Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the partnership-flip tax-equity structure governing the Solaris West solar photovoltaic project (the "Solaris West Project" or the "Project") for compliance with applicable Internal Revenue Service ("IRS") guidance, to assess Investment Tax Credit ("ITC") recapture risk in connection with the proposed initial public offering (the "IPO" or the "Proposed

1. No ITC Recapture Triggered by the IPO. The Proposed Offering does not constitute a "recapture event" or a disqualifying disposition that would trigger recapture of the Investment Tax Credit under Section 50(a) of the Code. This conclusion rests on the fact that the partnership-flip structure will remain intact at the project-entity level, with Solaris West Solar LLC (the "Project SPV" or the "Partnership") continu

2. Revenue Procedure 2007-65 Safe-Harbor Compliance. The Solaris West partnership-flip structure complies with the safe-harbor requirements of Revenue Procedure 2007-65, 2007-2 C.B. 967, as extended by analogy and IRS guidance to solar energy projects. Each of the six principal requirements of the safe harbor — bona fide partnership, minimum unconditional investment, reasonably anticipated profit motive, absence of i

3. Expected Flip Date. The flip under the Solaris West partnership is expected to occur in 2028, at which point CBR (through its subsidiary chain) will acquire substantially all economic interest in the Solaris West Partnership, with Veltara Basin retaining a nominal five percent (5%) residual interest. After the flip, CBR will hold a call option to acquire Veltara Basin's residual interest at fair market value.

4. Consent and Notice Requirements. The IPO is likely to constitute a "Change of Control" under Section 8.04 of the Partnership Agreement, triggering notice and consent requirements with respect to Veltara Basin. Written consent from Veltara Basin is advisable and likely required before the IPO is consummated. A draft consent request letter has been prepared separately and is referenced as Document 114 in the C&H doc

5. S-1 Disclosure. Appropriate risk factor disclosures, Description of Indebtedness disclosures, MD&A discussion, and financial statement note disclosures regarding the Solaris West tax-equity structure, the Hypothetical-Liquidation-at-Book-Value ("HLBV") accounting methodology, and ITC recapture risk should be included in the S-1. Coordination with Ashford & Pemberton LLP (the Company's independent registered public

II. Background A. Calloway-Briggs Renewables Inc. — Overview Calloway-Briggs Renewables Inc. is a Delaware C-corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746 (Employer Identification Number 83-4027615). CBR was founded in 2014 by Garrett Calloway and Elaine Briggs and has grown to become a significant independent developer and operator of utility-scale solar photovoltaic, onshore w

III. Partnership-Flip Structure — Mechanics A. Overview of Partnership-Flip Model Partnership-flip transactions are the predominant tax-equity structure for utility-scale solar and wind energy projects in the United States. The structure has been widely utilized since the publication of Revenue Procedure 2007-65 in 2007 and has been recognized by the IRS, the renewable energy industry, tax practitioners, and the fina

1. Formation of Project Partnership. A project partnership (here, Solaris West Solar LLC) is formed with two classes of members: (a) the "tax-equity investor" (here, Veltara Basin Financial LLC), which makes a substantial capital contribution in exchange for a membership interest carrying a disproportionately large share of the tax benefits; and (b) the "sponsor" or "managing member" (here, Calloway-Briggs Operating

2. Pre-Flip Period Allocations. During the pre-flip period, the tax-equity investor receives substantially all — typically ninety-nine percent (99%) — of the tax benefits generated by the project, including the ITC (or PTC, as applicable), depreciation deductions, and allocations of taxable income and loss. The tax-equity investor also receives a preferred return on its investment in the form of cash distributions, t

3. Flip Trigger. After the tax-equity investor achieves a target internal rate of return (the "Target IRR") — or, alternatively, upon the occurrence of a date-certain backstop — the allocation ratios "flip." The Target IRR is an after-tax return computed based on the value of the tax benefits received (ITC, depreciation, tax losses) and the cash distributions received by the tax-equity investor, less the tax-equity i

4. Post-Flip Period Allocations. After the flip, the allocation ratios reverse: the sponsor member receives the vast majority (typically ninety-five percent (95%) to ninety-nine percent (99%)) of all tax and economic allocations, while the tax-equity investor retains only a nominal residual interest (typically five percent (5%) or less). This shift reflects the fact that, after the flip, the tax benefits have been la

5. Purchase Option. The sponsor member typically holds a call option (purchase option) to acquire the tax-equity investor's residual post-flip interest at fair market value, as determined by independent appraisal. This option provides a pathway for the sponsor to achieve one hundred percent (100%) ownership of the project partnership after the tax-equity investor has received its negotiated return. The partnership-fl

IV. Revenue Procedure 2007-65 Safe-Harbor Compliance Analysis A. Overview of Rev. Proc. 2007-65 Revenue Procedure 2007-65, 2007-2 C.B. 967, was issued by the IRS on October 15, 2007, and provides a "safe harbor" under which the IRS will respect the allocation of federal income tax benefits — including the Production Tax Credit under Section 45 of the Code — in partnership-flip transactions involving wind energy facil

1. Bona Fide Partnership The first requirement of the Rev. Proc. 2007-65 safe harbor is that the arrangement must constitute a bona fide partnership for federal income tax purposes. A bona fide partnership exists where two or more persons join together with the intent to carry on a business for profit, each contributing something of value (capital, services, or property) and each sharing in the profits and losses of

2. Minimum Unconditional Investment by Tax-Equity Investor The safe harbor requires that the tax-equity investor make a minimum unconditional equity contribution of at least twenty percent (20%) of the total partnership capital. This requirement is designed to ensure that the tax-equity investor has a genuine economic stake in the venture and has not merely made a nominal or contingent investment designed solely to a

3. Reasonably Anticipated Profit Motive The safe harbor requires that the tax-equity investor have a reasonably anticipated pre-tax profit from its investment, independent of the tax benefits. This requirement — which is grounded in the longstanding judicial doctrine that a partnership must be entered into with a profit motive (as distinguished from a transaction entered into solely for tax avoidance purposes) — ensu

4. No Impermissible Put or Call Options The safe harbor prohibits the tax-equity investor from holding a put option that would guarantee a minimum return on its investment or would enable the tax-equity investor to exit the partnership at a price above fair market value. Such a put option would be inconsistent with the genuine equity character of the investment and could result in recharacterization of the arrangemen

5. Minimum Residual Interest of Tax-Equity Investor Post-Flip The safe harbor requires that the tax-equity investor retain a minimum ongoing interest in the partnership after the flip. The purpose of this requirement is to ensure that the tax-equity investor maintains a genuine, continuing economic interest in the partnership even after the allocation ratios shift, thereby reinforcing the characterization of the arra

6. Allocations Must Have Substantial Economic Effect The safe harbor requires that the allocations of partnership items have "substantial economic effect" within the meaning of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. Under Treasury Regulation § 1.704-1(b)(2), an allocation has economic effect if, and only if, throughout the full term of the partnership, the allocation is consis

V. ITC Recapture Risk Analysis in Connection with the Proposed IPO A. Section 50(a) Recapture Rules — Overview Under Section 50(a)(1) of the Code, if "Section 38 property" — which includes property generating the Investment Tax Credit under Section 48 — ceases to be "investment credit property" before the close of the "recapture period," the taxpayer must recapture a proportionate share of the ITC that was previously

1. No Disposition at the Partnership or Property Level. The IPO involves the issuance and sale of common stock of CBR, the Delaware C-corporation at the top of the subsidiary chain. It does not involve any transfer, sale, exchange, assignment, or other disposition of: (a) the Solaris West solar PV facility itself (the underlying Section 38 property); (b) any membership interest in Solaris West Solar LLC (the project

2. Change in Stockholders of a Corporation Does Not Constitute a "Disposition." Under Treasury Regulation § 1.47-6, a change in the stockholders of a corporation does not, by itself, constitute a "disposition" of investment credit property held directly or indirectly by the corporation. This regulation specifically addresses the situation where the ownership of a corporation changes (whether through an IPO, a seconda

3. Secondary Sale by Pinnacle Vista Does Not Trigger Recapture. Pinnacle Vista Capital Partners III, LP is selling approximately 6,818,182 secondary shares of CBR common stock (representing approximately $150,000,000 at the assumed midpoint price of $22.00 per share) in the IPO. This sale reduces Pinnacle Vista's percentage ownership of CBR's outstanding common stock. However, this is a sale of shares of stock in CBR

4. Entity Structure Remains Intact. As noted above, the entity structure through which CBR holds the Solaris West Project will remain wholly intact before and after the IPO. There is no reorganization, restructuring, or simplification of the subsidiary chain contemplated in connection with the Offering. The only structural change associated with the IPO is the conversion of CBR's capital structure from a private, clo

1. The Proposed Offering of Calloway-Briggs Renewables Inc. common stock does not constitute a recapture event under Section 50(a) of the Code with respect to the Investment Tax Credit claimed by Veltara Basin Financial LLC in the Solaris West partnership.

2. The five-year recapture period for the Solaris West ITC commenced in Q3 2020 and is expected to expire in Q3 2025. The recapture period is currently running as of the date of this memorandum.

3. No affirmative action is required in connection with the IPO itself to avoid triggering ITC recapture.

4. However, we recommend that CBR management exercise caution and consult with Calderwood & Harkness and Kessler McBride before undertaking any post-IPO restructuring transactions that might involve a transfer, assignment, or other disposition of membership interests at the Solaris West Solar LLC or Calloway-Briggs Operating Company LLC level during the remaining recapture period (through Q3 2025). Such transactions

5. Kessler McBride & Associates LLP has reviewed this analysis and concurs with our conclusions.

VI. Consent and Notice Requirements Under the Partnership Agreement A. Relevant Provisions The Solaris West Solar LLC Amended and Restated Operating Agreement contains several provisions that are relevant to the Proposed Offering. We have reviewed the operative sections and summarize the key provisions below.

Section 8.04 — Notice of Change of Control. Section 8.04 of the Partnership Agreement requires the managing member (Calloway-Briggs Operating Company LLC) to provide written notice to the Tax-Equity Investor (Veltara Basin Financial LLC) of any "Change of Control" of the managing member or any direct or indirect parent entity of the managing member. The notice must be delivered promptly upon the managing member becom

Section 8.05 — Consent Requirement. Section 8.05 of the Partnership Agreement provides that the prior written consent of the Tax-Equity Investor must be obtained before any Change of Control is "consummated." The consent provision specifies that such consent "shall not be unreasonably withheld, conditioned, or delayed." This formulation imposes an obligation of reasonableness on Veltara Basin, meaning that Veltara Ba

Section 8.06 — Officer's Certificate. Section 8.06 of the Partnership Agreement requires the managing member to deliver an officer's certificate to the Tax-Equity Investor confirming that the Change of Control does not constitute a "Disqualifying Event." The Partnership Agreement defines "Disqualifying Event" to include, among other things, any event that constitutes or triggers an ITC recapture event under Section 5

1. Delivery of Written Notice. CBR (through Calloway-Briggs Operating Company LLC, as managing member of Solaris West Solar LLC) should deliver written notice to Veltara Basin Financial LLC of the Proposed Offering, in compliance with Section 8.04 of the Partnership Agreement. The notice should describe the material terms of the IPO, including the identity of the issuer, the expected aggregate offering size, the prop

2. Consent Request. Concurrently with the notice, CBR should formally request the prior written consent of Veltara Basin Financial LLC under Section 8.05 of the Partnership Agreement. A draft consent request letter has been prepared by Calderwood & Harkness and is referenced as Document 114 in the C&H document index. The letter is addressed to Karen Fujimoto, Partner, Tax Equity Investments, at Veltara Basin Financia

3. Representations in Consent Request. The consent request letter should include a representation that the Proposed Offering does not constitute a Disqualifying Event under the Partnership Agreement and, specifically, does not trigger ITC recapture under Section 50(a) of the Code. The letter should briefly summarize the basis for this conclusion (i.e., no disposition at the partnership or property level; entity struc

4. Officer's Certificate. CBR should prepare and deliver the officer's certificate required by Section 8.06 of the Partnership Agreement, to be executed by Priya Anand (SVP Finance & Treasurer) or Marcus Yoon (General Counsel) on behalf of Calloway-Briggs Operating Company LLC. The certificate should confirm that the Change of Control represented by the IPO does not constitute a Disqualifying Event under the Partners

5. Timing. As of the date of this memorandum, the consent request has been drafted but not yet delivered to Veltara Basin. We recommend that delivery occur promptly following completion of the S-1 amendment process and before any public filing of the Registration Statement with the SEC. Public filing of the S-1 could itself be viewed as a material step toward consummation of the Change of Control, and it would be pru

6. Coordination. Brendan Walsh (Lead Associate, Corporate) should coordinate with Veltara Basin's relationship counsel (if any) to facilitate the consent process. We note that Whitfield Archer & Doss LLP ("WA&D") represents Pinnacle Vista Capital Partners III, LP in connection with the IPO but does not separately represent Veltara Basin Financial LLC. If Veltara Basin engages separate counsel to review the consent re

VII. Impact on S-1 Registration Statement Disclosures The Solaris West tax-equity partnership and the associated ITC recapture risk have significant implications for the disclosures to be included in the S-1 Registration Statement. We address each category of disclosure below. A. Risk Factors We recommend the inclusion of the following risk factors in the S-1:

1. ITC Recapture Risk — Solaris West. A specific risk factor should be included addressing the ITC recapture risk associated with the Solaris West tax-equity structure. This risk factor should address the following points: (a) The Solaris West Project claimed the Investment Tax Credit under Section 48 of the Code, which is subject to a five-year recapture period under Section 50(a) that expires in Q3 2025. (b) Althou

2. General Tax-Equity Structure Risk. A broader risk factor should be included addressing CBR's reliance on tax-equity financing structures for the development and financing of its renewable energy projects and the risk that the IRS could challenge the allocation of tax benefits under partnership-flip structures generally. This risk factor should note that: (a) The IRS has not issued formal guidance confirming that t

VIII. Coordination with External Advisors A. Kessler McBride & Associate