Case GMB Doc 30 Filed 06/19/14 Entered 06/19/14 22:46:20 Desc Main Document Page 1 of 19

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1 Document Page 1 of 19 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY Caption in compliance with D.N.J. LBR (c) WHITE & CASE LLP Alfred J. Lechner Jr. John K. Cunningham, Esq. (pro hac vice pending) Richard S. Kebrdle, Esq. (pro hac vice pending) Kevin M. McGill, Esq. (pro hac vice pending) Southeast Financial Center 200 South Biscayne Blvd., Suite 4900 Miami, FL (305) /fax (305) jlechner@whitecase.com jcunningham@whitecase.com rkebrdle@whitecase.com kmcgill@whitecase.com Proposed Counsel to the Debtors and Debtors in Possession In re: REVEL AC, INC., et al., Chapter 11 Case No (GMB) Debtors. 1 Joint Administration Requested DEBTORS MOTION FOR ORDER DETERMINING THE FAIR MARKET VALUE OF POSTPETITION SERVICES UNDER THE ENERGY SALES AGREEMENT Revel AC, Inc. ( Revel ) and its affiliated debtors and debtors in possession (collectively, the Debtors ) in the above-captioned chapter 11 cases (the Chapter 11 Cases ) hereby file this motion (the Motion ) pursuant to sections 365 and 366 of title 11 of the United States Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ) for entry of an order, 1 Objection Deadline: TBD Hearing Date: TBD The Debtors in these chapter 11 cases, along with the last four digits of each debtor s federal tax identification number, are: Revel AC, Inc. (3856), Revel AC, LLC (4456), Revel Atlantic City, LLC (9513), Revel Entertainment Group, LLC (2321), NB Acquisition, LLC (9387) and SI LLC (3856). The location of the Debtors corporate headquarters is 500 Boardwalk, Atlantic City, New Jersey

2 Document Page 2 of 19 substantially in the form attached hereto as Exhibit A, determining the fair market value of postpetition services provided to the Debtors under that certain Second Amended and Restated Energy Sales Agreement dated April 11, 2011 (the ESA ) by and between Debtor Revel Entertainment Group, LLC ( REG ) and ACR Energy Partners, LLC ( ACR ). In support of the Motion, the Debtors respectfully represent as follows: Background A. Overview 1. The Debtors own and operate a state of the art resort facility unlike any other in Atlantic City, New Jersey. The Debtors facility consists of 6.2 million square feet, located on approximately 20 acres with 820 feet of boardwalk frontage, and features the tallest building in Atlantic City, the Revel hotel, a sleek 47-story, 710-foot high tower. The Debtors 130,000 square foot casino features 110 table games and approximately 2,300 slot machines. The Debtors employ approximately 3,140 employees to operate the Revel facility. Additionally, the Debtors retail, food and beverage partners employ hundreds of employees who also work in the Debtors facility. 2. On June 19, 2014 (the Petition Date ), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code, thereby commencing these Chapter 11 Cases. The Debtors continue to operate their business and manage their property as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 3. To date, no official committee or examiner has been appointed by the Office of the United States Trustee in these Chapter 11 Cases. 4. Additional background facts on the Debtors, including an overview of the Debtors business, information on the Debtors debt structure and information on the events 2

3 Document Page 3 of 19 leading up to the Chapter 11 Cases are contained in the Declaration of Shaun Martin in Support of First Day Motions and Applications (the Martin Declaration ). 2 B. The Energy Sales Agreement 5. The Debtors purchase substantially all of their hot and chilled water, electric and other power exclusively from ACR pursuant to that certain ESA, attached hereto as Exhibit B. To meet the Debtors utility needs, ACR agreed under the ESA to, among other things, construct and operate a central utility plant (the CUP ) on property leased by ACR from Debtor NB Acquisition, LLC ( NB Acquisition ) Pursuant to the ESA, REG agreed to pay and has paid ACR (i) fixed monthly debt and equity financing fees (the Fixed Financing Fees ) equal to approximately $1.7 million per month during years one through five and approximately $2 million per month during years six through twenty, (ii) operation and maintenance related fees (the Operation & Maintenance Fees ) currently equal to approximately $318,000 per month and indexed for inflation, (iii) chilled water fees (the Chilled Water Fees ), calculated monthly and currently ranging between approximately $50,000 and $450,000 per month, (iv) hot water fees (the Hot Water Fees ), calculated monthly and currently ranging between approximately $50,000 and $250,000 per month, (v) electricity fees (the Electricity Fees ), calculated monthly and generally ranging between approximately $400,000 and $800,000 per month, and (vi) parasitic and utility fees (the Parasitic & Utility Fees and, together with the Chilled Water Fees, the Hot 2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Martin Declaration. 3 In connection with the ESA, NB Acquisition and ACR entered into that certain Lease Agreement dated April 8, 2011, attached hereto as Exhibit C (the ACR Lease ). Pursuant to the ACR Lease, ACR leases from NB Acquisition the real property on which the CUP is located for an annual rental rate of approximately $198,000, payable in monthly installments of approximately $16,500 (the ACR Lease Payments ). 3

4 Document Page 4 of 19 Water Fees and the Electricity Fees, the Monthly Energy Fees and the Fixed Financing Fees, the Operation & Maintenance Fees and the Monthly Energy Fees collectively, the ACR Fees ) calculated monthly and generally ranging between approximately $40,000 and $90,000 per month. 7. The Fixed Financing Fees are the largest portion of the ACR Fees, and are comprised of two distinct components, the fixed debt payments (the Debt Payments ) and the fixed equity payments (the Equity Payments ). The Debt Payments are fixed payments in the amount of approximately $1.15 million per month during years one through five, and approximately $1.41 million per month during years six through twenty. The Debt Payments are intended to pay bonds which financed 75% of the construction costs associated with ACR s construction of the CUP (the total amount of such construction costs, ACR s Project Costs ), such 75% portion equal to approximately $118.6 million ( ACR s Debt Costs ). In connection with the Debtors payment of ACR s Debt Costs, the Debtors also pay interest at an annual rate of 11.67%. During years one through five the Debt Payments equal roughly the interest expense associated with ACR s Debt Costs, and during years six through twenty the Debt Payments equal roughly the amount necessary to pay, with interest, ACR s Debt Costs over such fifteen year time period. 8. The Equity Payments are fixed payments in the amount of approximately $526,000 per month during years one through five, and approximately $615,000 per month during years six through twenty. The Equity Payments constitute monthly payments of 25% of ACR s Project Costs, such portion equal to approximately $39.5 million and representing that portion of ACR s Project Costs that ACR funded with equity financing ( ACR s Equity Costs ). ACR s Equity Costs, from the perspective of the Debtors and in connection with the Equity 4

5 Document Page 5 of 19 Payments, effectively bear interest at an annual rate of 15% during years one through five, and at an annual rate of 18% during years six through twenty. 9. The Fixed Financing Fees do not represent a portion of the fair market value of the energy services received by the Debtors each month under the ESA. Instead, the Fixed Financing Fees are payments to ACR on account of financing provided by ACR to the Debtors. 4 As such, the Fixed Financing Fees are not on account of the energy purchased monthly by the Debtors under the ESA, but instead relate to the initial financing of the CUP s construction, which was completed well in advance of these Chapter 11 Cases. As such, the Fixed Financing Fees represent payments, not for postpetition services, but rather for services that ACR already provided under the ESA. Said differently, the Fixed Financing Fees are effectively payments on a prepetition claim of ACR, nothing more. 10. Similarly, the Operation & Maintenance Fees do not represent a portion of the fair market value of the energy services received by the Debtors each month under the ESA. Rather, the Operation & Maintenance Fees payable by REG represent the fixed annual operation and maintenance costs of ACR in connection with the CUP and other secondary electric distribution systems, and bear no relation to the amount of energy actually supplied by ACR to the Debtors. Further, the Operation & Maintenance Fees also include the ACR Lease Payments, which ACR owes to debtor NB Acquisition under the ACR Lease. 11. In stark contrast to the Fixed Financing Fees and the Operation & Maintenance Fees, the Monthly Energy Fees are the only portion of the ACR Fees directly related to the Debtors monthly energy consumption and the services the Debtors will receive 4 The Debtors hereby reserve all of their rights with respect to the ESA and the Fixed Financing Fees, including, but not limited to, the right to seek recharacterization of the ESA and the Fixed Financing Fees. 5

6 Document Page 6 of 19 from ACR postpetition. Further, pursuant to the terms of the ESA, the Monthly Energy Fees are determined using the relevant fair market rates for services. See ESA Schedule 8. Importantly, with one minor exception, 5 the Monthly Energy Fees are derived from the Market Electric Rate, which rate is the cost of open market purchases of electric power including all energy, capacity, transmission, delivery, and applicable taxes and surcharges and is determined based on what such electricity would cost if purchased from the regulated utility that operates in the Debtors geographic area. See ESA 7.05; Schedule 8. Accordingly, the Debtors submit that only the Monthly Energy Fees reflect the fair market value of the postpetition services the Debtors require from ACR during these Chapter 11 Cases. Jurisdiction 12. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C and Relief Requested 13. By this Motion, pursuant to sections 365 and 366 of the Bankruptcy Code, the Debtors respectfully request the entry of an order, substantially in the form attached hereto as Exhibit A, determining the fair market value of services received by the Debtors under the ESA. 5 Specifically, the Hot Water Fees are derived primarily from the cost of open market purchases of natural gas and fuel oil, in each case inclusive of all applicable costs, fees, surcharges and taxes necessary to deliver those commodities to the CUP. See ESA Schedule 8 Exhibit A.4. The Hot Water Fees, however, represent only a small portion of the total Monthly Energy Fees. 6

7 Document Page 7 of 19 Basis for Relief 14. Generally under section 365 of the Bankruptcy Code, until a contract is assumed or rejected, the terms of an executory contract are temporarily unenforceable against the debtor. In re University Medical Center, 973 F.2d 1065, 1075 (3d Cir. 1992) (citing NLRB v. Bildisco & Bildisco, 465 U.S. 513, 532 (1984)). However, the [Bankruptcy] Code places an independent duty on the non-debtor to continue the performance of an executory contract until it is assumed or rejected.... [and] [w]hether the debtor performs or not, the non-debtor must perform until assumption or rejection. Krafsur v. UOP (In re El Paso Refinery, L.P.), 196 B.R. 58, 72 (Bankr. W.D. Tex. 1996); see also In re FBI Distribution Corp., 330 F.3d 36, 43 (1st Cir. 2003) ( Although during the Chapter 11 proceeding a prepetition executory contract remains in effect and enforceable against the nondebtor party to the contract, the contract is unenforceable against the debtor in possession unless and until the contract is assumed. ) (emphasis in original and citing Bildisco, 465 U.S. at 532); Burlington Motor Carriers Inc. v. APL Ltd. (In re Burlington Motor Carriers Inc.), No (MMS), 1999 WL , at *12 (D. Del. Dec. 30, 1999) ( [D]uring the time between filing the petition and the rejection, a contract remains in effect and the creditors are bound to it. ); In re National Steel Corp., 316 B.R. 287, 305 (Bankr. N.D. Ill. 2004) ( The non-debtor party must continue to perform under the contact prior to assumption or rejection, but the debtor in possession is not bound by the provisions of the executory contract unless the contract is subsequently assumed. ). Even where a debtor fails to perform its obligations under an unassumed/unrejected executory contract after the petition date, the non-debtor counterparty remains obligated to continue its performance absent further relief from the bankruptcy court. See Public Serv. Co. v. New Hampshire Elec. Coop., Inc., 884 F.2d 11, 14 (1st Cir. 1989). 7

8 Document Page 8 of However, [i]f the debtor in possession elects to continue to receive benefits from the other party to an executory contract pending a decision to reject or assume the contract, the debtor in possession is obligated to pay for the reasonable value of those services. Bildisco, 465 U.S. at 531 (citing Philadelphia Co. v. Dipple, 312 U.S. 168, 174 (1941); In re Public Ledger, 161 F.2d 762, (3d Cir. 1947); In re Mammoth Mart, Inc., 536 F.2d 950, (1st Cir. 1976)) (emphasis added). The reasonable value rule rests on the premise that, during the gap period prior to assumption or rejection, the parties to an executory contract have no contract price per se which governs the purchase or sale of their goods or services. Thus, there is no contractual basis upon which the nondebtor party may bring an action on the price for postpetition performance. On the other hand, the debtor is clearly not entitled to compel performance and then receive the nondebtor s goods or services without compensation, as that would constitute both a due process violation and an unjust enrichment of the debtor. See, e.g., Burlington Northern R.R. Co. v. Dant & Russell, Inc. (In re Dant & Russell, Inc.), 853 F.2d 700, 707 (9th Cir. 1988) ( [T]he debtor in possession or trustee s liability for [reasonable value] is not compensatory but rather is founded upon the equitable principle of preventing unjust enrichment. ); Continental Energy Assocs. Ltd. P ship v. Hazleton Fuel Mgmt. Co. (In re Continental Energy Assocs. Ltd. P ship), 178 B.R. 405, 407 (Bankr. M.D. Pa. 1995) ( While we are concerned about the Fifth Amendment rights of an entity to be compensated for property, the fact that the Debtor is not paying [movant] the contract amount in advance, together with a court commitment that that compensation should be at least as much as determined to be a reasonable amount, suggests that [movants ] Fifth Amendment rights are vigilantly being guarded by this court. ). 8

9 Document Page 9 of To promote these various goals, courts have found and imposed an obligation on a debtor s part to pay for postpetition performance under any executory contract on a quantum meruit basis essentially the price at which the common law would imply were deliveries requested and made with no agreement in place. See, e.g., S.N.A. Nut Co. v. Haagen- Dazs Co. (In re S.N.A. Nut Co.), 191 B.R. 117 (Bankr. N.D. Ill. 1996) (extending Bildisco analysis to sales contract); In re Providence Tel. Ltd. P ship d/b/a WSTG-TV 64, 113 B.R. 446, 451 (Bankr. N.D. Ill. 1990) (brokerage agreement); Skeen v. Coca-Cola Bottling Co. (In re Feyline Presents, Inc.), 81 B.R. 623, 626 (Bankr. D. Colo. 1988) (promotion and exclusive rights agreement). 17. In determining the actual quantum meruit, or reasonable, value of postpetition performance during the gap period between the petition date and when the contract is assumed or rejected, courts have created a rebuttable presumption that the contract price is determinative of the reasonable value of the contract. See, e.g., Bildisco, 465 U.S. at 546 ( The contract rate frequently will be the measure of the reasonable value of those services. ); In re Smurfit Stone Container Corp., 425 B.R. 735, 737 (Bankr. D. Del. 2012) ( [T]here is a presumption that the contract rate is reasonable. ) (citing In re Bethlehem Steel Corp., 291 B.R. 260, 264 (Bankr. S.D.N.Y. 2003)); In re Goody s Family Clothing, 392 B.R. 604, 614 (Bankr. D. Del. 2008), aff d 610 F.3d 812 (3d Cir. 2010) ( [T]he amount of the administrative claim for that use and occupancy is the fair market value, which is presumably the lease rate unless there is evidence to the contrary. ). 18. Such presumption, however, does not control where there is a demonstrable divergence between contract and market rates; rather, under such circumstances, market controls. See Sharon Steel Corp. v. National Fuel Gas Distribution 9

10 Document Page 10 of 19 Corp., 872 F.2d 36, 42 (3d Cir. 1989) (discussing the interplay between contract and market prices during the gap period); In re Washington-St. Tammany Elec. Coop., Inc., 111 B.R. 555, 559 (finding that the presumption is viable unless the debtor introduces convincing evidence to the contrary ) (Bankr. E.D. La. 1989). In the context of utility service contracts, courts have found that where the contract rate exceeds the reasonable value for services provided, the debtor only needs to pay the reasonable value. 6 For example, in In re Wheeling Pittsburgh Steel Corp., the debtors sought to recover payments made to their utility provider post-petition because such payments exceeded the reasonable value of the electric utility service. In Wheeling Pittsburgh Steel Corp. v. West Penn Power Co. (In re Wheeling Pittsburgh Steel Corp.), 122 B.R. 29, 30 (Bankr. W.D. Pa. 1990). The court held that [i]n determining the actual and necessary cost of utility service to the [d]ebtor, the court must determine the reasonable value of the utility service provided. Id. The court found that the debtors had been overcharged and ordered repayment of the amount of the overcharge plus interest. Id. at The application of a market price over the contract price occurs frequently in the context of executory contracts involving long-term contractual commitments, such as 6 Notably, ACR is a utility within the meaning of section 366 of the Bankruptcy Code. Although ACR is not a public utility, it clearly provides the Debtors with utility services, and the term utility has a broad meaning under the Bankruptcy Code. See One Stop Realtour Place, Inc. v. Allegiance Telecom, Inc. (In re One Stop Realtour Place, Inc.), 268 B.R. 430, 436 (Bankr. E.D. Pa. 2001) (citations omitted). Section 366 may apply to an entity that provides the debtor with utility services even if such entity (i) is a not a public utility, (ii) does not have a monopoly over services available to the debtor and (iii) does not provide utility services to a large customer base. See, e.g., In re Moorefield, 218 B.R. 795, 797 (Bankr. M.D.N.C. 1997) ( The utilities covered under 366 are not limited to public utilities, and other entities acting as utilities are also eligible. ); In re Good Time Charlie s Ltd., 25 B.R. 226, 227 (Bankr. E.D. Pa. 1982) (stating that Congress chose to use the term utility rather than public utility in 366, thereby indicating to us that an entity other than a public utility could be considered a utility for purposes of 366 ). Further, during the Debtors 2013 chapter 11 cases, jointly administered in the District of New Jersey under case number (JHW), and in connection with that certain stipulation by and between REG and ACR approved in such cases [Docket No. 161], which stipulation resolved certain utility provider issues among the parties, ACR expressly reserved its rights to demand an adequate assurance deposit under section 366 of the Bankruptcy Code, evidencing ACR s status as a utility within the meaning of such section. 10

11 Document Page 11 of 19 energy supply contracts like the ESA in the present Chapter 11 Cases. See e.g., Sharon Steel Corp., 872 F.2d at 42; In re Wheeling Pittsburgh Steel Corp., 122 B.R. at 30. In these cases, where pricing and other terms are presumably based upon expectations of multi-year performance, the long-term contract rate often will not accurately reflect the market value of such services during the gap period. Courts that have addressed the postpetition, preassumption/rejection status of long-term contracts have often jettisoned the contract price in favor of market value as the better indicator of the reasonable value of the postpetition performance demanded by the debtor. See, e.g., Sharon Steel Corp., 872 F.2d at 43 (Debtor was permitted to avoid an over-market contract in the stub period and obtain gas at the price that other non-contract industrial customers would have paid... during the relevant period. ); In re Washington-St. Tammany Elec. Coop., Inc., 111 B.R. 555 (Bankr. E.D. La. 1989). 20. Nothing in the present Chapter 11 Cases provides a reasonable justification for why the Debtors should continue paying ACR the Fixed Financing Fees on account of prepetition services provided by ACR under the ESA. As payments for prepetition services already provided to the Debtors (i.e., the financing and construction of the CUP), the Fixed Financing Fees cannot represent reasonable value on account of the postpetition performance demanded by the Debtors. Similarly, the Operation & Maintenance Fees are an attempt to pass on to the Debtors, and thus the Debtors other stakeholders, operational costs above and beyond those already incorporated in the market rates reflected by the Monthly Energy Fees which, as evidenced by their fixed nature, bear no relation to the amount or market value of services actually required and demanded by the Debtors postpetition. Accordingly, unless and until the Debtors determine, as an exercise of their business judgment, to assume the 11

12 Document Page 12 of 19 ESA, the Debtors should not be required to pay either the Fixed Financing Fees or the Operation & Maintenance Fees during these Chapter 11 Cases Based on the foregoing, the Debtors submit that granting the relief requested herein is both necessary and appropriate. It will afford the Debtors an opportunity to preserve the value of their operations and will not prejudice the rights of ACR under sections 365 or 366 of the Bankruptcy Code. Waiver of Stay 22. The Debtors request a waiver of any stay of the effectiveness of the order approving this Motion to the extent such an order is entered. Pursuant to Rule 6004(h) of the Federal Rules of Bankruptcy Procedure, [a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise. Fed. R. Bankr. P. 6004(h). As set forth above, the relief requested herein is critically important to prevent irreparable damage to the Debtors operations. Accordingly, the Debtors submit that cause exists to justify a waiver of the fourteen-day stay imposed by Bankruptcy Rule 6004(h), to the extent it applies. Waiver of Memorandum of Law 23. In accordance with Rule of the District of New Jersey Local Bankruptcy Rules, no brief is being filed in support of this Motion because the legal principles involved are not novel or in dispute and are adequately set forth in the Motion. 7 As set forth in further detail in the Martin Declaration, the Debtors are currently pursuing a sale of substantially all of their assets during these Chapter 11 Cases. Given that the Debtors will not know with certainty the identity of the successful bidder until after the auction, which successful bidder will ultimately determine whether the Debtors seek to assume or reject the ESA, it would be inappropriate for the Debtors to make such decision at this early stage in these Chapter 11 Cases. In the event the ESA is assumed and assigned by the Debtors, any unpaid contractual amounts will be cured in connection with such assumption and assignment. 12

13 Document Page 13 of 19 Notice 24. Notice of this Motion has been provided to the (i) Office of the United States Trustee for the District of New Jersey, (ii) counsel to the First Lien Lenders, (iii) counsel to the Second Lien Lenders, (iv) counsel to the DIP Agent, (v) the Debtors 30 largest unsecured creditors on a consolidated basis (including counsel if known), (vi) all parties requesting notices pursuant to Bankruptcy Rule 2002, (vii) the Office of the Attorney General for the State of New Jersey, (viii) the New Jersey Division of Gaming Enforcement, (ix) the New Jersey Casino Control Commission, (x) the Office of the Governor for the State of New Jersey, (xi) the United States Attorneys Office for the District of New Jersey, (xii) the United States Attorney General, (xiii) the Internal Revenue Service, (xiv) the Securities and Exchange Commission and (xv) counsel to ACR. The Debtors submit that no other or further notice need be provided. 25. No previous motion for the relief sought herein has been made to this or any other court. 13

14 Document Page 14 of 19 WHEREFORE, the Debtors respectfully request entry of an order (i) granting the relief requested herein and (ii) granting the Debtors such other and further relief as the Court deems just and proper. Dated: June 19, 2014 Miami, Florida WHITE & CASE LLP By: /s/ Alfred J. Lechner Jr. Alfred J. Lechner Jr. John K. Cunningham, Esq. (pro hac vice pending) Richard S. Kebrdle, Esq. (pro hac vice pending) Kevin M. McGill, Esq. (pro hac vice pending) WHITE & CASE LLP Southeast Financial Center 200 South Biscayne Boulevard, Suite 4900 Miami, Florida (305) /fax (305) Proposed Counsel to the Debtors and Debtors in Possession 14

15 Document Page 15 of 19 EXHIBIT A Proposed Order

16 Document Page 16 of 19 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY Caption in compliance with D.N.J. LBR (c) WHITE & CASE LLP Alfred J. Lechner Jr. John K. Cunningham, Esq. (pro hac vice pending) Richard S. Kebrdle, Esq. (pro hac vice pending) Kevin M. McGill, Esq. (pro hac vice pending) Southeast Financial Center 200 South Biscayne Blvd., Suite 4900 Miami, FL (305) /fax (305) Proposed Counsel to the Debtors and Debtors in Possession In re: REVEL AC, INC., et al., Chapter 11 Case No (GMB) Debtors. 1 Jointly Administered Re: Docket No. ORDER DETERMINING THE FAIR MARKET VALUE OF POSTPETITION SERVICES UNDER THE ENERGY SALES AGREEMENT The relief set forth on the following pages two (2) through four (4) is hereby ORDERED: 1 The Debtors in these chapter 11 cases, along with the last four digits of each debtor s federal tax identification number, are: Revel AC, Inc. (3856), Revel AC, LLC (4456), Revel Atlantic City, LLC (9513), Revel Entertainment Group, LLC (2321), NB Acquisition, LLC (9387) and SI LLC (3856). The location of the Debtors corporate headquarters is 500 Boardwalk, Atlantic City, New Jersey

17 (Page 2) Debtors: Document Revel AC, Inc., et al. Page 17 of 19 Case No.: (GMB) Caption of Order: ORDER DETERMINING THE FAIR MARKET VALUE OF POSTPETITION SERVICES UNDER THE ENERGY SALES AGREEMENT Upon the motion (the Motion ) 2 of Revel AC, Inc. ( Revel ) and its affiliated debtors and debtors in possession (collectively, the Debtors ) in the above-captioned chapter 11 cases (the Chapter 11 Cases ) pursuant to sections 365 and 366 of title 11 of the United States Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ) for entry of an order determining the fair market value of postpetition services provided to the Debtors under that certain Second Amended and Restated Energy Sales Agreement dated April 11, 2011 (the ESA ) by and between Debtor Revel Entertainment Group, LLC and ACR Energy Partners, LLC ( ACR ), all as more fully set forth in the Motion; and it appearing that the Court has jurisdiction over this matter; and it appearing that due notice of the Motion as set forth therein is sufficient under the circumstances, and that no other or further notice need be provided; and it further appearing that the relief requested in the Motion is in the best interests of the Debtors and their estates and creditors; and upon all of the proceedings had before the Court; and after due deliberation and sufficient cause appearing therefor, it is hereby ORDERED that the Motion is GRANTED; and it is further ORDERED that ACR shall continue performing under the ESA during these Chapter 11 Cases; and it is further ORDERED that during the pendency of these Chapter 11 Cases, and so long as the ESA has been neither assumed nor rejected, the Debtors shall pay neither the Fixed Financing Fees nor the Operation & Maintenance Fees under the ESA; and it is further 2 Motion. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the 2

18 (Page 3) Debtors: Document Revel AC, Inc., et al. Page 18 of 19 Case No.: (GMB) Caption of Order: ORDER DETERMINING THE FAIR MARKET VALUE OF POSTPETITION SERVICES UNDER THE ENERGY SALES AGREEMENT ORDERED that the Debtors are only obligated to pay ACR the Monthly Energy Fees as calculated pursuant to the ESA for the services provided by ACR under such ESA postpetition; and it is further ORDERD that, pursuant to the Final Order (I) Prohibiting Utility Companies From Altering, Refusing or Discontinuing Service to the Debtors, (II) Deeming Utility Companies Adequately Assured of Future Payment and (III) Establishing Procedures for Determining Requests for Additional Adequate Assurance [Docket No. ], the Debtors shall, within fifteen (15) days from the entry of this Order, pay ACR a deposit in the amount of $[ ] for the purpose of providing ACR with adequate assurance of payment for its postpetition services to the Debtors; and it is further ORDERED that ACR shall be deemed to have adequate assurance of payment for its postpetition services to the Debtors; and it is further ORDERED that absent any further Order of this Court, ACR is prohibited from discontinuing, altering or refusing service, or requiring payment of an additional deposit or receipt of other security, on account of (i) any unpaid pre- or postpetition Fixed Financing Fees, Operation & Maintenance Fees and/or (ii) any other unpaid prepetition charges; and it is further ORDERED that nothing in this Order or the Motion shall be deemed to vacate or modify any other restrictions on the termination of service by ACR as provided by sections 362 and 365 of the Bankruptcy Code or applicable law; and it is further 3

19 (Page 4) Debtors: Document Revel AC, Inc., et al. Page 19 of 19 Case No.: (GMB) Caption of Order: ORDER DETERMINING THE FAIR MARKET VALUE OF POSTPETITION SERVICES UNDER THE ENERGY SALES AGREEMENT ORDERED that nothing in this Order or the Motion shall be deemed to constitute an assumption of any executory contract under section 365 of the Bankruptcy Code; and it is further ORDERED that, notwithstanding the possible applicability of Rule 6004(h) of the Federal Rules of Bankruptcy Procedure or otherwise, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry; and it is further ORDERED that this Court shall retain jurisdiction to hear and determine all matters arising from or related to implementation of this Order. 4