11. Proposed Membership Contributions and Indebtedness
If the Commission does not grant the exemptions requested, applicant asks that the Commission authorize its proposed membership structure, capital contributions and indebtedness.
The application states that the membership composition has been restructured to align the ownership with the actual day-to-day management involvement of the family owners. The members of Wickland Pipelines are now: JAMIT LLC, a California limited liability company, which owns an 85% interest and is controlled by Roy L. Wickland; Daniel E. Hall, an individual, who owns a 12 ½% interest; and Wickland Oil Company, which owns a 2 ½% interest. This structure would take the place of the previous one, in which Wickland Oil Company held a 99% interest, with 1% owned by Wickland Oil Martinez, another Wickland family-owned entity. The application states that under that structure, Roy L. Wickland was a co-manager with two other Wickland family members. The new structure recognizes that Roy L. Wickland has been the family member most actively involved in managing the business and makes him sole manager of the business.
The application notes that Wickland Pipelines is still engaged only in pre-development activities with respect to the proposed pipeline project, and it conducts no other business. On these facts and representations, the restructured membership composition is not adverse to the public interest and should be approved.
Applicant anticipates that its costs to complete development of the proposed pipeline project through construction will total approximately $7,381,000. Costs are set forth in detail in a construction budget and updated balance sheet attached to the application as Exhibits B and C.
Applicant proposes to fund the pipeline project with a combination of additional capital contributions and debt financing. It asks Commission authorization to increase member capital contributions up to $7,381,000. The Commission also is asked to give advance approval to automatic adjustments to the percentage ownership interests to the extent that members provide additional capital contributions that exceed their then-existing percentage ownership interests.
Applicant states that it plans to rely on additional capital contributions to fund development of the project to the minimum extent of $2,013,000, and temporarily above that amount to the extent that applicant cannot timely arrange debt financing.
Applicant further asks the Commission's authorization to issue promissory notes in an amount not to exceed $5,368,000, and to encumber applicant's property to secure such debt financing. The notes would evidence loans arranged under standard credit agreements with one or more banks or insurance company that qualify as a "Finance Lender" under California Financial Code Section 22009. Applicant states that it will not seek debt financing from any bank having a Moody's Financial Strength Rating of less than "C" (meaning "adequate intrinsic financial strength").
Applicant anticipates first obtaining construction financing and, upon completion of construction, proceeding to obtain permanent financing. Applicant states that is seeking Commission authorization of the proposed debt financing in advance of its negotiation of specific agreements in order to allow applicant to proceed expeditiously, since the County's approval of an easement for the project contemplates start of construction within 120 days of execution of the tank farm site lease. The lease is to be brought to the County Board of Supervisors in approximately four months. (See Exhibit A to the application.)
The funding parameters proposed by the applicant, and the competition that applicant will face in offering its fuel transportation services, provide reasonable assurance that the terms and conditions of any financing arranged by the applicant will be commercially reasonable. Exhibits attached to the application indicate that the proposed fuel transportation services will generate sufficient cash flow to fund operations. Under these circumstances, the funding authorizations sought by applicant are reasonable and in the public interest, and should be granted.
