Contract analysis

From: Catherine Bloom <cbloom@calderwoodharkness.com> To: Martin Llewellyn <mllewellyn@dunmoreenergy.com> Cc: Alan Ngo <ango@calderwoodharkness.com> Date: Wed, 24 Jan 2024 17:47:00 -0500 Subject: IN23-7-000 — Agreed Settlement Terms

**PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION**

I am pleased to report that following continued discussions after the second settlement conference on January 17, the parties reached agreement today, January 24, 2024, on final settlement terms for resolution of the FERC investigation in Docket No. IN23-7-000. Specifically, Calderwood & Harkness and FERC Staff — Christine Pham, Senior Attorney, Division of Investigations, Office of Enforcement — have agreed on the p

1. **Civil Penalty: $4.75 Million.** Dunmore will pay a civil penalty of $4,750,000 in two equal installments of $2,375,000 each:

- First installment due within 30 days of the date of the FERC order approving the Stipulation and Consent Agreement. - Second installment due within 180 days of the date of the FERC order approving the Stipulation and Consent Agreement.

2. **Disgorgement: $0.** FERC Staff accepted our position that the alleged unjust profits were speculative and unquantifiable with sufficient certainty. There is no disgorgement component in the settlement.

3. **Neither Admit Nor Deny.** The Stipulation and Consent Agreement will contain standard "neither admit nor deny" language. Dunmore Energy Holdings Ltd. and Dunmore Power Trading LLC will neither admit nor deny the allegations set forth in the Stipulation and Consent Agreement.

4. **Enhanced Compliance Plan (36 Months).** A 36-month enhanced compliance plan will be attached as Appendix A to the Stipulation and Consent Agreement, incorporating the following key elements:

- Jennifer Caulfield confirmed as Chief Compliance Officer, reporting directly to the Board of Directors. - Annual compliance training for all trading personnel, with a minimum of 16 hours per year. - Quarterly compliance audits conducted by an independent compliance monitor — Ridgeway Compliance Solutions LLC (Dr. Carolyn Whitford). - Implementation of automated trade surveillance systems designed to detect potentia

5. **Cooperation Commitment.** Dunmore agrees to continue cooperating with FERC in any related investigations.

To put this outcome in perspective, the following summarizes the trajectory of the negotiations:

- **FERC Staff initial demand** (per the October 2, 2023 Preliminary Findings letter): $30.8 million total ($18 million civil penalty + $12.8 million disgorgement). - **FERC Staff revised offer** (December 18, 2023): $11.7 million ($8.5 million penalty + $3.2 million disgorgement). - **Dunmore counter-proposal** (January 8, 2024): $3.5 million penalty, no disgorgement. - **Final agreed resolution:** $4.75 million pen

**This represents total savings of $26.05 million versus FERC Staff's initial demand — an approximately 84.6% reduction.**

This outcome reflects the strength of the defense arguments we advanced throughout the investigation. In particular, the expert economic analysis prepared by Dr. Leonard Whitfield of Whitfield Economic Advisors LLC was instrumental in demonstrating that the actual market impact of the conduct at issue was no more than $2.1 million, as compared to FERC Staff's initial estimate of $12.8 million. The elimination of the

The parties will now proceed to finalize and execute the Stipulation and Consent Agreement. Our target is to have the agreement executed within the next week. Calderwood & Harkness is preparing the draft, and we will circulate it separately for Dunmore's review shortly.

**Board Authorization:** I would ask that you arrange for the Dunmore Energy Holdings Board of Directors to authorize execution of the Stipulation and Consent Agreement on the terms described above as promptly as possible. A board resolution or written consent of the directors would be appropriate for this purpose. Please let me know if you would like us to prepare a form of resolution for the Board's consideration.

Once executed, the Consent Agreement will be submitted to the Commission for approval by order. Based on current timelines, we anticipate the FERC order within approximately two weeks of submission. The first penalty installment of $2,375,000 will become due 30 days after that order, so the Board should be aware of that near-term payment obligation.

On the compliance side, the enhanced compliance plan is already in active development with Ridgeway Compliance Solutions and Jennifer Caulfield's team, so implementation can begin promptly upon issuance of the FERC order.

This is a very favorable outcome for Dunmore. Resolving an investigation that carried initial exposure of $30.8 million for $4.75 million — with no disgorgement and no admission of wrongdoing — reflects both the quality of the defense and Dunmore's constructive approach to the process. I am pleased with where we have landed.

I am available to discuss by phone at your convenience. If Gavin or Elena Mirova would like a presentation on the final terms, or if the Board would benefit from a briefing before acting on the authorization, Alan, Hannah, and I are happy to arrange that.

Catherine Bloom Partner Calderwood & Harkness LLP 1001 Fannin Street, Suite 4200 Houston, TX 77002 Direct: (713) 547-8200 Email: cbloom@calderwoodharkness.com

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