Contract analysis

From: "Leonard Cross" To: "Alan Kessler" Cc: "Linda McBride" Date: Fri, 08 Apr 2022 03:47:00 -0000 Subject: Calloway-Briggs Renewables Inc. — Tax-Equity Structure Analysis and Up-C/C-Corp Coordination [C&H Matter No. 1015-00001]

I hope this finds you well. I wanted to lay out in one place the key tax workstreams we need to coordinate on for the proposed IPO of Calloway-Briggs Renewables Inc. ("CBR") so that we can align on deliverables and timing. As you know, we are moving quickly — the DRS-1 is targeted for confidential submission to the SEC on Monday, April 11, and the S-1 drafting is well advanced.

By way of brief background for anyone on this chain who may not have the full picture: CBR is a Delaware-incorporated, Austin-headquartered developer and operator of utility-scale solar, wind, and battery-storage projects. The proposed offering is approximately $600,000,000 of common stock on the NYSE under the proposed ticker CBRI. Calderwood & Harkness represents CBR as issuer's counsel, with Jennifer Kwon serving

**1. Up-C vs. C-Corp Structure Analysis**

I am preparing a tax structure memorandum analyzing the choice between a traditional C-corp IPO and an Up-C structure. As you know, CBR is currently organized as a Delaware C-corporation (EIN 83-4027615), with a subsidiary structure flowing through CBR Holdings LLC (a Delaware LLC) and Calloway-Briggs Operating Company LLC (a Texas LLC), with project-level SPVs below. Pre-IPO ownership is approximately 62% held by Pi

My preliminary view is that a C-corp structure is the appropriate path given CBR's existing corporate form, Pinnacle Vista's exit horizon, and the complexity that a tax receivable agreement ("TRA") would add. I would appreciate Kessler McBride's independent analysis and concurrence on this point, or any views to the contrary. Specifically, I would ask you and Linda to assess whether a TRA would be warranted under the

**2. Tax-Equity Partnership-Flip Compliance (Solaris West)**

The most significant tax-equity arrangement in CBR's portfolio is the Solaris West tax-equity partnership with Veltara Basin Financial LLC ($280,000,000 invested; partnership flip expected in 2028). Solaris West Solar LLC is the project SPV — a Texas LLC, 100% owned by CB Operating — operating a 450 MW solar PV facility in Pecos County, Texas, with COD in Q3 2020.

There are several key questions I would like Kessler McBride to address:

- Whether the IPO (i.e., the change in ultimate ownership at the parent level) constitutes or could trigger a "recapture event" under the tax-equity partnership agreement or under applicable ITC provisions. - Compliance with the Rev. Proc. 2007-65 safe harbor for the partnership-flip structure in light of the IPO. - Whether the IPO affects the expected flip timing in 2028. - Whether any consent or notice is required

Please confirm your analysis of ITC recapture risk in the context of the IPO and flag any issues that should be surfaced in the S-1 risk factors. This is an area where I expect the SEC staff will focus, so the disclosures need to be airtight.

**3. ITC/PTC Eligibility Across the Portfolio**

CBR's operating portfolio is 3.8 GW across 22 projects in Texas, New Mexico, Arizona, California, and Oklahoma, with 1.4 GW currently under construction — Mesquite Wind (420 MW, Oldham County, TX, expected COD Q3 2022) and Cimarron Solar (350 MW, Doña Ana County, NM, expected COD Q1 2023) — and a 6.2 GW development pipeline. I would like Kessler McBride to review ITC and PTC eligibility across the portfolio, includin

The Hypothetical-Liquidation-at-Book-Value ("HLBV") accounting methodology used for the Solaris West tax-equity partnership was flagged during our organizational meeting as a potential area of SEC comment. I am coordinating with Ashford & Pemberton LLP — Gregory Sondheim is the lead engagement partner and Irene Valdez is the audit manager — on the HLBV disclosures in the S-1. I would ask Kessler McBride to provide an

**5. Section 409A Valuation / Cheap-Stock**

I am separately handling the Section 409A valuation review and cheap-stock analysis for equity grants issued from 2019 through Q1 2022, so I do not need Kessler McBride to take the lead on this workstream. That said, if you or Linda have any views on the common stock valuation history that should be coordinated with the broader tax analysis, please flag them. For reference, pre-IPO shares outstanding are 100,000,000

The tax due diligence request list (Document 11 in the matter index), which was prepared with my input, has been sent to CBR management — Sandra Haverford (General Counsel), Marcus Yoon (CFO), and Priya Anand (SVP Finance & Treasurer). If there are additional documents you need from the data room beyond what was included in that request list, please let me know and we will get them queued up.

I would like to propose a call early the week of April 11 to discuss preliminary findings and coordinate on the deliverables outlined above. Given that the DRS-1 is being filed on April 11, any tax disclosure issues that cannot be surfaced by then will need to be addressed in Amendment No. 1. For any questions about the overall deal structure or timeline, please direct those to Jennifer Kwon or Brendan Walsh.

I will circulate drafts of my C-corp vs. Up-C memorandum and the tax-equity partnership-flip memorandum once they are in more advanced form for your review and comment.

Alan, Linda — thank you both for your collaboration on this. Given the complexity of CBR's tax-equity structures and the scale of the portfolio, it is important that we get the tax analysis right, and I appreciate the attention your team is giving to these issues.

Leonard Cross Partner — Tax Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022 T: (212) 555-4100 lcross@calderwoodharkness.com

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