Contract analysis

From: Brendan Walsh <bwalsh@calderwoodharkness.com> To: Sandra Haverford <shaverford@calloway-briggs.com> Cc: Jennifer Kwon <jkwon@calderwoodharkness.com> Date: Fri, 06 May 2022 04:47:00 -0000 Subject: CBR IPO — SEC First-Round Comment Letter Received (18 Comments)

I am writing to let you know that the SEC's Division of Corporation Finance issued its first-round comment letter this afternoon on CBR's confidentially submitted draft registration statement on Form S-1 (DRS-1 filed April 11, 2022; EDGAR Accession No. 0001948372-22-000001; CIK 0001948372). The letter contains 18 comments. I have attached a copy of the comment letter (PDF) as well as a preliminary comment-tracking ma

Set forth below is a categorized summary of the 18 comments, our initial assessment, a proposed response timeline, and immediate next steps.

**A. Revenue Recognition (Comments 1–3)**

Comment 1 requests enhanced disclosure regarding how CBR recognizes revenue under its power purchase agreements, including differentiation between fixed-price PPA revenue streams and merchant revenue streams. Comment 2 asks for disaggregation of PPA revenue by contract type and by project. Comment 3 questions the revenue recognition timing for the Brazos Storage battery project, specifically the distinction between c

The Staff questions whether CBR should report separate operating segments (solar, wind, and battery storage) rather than a single reportable segment. The letter requests management's analysis under ASC 280, including an explanation of how the chief operating decision maker evaluates performance and allocates resources.

**C. Tax-Equity Accounting / HLBV (Comments 5–7)**

Three comments focus on the Hypothetical-Liquidation-at-Book-Value methodology used to account for the Solaris West tax-equity partnership with Veltara Basin Financial LLC ($280 million invested). Comment 5 requests expanded disclosure of the HLBV assumptions, key inputs, and sensitivity analysis. Comment 6 asks how the partnership flip (expected in 2028) is modeled in the financial statements and what impact the fli

Comment 8 requests a more granular discussion of revenue drivers broken out by individual project and technology type. Comment 9 asks for a quantitative reconciliation of Adjusted EBITDA ($218.6 million for FY 2021) to GAAP net income ($41.7 million for FY 2021) with line-item detail for each adjustment. Comment 10 requests an enhanced liquidity discussion, with particular attention to the $1.71 billion in total debt

Comment 12 asks CBR to tailor certain risk factors that the Staff views as generic or boilerplate to CBR's specific business circumstances. Comment 13 requests a specific risk factor addressing Pinnacle Vista's controlled-company status, its approximately 62% pre-IPO ownership stake, and its expected post-IPO voting influence. Comment 14 requests a risk factor addressing the geographic concentration of projects in Te

**F. Related-Party Transactions (Comment 15)**

The Staff requests additional detail regarding the Pinnacle Vista management-services agreement ($2.4 million per year), including the scope of services provided, the basis for the fee, and the terms under which the agreement will be modified or terminated in connection with the IPO.

**G. Non-GAAP Measures (Comments 16–17)**

Comment 16 requests enhanced reconciliation of Adjusted EBITDA, noting that certain adjustments require clearer labeling and a more specific justification for why each adjustment is appropriate. Comment 17 asks CBR to ensure that GAAP measures are given equal or greater prominence relative to non-GAAP measures throughout the prospectus.

**H. Other / Miscellaneous (Comment 18)**

Comment 18 requests that the cover page and prospectus summary more precisely describe the offering structure — specifically the primary/secondary split ($371.7 million primary offering by the Company; $150 million secondary offering by Pinnacle Vista) and the intended use of proceeds ($200 million toward repayment of the Term Loan B with Veltrano National Bank; $100 million toward Cimarron Solar construction costs;

Overall, we view the comments as substantive but well within expectations for a first-time registrant in the renewables space with tax-equity structures of this complexity. There are no comments that raise fundamental structural concerns or issues that we would characterize as potential obstacles to the offering.

- *HLBV / Tax-Equity (Comments 5–7)*: These will be the most involved to respond to and will require close coordination with Ashford & Pemberton LLP (Gregory Sondheim and Irene Valdez) on the accounting disclosure side and Kessler McBride & Associates LLP (Alan Kessler and Linda McBride) on the tax analysis. Leonard Cross will take the lead on this workstream from our end.

- *Revenue Recognition and Segment Reporting (Comments 1–4)*: These will require input from Marcus and the finance team, as well as coordination with A&P, to prepare the responsive disclosures and any supplemental ASC 280 analysis.

- *Risk Factors and MD&A (Comments 8–14)*: These are largely drafting exercises. Our team and the CBR team should be able to work through these efficiently.

- *Related-Party Transactions and Non-GAAP Measures (Comments 15–17)*: Straightforward and addressable through enhanced disclosure. We do not anticipate these requiring significant back-and-forth.

- *Offering Structure (Comment 18)*: This is a routine presentation matter and should be quick to resolve.

We propose targeting the filing of Amendment No. 1 and the accompanying response letter by **Friday, May 20, 2022** — approximately two weeks from today. Based on Jennifer's experience, this is an appropriate and achievable turnaround for a first-round response of this scope.

**Week of May 9:** - Internal working-group calls to walk through each comment category and assign response responsibilities. - Coordinate with A&P and Kessler McBride on the HLBV/tax-equity workstream. - Request any supplemental data needed from CBR management (revenue disaggregation, ASC 280 analysis materials, liquidity data, etc.).

**Week of May 16:** - Circulate draft response letter and marked S-1 amendment to all parties for review. - Incorporate comments and finalize. - Target filing by May 20.

In terms of C&H roles: Jennifer will be quarterbacking the overall response process; I will handle the primary drafting of the response letter and amended registration statement; Natasha will maintain the tracking matrix and manage document flow; and Leonard will lead on the tax-equity/HLBV responses. We will also need Prescott, Danforth & Yee LLP (Margaret Yee and Scott Halverson, as underwriters' counsel) and Hargr

**IV. IMMEDIATE ACTION ITEMS / NEXT STEPS**

1. **CBR Internal Distribution.** Could you please circulate the comment letter to Garrett Calloway, Marcus, and Priya internally? We want to make sure the full leadership team has eyes on the letter heading into the weekend.

2. **Working-Group Call.** I would like to propose a working-group call for **Monday, May 9**, ideally in the morning (10:00 a.m. ET?), to walk through each comment in detail and assign response responsibilities across the workstreams. Please let me know if that time works for your side, and I will send a calendar invitation to the full group.

3. **Finance Team Data Requests.** Marcus — if you and the finance team could begin pulling together supplemental data relevant to the revenue recognition comments (disaggregation by contract type and project), the segment reporting analysis (ASC 280 CODM materials), and the MD&A comments (revenue bridge, project-level detail, liquidity schedules), that would allow us to hit the ground running on Monday.

4. **HLBV / Tax-Equity Coordination.** We will separately reach out to Gregory Sondheim at A&P and Alan Kessler at Kessler McBride today to initiate the HLBV/tax-equity workstream and get them started on their review of Comments 5–7.

5. **Second-Round Expectations.** For planning purposes, Jennifer has noted that if a second round of comments is issued after our response, we should expect it to be narrower and more targeted — the 18-comment first round is typical, and a second round, if any, would likely be in the range of a handful of follow-up questions. We will plan accordingly.

To reiterate, none of the comments appear to raise fundamental structural or "show-stopper" issues for the offering. The Staff's focus areas — tax-equity accounting, non-GAAP measures, revenue recognition, and controlled-company governance — are entirely consistent with what we have been seeing in renewables-sector IPOs, and we are well positioned to address each of them.

I am available over the weekend if you or anyone on the team would like to discuss any of the comments in more detail. Please do not hesitate to call my cell or send me an email.

Thank you, Sandra. We will get moving on this right away.

**Brendan Walsh** Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022 Direct: (212) 506-4738 Mobile: (917) 635-2291 Email: bwalsh@calderwoodharkness.com

C&H Matter No. 1015-00001 — Calloway-Briggs Renewables Inc. IPO

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