1015-00001 · Graymont Brothers Inc · Registration Statement

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REGULATORY AND ENVIRONMENTAL OVERVIEW

The following section forms part of the Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the "SEC") for the initial public offering of shares of common stock of Calloway-Briggs Renewables Inc. ("CBR," the "Company," "we," "us," or "our"), a Delaware corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, TX 78746. The purpose of this section is to provide prospective investors with a comprehensive overview of the regulatory and environmental framework applicable to CBR's business as a developer, owner, and operator of utility-scale solar, onshore wind, and battery energy storage projects across the states of Texas, New Mexico, Arizona, California, and Oklahoma. As of the date of this registration statement, CBR's operating portfolio comprises approximately 3.8 gigawatts ("GW") of nameplate generating and storage capacity across 22 projects, with an additional 1.4 GW of capacity currently under construction — specifically, Mesquite Wind (420 MW, Oldham County, Texas) and Cimarron Solar (350 MW, Doña Ana County, New Mexico) — and a development pipeline of approximately 6.2 GW. This section should be read in conjunction with the sections entitled "Risk Factors," "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the consolidated financial statements and related notes included elsewhere in this registration statement.

1. Overview of the U.S. Renewable Energy Regulatory Framework

The development, construction, ownership, and operation of utility-scale renewable energy and battery energy storage projects in the United States are subject to a multi-layered and complex regulatory environment involving federal, state, and local authorities. These authorities regulate, among other things, the generation, transmission, and wholesale and retail sale of electricity; the environmental impacts of project development, construction, and operation; the tax treatment of renewable energy investments; occupational health and safety; and land use and siting. No single federal agency or state body exercises comprehensive jurisdiction over all aspects of CBR's business. Rather, our projects are subject to overlapping and, in some cases, potentially conflicting regulatory requirements imposed by multiple agencies at each level of government.

CBR's operations span five states — Texas, New Mexico, Arizona, California, and Oklahoma — each of which maintains distinct regulatory regimes governing electricity markets, environmental permitting, land use, and taxation. The regulatory frameworks in these states range from the fully deregulated competitive wholesale market administered by the Electric Reliability Council of Texas ("ERCOT") in Texas, to the vertically integrated and more extensively regulated markets overseen by the public utility commissions in Oklahoma and Arizona, to the hybrid competitive and regulated market structures administered by the California Independent System Operator ("CAISO") and the California Public Utilities Commission ("CPUC") in California, and to the Southwest Power Pool ("SPP") market applicable to certain of our projects in Oklahoma and New Mexico. The differences among these regulatory environments create both opportunities and risks for CBR, as discussed in greater detail below and in the section entitled "Risk Factors."

At the federal level, the principal regulatory agencies with jurisdiction over aspects of CBR's business include:

• The Federal Energy Regulatory Commission ("FERC"), which regulates the transmission and wholesale sale of electricity in interstate commerce, oversees the reliability of the bulk power system, and administers interconnection procedures for generating facilities connecting to the interstate transmission grid;

• The North American Electric Reliability Corporation ("NERC"), the FERC-certified Electric Reliability Organization ("ERO"), which develops and enforces mandatory reliability standards applicable to owners and operators of generating facilities interconnected to the bulk power system;

• The U.S. Environmental Protection Agency ("EPA"), which administers and enforces federal environmental statutes including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation, and Liability Act;

• The U.S. Fish and Wildlife Service ("USFWS"), which administers the Endangered Species Act and the Bald and Golden Eagle Protection Act and issues permits related to the incidental take of protected species and eagles;

• The U.S. Army Corps of Engineers, which administers the permitting programs under Section 404 of the Clean Water Act related to the discharge of dredged or fill material into waters of the United States; and

• The Internal Revenue Service ("IRS"), which administers the federal tax incentive programs — principally 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 — that are critical to the economics of renewable energy projects.

At the state level, CBR's principal regulatory counterparts include the state public utility commissions ("PUCs") or their equivalents, state environmental agencies, and state land management offices. Each of these agencies exercises jurisdiction over matters directly affecting the permitting, construction, operation, and revenue generation of our projects.

CBR operates both regulated and unregulated utility operations across its portfolio. Certain of our project-level subsidiaries hold or are subject to regulatory authorizations that impose ongoing compliance obligations, including the maintenance of market-based rate authority from FERC, registration with NERC and its applicable regional entities, and compliance with state-level generation licensing and interconnection requirements. Our failure to comply with any of the regulatory requirements described in this section could result in the imposition of fines, penalties, or sanctions; the loss of permits, authorizations, or licenses critical to our business; delays in project development or construction; or other adverse consequences that could materially and adversely affect our business, financial condition, and results of operations. See "Risk Factors — Risks Related to Regulatory and Environmental Matters."

2. Federal Energy Regulatory Commission (FERC)

2.1 FERC Jurisdiction and Authority

FERC regulates the transmission and wholesale sale of electricity in interstate commerce under the Federal Power Act (the "FPA"), 16 U.S.C. §§ 791a–828c. FERC's jurisdiction extends to the rates, terms, and conditions of wholesale electricity sales by public utilities, the licensing and operation of non-federal hydroelectric projects, the reliability of the bulk power system, and the approval of certain corporate transactions involving jurisdictional public utilities. Under Sections 205 and 206 of the FPA, FERC has the authority to review and approve the rates charged by public utilities for wholesale electricity sales and to ensure that such rates are just, reasonable, and not unduly discriminatory or preferential.

CBR's project-level subsidiaries that sell wholesale electricity in interstate commerce are subject to FERC jurisdiction as public utilities under the FPA. Because the ERCOT grid in Texas operates as an intrastate system and is not synchronously interconnected to the interstate transmission grid (except through certain direct current ties), CBR's Texas-based projects that sell electricity exclusively within the ERCOT market are generally not subject to FERC's wholesale sale and transmission jurisdiction, although FERC retains jurisdiction over the reliability standards applicable to the bulk electric system within ERCOT through NERC and the Texas Reliability Entity. CBR's projects located in Oklahoma, Arizona, New Mexico, and California, which are interconnected to the interstate transmission grid, are more directly subject to FERC's wholesale sale and transmission jurisdiction.

Certain of CBR's smaller generating facilities may qualify as "Qualifying Facilities" ("QFs") under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). QF status provides certain benefits under PURPA, including the right to sell electricity to interconnected electric utilities at their "avoided cost" and exemptions from certain provisions of the FPA and state laws governing electric utilities. While CBR has not historically relied on QF status as a primary commercial strategy, the applicability of PURPA and QF status to certain of our projects is evaluated on a project-by-project basis as part of our regulatory planning.

2.2 Market-Based Rate Authority

CBR's operating subsidiaries that sell wholesale electricity in interstate commerce hold, or have applications pending to obtain, market-based rate ("MBR") authority from FERC. MBR authority permits the holder to sell wholesale power at market-determined prices, rather than at cost-based rates, provided that FERC has determined that the seller and its affiliates do not possess or have adequately mitigated horizontal and vertical market power in the relevant markets. The following CBR subsidiaries currently hold or seek MBR authority:

• Solaris West Solar LLC (450 MW solar, Pecos County, TX) — while the Solaris West project participates in the ERCOT market and its ERCOT sales are not FERC-jurisdictional, CBR has obtained MBR authority for this subsidiary to preserve flexibility for future sales outside ERCOT;

• Red Mesa Wind Energy LLC (380 MW wind, Custer County, OK) — MBR authority granted by FERC, Docket No. ER21-1847-000;

• Painted Rock Solar LLC (320 MW solar, Maricopa County, AZ) — MBR authority granted by FERC, Docket No. ER20-2953-000;

• Pronghorn Wind LLC (510 MW wind, Nolan County, TX) — MBR authority obtained as a precautionary measure, notwithstanding the project's primary participation in the ERCOT market;

• Brazos Energy Storage LLC (200 MW/800 MWh battery storage, Fort Bend County, TX) — MBR authority obtained in connection with potential sales of ancillary services and wholesale electricity to markets interconnected with ERCOT through DC ties; and

• Additional subsidiaries associated with the development pipeline, including those that will own and operate the Copper Basin Solar + Storage project (750 MW solar + 300 MW/1,200 MWh battery storage, Riverside County, CA), which is expected to participate in the CAISO market and will require MBR authority upon commencement of commercial operations.

The issuance and maintenance of MBR authority require CBR's subsidiaries to comply with FERC's regulations governing sellers with MBR authority, including the filing of Electric Quarterly Reports ("EQRs") reflecting the details of all wholesale electricity sales, compliance with affiliate abuse safeguards designed to prevent the exercise of market power through affiliate transactions, and periodic updates to market power analyses as required by FERC. Failure to comply with these requirements could result in the revocation of MBR authority, the imposition of cost-based rate requirements, or the assessment of penalties, any of which could materially and adversely affect the revenues and operations of the affected projects.

In connection with the IPO, CBR has conducted an analysis of whether the offering and associated changes in the Company's ownership structure will constitute a "change in control" of any of its subsidiaries holding MBR authority, which could trigger the requirement to obtain prior FERC approval under Section 203 of the FPA, 16 U.S.C. § 824b, or to file a post-consummation notification under 18 C.F.R. § 35.42. Section 203 of the FPA requires prior FERC approval for, among other things, dispositions of jurisdictional facilities and changes in the upstream ownership or control of public utilities holding MBR authority, unless the transaction falls within a blanket authorization issued by FERC. CBR's analysis considers the pre- and post-IPO ownership structure, including the continued holding by Pinnacle Vista Capital Partners, L.P. ("Pinnacle Vista") of approximately 49% of the post-IPO voting power of CBR on a base offering (before giving effect to the underwriters' option to purchase additional shares). Based on this analysis, CBR has determined that the IPO may require the filing of a post-consummation notification with FERC under 18 C.F.R. § 35.42, and CBR intends to make such filing promptly following the consummation of the offering. CBR does not believe that prior FERC Section 203 approval is required for the IPO; however, there can be no assurance that FERC will not assert jurisdiction or take a contrary position.

2.3 Exempt Wholesale Generator (EWG) Status

Certain of CBR's subsidiaries hold, or may in the future seek, status as "Exempt Wholesale Generators" ("EWGs") under Section 32 of the Public Utility Holding Company Act of 2005 ("PUHCA 2005"), as codified in Section 1262 of the Energy Policy Act of 2005. EWG status is available to entities that are engaged exclusively in the business of owning or operating, or both owning and operating, eligible facilities used for the generation of electric energy exclusively for sale at wholesale, and whose facilities have been determined by FERC to be "eligible facilities." EWG status exempts the holding company of such entities from certain restrictions and regulatory requirements that would otherwise apply under PUHCA 2005, including limitations on the types of businesses in which holding company subsidiaries may engage and the types of financing they may undertake. CBR has obtained or intends to obtain EWG status for its project-level subsidiaries where such status is advantageous from a regulatory and financing perspective.

2.4 FERC Reliability Standards and Interconnection

The interconnection of CBR's generating facilities to the transmission grid is governed by interconnection agreements entered into with the applicable transmission providers. For projects interconnected to the interstate transmission grid outside ERCOT, these interconnection agreements are subject to FERC-jurisdictional Open Access Transmission Tariffs ("OATTs") and are processed through the Large Generator Interconnection Procedures ("LGIPs") established under FERC Order No. 2003 and its progeny. The interconnection process involves the preparation and processing of Large Generator Interconnection Agreements ("LGIAs"), which specify the technical requirements, cost allocation, and schedule for interconnecting the generating facility to the transmission system.

The FERC interconnection process has historically been subject to significant delays due to the volume of interconnection requests pending in the queues of the various regional transmission organizations ("RTOs") and independent system operators ("ISOs"), as well as the complexity of the studies required to evaluate the impact of proposed interconnections on the transmission system. These delays have been a material constraint on the pace of renewable energy development across the United States. In response to these challenges, FERC issued Order No. 2023 on July 28, 2023, which adopted comprehensive reforms to the interconnection procedures applicable to FERC-jurisdictional transmission providers, including the transition from a serial "first-come, first-served" study process to a "first-ready, first-served" cluster study process, the imposition of financial readiness requirements for interconnection customers, and the establishment of firm deadlines for the completion of interconnection studies.

The implementation of FERC Order No. 2023 may have significant implications for CBR's development pipeline of approximately 6.2 GW. While the reforms are intended to accelerate the processing of viable interconnection requests and reduce the backlog of speculative projects in the queue, the transition to the new procedures may create uncertainty regarding the status and timing of CBR's existing and future interconnection requests. CBR is closely monitoring the implementation of Order No. 2023 by the applicable transmission providers and RTOs/ISOs and is adjusting its development strategy accordingly.

For CBR's Texas-based projects, interconnection is processed through ERCOT's interconnection procedures, which are administered by ERCOT and the Public Utility Commission of Texas ("PUCT") rather than FERC. ERCOT's interconnection process involves the submission of an interconnection request, the conduct of screening and full interconnection studies, and the execution of an interconnection agreement with the applicable transmission service provider. While ERCOT is not subject to FERC Order No. 2023, ERCOT has implemented its own interconnection queue reforms in recent years to address the significant backlog of interconnection requests in the ERCOT region.

3. North American Electric Reliability Corporation (NERC)

3.1 Mandatory Reliability Standards

NERC, as the FERC-certified Electric Reliability Organization under Section 215 of the FPA, is responsible for developing, implementing, and enforcing mandatory reliability standards for the planning, design, and operation of the bulk power system in North America. These standards are designed to ensure the reliable operation of the interconnected transmission grid and to protect against instability, uncontrolled separation, and cascading failures that could result in widespread power outages. NERC reliability standards are binding on all users, owners, and operators of the bulk power system, including generators, transmission owners, and other registered entities.

CBR's generating facilities that are interconnected to the bulk power system are subject to applicable NERC reliability standards. As an owner and operator of generating facilities, CBR is required to register with NERC in the applicable functional categories — principally as a Generator Owner ("GO") and Generator Operator ("GOP") — and to comply with the reliability standards applicable to those functional categories. These standards address a wide range of operational, technical, and cybersecurity requirements, including protection system maintenance and testing, facility ratings, generator performance, modeling and data requirements, and Critical Infrastructure Protection ("CIP") cybersecurity standards.

3.2 Regional Entity Compliance

NERC delegates certain compliance monitoring and enforcement functions to regional entities, which serve as the primary points of contact for registered entities within their geographic or electrical footprint. CBR's projects fall within the jurisdictions of multiple NERC regional entities, depending on the project's location and electrical interconnection:

• Texas projects — Solaris West Solar (Pecos County), Pronghorn Wind (Nolan County), Brazos Energy Storage (Fort Bend County), and Mesquite Wind (Oldham County, under construction) are located within the ERCOT region and are subject to the compliance monitoring and enforcement jurisdiction of the Texas Reliability Entity ("Texas RE"). Texas RE is the regional entity responsible for ensuring the reliability and security of the ERCOT bulk power system and for monitoring compliance with NERC reliability standards within the ERCOT region.

• Oklahoma project — Red Mesa Wind (Custer County, OK) is interconnected to the Southwest Power Pool ("SPP") transmission system and is subject to the compliance monitoring and enforcement jurisdiction of the Southwest Power Pool Regional Entity ("SPP RE"). SPP RE oversees reliability compliance for entities registered within the SPP region.

• Arizona project — Painted Rock Solar (Maricopa County, AZ) is interconnected to the Western Interconnection and is subject to the compliance monitoring and enforcement jurisdiction of the Western Electricity Coordinating Council ("WECC"). WECC serves as the regional entity for the Western Interconnection, encompassing all or portions of the states west of the Rocky Mountains, as well as the western provinces of Canada and the northern portion of Baja California, Mexico.

• New Mexico project — Cimarron Solar (Doña Ana County, NM, under construction) will be interconnected to either the WECC or the SPP transmission system, depending on the final interconnection configuration. The applicable regional entity — WECC or SPP RE — will exercise compliance monitoring and enforcement jurisdiction over the project upon its registration with NERC and commencement of commercial operations.

• California development pipeline project — Copper Basin Solar + Storage (Riverside County, CA) will be interconnected to the CAISO-controlled grid within the Western Interconnection and will be subject to the compliance monitoring and enforcement jurisdiction of WECC.

CBR's compliance obligations under NERC reliability standards encompass a broad range of requirements applicable to generation owners and operators, including, without limitation:

• Protection system maintenance, testing, and documentation standards;

• Generator facility ratings methodology and validation;

• Modeling, data, and analysis requirements for generation resources;

• Vegetation management standards for any transmission assets owned by CBR;

• Event analysis and reporting requirements for system disturbances and reliability events; and

• Critical Infrastructure Protection ("CIP") cybersecurity standards, which require the identification and protection of critical cyber assets, the implementation of electronic security perimeters and access controls, personnel risk assessments, security awareness training, and incident response planning.

CBR has implemented internal compliance programs, policies, and procedures designed to ensure ongoing compliance with all applicable NERC reliability standards. These programs include dedicated compliance personnel, periodic self-assessments and internal audits, compliance monitoring tools, training programs for operations and maintenance personnel, and documented corrective action processes for identified deficiencies.

3.3 Penalties for Non-Compliance

Violations of NERC reliability standards can result in the imposition of substantial penalties. Under Section 215 of the FPA, NERC and its regional entities are authorized to impose penalties of up to $1,000,000 per violation per day for violations of mandatory reliability standards. In practice, the severity of penalties depends on a range of factors, including the nature and severity of the violation, the risk posed to the reliability of the bulk power system, the entity's compliance history, the effectiveness of the entity's internal compliance program, and the entity's cooperation in the investigation and resolution of the violation. Penalties may also include directives to implement specific corrective actions, enhanced compliance monitoring, and other non-monetary sanctions.

CBR has not been the subject of any material NERC enforcement actions or penalties as of the date of this registration statement. However, there can be no assurance that violations will not occur in the future or that any future violations would not result in penalties or other consequences that could materially and adversely affect our business, financial condition, or results of operations. CBR maintains internal compliance programs and continuous monitoring processes to identify and address potential compliance issues before they escalate to enforcement actions.

4. State Public Utility Commission Regulation

4.1 Texas — Public Utility Commission of Texas (PUCT) and ERCOT

Texas operates a competitive, deregulated wholesale electricity market that is unique among the states in which CBR operates. The wholesale electricity market in Texas is administered by ERCOT, a membership-based, independent system operator that manages the flow of electric power to approximately 26 million customers, representing approximately 90% of the state's electric load. Unlike other major wholesale electricity markets in the United States, the ERCOT market is an energy-only market, meaning that generators are compensated primarily for the energy they produce and deliver to the market, rather than through a separate capacity market mechanism. ERCOT also administers markets for ancillary services, including regulation, responsive reserves, and non-spinning reserves.

CBR's Texas projects participate in the ERCOT wholesale electricity market:

• Solaris West Solar — 450 MW solar photovoltaic facility located in Pecos County, Texas. Commercial operations date: June 2020. Participates in the ERCOT day-ahead and real-time energy markets.

• Pronghorn Wind — 510 MW onshore wind facility located in Nolan County, Texas. Commercial operations date: November 2019. Participates in the ERCOT energy and ancillary services markets.

• Brazos Energy Storage — 200 MW / 800 MWh lithium-ion battery energy storage facility located in Fort Bend County, Texas. Commercial operations date: March 2022. Participates in the ERCOT energy and ancillary services markets.

• Mesquite Wind — 420 MW onshore wind facility under construction in Oldham County, Texas. Expected commercial operations date: Q2 2023. Upon completion, the facility will participate in the ERCOT energy and ancillary services markets.

The PUCT oversees the reliability and adequacy of the ERCOT grid, the design of the ERCOT wholesale market, and the regulation of retail electric service in areas of the state where retail competition has been introduced. The PUCT does not directly regulate wholesale electricity rates in the competitive ERCOT market; rather, wholesale prices are determined by market forces through the ERCOT energy and ancillary services markets. However, the PUCT has broad authority to adopt rules and protocols governing the operation of the ERCOT market, including market design changes that can significantly affect the revenue opportunities and risks faced by generators and storage providers participating in the market. Recent PUCT rulemaking and ERCOT protocol changes — including the implementation of the Performance Credit Mechanism ("PCM") or other reliability-focused market reforms proposed in the wake of Winter Storm Uri in February 2021 — could materially affect the economics of CBR's Texas projects.

ERCOT protocols and operating guides establish the detailed rules governing dispatch, scheduling, metering, settlement, and ancillary service procurement within the ERCOT market. CBR's Texas projects are registered as ERCOT market participants and are required to comply with all applicable ERCOT protocols, operating guides, and procedures, including registration and qualification requirements, real-time operational requirements, telemetry and communication standards, and settlement and billing procedures.

4.2 Oklahoma — Oklahoma Corporation Commission (OCC)

CBR's Red Mesa Wind project (380 MW, Custer County, OK) is located within the jurisdiction of the Oklahoma Corporation Commission ("OCC"), which is the principal regulatory body for electric utilities and generation facilities in the State of Oklahoma. Oklahoma maintains a largely vertically integrated utility structure, in which the major investor-owned utilities — principally Penrose Corporation and Tidewater Enterprises — own and operate generation, transmission, and distribution facilities and provide bundled retail electric service to end-use customers under rates regulated by the OCC.

Under Oklahoma law, independent power producers such as CBR are not classified as "public utilities" subject to the OCC's rate-setting jurisdiction, provided that they sell electricity at wholesale rather than directly to retail customers. However, the OCC exercises jurisdiction over certain aspects of generation facility development, including the approval of power purchase agreements entered into by regulated Oklahoma utilities as part of their resource procurement processes. The Red Mesa Wind project sells its output under a long-term PPA with an investment-grade Oklahoma utility, the terms of which were subject to OCC review and approval as part of the utility's integrated resource planning and procurement process.

Oklahoma law provides for the licensing and regulation of wind energy facilities, including requirements related to setback distances from occupied structures, aviation safety lighting, decommissioning obligations, and financial assurance. CBR has obtained all required state and local permits and approvals for the Red Mesa Wind project and maintains compliance with all applicable Oklahoma regulatory requirements.

4.3 Arizona — Arizona Corporation Commission (ACC)

CBR's Painted Rock Solar project (320 MW, Maricopa County, AZ) is located within the jurisdiction of the Arizona Corporation Commission ("ACC"), which regulates electric utilities and oversees the generation, transmission, and distribution of electricity in the State of Arizona. The ACC exercises jurisdiction over the rates and service of regulated electric utilities, approves utility resource procurement plans, and administers Arizona's Renewable Energy Standard and Tariff ("REST").

The REST, originally adopted by the ACC in 2006, established a renewable portfolio standard requiring regulated electric utilities in Arizona to derive a specified percentage of their retail energy sales from eligible renewable energy resources. Although the REST has been the subject of ongoing regulatory and political debate — including a 2018 ballot initiative that sought to increase the standard to 50% by 2030, which was not approved by voters — the existing REST requirements continue to create demand for renewable energy resources in Arizona, including solar generation.

The Painted Rock Solar project sells its output under a long-term PPA with a regulated Arizona utility. The terms of the PPA, including the pricing structure and contract duration, were reviewed by the ACC in the context of the utility's resource procurement and integrated resource planning processes. CBR has obtained all required ACC and state-level permits and approvals for the Painted Rock Solar project, including generation facility certification and siting approvals under applicable ACC rules and Arizona statutes. CBR maintains compliance with all ongoing regulatory obligations applicable to the project.

4.4 New Mexico — New Mexico Public Regulation Commission (NMPRC)

CBR's Cimarron Solar project (350 MW, Doña Ana County, NM, currently under construction) is located within the jurisdiction of the New Mexico Public Regulation Commission ("NMPRC"), which is the principal regulatory body for electric utilities in the State of New Mexico. The NMPRC exercises jurisdiction over the rates, services, and resource procurement of regulated electric utilities, including the approval of power purchase agreements and resource plans.

New Mexico has adopted one of the more ambitious state-level renewable energy policies in the United States. The New Mexico Energy Transition Act ("ETA"), enacted in 2019, established aggressive renewable energy and clean energy standards, requiring regulated electric utilities to achieve 50% renewable energy by 2030, 80% renewable energy by 2040, and 100% zero-carbon resources by 2045. The ETA also provided a framework for the securitization of costs associated with the early retirement of coal-fired power plants, accelerating the transition to renewable energy resources in the state.

The policy environment created by the ETA has generated significant demand for new renewable energy resources in New Mexico, supporting the economic viability of the Cimarron Solar project and other projects in CBR's New Mexico development pipeline. CBR is in the process of obtaining all required state and local permits and approvals for the Cimarron Solar project, including generation facility certification, environmental review, and siting approvals under applicable NMPRC rules and New Mexico law.

4.5 California — California Public Utilities Commission (CPUC)

CBR's Copper Basin Solar + Storage project (750 MW solar photovoltaic + 300 MW / 1,200 MWh battery energy storage, Riverside County, CA) is in the development pipeline and, upon completion, will be located within the jurisdiction of the California Public Utilities Commission ("CPUC") and will participate in the wholesale electricity market administered by the California Independent System Operator ("CAISO").

California has the most expansive and mature renewable energy regulatory framework of any state in which CBR operates. The state's Renewables Portfolio Standard ("RPS"), as amended by Senate Bill 100 in 2018, requires that retail sellers of electricity procure at least 60% of their retail electricity sales from eligible renewable energy resources by 2030, with a goal of achieving 100% zero-carbon electricity by 2045. These requirements create substantial ongoing demand for new renewable energy and energy storage resources to meet the state's ambitious clean energy targets.

The CPUC administers a comprehensive Integrated Resource Planning ("IRP") process through which regulated electric utilities and other load-serving entities are required to develop resource plans that identify the mix of generation, storage, and demand-side resources needed to meet their customers' electricity needs reliably and at reasonable cost while achieving the state's environmental and energy policy objectives. The IRP process has identified a need for tens of thousands of megawatts of new renewable energy and energy storage capacity in California over the coming decades, supporting the commercial viability of the Copper Basin Solar + Storage project.

In addition to the IRP process, the CPUC administers Resource Adequacy ("RA") requirements that require load-serving entities to demonstrate that they have secured sufficient capacity commitments to meet their forecasted peak demand plus a planning reserve margin. The RA requirements create additional contracting opportunities for resource providers, including solar and battery storage facilities, which can provide both energy and capacity value to the California market.

CBR's Copper Basin Solar + Storage project will be required to comply with CAISO's market rules and tariff provisions governing the participation of generating and storage resources in the CAISO wholesale electricity market, including requirements related to scheduling, dispatch, metering, settlements, and compliance with CAISO reliability standards. CBR intends to seek the necessary CAISO interconnection and market participation approvals in connection with the development of the Copper Basin project.

4.6 Multi-State Regulatory Risks

CBR's geographic diversification across five states, while providing risk mitigation benefits, also exposes the Company to the risk of differing and changing state regulatory requirements. Each of the five states in which CBR operates maintains its own regulatory framework for electricity markets, environmental permitting, land use, taxation, and renewable energy policy. Changes in any of these state-level regulatory frameworks — whether through legislative action, regulatory rulemaking, or ballot initiative — could adversely affect the economics of CBR's existing projects, the terms and enforceability of its power purchase agreements, the timeline and cost of interconnection and permitting processes, and the commercial viability of projects in its development pipeline.

Specific multi-state regulatory risks include, without limitation: (i) changes in state renewable portfolio standards or clean energy mandates that could reduce demand for CBR's renewable energy output or reduce the value of renewable energy credits; (ii) changes in state permitting or siting requirements that could delay project development or increase permitting costs; (iii) changes in state tax policy that could reduce or eliminate state-level tax incentives for renewable energy; (iv) changes in state utility regulation that could affect the ability of regulated utilities to enter into or honor long-term PPAs with independent power producers; and (v) the adoption of new state regulations applicable to battery energy storage systems, including safety, siting, and decommissioning requirements, that could increase the cost of storage projects. See "Risk Factors — Risks Related to Regulatory and Environmental Matters — We are subject to complex and evolving state regulatory requirements across the five states in which we operate, and changes in those requirements could adversely affect our business."

5. Federal Tax Incentives — Investment Tax Credit (ITC) and Production Tax Credit (PTC)

5.1 Overview of ITC and PTC Framework

Federal tax incentives have been, and continue to be, a critical component of the economics of renewable energy development in the United States. The Internal Revenue Code of 1986, as amended, provides two primary tax credit mechanisms for renewable energy facilities:

• The Investment Tax Credit ("ITC"), codified in Section 48 of the Code, which provides a one-time tax credit based on a percentage of the eligible capital cost of qualifying energy property, including solar energy property and, more recently, standalone energy storage property; and

• The Production Tax Credit ("PTC"), codified in Section 45 of the Code, which provides a per-kilowatt-hour tax credit for electricity generated from qualifying renewable energy resources, including wind energy, during the first ten years of a facility's operation.

These federal tax incentives have been the principal drivers of renewable energy project development in the United States for over two decades, and they remain fundamental to the financial returns and investment decisions underlying CBR's operating portfolio, construction-stage projects, and development pipeline. The availability, magnitude, and duration of the ITC and PTC are subject to the terms of the Code as amended from time to time by congressional legislation, and any reduction, modification, or elimination of these incentives could materially and adversely affect CBR's business, financial condition, and results of operations.

5.2 ITC — Solar and Battery Storage

CBR's solar energy projects — Solaris West Solar (450 MW, Pecos County, TX), Painted Rock Solar (320 MW, Maricopa County, AZ), Cimarron Solar (350 MW, Doña Ana County, NM, under construction), and Copper Basin Solar (750 MW, Riverside County, CA, development pipeline) — and battery energy storage projects — Brazos Energy Storage (200 MW / 800 MWh, Fort Bend County, TX) and the storage component of Copper Basin Solar + Storage (300 MW / 1,200 MWh, Riverside County, CA, development pipeline) — are eligible for the ITC under Section 48 of the Code.

The ITC rate for solar energy property that satisfies the applicable begin-construction requirements has historically been set at 30% of the eligible capital cost of the property, subject to phase-down schedules enacted by Congress and potential modifications or extensions through subsequent legislation. The ITC for solar energy property was extended and modified by the Consolidated Appropriations Act, 2021 and, more recently, by the Inflation Reduction Act of 2022 (the "IRA"), which provided for a base ITC rate and bonus credits for meeting domestic content, energy community, and prevailing wage and apprenticeship requirements.

The eligibility of standalone energy storage property for the ITC has been the subject of significant legislative and industry attention. Prior to the enactment of the IRA, the ITC was generally available for energy storage systems only to the extent they were integrated with and charged exclusively by a qualifying solar energy installation. The IRA extended ITC eligibility to standalone energy storage technology, defined to include battery storage systems with a capacity of not less than five kilowatt-hours, effective for projects that begin construction after December 31, 2022. This legislative development is expected to enhance the economics and attractiveness of CBR's standalone and co-located battery storage projects, including the Brazos Energy Storage project and the storage component of the Copper Basin Solar + Storage project.

To qualify for the ITC, a project must satisfy the applicable "begin construction" requirements established by the IRS. The IRS has issued a series of notices providing safe harbors for determining when construction of a qualifying facility has begun, including:

• The Physical Work Test, which requires that physical work of a significant nature has begun on the project or on equipment manufactured or produced for the project; and

• The Five Percent Safe Harbor, which deems construction to have begun when the taxpayer has paid or incurred at least five percent of the total cost of the facility.

These safe harbors were established and elaborated upon in a series of IRS Notices, including IRS Notices 2013-29, 2013-60, 2014-46, 2015-25, 2016-31, 2017-04, 2018-59, 2019-43, 2020-41, and 2021-5. In addition, the IRS has established a continuity-of-construction requirement, under which a taxpayer must demonstrate continuous efforts to advance the project toward completion after satisfying the begin-construction requirement. The IRS has provided a safe harbor deeming the continuity requirement to be satisfied if the project is placed in service within four years of the date on which construction begins (the "four-year safe harbor"), subject to extensions for certain force majeure events.

CBR carefully tracks and documents its compliance with the begin-construction safe harbors and continuity-of-construction requirements for each of its solar and storage projects, including maintaining contemporaneous records of physical work activities, equipment procurement, and project expenditures.

5.3 PTC — Wind Energy

CBR's onshore wind energy projects — Red Mesa Wind (380 MW, Custer County, OK), Pronghorn Wind (510 MW, Nolan County, TX), Mesquite Wind (420 MW, Oldham County, TX, under construction), and Silverleaf Wind (a development pipeline project) — are eligible for the PTC under Section 45 of the Code.

The PTC provides a per-kilowatt-hour tax credit for electricity generated by a qualifying wind energy facility and sold to an unrelated party during the first ten years of the facility's operation. The PTC rate is adjusted annually for inflation and is determined based on the rate in effect at the time the facility is placed in service. For wind facilities placed in service in recent years, the PTC rate has been approximately $0.026 per kilowatt-hour (as adjusted for inflation), and the credit is available for a ten-year period beginning on the date the facility is placed in service.

As with the ITC, eligibility for the PTC requires that the wind facility satisfy the applicable begin-construction requirements, which are governed by the same Physical Work Test, Five Percent Safe Harbor, and continuity-of-construction standards described in Section 5.2 above. CBR has satisfied or is in the process of satisfying the begin-construction requirements for each of its wind energy projects and maintains documentation supporting its compliance with the applicable safe harbors.

The PTC has been subject to multiple expirations, extensions, and modifications by Congress over the past two decades, creating a pattern of policy uncertainty that has at times disrupted investment decisions and development timelines for wind energy projects. The IRA enacted in August 2022 provided a significant extension of the PTC for wind energy projects, which is expected to provide greater policy certainty for CBR's wind development pipeline.

5.4 Tax-Equity Partnership Structures

CBR utilizes tax-equity partnership-flip structures as a primary mechanism for monetizing the ITC and PTC benefits associated with its renewable energy projects. Under a typical partnership-flip structure, CBR forms a project-level partnership (taxed as a partnership for federal income tax purposes) with a tax-equity investor, which contributes capital to the partnership in exchange for an allocation of the project's tax benefits (ITC or PTC credits and accelerated depreciation deductions) and a preferred economic return during the initial period of the partnership. After a specified date or the achievement of a target return for the tax-equity investor (the "flip" date), the allocation of partnership cash flows and tax benefits is restructured, with CBR receiving a substantially greater share of the partnership's economic interests and the tax-equity investor's interest being reduced to a nominal percentage.

As a representative example, the Solaris West Solar project is structured as a tax-equity partnership with Veltara Basin Financial LLC, a subsidiary of a major national financial institution. Veltara Basin Financial LLC contributed approximately $280,000,000 to the Solaris West partnership in exchange for an initial allocation of the project's ITC and accelerated depreciation benefits and a preferred economic return. The partnership flip for the Solaris West project is expected to occur in 2028, after which CBR's share of partnership cash flows will increase significantly. As of the date of this registration statement, the Solaris West tax-equity partnership is performing in accordance with the terms of the partnership agreement, and Veltara Basin Financial LLC's invested capital has been substantially deployed.

A significant risk associated with the ITC is the potential for recapture. Under Section 50(a) of the Code, if a project for which the ITC has been claimed is disposed of, or otherwise ceases to be eligible property, within five years of being placed in service, a portion of the ITC previously claimed must be recaptured (i.e., repaid to the IRS). The recapture amount is determined based on the number of years remaining in the five-year recapture period at the time of the disposition or disqualifying event. CBR has analyzed whether the IPO and associated changes in the Company's upstream ownership structure could constitute a disposition or other event triggering ITC recapture for any of its ITC-eligible projects. Based on this analysis, CBR has concluded that the IPO should not trigger ITC recapture because the project-level ownership of the applicable tax-equity partnerships will not change as a result of the offering — the IPO involves the issuance and sale of shares of CBR's common stock at the holding-company level, and the project-level partnerships through which the ITC-eligible assets are held will continue to be owned by the same entities before and after the IPO. However, there can be no assurance that the IRS will not take a contrary position, and any successful assertion by the IRS that the IPO triggers ITC recapture could result in material tax liabilities for the affected project-level partnerships and, indirectly, for CBR.

CBR accounts for its interests in tax-equity partnerships using the Hypothetical-Liquidation-at-Book-Value ("HLBV") methodology, which is a balance-sheet approach for allocating net income or loss from the partnership to each partner based on the change in each partner's claim to the partnership's net assets during the period, as determined under the partnership agreement. The HLBV methodology is widely used in the renewable energy industry for partnerships with complex allocation provisions, such as partnership-flip structures, and is consistent with accounting guidance under ASC 970-323 (Real Estate — General — Investments — Equity Method and Joint Ventures). The application of HLBV accounting can result in significant variability in the timing and amount of income or loss recognized by CBR from its tax-equity partnerships, which can affect the comparability of CBR's financial results from period to period. The SEC Staff has scrutinized the HLBV disclosures and accounting policies of registrants in the renewable energy industry, and CBR has addressed SEC comment letter inquiries regarding its HLBV disclosures in Amendment Nos. 1 and 2 to this registration statement.

5.5 Legislative and Policy Risk

Federal tax incentives for renewable energy, including the ITC and PTC, are entirely dependent on congressional action and are subject to the risk of modification, phase-down, or repeal through future legislation. While the enactment of the IRA in August 2022 provided a significant extension and expansion of the ITC and PTC, there can be no assurance that these incentives will remain available at their current levels or in their current form throughout the useful lives of CBR's projects or the development timeline of its pipeline.

A reduction or elimination of the ITC or PTC would have a material adverse effect on the economics of CBR's projects and its development pipeline by reducing the tax benefits available to tax-equity investors, which would in turn reduce the amount of tax-equity capital available to finance new projects and increase the cost of capital for project development. The loss of these incentives could also reduce the competitiveness of renewable energy relative to conventional generation technologies, potentially reducing the demand for renewable energy and the value of CBR's existing operating projects.

In addition to federal tax incentives, CBR's projects may benefit from state-level tax incentives and the generation and sale of Renewable Energy Credits ("RECs") or similar environmental attributes, which provide supplemental revenue streams. The availability and value of these state-level incentives and environmental attributes are subject to state legislative and regulatory action and market conditions and may change over time.

6. Environmental Compliance — Federal Laws

6.1 National Environmental Policy Act (NEPA)

The National Environmental Policy Act of 1969 ("NEPA"), 42 U.S.C. §§ 4321–4347, requires federal agencies to assess the environmental impacts of "major federal actions significantly affecting the quality of the human environment" before taking such actions. NEPA applies to a wide range of federal agency decisions, including the issuance of permits, the provision of federal funding, and the approval of projects on federal lands. NEPA does not apply to purely private actions that do not involve federal agency approval, funding, or land use.

NEPA may be applicable to CBR's projects in several circumstances, including:

• Projects located on federal or mixed-ownership lands, including lands managed by the Bureau of Land Management ("BLM"), the U.S. Forest Service, or other federal agencies;

• Projects requiring federal permits, such as permits under Section 404 of the Clean Water Act issued by the U.S. Army Corps of Engineers, or permits under the Endangered Species Act issued by the USFWS;

• Projects involving the construction of transmission interconnection facilities on federal lands or across federal rights-of-way; and

• Projects that receive federal financial assistance, loan guarantees, or other federal funding.

When NEPA is triggered, the responsible federal agency must prepare an environmental review document, the scope and depth of which depends on the significance of the potential environmental impacts. For actions that may significantly affect the environment, the agency must prepare a detailed Environmental Impact Statement ("EIS"), which involves a comprehensive analysis of the proposed action, alternatives to the proposed action, and the environmental consequences of the proposed action and alternatives. The EIS process includes public notice and comment periods and typically takes 18 months to several years to complete. For actions with less significant environmental impacts, the agency may prepare a shorter Environmental Assessment ("EA"), which evaluates whether the proposed action will have a significant environmental impact and, if not, results in a Finding of No Significant Impact ("FONSI"). Certain categories of federal actions that have been determined to have no significant environmental impact may qualify for Categorical Exclusions ("CatEx"), which exempt the action from the requirement to prepare an EA or EIS.

NEPA review can be a time-consuming and costly process, particularly for large-scale renewable energy projects that require multiple federal permits or that are located on or near federal lands. Delays in the NEPA process can delay the commencement of construction and increase project development costs. In addition, the NEPA process provides opportunities for public participation and legal challenge, and lawsuits challenging the adequacy of NEPA environmental reviews have been filed in connection with renewable energy projects across the United States.

6.2 Endangered Species Act (ESA)

The Endangered Species Act of 1973 (the "ESA"), 16 U.S.C. §§ 1531–1544, is the primary federal statute for the protection of threatened and endangered species and their habitats. The ESA is administered jointly by the USFWS (for terrestrial and freshwater species) and the National Marine Fisheries Service ("NMFS") (for marine and anadromous species). The ESA prohibits the "take" of any species listed as endangered and, by regulation, most species listed as threatened. "Take" is broadly defined to include harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct. The term "harm" has been interpreted by the USFWS to include significant habitat modification or degradation that actually kills or injures wildlife.

The ESA is relevant to CBR's projects in several significant respects:

Wind Projects — Avian and Bat Mortality Risk. Wind energy projects present ongoing risks of avian and bat mortality due to collisions with turbine blades and towers. Species of particular concern at CBR's wind project sites include golden eagles (Aquila chrysaetos), bald eagles (Haliaeetus leucocephalus), and various migratory bird species, as well as listed bat species such as the northern long-eared bat (Myotis septentrionalis) and the Indiana bat (Myotis sodalis). CBR's wind projects — Red Mesa Wind, Pronghorn Wind, Mesquite Wind, and development pipeline projects — are located in areas where eagles, migratory birds, and listed bat species are known or expected to occur, and the risk of incidental take of these species is an ongoing operational and regulatory consideration.

Solar Projects — Desert and Grassland Habitat Impacts. Utility-scale solar development in the southwestern United States can affect habitat for listed species, including the desert tortoise (Gopherus agassizii and Gopherus morafkai) in Arizona, California, and New Mexico, and the lesser prairie-chicken (Tympanuchus pallidicinctus) in Texas, Oklahoma, and New Mexico. The construction and operation of solar facilities may result in habitat loss, fragmentation, or degradation that could constitute "harm" under the ESA. CBR conducts pre-construction species surveys and habitat assessments for all of its solar projects to identify and address potential ESA compliance issues.

Battery Storage Projects. Battery energy storage projects, while generally having a smaller land footprint than solar or wind projects, are still subject to site-specific habitat assessments to identify any listed species or critical habitat that could be affected by project construction or operation.

The ESA provides two principal mechanisms for authorizing the incidental take of listed species in connection with otherwise lawful activities:

• Section 7 Consultation. For projects with a "federal nexus" — i.e., projects that require federal agency permits, approvals, or funding — the responsible federal agency must consult with the USFWS under Section 7 of the ESA to ensure that the proposed action is not likely to jeopardize the continued existence of any listed species or result in the destruction or adverse modification of designated critical habitat. The Section 7 consultation process may result in the issuance of a Biological Opinion that includes an incidental take statement authorizing a specified level of incidental take, subject to reasonable and prudent measures and terms and conditions designed to minimize the impact of the taking.

• Section 10 Incidental Take Permits. For projects without a federal nexus, the project proponent may apply to the USFWS for an Incidental Take Permit ("ITP") under Section 10(a)(1)(B) of the ESA. An ITP authorizes the incidental take of listed species associated with the project, provided that the applicant prepares and implements a Habitat Conservation Plan ("HCP") that specifies the impact, the steps to minimize and mitigate the impact, and the funding available to implement the plan. The Section 10 permitting process can be lengthy and costly, particularly for large-scale projects that affect multiple listed species.

In addition to the ESA, CBR's wind projects are subject to the requirements of the Bald and Golden Eagle Protection Act ("BGEPA"), 16 U.S.C. §§ 668–668d, which prohibits the take of bald and golden eagles without a permit. The USFWS issues Eagle Take Permits under the BGEPA that authorize the incidental take of eagles associated with wind energy operations, subject to mitigation requirements such as the implementation of avian monitoring and management plans, the curtailment of turbine operations during periods of high eagle activity, and compensatory mitigation (e.g., electrocution-risk reduction at utility poles). CBR has obtained or is in the process of obtaining Eagle Take Permits for its wind projects located in areas where eagle collision risk has been identified.

CBR engages Greenridge Environmental Sciences LLC, headquartered at 8400 Shoal Creek Blvd., Suite 200, Austin, TX 78757, under the direction of Dr. Nadine Torres, Principal Scientist, to conduct Phase I and Phase II environmental site assessments, pre-construction species surveys, habitat assessments, and environmental permitting support for CBR's project portfolio. Greenridge Environmental Sciences provides CBR with expert guidance on ESA compliance, BGEPA permitting, and other environmental regulatory matters.

6.3 Clean Air Act (CAA)

The Clean Air Act (the "CAA"), 42 U.S.C. §§ 7401–7671q, is the principal federal statute governing air quality and the emission of air pollutants. The CAA establishes National Ambient Air Quality Standards ("NAAQS") for criteria pollutants, requires the issuance of permits for major sources and certain minor sources of air emissions, and regulates emissions of hazardous air pollutants. The CAA is administered by the EPA and implemented through State Implementation Plans ("SIPs") adopted by each state.

Renewable energy projects such as those developed and operated by CBR generally have minimal direct air emissions during normal operations, as solar, wind, and battery storage facilities do not combust fossil fuels to generate electricity. As a result, the CAA is less directly applicable to CBR's operations than it would be for fossil-fuel-fired generating facilities. However, certain aspects of the CAA may apply to CBR's construction and operational activities:

• Construction-Phase Dust Emissions. The construction of utility-scale solar, wind, and battery storage facilities involves extensive land disturbance, grading, and earthmoving activities that can generate fugitive dust emissions, including particulate matter (PM10 and PM2.5). In areas classified as nonattainment or maintenance areas for particulate matter under the NAAQS, dust control measures may be required under the applicable SIP. CBR implements dust suppression measures (water application, soil stabilizers, speed limits, and revege

REGULATORY AND ENVIRONMENTAL OVERVIEW
The following section forms part of the Registration Statement on Form S-1 filed with the Securities and Exchange Commission (the "SEC") for the initial public offering of shares of common stock of Calloway-Briggs Renewables Inc. ("CBR," the "Company," "we," "us," or "our"), a Delaware corporation headquartered at 4200 Ridgeline Parkway, Suite 1100, Austin, TX 78746. The purpose of this section is to provide prospective investors with a comprehensive overview of the regulatory and environmental framework applicable to CBR's business as a developer, owner, and operator of utility-scale solar, onshore wind, and battery energy storage projects across the states of Texas, New Mexico, Arizona, California, and Oklahoma. As of the date of this registration statement, CBR's operating portfolio comprises approximately 3.8 gigawatts ("GW") of nameplate generating and storage capacity across 22 projects, with an additional 1.4 GW of capacity currently under construction — specifically, Mesquite Wind (420 MW, Oldham County, Texas) and Cimarron Solar (350 MW, Doña Ana County, New Mexico) — and a development pipeline of approximately 6.2 GW. This section should be read in conjunction with the sections entitled "Risk Factors," "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the consolidated financial statements and related notes included elsewhere in this registration statement.
1. Overview of the U.S. Renewable Energy Regulatory Framework
The development, construction, ownership, and operation of utility-scale renewable energy and battery energy storage projects in the United States are subject to a multi-layered and complex regulatory environment involving federal, state, and local authorities. These authorities regulate, among other things, the generation, transmission, and wholesale and retail sale of electricity; the environmental impacts of project development, construction, and operation; the tax treatment of renewable energy investments; occupational health and safety; and land use and siting. No single federal agency or state body exercises comprehensive jurisdiction over all aspects of CBR's business. Rather, our projects are subject to overlapping and, in some cases, potentially conflicting regulatory requirements imposed by multiple agencies at each level of government.
CBR's operations span five states — Texas, New Mexico, Arizona, California, and Oklahoma — each of which maintains distinct regulatory regimes governing electricity markets, environmental permitting, land use, and taxation. The regulatory frameworks in these states range from the fully deregulated competitive wholesale market administered by the Electric Reliability Council of Texas ("ERCOT") in Texas, to the vertically integrated and more extensively regulated markets overseen by the public utility commissions in Oklahoma and Arizona, to the hybrid competitive and regulated market structures administered by the California Independent System Operator ("CAISO") and the California Public Utilities Commission ("CPUC") in California, and to the Southwest Power Pool ("SPP") market applicable to certain of our projects in Oklahoma and New Mexico. The differences among these regulatory environments create both opportunities and risks for CBR, as discussed in greater detail below and in the section entitled "Risk Factors."
At the federal level, the principal regulatory agencies with jurisdiction over aspects of CBR's business include:
•  The Federal Energy Regulatory Commission ("FERC"), which regulates the transmission and wholesale sale of electricity in interstate commerce, oversees the reliability of the bulk power system, and administers interconnection procedures for generating facilities connecting to the interstate transmission grid;
•  The North American Electric Reliability Corporation ("NERC"), the FERC-certified Electric Reliability Organization ("ERO"), which develops and enforces mandatory reliability standards applicable to owners and operators of generating facilities interconnected to the bulk power system;
•  The U.S. Environmental Protection Agency ("EPA"), which administers and enforces federal environmental statutes including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation, and Liability Act;
•  The U.S. Fish and Wildlife Service ("USFWS"), which administers the Endangered Species Act and the Bald and Golden Eagle Protection Act and issues permits related to the incidental take of protected species and eagles;
•  The U.S. Army Corps of Engineers, which administers the permitting programs under Section 404 of the Clean Water Act related to the discharge of dredged or fill material into waters of the United States; and
•  The Internal Revenue Service ("IRS"), which administers the federal tax incentive programs — principally 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 — that are critical to the economics of renewable energy projects.
At the state level, CBR's principal regulatory counterparts include the state public utility commissions ("PUCs") or their equivalents, state environmental agencies, and state land management offices. Each of these agencies exercises jurisdiction over matters directly affecting the permitting, construction, operation, and revenue generation of our projects.
CBR operates both regulated and unregulated utility operations across its portfolio. Certain of our project-level subsidiaries hold or are subject to regulatory authorizations that impose ongoing compliance obligations, including the maintenance of market-based rate authority from FERC, registration with NERC and its applicable regional entities, and compliance with state-level generation licensing and interconnection requirements. Our failure to comply with any of the regulatory requirements described in this section could result in the imposition of fines, penalties, or sanctions; the loss of permits, authorizations, or licenses critical to our business; delays in project development or construction; or other adverse consequences that could materially and adversely affect our business, financial condition, and results of operations. See "Risk Factors — Risks Related to Regulatory and Environmental Matters."
2. Federal Energy Regulatory Commission (FERC)
2.1 FERC Jurisdiction and Authority
FERC regulates the transmission and wholesale sale of electricity in interstate commerce under the Federal Power Act (the "FPA"), 16 U.S.C. §§ 791a–828c. FERC's jurisdiction extends to the rates, terms, and conditions of wholesale electricity sales by public utilities, the licensing and operation of non-federal hydroelectric projects, the reliability of the bulk power system, and the approval of certain corporate transactions involving jurisdictional public utilities. Under Sections 205 and 206 of the FPA, FERC has the authority to review and approve the rates charged by public utilities for wholesale electricity sales and to ensure that such rates are just, reasonable, and not unduly discriminatory or preferential.
CBR's project-level subsidiaries that sell wholesale electricity in interstate commerce are subject to FERC jurisdiction as public utilities under the FPA. Because the ERCOT grid in Texas operates as an intrastate system and is not synchronously interconnected to the interstate transmission grid (except through certain direct current ties), CBR's Texas-based projects that sell electricity exclusively within the ERCOT market are generally not subject to FERC's wholesale sale and transmission jurisdiction, although FERC retains jurisdiction over the reliability standards applicable to the bulk electric system within ERCOT through NERC and the Texas Reliability Entity. CBR's projects located in Oklahoma, Arizona, New Mexico, and California, which are interconnected to the interstate transmission grid, are more directly subject to FERC's wholesale sale and transmission jurisdiction.
Certain of CBR's smaller generating facilities may qualify as "Qualifying Facilities" ("QFs") under the Public Utility Regulatory Policies Act of 1978 ("PURPA"). QF status provides certain benefits under PURPA, including the right to sell electricity to interconnected electric utilities at their "avoided cost" and exemptions from certain provisions of the FPA and state laws governing electric utilities. While CBR has not historically relied on QF status as a primary commercial strategy, the applicability of PURPA and QF status to certain of our projects is evaluated on a project-by-project basis as part of our regulatory planning.
2.2 Market-Based Rate Authority
CBR's operating subsidiaries that sell wholesale electricity in interstate commerce hold, or have applications pending to obtain, market-based rate ("MBR") authority from FERC. MBR authority permits the holder to sell wholesale power at market-determined prices, rather than at cost-based rates, provided that FERC has determined that the seller and its affiliates do not possess or have adequately mitigated horizontal and vertical market power in the relevant markets. The following CBR subsidiaries currently hold or seek MBR authority:
•  Solaris West Solar LLC (450 MW solar, Pecos County, TX) — while the Solaris West project participates in the ERCOT market and its ERCOT sales are not FERC-jurisdictional, CBR has obtained MBR authority for this subsidiary to preserve flexibility for future sales outside ERCOT;
•  Red Mesa Wind Energy LLC (380 MW wind, Custer County, OK) — MBR authority granted by FERC, Docket No. ER21-1847-000;
•  Painted Rock Solar LLC (320 MW solar, Maricopa County, AZ) — MBR authority granted by FERC, Docket No. ER20-2953-000;
•  Pronghorn Wind LLC (510 MW wind, Nolan County, TX) — MBR authority obtained as a precautionary measure, notwithstanding the project's primary participation in the ERCOT market;
•  Brazos Energy Storage LLC (200 MW/800 MWh battery storage, Fort Bend County, TX) — MBR authority obtained in connection with potential sales of ancillary services and wholesale electricity to markets interconnected with ERCOT through DC ties; and
•  Additional subsidiaries associated with the development pipeline, including those that will own and operate the Copper Basin Solar + Storage project (750 MW solar + 300 MW/1,200 MWh battery storage, Riverside County, CA), which is expected to participate in the CAISO market and will require MBR authority upon commencement of commercial operations.
The issuance and maintenance of MBR authority require CBR's subsidiaries to comply with FERC's regulations governing sellers with MBR authority, including the filing of Electric Quarterly Reports ("EQRs") reflecting the details of all wholesale electricity sales, compliance with affiliate abuse safeguards designed to prevent the exercise of market power through affiliate transactions, and periodic updates to market power analyses as required by FERC. Failure to comply with these requirements could result in the revocation of MBR authority, the imposition of cost-based rate requirements, or the assessment of penalties, any of which could materially and adversely affect the revenues and operations of the affected projects.
In connection with the IPO, CBR has conducted an analysis of whether the offering and associated changes in the Company's ownership structure will constitute a "change in control" of any of its subsidiaries holding MBR authority, which could trigger the requirement to obtain prior FERC approval under Section 203 of the FPA, 16 U.S.C. § 824b, or to file a post-consummation notification under 18 C.F.R. § 35.42. Section 203 of the FPA requires prior FERC approval for, among other things, dispositions of jurisdictional facilities and changes in the upstream ownership or control of public utilities holding MBR authority, unless the transaction falls within a blanket authorization issued by FERC. CBR's analysis considers the pre- and post-IPO ownership structure, including the continued holding by Pinnacle Vista Capital Partners, L.P. ("Pinnacle Vista") of approximately 49% of the post-IPO voting power of CBR on a base offering (before giving effect to the underwriters' option to purchase additional shares). Based on this analysis, CBR has determined that the IPO may require the filing of a post-consummation notification with FERC under 18 C.F.R. § 35.42, and CBR intends to make such filing promptly following the consummation of the offering. CBR does not believe that prior FERC Section 203 approval is required for the IPO; however, there can be no assurance that FERC will not assert jurisdiction or take a contrary position.
2.3 Exempt Wholesale Generator (EWG) Status
Certain of CBR's subsidiaries hold, or may in the future seek, status as "Exempt Wholesale Generators" ("EWGs") under Section 32 of the Public Utility Holding Company Act of 2005 ("PUHCA 2005"), as codified in Section 1262 of the Energy Policy Act of 2005. EWG status is available to entities that are engaged exclusively in the business of owning or operating, or both owning and operating, eligible facilities used for the generation of electric energy exclusively for sale at wholesale, and whose facilities have been determined by FERC to be "eligible facilities." EWG status exempts the holding company of such entities from certain restrictions and regulatory requirements that would otherwise apply under PUHCA 2005, including limitations on the types of businesses in which holding company subsidiaries may engage and the types of financing they may undertake. CBR has obtained or intends to obtain EWG status for its project-level subsidiaries where such status is advantageous from a regulatory and financing perspective.
2.4 FERC Reliability Standards and Interconnection
The interconnection of CBR's generating facilities to the transmission grid is governed by interconnection agreements entered into with the applicable transmission providers. For projects interconnected to the interstate transmission grid outside ERCOT, these interconnection agreements are subject to FERC-jurisdictional Open Access Transmission Tariffs ("OATTs") and are processed through the Large Generator Interconnection Procedures ("LGIPs") established under FERC Order No. 2003 and its progeny. The interconnection process involves the preparation and processing of Large Generator Interconnection Agreements ("LGIAs"), which specify the technical requirements, cost allocation, and schedule for interconnecting the generating facility to the transmission system.
The FERC interconnection process has historically been subject to significant delays due to the volume of interconnection requests pending in the queues of the various regional transmission organizations ("RTOs") and independent system operators ("ISOs"), as well as the complexity of the studies required to evaluate the impact of proposed interconnections on the transmission system. These delays have been a material constraint on the pace of renewable energy development across the United States. In response to these challenges, FERC issued Order No. 2023 on July 28, 2023, which adopted comprehensive reforms to the interconnection procedures applicable to FERC-jurisdictional transmission providers, including the transition from a serial "first-come, first-served" study process to a "first-ready, first-served" cluster study process, the imposition of financial readiness requirements for interconnection customers, and the establishment of firm deadlines for the completion of interconnection studies.
The implementation of FERC Order No. 2023 may have significant implications for CBR's development pipeline of approximately 6.2 GW. While the reforms are intended to accelerate the processing of viable interconnection requests and reduce the backlog of speculative projects in the queue, the transition to the new procedures may create uncertainty regarding the status and timing of CBR's existing and future interconnection requests. CBR is closely monitoring the implementation of Order No. 2023 by the applicable transmission providers and RTOs/ISOs and is adjusting its development strategy accordingly.
For CBR's Texas-based projects, interconnection is processed through ERCOT's interconnection procedures, which are administered by ERCOT and the Public Utility Commission of Texas ("PUCT") rather than FERC. ERCOT's interconnection process involves the submission of an interconnection request, the conduct of screening and full interconnection studies, and the execution of an interconnection agreement with the applicable transmission service provider. While ERCOT is not subject to FERC Order No. 2023, ERCOT has implemented its own interconnection queue reforms in recent years to address the significant backlog of interconnection requests in the ERCOT region.
3. North American Electric Reliability Corporation (NERC)
3.1 Mandatory Reliability Standards
NERC, as the FERC-certified Electric Reliability Organization under Section 215 of the FPA, is responsible for developing, implementing, and enforcing mandatory reliability standards for the planning, design, and operation of the bulk power system in North America. These standards are designed to ensure the reliable operation of the interconnected transmission grid and to protect against instability, uncontrolled separation, and cascading failures that could result in widespread power outages. NERC reliability standards are binding on all users, owners, and operators of the bulk power system, including generators, transmission owners, and other registered entities.
CBR's generating facilities that are interconnected to the bulk power system are subject to applicable NERC reliability standards. As an owner and operator of generating facilities, CBR is required to register with NERC in the applicable functional categories — principally as a Generator Owner ("GO") and Generator Operator ("GOP") — and to comply with the reliability standards applicable to those functional categories. These standards address a wide range of operational, technical, and cybersecurity requirements, including protection system maintenance and testing, facility ratings, generator performance, modeling and data requirements, and Critical Infrastructure Protection ("CIP") cybersecurity standards.
3.2 Regional Entity Compliance
NERC delegates certain compliance monitoring and enforcement functions to regional entities, which serve as the primary points of contact for registered entities within their geographic or electrical footprint. CBR's projects fall within the jurisdictions of multiple NERC regional entities, depending on the project's location and electrical interconnection:
•  Texas projects — Solaris West Solar (Pecos County), Pronghorn Wind (Nolan County), Brazos Energy Storage (Fort Bend County), and Mesquite Wind (Oldham County, under construction) are located within the ERCOT region and are subject to the compliance monitoring and enforcement jurisdiction of the Texas Reliability Entity ("Texas RE"). Texas RE is the regional entity responsible for ensuring the reliability and security of the ERCOT bulk power system and for monitoring compliance with NERC reliability standards within the ERCOT region.
•  Oklahoma project — Red Mesa Wind (Custer County, OK) is interconnected to the Southwest Power Pool ("SPP") transmission system and is subject to the compliance monitoring and enforcement jurisdiction of the Southwest Power Pool Regional Entity ("SPP RE"). SPP RE oversees reliability compliance for entities registered within the SPP region.
•  Arizona project — Painted Rock Solar (Maricopa County, AZ) is interconnected to the Western Interconnection and is subject to the compliance monitoring and enforcement jurisdiction of the Western Electricity Coordinating Council ("WECC"). WECC serves as the regional entity for the Western Interconnection, encompassing all or portions of the states west of the Rocky Mountains, as well as the western provinces of Canada and the northern portion of Baja California, Mexico.
•  New Mexico project — Cimarron Solar (Doña Ana County, NM, under construction) will be interconnected to either the WECC or the SPP transmission system, depending on the final interconnection configuration. The applicable regional entity — WECC or SPP RE — will exercise compliance monitoring and enforcement jurisdiction over the project upon its registration with NERC and commencement of commercial operations.
•  California development pipeline project — Copper Basin Solar + Storage (Riverside County, CA) will be interconnected to the CAISO-controlled grid within the Western Interconnection and will be subject to the compliance monitoring and enforcement jurisdiction of WECC.
CBR's compliance obligations under NERC reliability standards encompass a broad range of requirements applicable to generation owners and operators, including, without limitation:
•  Protection system maintenance, testing, and documentation standards;
•  Generator facility ratings methodology and validation;
•  Modeling, data, and analysis requirements for generation resources;
•  Vegetation management standards for any transmission assets owned by CBR;
•  Event analysis and reporting requirements for system disturbances and reliability events; and
•  Critical Infrastructure Protection ("CIP") cybersecurity standards, which require the identification and protection of critical cyber assets, the implementation of electronic security perimeters and access controls, personnel risk assessments, security awareness training, and incident response planning.
CBR has implemented internal compliance programs, policies, and procedures designed to ensure ongoing compliance with all applicable NERC reliability standards. These programs include dedicated compliance personnel, periodic self-assessments and internal audits, compliance monitoring tools, training programs for operations and maintenance personnel, and documented corrective action processes for identified deficiencies.
3.3 Penalties for Non-Compliance
Violations of NERC reliability standards can result in the imposition of substantial penalties. Under Section 215 of the FPA, NERC and its regional entities are authorized to impose penalties of up to $1,000,000 per violation per day for violations of mandatory reliability standards. In practice, the severity of penalties depends on a range of factors, including the nature and severity of the violation, the risk posed to the reliability of the bulk power system, the entity's compliance history, the effectiveness of the entity's internal compliance program, and the entity's cooperation in the investigation and resolution of the violation. Penalties may also include directives to implement specific corrective actions, enhanced compliance monitoring, and other non-monetary sanctions.
CBR has not been the subject of any material NERC enforcement actions or penalties as of the date of this registration statement. However, there can be no assurance that violations will not occur in the future or that any future violations would not result in penalties or other consequences that could materially and adversely affect our business, financial condition, or results of operations. CBR maintains internal compliance programs and continuous monitoring processes to identify and address potential compliance issues before they escalate to enforcement actions.
4. State Public Utility Commission Regulation
4.1 Texas — Public Utility Commission of Texas (PUCT) and ERCOT
Texas operates a competitive, deregulated wholesale electricity market that is unique among the states in which CBR operates. The wholesale electricity market in Texas is administered by ERCOT, a membership-based, independent system operator that manages the flow of electric power to approximately 26 million customers, representing approximately 90% of the state's electric load. Unlike other major wholesale electricity markets in the United States, the ERCOT market is an energy-only market, meaning that generators are compensated primarily for the energy they produce and deliver to the market, rather than through a separate capacity market mechanism. ERCOT also administers markets for ancillary services, including regulation, responsive reserves, and non-spinning reserves.
CBR's Texas projects participate in the ERCOT wholesale electricity market:
•  Solaris West Solar — 450 MW solar photovoltaic facility located in Pecos County, Texas. Commercial operations date: June 2020. Participates in the ERCOT day-ahead and real-time energy markets.
•  Pronghorn Wind — 510 MW onshore wind facility located in Nolan County, Texas. Commercial operations date: November 2019. Participates in the ERCOT energy and ancillary services markets.
•  Brazos Energy Storage — 200 MW / 800 MWh lithium-ion battery energy storage facility located in Fort Bend County, Texas. Commercial operations date: March 2022. Participates in the ERCOT energy and ancillary services markets.
•  Mesquite Wind — 420 MW onshore wind facility under construction in Oldham County, Texas. Expected commercial operations date: Q2 2023. Upon completion, the facility will participate in the ERCOT energy and ancillary services markets.
The PUCT oversees the reliability and adequacy of the ERCOT grid, the design of the ERCOT wholesale market, and the regulation of retail electric service in areas of the state where retail competition has been introduced. The PUCT does not directly regulate wholesale electricity rates in the competitive ERCOT market; rather, wholesale prices are determined by market forces through the ERCOT energy and ancillary services markets. However, the PUCT has broad authority to adopt rules and protocols governing the operation of the ERCOT market, including market design changes that can significantly affect the revenue opportunities and risks faced by generators and storage providers participating in the market. Recent PUCT rulemaking and ERCOT protocol changes — including the implementation of the Performance Credit Mechanism ("PCM") or other reliability-focused market reforms proposed in the wake of Winter Storm Uri in February 2021 — could materially affect the economics of CBR's Texas projects.
ERCOT protocols and operating guides establish the detailed rules governing dispatch, scheduling, metering, settlement, and ancillary service procurement within the ERCOT market. CBR's Texas projects are registered as ERCOT market participants and are required to comply with all applicable ERCOT protocols, operating guides, and procedures, including registration and qualification requirements, real-time operational requirements, telemetry and communication standards, and settlement and billing procedures.
4.2 Oklahoma — Oklahoma Corporation Commission (OCC)
CBR's Red Mesa Wind project (380 MW, Custer County, OK) is located within the jurisdiction of the Oklahoma Corporation Commission ("OCC"), which is the principal regulatory body for electric utilities and generation facilities in the State of Oklahoma. Oklahoma maintains a largely vertically integrated utility structure, in which the major investor-owned utilities — principally Penrose Corporation and Tidewater Enterprises — own and operate generation, transmission, and distribution facilities and provide bundled retail electric service to end-use customers under rates regulated by the OCC.
Under Oklahoma law, independent power producers such as CBR are not classified as "public utilities" subject to the OCC's rate-setting jurisdiction, provided that they sell electricity at wholesale rather than directly to retail customers. However, the OCC exercises jurisdiction over certain aspects of generation facility development, including the approval of power purchase agreements entered into by regulated Oklahoma utilities as part of their resource procurement processes. The Red Mesa Wind project sells its output under a long-term PPA with an investment-grade Oklahoma utility, the terms of which were subject to OCC review and approval as part of the utility's integrated resource planning and procurement process.
Oklahoma law provides for the licensing and regulation of wind energy facilities, including requirements related to setback distances from occupied structures, aviation safety lighting, decommissioning obligations, and financial assurance. CBR has obtained all required state and local permits and approvals for the Red Mesa Wind project and maintains compliance with all applicable Oklahoma regulatory requirements.
4.3 Arizona — Arizona Corporation Commission (ACC)
CBR's Painted Rock Solar project (320 MW, Maricopa County, AZ) is located within the jurisdiction of the Arizona Corporation Commission ("ACC"), which regulates electric utilities and oversees the generation, transmission, and distribution of electricity in the State of Arizona. The ACC exercises jurisdiction over the rates and service of regulated electric utilities, approves utility resource procurement plans, and administers Arizona's Renewable Energy Standard and Tariff ("REST").
The REST, originally adopted by the ACC in 2006, established a renewable portfolio standard requiring regulated electric utilities in Arizona to derive a specified percentage of their retail energy sales from eligible renewable energy resources. Although the REST has been the subject of ongoing regulatory and political debate — including a 2018 ballot initiative that sought to increase the standard to 50% by 2030, which was not approved by voters — the existing REST requirements continue to create demand for renewable energy resources in Arizona, including solar generation.
The Painted Rock Solar project sells its output under a long-term PPA with a regulated Arizona utility. The terms of the PPA, including the pricing structure and contract duration, were reviewed by the ACC in the context of the utility's resource procurement and integrated resource planning processes. CBR has obtained all required ACC and state-level permits and approvals for the Painted Rock Solar project, including generation facility certification and siting approvals under applicable ACC rules and Arizona statutes. CBR maintains compliance with all ongoing regulatory obligations applicable to the project.
4.4 New Mexico — New Mexico Public Regulation Commission (NMPRC)
CBR's Cimarron Solar project (350 MW, Doña Ana County, NM, currently under construction) is located within the jurisdiction of the New Mexico Public Regulation Commission ("NMPRC"), which is the principal regulatory body for electric utilities in the State of New Mexico. The NMPRC exercises jurisdiction over the rates, services, and resource procurement of regulated electric utilities, including the approval of power purchase agreements and resource plans.
New Mexico has adopted one of the more ambitious state-level renewable energy policies in the United States. The New Mexico Energy Transition Act ("ETA"), enacted in 2019, established aggressive renewable energy and clean energy standards, requiring regulated electric utilities to achieve 50% renewable energy by 2030, 80% renewable energy by 2040, and 100% zero-carbon resources by 2045. The ETA also provided a framework for the securitization of costs associated with the early retirement of coal-fired power plants, accelerating the transition to renewable energy resources in the state.
The policy environment created by the ETA has generated significant demand for new renewable energy resources in New Mexico, supporting the economic viability of the Cimarron Solar project and other projects in CBR's New Mexico development pipeline. CBR is in the process of obtaining all required state and local permits and approvals for the Cimarron Solar project, including generation facility certification, environmental review, and siting approvals under applicable NMPRC rules and New Mexico law.
4.5 California — California Public Utilities Commission (CPUC)
CBR's Copper Basin Solar + Storage project (750 MW solar photovoltaic + 300 MW / 1,200 MWh battery energy storage, Riverside County, CA) is in the development pipeline and, upon completion, will be located within the jurisdiction of the California Public Utilities Commission ("CPUC") and will participate in the wholesale electricity market administered by the California Independent System Operator ("CAISO").
California has the most expansive and mature renewable energy regulatory framework of any state in which CBR operates. The state's Renewables Portfolio Standard ("RPS"), as amended by Senate Bill 100 in 2018, requires that retail sellers of electricity procure at least 60% of their retail electricity sales from eligible renewable energy resources by 2030, with a goal of achieving 100% zero-carbon electricity by 2045. These requirements create substantial ongoing demand for new renewable energy and energy storage resources to meet the state's ambitious clean energy targets.
The CPUC administers a comprehensive Integrated Resource Planning ("IRP") process through which regulated electric utilities and other load-serving entities are required to develop resource plans that identify the mix of generation, storage, and demand-side resources needed to meet their customers' electricity needs reliably and at reasonable cost while achieving the state's environmental and energy policy objectives. The IRP process has identified a need for tens of thousands of megawatts of new renewable energy and energy storage capacity in California over the coming decades, supporting the commercial viability of the Copper Basin Solar + Storage project.
In addition to the IRP process, the CPUC administers Resource Adequacy ("RA") requirements that require load-serving entities to demonstrate that they have secured sufficient capacity commitments to meet their forecasted peak demand plus a planning reserve margin. The RA requirements create additional contracting opportunities for resource providers, including solar and battery storage facilities, which can provide both energy and capacity value to the California market.
CBR's Copper Basin Solar + Storage project will be required to comply with CAISO's market rules and tariff provisions governing the participation of generating and storage resources in the CAISO wholesale electricity market, including requirements related to scheduling, dispatch, metering, settlements, and compliance with CAISO reliability standards. CBR intends to seek the necessary CAISO interconnection and market participation approvals in connection with the development of the Copper Basin project.
4.6 Multi-State Regulatory Risks
CBR's geographic diversification across five states, while providing risk mitigation benefits, also exposes the Company to the risk of differing and changing state regulatory requirements. Each of the five states in which CBR operates maintains its own regulatory framework for electricity markets, environmental permitting, land use, taxation, and renewable energy policy. Changes in any of these state-level regulatory frameworks — whether through legislative action, regulatory rulemaking, or ballot initiative — could adversely affect the economics of CBR's existing projects, the terms and enforceability of its power purchase agreements, the timeline and cost of interconnection and permitting processes, and the commercial viability of projects in its development pipeline.
Specific multi-state regulatory risks include, without limitation: (i) changes in state renewable portfolio standards or clean energy mandates that could reduce demand for CBR's renewable energy output or reduce the value of renewable energy credits; (ii) changes in state permitting or siting requirements that could delay project development or increase permitting costs; (iii) changes in state tax policy that could reduce or eliminate state-level tax incentives for renewable energy; (iv) changes in state utility regulation that could affect the ability of regulated utilities to enter into or honor long-term PPAs with independent power producers; and (v) the adoption of new state regulations applicable to battery energy storage systems, including safety, siting, and decommissioning requirements, that could increase the cost of storage projects. See "Risk Factors — Risks Related to Regulatory and Environmental Matters — We are subject to complex and evolving state regulatory requirements across the five states in which we operate, and changes in those requirements could adversely affect our business."
5. Federal Tax Incentives — Investment Tax Credit (ITC) and Production Tax Credit (PTC)
5.1 Overview of ITC and PTC Framework
Federal tax incentives have been, and continue to be, a critical component of the economics of renewable energy development in the United States. The Internal Revenue Code of 1986, as amended, provides two primary tax credit mechanisms for renewable energy facilities:
•  The Investment Tax Credit ("ITC"), codified in Section 48 of the Code, which provides a one-time tax credit based on a percentage of the eligible capital cost of qualifying energy property, including solar energy property and, more recently, standalone energy storage property; and
•  The Production Tax Credit ("PTC"), codified in Section 45 of the Code, which provides a per-kilowatt-hour tax credit for electricity generated from qualifying renewable energy resources, including wind energy, during the first ten years of a facility's operation.
These federal tax incentives have been the principal drivers of renewable energy project development in the United States for over two decades, and they remain fundamental to the financial returns and investment decisions underlying CBR's operating portfolio, construction-stage projects, and development pipeline. The availability, magnitude, and duration of the ITC and PTC are subject to the terms of the Code as amended from time to time by congressional legislation, and any reduction, modification, or elimination of these incentives could materially and adversely affect CBR's business, financial condition, and results of operations.
5.2 ITC — Solar and Battery Storage
CBR's solar energy projects — Solaris West Solar (450 MW, Pecos County, TX), Painted Rock Solar (320 MW, Maricopa County, AZ), Cimarron Solar (350 MW, Doña Ana County, NM, under construction), and Copper Basin Solar (750 MW, Riverside County, CA, development pipeline) — and battery energy storage projects — Brazos Energy Storage (200 MW / 800 MWh, Fort Bend County, TX) and the storage component of Copper Basin Solar + Storage (300 MW / 1,200 MWh, Riverside County, CA, development pipeline) — are eligible for the ITC under Section 48 of the Code.
The ITC rate for solar energy property that satisfies the applicable begin-construction requirements has historically been set at 30% of the eligible capital cost of the property, subject to phase-down schedules enacted by Congress and potential modifications or extensions through subsequent legislation. The ITC for solar energy property was extended and modified by the Consolidated Appropriations Act, 2021 and, more recently, by the Inflation Reduction Act of 2022 (the "IRA"), which provided for a base ITC rate and bonus credits for meeting domestic content, energy community, and prevailing wage and apprenticeship requirements.
The eligibility of standalone energy storage property for the ITC has been the subject of significant legislative and industry attention. Prior to the enactment of the IRA, the ITC was generally available for energy storage systems only to the extent they were integrated with and charged exclusively by a qualifying solar energy installation. The IRA extended ITC eligibility to standalone energy storage technology, defined to include battery storage systems with a capacity of not less than five kilowatt-hours, effective for projects that begin construction after December 31, 2022. This legislative development is expected to enhance the economics and attractiveness of CBR's standalone and co-located battery storage projects, including the Brazos Energy Storage project and the storage component of the Copper Basin Solar + Storage project.
To qualify for the ITC, a project must satisfy the applicable "begin construction" requirements established by the IRS. The IRS has issued a series of notices providing safe harbors for determining when construction of a qualifying facility has begun, including:
•  The Physical Work Test, which requires that physical work of a significant nature has begun on the project or on equipment manufactured or produced for the project; and
•  The Five Percent Safe Harbor, which deems construction to have begun when the taxpayer has paid or incurred at least five percent of the total cost of the facility.
These safe harbors were established and elaborated upon in a series of IRS Notices, including IRS Notices 2013-29, 2013-60, 2014-46, 2015-25, 2016-31, 2017-04, 2018-59, 2019-43, 2020-41, and 2021-5. In addition, the IRS has established a continuity-of-construction requirement, under which a taxpayer must demonstrate continuous efforts to advance the project toward completion after satisfying the begin-construction requirement. The IRS has provided a safe harbor deeming the continuity requirement to be satisfied if the project is placed in service within four years of the date on which construction begins (the "four-year safe harbor"), subject to extensions for certain force majeure events.
CBR carefully tracks and documents its compliance with the begin-construction safe harbors and continuity-of-construction requirements for each of its solar and storage projects, including maintaining contemporaneous records of physical work activities, equipment procurement, and project expenditures.
5.3 PTC — Wind Energy
CBR's onshore wind energy projects — Red Mesa Wind (380 MW, Custer County, OK), Pronghorn Wind (510 MW, Nolan County, TX), Mesquite Wind (420 MW, Oldham County, TX, under construction), and Silverleaf Wind (a development pipeline project) — are eligible for the PTC under Section 45 of the Code.
The PTC provides a per-kilowatt-hour tax credit for electricity generated by a qualifying wind energy facility and sold to an unrelated party during the first ten years of the facility's operation. The PTC rate is adjusted annually for inflation and is determined based on the rate in effect at the time the facility is placed in service. For wind facilities placed in service in recent years, the PTC rate has been approximately $0.026 per kilowatt-hour (as adjusted for inflation), and the credit is available for a ten-year period beginning on the date the facility is placed in service.
As with the ITC, eligibility for the PTC requires that the wind facility satisfy the applicable begin-construction requirements, which are governed by the same Physical Work Test, Five Percent Safe Harbor, and continuity-of-construction standards described in Section 5.2 above. CBR has satisfied or is in the process of satisfying the begin-construction requirements for each of its wind energy projects and maintains documentation supporting its compliance with the applicable safe harbors.
The PTC has been subject to multiple expirations, extensions, and modifications by Congress over the past two decades, creating a pattern of policy uncertainty that has at times disrupted investment decisions and development timelines for wind energy projects. The IRA enacted in August 2022 provided a significant extension of the PTC for wind energy projects, which is expected to provide greater policy certainty for CBR's wind development pipeline.
5.4 Tax-Equity Partnership Structures
CBR utilizes tax-equity partnership-flip structures as a primary mechanism for monetizing the ITC and PTC benefits associated with its renewable energy projects. Under a typical partnership-flip structure, CBR forms a project-level partnership (taxed as a partnership for federal income tax purposes) with a tax-equity investor, which contributes capital to the partnership in exchange for an allocation of the project's tax benefits (ITC or PTC credits and accelerated depreciation deductions) and a preferred economic return during the initial period of the partnership. After a specified date or the achievement of a target return for the tax-equity investor (the "flip" date), the allocation of partnership cash flows and tax benefits is restructured, with CBR receiving a substantially greater share of the partnership's economic interests and the tax-equity investor's interest being reduced to a nominal percentage.
As a representative example, the Solaris West Solar project is structured as a tax-equity partnership with Veltara Basin Financial LLC, a subsidiary of a major national financial institution. Veltara Basin Financial LLC contributed approximately $280,000,000 to the Solaris West partnership in exchange for an initial allocation of the project's ITC and accelerated depreciation benefits and a preferred economic return. The partnership flip for the Solaris West project is expected to occur in 2028, after which CBR's share of partnership cash flows will increase significantly. As of the date of this registration statement, the Solaris West tax-equity partnership is performing in accordance with the terms of the partnership agreement, and Veltara Basin Financial LLC's invested capital has been substantially deployed.
A significant risk associated with the ITC is the potential for recapture. Under Section 50(a) of the Code, if a project for which the ITC has been claimed is disposed of, or otherwise ceases to be eligible property, within five years of being placed in service, a portion of the ITC previously claimed must be recaptured (i.e., repaid to the IRS). The recapture amount is determined based on the number of years remaining in the five-year recapture period at the time of the disposition or disqualifying event. CBR has analyzed whether the IPO and associated changes in the Company's upstream ownership structure could constitute a disposition or other event triggering ITC recapture for any of its ITC-eligible projects. Based on this analysis, CBR has concluded that the IPO should not trigger ITC recapture because the project-level ownership of the applicable tax-equity partnerships will not change as a result of the offering — the IPO involves the issuance and sale of shares of CBR's common stock at the holding-company level, and the project-level partnerships through which the ITC-eligible assets are held will continue to be owned by the same entities before and after the IPO. However, there can be no assurance that the IRS will not take a contrary position, and any successful assertion by the IRS that the IPO triggers ITC recapture could result in material tax liabilities for the affected project-level partnerships and, indirectly, for CBR.
CBR accounts for its interests in tax-equity partnerships using the Hypothetical-Liquidation-at-Book-Value ("HLBV") methodology, which is a balance-sheet approach for allocating net income or loss from the partnership to each partner based on the change in each partner's claim to the partnership's net assets during the period, as determined under the partnership agreement. The HLBV methodology is widely used in the renewable energy industry for partnerships with complex allocation provisions, such as partnership-flip structures, and is consistent with accounting guidance under ASC 970-323 (Real Estate — General — Investments — Equity Method and Joint Ventures). The application of HLBV accounting can result in significant variability in the timing and amount of income or loss recognized by CBR from its tax-equity partnerships, which can affect the comparability of CBR's financial results from period to period. The SEC Staff has scrutinized the HLBV disclosures and accounting policies of registrants in the renewable energy industry, and CBR has addressed SEC comment letter inquiries regarding its HLBV disclosures in Amendment Nos. 1 and 2 to this registration statement.
5.5 Legislative and Policy Risk
Federal tax incentives for renewable energy, including the ITC and PTC, are entirely dependent on congressional action and are subject to the risk of modification, phase-down, or repeal through future legislation. While the enactment of the IRA in August 2022 provided a significant extension and expansion of the ITC and PTC, there can be no assurance that these incentives will remain available at their current levels or in their current form throughout the useful lives of CBR's projects or the development timeline of its pipeline.
A reduction or elimination of the ITC or PTC would have a material adverse effect on the economics of CBR's projects and its development pipeline by reducing the tax benefits available to tax-equity investors, which would in turn reduce the amount of tax-equity capital available to finance new projects and increase the cost of capital for project development. The loss of these incentives could also reduce the competitiveness of renewable energy relative to conventional generation technologies, potentially reducing the demand for renewable energy and the value of CBR's existing operating projects.
In addition to federal tax incentives, CBR's projects may benefit from state-level tax incentives and the generation and sale of Renewable Energy Credits ("RECs") or similar environmental attributes, which provide supplemental revenue streams. The availability and value of these state-level incentives and environmental attributes are subject to state legislative and regulatory action and market conditions and may change over time.
6. Environmental Compliance — Federal Laws
6.1 National Environmental Policy Act (NEPA)
The National Environmental Policy Act of 1969 ("NEPA"), 42 U.S.C. §§ 4321–4347, requires federal agencies to assess the environmental impacts of "major federal actions significantly affecting the quality of the human environment" before taking such actions. NEPA applies to a wide range of federal agency decisions, including the issuance of permits, the provision of federal funding, and the approval of projects on federal lands. NEPA does not apply to purely private actions that do not involve federal agency approval, funding, or land use.
NEPA may be applicable to CBR's projects in several circumstances, including:
•  Projects located on federal or mixed-ownership lands, including lands managed by the Bureau of Land Management ("BLM"), the U.S. Forest Service, or other federal agencies;
•  Projects requiring federal permits, such as permits under Section 404 of the Clean Water Act issued by the U.S. Army Corps of Engineers, or permits under the Endangered Species Act issued by the USFWS;
•  Projects involving the construction of transmission interconnection facilities on federal lands or across federal rights-of-way; and
•  Projects that receive federal financial assistance, loan guarantees, or other federal funding.
When NEPA is triggered, the responsible federal agency must prepare an environmental review document, the scope and depth of which depends on the significance of the potential environmental impacts. For actions that may significantly affect the environment, the agency must prepare a detailed Environmental Impact Statement ("EIS"), which involves a comprehensive analysis of the proposed action, alternatives to the proposed action, and the environmental consequences of the proposed action and alternatives. The EIS process includes public notice and comment periods and typically takes 18 months to several years to complete. For actions with less significant environmental impacts, the agency may prepare a shorter Environmental Assessment ("EA"), which evaluates whether the proposed action will have a significant environmental impact and, if not, results in a Finding of No Significant Impact ("FONSI"). Certain categories of federal actions that have been determined to have no significant environmental impact may qualify for Categorical Exclusions ("CatEx"), which exempt the action from the requirement to prepare an EA or EIS.
NEPA review can be a time-consuming and costly process, particularly for large-scale renewable energy projects that require multiple federal permits or that are located on or near federal lands. Delays in the NEPA process can delay the commencement of construction and increase project development costs. In addition, the NEPA process provides opportunities for public participation and legal challenge, and lawsuits challenging the adequacy of NEPA environmental reviews have been filed in connection with renewable energy projects across the United States.
6.2 Endangered Species Act (ESA)
The Endangered Species Act of 1973 (the "ESA"), 16 U.S.C. §§ 1531–1544, is the primary federal statute for the protection of threatened and endangered species and their habitats. The ESA is administered jointly by the USFWS (for terrestrial and freshwater species) and the National Marine Fisheries Service ("NMFS") (for marine and anadromous species). The ESA prohibits the "take" of any species listed as endangered and, by regulation, most species listed as threatened. "Take" is broadly defined to include harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct. The term "harm" has been interpreted by the USFWS to include significant habitat modification or degradation that actually kills or injures wildlife.
The ESA is relevant to CBR's projects in several significant respects:
Wind Projects — Avian and Bat Mortality Risk. Wind energy projects present ongoing risks of avian and bat mortality due to collisions with turbine blades and towers. Species of particular concern at CBR's wind project sites include golden eagles (Aquila chrysaetos), bald eagles (Haliaeetus leucocephalus), and various migratory bird species, as well as listed bat species such as the northern long-eared bat (Myotis septentrionalis) and the Indiana bat (Myotis sodalis). CBR's wind projects — Red Mesa Wind, Pronghorn Wind, Mesquite Wind, and development pipeline projects — are located in areas where eagles, migratory birds, and listed bat species are known or expected to occur, and the risk of incidental take of these species is an ongoing operational and regulatory consideration.
Solar Projects — Desert and Grassland Habitat Impacts. Utility-scale solar development in the southwestern United States can affect habitat for listed species, including the desert tortoise (Gopherus agassizii and Gopherus morafkai) in Arizona, California, and New Mexico, and the lesser prairie-chicken (Tympanuchus pallidicinctus) in Texas, Oklahoma, and New Mexico. The construction and operation of solar facilities may result in habitat loss, fragmentation, or degradation that could constitute "harm" under the ESA. CBR conducts pre-construction species surveys and habitat assessments for all of its solar projects to identify and address potential ESA compliance issues.
Battery Storage Projects. Battery energy storage projects, while generally having a smaller land footprint than solar or wind projects, are still subject to site-specific habitat assessments to identify any listed species or critical habitat that could be affected by project construction or operation.
The ESA provides two principal mechanisms for authorizing the incidental take of listed species in connection with otherwise lawful activities:
•  Section 7 Consultation. For projects with a "federal nexus" — i.e., projects that require federal agency permits, approvals, or funding — the responsible federal agency must consult with the USFWS under Section 7 of the ESA to ensure that the proposed action is not likely to jeopardize the continued existence of any listed species or result in the destruction or adverse modification of designated critical habitat. The Section 7 consultation process may result in the issuance of a Biological Opinion that includes an incidental take statement authorizing a specified level of incidental take, subject to reasonable and prudent measures and terms and conditions designed to minimize the impact of the taking.
•  Section 10 Incidental Take Permits. For projects without a federal nexus, the project proponent may apply to the USFWS for an Incidental Take Permit ("ITP") under Section 10(a)(1)(B) of the ESA. An ITP authorizes the incidental take of listed species associated with the project, provided that the applicant prepares and implements a Habitat Conservation Plan ("HCP") that specifies the impact, the steps to minimize and mitigate the impact, and the funding available to implement the plan. The Section 10 permitting process can be lengthy and costly, particularly for large-scale projects that affect multiple listed species.
In addition to the ESA, CBR's wind projects are subject to the requirements of the Bald and Golden Eagle Protection Act ("BGEPA"), 16 U.S.C. §§ 668–668d, which prohibits the take of bald and golden eagles without a permit. The USFWS issues Eagle Take Permits under the BGEPA that authorize the incidental take of eagles associated with wind energy operations, subject to mitigation requirements such as the implementation of avian monitoring and management plans, the curtailment of turbine operations during periods of high eagle activity, and compensatory mitigation (e.g., electrocution-risk reduction at utility poles). CBR has obtained or is in the process of obtaining Eagle Take Permits for its wind projects located in areas where eagle collision risk has been identified.
CBR engages Greenridge Environmental Sciences LLC, headquartered at 8400 Shoal Creek Blvd., Suite 200, Austin, TX 78757, under the direction of Dr. Nadine Torres, Principal Scientist, to conduct Phase I and Phase II environmental site assessments, pre-construction species surveys, habitat assessments, and environmental permitting support for CBR's project portfolio. Greenridge Environmental Sciences provides CBR with expert guidance on ESA compliance, BGEPA permitting, and other environmental regulatory matters.
6.3 Clean Air Act (CAA)
The Clean Air Act (the "CAA"), 42 U.S.C. §§ 7401–7671q, is the principal federal statute governing air quality and the emission of air pollutants. The CAA establishes National Ambient Air Quality Standards ("NAAQS") for criteria pollutants, requires the issuance of permits for major sources and certain minor sources of air emissions, and regulates emissions of hazardous air pollutants. The CAA is administered by the EPA and implemented through State Implementation Plans ("SIPs") adopted by each state.
Renewable energy projects such as those developed and operated by CBR generally have minimal direct air emissions during normal operations, as solar, wind, and battery storage facilities do not combust fossil fuels to generate electricity. As a result, the CAA is less directly applicable to CBR's operations than it would be for fossil-fuel-fired generating facilities. However, certain aspects of the CAA may apply to CBR's construction and operational activities:
•  Construction-Phase Dust Emissions. The construction of utility-scale solar, wind, and battery storage facilities involves extensive land disturbance, grading, and earthmoving activities that can generate fugitive dust emissions, including particulate matter (PM10 and PM2.5). In areas classified as nonattainment or maintenance areas for particulate matter under the NAAQS, dust control measures may be required under the applicable SIP. CBR implements dust suppression measures (water application, soil stabilizers, speed limits, and revege

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