JB MDL EUL Questions - Comments Ltr.pdf

October 26, 2022

VIA E-MAIL

Mr. David Kinnon, AFCEC/CIUE David.kinnon@us.af.mil

Re: Comments and Questions, Draft Request for Lease Proposal (RFLP) AFCEC-23-R-0001 Joint Base McGuire-Dix-Lakehurst Enhanced Use Lease Project

Dear Mr. Kinnon:

Our Joint Base McGuire-Dix-Lakehurst Enhanced Use Lease (EUL) project team has the following suggested comments and questions regarding the EUL RFLP.

3.1. STATUTORY REQUIREMENTS – 10 U.S.C. § 2667

a. The Lease shall not be for a term of more than five (5) years unless the Offeror proposes, and the Government determines that a longer term promotes national defense or is in the Government’s interest. The Offeror(s) shall clearly demonstrate (to the satisfaction of the Government) that the length/term of the proposed Lease is reasonable, necessary, and/or otherwise required.

Comment: In order to secure private financing for an energy project that promotes the national defense, a lease term length of up to 50-years and not less than 35 years will be necessary. This provides the surety that private sector entities will require to finance and construct a revenue-generating asset sufficient to meet or exceed the costs of the lease in the form of cash or in-kind consideration. Such lease payments will be designed to promote the national defense and be in the Government's interest, and the longer term only increases the overall benefit to Government.

b. The Government shall have the right to revoke the Lease at any time, unless the Government determines that the omission of such a right will promote national defense or be in the Government’s interest.

Comment: To date, financial risk managers in the private sector, including banks, private equity, and development/ construction capital providers have not been able to agree to deals that include Government's right to terminate or revoke a Lease at any time outside of events of national security or invocation of eminent domain. We recommend a milestone-based de-risking of the project from the Government's perspective, so that it is agreed up-front that if a private developer meets certain development milestones (e.g., utility interconnection, market offtake), then the Government will revoke its right to such termination for convenience. As the lease payments will be designed to promote the national defense, securing a bankable lease and receiving those benefits will be in the Government's interest.

October 27, 2022

d. The consideration shall be paid by the Potential Lessee(s) to the Government. The consideration must be paid in cash (while the Enabling Statute also authorizes payment of in-kind, or a combination the Government is requiring consideration for the Lease of the Property to be paid in cash)” or alternatively, or Potential Lessee(s) provide consideration in cash sufficient to allow the Government to construct the improvements it prefers to obtain through the In-Kind Payment.

Comment: It is not clear whether JBMDL prefers cash or in-kind consideration. The benefits of receiving IKC in lieu of cash payments include direct application to the hosting installation, 100% accrual of value to hosting installation and Secretary, and private sector efficiencies in procurement of goods and services.

Proposal additional clarification in the RFLP.

3.2. OTHER TERMS AND REQUIREMENTS

d. Upon the expiration or earlier termination of the Lease, the Lessee shall, at no cost to the Government and to the reasonable satisfaction of the Government, demolish or remove all or a portion of, as designated by the Government, the Existing Improvements, EUL Improvements, and the structures or improvements located on the Property; abandon, vacate or remove utilities or other infrastructure from the Property; restore the Property and surrender the Property to the Government in the condition it existed on the date the Lease was executed, unless the Government, at its sole discretion and subject to Applicable Law, elects to retain all or a portion of the Lessee’s improvements located on the Property, without compensation to the Lessee. The Lessee shall establish and maintain a demolition reserve account to fund the demolition of all facilities, Existing Improvements, and EUL Improvements on the Property and to restore the Property to the reasonable satisfaction of the Government upon the expiration or earlier termination of the Lease.

Comment: Depending on the project type, we suggest there is clarification that this should not require a reserve account as it will increase the cost or reduce the IKC. This could be included in the review of financial information of proposers. This is dependent on project type and size and could have differing impacts.

3.3. FINANCIAL REQUIREMENTS

a. The Government requires that all financing be in place on or before the date of Lease execution.

If a Project proposal includes gifts, donations and/or other alternative financing, the Government may require that the Potential Lessee(s) provide evidence, satisfactory to the Government, that the funds have been placed in a third-party escrow account before the date of Lease execution.

Comment: It is possible that financial close for key elements of a project will require a signed lease as a condition of signature. This includes private financing and offtake agreements, as well as public grants, loan guarantees, or other mechanisms. One may recommend adding some flexibility to this requirement while still protecting the government by requiring proof of ability to secure financing and proposed terms.

3.4. DEVELOPMENT AND USE REQUIREMENTS

e. Prior to the commencement of any phase of construction, the Potential Lessee shall deliver to the Government payment and performance bonds in amounts and subject to conditions deemed acceptable to the Government.

Comment: Clarify that the requirements of bonds are on the IKC scope

4.8. SUBFACTOR 2.1: PROPOSED RENTAL AND/OR ADDITIONAL CONSIDERATION

a. Offeror’s shall explicitly document their proposed consideration to be provided to the Government, in exchange for the leasehold interest in the Property.

Comment: This clause appears to place an appraisal requirement on the Offeror. Would it not be more efficient to disclose the Government's own appraisal to the potential Lessee during negotiations as that will be the deciding document when determining FMRV?

b. If In-Kind Payment is proposed to be paid to the Government in the preferred form, Offeror(s) shall also submit the following:

1. A description of the proposed In-Kind Payment development, size, type, performance or capacity, site considerations, and engineering and construction work to be performed;

Comment: It is not clear what the preferred form of payment is. Does the Government wish to receive rent via cash or IKC?

4.9. SUBFACTOR 2.2: FINANCIAL PRO FORMA

Offeror(s) shall submit a FINANCIAL PRO FORMA, developed using Microsoft Excel software illustrating the economic viability of the proposed Project.

Comment: We would be open to provide a project pro-forma, and in an effort to increase transparency between parties. With this openness, it would help for Government to provide its Government-furnished appraisal to the potential Lessee during negotiations.

Appendix A-1 - Depiction of Property and Map

Comment: Request .KML, .KMZ, or .shp files for the potential parcels. General location of Property 1 can be determined, but exact site boundaries are not made available. Property 2 image is very low resolution and exact location cannot be determined.

Comment: Provide clarification if the buildings on the BOMARC site are on the national historic register, are they eligible to be demolished for the purposes of redevelopment of the land?

Comment: It would be helpful to provide 100-year and 500-year flood maps if available.

Comment: It would be helpful to provide underground or above ground utility distribution maps.

Comment: It would be helpful to include distribution maps in RFLP, specifically the JCP&L substation and distribution location.

Comment: Provide clarification if the parcel contains landfill caps or have ever been subjected to contaminated material spills.

Comment: If possible, provide past environmental studies specifically to identify if there any indigenous species on the site, and locations.

Comment: Provide if done, the Environmental Condition of Property (ECP) report.

We appreciate your acknowledgement of our comments to the draft RFLP and are available to clarify any questions from your team.

Sincerely, Nicole Bulgarino Executive Vice President Ameresco, Inc.