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lzc2lvbiwgZGlzc2VtaW5hdGlvbiwgZGlzdHJpYnV0aW9uLCBjb3B5aW5nLCBjb252ZXJzaW9u IHRvIGhhcmQgY29weSBvciBvdGhlciB1c2Ugb2YgdGhpcyBjb21tdW5pY2F0aW9uIGlzIHN0cm ljdGx5IHByb2hpYml0ZWQuIElmIHlvdSBhcmUgbm90IHRoZSBpbnRlbmRlZCByZWNpcGllbnQg YW5kIGhhdmUgcmVjZWl2ZWQgdGhpcyBtZXNzYWdlIGluIGVycm9yLCBwbGVhc2Ugbm90aWZ5IG 1lIGJ5IHJldHVybiBlLW1haWwgYW5kIGRlbGV0ZSB0aGlzIG1lc3NhZ2UgZnJvbSB5b3VyIHN5 c3RlbS4gT250YXJpbyBQb3dlciBHZW5lcmF0aW9uIEluYy4gPC9zdHJvbmc+PC9wPg== ATTENDEE;CN="Gadi Mayman";RSVP=TRUE:mailto:Gadi.Mayman@ofina.on.ca ATTENDEE;CN="Scott Nelms (ENERGY)";RSVP=TRUE:mailto:Scott.Nelms@ontario.ca ATTENDEE;CN="LEE John -TREASURY";RSVP=TRUE:mailto:john.s.lee@opg.com ATTENDEE;CN="RYFA Ken -TREASURY";RSVP=TRUE:mailto:ken.ryfa@opg.com ATTENDEE;CN="'Persaud, Donnie - Debt Capital Markets'";RSVP=TRUE:mailto:Don nie.Persaud@cibc.com ATTENDEE;CN="Benaiah, Ian";RSVP=TRUE:mailto:ian.benaiah@rbccm.com ATTENDEE;CN="'Montgomery, Kaitlin (MOF)'";RSVP=TRUE:mailto:Kaitlin.Montgome ry@ontario.ca ATTENDEE;CN="Anna Strathy";RSVP=TRUE:mailto:Anna.Strathy@ofina.on.ca ATTENDEE;CN="Carlos Yep";RSVP=TRUE:mailto:Carlos.Yep@ofina.on.ca ATTENDEE;CN='Cindy.Veinot@ontario.ca';RSVP=TRUE:mailto:Cindy.Veinot@ontario .ca ATTENDEE;CN="Mike Manning";RSVP=TRUE:mailto:Mike.Manning@ofina.on.ca ATTENDEE;CN="Steen Hume (CAB)";RSVP=TRUE:mailto:Steen.Hume@ontario.ca ATTENDEE;CN="Niehaus, Katrina";RSVP=TRUE:mailto:Katrina.Niehaus@gs.com ATTENDEE;CN="Maciel, Andrew";ROLE=OPT-PARTICIPANT;RSVP=TRUE:mailto:Andrew.M aciel@cibc.com ATTENDEE;CN="Khan, Nur";ROLE=OPT-PARTICIPANT;RSVP=TRUE:mailto:nur.khan@rbcc m.com ATTENDEE;CN="Ken Kandeepan";ROLE=OPT-PARTICIPANT;RSVP=TRUE:mailto:Ken.Kande epan@ofina.on.ca ATTENDEE;CN="Ronald Kwan";ROLE=OPT-PARTICIPANT;RSVP=TRUE:mailto:Ronald.Kwan @ofina.on.ca CLASS:PUBLIC CREATED:20170810T174033Z DESCRIPTION:When: Thursday\, August 10\, 2017 2:00 PM-3:00 PM (UTC-05:00) E astern Time (US & Canada).\nWhere: OFA Offices\, 1 Dundas St West.\, 14th Floor\n\nNote: The GMT offset above does not reflect daylight saving time adjustments.\n\n*~*~*~*~*~*~*~*~*~*\n\nMeeting Location Updated: 1 Dundas St.\, West\, 14th floor\nAttendees please call Hresa at 5-8002 to gain ac cess to the Executive Boardroom on the 14th Floor\n\nToll-free dial-in num ber: 1-866-602-5461\nLocal dial-in number: 416-212-8011\nConference ID: 4717656\n\n------------------------------------------------------------- --\n\nPlease come to OPG’s office\, 18th floor. We will meet you at the Glass Doors.\n\nNo pass required.\n\nThank you.\n\nNotice Updated: Augus t 9 @ 3:40 - see the following e-mail\n\n--------------------------------- ---------------------------------------\n\n\nFrom: Adalja\, Sunil [mailto: Sunil.Adalja@cibc.com]\nSent: Wednesday\, August 09\, 2017 3:28 PM\nTo: LE E John -TREASURY\; RYFA Ken -TREASURY\; WONG Leslie -LAWDIV\nCc: Persaud\, Donnie - Debt Capital Markets\; 'Niehaus\, Katrina'\; 'Turnbull\, Vickie' \; 'Sebastiano\, Rocco'\; 'Milligan\, Peter'\; 'Smith\, Elliot'\; 'Khan\, Nur'\; Alvi\, Shariq\; 'Delaney\, Brian'\; 'Benaiah\, Ian'\; Persad\, Nico le\; 'King\, Richard'\; Hume\, Tyler\; D'Angelo\, Paul\; Stoddart\, Jesse - Debt Capital Markets\; 'Fullerton\, Rick'\; Maciel\, Andrew\nSubject: EX TERNAL – RE: OGP/Fair Hydro - Provincial Guarantee\n\n*** Exercise cauti on. This is an EXTERNAL email. DO NOT open attachments or click links from unknown senders or unexpected email. ***\n[X]\n\nJohn\, as discussed\, be low is our summary for the discussion with the Province –\nThanks\, Suni l.\n\n\nChange in Law\n * We are okay with the province assuming the f inancing obligations of the Financing Entity (“FE”) with no early rede mption rights (by either the province or investors) in the circumstance of a Change in Law.\n * We note that in the US\, the potential downgrade on the bonds once the province steps could result in the bonds spreads wi dening\, which would result in losses for US investors. US investors woul d expect to be compensated for that risk (either through a pre-determined step-up in pricing when the province assumes the obligation\, and/or throu gh a premium they would require for this risk when purchasing the notes in itially).\n\nApproval Process\n * The province (OFA) will want to see the form of the various program and series documents that will be captured by the guarantee/support before approving any guarantee. As long as the documents are in the agreed form\, they would NOT need to provide specific approval for each series.\n * We understand that Provincial control o f the financing program would eliminate OPG’s consolidation of the Finan cing Entity so Provincial approval of transaction terms needs to be avoide d.\n * Since the financing documents cannot affect how or when the Pro vincial Guarantee is triggered (Change in Law and Constitutionality of the Program) then specific Provincial approval of transaction documentation w ould be seen as exerting control and must be avoided.\n\nWarehousing Risk\ n• The issue is the moratorium period and the length of time for the warehouse provider to be taken out if there is an extended period of time where the program can no longer be funded in the term markets\n• Option here if the warehouse providers are to absorb the risk is:\no On default\, pricing would step up materially\no After [one] year fol lowing the moratorium ended\, pricing would step up again and would contin ue to do so every 6 months until the warehouse is repaid\no This mechani c helps compensate the warehouse providers to the extended tail risk in th is transaction and creates alignment of interest\n• The warehouse provi ders cannot control the maturity of other pieces of FE debt issues. The s tep up schedule incents the financial manager to ensure that there are no competing maturities (so that the warehouse provider can be repaid as quic kly as possible) during the first few years after the moratorium period en ds\n• This would be subject to banks receiving necessary approvals as t he tail risk is longer than anticipated. That process will require a grea ter understanding of how long the tail could be (i.e. how quickly could we be repaid through clean energy adjustments after the moratorium period ha s ended)\n• The higher pricing will result in higher clean energy prici ng during this default scenario. As an alternative to letting the warehou se provider being repaid over time through these clean-energy adjustments\ , the province could voluntarily choose to purchase a term note to take ou t the warehouse provider\n• The province could resell that note in the secondary market if that market opens\n• Assuming there a re other series of notes outstanding by the FE that are sold to others\, t he province may need to confirm whether there are consolidation concerns f rom being an investor in the FE (and if so\, what threshold of notes would result in that consolidation risk)\n• The province is not oblig ated to purchase notes in this scenario\, this is just an option they woul d have at their disposal if they did not want to clean energy adjustment a mounts (and hence charges to ratepayers) to increase because the default p ricing\n• Other options\no IESO provides the warehouse instead of the banks – note that this will likely be limited based on the size of the IESO’s credit facility. If there is a prolonged period of market disruption\, then this credit facility will likely fill up fast and at tha t point the Province will likely have to increase the facility or backstop further rebates --> essentially under a market disruption\, the Province may ultimately have to backstop the funding. Based on this\, it may be pre ferable for the Province to provide a market disruption guarantee to the s hort-term ABCP facilities?\n\n Servicing Guarantee\n• The substa ntive risk not addressed through regulation/legislation/contract so far is commingling risk\n• In general\, the rating agencies require da ily cash remittance of any collections for non-investment grade entities u nless a suitable mitigant is in place\no The investment grade test will generally need to be by the same rating agency rating the FE debt\n• (E .g. if an entity is not rated by Moody’s\, but is rated investment grade by DBRS and S&P\, and the FE debt is rated by Moody’s\, Moody’s may n ot consider that entity to be investment grade and may not permit them to commingle)\n• Fitch often gives an exception for this where they may al low commingling for investment grade entities even if Fitch does not rate that counterparty\no This should not be an issue from IESO perspective\, but can be an issue from an LDC perspective\n• The majority of the LDC s are not\n• Rating individual LDCs by each of the rating agencies that rate the FE debt will be time consuming and expensive and is not a viable option\n• Proposal would be for IESO or another highly rated en tity to post a L/C facility to mitigate the servicing risks of the LDCs an d thereby avoiding any review of the LDCs by the agenciesand avoid daily c ash remittances for any LDC assessed to be non-investment grade\n\n\nSunil Adalja | Executive Director\, Securitization | CIBC Capital Markets | CIB C World Markets Inc.\n161 Bay St.\, 5th Floor\, Toronto\, ON M5J 2S8 | Te l: 416 594-7383 | Fax: 416 956-6220 | sunil.adalja@cibc.com\n\n\n\nThis message\, including attachments\, is confident ial and may be privileged. If you received this in error\, please notify m e by reply email and delete this message.\n\n\n\n[X]\nThis message\, inclu ding any attachments\, is intended only for the use of the individual(s) t o which it is addressed and may contain information that is privileged/con fidential. Any other distribution\, copying or disclosure is strictly proh ibited. If you are not the intended recipient or have received this messag e in error\, please notify us immediately by reply email and permanently d elete this message including any attachments\, without reading it or makin g a copy.\n\nYou are receiving this email because our records show that yo u have a relationship with one or more of the CIBC Capital Markets lines o f business of Canadian Imperial Bank of Commerce (CIBC) or CIBC World Mark ets Inc.\, which includes Investment and Corporate Banking and Global Mark ets. If you believe you are receiving this message in error or you no long er wish to receive electronic messages from us\, you may unsubscribe[cibc. com] at any time. If you experience challenges with the unsubsc ribe link\, reply to this email with the Subject Line "Unsubscribe" and Cc : Mailbox.CASLUnsubscribe@cibc.com. Please note that by selecting unsubscribe\, we will only be able to sen d you emails that are required or permitted by law. Our mailing address is : CIBC CASL Unsubscribe\, 161 Bay St\, 9th Floor\, Toronto\, Ontario\, M5 J 2W5\n\n ________________________________\n\n _________________________ _______\n\nTHIS MESSAGE IS ONLY INTENDED FOR THE USE OF THE INTENDED RECIP IENT(S) AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED\, PROPRIETARY AND/O R CONFIDENTIAL. If you are not the intended recipient\, you are hereby not ified that any review\, retransmission\, dissemination\, distribution\, co pying\, conversion to hard copy or other use of this communication is stri ctly prohibited. If you are not the intended recipient and have received t his message in error\, please notify me by return e-mail and delete this m essage from your system. Ontario Power Generation Inc.\n DTEND;TZID="Eastern Standard Time":20170810T150000 DTSTAMP:20170809T194227Z DTSTART;TZID="Eastern Standard Time":20170810T140000 LAST-MODIFIED:20170810T174033Z LOCATION:OFA Offices\, 1 Dundas St West.\, 14th Floor ORGANIZER;CN="HAHN PARKER Janet -TREASURY":mailto:j.hahnparker@opg.com PRIORITY:5 SEQUENCE:3 SUMMARY;LANGUAGE=en-ca:OPG - FHP - Guarantee Meeting and Conference Call TRANSP:OPAQUE UID:040000008200E00074C5B7101A82E00800000000D0554BC09D0BD301000000000000000 010000000E5B1AD4A7F9E3F49A904A3BD558B3AB2 X-ALT-DESC;FMTTYPE=text/html:
When: Thursday\, August 10\, 2017 2:00 PM-3:00 PM (UTC -05:00) Eastern Time (US & Canada).
Where: OFA Offices\, 1 Dunda s St West.\, 14th Floor
Note: The GMT offset above d oes not reflect daylight saving time adjustments.
*~ *~*~*~*~*~*~*~*~*
Meeting Location Updated: 1 Dunda s St.\, West\, 14th floor
Attendees please call Hresa at 5-8002 to gain access to the Executive Boardroom on the 14th Floor
< div>Toll-free dial-in number: 1-866-602-5461
Local dial-in numb er: 416-212-8011
Conference ID: 4717656
---------------------------------------------------------------
Please come to OPG’s office\, 18th floor. We will meet you at the Glass Doors.
No pass required.
Thank you.
Notice Updated: August 9 @ 3:40 - see t he following e-mail
-------------------------------- ----------------------------------------
From: Adalja\, Sunil [mailto:Sunil.Adalja@cibc.com]
\nSent: Wednesday\, August 09\, 2017 3:28 PM
\nTo: LEE John -TREASURY\; RYFA Ken -TREASURY\; WONG Leslie -LAWDIV
\nCc: Persaud\, Donnie - Debt Capital Markets\; 'Niehaus\, Katrina'\; 'Turn bull\, Vickie'\; 'Sebastiano\, Rocco'\; 'Milligan\, Peter'\; 'Smith\, Elli ot'\; 'Khan\, Nur'\; Alvi\, Shariq\; 'Delaney\, Brian'\; 'Benaiah\, Ian'\; Persad\, Nicole\; 'King\, Richard'\; Hume\, Tyler\; D'Angelo\, Paul\; Sto ddart\, Jesse - Debt Capital Markets\; 'Fullerton\, Rick'\; Maciel\, Andre w
\nSubject: EXTERNAL – RE: OGP/Fair Hydro - Provincial Guaran tee
*** Exercise caution. This is an EXTE RNAL email. DO NOT open attachments or click links from unknown senders or unexpected email. ***
John\, as discussed\, below is our summary for the dis cussion with the Province –
Thanks\, Sunil.
Change in Law
  • We are okay with the province assuming the financing ob ligations of the Financing Entity (“FE”) with no early redemption righ ts (by either the province or investors) in the circumstance of a Change i n Law.
  • We note that in the US\, the potential downgrade on the bo nds once the province steps could result in the bonds spreads widening\, w hich would result in losses for US investors. US investors would expect t o be compensated for that risk (either through a pre-determined step-up in pricing when the province assumes the obligation\, and/or through a premi um they would require for this risk when purchasing the notes initially).< /LI>
Approval Process
  • The province (OFA) will want to see the form of the various progr am and series documents that will be captured by the guarantee/support bef ore approving any guarantee. As long as the documents are in the agreed f orm\, they would NOT need to provide specific approval for each series. < /LI>
  • We understand that Provincial control of the financing program wou ld eliminate OPG’s consolidation of the Financing Entity so Provincial a pproval of transaction terms needs to be avoided.
  • Since the financ ing documents cannot affect how or when the Provincial Guarantee is trigge red (Change in Law and Constitutionality of the Program) then specific Pro vincial approval of transaction documentation would be seen as exerting co ntrol and must be avoided.
Warehousing Ris k
· The issue is the moratorium period and the length of time for the warehouse provider to be taken out if there is an extended period of time where the program can no longer be funded i n the term markets
· Option here if the warehou se providers are to absorb the risk is:
o On default\, pricing would step up materially
o After [one] year following the moratorium ended\, pricing would step up a gain and would continue to do so every 6 months until the warehouse is rep aid
o This mechanic h elps compensate the warehouse providers to the extended tail risk in this transaction and creates alignment of interest
§ The warehouse providers cannot control the maturity of other p ieces of FE debt issues. The step up schedule incents the financial manag er to ensure that there are no competing maturities (so that the warehouse provider can be repaid as quickly as possible) during the first few years after the moratorium period ends
§ This would be subject to banks receiving necessary approvals as the tail risk is longer than anticipated. That process will require a greater understanding of ho w long the tail could be (i.e. how quickly could we be repaid through clea n energy adjustments after the moratorium period has ended)
§ The higher pricing will result in higher clean energy pricing during this default scenario. As an alternative to letting the warehouse provider being repaid over time through these clean-energy adjustments\, t he province could voluntarily choose to purchase a term note to take out t he warehouse provider
·< span style="font-size:7pt\;"> The province could res ell that note in the secondary market if that market opens
· Assuming there are other series of notes outstanding by the FE that are sold to others\, the province may need to confirm whether the re are consolidation concerns from being an investor in the FE (and if so\ , what threshold of notes would result in that consolidation risk)
·< /Font> The province is not obligated to purchase notes in this scenario\, this is just an option they would have at their disposal i f they did not want to clean energy adjustment amounts (and hence charges to ratepayers) to increase because the default pricing
· Other options
o IESO prov ides the warehouse instead of the banks – note that this will likely be limited based on the size of the IESO’s credit facility. If there is a p rolonged period of market disruption\, then this credit facility will like ly fill up fast and at that point the Province will likely have to increas e the facility or backstop further rebates à essentially under a market disruption\, the Province may ultimately have to backstop the funding. Based on this\, it may be preferable for the Province to provide a market disruption guarante e to the short-term ABCP facilities?
Servicing Guarantee
· The substantive risk not addressed through regulation/leg islation/contract so far is commingling risk
· In general\, the rating agencies require daily cash remittance of any coll ections for non-investment grade entities unless a suitable mitigant is in place
o The investment grade test will generally need to be by the same rating agency rating the FE debt
§ (E.g. if an entity is not rated by Mo ody’s\, but is rated investment grade by DBRS and S&P\, and the FE debt is rated by Moody’s\, Moody’s may not consider that entity to be inves tment grade and may not permit them to commingle)
§ Fitch often gives an exception for this where they may allow commingling for investment grade entities even if Fitch does not rate that counterpar ty
o This should not be an issue fr om IESO perspective\, but can be an issue from an LDC perspective
§ The majority of the LDCs are not
§ Rating individual LDCs by each of the rating agencies that rate the FE debt will be time consuming a nd expensive and is not a viable option
· Propo sal would be for IESO or another highly rated entity to post a L/C facilit y to mitigate the servicing risks of the LDCs and thereby avoiding any rev iew of the LDCs by the agenciesand avoid daily cash remittances for any LD C assessed to be non-investment grade
Sunil Adalja | Executive Director\, Securitization | CIBC Capi tal Markets | CIBC World Markets Inc.
161 B ay St.\, 5th Floor\, Toronto\, ON M5J 2S8 | Tel: 416 594-7383 | Fax: 416 956-6220 | sunil.adalja@cibc.com
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