EDGAR Accession No. SEC CIK: 0001948372
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT ON FORM S-1
AMENDMENT NO.
(Confidential Submission Under the Jumpstart Our Business Startups Act of 2012)
Under the Securities Act of 1933, as amended
CALLOWAY-BRIGGS RENEWABLES INC.
(Exact Name of Registrant as Specified in Its Charter)
4200 Ridgeline Parkway, Suite 1100 Austin, Texas 78746 (512) 555-8400
(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 (512) 555-8400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service of Process)
Copies to:
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
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, 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.
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 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.
CALCULATION OF REGISTRATION FEE
(1) Includes shares of common stock that the underwriters have the option to purchase to cover overallotments, if any.
(2) Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. The fee rate in effect on the date of this filing is $92.70 per $1,000,000.
(4) Previously paid in connection with the confidential submission of the draft registration statement on April 11, 2022.
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 becomes effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
**SUBJECT TO COMPLETION, DATED **
PROSPECTUS
Calloway-Briggs Renewables Inc.
Common Stock
This is an initial public offering of shares of common stock of Calloway-Briggs Renewables Inc., a Delaware corporation. We are offering shares of our common stock and Pinnacle Vista Capital Partners III, LP (the "Selling Stockholder") is offering shares of our common stock. We will not receive any of the proceeds from the sale of shares by the Selling Stockholder. The proposed aggregate offering amount is approximately $600,000,000 (inclusive of the overallotment option described below).
Prior to this offering, there has been no public market for our common stock. The initial public offering price per share is expected to be between $20.00 and $24.00. For purposes of this filing, we have assumed an initial public offering price of $22.00 per share, which represents the midpoint of the estimated range. We have applied to list our common stock on the New York Stock Exchange (the "NYSE") under the ticker symbol "CBRI."
We are an "emerging growth company" as defined under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and, as such, we may take advantage of certain reduced public company reporting requirements.
Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 26 of this prospectus for a discussion of risks you should consider before purchasing shares of our common stock.
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.
(1) Based on the assumed initial public offering price of $22.00 per share and the base offering of 23,713,636 shares.
(2) See "Underwriting" for additional information regarding total underwriting compensation.
(3) Reflects only the proceeds from the 16,895,455 shares offered by the Company.
(4) Reflects only the proceeds from the 6,818,182 shares offered by the Selling Stockholder.
We have granted the underwriters a 30-day option to purchase up to 3,559,091 additional shares of common stock from us at the initial public offering price, less the underwriting discount, to cover overallotments, if any. The overallotment option represents 15% of the base offering shares.
The underwriters expect to deliver the shares of common stock against payment in New York, New York on or about , 2022.
Lead-Left Book-Running Manager
Hargrove Keating & Co.
Joint Book-Running Managers
Linden Pratt Securities LLC Graymont Brothers Inc.
Co-Managers
Barfield Stuart & Co. Crane Whitley Capital LLC
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 making your investment decision. You should read the entire prospectus carefully, 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 related notes included elsewhere in this prospectus, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements."
Overview. Calloway-Briggs Renewables Inc. ("CBR," "we," "us," or the "Company") is a leading developer and operator of utility-scale solar, onshore wind, and battery energy storage system ("BESS") projects across the western and southwestern United States. We were founded in 2014 by Garrett Calloway, our Chairman and Chief Executive Officer, and Elaine Briggs, our President of Development and a member of our Board of Directors. Our principal executive offices are located at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746, and our telephone number is (512) 555-8400. We are incorporated under the laws of the State of Delaware.
Since our founding, we have grown rapidly into one of the largest independent renewable energy platforms in the United States. As of December 31, 2021, we had approximately 3.8 gigawatts ("GW") of operating renewable energy capacity across 22 projects located in Texas, New Mexico, Arizona, California, and Oklahoma. In addition, we had 1.4 GW of capacity under construction and a robust development pipeline of approximately 6.2 GW, providing us with significant multi-year growth visibility. As of December 31, 2021, we employed approximately 1,240 people across our corporate headquarters and project sites.
We generate revenue primarily through long-term power purchase agreements ("PPAs") with investment-grade counterparties, including investor-owned utilities, electric cooperatives, municipal utilities, and corporate offtakers. Our operating portfolio benefits from a weighted-average remaining PPA contract tenor of approximately 13 years, which provides us with highly predictable, contracted cash flows. We complement our contracted revenue base with selective exposure to wholesale electricity markets, which we believe allows us to capture upside in periods of elevated pricing.
Our portfolio spans three complementary technology platforms — utility-scale solar photovoltaic ("PV"), onshore wind, and lithium-ion battery energy storage. This diversification across technologies and geographies reduces our exposure to weather-related variability and regional market dynamics while positioning us to capitalize on favorable secular trends in the energy transition. We believe our integrated development, construction, and operations capabilities provide us with a meaningful competitive advantage and enable us to deliver projects on time and on budget.
In 2017, Pinnacle Vista Capital Partners, LP, through its Series III Fund (the "Pinnacle Vista Fund III"), made a $385 million equity investment in CBR, followed by a $120 million follow-on investment in 2019. Pinnacle Vista's sponsorship has provided us with the financial resources, strategic guidance, and operational support necessary to scale our platform and accelerate growth. As of the date of this prospectus, Pinnacle Vista beneficially owns approximately 62% of our outstanding common stock on a fully diluted basis.
Our Portfolio. Our portfolio of operating, under-construction, and development-stage projects encompasses a total of approximately 11.4 GW of renewable energy capacity. The following summarizes our key projects:
Operating Projects (3.8 GW across 22 Projects)
Our operating portfolio is anchored by five flagship projects that represent a diverse mix of solar, wind, and battery storage technologies:
In addition to these flagship projects, our operating portfolio includes 17 additional projects across Texas, New Mexico, Arizona, California, and Oklahoma, with individual capacities ranging from approximately 50 MW to 250 MW, which in the aggregate bring our total operating capacity to approximately 3.8 GW.
Projects Under Construction (1.4 GW)
We are currently constructing two projects that we expect will add approximately 770 MW of capacity to our operating portfolio:
The Mesquite Wind project is well-advanced in construction and we expect to achieve commercial operation on schedule in the third quarter of 2022. The Cimarron Solar project commenced construction in the fourth quarter of 2021, and we expect to achieve commercial operation in the first quarter of 2023. Construction of these projects is being financed through dedicated construction-to-term loan facilities with Prairie Commercial Bank, N.A., as described in "Description of Indebtedness."
Development Pipeline (6.2 GW)
Our development pipeline of approximately 6.2 GW provides us with visibility into our growth trajectory over the next several years. Key pipeline projects include:
Our development pipeline also includes additional solar, wind, and storage projects across our core markets, which in the aggregate bring our total development pipeline to approximately 6.2 GW. We expect to advance these projects through the development process in a disciplined manner, selectively committing capital only upon the achievement of key milestones, including site control, permitting, interconnection, and offtake arrangements.
Summary Financial Data
The following table presents summary consolidated financial and operating data for the periods indicated. The financial data for the 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 financial data for the three months ended March 31, 2022 are unaudited and have been prepared on a basis consistent with our audited consolidated financial statements.
Consolidated Statements of Operations Data:
Consolidated Balance Sheet Data:
Other Operating Data:
(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 — Adjusted EBITDA Reconciliation" for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.
The Offering. The following summarizes the material terms of this offering. For a more detailed description of our common stock, see "Description of Capital Stock."
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 basis (after giving effect to the conversion of all outstanding preferred stock and the reclassification of our capital stock), and excludes:
• 12,727,273 shares of common stock reserved for issuance under our 2022 Omnibus Equity Incentive Plan, which we intend to adopt in connection with this offering; and
• 2,545,455 shares of common stock reserved for issuance under our 2022 Employee Stock Purchase Plan, which we intend to adopt in connection with this offering.
Use of Proceeds
We estimate that the net proceeds to us from our sale of 16,895,455 shares of common stock in this offering (or 20,454,546 shares if the underwriters exercise their overallotment option in full) will be approximately $349,256,500 (or approximately $425,256,500 if the underwriters exercise their overallotment option in full), based on an assumed initial public offering price of $22.00 per share and after deducting underwriting discounts and commissions of approximately $20,443,500 (or approximately $24,750,000 if the underwriters exercise their overallotment option in full) and estimated offering expenses payable by us of approximately $2.0 million.
We intend to use the net proceeds from this offering as follows:
• approximately $200 million to repay a portion of the outstanding Term Loan B under our corporate credit facility with Veltrano National Bank, as Administrative Agent (outstanding balance of approximately $612.5 million as of December 31, 2021; maturity January 2029; estimated prepayment premium of 1.00% on the amount prepaid, or approximately $2.0 million);
• approximately $100 million to fund the continued construction of our Cimarron Solar project (350 MW, Doña Ana County, New Mexico; expected commercial operation date in the first quarter of 2023); and
• approximately $49.3 million for general corporate purposes, including working capital and potential acquisitions.
If the overallotment option is exercised in full, we would receive additional net proceeds of approximately $76,000,000 (after deducting additional underwriting discounts and commissions), which we intend to use for general corporate purposes, including working capital and potential acquisitions.
We will not receive any proceeds from the sale of 6,818,182 shares of our common stock by the Selling Stockholder, Pinnacle Vista Capital Partners III, LP.
Pre-IPO Ownership. As of the date of this prospectus, our pre-IPO ownership structure is as follows:
Our Sponsor. We have been supported by Pinnacle Vista Capital Partners, LP ("Pinnacle Vista"), through its Series III Fund (2016 vintage, approximately $4.8 billion in fund commitments), since 2017. Pinnacle Vista initially invested $385 million of equity capital in CBR in 2017, followed by a $120 million follow-on investment in 2019, for an aggregate equity investment of $505 million. Pinnacle Vista Capital Management LLC serves as the general partner of the Pinnacle Vista Fund III. Hugh Pemberton and Diane Kovac are the Co-Founders and Managing Partners of Pinnacle Vista. Pinnacle Vista's principal office is located at 900 Park Avenue, 38th Floor, New York, New York 10021. Pinnacle Vista has approximately $14.2 billion in assets under management across four flagship funds.
Pinnacle Vista has been a valuable strategic partner, providing us with financial resources, board-level governance, and access to a broad network of industry relationships and institutional knowledge. Following this offering, Pinnacle Vista is expected to continue to be a significant stockholder, and two of Pinnacle Vista's designees — Hugh Pemberton and Diane Kovac — will continue to serve on our Board of Directors.
Risk Factors Summary
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described in the "Risk Factors" section of this prospectus before making a decision to invest in our common stock. The following is a summary of some of the principal risks we face:
• We depend on long-term PPAs and exposure to wholesale electricity markets, and our counterparties may fail to perform their contractual obligations.
• Our projects under construction, including Mesquite Wind and Cimarron Solar, are subject to cost overruns, supply chain delays, and other construction risks.
• We have substantial indebtedness, which may limit our financial and operational flexibility.
• Our business depends on favorable tax incentives, including the ITC and PTC, which may be reduced, modified, or eliminated.
• Our tax-equity structures involve complex accounting under the HLBV methodology, which may result in earnings volatility.
• A significant portion of our operating capacity is concentrated in Texas, exposing us to ERCOT market dynamics and weather-related risks.
• There is no prior public market for our common stock, and the initial public offering price may not be indicative of the price at which our shares will trade following this offering.
• Following this offering, Pinnacle Vista will continue to own a significant percentage of our outstanding common stock and will have influence over our corporate decisions.
These and other risks are discussed more fully in "Risk Factors" beginning on page 26 of this prospectus.
Emerging Growth Company Status
We are an "emerging growth company" as defined in the JOBS Act. As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure of executive compensation, and the requirement that we hold a nonbinding advisory vote on executive compensation or any golden parachute payments. Our fiscal year 2021 revenue of $487.3 million is below the $1.235 billion revenue threshold applicable to emerging growth companies. We may take advantage of these exemptions until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous three-year period, or (iv) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC.
Corporate Information. Calloway-Briggs Renewables Inc. is a Delaware corporation. Our principal executive offices are located at 4200 Ridgeline Parkway, Suite 1100, Austin, Texas 78746, and our telephone number is (512) 555-8400. Our Employer Identification Number is 83-4027615. Our website address is www.calloway-briggs.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus and should not be considered a part of this prospectus.
RISK FACTORS
An investment 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 included in this prospectus, including our consolidated financial statements and related notes, before deciding whether to invest in our common stock. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, results of operations, financial condition, and prospects. In such case, the trading price of our common stock could decline and you could lose all or part of your investment. The risks described below are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, results of operations, financial condition, and prospects.
Risks Related to Our Business and Industry
We are dependent on power purchase agreements and wholesale electricity markets, and our business could be materially adversely affected by counterparty credit risk or unfavorable market conditions.
A substantial majority of our revenue is derived from long-term PPAs with investment-grade counterparties. However, our counterparties may fail to honor their contractual obligations due to financial distress, bankruptcy, regulatory changes, or other factors. In addition, we have a portion of our revenue that is exposed to wholesale electricity market prices, which are subject to significant volatility based on supply and demand dynamics, fuel costs, weather conditions, and regulatory actions. A decline in wholesale electricity prices or the failure of one or more of our PPA counterparties to perform its obligations could materially reduce our revenue and adversely affect our results of operations and financial condition.
Our projects under construction, including Mesquite Wind and Cimarron Solar, are subject to construction risks, cost overruns, and supply chain delays.
We are currently constructing the Mesquite Wind project (420 MW, Oldham County, Texas, expected commercial operation date in Q3 2022) and the Cimarron Solar project (350 MW, Doña Ana County, New Mexico, expected commercial operation date in Q1 2023). The construction of renewable energy projects involves significant risks, including risks relating to engineering and design challenges, equipment procurement delays, labor shortages, adverse weather conditions, failure of contractors to perform, delays in obtaining or maintaining required permits and approvals, and increases in the cost of equipment, materials, and labor. We have experienced, and may continue to experience, supply chain disruptions affecting the availability and cost of solar panels, wind turbine components, and other critical equipment. Any significant delays in the expected commercial operation dates or cost overruns for our projects under construction could materially adversely affect our business, results of operations, and financial condition.
The renewable energy industry is characterized by rapid technological change and intense competition.
The renewable energy industry is rapidly evolving and subject to significant technological changes, including advances in solar panel efficiency, wind turbine design, battery storage technology, and energy management systems. Our competitors include other independent power producers, utilities, and technology companies, many of which have greater financial, technical, and other resources than we do. The emergence of new technologies or the improvement of existing technologies could render our projects less competitive or obsolete, which could materially adversely affect our business.
Our operations are dependent on favorable weather conditions, including solar irradiance and wind resources, which are inherently variable and unpredictable.
The electricity generation output of our solar and wind projects is dependent on solar irradiance and wind speeds at our project sites, respectively. These weather conditions are inherently variable and difficult to predict, and may vary significantly from historical averages and from the projections used in our financial models. Extended periods of below-average solar irradiance or wind speeds could materially reduce our energy production and revenue. In addition, climate change may alter historical weather patterns in ways that are difficult to predict, potentially affecting the long-term performance of our projects.
Battery energy storage technology involves risks related to degradation, thermal events, and evolving performance standards.
Our Brazos Storage facility (200 MW / 800 MWh, Fort Bend County, Texas) and our planned Copper Basin Solar + Storage project incorporate lithium-ion battery energy storage technology. Battery energy storage systems are subject to risks related to capacity degradation over time, thermal runaway and fire risk, limited warranty protections from manufacturers, evolving safety and performance standards, and the potential for recalls or design defects. The occurrence of a significant thermal event or safety incident at one of our battery storage facilities could result in damage to the facility, personal injury, environmental contamination, regulatory enforcement actions, and reputational harm.
We depend on third-party EPC contractors and O&M service providers for the construction and operation of our projects.
We rely on third-party engineering, procurement, and construction ("EPC") contractors for the construction of our renewable energy projects and on third-party operations and maintenance ("O&M") service providers for certain aspects of the operation of our projects. The failure of these contractors or service providers to perform their obligations in a timely and satisfactory manner could result in project delays, cost overruns, operational disruptions, and reduced energy production. We may not be able to find replacement contractors or service providers on acceptable terms, or at all, if our current contractors or service providers fail to perform.
A significant portion of our operating capacity is concentrated in Texas, exposing us to ERCOT market dynamics and related risks.
A majority of our operating capacity, including Solaris West (450 MW), Pronghorn Wind (510 MW), and Brazos Storage (200 MW), is located in Texas and interconnected to the Electric Reliability Council of Texas ("ERCOT") grid. ERCOT operates as a largely self-contained electricity market with limited interconnections to neighboring grids. As a result, we are exposed to ERCOT-specific market dynamics, including wholesale price volatility, congestion costs, transmission constraints, and regulatory actions by the Public Utility Commission of Texas ("PUCT"). The February 2021 Winter Storm Uri demonstrated the vulnerability of the ERCOT grid to extreme weather events and resulted in significant market disruptions, regulatory reforms, and legislative actions that have increased compliance costs and obligations for market participants.
We are subject to environmental compliance risks, including risks related to avian and bat mortality and habitat impacts.
The operation of our wind projects may result in avian and bat mortality, which is subject to regulation under the Endangered Species Act, the Migratory Bird Treaty Act, and applicable state laws. We may be required to obtain incidental take permits, implement mitigation measures, or curtail operations to minimize impacts to protected species. Environmental compliance failures could result in enforcement actions, fines, penalties, project delays, and reputational harm. In addition, our projects may be located in or near habitats for threatened or endangered species, and changes in the listing status of species or critical habitat designations could impose additional regulatory burdens on our operations.
Our operations are subject to cybersecurity risks related to our SCADA systems and operational technology.
We rely on supervisory control and data acquisition ("SCADA") systems and other operational technology to monitor and control our renewable energy projects. These systems are vulnerable to cyberattacks, including ransomware, malware, phishing, and denial-of-service attacks. A successful cyberattack on our SCADA systems could disrupt our operations, compromise the safety and reliability of our projects, result in the loss or corruption of data, and expose us to liability. The increasing frequency and sophistication of cyberattacks targeting critical infrastructure, including energy facilities, heightens these risks.
Our project sites are subject to climate-related physical risks, including extreme weather events.
Our project sites are located in geographic regions that are susceptible to extreme weather events, including hurricanes, tornadoes, hailstorms, wildfires, flooding, and extreme temperatures. The occurrence of such events could result in physical damage to our projects, prolonged operational outages, and increased costs for repairs and insurance. Climate change may increase the frequency and severity of extreme weather events, which could materially adversely affect our business.
Risks Related to Our Financial Condition and Indebtedness
We have substantial indebtedness, which may limit our financial and operational flexibility.
As of December 31, 2021, we had total debt of approximately $1.71 billion, consisting of amounts outstanding under our corporate credit facility with Veltrano National Bank (including the $400 million Corporate Revolving Credit Facility and the Term Loan B with an outstanding balance of approximately $612.5 million) and various project-finance facilities. Our substantial indebtedness could have important consequences for our business, including limiting our ability to borrow additional funds or refinance existing debt, increasing our vulnerability to adverse economic and industry conditions, requiring us to dedicate a substantial portion of our cash flow from operations to debt service payments, and placing us at a competitive disadvantage compared to less leveraged competitors.
Our credit agreements contain restrictive covenants that may limit our operational and financial flexibility.
Our corporate credit facility with Veltrano National Bank and our project-finance facilities contain financial and operating covenants that restrict our ability to take certain actions, including incurring additional indebtedness, making investments, paying dividends and other distributions, creating liens, selling assets, and entering into transactions with affiliates. Our ability to comply with these covenants is subject to prevailing economic conditions and other factors beyond our control. A breach of any of these covenants could result in an event of default under the applicable credit agreement, which could result in the acceleration of all amounts outstanding under such agreement and the exercise of remedies by our lenders.
We may not be able to refinance our maturing debt on favorable terms, or at all.
Our Term Loan B matures in January 2029, and our Corporate Revolving Credit Facility matures in January 2027. Our construction-to-term loan facilities for the Mesquite Wind project ($165 million, Prairie Commercial Bank, N.A., conversion December 2024) and the Cimarron Solar project ($143 million, Prairie Commercial Bank, N.A., conversion March 2025) will also require refinancing or conversion. We may not be able to refinance our maturing debt on terms comparable to our existing debt, or at all. If we are unable to refinance our debt or obtain alternative financing, we may be forced to sell assets, reduce capital expenditures, or take other actions that could adversely affect our business and growth strategy.
We are exposed to interest rate risk on our variable rate debt.
A portion of our outstanding indebtedness bears interest at variable rates based on LIBOR or SOFR plus an applicable margin. Increases in interest rates would increase the cost of servicing our variable rate debt, which could materially adversely affect our results of operations and cash flows. While we have entered into interest rate hedging arrangements with respect to a portion of our variable rate debt, these arrangements may not fully protect us against interest rate increases, and we may be exposed to basis risk and counterparty credit risk in connection with our hedging activities.
Risks Related to Tax-Equity Structures and Tax Incentives
Our business depends on favorable tax incentives, including the Investment Tax Credit and the Production Tax Credit, which may be reduced, modified, or eliminated.
We have historically benefited from the Investment Tax Credit ("ITC") under Section 48 of the Internal Revenue Code of 1986, as amended (the "Code"), applicable to our solar projects, and the Production Tax Credit ("PTC") under Section 45 of the Code, applicable to our wind projects. These tax credits have been critical to the economic viability of our projects and our ability to attract tax-equity investment. Changes in federal tax policy, including the reduction, modification, or elimination of the ITC or PTC, could materially adversely affect the economics of our existing and future projects, our ability to secure tax-equity financing, and our overall financial performance.
Our Solaris West tax-equity partnership involves ITC recapture risk in the event of a change of control or other triggering events.
Our Solaris West project (450 MW, Pecos County, Texas) is owned through a tax-equity partnership with Veltara Basin Financial LLC, which invested $280 million in the partnership. The ITC claimed in connection with the Solaris West project is subject to recapture if certain events occur within the five-year recapture period, including a change of control or other events that result in a reduction of the tax-equity investor's ownership interest below applicable thresholds. If an ITC recapture event were to occur, the resulting tax liability could be substantial and could materially adversely affect our financial condition and our relationship with Veltara Basin Financial LLC.
The HLBV accounting methodology used for our tax-equity partnerships is complex and may result in earnings volatility.
We account for our tax-equity partnerships, including the Solaris West partnership with Veltara Basin Financial LLC, using the Hypothetical-Liquidation-at-Book-Value ("HLBV") methodology. Under the HLBV methodology, income or loss is allocated to the Company and the tax-equity investor based on the change in each party's claim on the partnership's net assets in a hypothetical liquidation at book value at each reporting date. The HLBV methodology involves significant estimates and assumptions, including assumptions regarding the timing of the partnership flip (expected 2028 for the Solaris West partnership), ITC recapture risk, and the trajectory of capital account balances. Changes in these assumptions, or differences between actual and assumed outcomes, could result in significant volatility in our reported earnings from period to period, which may make it difficult for investors to evaluate our financial performance.
Our tax-equity structures must comply with the safe harbor requirements of Rev. Proc. 2007-65, and a failure to maintain compliance could have material adverse tax consequences.
Our partnership-flip structures are designed to comply with the safe harbor requirements established by the Internal Revenue Service in Revenue Procedure 2007-65. If we fail to satisfy the conditions of the safe harbor, the IRS could challenge the allocation of tax credits and income or loss under the partnership agreements, which could result in the reallocation of tax benefits, the imposition of penalties, and potential disputes with our tax-equity investors.
Risks Related to Regulatory and Permitting Matters
We are subject to extensive federal, state, and local regulatory requirements, and changes in applicable laws, regulations, or policies could 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, including the PUCT, the New Mexico Public Regulation Commission ("NMPRC"), the Arizona Corporation Commission ("ACC"), the California Public Utilities Commission ("CPUC"), and the Oklahoma Corporation Commission ("OCC"). Changes in applicable federal, state, or local laws, regulations, or policies, including changes to wholesale electricity market rules, interconnection procedures, renewable portfolio standards, or energy and environmental policies, could adversely affect our ability to develop, construct, and operate our projects.
Permitting delays and challenges for our development-pipeline projects could adversely affect our growth strategy.
The development of renewable energy projects requires numerous federal, state, and local permits and approvals, including environmental permits, land use permits, construction permits, and interconnection approvals. The permitting process can be time-consuming, costly, and uncertain, and we may encounter opposition from local communities, environmental groups, government agencies, or other stakeholders. Delays in obtaining required permits and approvals, or the imposition of conditions or requirements that increase project costs, could adversely affect our ability to advance our development pipeline and achieve our growth objectives.
Changes in interconnection queue procedures and transmission capacity constraints could adversely affect our ability to develop new projects.
Our ability to interconnect new projects to the electric grid is dependent on the availability of transmission capacity and the procedures and timelines for processing interconnection requests. In recent years, many regional transmission organizations and independent system operators have experienced significant backlogs in their interconnection queues, resulting in extended processing timelines and increased costs for interconnection studies and network upgrades. FERC has initiated rulemakings to reform interconnection queue procedures, including the landmark Order No. 2023, but the ultimate impact of these reforms is uncertain. Transmission capacity constraints and interconnection delays could adversely affect our ability to develop and bring new projects to market on a timely basis.
We are subject to environmental permitting requirements under NEPA, the ESA, the Clean Air Act, the Clean Water Act, and other environmental laws.
The development and operation of our projects are subject to environmental review and permitting requirements under the National Environmental Policy Act ("NEPA"), the Endangered Species Act ("ESA"), the Clean Air Act, the Clean Water Act, and other applicable federal, state, and local environmental laws and regulations. Compliance with these requirements may involve the preparation of environmental impact statements, biological assessments, wetland delineation reports, and other analyses, which can be time-consuming and costly. Changes in environmental laws or regulations, or in the interpretation or enforcement of existing laws or regulations, could increase our compliance costs and adversely affect our ability to develop, construct, and operate our projects.
Risks Related to This Offering and Ownership of Our Common Stock
There is no prior public market for our common stock, and the initial public offering price may not be indicative of the price at which our shares will trade following this offering.
Prior to this offering, there has been no public market for our common stock. The initial public offering price per share has been determined by negotiations between us and the underwriters and may not be indicative of the market price of our common stock after this offering. The market price of our common stock following this offering may decline below the initial public offering price, and you may not be able to resell your shares at or above the initial public offering price.
Pinnacle Vista will continue to have significant influence over our corporate decisions after this offering.
After the completion of this offering (assuming the base offering without exercise of the overallotment option), Pinnacle Vista Capital Partners III, LP is expected to beneficially own approximately 44.6% of our outstanding common stock. As a result, Pinnacle Vista will have significant influence over the election and removal of our directors, the approval of significant corporate transactions, and other matters requiring stockholder approval. Pinnacle Vista's interests may differ from the interests of our other stockholders, and Pinnacle Vista may cause us to take actions or make decisions that are not in the best interests of our other stockholders.
We intend to avail ourselves of the "controlled company" exemption under the NYSE listing rules for so long as Pinnacle Vista controls more than 50% of the voting power of our outstanding common stock, which exemption allows us to forgo certain corporate governance requirements, including the requirement that a majority of our board of directors consist of independent directors and the requirement that our compensation committee and nominating and corporate governance committee be composed entirely of independent directors. As a result, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
The definition of "material adverse effect" in the underwriting agreement contains customary carve-outs that may limit the ability of the underwriters to terminate the underwriting agreement.
The underwriting agreement entered into in connection with this offering contains a standard termination provision triggered by the occurrence of a material adverse effect on the Company. However, the definition of "material adverse effect" in the underwriting agreement contains customary carve-outs for (i) changes in general economic or market conditions, (ii) changes in GAAP or applicable law, (iii) changes affecting the renewable-energy or utility industries generally, (iv) natural disasters, pandemics, or acts of war, (v) changes resulting from the announcement or pendency of this offering, and (vi) changes in the Company's stock price or credit rating, in each case to the extent such changes do not disproportionately affect the Company relative to other companies in the renewable energy industry. As a result, certain adverse developments may not constitute a "material adverse effect" for purposes of the underwriting agreement, and the underwriters may not be able to terminate the underwriting agreement in all circumstances that would be detrimental to investors.
Lock-up restrictions will expire after 180 days, and the subsequent sale of substantial amounts of our common stock could adversely affect the market price of our common stock.
Our directors, executive officers, Pinnacle Vista Capital Partners III, LP, and holders of 1% or more of our pre-IPO common stock (approximately 18 persons and entities) have agreed, subject to certain exceptions, not to sell or otherwise dispose of shares of our common stock for a period of 180 days following the date of the final prospectus. After the expiration of the lock-up period, these stockholders will be free to sell their shares in the open market, subject to the provisions of Rule 144 under the Securities Act and the registration rights described in this prospectus. The sale of a significant number of shares following the expiration of the lock-up period, or the perception that such sales may occur, could adversely affect the market price of our common stock and could impair our ability to raise capital through future equity offerings.
Anti-takeover provisions in our charter, bylaws, and Delaware law may delay or prevent changes in control that stockholders may consider favorable.
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain provisions that may delay or prevent a change of control of the Company or changes in our management that our stockholders might consider favorable. These provisions include a classified board of directors with staggered three-year terms, advance-notice requirements for stockholder nominations and proposals, supermajority voting requirements for amendments to certain charter and bylaw provisions, the prohibition of stockholder action by written consent (after such time as Pinnacle Vista ceases to hold a majority of the voting power of our common stock), and the restriction of the ability to call special meetings to the Board of Directors, the Chairman, or the Chief Executive Officer. In addition, our charter contains an exclusive forum provision requiring that certain stockholder actions be brought exclusively in the Delaware Court of Chancery (or, if the Court of Chancery does not have jurisdiction, another state court or federal court located in the State of Delaware).
We are also subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date that the stockholder became an interested stockholder, subject to certain exceptions.
These provisions may discourage proxy contests, tender offers, and other takeover attempts that are not approved by our Board of Directors, even if such transactions could offer our stockholders a premium over the current market price of their shares.
We will be subject to dilution from future equity grants under our equity incentive plans.
We intend to adopt the 2022 Omnibus Equity Incentive Plan with a share reserve of 12,727,273 shares (representing approximately 10% of our post-IPO outstanding common stock on a fully-exercised basis) and the 2022 Employee Stock Purchase Plan with a share reserve of 2,545,455 shares (representing approximately 2% of our post-IPO outstanding common stock). The issuance of shares under these plans will dilute the ownership interest of our existing stockholders, including investors in this offering.
We do not anticipate paying dividends for the foreseeable future.
We do not anticipate paying any cash dividends on our common stock for the foreseeable future. We intend to retain all future earnings, if any, for use in the operation and growth of our business. In addition, our ability to pay dividends is restricted by covenants in our credit agreements. As a result, any return on your investment will depend entirely upon the appreciation in the market price of our common stock, which may not occur.
Risks Related to Our Organizational Structure
Our multi-layered subsidiary structure may limit the ability of our creditors to access the assets of our project-level subsidiaries.
We conduct substantially all of our operations through a multi-layered subsidiary structure. Calloway-Briggs Renewables Inc. owns 100% of CBR Holdings LLC, which in turn owns 100% of Calloway-Briggs Operating Company LLC, which in turn owns 100% of the project-level special purpose vehicles ("SPVs") that hold our individual projects. The assets and cash flows of our project-level SPVs are generally pledged as collateral to secure project-level debt and are subject to restrictions on upstream distributions under the applicable project-finance facilities. As a result, creditors of CBR at the parent level are structurally subordinated to the claims of creditors of our project-level subsidiaries, and the assets of our project-level subsidiaries may not be available to satisfy the claims of parent-level creditors.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on our current expectations and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements are generally identifiable by the use of words such as "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project," "plan," "could," "would," or other similar expressions.
Forward-looking statements contained in this prospectus include, but are not limited to, statements regarding:
• our expected operating capacity, capacity additions, and development pipeline progress;
• our projected revenue growth, Adjusted EBITDA, and other financial metrics;
• the expected construction timelines and commercial operation dates for our projects under construction, including Mesquite Wind (expected Q3 2022) and Cimarron Solar (expected Q1 2023);
• the expected advancement of our development pipeline, including Silverleaf Wind (expected Q4 2024) and Copper Basin Solar + Storage (expected Q2 2025);
• our plans for the use of the net proceeds from this offering;
• our expectations regarding the Term Loan B prepayment and its impact on our capital structure;
• our expectations regarding the future availability and levels of the ITC and PTC;
• the expected timing of the partnership flip for our Solaris West tax-equity partnership (expected 2028);
• our expectations regarding our competitive strengths and growth strategy;
• our expectations regarding future acquisitions and geographic diversification;
• our expectations regarding dividends and share repurchases;
• our expectations regarding regulatory developments and their impact on our business; and
• our ability to maintain and expand our relationships with PPA counterparties, tax-equity investors, and financing sources.
These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, including those described under "Risk Factors" and elsewhere in this prospectus. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, among others:
• changes in wholesale electricity market prices and PPA counterparty creditworthiness;
• construction delays, cost overruns, and supply chain disruptions;
• changes in federal, state, or local laws, regulations, or policies affecting the renewable energy industry;
• changes in tax laws or regulations, including changes affecting the ITC and PTC;
• adverse weather conditions and climate-related physical risks;
• cybersecurity breaches and operational technology failures;
• our ability to attract and retain qualified personnel;
• our ability to maintain compliance with the covenants in our credit agreements;