• BGS-RSCP: $24,500/tranche 
• BGS-CIEP: $19,400/tranche

• to provide a Pre-Auction Letter of Credit in an amount of $500,000 per tranche of the indicative offer at the maximum starting price and a Letter of Intent to Provide a Guaranty in an amount of $1.9M per tranche of the indicative offer at the maximum starting price; or:
• to provide a Pre-Auction Letter of Credit in an amount of $2.4M per tranche of the indicative offer at the maximum starting price.

Neither the Authorized Representative, nor the Officer who names the Authorized Representative in the Part 1 Application, is required to be the individual who would execute the applicable SMA should the bidder win at the Auction.

If you become a winning bidder in the Auction, the entity that executes the applicable SMA must be the same entity that has agreed to the terms of the SMA in the Part 1 and Part 2 Applications. However, the individual who signs the SMA can be any officer or representative who is authorized to execute contracts and bind the bidder.

No, the Applicant is not required to be a PJM LSE at the time of submitting the Part 1 Application. However, if the Applicant is not a PJM LSE at the time of submitting the Part 1 Application, the Applicant must certify in its Part 1 Application that there exist no impediments for the Applicant to become a PJM LSE by the start of the supply period (by using the LSE Certification Insert labelled #P1-4).

Section 3 of the Part 1 Application does not compel the Applicant to have an office in New Jersey or to have legal counsel in New Jersey. Section 3 requires that the Applicant name a legal representative; for purposes of the Part 1 Application, a legal representative is a person or company that agrees to accept service of process on the Applicant’s behalf. The legal representative can be either legal counsel or a representative agent. The individual or company serving as the Applicant’s legal representative must provide an address in New Jersey. If a company agrees to accept service of process on your behalf, an individual from that company must sign the Legal Representative Insert (labelled #P1-3).  The name of the individual and contact information must be provided.

As we understand your inquiry, Entity A would sell to Entity B a product that would obligate Entity A to post margin as an agent for Entity B when forward prices for PJM exceeded a certain threshold.  As you have described the product, the product applies for BGS obligations only and not for a wider range of trading obligations.  Further, it applies to BGS load won in Auctions already held and ruled upon by the BPU.  

There is no issue, with respect to BGS certifications that have been made, with the two entities transacting such a product that relate to positions won in past auctions once the Supplier Master Agreements have been signed for the relevant supply period.  Your concern is also whether entering into such a transaction could make it difficult for Entity A or Entity B to make the certifications required to participate in future BGS Auctions.    

Without going through each certification in detail, an entity will generally be required to certify in future auctions that the entity has no bidding agreements, no knowledge of another bidder’s bidding strategy, no knowledge of another bidder's preference for bidding on any product, or no knowledge of another bidder's valuation of any product in the upcoming auction.  You will also be required to certify that you have not revealed any such information to anyone, including another bidder.  It does not seem that selling the product you describe, in the particular timeframe you describe, related only to past BGS obligations, would create any type of bidding arrangement for a future auction, would reveal confidential information with respect to bidding strategy, would reveal either entity’s valuation of the BGS product for future auctions, or would reveal an entity's preference for bidding on any specific product.  Hence, it would seem that if Entity A and Entity B entered into this contingent credit sleeve arrangement in the timeframe you describe, the transaction would not have an impact on the certifications to be made for future auctions.  

Our response does not contemplate, and would not necessarily apply, to a situation in which Entity A and Entity B entered into a general corporate agreement where Entity A would be supporting all of Entity B’s trading obligations.  Similarly, we are assuming that the arrangement is not a transaction that would entail Entity A conducting due diligence with respect to Entity B’s trading operations, or BGS supply arrangements, or valuations (and vice versa).  Further, we are assuming, as you have stated, that this credit product is not for the purposes of bidding in future BGS Auctions.  Were any of these assumptions to be incorrect, the guidance we are providing could differ as the level of knowledge that each entity may have about the other’s valuation methods and preferences could make it difficult to make some of the required certifications.  However, trading a contingent credit sleeve on a one-time basis, without a review of the other entity’s trading strategies and BGS hedging and supply arrangements, does not in itself appear to pose any problem for future auctions.  Finally, we note that the transaction you describe would not "make" one entity a financial institution for the other, and that any provisions for additional information to be provided to a financial institution under the Association and Confidential Information Rules would not apply to the circumstance described.

In general, Qualified Bidders that are associated with one another are considered as one bidder for the purposes of application of the load caps and for the administration of the auction. 

Two affiliated entities may each be considering bidding in the auction and may separately submit a separate Part 1 Application, unaware that the other is also submitting a Part 1 Application.  In the Part 1 Application, each entity will be asked to declare either that 1) it is bidding independently; or 2) it is part of a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction.  Each entity would indicate that it is bidding independently given that it is unaware that the other is preparing an application to the auction.  Each entity would learn that an affiliated entity is also preparing to submit a bid in the same auction upon seeing the list of Qualified Bidders after having qualified through a successful Part 1 Application.  

A Qualified Bidder may submit a Part 2 Application but is not required to do so.  If one or both of these affiliated Qualified Bidders subsequently submits a Part 2 Application, it would name the other (i.e., would name the affiliated entity) as a bidder with which it is associated.  Whether or not the other Qualified Bidder submits a Part 2 Application is irrelevant to the requirement imposed on the Qualified Bidder that is submitting the Part 2 Application to disclose the association.  Furthermore, the Qualified Bidder submitting the Part 2 Application will be asked to make a number of other certifications or to make information disclosures that may be affected by the presence of the associated bidder.  In general, Qualified Bidders that are associated with one another are considered as one bidder for the purposes of application of the load caps and for the administration of the auction.  It is certainly possible for two affiliated entities both to participate in the same auction.  Should both affiliated entities submit a Part 2 Application, the Auction Manager will make a determination on a case-by-case basis of whether the two affiliated entities would be able to bid separately and whether the two affiliated would be considered as one bidder for the application of the load caps.  

If instead the two affiliated entities know that the other is preparing a Part 1 Application for the auction so that these entities will have communicated their potential intention to bid to each other, these entities are considered to be bidding as part of a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement (“Arrangement”) pertaining to bidding in the auction.  These entities should follow the procedures for entities that have entered into an Arrangement, as described in FAQ-65. 

When Entities participate in an Arrangement, it is typical to nominate one Entity to fulfill the creditworthiness requirements and to sign the Master Supplier Agreement.  If the Entities participating in the Arrangement are either uncertain as to which Entity will sign the Supplier Master Agreement or if any or all Entities may sign a Supplier Master Agreement, all Entities must submit to the creditworthiness evaluation in the Part 1 Application.  All Entities should then submit separate Part 1 Applications, with all required documents, and in the Insert for the Part 1 Application prepared specifically for that purpose, each Entity states that it is NOT bidding independently, each Entity describes the Arrangement, and each Entity names all other Entities that are participating in the Arrangement.  In this same Insert, the Authorized Representative of each Entity signs to confirm that the Entity will be subject to the creditworthiness requirements (since the Entity may execute the Supplier Master Agreement should the Entities under the Agreement win at the auction).  Each Entity would respond to any request for additional information from the Auction Manager.  For example, the Auction Manager may require that the Entities designate a single point of contact for purposes of providing materials related to the auction, including the confidential information needed to submit bids.  Each Entity would present its financial information for purposes of a creditworthiness assessment.  Assuming that all Entities submit all required materials and respond to all requests for information from the Auction Manager and provide all information requested by the Part 1 Application process, the Entities participating in the Arrangement would qualify as a single bidder (“Joint Bidder”).  The Entities participating in the Arrangement would receive a single notification of qualification, and would be designated as a single bidder on the list of Qualified Bidders.  However, because at the time of qualification it is not known which Entity or Entities would sign the Supplier Master Agreement, each Entity would receive a separate creditworthiness assessment that would specify the pre-auction security that the Entity must provide with the Part 2 Application.  Please note that each Qualified Bidder will consider all Entities named on the list of Qualified Bidders when making their certifications in the Part 2 Application, including all Entities participating in the Arrangement. 

At the Part 2 Application stage, each Entity to the Arrangement would make the certifications of the Part 2 Application or make appropriate information disclosures.  The Entity responsible for the creditworthiness requirements and for signing the Supplier Master Agreement would be the Entity providing the pre-auction security required with the Part 2 Application and would be the Entity submitting the Part 2 Application.  If the issue of which Entity is to sign the Supplier Master Agreement and is to be subject to the creditworthiness requirements is still not resolved by the Part 2 Application deadline, or should multiple Entities intend to enter into the Supplier Master Agreement upon winning at the auction, each Entity participating in the Arrangement would submit a Part 2 Application.  In each Part 2 Application, the indicative offer and maximum preliminary interest (if applying to the BGS-RSCP Auction) would be expected to reflect the interest of Joint Bidder and thus would be expected to be identical in the Part 2 Application submitted by each Entity.  The indicative offer for Joint Bidder is subject to the same statewide load cap as any other single bidder in the auction.  The maximum preliminary interest of Joint Bidder, if applying to the BGS-RSCP Auction, is subject to the same EDC load caps as any other single bidder in the auction.  Each Entity would post the entire amount of pre-auction security required for the indicative offer presented at the maximum starting price.  The amounts of pre-auction security for each Entity participating in the Arrangement may be different depending on the creditworthiness assessment of the particular Entity but these amounts should all be based on the same indicative offer at the maximum starting price valid for Joint Bidder.  Each Entity will separately agree that the submission of any bid creates a binding and irrevocable offer to provide service under the terms of the Supplier Master Agreement and will separately agree to any other certification of the Part 2 Application applicable to the entity that would execute the Supplier Master Agreement should the entities participating in the Arrangement win at the auction.  Each Entity would additionally be required to agree that upon conclusion of the auction, Joint Bidder would provide to the Auction Manager any division among the Entities of tranches won by Joint Bidder for purposes of signing the Supplier Master Agreement.  The Entities participating in the Arrangement would receive a single notification of registration, would appear as a single bidder on the list of Registered Bidder, and would receive a single confidential information packet with information for the submission of bids. 

If Joint Bidder wins at the auction, it may be the case that the issue of which Entity is to sign the Supplier Master Agreement has not been resolved at the conclusion of the auction or that multiple Entities intend to enter into the Supplier Master Agreement.  In accordance with their undertakings at the Part 2 Application stage, the Entities participating in the Arrangement are entirely responsible for providing to the Auction Manager, within one business day of the close of the auction, the names of the Entities that will sign the Supplier Master Agreement, and the number of tranches that each such Entity will serve.  Any failure of the Entities to agree on a division among themselves of the tranches won by Joint Bidder may result in the EDCs drawing upon the Pre-Auction Letters of Credit of any or all Entities participating in the Arrangement.  Should the Board approve the auction results, each such Entity will be responsible for signing the Supplier Master Agreement and meeting the creditworthiness requirements within three (3) business days of the Board decision.  The EDCs may draw upon the Pre-Auction Letter of Credit of an Entity that fails to abide by these obligations.  When the contract execution process is successfully concluded, the Auction Manager will cancel the Pre-Auction Letter of Credit separately for each Entity participating in the Arrangement. 

Although such arrangements can take a variety of forms and the Auction Manager may require different procedures in specific circumstances, entities that bid jointly through a bidding agreement, joint venture for purposes of the auction, bidding consortium, or other arrangement pertaining to the auction (“the Arrangement”) would typically proceed as follows through the Application Process and proceed as follows for the submission of bids. 

Only the entity that intends to execute the Supplier Master Agreement should the entities participating in the Arrangement win at the auction (“Entity A”) submits the Part 1 Application.  In the Insert for the Part 1 Application prepared specifically for that purpose, Entity A states that it is NOT bidding independently, Entity A describes the Arrangement, and Entity A names the other entity that is participating in the Arrangement.  In this same Insert, the Authorized Representative of Entity A signs to confirm that Entity A will be the entity that will fulfill the creditworthiness requirements (since it is the entity that would execute the Supplier Master Agreement should the entities participating in the Agreement win at the auction).  The applicable Insert is Insert #P1-8 if Entity A is applying to participate only in the BGS-RSCP Auction; Insert #P1-14 if Entity A is applying to participate only in the BGS-CIEP Auction; or Insert #P1-11 if Entity A is applying to participate in both the BGS-RSCP Auction and the BGS-CIEP Auction, in which case Entity A notes in Insert #P1-11 whether the arrangement pertains to the BGS-RSCP Auction, or to the BGS-CIEP Auction, or to both Auctions.  An Arrangement is specific to a particular Auction; it is possible, for example, for two entities to be participating in an Arrangement that only pertains to one Auction (say the BGS-RSCP Auction) and for one of the two entities to apply to bid independently in the other Auction (i.e., the BGS-CIEP Auction).  

Please note that this same procedure for the Part 1 Application would be followed if more than two entities were participating in the Arrangement.  

If the Part 1 Application for an auction complied with all requirements, both entities participating in the Arrangement qualify as a single bidder (“Joint Bidder”) for that auction.  Joint Bidder receives a single notification of qualification naming the two entities.  With the notification of qualification, each Qualified Bidder receives a list of Qualified Bidders for that auction.  The list of Qualified Bidders has a single entry for Joint Bidder, naming both entities participating in the Arrangement (e.g., the entities typically are listed as “Entity A and Entity B” on a single line or in some other manner that makes it clear that Entity A and Entity B have qualified as a single bidder).  

In the Part 2 Application for a given auction, each entity on the list of Qualified Bidders makes certifications for compliance with the Association and Confidential Information Rules (or makes appropriate information disclosures) using the list of all entities on the list of Qualified Bidders in that auction.  Thus, each Qualified Bidder is asked whether it can make each certification with respect to Entity A and whether it can make each certification with respect to the other entity participating in the Arrangement, “Entity B”.  Joint Bidder makes certifications for compliance with the Association and Confidential Information Rules (or makes appropriate information disclosures) that apply to both Entity A and Entity B.  These certifications are submitted by Entity A to apply to Joint Bidder or are submitted separately by Entity A and by Entity B.  The indicative offer of Joint Bidder is subject to the same statewide load cap as any other single bidder in the auction.  For the BGS-RSCP Auction, the preliminary interest of Joint Bidder is subject to the same EDC load caps as any other single bidder in the auction.  

Entity A submits the Part 2 Application including any required pre-auction security based on Entity A’s creditworthiness assessment at the Part 1 Application stage and on the indicative offer of Joint Bidder.  For the required Pre-Auction Letter of Credit in an auction, Joint Bidder has the following options:      (i) Entity A submits a single Pre-Auction Letter of Credit that names Entity A and Entity B as the “Bidder”; or (ii) Entity A names Entity A as the “Bidder” strictly for the purposes of the Pre-Auction Letter of Credit and the Authorized Representative from Entity A acknowledges in writing that the EDCs may draw upon the letter if Entity B has made a material omission or misrepresentation in the Part 1 Application or the Part 2 Application submitted to participate in the auction or has violated the Auction Rules; or (iii) Entity A submits a Pre-Auction Letter of Credit that names Entity A as the “Bidder” and Entity B also submits a Pre-Auction Letter of Credit that names Entity B as the “Bidder”, each letter of credit being for the full required amount (i.e., $500,000 per tranche of Joint Bidder’s indicative offer at the maximum starting price for the BGS-RSCP Auction or $375,000 per tranche of Joint Bidder’s indicative offer at the maximum starting price for the BGS-CIEP Auction).  Entity A submits any additional pre-auction security that is required.  Entity A submits a letter of intent to provide a guaranty if it relies on the financial standing of a guarantor and/or submits a letter of reference from its financial institution if required.  These documents refer to Entity A only as Entity A fulfills the creditworthiness requirements and would be the signatory to the Supplier Master Agreement should Joint Bidder win at the auction.  Entity A alone submits any certification of the Part 2 Application that is applicable to the entity that would execute the Supplier Master Agreement should the entities participating in the Arrangement win at the auction.      

If the Part 2 Application for an auction complied with all requirements, both entities participating in the Arrangement register as Joint Bidder for that auction.  Joint Bidder receives a single notification of registration naming the two entities.  With the notification of registration, each Registered Bidder receives a list of Registered Bidders for that auction.  The list of Registered Bidders has a single entry for Joint Bidder, naming both entities participating in the Arrangement.  The notification of registration for Joint Bidder includes the initial eligibility for Joint Bidder in the auction.  

The Auction Manager provides to Joint Bidder a single confidential information packet, including a single Login ID and password, for purposes of participating in the Trial Auction and for submitting bids in the auction.  Joint Bidder submits a single bid each round.  Entities A and B are entirely responsible for agreeing among themselves on all logistics associated with the submission of bids, including the bidding location and the point of contact for the Auction Manager, it being understood that the Auction Software may not function properly when more than one individual is logged in as a bidder.  Entity A and Entity B can communicate freely regarding their bidding strategy as well as regarding any other matter related to the auction for which they have declared the Arrangement to the Auction Manager.  
If Joint Bidder does not win any tranches in the auction, the Pre-Auction Letter(s) of Credit is(are) cancelled as soon as practicable after the Board decision.  If Joint Bidder is a winner at the auction and the Board approves the auction results, the Auction Manager provides to the EDC(s) the contact information for representatives of Entity A for execution of the Supplier Master Agreement.  If Entity B submitted a Pre-Auction Letter of Credit, it is cancelled as soon as practicable after the Board decision.  The Pre-Auction Letter of Credit submitted by Entity A is cancelled as soon as practicable after all EDCs with whom Entity A is executing a Supplier Master Agreement have confirmed that Entity A has executed the Supplier Master Agreement and met the creditworthiness requirements of the Supplier Master Agreement (including the posting of any necessary security). 

Yes, all entities in any such arrangements together cannot bid or win more than the applicable load caps.

Any bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in an auction must be disclosed in the Part 1 Application using the Insert prepared for this purpose.  Any such agreement cannot be first disclosed at a later point in time.  If the parties to this agreement qualify, the parties do so as a single “Joint Bidder”.  Joint Bidder receives a single notification of qualification naming the entities that are parties to the agreement.  The list of Qualified Bidders included with the notification of qualification has a single entry for the Joint Bidder, naming all entities participating in the Arrangement (e.g., the entities are listed as “Entity A and Entity B” on a single line or in some other manner that makes it clear that the entities have qualified as a single joint bidder).

Thus it is the Joint Bidder that becomes the Qualified Bidder able to submit a Part 2 Application; each party separately does not have the status of a Qualified Bidder and cannot continue in the Auction Process separately.  Status as a Qualified Bidder cannot be rescinded or changed after the Auction Manager has issued the Notification of Qualification.  In particular, the Qualified Bidder status of the Joint Bidder cannot be assigned or transferred to one of the parties to the agreement.  Applicants certify in their Part 1 Application that they will not assign or transfer their status as a Qualified Bidder to another party.

For the Joint Bidder to continue in the Auction Process after the Joint Bidder has become a Qualified Bidder, the entity that presented its financial information for creditworthiness purposes (“Entity A”) submits the Part 2 Application including any required pre-auction security.  For the Pre-Auction Letter of Credit, Joint Bidder has the following options: (i) Entity A submits a single Pre-Auction Letter of Credit that names all parties to the agreement as the “Bidder”; or (ii) Entity A names Entity A as the “Bidder” strictly for the purposes of the Pre-Auction Letter of Credit and the Authorized Representative from Entity A acknowledges in writing that the EDCs may draw upon the letter of credit if any of the parties to the agreement have made a material omission or misrepresentation in the Part 1 Application or the Part 2 Application submitted to participate in the auction or has violated the Auction Rules; or (iii) each party to the agreement separately submits a Pre-Auction Letter of Credit for the full required amount.  Entity A submits any additional pre-auction security that is required.  The Part 2 Application for Joint Bidder must include the certifications for compliance with the Association and Confidential Information Rules (or appropriate information disclosures) from each party to the agreement.

No.  Any bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, must be fully disclosed in the Part 1 Application.  This implies that any such arrangement must be entered into before the Part 1 Applications are received and cannot be entered into later in the Auction Process.  In the Part 2 Application, a Qualified Bidder will be required to certify that, other than agreements disclosed in the Part 1 Application, the Qualified Bidder has not entered and will not enter into any agreement regarding bidding or participation in the auction.

Bidding agreements are disclosed in the Part 1 Application.

If it is possible that the parent and Guarantor of Entity A could cease to exist during the Auction Process, Entity A should apply to the auction under its own financial standing.  There is no mechanism to update financial information or to change the identity of the Guarantor once it is submitted in the Part 1 Application and once a creditworthiness assessment has been made.  If Entity A applies under the financial standing of its parent and Guarantor, the Auction Manager will communicate to Entity A through the notification of qualification that Entity A is required to submit a Pre-Auction Letter of Credit and that Entity A’s named parent and Guarantor is required to submit a letter of intent to provide a guaranty for a specific amount that is determined on the basis of the creditworthiness assessment of the named parent and Guarantor.  Entity A could be in a situation where it cannot fulfill the pre-auction security requirements of the Part 2 Application because its (now defunct) parent and Guarantor cannot provide a letter of intent to provide a guaranty.  

Entity A should instead proceed through the Part 1 Application relying on its own financial standing.  Entity A will be required to submit a Pre-Auction Letter of Credit and possibly a letter of reference from a bank (if its unsecured credit line under the terms of the Supplier Master Agreement is not sufficient to support its indicative offer).  Entity A would be able to fulfill the pre-auction security requirements if the merger occurs as anticipated and its parent and Guarantor ceases to exist or becomes another entity.  If Entity A is successful at the auction, Entity A can subsequently request of the EDC a creditworthiness assessment for an entity that would serve as Guarantor and that would fulfill the creditworthiness requirements of the Supplier Master Agreement. 

Yes.  When the merger closes, the Entities will become associated.   If the association is created after Entities A and B have submitted their Part 2 Applications but before the Part 2 Application deadline, the Auction Manager would consider any supplemental information submitted by Entities A and B as a consequence of the creation of the association.  

We reiterate that it is assumed that neither Entity A nor Entity B would legally or effectively combine with each other or with any subsidiaries of the company with which its parent has merged.  

The fact that Entities A and B could enter into an Arrangement in the Part 1 Application may contribute to ease concerns about an association forming between Entities A and B after the Part 2 Applications are submitted because the restrictions placed on the Entities participating in the Arrangement are likely to be sufficient for those that would apply to any two Qualified Bidders that are associated with one another.  However, the participation in an Arrangement does not grant an exception for the Entities to make all other certifications required of the Part 2 Application, including:  (1) certifications that the Qualified Bidder must remain the same Entity until three days after the Board renders a decision on the auction results; and (2) the certification that the Qualified Bidder will not substitute another entity in its place, transfer its rights to another entity, or otherwise assign its status as a bidder to another entity.  These certifications ensure that the Entities that submit to the qualification process, that certify agreement to the Supplier Master Agreement and the Auction Rules, and that certify compliance to the Association and Confidential Information Rules are those Entities that bid and that would sign the Supplier Master Agreement should they be successful at the auction.    

On the basis of the Part 1 and Part 2 Applications, the Auction Manager would determine whether Entities A and B comply with the Association and Confidential Information Rules and whether these Entities could be registered in the auction as a “Joint Bidder”.  This determination would rely on the details of the certifications and information disclosures, as well as the specific circumstances; a general determination cannot be made.

We emphasize in the strongest possible terms that this response does NOT purport to state that if the parent of Entity A and the parent of Entity B have plans to merge, it is legal under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) or other controlling antitrust laws for Entity A and Entity B to form a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction (“Arrangement”).  Our response discusses, under the hypothetical that Entity A and Entity B do participate in an Arrangement and have entered into such an Arrangement after seeking all relevant legal advice in their sole discretion, the possibility that these Entities may continue to participate in the auction.  Bidders should consult their own legal counsel to determine whether any such Arrangement in their particular circumstances complies with the HSR Act as well as any other regulation, law, or undertaking of the Entities and of the merging parties.   

Although the Association and Confidential Information Rules are designed to accommodate many different circumstances, unfortunately these Rules do not contemplate the arrangement that you describe and the Auction Manager would not accept such an arrangement in the Part 1 Application.  The contingent arrangement that you describe does not seem to be an ‘agreement’.  If, on the one hand, Entity A is acting without the accord and the knowledge of Entity B, then there is no agreement between Entity A and Entity B, contingent or otherwise.  Entity A cannot declare a Bidding Agreement with Entity B when Entity B is not even informed of that fact.  If, on the other hand, Entity A and Entity B are communicating with respect to their participation in the auction, then each of Entity A and Entity B should declare in it Part 1 Application an actual bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, which renders a ‘contingent’ agreement moot.   

If Energy Marketer A continues to stand alone and conduct its business independently, and has not legally or effectively combined with any subsidiaries of the company with which its parent has merged, it would not be considered to have substituted, assigned or transferred its rights as a Qualified or Registered Bidder and would be considered the Same Entity. 

We are assuming that no other subsidiary of the merging parents is participating in the auctions.  If, on the contrary, Parent A and Parent B do merge between the time of qualifications and three days after the Board renders a decision on the auction results and a subsidiary of Parent B is a Qualified Bidder, then an additional and immediate issue arises with respect to the Association and Confidential Information Rules.  Energy Marketer A will have certified in its Part 2 Application that it is not associated with any other Qualified Bidder.  Energy Marketer A would violate this certification of the Part 2 Application upon the merger of Parent A with Parent B if a subsidiary Parent B was also a Qualified Bidder.  Indeed, in this case, Energy Marketer A and Energy Marketer B, the subsidiary of Parent B and another Qualified Bidder in the auction, would become sister companies and thereby associated with each other.  Bidders that are known to be associated or to have become associated and have not declared an association in the Part 2 Application, and have not declared in the Part 1 Application a bidding agreement, joint venture for the purpose of bidding in the auction, bidding consortium, or other arrangement pertaining to bidding in the auction, are subject to sanctions, including forfeiting the right to any further participation in the auctions.

Even if, as it appears from your description of the situation, Energy Marketer A will remain the Same Entity and will not be considered to have substituted, assigned or transferred its rights as a Qualified or Registered Bidder, the Auction Manager may ask Energy Marketer A to certify that procedures are in place to keep its business separate from other affiliates including through corporate personnel who may communicate across affiliates.  Furthermore, the Auction Manager may require additional information or additional undertakings to ensure continued compliance with the Association and Confidential Information Rules, such as ensuring that no confidential information (relative to its bidding strategy or regarding the Auction Process) would be exchanged with its affiliates as a result of the merger of its parent.

The requirement that a Qualified Bidder and a Registered Bidder not substitute, transfer or assign its rights serves an important purpose.  Each bidder is required to maintain its corporate identity so that the effectiveness of the certifications it has made and the certifications other bidders have made, in order to preserve the fairness and the competitiveness of the auction, are maintained.  When a bidder changes its corporate identity, including being acquired and folded into another company, it would in general lose its rights as a bidder and would be disqualified from participation in the auction.  There may be additional issues concerning the certifications of the Part 1 and Part 2 Applications but the inability to uphold the certification that energy marketer A not transfer its right is sufficient to result in energy marketer A’s exclusion from the auction.  It would not be able to assign or transfer its rights to the new corporate entity or substitute that entity in its place.  Please note that these certifications are intended to be in effect from the time at which the certification is made until three days after the Board has rendered a decision on the auction results.  This period of time should be sufficiently short that entities participating in the auction can plan any such activity so that it does not interfere with their participation in the auction. 

If energy marketer A is acquired by energy marketer B, as stated above, in general energy marketer A would be precluded from further participation in the auction.  However, it may be possible that the acquisition could be structured or timed in a way that enables energy marketer A to constitute a distinct part of an acquisition that can be postponed until a later time.  If it is the case that energy marketer A continues to stand alone and conduct its business independently throughout the Auction Process, and that energy marketer A has not legally or effectively combined with the acquiring entity or any subsidiaries of the acquiring entity, then energy marketer A will not have assigned, substituted or transferred its rights as a bidder and energy marketer A may continue in the Auction Process.  The Auction Manager may ask for additional information or additional representations to ensure that this is the case, and to ensure that energy marketer A continues to abide by the certifications of the Part 1 and Part 2 Applications even if its situation has changed and even if it will change its corporate structure in the near future.  This could involve asking energy marketer A to represent that it has not exchanged and will not exchange any information concerning its business that could involve the auction to the acquiring entity or its affiliates.  These are high hurdles that would most likely require careful advance planning on the part of energy marketer A.

Go to page: Previous  1(newest)  2  3  4  5(oldest)  Next