreed to amend the PPA. Through this effort AMP s goal was to mitigate AMP s risk exposure stemming from the LGA and Lease and to seek indemnification from Ameresco where the amended PPA conflicted with provisions of the LGA and Lease. Initial discussions with Ameresco resulted in agreement between the parties to eliminate the onetime payment of $1.075 Million and to increase the purchased power price from $87.00 to $93.50 per Megawatt-hour (MWh) while maintaining the same annual escalation rate of 1.5 % over the term of the contract and any extensions. Negotiations concluded once improved terms for AMP pertaining to the issues outlined above had been obtained. Terms and Provisions of the Amendment - The amendment to the PPA benefits AMP by: Eliminating the $1.075 Million up-front payment and associated risk on non-recovery under certain circumstances arising from an event of default by Ameresco or Butte; Clarifying AMP s rights and costs in the event AMP does not purchase the expansion capacity, should it materialize; Clarifying cost sharing requirements for operation and maintenance costs of the initial interconnection with PG&E should the expansion capacity include an additional interconnection or provide attributes that are not included in the current contract

4 AGENDA ITEM NO.: 6.B.4 MEETING DATE: 06/27/2011 ADMINISTRATIVE REPORT NO.: definition; Providing AMP notification and an option to purchase the Project ahead of Butte including appropriate time to review pertinent documents and request approval of the Board and the City Council of Alameda; Adding three new Events of Default on the part of Ameresco that allow AMP to terminate the PPA; Clarifying Ameresco s requirement to maintain insurance to cover the generation capacity of the Project that supports AMP s PPA; Clarifying AMP s operating costs under Section 7.6, Buyer s Right to Operate; Obtaining indemnification by Ameresco against Butte in the event that AMP exercises its right to purchase the Project under the PPA as amended; and Clarifying other more minor miscellaneous items. Price & Economic Considerations Table 1: Levelized Price Comparison by Contract Term ($/MWh) 15 year 20 year 25 year Amended PPA PPA (dated 10/27/2010) CPUC Market Price Reference The levelized prices presented in Table 1 have all been restated from those presented in the Administrative Report for NO: dated 10/26/2010 describing the PPA, as a result of Ameresco s restatement of the net capacity of the project to from 1.9 to 2.0 MW and to include PG&E s monthly operations and maintenance charges under their IA. The table shows that although the levelized price for the 15-year contract exceeds the MPR by $5.00 per MWh, the Project s levelized price more closely tracks the corresponding MPR in succeeding five-year terms, indicating that the Project s pricing is increasingly competitive as the overall term increases. In addition to price, staff assessed the expected annual and total costs of the amended PPA Table 2 below updates the cash flow information for Year 1 of the contract, Year 2, the average annual cost across the three possible term durations, the Net Present Value of total costs (discounted at 5%) and the total costs in nominal dollars. Comparable data for the original PPA is also provided for comparison purposes.

5 AGENDA ITEM NO.: 6.B.5 MEETING DATE: 06/27/2011 ADMINISTRATIVE REPORT NO.: Table 2: Cash Flows of PPA vs. amended PPA by Contract Term ($000) Amended PPA PPA year 20 year 25 year 15 year 20 year 25 year Year 1 1,417 1,417 1,417 2,396 2,396 2,396 Year 2 1,438 1,438 1,438 1,340 1,340 1,340 Avg. Annual 1,574 1,635 1,699 1,538 1,577 1,626 Total NPV 16,118 19,901 23,091 16,040 19,563 22,534 Total 23,604 32,699 42,487 23,065 31,536 40,652 The costs of the amended PPA were included as input to the 10 Year Pro Forma and are already incorporated in the approved rate adjustment for FY12. Analysis indicated that the rate impact of the amended PPA was small, but had a positive impact on overall cash flow as the one-time payment anticipated to be made in 2014 is eliminated. Palo Alto terminated their Power Purchase Agreement, dated November 10, 2008, with Ameresco for a percentage share of the output of the Project on September 10, 2010 however they retain certain residual rights that survive through September 10, These rights include: 1) a right of first refusal (ROFR) of a share of any new capacity resulting from an expansion of the Project and 2) the right to their original share of the Project should the PPA be amended. Palo Alto has reviewed the PPA as amended, and issued a waiver and release, dated June that reaffirms their irrevocable choice not to exercise their right to the initial capacity for the Project and preserves their right to the expansion capacity. FINANCIAL IMPACT Given the take-and-pay form of contract, Alameda s risk is minimized if the project does not operate as expected. As amended, AMP s risk is further reduced because the requirement for a one-time payment of $1.075 million has been eliminated. Further, additional terms negotiated in the PPA amendment limit contract liability in the event the supplier fails to perform for an extended period of time by allowing Alameda to step in and purchase the Project or terminate the PPA and secure replacement resources elsewhere. LINK TO STRATEGIC PLAN AND METRICS Strategy 2: Ensure utility financial health is preserved through short and long-term risk management and planning. Strategy 10: Manage short-term and long-term power supply reliability and cost, while maintaining a loading order of efficiency and demand response, renewable energy resources, and clean and efficiency fossil generation.

6 AGENDA ITEM NO.: 6.B.6 MEETING DATE: 06/27/2011 ADMINISTRATIVE REPORT NO.: EXHIBITS A. Resolution B. Amended Power Purchase Agreement between Ameresco Butte County LLC, and Alameda Municipal Power

7 CITY OF ALAMEDA ALAMEDA MUNICIPAL POWER RESOLUTION NO. APPROVING THE AMENDMENT TO THE POWER PURCHASE AGREEMENT BETWEEN ALAMEDA MUNICIPAL POWER AND AMERESCO BUTTE COUNTY LLC WHEREAS, on October 27, 2010, the Public Utilities Board approved a 15-year term Power Purchase Agreement (PPA) between Alameda Municipal Power (AMP) and Ameresco Butte County LLC (Ameresco) for 100% of the capacity, energy and environmental attributes from a new 1.9 megawatt (MW) landfill-gas-to-energy project located at the Butte County Landfill in Paradise, California; and WHEREAS, under the terms of the PPA, AMP is to make a one-time payment of $1.075 million within one month of the project s Commercial Operation Date in order to offset the developer s increased interconnection costs and shall pay Ameresco a purchase power price of $87.00 per Megawatt-hour (MWh), escalating at 1.5% annually per year over the term of the contract; and WHEREAS, susequent to the Board s approval of the PPA, in December 2010 AMP staff reviewed the Landfill Gas Agreement (LGA), as amended, between Ameresco and Butte County (Butte) for AMP s approval as provided for in the PPA; and WHEREAS, based on staff s review of the LGA and its review of Amereasco s Lease agreement, staff identified certain provisions therein that could result in risks to AMP in the event of default by Ameresco; and WHEREAS, such risks to AMP include: loss of site control; loss of fuel supply; a forced sale of the project; lack of ability by AMP to terminate the PPA; and non-recovery of the one-time payment of $1.075 Million; and WHEREAS, staff conveyed its concerns to Ameresco and notifed the company that its concerns must be addressed in order for AMP to approve the LGA; and WHEREAS, Ameresco represented that it would not negotiate an additional amendment with Butte, but agreed to negotiate an amendment to the PPA to address AMP s concerns; and AGENDA ITEM NO.: 6.B MEETING DATE: 06/27/2011 EXHIBIT A - Page 1 of 2

8 WHEREAS, AMP staff worked with Ameresco to successfully negotiate amended terms of the PPA that mitigate the risks to Alameda identified in the LGA and that secure additional benefits to AMP; and WHEREAS, the amended PPA eliminates the $1.075 Million one-time payment, increases the purchaed power price from $87.00 to $93.5 per MWh while maintaining the 1.5% annual escalation rate, and includes new language that reduces the risks identified in the LGA review related to site control, a forced sale of the project, and fuel supply. WHEREAS, the amended PPA satisfactorily resolves AMP s concerns associated with the LGA and Lease agreement at a cost that remains competitive and attractive to AMP. NOW, THERFORE, BE IT RESOLVED that the Public Utilities Board of the City of Alameda hereby approves the amended PPA between Alameda Municipal Power and Ameresco Butte County LLC and authorizes the execution of the subject agreement by the General Manager without material change. Approved as to Form By: Farimah Faiz Assistant City Attorney AGENDA ITEM NO.: 6.B MEETING DATE: 10/26/2010 EXHIBIT A - Page 2 of 2

9 AMENDMENT NO. 1 to POWER PURCHASE AGREEMENT This Amendment No. 1 to Power Purchase Agreement is entered into this day of June, 2011 by and between Alameda Municipal Power, a department of the City of Alameda, California, a municipal corporation ( Buyer ), and Ameresco Butte County LLC, a Delaware limited liability company ( Seller )(collectively, Parties ). RECITALS 1. The Parties have previously entered into a Power Purchase Agreement dated October 27, 2010 ( the PPA ) regarding the purchase and sale of certain output of a Landfill Gas electric generating facility to be located at the Butte County Neal Road Landfill (the Landfill ) in Paradise, California, on a site leased from Butte County, which owns the Landfill. 2. The Parties wish to amend the PPA in certain respects. NOW THEREFORE, in consideration of these premises and the mutual promises set forth below, Seller and Buyer agree as follows. A. Amendments. The Parties amend the PPA as reflected below; provided that such amendment shall not take effect until Seller secures written confirmation from Palo Alto to clarify that Palo Alto will not exercise the residual rights to Initial Capacity pursuant to Section Underlines signify additions and strike-outs reflect the elimination of provisions. ARTICLE I- DEFINITIONS Initially capitalized terms and other terms defined herein, whenever used in this Agreement, have the meanings set forth below unless otherwise herein defined. The term including, when used in this Agreement, shall mean to include without limitation. 1.1(a) The term anniversary, as used in Sections 2.1 and 2.3, or any other provision of the Agreement or any amendment, shall be defined to be the annual recurrence of a date. 1.1(b) Ameresco Facilities: As used in Section 7.7, this term means (1) facilities to process and to transport landfill gas from the point the landfill gas enters facilities owned by Seller to the landfill gas processing equipment and the Plant, (2) the landfill gas processing equipment owned by Seller, and (3) the Plant, including without limitation any additional metering stations and blowers constructed or installed and owned by Seller LFG Agreement: As defined in Section 4.2(d). Is the Landfill Gas Purchase Agreement between Butte and Seller, including all exhibits, attachments, and 1

10 other supporting documents thereto, dated October 21, 2008, as modified by any amendment. 1.57(a) Site Lease Agreement: Is the Site Lease agreement between Butte and Seller, including all exhibits, attachments, and other supporting documents thereto, dated October 21, 2008, as modified by any amendment. 2.2 Purchase and Sale of the Output (a) In accordance with the terms and conditions hereof, commencing on the Commercial Operation Date and continuing throughout the Term, Seller shall sell and deliver at the Point of Interconnection, and Buyer shall purchase, accept from Seller at the Point of Interconnection and pay for, its Percentage Share of the Output produced during the Term pursuant to the terms of this Agreement. Prior to the Commercial Operation Date, Buyer shall purchase and accept from Seller at the Point of Interconnection and pay for, the Percentage Share of Output relating to Test Energy pursuant to the terms of this Agreement. All Test Energy shall be scheduled in accordance with the procedures set forth in Appendix D. Seller shall not sell to any other party, and Buyer may claim credit for, Buyer s Percentage Share of the Output as may be available from time to time. If there are sales of Expansion Plant Output to third party(ies), as specified in Section 2.5, Seller shall not employ Landfill Gas to fuel such Expansion Plant in any hour unless the Landfill Gas flow requirements of the Initial Capacity have been, and continue to be met. provided, however, notwithstanding anything in this Agreement to the contrary, Seller and Buyer acknowledge that Palo Alto may take a portion of the Output and if Palo Alto decides to take a portion of the Output (which would therefore reduce Buyer s Percentage Share of the Output), Seller and Buyer shall enter into an amendment to this Agreement, in each Party s sole discretion, to reduce Buyer s Percentage Share and to make corresponding changes to this Agreement (including, without limitation, making changes to Section 2.7 of this Agreement) to take into account that Seller will sell and deliver a portion of the Output to Palo Alto. (b) Throughout the Term, Seller shall sell and transfer to Buyer, and Buyer shall purchase and receive from Seller, all right, title and interest in and to the Environmental Attributes associated with Buyer s Percentage Share of the Output, if any, whether now existing or subsequently generated or acquired (other than by direct purchase from a third party) by Seller, or that hereafter come into existence, during the Term, as a component of the Output purchased by Buyer from Seller hereunder. Seller agrees to transfer and make such Environmental Attributes available to Buyer immediately to the fullest extent allowed by applicable law upon Seller s production or acquisition of the Environmental Attributes. If Seller receives any tradable Environmental Attributes based on the greenhouse gas reduction benefits or other emission offsets attributed to its fuel usage, it shall be entitled to retain sufficient Environmental Attributes to ensure that there are zero net emissions associated with the production of electricity from the Plant. Seller 2

11 shall not assign, transfer, convey, encumber, sell or otherwise dispose of all or any portion of the Buyer s Percentage Share of the Environmental Attributes to any Person other than Buyer. Seller makes no written or oral representation or warranty, either express or implied, regarding the current or future existence of any Environmental Attributes except as otherwise provided in Subsection(c). (c) Seller shall, consistent with Prudent Utility Practice, (i) apply for pre-certification from the CEC (at least forty-five (45) days prior to the generation of Test Energy) that the Plant meets the requirements for an Eligible Renewable Energy Resource, (ii) ensure that the Plant meets the requirements for an Eligible Renewable Energy Resource in effect as of the Effective Date, and (iii) apply for certification from the CEC that the Plant meets the requirements for an Eligible Renewable Energy Resource no later than fourteen (14) days following the Commercial Operation Date. While Notwithstanding anything in this Agreement to the contrary, Seller is not responsible for ensuring that the Plant meets any new or revised laws, orders, regulations, standards or requirements that may be enacted after the Effective Date and that change the criteria for determining whether the Plant meets the requirements for an Eligible Renewable Energy Resource or is otherwise eligible to provide energy that counts toward meeting the California Renewable Portfolio Standard as codified in California s Public Utilities Code Section et seq, provided, however, Seller shall use reasonable efforts and comport with Prudent Utility Practice to cause the Plant to meet any new or revised laws, orders, regulations, standards or requirements, pertaining to the Plant s status as an Eligible Renewable Energy Resource, that may be enacted after the Effective Date, provided that but Seller shall not be required to incur any costs or expenses to do so. To the extent Seller decides, in its sole discretion, to incur any costs or expenses in connection with Seller using reasonable efforts and Prudent Utility Practice to cause the Plant to meet any new or revised laws, orders, regulations, standards or requirements that may be enacted after the Effective Date, Seller shall be reimbursed by Buyer for any and all such costs and expenses within thirty (30) days of submitting an invoice for such costs or expenses to Buyer, provided that Seller has received prior written approval from Buyer for such costs or expenses. 2.3 Price Subject to the provisions of Section 4.1(k), Buyer shall pay Seller $0.087 $ per kwh of Energy delivered or tendered to Buyer at the Point of Interconnection, which price shall be escalated at a rate of 1.5% (of the then-current price) annually on the anniversary of (i) the first day of the first full month following the Commercial Operation Date or (ii) if the Commercial Operation Date falls on the first day of the month, the Commercial Operation Date. The Price shall be the total compensation owed by Buyer for Output delivered or tendered to Buyer hereunder. 2.5 Right of First Refusal for Expansion Plant and Expansion Plant Output 3

12 (a) Seller may in its sole discretion determine, from time to time, during the Term to develop, finance, construct and/or operate an Expansion Plant. Each time such a determination is made, Seller shall notify Buyer of such determination and shall offer in writing to sell the Percentage Share of the Expansion Plant Output to Buyer. The offer shall include the price to be paid by Buyer for the Percentage Share of the Expansion Plant Output, the term of the proposed power purchase agreement and the other principal terms and conditions of the proposed sale. Notwithstanding the above, Buyer s right to Expansion Plant and Expansion Plant Output are subject to the rights of Palo Alto as specified in Section If Buyer wishes to accept such offer to purchase all (but not less than all) of such Percentage Share of the Expansion Plant Output, Buyer shall so notify Seller within sixty (60) days of its receipt of such offer. Buyer and Seller shall promptly thereafter enter into good faith negotiation of a definitive power purchase agreement incorporating the terms of such offer. Until such an Expansion Plant power purchase agreement is executed, the Seller s proposal, accepted by Buyer (including any modifications agreed upon in writing by both parties), shall control all dealings between the Parties relating to the Expansion Plant. Should any issue arise that is not covered by such documentation, the terms of this Agreement shall apply. (b) If Buyer does not accept Seller s offer to purchase its Percentage Share of the Expansion Output within sixty (60) days of receipt of - Seller s offer, Seller shall be free to offer to sell that portion of the Expansion Plant Output to one or more third parties at a price and on other terms and conditions which, taken as a whole, are at least as favorable to Seller as the price and other terms and conditions set forth in Seller s offer to Buyer. If Seller offers to break up Buyer s Percentage Share of the Expansion Plant Output to sell to multiple independent buyers, Seller shall notify Buyer in writing of the terms and conditions of such offers and Buyer shall again have the right of first refusal consistent with the terms set forth above for each of the lesser amounts being offered to the third parties. If Buyer does not purchase its Percentage Share of the Expansion Plant Output and Seller sells such Expansion Plant Output to a third party, it shall promptly certify in writing to Buyer that the terms and conditions of sale of such Expansion Plant Output to such third party, taken as a whole, are at least as favorable to Seller as the price and other terms and conditions set forth in Seller s offer to Buyer, and Seller shall provide the relevant contract and any other supporting documentation for such certification. Upon the sale of such Expansion Plant Output in compliance with this Agreement, Buyer shall have no further rights to be offered or to purchase such Expansion Plant Output. Buyer s refusal of its Percentage Share of the Expansion Plant Output from one Expansion Plant shall not affect Buyer s right to purchase its Percentage Share of the Expansion Plant Output from a later Expansion Plant under the terms of this Agreement. In addition to payment for the power, any third party receiving energy or a different component or feature of Expansion Plant Output, as defined in Section 1.17, shall be obligated to share out-of-pocket costs and charges, related to interconnection other than those initial non-recurring costs and charges, on a prorated basis as specified in Section 4.1(h). 4

13 Seller shall not sell or provide Buyer s Percentage Share of the Expansion Plant Output to any third party unless it can do without compromising in any material way its ability to provide Buyer s Percentage Share of the Output to Buyer hereunder. The materiality of any such impact shall be determined by Buyer in its reasonable discretion. If Seller sells or provides Expansion Plant Output to any third party, Seller shall not employ Landfill Gas to fuel such Expansion Plant in any hour unless the Landfill Gas flow requirements of the Initial Capacity have been, and shall continue to be, met. 2.7 One-Time Payment from Buyer to Seller Notwithstanding anything to the contrary, in addition to the Price Buyer shall pay Seller per kwh of Energy delivered or tendered to Buyer at the Point of Interconnection pursuant to Section 2.3 (and in addition to any other payments Buyer is (or becomes) obligated to make to Seller), Buyer shall pay Seller a one-time payment of One Million Seventy-Five Thousand dollars ($1,075,000.00) within thirty (30) days after the Commercial Operation Date. Such one-time payment from Buyer to Seller is not for emission offsets (pursuant to Section 4.3(j) or otherwise). 4.1 Development, Finance, Construction and Operation of the Plant (d) Operate, maintain, and repair the Plant in accordance with this Agreement, and for the Term of the Agreement including any extensions, all Requirements of Law applicable to Seller or the Plant, Contractual Obligations, Permits and in accordance with Prudent Utility Practice, including with respect to efforts to maintain availability of the Initial Capacity. (h) Negotiate and enter into an Interconnection Agreement with LDC to enable Buyer to transmit Energy received at the Point of Interconnection through the ISOcontrolled grid. Seller shall be responsible for and pay all initial non-recurring costs and charges arising under the Interconnection Agreement (even if not actually incurred) prior to the Commercial Operation Date in compliance with the Interconnection Agreement and associated rules and requirements in place as of the Commercial Operation Date. All other out-of-pocket costs and charges related to interconnection other than these initial non-recurring costs and charges will be reimbursed, on a pro rata, energy basis, by the purchaser of energy from the Plant. During the Term of this Agreement prior to any Expansion Plant becoming available for commercial service, Buyer will reimburse Seller for its Percentage Share of such other out-of-pocket costs and charges under the Interconnection Agreement paid or required to be paid by Seller to LDC or its successor; provided, however, Buyer shall be responsible for its Percentage Share of such other out-of-pocket costs and charges under the Interconnection Agreement only to extent Buyer has approved in writing, in the sole discretion of Buyer, the Interconnection Agreement, including any amendments (which shall not include changes in relevant tariffs) from time to time. Upon completion of an Expansion Plant which uses the Interconnection Facilities, such other out-of- 5

14 pocket costs and charges shall be prorated, on a Percentage Share of energy basis, and Buyer s share would be based on its Percentage Share of Energy compared to the energy of the Expansion Plant delivered to the Point of Interconnection. Seller shall cooperate with Buyer to minimize any such costs as are to be reimbursed by Buyer. If a third party receives a different component or feature of Expansion Plant Output, as defined in Section 1.17, as a result of Expansion Plant, and/or if additional interconnection facilities are constructed in connection with the Expansion Plant, Buyer and Seller shall meet and confer in advance of third party contract execution to, in good faith, develop a methodology by which these out-of-pocket costs and charges costs will be shared. (k) Maintain an Availability Threshold of seventy percent (70%). Should Seller fail to maintain such an Availability Threshold, the Price applicable to Output sold and purchased during each month during which the Availability Threshold is below seventy percent (70%) shall be seven and one-half percent (7.5%) below the Price that would otherwise be in effect pursuant to Section 2.3 until the Availability Threshold is increased to at least seventy percent (70%). Except as otherwise expressly stated in Sections 6.4, 7.2(h), 7.3 and 7.6 the foregoing shall be Buyer s sole remedy for any shortfall of or failure to produce Output or failure to maintain any particular Availability Threshold provided that any termination will be without liability. 4.2 General Obligations (d) Prior to the date ninety (90) days following the date of this Agreement, Seller shall make available for review by Buyer, and its representatives, at Buyer s offices in Alameda, California, a fully executed copy of its contract with Butte, including all exhibits, attachments, and other supporting documents thereto, for the purchase of Landfill Gas through the LFG Agreement Landfill Gas (the LFG Agreement ). Such contract may be redacted to remove pricing information. If (i) Seller does not fulfill its obligations under the first two sentences of this Section 4.2(d) in the time allowed, or (ii) Seller fulfills such obligations but Buyer in its reasonable discretion does not approve of the terms of the LFG Agreement, then Buyer may, as its sole remedy and without liability of one party to the other, terminate this Agreement by written notice given no later than sixty (60) days after Seller has fulfilled, or failed to fulfill, as the case may be, such obligations under such first two sentences. Other than increasing the amount of fuel purchased thereunder, Seller shall not allow such contract to be amended or otherwise modified, nor shall it waive or fail to enforce any of its rights thereunder, without Buyer s prior written approval, whose approval shall not be unreasonably withheld. Seller shall make the LFG Agreement available to Buyer for review during normal business hours at Buyer s offices in Alameda, California throughout the term of this Agreement within seven (7) days of a written request by Buyer. 6

15 (h) Seller shall make a good faith effort to notify Buyer of changes that jeopardize the supply of landfill gas supply required to meet the Availability Threshold provided in Section 4.1(k). For so long as an entity that is subject to reporting requirements under Section 13 or Section 15 of the Securities Exchange Act of 1934 directly holds an equity interest in Seller (the Reporting Parent ), Seller shall forward electronic copies of all Form 10-K and 10-Q filings made by the Reporting Parent within five (5) business days of the Reporting Parent s filing of any such Form. (i) Seller shall take steps reasonably necessary to maintain interconnection agreement with PG&E. 7.2 Events of Default by Seller (1) The following shall each constitute an Event of Default by the Seller if Seller does not cure within the time set forth in clause (2), below: (a) Seller breaches any material obligation (other than ones covered by Sections 7.2(b), (c), (d), (e), or (f), (g), (h) or (i) of this Agreement or for which a remedy is specified). (b) Seller fails to make any payment due under this Agreement within thirty (30) days after written notice that such payment is due. (c) The initiation of an involuntary proceeding against Seller under the bankruptcy or insolvency laws, which involuntary proceeding remains undismissed for sixty (60) consecutive days, or in the event of the initiation by Seller of a voluntary proceeding under the bankruptcy or insolvency laws. (d) Seller sells or transfers Buyer s share of the Output (or any individual component thereof) or Expansion Plant Output (or any individual component thereof) or the right to Buyer s share of the Output (or any individual component thereof) or Expansion Plant Output (or any individual component thereof), to the extent that such Expansion Plant Output is purchased by Buyer, to any Person other than Buyer. (e) Seller fails to comply with the terms of Buyer s right of first refusal as described in Section 2.5 or Buyer s right to purchase as described in Section 7.7 of this Agreement. (f) Subject to Section 7.4(c), Seller fails, for any reason other than an unauthorized act or omission by Buyer, to achieve the Commercial Operation Date by the applicable Milestone deadline as set forth in Section 4.3(b)(v), as such deadline may be extended as a result of a Force Majeure Event in accordance with Section 4.3(e). (g) Termination of LFG Agreement, Site Lease Agreement, or Interconnection Agreement evidenced by a final and unappealable order from a court of competent jurisdiction. (h) Seller fails to maintain a twenty-five percent (25%) Availability Threshold for twenty-four (24) months. 7

16 (i) Seller fails to provide Buyer notice, pursuant to Section 7.7, before it takes an action that would give the counterparty under the LFG Agreement the right to purchase the Plant pursuant to Article XVII of the LFG Agreement. (2) Time for Cure. Nothing described in Section 7.2(1)(a) above shall constitute an Event of Default if Seller cures the event, failure or circumstance within thirty (30) days after written notification by Buyer or such longer period as may be necessary to cure as long as Seller is exercising diligent efforts to cure. Buyer and Seller may agree to an incremental sixty (60) days to cure default pursuant to Subsection 7.2(1)(h). Agreement to such a period shall not waive Buyer s right to terminate the Agreement under Section 7.3 at the end of the cure period. 7.4 Damages (e) Any termination with respect to an Event of Default described in Section 7.2(1)(g), (h) or (i) shall be without liability of one Party to the other. 7.5 Indemnification (c) Seller agrees to defend, indemnify, and hold Buyer, its officers, directors, employees, and agents harmless from and against any and all claims and demands of Butte arising from Article XVII of the LFG Agreement. Buyer shall be indemnified against any loses liabilities and expenses including reasonable attorneys fees and expert witness costs, arbitration costs, arbitrator fees, court fees. 7.6 Buyer s Right to Operate If Seller (i) fails to maintain the Availability Threshold for a period of nine (9) months in any twelve (12) month period, or (ii) fails to generate Energy for sixty (60) consecutive days, then Buyer or its designee may, but shall not be obligated to, stepin and assume operational control from Seller of the Plant; provided that Buyer shall not be permitted to step-in and take control so long as Seller or any of Seller s Lenders are using commercially reasonable efforts to remedy the failures described in (i) or (ii) above. Within five (5) months of the beginning of the nine (9) month period described in (i) above or ten (10) days from the failure described in (ii) above, and upon receipt of a written request from Buyer, Seller shall provide Buyer, its employees, contractors, and designees access to unredacted copies of all documentation relevant to the assumption of operational control, including but not limited to documentation revealing lenders, contracts relating to the fuel supply to the Plant, contracts that list parties receiving payment from Seller based on Plant s output, contracts through which third parties receive Energy from the Plant, operating data, inspection data, compliance reports, community complaints, maintenance contracts, operational contracts, power purchase agreements with third parties, interconnection agreements, and all relevant financial documents. Buyer, its employees, contractors and designees shall have the unrestricted right to enter the 8

17 Plant to the extent necessary to operate the Plant. Upon the exercise of this right, Buyer or its designee shall at all times operate the Plant using Prudent Utility Practice and shall comply, to the extent commercially practicable, with the terms of this Agreement. Notwithstanding the foregoing, Seller shall not be excused from any obligation or remedy available to Buyer as a result of Buyer s operation of, or election not to operate, the Plant. Buyer shall pay Seller the applicable rate for Output provided hereunder, less any costs incurred by Buyer to operate the Plant. Costs to operate the Plant will include but not be limited to all actions necessary and proper to operation of Plant such as labor, management, due diligence assessment, or any costs associated with non-compliance and/or fines that may be due to operation of the facility by Seller. Buyer shall indemnify and hold Seller harmless from any liability to third parties arising out of Buyer s failure to operate the Plant using Prudent Utility Practice. While Buyer exercises right to operate, Buyer shall not assume obligations related to Seller s employees, subsidiaries, or affiliates, including but not limited to wages, retirement, and workers compensation. Upon Buyer s satisfaction that Seller has the ability to operate the Plant in accordance with this Agreement, Seller shall resume operational control. If Buyer elects not to operate the Plant or is precluded from operating the Plant under the terms provided herein and a twenty-five percent Availability Threshold is not maintained for a twenty-four (24) month period, Buyer shall have the option to terminate this Agreement without liability. Should Seller s Lender(s) refuse to finance the Plant, or materially condition such financing, solely as a result of this Section 7.6, and Seller gives Buyer written notice of such refusal to finance, Buyer shall have the following options: (1) terminate this Agreement without liability of one party to the other; (2) renegotiate this Section 7.6 with Seller and Lender(s) in a manner mutually acceptable; (3) delete this Section 7.6 in its entirety (which deletion will not require Seller s additional consent); or (4) arrange for financing for the Plant under materially equivalent term and conditions as the Lender(s) were prepared to provide but for this Section 7.6. If Buyer fails to elect and complete one of these options within sixty (60) days of written notice from Seller, Seller shall have the right to terminate this Agreement without liability of one party to the other. 7.7 Abandonment Under and Certain Terminations of LFG Agreement Seller shall give Buyer written notice at least seventy (70) days before Seller takes an action that would give the counterparty under the LFG Agreement the right to purchase the Ameresco Facilities pursuant to Article XVII of the LFG Agreement ( Article XVII ). Upon receipt of such notice, and notwithstanding Seller s sales of Expansion Plant Output to any third party(ies) or Seller s contracts with other parties for the sale of Output, Buyer shall have the right of first refusal to purchase Ameresco Butte County LLC and the Ameresco Facilities subject to lenders rights. Seller shall, within ten (10) days of the written notice, provide Buyer, its employees, contractors, and designees access to unredacted copies of all documentation relevant to the 9

18 purchase of Ameresco Butte County LLC and Ameresco Facilities, including but not limited to documentation revealing lenders, contracts relating to the fuel supply to the Ameresco Butte County LLC or Ameresco Facilities, contracts that list parties receiving payment from Seller based on Ameresco Facilities output, contracts through which third parties receive Energy from Ameresco Butte County LLC or Ameresco Facilities, operating data, inspection data, compliance reports, community complaints, maintenance contracts, operational contracts, power purchase agreements with third parties, and all relevant financial documents. Once Buyer has access to all documents referenced above, it shall have sixty (60) days to evaluate, subject to the approval of any Lenders, each in their sole discretion, the option to purchase all of the ownership interest in Ameresco Butte County LLC and Ameresco Facilities. At the end of this due diligence period, Buyer shall notify Seller whether its staff recommends purchase of Ameresco Butte County LLC and Ameresco Facilities. If Buyer notifies Seller of staff s interest in purchasing Ameresco Butte County LLC and Ameresco Facilities, Seller shall provide Buyer an additional sixty (60) days to secure approval of Buyer s board and city council and execute the purchase agreement. Upon execution of the purchase agreement, Seller shall cause the transfer of such interest in Seller to Buyer, including the obligations of Seller to make sales of Output and Expansion Plant Output to third parties. Buyer shall not assume obligations related to Seller employees, subsidiaries, or affiliates, including but not limited to wages, retirement, and workers compensation unless Buyer retains by written agreement the services of Seller s employees, subsidiaries and affiliates. At the end of the initial seventy (70) day review period, if Buyer s staff elects not to purchase Ameresco Butte County LLC and Ameresco Facilities, Buyer shall have the option to terminate this Agreement without liability Palo Alto Agreement Notwithstanding any provision in this Agreement anything to the contrary, all terms, conditions and provisions of this Agreement (including, without limitation, Seller s obligations, covenants, representations, warranties and other agreements in this Agreement) Buyer s rights under Section 2.5 to Expansion Plant and Expansion Plant Output are subject to Sections 2.5 and 4.3(j) of the Power Purchase Agreement (including any amendments thereto), dated November 10, 2008, by and between Palo Alto and Seller ( Palo Alto PPA ). The Palo Alto PPA was terminated on September 15, Notwithstanding termination of the Palo Alto PPA, Palo Alto retains residual rights under Sections 2.5 and 4.3(j) of the Palo Alto PPA through September 15, No provision of this Agreement shall contravene the residual rights held by Palo Alto pursuant to Sections 2.5 and 4.3(j) of the Palo Alto PPA and Buyer s rights under this Agreement are subject thereto. which was terminated by Seller (including, without limitation, any obligations, covenants, representations, warranties, and other agreements Seller may have under such Power Purchase Agreement with Palo Alto. Appendix C-Insurance Coverages 10

19 5. Property, Liability, Replacement, Catastrophic Loss, and Other Forms of Insurance Consistent with Prudent Utility Practice. Seller shall maintain the greater of, the insurance required of the Lender, from time to time, or that degree of insurance consistent with Prudent Utility Practice for the facilities encompassing the entire Initial Capacity. B. Counterparts. This Amendment No. 1 may be executed in two or more counterparts and by different parties on separate counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. C. No Other Amendments. Except as expressly set forth herein, the terms of the PPA remain unchanged and in full force and effect. [signature page follows] 11

20 IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written. ALAMEDA MUNICIPAL POWER By: Name: Girish Balachandran Title: General Manager AMERESCO BUTTE COUNTY LLC By Ameresco, Inc., its sole member By: Name: Michael T. Bakas Title: Senior Vice President 12