Contract analysis

I. Executive Summary and Purpose This memorandum reviews the Hypothetical-Liquidation-at-Book-Value ("HLBV") methodology applied by Calloway-Briggs Renewables Inc. ("CBR" or the "Company") to account for its tax-equity partnership structures, principally the Solaris West tax-equity partnership entered into with Veltara Basin Financial LLC ("Veltara Basin"). The Solaris West arrangement is the Company's sole existing

1. Evaluate the appropriateness of the HLBV methodology as applied to CBR's tax-equity arrangements. We assess whether the Company's application of the HLBV method is consistent with the relevant authoritative accounting guidance — principally ASC 323 (Investments — Equity Method and Joint Ventures), ASC 740 (Income Taxes), and ASC 810 (Consolidation) — as well as prevailing industry practice among publicly traded re

2. Assess the adequacy of HLBV-related disclosures in the draft registration statement. The Company filed a draft registration statement on Form S-1 (SEC CIK 0001948372), which has since been amended twice. We evaluate the HLBV-related disclosures in the Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), the financial-statement footnotes, and the risk factors across all ve

3. Address specific SEC comment letter concerns. The SEC Division of Corporation Finance issued a first-round comment letter on May 6, 2022, containing eighteen (18) comments, and a second-round comment letter on June 3, 2022, containing seven (7) comments. Several of these comments included targeted questions regarding the Company's HLBV methodology, the basis for consolidation of the Solaris West SPV, and the adequ

4. Coordinate with the Company's independent auditor and external tax advisor. We discuss the alignment of the accounting treatment, tax analysis, and disclosure language among Calderwood & Harkness LLP, Ashford & Pemberton LLP (the Company's independent auditor; lead engagement partner Gregory Sondheim, CPA; audit manager Irene Valdez, CPA), and Kessler McBride & Associates LLP ("KMA"; external tax advisor; Alan Kes

II. Background A. CBR's Tax-Equity Partnership Structure — Solaris West The Solaris West solar energy project is the centerpiece of the HLBV analysis and the primary focus of the SEC Staff's comment letter inquiries. We summarize the key structural parameters below. Project Entity. The project is held through Solaris West Solar LLC, a Texas limited liability company organized as the special-purpose vehicle ("SPV") fo

III. Overview of the HLBV Methodology A. Conceptual Framework The Hypothetical-Liquidation-at-Book-Value method is an equity method of accounting used to allocate income or loss among partners in a partnership where the partners' economic interests differ from their stated profit-and-loss sharing ratios. This divergence between economic interests and stated sharing ratios is a defining characteristic of renewable-ene

1. Partnership Agreement Liquidation Waterfall. The liquidation provisions of the Solaris West partnership agreement specify the priority and order of distributions upon a hypothetical liquidation of the SPV. These provisions distinguish between the pre-flip period (during which Veltara Basin's economic interest is predominant) and the post-flip period (during which CBR's economic interest increases substantially). T

2. Book Value of Solaris West SPV's Net Assets. At each reporting date, the GAAP carrying amounts of all assets and liabilities of the Solaris West SPV are determined, yielding the net asset value available for hypothetical distribution. The most significant component of the SPV's assets is the solar PV plant and associated equipment, which is carried at historical cost less accumulated depreciation.

3. Capital Contributions by Each Partner. CBR contributed its sponsor equity to the partnership, and Veltara Basin contributed $280,000,000 in tax-equity capital. These contributions establish the initial capital-account balances from which the HLBV calculation proceeds.

4. Distributions Made to Each Partner During the Period. Actual cash distributions made by the SPV to CBR and Veltara Basin during each reporting period are netted against the HLBV allocation to determine each partner's share of income or loss.

5. Tax Credit and Tax Benefit Allocations. The ITCs allocated to Veltara Basin, together with the accelerated depreciation deductions, are reflected in the capital-account balances and directly affect the hypothetical-liquidation distribution. These allocations are among the most significant drivers of the HLBV income/loss pattern.

6. Depreciation and Amortization Schedules. The useful-life assumptions applied to the solar PV assets determine the rate at which the book value of those assets declines over time, which in turn affects the hypothetical liquidation proceeds available for distribution at each reporting date.

7. Expected Flip Date and Conditions Precedent. The expected 2028 flip date, and the conditions that must be satisfied for the flip to occur (principally, Veltara Basin's achievement of its target after-tax IRR), are embedded in the HLBV model. Changes in the expected flip date — whether due to changes in project performance, tax-law changes, or other factors — can have a material effect on the pattern of income/loss

IV. Application of HLBV to the Solaris West Tax-Equity Partnership A. Partnership Agreement Structure The Solaris West Solar LLC partnership agreement establishes a two-member structure with the following key features: Members. CBR, acting through its wholly owned subsidiary Calloway-Briggs Operating Company LLC, serves as the managing member and sponsor. Veltara Basin Financial LLC participates as the tax-equity inv

V. Coordination with Ashford & Pemberton LLP (Independent Auditor) A. Audit Approach Gregory Sondheim, CPA (lead engagement partner) and Irene Valdez, CPA (audit manager) at Ashford & Pemberton LLP ("A&P") have served as CBR's independent auditor for the fiscal years ended December 31, 2019, 2020, and 2021. In connection with the proposed IPO, A&P has also performed agreed-upon procedures with respect to the Q1 2022

VI. Coordination with Kessler McBride & Associates LLP (Tax Advisor) A. Tax Structuring Input Alan Kessler, Managing Partner, and Linda McBride, Partner, Tax Structures, at Kessler McBride & Associates LLP ("KMA") serve as CBR's external tax advisor for the IPO and have deep institutional familiarity with the Solaris West tax-equity structure, having advised on its initial structuring and documentation in 2019–2020.

VII. SEC Comment Letter Concerns Regarding HLBV A. First-Round Comment Letter (Received May 6, 2022 — 18 Comments Total) The SEC Division of Corporation Finance issued its first-round comment letter on the Company's draft registration statement on Form S-1 on May 6, 2022. The letter contained eighteen (18) comments spanning a range of topics, including financial-statement presentation, MD&A disclosure, risk factors,

VIII. Assessment of Current S-1 Disclosure Adequacy A. MD&A — Critical Accounting Policies The current draft of the registration statement (Amendment No. 2, clean version, filed June 10, 2022) includes a dedicated subsection on the HLBV methodology within the critical-accounting-policies discussion in MD&A. The subsection addresses the following elements: • A description of the HLBV methodology, including the hypothe

1. Updated HLBV Calculations. The HLBV calculations will need to be updated for any additional reporting periods included in the reactivated registration statement, including FY 2022 (if annual audited financial statements are required) and any quarterly interim periods. CBR's management team (Marcus Yoon, CFO; Priya Anand, VP Accounting and Tax) will need to prepare updated HLBV models for these periods, subject to

2. Refreshed Sensitivity Analysis. The qualitative sensitivity discussion in MD&A should be refreshed to reflect any changes in flip-date expectations, useful-life estimates, or other key assumptions since the last filing. As noted above, we recommend that the sensitivity discussion be enhanced with quantitative analysis at the time of reactivation.

3. Confirmation of Methodology Consistency. Coordination with A&P will be required to confirm that any updated financial statements reflect the same HLBV methodology applied in prior periods, without changes in methodology or key assumptions that would require disclosure under ASC 250 (Accounting Changes and Error Corrections) or that could raise comparability concerns.

4. Assessment of New Tax-Equity Arrangements. The Company should assess whether any new tax-equity arrangements have been entered into for the projects currently under construction — specifically, Mesquite Wind (420 MW, Oldham County, Texas, expected COD Q3 2022) and Cimarron Solar (350 MW, Doña Ana Co