As confidentially submitted to the Securities and Exchange Commission on June 10, 2022. This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein remains strictly confidential.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CALLOWAY-BRIGGS RENEWABLES INC.
(Exact Name of Registrant as Specified in Its Charter)
4200 Ridgeline Parkway, Suite 1100 Austin, Texas 78746 Telephone: (512) 555-7800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
Sandra Haverford General Counsel & Corporate Secretary Calloway-Briggs Renewables Inc. 4200 Ridgeline Parkway, Suite 1100 Austin, Texas 78746 Telephone: (512) 555-7800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service of Process)
with a copy to: Capitol Statutory Services, Inc. 1209 Orange Street Wilmington, Delaware 19801
Copies of all communications, including communications sent to the agent for service of process, should be sent to:
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
CALCULATION OF REGISTRATION FEE
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended.
(2) To be computed upon public filing of this Registration Statement.
(3) Includes 3,559,091 shares of common stock that the underwriters have the option to purchase from the registrant to cover overallotments.
(4) Calculated in accordance with Rule 457(a) based on an estimate of the proposed maximum aggregate offering price. The registration fee will be paid at the time of public filing.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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PART I — PROSPECTUS
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 10, 2022
PRELIMINARY PROSPECTUS
23,713,636 Shares
CALLOWAY-BRIGGS RENEWABLES INC.
Common Stock
This is an initial public offering of shares of common stock of Calloway-Briggs Renewables Inc.
Calloway-Briggs Renewables Inc. is offering 16,895,455 shares of its common stock (representing approximately $371,700,000 based on an assumed initial public offering price of $22.00 per share, the midpoint of the estimated price range set forth below). The selling stockholder identified in this prospectus, Pinnacle Vista Capital Partners III, LP, is offering 6,818,182 shares of common stock (representing approximately $150,000,000 based on the assumed initial public offering price). The Company will not receive any of the proceeds from the sale of shares by the selling stockholder.
Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $[●] and $[●]. The Company has applied to list its common stock on the New York Stock Exchange under the ticker symbol "CBRI."
The underwriters have been granted a 30-day option to purchase up to 3,559,091 additional shares of common stock from the Company at the initial public offering price less the underwriting discount, solely to cover overallotments, if any.
Following the completion of this offering, Pinnacle Vista Capital Partners III, LP, together with its affiliates, will continue to beneficially own a majority of the combined voting power of the outstanding shares of the Company's common stock. As a result, the Company will be a "controlled company" within the meaning of the corporate governance standards of the New York Stock Exchange. See "Management — Controlled Company Status."
Investing in our common stock involves risks. See "Risk Factors" beginning on page [●].
(1) See "Underwriting" for a description of the compensation payable to the underwriters.
(2) Assumes no exercise of the overallotment option.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares of common stock will be ready for delivery on or about [●], 2022.
Joint Book-Running Managers
Co-Managers
The date of this prospectus is [●], 2022.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before making an investment decision.
Unless the context requires otherwise, references in this prospectus to "CBR," the "Company," "we," "us," and "our" refer to Calloway-Briggs Renewables Inc. and its consolidated subsidiaries. References to "Pinnacle Vista" or "PVCP III" refer to Pinnacle Vista Capital Partners III, LP, its general partner, Pinnacle Vista Capital Management LLC, and their affiliates, unless the context otherwise requires.
Overview
Calloway-Briggs Renewables Inc. is a leading developer, owner, and operator of utility-scale solar photovoltaic, onshore wind, and battery energy storage system ("BESS") projects in the United States. We were founded in 2014 by Garrett Calloway and Elaine Briggs and are headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. Since our founding, we have built an integrated platform spanning project development, engineering and construction management, financing, and long-term asset management, which we believe positions us as a differentiated participant in the growing U.S. renewable-energy market.
As of the date of this prospectus, we have an operating portfolio of approximately 3.8 gigawatts ("GW") of renewable-energy capacity across 22 projects in Texas, New Mexico, Arizona, California, and Oklahoma. In addition, we have approximately 1.4 GW of capacity under construction and a development pipeline of approximately 6.2 GW. Our portfolio generates revenue primarily through long-term power purchase agreements ("PPAs"), merchant power sales, and ancillary-services contracts with utility offtakers, commercial and industrial customers, and wholesale market participants.
We employ approximately 1,240 people across our corporate headquarters, regional offices, and project sites. Our vertically integrated capabilities allow us to manage the full project lifecycle — from site identification, permitting, and interconnection through engineering, procurement, and construction management, and ultimately into long-term commercial operations and asset management. This end-to-end approach has enabled us to deliver projects on time and on budget while maintaining strong returns for our investors.
Our Business
We are a developer, owner, and operator of utility-scale renewable-energy projects across three core technologies:
• Solar Photovoltaic (PV). We develop and operate large-scale solar PV projects using proven crystalline-silicon and advanced bifacial module technologies, deployed on single-axis tracker systems to maximize energy capture across our project sites in the Southwest and Southern Plains regions of the United States.
• Onshore Wind. We develop and operate onshore wind energy projects using industry-leading turbine technology from established original equipment manufacturers. Our wind projects are sited in regions with strong and consistent wind resources, including the Texas Panhandle, West Texas, and Western Oklahoma.
• Battery Energy Storage Systems (BESS). We develop, own, and operate lithium-ion battery energy storage projects, both as standalone assets and as hybrid configurations co-located with our solar PV projects. Our storage assets provide energy time-shifting, capacity firming, and ancillary services to the grid, which we believe will become an increasingly critical component of the renewable-energy value chain.
Our revenue model is diversified across contract types and geographies. The majority of our revenue is derived from long-term PPAs with creditworthy utility and commercial counterparties, which provide contracted cash flows with limited commodity price exposure. We supplement our PPA revenue with merchant power sales and ancillary-services contracts, which allow us to capture upside from favorable market conditions.
Key Project Portfolio Highlights
The following table presents an overview of our key operating, under-construction, and development-stage projects as of the date of this prospectus:
Our operating portfolio, construction projects, and development pipeline collectively represent over 11.4 GW of renewable-energy capacity, providing significant long-term growth visibility. We believe our scale, geographic diversification, and technology breadth distinguish us from many of our peers in the renewable-energy sector.
Summary Financial Data
The following table presents summary consolidated financial data for the periods indicated. The data for the fiscal years ended December 31, 2019, 2020, and 2021 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. The data for the three months ended March 31, 2022 has been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The summary financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.
(1) Adjusted EBITDA is a non-GAAP financial measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures" for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.
Our Competitive Strengths
We believe the following competitive strengths differentiate us and position us for continued growth:
• Scale and Geographic Diversification. Our 3.8 GW operating portfolio spans five states — Texas, New Mexico, Arizona, California, and Oklahoma — providing geographic diversification that mitigates the impact of regional weather patterns, grid congestion, and regulatory changes on our overall results of operations.
• Track Record of On-Time, On-Budget Project Delivery. Since our founding, we have successfully developed and brought online 22 utility-scale renewable-energy projects, with a strong track record of delivering projects on schedule and within budget. We believe this execution capability is a key differentiator in an industry where construction and development risks are significant.
• Experienced Management Team with Deep Industry Expertise. Our management team, led by Co-Founders Garrett Calloway and Elaine Briggs, has extensive experience in renewable-energy project development, finance, and operations. Our senior leadership team averages more than 15 years of experience in the renewable-energy and power sectors.
• Attractive Development Pipeline Providing Multi-Year Growth Visibility. Our 6.2 GW development pipeline provides visibility into multiple years of future project additions. This pipeline includes both greenfield development opportunities and projects at advanced stages of permitting and interconnection.
• Diversified Technology Platform. Our ability to develop, construct, and operate projects across solar PV, onshore wind, and battery energy storage technologies allows us to optimize our project mix and pursue hybrid configurations that we believe will be increasingly attractive to offtakers and grid operators.
Our Growth Strategy
Our growth strategy is focused on the following key initiatives:
• Develop and Construct Projects from the 6.2 GW Pipeline. We intend to continue converting our development pipeline into operating assets. Our near-term priorities include the Silverleaf Wind project (600 MW, Irion County, Texas, expected commercial operation date ("COD") Q4 2024) and the Copper Basin Solar + Storage project (750 MW solar PV plus 300 MW / 1,200 MWh BESS, Riverside County, California, expected COD Q2 2025).
• Pursue Selective Acquisitions of Operating and Development-Stage Projects. We intend to selectively pursue acquisitions of operating renewable-energy projects and development-stage assets that complement our existing portfolio and geographic footprint.
• Expand into Hybrid Solar-Plus-Storage Configurations. We believe that hybrid solar-plus-storage projects offer enhanced value relative to standalone solar or standalone storage projects. The Copper Basin project represents our first large-scale hybrid project, and we expect to develop additional hybrid configurations from our pipeline.
• Leverage Federal Tax Incentives and State Renewable Portfolio Standards. We intend to continue to take advantage of federal tax incentives, including the Investment Tax Credit ("ITC") under Section 48 and the Production Tax Credit ("PTC") under Section 45 of the Internal Revenue Code, as well as state renewable portfolio standards, to enhance the economic returns of our projects.
Our Sponsor — Pinnacle Vista Capital Partners
Pinnacle Vista Capital Partners III, LP ("Pinnacle Vista" or "PVCP III") is a Delaware limited partnership whose general partner is Pinnacle Vista Capital Management LLC. Pinnacle Vista is managed by Hugh Pemberton and Diane Kovac, Co-Founders and Managing Partners of Pinnacle Vista Capital Management LLC. Pinnacle Vista Capital Management LLC manages approximately $14.2 billion in assets under management across four flagship private equity funds. PVCP III is a 2016-vintage fund with approximately $4.8 billion in committed capital.
Pinnacle Vista made its initial investment in CBR of $385 million in 2017 and a follow-on investment of $120 million in 2019, for aggregate equity investments of $505 million. As of the date of this prospectus, Pinnacle Vista holds approximately 62,000,000 shares of our common stock, representing approximately 62% of our outstanding common stock on a fully diluted basis (prior to giving effect to this offering).
The principal office of Pinnacle Vista Capital Management LLC is located at 900 Park Avenue, 38th Floor, New York, New York 10021. Pinnacle Vista's counsel for this offering is Whitfield Archer & Doss LLP.
Controlled Company Status
Following the completion of this offering, Pinnacle Vista will continue to beneficially own a majority of the combined voting power of our outstanding common stock. In addition, pursuant to the Amended and Restated Stockholders' Agreement to be effective upon the closing of this offering, Pinnacle Vista, together with shares held by our founders, Garrett Calloway and Elaine Briggs, will control a majority of the voting power of our common stock. As a result, we will be a "controlled company" within the meaning of the corporate governance standards of the New York Stock Exchange.
As a controlled company, we intend to avail ourselves of certain exemptions from the NYSE corporate governance standards, including exemptions from the requirements that (i) a majority of our board of directors consist of independent directors, (ii) our compensation committee be composed entirely of independent directors, and (iii) our nominating and corporate governance committee be composed entirely of independent directors. See "Management — Board Composition and Independence" and "Management — Controlled Company Status."
Emerging Growth Company Status
We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Our total annual gross revenue for the fiscal year ended December 31, 2021 was $487.3 million, which is below the $1.235 billion threshold established under the JOBS Act. As an emerging growth company, we will be permitted to take advantage of certain reduced reporting and disclosure requirements, including exemptions from the requirements to provide an auditor's attestation report on the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We may take advantage of these reduced reporting requirements until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt securities, or (iv) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act.
The Offering
The number of shares of common stock to be outstanding after this offering is based on 100,000,000 shares of common stock outstanding as of the date of this prospectus (on a fully diluted, post-reclassification basis) and excludes:
• 12,727,273 shares of common stock reserved for issuance under the 2022 Omnibus Equity Incentive Plan;
• 2,545,455 shares of common stock reserved for issuance under the 2022 Employee Stock Purchase Plan; and
• any shares of common stock issuable upon the exercise of the underwriters' overallotment option (except where specifically stated).
Unless otherwise indicated, the information in this prospectus assumes no exercise by the underwriters of their overallotment option.
Corporate Information
Calloway-Briggs Renewables Inc. is a Delaware corporation. Our employer identification number is 83-4027615, and our principal executive offices are located at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746. Our telephone number is (512) 555-7800. Our registered agent in the State of Delaware is Capitol Statutory Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801.
Our website address is [●]. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus and is not incorporated by reference herein, and you should not consider information on our website to be part of this prospectus.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes thereto, before making a decision to invest in our common stock. Any of the following risks could materially and adversely affect our business, financial condition, results of operations, and prospects. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Risks Related to Our Business and Industry
Our operating results may fluctuate significantly from quarter to quarter and year to year, which could make our future results difficult to predict and could cause our operating results to fall below expectations.
Our revenue and operating results depend on a number of factors that are inherently variable, including weather patterns, seasonality of solar irradiance and wind resource availability, prevailing electricity prices in the wholesale markets in which we operate, the availability and reliability of our projects, and the timing of new project additions. Solar energy production varies with the amount of sunlight, which is affected by cloud cover, time of day, season, and geographic location. Wind energy production varies with wind speed and direction, air density, and other meteorological conditions. Battery energy storage system performance is affected by ambient temperature, state of charge, degradation rates, and dispatch patterns. As a result, our quarterly and annual operating results have historically varied significantly and may continue to do so, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our common stock.
We depend on a limited number of large projects and power purchase agreements, and the loss of, or a default by, a significant offtaker could materially adversely affect our results of operations and financial condition.
As of the date of this prospectus, our operating portfolio consists of 22 projects. However, a significant portion of our revenue is concentrated among a limited number of large projects and corresponding PPAs. Our five largest projects by capacity — Pronghorn Wind (510 MW), Solaris West (450 MW), Mesquite Wind (420 MW, under construction), Red Mesa Wind (380 MW), and Painted Rock Solar (320 MW) — account for a substantial portion of our total operating and under-construction capacity. A disruption at, or the underperformance of, any of these projects, or a default by the corresponding PPA counterparty, could have a material adverse effect on our business, financial condition, and results of operations.
Our projects under construction face risks of delays, cost overruns, and equipment supply-chain disruptions that could materially adversely affect our business, financial condition, and results of operations.
We currently have approximately 1.4 GW of capacity under construction, principally consisting of the Mesquite Wind project (420 MW, Oldham County, Texas) and the Cimarron Solar project (350 MW, Doña Ana County, New Mexico). Construction of large-scale renewable-energy projects involves numerous risks, including delays in obtaining or maintaining required permits and approvals; shortages or delays in the delivery of key equipment, including wind turbines, solar panels, inverters, and battery systems; labor shortages and increased labor costs; adverse weather conditions; the inability of contractors to perform under fixed-price or lump-sum turnkey contracts; unforeseen engineering, environmental, or geological problems; and other unanticipated difficulties. Any of these risks, if realized, could result in significant cost increases, delays in achieving commercial operation, and the loss of anticipated tax incentives, any of which could have a material adverse effect on our results of operations and financial condition.
Our development pipeline may not convert to operating projects, and we may not be able to successfully execute our growth strategy.
Our 6.2 GW development pipeline is at various stages of development, and there can be no assurance that any or all of the projects in our pipeline will be successfully developed, permitted, financed, constructed, and brought into commercial operation. The development of renewable-energy projects involves significant execution risk, including risks related to site control, permitting, environmental review, interconnection, power marketing, equipment procurement, and financing. Moreover, the timeline from initial development to commercial operation for a utility-scale renewable-energy project can span several years, during which market conditions, policy environments, and technology costs may change materially. If we are unable to successfully convert a significant portion of our pipeline into operating projects, our future revenue and growth prospects could be materially adversely affected.
Our projects are subject to technology risks, including solar panel degradation, wind-turbine mechanical failures, and battery storage degradation and safety concerns, that could adversely affect their performance and our results of operations.
Our solar PV projects are subject to degradation in output over time, which may exceed the rates assumed in our financial models. Our wind projects are subject to mechanical failures of wind-turbine components, including gearboxes, generators, blades, and towers, which can result in extended periods of downtime and costly repairs. Our battery energy storage projects are subject to degradation in storage capacity and energy output over time, as well as safety risks, including the risk of thermal runaway, fire, and related damage. If degradation rates exceed our expectations, or if we experience mechanical failures or safety events, our projects may underperform relative to our projections, which could adversely affect our revenue, operating results, and the value of our assets.
Interconnection and transmission constraints may limit the output of our projects and reduce our revenue.
Our projects depend on the availability of interconnection capacity and transmission infrastructure to deliver electricity to the grid and ultimately to our offtakers. Grid congestion, curtailment, and transmission constraints in the regions where we operate, particularly in the ERCOT market in Texas and the SPP market in Oklahoma, have at times resulted in involuntary reductions in the output of our projects. If grid congestion or curtailment increases, or if we are unable to obtain or maintain adequate interconnection and transmission capacity for our existing or future projects, our revenue and results of operations could be materially adversely affected.
The renewable-energy industry is highly competitive, and we may not be able to compete effectively.
We face competition from a large number of renewable-energy developers, independent power producers, regulated utilities, and other market participants, many of which have greater financial, technical, and operational resources than we do. Competition for project development opportunities, interconnection capacity, equipment supply, PPA contracts, and qualified personnel is intense and may increase in the future. If we are unable to compete effectively, our ability to develop, construct, and operate new projects could be impaired, which could adversely affect our growth and results of operations.
We depend on key personnel, including our Co-Founders, Garrett Calloway and Elaine Briggs, and the loss of key personnel could adversely affect our operations.
Our success depends to a significant degree on the continued services of our Co-Founders, Garrett Calloway, our Chairman and Chief Executive Officer, and Elaine Briggs, our President, Development, as well as our other senior officers, including Marcus Yoon, our Chief Financial Officer, and Dale Renfroe, our Chief Operating Officer. The loss of any of these individuals, or our inability to attract and retain other qualified personnel, could have a material adverse effect on our business, financial condition, and results of operations.
Our SCADA systems and operational technology systems are subject to cybersecurity risks.
We rely on supervisory control and data acquisition ("SCADA") systems and other operational technology systems to monitor and control the operation of our projects. These systems are potentially vulnerable to cyberattacks, including ransomware, phishing, and other forms of unauthorized access. A successful cyberattack on our systems could result in disruptions to our operations, loss of revenue, damage to equipment, environmental harm, regulatory penalties, and harm to our reputation.
Risks Related to Regulation and Policy
Changes in the availability, eligibility criteria, or amount of federal tax incentives, including the Investment Tax Credit and the Production Tax Credit, could reduce the economic returns of our projects and adversely affect our business.
Our projects have historically benefited from, and our future projects are expected to benefit from, federal tax incentives, including the Investment Tax Credit ("ITC") under Section 48 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Production Tax Credit ("PTC") under Section 45 of the Code. These tax incentives have been, and continue to be, subject to legislative changes, including phase-downs, expirations, and modifications of eligibility criteria. Any reduction, elimination, or modification of the ITC, the PTC, or other federal tax incentives that are material to our business could adversely affect the economic returns of our projects, reduce our ability to attract tax-equity financing, and impair our competitiveness, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Our projects require multiple federal, state, and local permits and approvals, and delays or denials in the permitting process could impair our ability to develop new projects.
The development and operation of our renewable-energy projects require numerous federal, state, and local permits, approvals, and authorizations, including those related to environmental review, land use, building codes, electrical interconnection, and wildlife protection. The permitting process can be lengthy, complex, and uncertain, and we may encounter opposition from governmental agencies, environmental organizations, neighboring landowners, or other stakeholders. Delays in obtaining, or the failure to obtain, required permits and approvals could delay or prevent the development of our projects, which could have a material adverse effect on our growth and results of operations.
Changes in regulations imposed by FERC, NERC, and state public utility commissions could increase our compliance costs and adversely affect our business.
Our operations are subject to regulation by the Federal Energy Regulatory Commission ("FERC"), the North American Electric Reliability Corporation ("NERC"), and state public utility commissions in Texas, New Mexico, Arizona, California, and Oklahoma. Changes in the regulatory frameworks governing wholesale electricity sales, transmission access, interconnection procedures, reliability standards, and other matters could increase our compliance costs, limit our ability to sell electricity, or otherwise adversely affect our operations and financial results.
Changes in state renewable portfolio standards could reduce demand for renewable energy.
Several states in which we operate, including California, New Mexico, and Arizona, have enacted renewable portfolio standards or renewable energy standards that require electric utilities to procure a specified percentage of their electricity from renewable sources. Changes in, or the repeal of, these standards could reduce demand for renewable energy from our projects, which could adversely affect our ability to enter into new PPAs on favorable terms and could negatively impact our revenue and growth prospects.
Risks Related to Our Indebtedness and Financial Condition
We have substantial indebtedness, which could adversely affect our financial condition and our ability to operate our business.
As of December 31, 2021, we had approximately $1.71 billion of total consolidated debt, which increased to approximately $1.74 billion as of March 31, 2022. Our substantial indebtedness could have important consequences for investors, including: requiring us to dedicate a significant portion of our cash flow from operations to debt service payments; limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, and other general corporate purposes; limiting our flexibility in planning for, or reacting to, changes in our business and the renewable-energy industry; placing us at a competitive disadvantage relative to our less-leveraged competitors; and increasing our vulnerability to adverse economic conditions and downturns in our industry.
Our corporate credit facilities contain restrictive covenants that may limit our operational flexibility.
Our Corporate Revolving Credit Facility ($400 million commitment) and Term Loan B ($650 million, approximately $612.5 million outstanding as of December 31, 2021), each with Veltrano National Bank as Administrative Agent, contain financial covenants, including minimum interest coverage ratios, maximum leverage ratios, and minimum liquidity requirements, as well as restrictive covenants that limit our ability to, among other things, incur additional indebtedness, pay dividends and make distributions, create liens, make investments, enter into certain transactions with affiliates, sell assets, and engage in mergers or consolidations. Our failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all of our indebtedness under such facilities.
Our project-finance and tax-equity structures create structural subordination and cash-flow restrictions that may limit our ability to access cash generated by our projects.
We finance certain of our projects through project-level construction and term loan facilities and tax-equity partnership structures. Our Mesquite Wind project is financed by a $165 million construction-to-term facility with Prairie Commercial Bank, N.A., and our Cimarron Solar project is financed by a $143 million construction-to-term facility with Prairie Commercial Bank, N.A. Our Solaris West project is subject to a tax-equity partnership with Veltara Basin Financial LLC, which has invested $280 million in the partnership, with a partnership flip expected in 2028. These project-level financing structures typically include covenants and restrictions that limit the ability of the project-level subsidiaries to distribute cash to us, which could limit our liquidity and our ability to service our corporate-level indebtedness.
If our projects undergo a recapture event within five years of the placed-in-service date, Investment Tax Credits could be recaptured, and we could be required to make indemnification payments to our tax-equity investors.
Certain of our projects, including the Solaris West project, have claimed the ITC under Section 48 of the Code. The ITC is subject to recapture if the qualifying project undergoes a "recapture event" (including a disposition or a change in the nature of the project) within five years of the date on which the project is placed in service. If a recapture event were to occur, we could be required to return a portion of the ITC to the U.S. government and to make indemnification payments to our tax-equity investor, Veltara Basin Financial LLC, which could have a material adverse effect on our financial condition.
The Hypothetical-Liquidation-at-Book-Value methodology used to account for our tax-equity partnerships involves significant judgment and estimates, and changes in key assumptions could result in material changes to our reported results.
We use the Hypothetical-Liquidation-at-Book-Value ("HLBV") methodology to allocate income and loss to our tax-equity investors in our partnership-flip structures. The HLBV methodology requires the application of significant judgment and estimates, including the determination of hypothetical liquidation proceeds, the application of the allocation waterfall set forth in the partnership agreement, the assumed timing of the flip date, and assumptions regarding ITC recapture. Changes in these assumptions, or errors in the application of the HLBV methodology, could result in material changes to the allocation of income and loss between us and our tax-equity investors, which could adversely affect our reported financial results.
Risks Related to Our Corporate Structure and Governance
Pinnacle Vista will continue to hold a majority of our voting power following this offering, and its interests may differ from those of our public stockholders.
Following the completion of this offering, Pinnacle Vista Capital Partners III, LP will continue to beneficially own a majority of the combined voting power of our outstanding common stock. As a result, Pinnacle Vista will be able to exercise significant influence over all matters requiring stockholder approval, including the election and removal of directors, amendments to our charter and bylaws, and the approval of mergers, acquisitions, and other significant corporate transactions. The interests of Pinnacle Vista may not always be consistent with the interests of our public stockholders, and Pinnacle Vista may cause us to take actions that are not in the best interests of our public stockholders.
Anti-takeover provisions in our charter, bylaws, and Delaware law may discourage, delay, or prevent a change of control of our Company.
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, to be effective upon the closing of this offering, will contain provisions that may have the effect of discouraging, delaying, or preventing a change of control of our Company, including a classified board of directors with staggered three-year terms, advance-notice procedures for stockholder nominations and proposals, supermajority voting requirements for certain amendments to our charter and bylaws, the absence of cumulative voting rights, a forum-selection clause designating the Delaware Court of Chancery as the exclusive forum for certain stockholder litigation, and authorization for our board of directors to issue blank-check preferred stock without stockholder approval. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in certain business combinations with an interested stockholder for a period of three years following the date on which such stockholder became an interested stockholder.
Under the Amended and Restated Stockholders' Agreement, Pinnacle Vista has the right to designate directors to our board, subject to ownership thresholds.
Pursuant to the Amended and Restated Stockholders' Agreement, which will become effective upon the closing of this offering, Pinnacle Vista has the right to designate a number of nominees for election to our board of directors, subject to a step-down schedule tied to Pinnacle Vista's ownership of our outstanding common stock. These designation rights may limit the ability of our public stockholders to influence the composition of our board of directors and the governance of our Company.
We have entered into related-party transactions with Pinnacle Vista and our founders, and such transactions may not be on terms as favorable as those that could be obtained from unaffiliated third parties.
We have entered into a management-services agreement with Pinnacle Vista Capital Management LLC, under which we pay an annual management fee of $2.4 million. Although this agreement will terminate upon the closing of this offering, we also have employment agreements with our founders, Garrett Calloway and Elaine Briggs, and we have entered into an Amended and Restated Stockholders' Agreement and a Registration Rights Agreement with Pinnacle Vista. These related-party transactions may not have been negotiated on an arm's-length basis, and the terms may not be as favorable to us as terms we could have obtained from unaffiliated third parties.
Risks Related to This Offering and Our Common Stock
There has been no prior public market for our common stock, and an active trading market may not develop or be sustained after this offering.
Prior to this offering, there has been no public market for our common stock. Although we have applied to list our common stock on the New York Stock Exchange under the ticker symbol "CBRI," there can be no assurance that an active trading market will develop or, if it develops, that it will be sustained after the completion of this offering. The initial public offering price of our common stock will be determined by negotiation between us and the representatives of the underwriters, and may not be indicative of the price at which our common stock will trade after the offering.
New investors in this offering will experience immediate and substantial dilution in the net tangible book value of their shares.
The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our common stock immediately after this offering. As a result, investors purchasing shares of common stock in this offering will experience immediate and substantial dilution. See "Dilution" for a more detailed discussion of the dilution you will incur in connection with this offering.
Future issuances of shares of our common stock, including under our equity incentive plans, could dilute your ownership and adversely affect the price of our common stock.
Following the completion of this offering, we will have reserved 12,727,273 shares of common stock for issuance under the 2022 Omnibus Equity Incentive Plan and 2,545,455 shares of common stock for issuance under the 2022 Employee Stock Purchase Plan. The issuance of additional shares under these plans, as well as any future equity issuances, could dilute the ownership interests of our existing stockholders and could adversely affect the prevailing market price of our common stock. In addition, under the Registration Rights Agreement, Pinnacle Vista holds demand registration rights, piggyback registration rights, and S-3 shelf registration rights, which could facilitate the sale of substantial amounts of our common stock in the public market.
Sales of substantial amounts of our common stock in the public market after the expiration of the 180-day lock-up period could depress the market price of our common stock.
Following the completion of this offering, there will be 123,713,636 shares of common stock outstanding (or 127,272,727 shares if the underwriters exercise their overallotment option in full). Of these shares, the 23,713,636 shares sold in this offering (or 27,272,727 shares if the overallotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our "affiliates" as defined in Rule 144 under the Securities Act. The remaining shares are subject to the 180-day lock-up period described under "Shares Eligible for Future Sale — Lock-Up Agreements." Sales of a substantial number of shares of our common stock after the expiration of the lock-up period, or the perception that such sales could occur, could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.
As an emerging growth company, we are subject to reduced disclosure obligations, which may make our common stock less attractive to some investors.
As an emerging growth company, we are permitted to take advantage of certain reduced reporting and disclosure requirements. We cannot predict whether investors will find our common stock less attractive as a result of our reliance on these exemptions. If some investors find our common stock less attractive, there may be a less active trading market for our common stock, and the price of our common stock may be more volatile.
Events described in these risk factors could have a material adverse effect on our business, financial condition, and results of operations.
The occurrence of any of the risks described in these risk factors could individually or in the aggregate have a material adverse effect on the business, assets, properties, financial condition, or results of operations of the Company and its subsidiaries, taken as a whole, or on the ability of the Company to consummate the transactions contemplated by the underwriting agreement. As used in this prospectus, the term "material adverse effect" refers to any event, change, effect, condition, occurrence, or development that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on the business, assets, properties, financial condition, or results of operations of the Company and its subsidiaries, taken as a whole; provided, however, that none of the following, either alone or in combination, shall be deemed to constitute, or shall be taken into account in determining whether there has been, a material adverse effect: (i) changes in general economic or market conditions in the United States or globally, (ii) changes in GAAP or applicable law or regulations, (iii) changes generally affecting the renewable-energy or utility industries, (iv) natural disasters, pandemics, epidemics, or acts of war, terrorism, or hostilities (including any escalation or worsening thereof), (v) changes resulting from the announcement or pendency of this offering or the transactions contemplated thereby, and (vi) changes in the market price or trading volume of the Company's common stock or changes in the Company's credit ratings, in each case of clauses (i) through (iv), to the extent such changes do not disproportionately affect the Company relative to other similarly situated companies operating in the same industries and geographies in which the Company operates.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of 16,895,455 shares of common stock offered by us in this offering will be approximately $351.1 million (based on an assumed initial public offering price of $22.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discount of approximately $20.6 million on the primary portion and estimated offering expenses payable by us of approximately $[●] million), or approximately $424.4 million if the underwriters exercise their overallotment option in full.
We will not receive any of the proceeds from the sale of 6,818,182 shares of common stock by the selling stockholder, Pinnacle Vista Capital Partners III, LP. The selling stockholder will receive all net proceeds from the sale of its shares, after deducting the underwriting discount applicable to such shares.
We intend to use the net proceeds from this offering as follows:
• Approximately $200 million to repay a portion of the outstanding indebtedness under the Term Loan B with Veltrano National Bank, as Administrative Agent. The Term Loan B was originally issued in an aggregate principal amount of $650 million, of which approximately $612.5 million was outstanding as of December 31, 2021, bearing interest at a floating rate equal to LIBOR plus 3.50% per annum (with a LIBOR floor of 0.75%). The Term Loan B matures in January 2029. A prepayment premium of 1.00% applies to voluntary prepayments, and we estimate that we will pay a prepayment premium of approximately $2,000,000 in connection with the $200 million prepayment. The proceeds of the Term Loan B were used to fund the acquisition and development of certain of our projects and for general corporate purposes.
• Approximately $100 million to fund construction of the Cimarron Solar project, a 350 MW solar PV project located in Doña Ana County, New Mexico, with an expected commercial operation date of Q1 2023. These funds will supplement the $143 million construction-to-term facility provided by Prairie Commercial Bank, N.A. and will be used to fund equipment procurement, balance-of-system construction, interconnection upgrades, and other project-related costs.
• Approximately $71.7 million for general corporate purposes, including working capital, potential future project development, and other capital expenditures.
Pending the application of the net proceeds as described above, we intend to invest the net proceeds in short-term, investment-grade, interest-bearing securities, including government securities and money-market funds.
Each $1.00 increase (decrease) in the assumed initial public offering price of $22.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $16.9 million (or approximately $20.5 million if the underwriters exercise their overallotment option in full), assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and estimated offering expenses.
DIVIDEND POLICY
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings for use in the operation and expansion of our business, including the development and construction of projects in our pipeline.
Our ability to pay dividends is currently restricted by the terms of our Corporate Revolving Credit Facility and Term Loan B with Veltrano National Bank, which contain covenants that limit our ability to pay dividends and make distributions on our capital stock, subject to certain baskets and exceptions. Our project-level debt facilities with Prairie Commercial Bank, N.A. also contain restrictions on distributions from our project-level subsidiaries.
Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, and such other factors as the Board of Directors deems relevant.
CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2022 on:
• an actual basis;
• a pro forma basis, giving effect to (i) the reclassification of our capital stock prior to the closing of this offering, (ii) the issuance and sale of 16,895,455 shares of common stock by us in this offering at an assumed initial public offering price of $22.00 per share and after deducting the estimated underwriting discount and estimated offering expenses payable by us, (iii) the application of the estimated net proceeds from this offering as described under "Use of Proceeds," and (iv) the sale of 6,818,182 shares by the selling stockholder (from which we will not receive any proceeds); and
• a pro forma as-adjusted basis, giving effect to the foregoing and assuming the underwriters exercise their overallotment option in full.
You should read this table in conjunction with "Use of Proceeds," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.
(1) Reflects net proceeds from this offering after deducting underwriting discounts, estimated offering expenses, and the application of approximately $200 million to repay a portion of the Term Loan B (including the estimated $2 million prepayment premium) and approximately $100 million allocated to the construction of the Cimarron Solar project.
(2) Reflects the repayment of approximately $200 million of the Term Loan B from the net proceeds of this offering.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share of our common stock after this offering.
As of March 31, 2022, our historical net tangible book value was approximately $[●] million, or approximately $[●] per share of common stock. Net tangible book value per share represents total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.
After giving effect to the sale by us of 16,895,455 shares of common stock in this offering at an assumed initial public offering price of $22.00 per share and after deducting the estimated underwriting discount and estimated offering expenses payable by us and the application of the net proceeds as described under "Use of Proceeds," our pro forma net tangible book value as of March 31, 2022 would have been approximately $[●] million, or approximately $[●] per share of common stock. This represents an immediate increase in pro forma net tangible book value of approximately $[●] per share to existing stockholders and an immediate dilution of approximately $[●] per share to new investors purchasing shares in this offering.
The following table illustrates this per share dilution:
If the underwriters exercise their overallotment option in full, the pro forma net tangible book value per share after giving effect to this offering would be approximately $[●] per share, and the dilution in pro forma net tangible book value per share to new investors would be approximately $[●] per share.
The following table summarizes, on a pro forma basis as of March 31, 2022, the total number of shares of common stock purchased from us, the total consideration paid to us, and the average price per share paid to us by existing stockholders and by new investors purchasing shares in this offering, based on an assumed initial public offering price of $22.00 per share, before deducting underwriting discounts and estimated offering expenses:
The tables above exclude:
• 12,727,273 shares of common stock reserved for issuance under the 2022 Omnibus Equity Incentive Plan;
• 2,545,455 shares of common stock reserved for issuance under the 2022 Employee Stock Purchase Plan; and
• any shares issuable upon exercise of the underwriters' overallotment option (except where specifically noted).
To the extent that additional shares are issued under our equity incentive plans or otherwise, or to the extent outstanding options are exercised, new investors purchasing shares in this offering may experience further dilution.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth our selected historical consolidated financial data for the periods and as of the dates indicated. The selected consolidated financial data for the fiscal years ended December 31, 2019, 2020, and 2021 have been derived from our audited consolidated financial statements included elsewhere in this prospectus, which have been audited by Ashford & Pemberton LLP, an independent registered public accounting firm. The selected consolidated financial data for the three months ended March 31, 2022 and March 31, 2021 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus.
The selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in any future period.