Contract analysis

I. Executive Summary CBR is organized as a Delaware C-corporation (EIN: 83-4027615), incorporated on September 15, 2014, by Garrett Calloway and Elaine Briggs. The Company's principal executive offices are located at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. CBR is a utility-scale renewable energy company that develops, owns, and operates a portfolio of solar photovoltaic, onshore wind, and battery ene

II. Corporate Structure and Tax Classification A. Current Entity Structure The following summarizes each entity in the CBR corporate structure, its jurisdiction of organization, its tax classification for federal income tax purposes, and its role within the organizational hierarchy. An entity organizational chart with tax-classification annotations is set forth in Appendix A. Calloway-Briggs Renewables Inc. CBR is a

III. Up-C vs. Down-C vs. C-Corp Structure Analysis A. Overview of Alternative IPO Structures In connection with any IPO of a company with significant pre-IPO equity holders, it is customary to evaluate whether the Company's existing organizational structure is optimal for the public markets or whether a restructuring into an alternative structure would yield meaningful tax and economic benefits to the pre-IPO holders

1. Structural Simplicity. CBR is already organized as a C-corporation. The Company has been a C-corporation since its incorporation in 2014 and has operated in corporate form throughout its existence. Converting to an Up-C structure would require significant restructuring, including: (a) the formation of a new holding company; (b) the contribution of all of CBR's assets and liabilities to a newly formed operating par

2. Pinnacle Vista Exit Horizon. Pinnacle Vista Capital Partners III, LP is a 2016 vintage private equity fund (Series III Fund, with approximately $4.8 billion in aggregate committed capital). Pinnacle Vista's initial investment in CBR was approximately $385 million in 2017, with a follow-on investment of approximately $120 million in 2019, for an aggregate investment of approximately $505 million. Pinnacle Vista cur

3. Basis Step-Up Analysis. The economic case for an Up-C structure depends critically on the magnitude of the tax-basis step-up that would be generated upon the exchange of partnership units for PubCo shares. A significant step-up arises when there is a substantial difference between the "inside basis" of the partnership's assets (i.e., the tax basis of the assets as reflected on the partnership's books) and the "out

4. TRA Avoidance. Tax receivable agreements add significant complexity to a public company's financial reporting and ongoing operations. A TRA creates a contingent liability on the balance sheet (recorded at fair value under GAAP), which fluctuates with changes in the expected timing and amount of future tax savings. This introduces volatility into reported earnings and complicates the already-complex HLBV accounting

5. Investor Preference. Based on our experience with renewable-energy IPOs and feedback from the underwriting syndicate, institutional investors in the renewables sector generally prefer straightforward C-corporation structures. A C-corp structure eliminates several common concerns, including: (a) the administrative burden of receiving Schedule K-1s (which arise in Up-C structures where investors hold partnership uni

6. Double Taxation Consideration. We acknowledge that the C-corporation structure results in double taxation — corporate-level tax on the Company's income plus shareholder-level tax on distributions and dividends — whereas a partnership structure (as in an Up-C) provides a single level of tax at the partner level. However, this consideration is significantly mitigated in CBR's case by several factors. First, CBR does

IV. Tax-Equity Partnership-Flip Structure — Solaris West A. Structure Overview Project. Solaris West is a 450 MW utility-scale solar photovoltaic project located in Pecos County, Texas. The project achieved commercial operation in Q3 2020 and consists of approximately 1.2 million solar panels across approximately 4,500 acres of leased ranchland. The project sells electricity under a 15-year power purchase agreement w

V. ITC and PTC Eligibility Across the Portfolio A. Investment Tax Credit (ITC) — Solar Projects The Investment Tax Credit under Section 48 of the Internal Revenue Code is available for solar energy property placed in service before the applicable statutory deadline. The ITC rate has been subject to a phase-down schedule, with the following rates applicable to CBR's solar projects: Solaris West and Painted Rock Solar.