ORDER NUMBER
G-187-20
IN THE MATTER OF
the Utilities Commission Act, RSBC 1996, Chapter 473
and
Creative Energy Vancouver Platforms Inc.
Application for Approval of a Credit Agreement
BEFORE:
A. K. Fung, QC, Commissioner
T. A. Loski, Commissioner
on July 15, 2020
ORDER
WHEREAS:
A. On July 3, 2020, Creative Energy Vancouver Platforms Inc. (Creative Energy) filed an application with the British Columbia Utilities Commission (BCUC) pursuant to sections 50 and 52 of the Utilities Commission Act (UCA) for approval to enter into an agreement for senior secured credit facilities up to $33.8 million (Credit Agreement) with Toronto Dominion Bank (TD) and HSBC Bank Canada (HSBC) (Application);
B. By Order G-195-15, dated December 10, 2015, the BCUC approved a prior credit facility agreement between Creative Energy and the Royal Bank of Canada dated November 3, 2015, which was amended and restated by Order G-184-16, dated December 8, 2016;
C. The credit provided under the Credit Agreement will replace the existing credit facilities Creative Energy has in place at this time with other lenders;
D. Creative Energy requests the Application be held on a confidential basis as it contains commercially sensitive information;
E. On July 6, 2020, the BCUC issued confidential Staff questions to Creative Energy. Creative Energy submitted its responses on July 7, 2020;
F. On July 9, 2020, the BCUC issued confidential Panel questions to Creative Energy. Creative Energy submitted its responses on July 10th, 2020; and
G. The BCUC has reviewed the Application, Creative Energy’s responses to Staff and Panel questions and finds that approval of the Application is warranted.
NOW THEREFORE, for reasons to follow, the BCUC orders as follows:
1. Pursuant to sections 50 and 52 of the UCA, the BCUC approves Creative Energy entering into the Credit Agreement with TD and HSBC;
2. The BCUC approves the subsequent extension of the Credit Agreement for additional periods not greater than 364 days without further BCUC approval where there are no other material changes to the Credit Agreement. Creative Energy must provide in writing to the BCUC notification of any extensions to the Credit Agreement.
3. Creative Energy must cancel Tranche I (for up to $5.5 million) of the credit facilities once that loan is fully repaid and provide written notification of such cancellation to the BCUC upon repayment of that loan.
4. Creative Energy must file with the BCUC a copy of the final executed credit facility agreement within ten days of its execution by Creative Energy.
5. The BCUC will keep confidential the proposed terms and conditions within the Application as it contains commercially sensitive information.
DATED at the City of Vancouver, in the Province of British Columbia, this 15th day of July, 2020.
BY ORDER
Original signed by:
A. K. Fung
Commissioner
Creative Energy Vancouver Platforms Inc.
Application for Approval of a Credit Agreement
REASONS FOR DECISION
1.0 Introduction
1.1 Application and Approvals Sought
On July 3, 2020, Creative Energy Vancouver Platforms Inc. (Creative Energy) filed an application with the British Columbia Utilities Commission (BCUC) pursuant to sections 50 and 52 of the Utilities Commission Act (UCA) for approval to enter into an agreement for senior secured credit facilities up to $33.8 million (Credit Agreement) with Toronto Dominion Bank (TD) and HSBC Bank Canada (HSBC) (Application).
Creative Energy requested an expedited review process to meet a target closing date of July 15, 2020. On July 6, 2020, the BCUC issued confidential staff questions to Creative Energy. Creative Energy submitted its responses on July 7, 2020. The BCUC issued confidential Panel questions to Creative Energy on July 9, 2020. Creative Energy submitted its responses on July 10th, 2020.
Following review of the Application, the BCUC issued Order G-187-20 dated July 15, 2020, approving the Application with reasons to follow. This document serves as reasons to support that approval.
2.0 Panel Discussion and Determination
The Panel identifies several issues in its review of this Application which warrant a discussion within these reasons. The review of this Application is conducted under section 50 of the UCA, in particular section 50(7), which provides the BCUC with the discretion to “give its approval under this section subject to conditions and requirements considered necessary or desirable in the public interest.”
This Application partially stems from Creative Energy’s application for a Certificate of Public Convenience and Necessity (CPCN) for Beatty-Expo Plants and Reorganization and the subsequent BCUC Decision and Order C-1-20 dated March 5, 2020 (Original CPCN), and the Lieutenant Governor in Council pursuant to Order in Council No. 367 dated June 29, 2020. The proposed new Credit Agreement enables Creative Energy to refinance its existing debt with other lenders and permits the company to complete the corporate reorganization as approved.[1]
The Panel notes that Creative Energy neglected to state the importance of this refinancing in the Original CPCN. In the Panel’s view, Creative Energy should have reasonably contemplated and disclosed this proposed refinancing in the Original CPCN as amending Creative Energy’s original credit agreement or seeking alternative financing in place of that original credit agreement was evidently required in order to complete the steps of the reorganization. The Panel is concerned with Creative Energy’s apparent lack of intent to be forthcoming with this information in its previous regulatory filing with the BCUC. This lack of foresight and prompt disclosure by Creative Energy resulted in a less than reasonable time frame for the Panel to review this Application, as any further delays would apparently delay the scheduled project for the Beatty and Expo plants contrary to the terms of the approved Original CPCN.[2] In addition, the Panel found the lack of alternative lenders explored by Creative Energy, in this Application, concerning as only one financing option was ultimately brought forward for BCUC expedited review and approval, with no apparent consideration of other alternatives or if such alternatives were explored in any detail, an explanation as to why Creative Energy rejected those alternatives in favour of the option that was brought forward.[3] Given the size of the refinancing in question ($33.8 million), the Panel expects that Creative Energy would have explored ways to garner alternative refinancing options on terms that could be have been more favourable to its ratepayers.
While the Panel accepts that Creative Energy may incur fees and charges in order to secure its refinancing and these costs are generally appropriate to be recoverable from ratepayers provided that they are prudently incurred, not having access to information about other alternative financing proposals hampers the Panel’s ability to objectively assess the reasonableness and prudency of those costs. Nonetheless, having regard to the sunk costs that Creative Energy has already invested into this refinancing proposal, which ratepayers would have to bear, and the unfortunate delay in Creative Energy bringing forward this Application for timely review, the Panel considers that on balance it would not be in the public interest to deny the Application in light of the effects that would have on the completion of the Beatty and Expo plants and the approved Original CPCN and corporate reorganization.
Creative Energy has also requested the subsequent extension of the Credit Agreement for additional periods not greater than 364 days without further BCUC approval where there are no other material changes to the Credit Agreement. The Panel finds this condition to be reasonable and therefore approves this request pursuant to section 50 of the UCA. Creative Energy must provide in writing to the BCUC notification of any extensions to the Credit Agreement.
As part of this Application, Creative Energy proposed Tranche I of the credit facilities with TD and HSBC which was not originally provided by Royal Bank of Canada (RBC). As this tranche increases Creative Energy’s financing exposure to a third-party lender as opposed to the previous loan provided by Creative Energy’s shareholders on more favourable (albeit non-market) terms, the Panel orders that Creative Energy must cancel Tranche I (for up to $5.5 million) once that loan is fully repaid and to provide written notification of such cancellation to the BCUC upon repayment of that loan.
The Panel reminds Creative Energy that as a regulated public utility, ensuring its adherence to best practices and compliance with regulatory requirements are of paramount importance to the BCUC in its role as the regulator. In that regard, timeliness and full disclosure are expected from all regulated entities without exception.
Dated at the City of Vancouver, in the Province of British Columbia, this 23rd day of July, 2020.
Original signed by:
_________________________________
A. K. Fung, QC
Commissioner
Original signed by:
_________________________________
T. A. Loski
Commissioner