Exhibit 10.7

Twelfth Amended and Restated Rent Supplement

(McAllen Lease)

February 22, 2017

 

This Twelfth Amended and Restated Rent Supplement (this “Twelfth Amended
Supplement”) between Sharyland Distribution & Transmission Services, L.L.C.
(“Lessor”) and Sharyland Utilities, L.P. (“Lessee”) is executed and delivered on
February 22, 2017, to memorialize supplements to the McAllen Lease (as defined
below), effective as of January 1, 2017.  Capitalized terms used herein that are
not otherwise defined will have the meanings assigned to them in the McAllen
Lease.

WHEREAS, Lessor and Lessee are Parties to a Third Amended and Restated Master
System Lease Agreement (McAllen System), dated December 1, 2014 (as amended from
time to time in accordance with its terms, the “McAllen Lease”);

WHEREAS, on December 31, 2016 the Parties executed an Eleventh Amended and
Restated Rent Supplement (McAllen Lease) effective as of January 1, 2017 (the
“Eleventh Amended Supplement”);

WHEREAS, the Incremental CapEx for 2016 was different than expected by the
Eleventh Amended Supplement and the Parties wish to effect a Rent Validation (as
set forth in Section 3.2(c) of the McAllen Lease) and to amend and restate the
Eleventh Amended Supplement to memorialize the effect of such difference; and

WHEREAS, as a result of this Rent Validation, a one-time payment set forth below
is owed by Lessor and will be paid within 30 days after execution hereof.

NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Parties hereto
agree to the following:

1.The Eleventh Amended Supplement is hereby amended and restated in its entirety
as set forth below.

2.The McAllen Lease, except as supplemented by this Twelfth Amended Supplement,
shall remain in full force and effect.

Incremental CapEx:

 

 

 

2010

$  2,195,000

 

2011

$     504,000

 

2012

$  1,262,963

 

2013

$16,391,255

 

2014

$46,042,142

 

2015

$ 2,431,198

 

2016

$  456,509*

 

 

$  457,892**

 

(Total 2016)

$  914,401***

 

2017

$  4,632,906#

 

 

$       20,859##

 

(Total 2017)

$  4,653,764###

 

* Represents the “validated” amount of 2016 distribution Incremental CapEx, i.e.
a Rent Validation has occurred pursuant to Section 3.2(c) of the McAllen Lease,
and, as part of this Rent Validation, the amount

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of 2016 distribution Incremental CapEx has been restated to $456,509 with a
weighted average in-service date of June 1, 2016.  The amount of 2016
distribution Incremental CapEx included in the Eleventh Amended Supplement was
$4,360,495 with an expected weighted average in-service date of September 1,
2016.  

 

** Represents the “validated” aggregate amount of 2016 transmission Incremental
CapEx, i.e. a Rent Validation has occurred pursuant to Section 3.2(c) of the
McAllen Lease, and, as part of this Rent Validation, the Parties have restated
the aggregate amount of 2016 transmission Incremental CapEx placed in service,
consisting of (i) the amount of 2016 transmission Incremental CapEx placed in
service as of the balance sheet date reflected in Lessee’s first 2016 Regulatory
Order (“First 2016 CapEx”); (ii) the amount of 2016 transmission Incremental
CapEx placed in service as of the balance sheet date reflected in Lessee’s
second 2016 Regulatory Order (“Second 2016 CapEx”); and (iii) the amount of 2016
transmission Incremental CapEx placed in service throughout the remainder of
2016 (“2016 Stub-Year CapEx”), together with the  weighted average in-service
dates of 2016 transmission Incremental CapEx and the effective dates for the
first and second 2016 Regulatory Orders. A “Regulatory Order” is defined as
either (i) the PUCT’s approval of Lessee’s application for updated wholesale
transmission rates or (ii) final resolution or settlement of a rate case
applicable to Lessee’s transmission rates. The aggregate amount of 2016
transmission Incremental CapEx has been restated to $457,892, with a weighted
average in-service date of April 1, 2016.  The aggregate amount of estimated
2016 transmission Incremental CapEx included in the Eleventh Amended Supplement
was $8,189, with a weighted average in-service date of April 1, 2016.  The
Parties placed in service an aggregate of $171,193 of First 2016 CapEx, which
was included in the first 2016 Regulatory Order that became effective on June
13, 2016; an aggregate of $378,745 of Second 2016 CapEx, which was included in
the second 2016 Regulatory Order that became effective on September 22, 2016;
and an aggregate of $(92,046) of 2016 Stub-Year CapEx, which has not yet been
included in a Regulatory Order. The amount of First 2016 CapEx included in the
Eleventh Amended Supplement was $0, the amount of Second 2016 CapEx included in
the Eleventh Amended Supplement was $8,189 and the amount of 2016 Stub-Year
CapEx included in the Eleventh Amended Supplement was $0. As set forth in the
Eleventh Amended Supplement, the Parties expected the first 2016 Regulatory
Order to be effective on June 1, 2016, the second 2016 Regulatory Order to be
effective on October 1, 2016, and the first 2017 Regulatory Order to be
effective on March 1, 2017.

 

*** Represents the total validated amount of transmission and distribution
Incremental CapEx that the Parties placed in service during 2016.

 

# Represents the amount of distribution Incremental CapEx that the Parties
expect to be placed in service during 2017, with an expected weighted average in
service date of October 1, 2017. Rent supplements with respect to this
distribution Incremental CapEx were agreed to and memorialized as part of the
Eleventh Amended Supplement.

 

## Represents the aggregate amount of transmission Incremental CapEx the Parties
expect to be placed in service in 2017. Rent supplements with respect to this
transmission Incremental CapEx were agreed to and memorialized as part of the
Eleventh Amended Supplement.   Of the 2017 Incremental CapEx, $0 is expected to
be in service as of the balance sheet date reflected in Lessee’s first 2017
Regulatory Order (“First 2017 CapEx”), an aggregate of $20,859 is expected to be
in service as of the balance sheet date reflected in Lessee’s second 2017
Regulatory Order (“Second 2017 CapEx”), and $0 is expected to be placed in
service throughout the remainder of 2017 (“2017 Stub-Year CapEx”) and to be
included in the first 2018 Regulatory Order.  The Parties expect the First 2017
CapEx, Second 2017 CapEx, and 2017 Stub-Year CapEx, collectively, to have a
weighted average in-service date of April 1, 2017.  The Parties expect the first
2017 Regulatory Order to be effective on May 1, 2017, the second 2017 Regulatory
Order to be effective on March 1, 2018, and the first 2018 Regulatory Order to
be effective on June 1, 2018.  The Parties agree that any Rent Validation
(within the meaning of the McAllen Lease) with respect to First 2017 CapEx,
Second 2017 CapEx, or 2017 Stub-Year CapEx will use the actual effective dates
of

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the applicable Regulatory Order (to the extent known), but will otherwise be
determined in accordance with Section 3.2(c) of the McAllen Lease.

 

### Represents the total amount of transmission and distribution Incremental
CapEx that the Parties expect to be placed in service during 2017.

 

Lessee CapEx:

 

 

 

2010

$666,488

 

2011

$121,897

 

2012

$263,733

 

2013

$  68,303

 

2014

$  89,405

 

2015

$168,289

 

2016

$           0

 

2017

$           0

 

 

 

 

Base Rent:

 

 

 

2010

$  5,260,447

 

2011

$  5,453,529

 

2012

$  5,521,881

 

2013

$  6,566,290

 

2014

$  8,445,964

 

2015

$11,818,692

 

2016

$11,860,813#

 

2017

$11,415,459##

 

2018

$11,238,792###

 

2019

$11,024,892

 

# Represents the “validated” amount of 2016 Base Rent, i.e. a Rent Validation
has occurred pursuant to Section 3.2(c) of the McAllen Lease, and, as part of
this Rent Validation, the amount of 2016 Base Rent has been restated.  The
amount of 2016 Base Rent included in the Eleventh Amended Supplement was
$11,931,782, comprised of 2016 Base Rent payments of (i) $994,302 on the 15th
day of each month beginning on March 15, 2016 through August 15, 2016 (with
respect to January 2016 through June 2016); (ii) $994,302 on the 15th day of
each month beginning on September 15, 2016 through December 15, 2016 (with
respect to July 2016 through October 2016), with the increase in monthly Base
Rent reflecting First 2016 CapEx and commencing July 1, 2016, which was 30 days
after the expected approval of Lessee’s first 2016 Regulatory Order; and (iii)
$994,382 on each of January 15, 2017 and February 15, 2017 (with respect to
November 2016 and December 2016), with the increase in monthly Base Rent
reflecting Second 2016 CapEx and commencing November 1, 2016, which was 30 days
after the expected approval of Lessee’s second 2016 Regulatory Order.  The first
2016 Regulatory Order and the second 2016 Regulatory Order were effective June
13, 2016, and September 22, 2016, respectively.  Lessor owes Lessee $70,969 (the
difference between the amount set forth as Base Rent above and the aggregate
amount of monthly Base Rent set forth in this footnote), in validated Base Rent,
and will make the validation payment set forth under “Validation Payment” below
within 30 days of the date hereof.  

 

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## Lessee will make a monthly 2017 Base Rent payment of $951,288 on the 15th day
of each month beginning on March 15, 2017 through June 15, 2017 (with respect to
January 2017 through April 2017).  Lessee will then make a 2017 Base Rent
payment of $951,288 on the 15th day of each month beginning on July 15, 2017
through February 15, 2018 (with respect to May 2017 through December 2017), with
the increase in monthly Base Rent reflecting 2016 Stub-Year CapEx and commencing
May 1, 2017, which is the expected date of the approval of Lessee’s first 2017
Regulatory Order.

### Lessee will make a monthly 2018 Base Rent payment of $936,407 on the 15th
day of each month beginning on March 15, 2018 through April 15, 2018 (with
respect to January 2018 and February 2018).  Lessee will make a monthly 2018
Base Rent payment of $936,598 on the 15th day of each month beginning on May 15,
2018 through July 15, 2018 (with respect to March 2018 through May 2018), with
the increase in monthly Base Rent reflecting Second 2017 CapEx and commencing
March 1, 2018, which is 30 days after the expected approval of Lessee’s second
2017 Regulatory Order.  Lessee will then make a 2018 Base Rent payment of
$936,598 on the 15th day of each month beginning on August 15, 2018 through
February 15, 2019 (with respect to June 2018 through December 2018), with the
increase in monthly Base Rent reflecting 2017 Stub-Year CapEx and commencing
June 1, 2018, which is the expected date of the approval of Lessee’s first 2018
Regulatory Order.  

 

Percentage Rent Percentages:

 

 

 

2010

36.993%

 

2011

36.972%

 

2012

36.923%

 

2013

37.0%

 

2014

36.9%

 

2015

37.2%

 

2016

32.1% #

 

2017

31.1%

 

2018

29.2%

 

2019

28.9%

 

# Represents the “validated” percentage applicable to 2016 Percentage Rent, i.e.
a Rent Validation has occurred pursuant to Section 3.2(c) of the McAllen Lease
and, as part of this Rent Validation, the 2016 percentage has been
restated.  The 2016 percentage included in the Eleventh Amended Supplement was
32.1% (i.e., even though the percentage has not changed it has been “validated”
pursuant to this Rent Validation).

 

Annual Percentage Rent

 

 

Breakpoints:

 

 

 

2010

$  5,260,447

 

2011

$  5,453,529

 

2012

$  5,521,881

 

2013

$  6,566,290

 

2014

$  8,445,964

 

2015

$11,818,692

 

2016

$12,616,219#

 

2017

$12,194,550*

 

2018

$12,049,792**

 

2019

$11,868,892

 

# Represents the “validated” 2016 Annual Percentage Rent Breakpoint, i.e. a Rent
Validation has occurred pursuant to Section 3.2(c) of the McAllen Lease, and, as
part of this Rent Validation, the 2016

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Annual Percentage Rent Breakpoint has been restated.  The 2016 Annual Percentage
Rent Breakpoint included in the Eleventh Amended Supplement was $12,681,862.

 

* The 2017 Annual Percentage Rent Breakpoint reflects the assumptions set forth
above regarding the timing of the first 2017 Regulatory Order and the second
2017 Regulatory Order, as well as the amount of First 2017 CapEx and Second 2017
CapEx.

 

** The 2018 Annual Percentage Rent Breakpoint reflects the assumptions set forth
above regarding the timing of the first 2017 Regulatory Order, the second 2017
Regulatory Order, and the first 2018 Regulatory Order, as well as the amount of
First 2017 CapEx, Second 2017 CapEx, and 2017 Stub-Year CapEx.

 

Revenues Attributable to

 

 

Lessee CapEx:

 

 

 

 

 

 

2010

$ 60,546

 

2011

$249,481

 

2012

$289,945

 

2013

$345,693

 

2014

$355,744

 

2015

$360,527

 

2016

$206,130

 

2017

$  97,925

 

2018

$  73,431

 

2019

$  45,266

 

Validation Payment:  As a result of the validation described above, pursuant to
Section 3.2(c) of the McAllen Lease, Lessor will pay Lessee $48,176, within 30
days following execution hereof, of which $70,969 is attributable to validated
Base Rent and $(22,793) is attributable to the validation of Percentage Rent.

 

ERCOT Transmission Rate

Allocation:

before June 20, 2013:  100%

 

between June 20 and October 17, 2013:  27.8%

 

between October 17, 2013 and February 25, 2014:  11.8%

 

between February 25, 2014 and May 1, 2014:  8.2%

 

between May 1, 2014 and October 3, 2014:  8.6%

 

between October 3, 2014 and March 31, 2015:  12.0%

 

Between April 1, 2015 and October 31, 2015:  11.9%

 

between November 1, 2015 and June 13, 2016:  10.6%

 

between June 14, 2016 and September 22, 2016:  9.8%

 

between September 23, 2016 and April 30, 2017:  8.5%

 

between May 1, 2017 and February 28, 2018:  7.9%

 

starting March 1, 2018:  7.2%

 

Term of Rent Supplement:  Expires 12/31/19

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The Parties have executed this Twelfth Amended Supplement to the McAllen Lease
as of the date set forth above.

 

 

SHARYLAND UTILITIES, L.P.

 

 

 

 

By:

/s/ Greg Wilks

 

Name:

Greg Wilks

 

Title:

Chief Financial Officer

 

 

SHARYLAND DISTRIBUTION &

 

TRANSMISSION SERVICES, L.L.C.

 

 

 

 

By:

/s/ Brant Meleski

 

Name:

Brant Meleski

 

Title:

Chief Financial Officer

 

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