Contract analysis

I. Executive Summary On September 1, 2024, Meridian Infrastructure Partners LP, acting through its general partner, Meridian Infrastructure GP IV LLC (collectively, "Meridian" or the "GP"), circulated a reactivation feasibility memorandum (the "Reactivation Memo") to co-investors in the proposed acquisition of Cascadia Renewables Holdings, Inc. ("Cascadia" or the "Company"). The Reactivation Memo was addressed to Iro

II. Background and Procedural History A. Transaction Overview The proposed transaction involves the acquisition of 100% of the outstanding equity interests of Cascadia Renewables Holdings, Inc., an Oregon corporation headquartered in Portland, Oregon. Cascadia is led by its Chief Executive Officer, Jonathan M. Weir, and its Chief Financial Officer, Sandra K. Llewellyn. The acquisition would be effected through Cascad

III. Summary of the Reactivation Memo A. Meridian's Principal Conclusions The Reactivation Memo, a copy of which is attached as Enclosure A, sets forth Meridian's assessment that the Cascadia acquisition should be reactivated and brought to closing. The Reactivation Memo was prepared by Meridian's deal team, led by David R. Hargreaves (Managing Partner), Lillian Fong (Partner, Infrastructure), and Graham Whitfield (V

IV. Key Issues for Ironside A. Regulatory Re-Approvals

1. FERC Section 203 Re-Filing The prior FERC Section 203 approval for the Cascadia acquisition was issued on December 15, 2022, in Docket No. EC22-143-000. The approval authorized the proposed disposition of jurisdictional facilities associated with Cascadia's hydroelectric assets, subject to certain standard conditions relating to license-transfer filings, informational requirements, and compliance reporting. The ap

2. Oregon Public Utility Commission Proceedings (OPUC Docket No. UM-2287) The OPUC application for approval of the Cascadia acquisition was originally filed on October 14, 2022, in Docket No. UM-2287. The proceedings were stayed at the joint request of the parties in February 2023, following the commencement of the dormancy period. The stay has remained in effect since that time, and no substantive action has been ta

3. CFIUS. The transaction received clearance through the voluntary notice process administered by the Committee on Foreign Investment in the United States ("CFIUS"). The CFIUS review was acknowledged on September 20, 2022, and no further action was required. Because there have been no changes in the foreign-ownership profile of the acquiring entities — Meridian Fund IV and the Vehicle are both domestic entities with

1. Debt Commitment Letter Status The debt commitment letter that was originally executed in August 2022 by Atlas National Bank, N.A. (as lead arranger and administrative agent, committing $650,000,000 of the senior secured term loan) and Pinnacle Credit Partners LLC (as co-lender, committing $325,000,000 of the senior secured term loan) expired on October 31, 2023. The commitment letter had been extended once from it

2. Impact on Transaction Economics and Returns The interplay between higher debt costs and the potential adjustment to Cascadia's enterprise value has significant implications for the returns available to equity investors. Higher interest expense reduces free cash flow available for distributions and debt repayment, which in turn reduces equity returns on both an IRR and MOIC basis. The impact is amplified by leverag

3. Allocation of Extension and Refiling Costs As noted above, the extension fee of $2,437,500 paid in connection with the first extension of the original debt commitment letter was borne by Meridian Fund IV. This established a precedent for the allocation of financing-related costs to Fund IV rather than the Vehicle. Ironside should confirm that any new commitment fees, ticking fees, break fees, or other costs associ

1. Current Status The Equity Purchase Agreement for the acquisition of Cascadia was originally executed on September 15, 2022, among Cascadia Acquisition Corp. (as buyer), Cascadia Renewables Holdings, Inc. (as the Company), and the selling shareholders. The EPA was subsequently amended three times to extend the outside date for closing, with the third amendment (dated June 28, 2023) establishing a final extended out

2. Options for EPA There are two principal options for restoring the EPA to an operative state: Option A — Fourth Amendment to EPA. Under this approach, the parties would execute a fourth amendment to the existing EPA, which would reinstate the agreement with a new outside date and incorporate any necessary updates. These updates would include, at a minimum: revised representations and warranties to reflect current f

3. Selling Shareholder Willingness A threshold question for reactivation is whether the selling shareholders remain willing to consummate the transaction. The Reactivation Memo assumes that the sellers — Timberline Growth Equity Fund III, LP (represented by Hugh Callister); the Weir Family Trust (represented by Jonathan M. Weir); and the Management Rollover Pool — will continue to support the transaction at or near t

1. Impact of Revised Concession Terms The Bull Run Filtration Project concession is one of the most significant components of Cascadia's revenue base and was the central issue that precipitated the dormancy. The original concession, awarded to Cascadia in approximately 2018, provided for a forty-year term with annual revenue of approximately $64,000,000. The renegotiation demand issued by the Portland Metropolitan Wa

2. Updated Enterprise Value Analysis The original enterprise value of $1,950,000,000, implying an EV/EBITDA multiple of approximately 14.1x based on fiscal year 2021 EBITDA of $138,000,000, was established in September 2022. Two years have elapsed since that valuation, during which period several factors may have affected the supportable enterprise value: Concession Revenue. If the revised concession terms result in

3. Weighted-Average Contract Life The original due-diligence analysis indicated that Cascadia's portfolio of PPAs and municipal service contracts had a weighted-average remaining life of approximately twenty-two years. This metric was an important component of the investment thesis, as it provided visibility into Cascadia's long-term revenue stream and reduced exposure to commodity price risk. Two years of dormancy h

1. Carried Interest and Preferred Return Under the current terms of the LP Agreement and the Co-Investment Allocation Agreement, Meridian GP IV LLC is entitled to a carried interest of 10% of the Vehicle's profits above an 8% preferred return to Ironside (compounded quarterly). This carry rate is materially lower than the 20% carried interest applicable to Fund IV limited partners, reflecting the co-invest nature of

2. Called Capital Treatment As noted above, $22,500,000 of Ironside's $300,000,000 commitment has been called and funded, deployed as follows: The recoverability of these amounts varies by category. Organizational expenses ($285,000) and the placement-agent fee ($1,050,000) are sunk costs that are not recoverable in any scenario. The R&W insurance premium deposit ($4,875,000) may be partially recoverable depending on

3. Unfunded Commitment Status Ironside's unfunded commitment of $277,500,000 remains subject to capital call under Section 4.01 of the LP Agreement. If the Vehicle is reactivated and the transaction proceeds, the GP would be entitled to resume capital calls in accordance with the LP Agreement to fund Ironside's share of the equity investment and any additional transaction costs. An important question for Ironside is

4. Wind-Down Election Right Ironside's wind-down election right under Section 7.04(c) of the LP Agreement is of paramount importance in the current situation. This right, which ripened on July 9, 2024 (the eighteen-month anniversary of the dormancy commencement), provides Ironside with the option to require the GP to commence an orderly wind-down of the Vehicle and return of Ironside's capital. Ironside has deferred

1. Current Status The representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) was bound on September 1, 2022, in connection with the Cascadia acquisition. The policy provides a coverage limit of $195,000,000, representing 10% of the $1,950,000,000 enterprise value, at a premium rate of 2.5% of the coverage limit ($4,875,000, which has been deposited f

2. Reactivation Considerations Several issues must be addressed in connection with the R&W insurance policy if the transaction is reactivated: Underwriting Update. Northgate will likely require an updated underwriting review before reactivating coverage. This review would encompass changes to Cascadia's business, financial condition, and risk profile during the dormancy period, as well as the revised concession terms