In March 2016, Seminole Electric Cooperative, Inc. (defendant and NERA client) issued a request for proposals seeking a contractor to provide for its anticipated power supply needs, which was subsequently awarded to GE Energy Financial Services (GE EFS). GE EFS created a special purpose vehicle, Shady Hills Energy Center, LLC (plaintiff), to facilitate the transaction and execute the Tolling Agreement. Under the Tolling Agreement signed between the parties, the plaintiff would be responsible for developing, financing, constructing, operating, and owning a natural gas-fired electric generation plant and the defendant would purchase the output at a fixed price for 30 years subject to a purchase option. In early 2019, a dispute arose concerning the plaintiff’s proposed financing that led to the power plant never getting built. During 2020, the defendant provided the plaintiff with a notice terminating the Tolling Agreement, and the plaintiff served a similar notice to the defendant thereafter. Shady Hills and Seminole each contended the other party had breached the Tolling Agreement. This case is a breach of contract dispute involving the Tolling Agreement between Shady Hills and Seminole.

As experts for the defendant, Julie M. Carey and the NERA team were asked to review, analyze, and respond to the plaintiff’s expert report that assessed alleged harm “due to the loss of its contract” and the $700 million damages claim proffered by the expert based on the Tolling Agreement for “termination damages.” NERA’s role was to review, analyze, and respond to the plaintiff’s assumptions, calculations, and opinions concerning Shady Hills’ “termination damages” claim, which relied on many assumptions about the contract, the energy industry practices, and the future energy market.

NERA’s expert report outlined the plaintiffs’ expert’s unsupported assumptions and methodology and its consequences in significantly overstating the value for termination damages. The report explained that the plaintiff’s expert’s damages analysis was based on an unsupported interpretation of the economic rate in the Tolling Agreement, which was inconsistent with industry practice and economic theory and, if accepted by the court, would provide an economically inappropriate windfall to Shady Hills. Further, NERA’s expert identified numerous erroneous assumptions in the long-term forecast of energy market and regulatory assumption, including those pertaining to replacement capacity prices, future technology and cost assumptions, regulatory requirements, and the discount rate. NERA presented corrections to the plaintiff’s unsupported assumptions and methodology.

NERA’s analysis contributed to the success of the case for the client. Seminole Electric Cooperative, Inc. was granted summary judgment and the dismissal of the plaintiff’s claim for $700 million termination damages on 3 October 2022.