PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP 1100 Louisiana Street, Suite 4500 Houston, TX 77002
July 22, 2025
Matter No.: 1015-00002
TO: Derek Engstrom, Vice President, Project Finance & Treasury, Calloway-Briggs Renewables Inc. Rachel Muñoz, General Counsel, Calloway-Briggs Renewables Inc.
FROM: Helen Nakamura, Of Counsel, Project Finance, Calderwood & Harkness LLP Brett Callahan, Lead Associate, Energy & Infrastructure, Calderwood & Harkness LLP
RE: Saguaro Flats Solar Project — PPA Bankability Considerations and Lender Requirements
cc: Patricia Dunmore, Responsible Partner, Calderwood & Harkness LLP
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I. Executive Summary
The purpose of this memorandum is to provide Calloway-Briggs Renewables Inc. ("CBR" or the "Company") with a comprehensive analysis of the bankability of the proposed Power Purchase Agreement (the "PPA") between Saguaro Flats Solar LLC (the "Seller") and Meridian DataCore Solutions Inc. (the "Buyer" or "Meridian") for the 150 MWac Saguaro Flats Solar Project (the "Project"). This analysis is conducted from the perspective of Tralvendo National Bank, N.A. ("Tralvendo"), acting in its capacity as Administrative Agent and Lead Arranger for the syndicated senior secured construction-to-term loan facility, and the syndicate lenders: Osprey Commercial Lending Corp. ("Osprey"), Grandview Savings Bank, FSB ("Grandview"), Blue Prairie Capital Markets LLC ("Blue Prairie"), and Tralvendo's own $21 million hold position within the syndicate.
The construction-to-term loan facility totals $108,000,000 in senior secured debt commitments, representing approximately 70% of the estimated total project cost of approximately $154,300,000. The remaining approximately $46,300,000 in equity is being contributed by CBR, backed by Ridgepoint Capital Partners LP ("Ridgepoint"), which holds a 68% equity interest in CBR. The financing structure is designed as a conventional limited-recourse project finance facility, meaning the PPA — as the sole contracted revenue stream — constitutes the cornerstone revenue contract and the single most critical document supporting the credit of the Project. Without a PPA that satisfies Tralvendo's and the syndicate lenders' bankability requirements, Tralvendo will not approve construction loan closing, which is currently targeted for October 1, 2025.
Lender's counsel for this transaction is Whitfield Stroval & Cade LLP ("WJC"), represented by Philip Thornton, Lead Partner, at 51 West 52nd Street, 30th Floor, New York, NY 10019. WJC will conduct its own independent bankability review of the PPA and will be responsible for preparing the conditions precedent certification on behalf of Tralvendo and the syndicate lenders. Coordination with WJC will be essential throughout the PPA negotiation process.
As of the date of this memorandum, the Seller's Form PPA was circulated to Buyer's counsel, Hargrove & Linden LLP (Evelyn Crumveth, Lead Partner), on July 14, 2025. We understand that Buyer's redline is expected on or about August 1, 2025. This timing is significant: given the target PPA execution date of September 15, 2025, and the construction loan closing target of October 1, 2025, there is a compressed window for negotiation of the PPA terms with Buyer's counsel and concurrent review of the final PPA by lender's counsel.
This memorandum identifies the key lender-required PPA provisions, assesses the current draft of the Seller's Form PPA against those requirements, flags areas where Buyer's anticipated positions may create bankability issues, and recommends specific drafting approaches to resolve these issues. The memorandum is organized around the major bankability topics that Tralvendo and the syndicate lenders will evaluate: collateral assignment, lender step-in and cure rights, replacement PPA rights, revenue protection and DSCR adequacy, change of control, credit support, force majeure, termination payments, and insurance. We also address the coordination required with WJC and the timeline for parallel lender review.
II. Background — Project Finance Structure
A. Facility Overview
The Project is being financed through a senior secured construction-to-term loan facility with total commitments of $108,000,000, arranged as follows:
The Administrative Agent for the facility is Tralvendo National Bank, N.A. The primary point of contact at Tralvendo is Diane Roessler, Director, Project Finance, headquartered at 600 Main Street, Suite 3000, Dallas, TX 75202. Ms. Roessler has been closely involved in the structuring of the facility and has communicated Tralvendo's key bankability requirements on multiple occasions during the term sheet negotiation phase.
The facility has a tenor consisting of an approximately 18-month construction period (from first draw, anticipated in October 2025, through the expected Commercial Operation Date of April 1, 2027), followed by an 18-year amortizing term loan, for a total facility life of approximately 19.5 years from first draw. The amortization schedule is sculpted to the Project's projected cash flows, with a target average DSCR of approximately 1.40x over the term loan period and a minimum DSCR covenant of 1.30x at all times.
The interest rate is structured as follows:
• Construction Period: Term SOFR + 200 basis points
• Term Period: Term SOFR + 175 basis points
The target debt-to-equity ratio for the Project is 70/30, with $108,000,000 in senior secured debt and approximately $46,300,000 in equity. The total project cost of approximately $154,300,000 comprises:
• EPC Contract (Sunbelt Power Construction LLC): $142,500,000 (fixed-price turnkey)
• Soft Costs, Land, Interconnection, and Reserves: Approximately $11,800,000
The equity contribution of approximately $46,300,000 is being funded by CBR, which is backed by Ridgepoint Capital Partners LP as the 68% equity holder in CBR. The remaining 32% of CBR equity is held by CBR's management team and other minority investors. Ridgepoint's commitment to fund its proportional share of the equity has been confirmed through an equity commitment letter that will be a condition precedent to construction loan closing.
B. Revenue Model and DSCR
The PPA is the sole contracted revenue stream supporting debt service on the facility. There is no merchant tail revenue assumed in the base-case financial model, and lenders are not extending credit on the basis of any uncontracted revenue. This makes the PPA the single most critical document in the Project's capital structure.
Key revenue and debt service metrics are summarized below:
• P50 Annual Generation (per the independent resource assessment by Heliograph Energy Consulting LLC, dated March 12, 2025): 350,000 MWh per year
• Initial Contract Price: $20.00 per MWh (fixed for Years 1–5), with a 1.50% per annum compounding escalator for Years 6–20
• Year 1 Estimated Annual Revenue (P50): 350,000 MWh × $20.00/MWh = $7,000,000
• Projected Annual Debt Service: Approximately $5,200,000 (based on the sculpted amortization schedule at current Term SOFR forward curve assumptions)
• Projected Initial DSCR: Approximately $7,000,000 ÷ $5,200,000 ≈ 1.35x
• Minimum DSCR Covenant: 1.30x
The margin between the projected initial DSCR of 1.35x and the minimum DSCR covenant of 1.30x is thin — approximately 0.05x. This narrow cushion means that any PPA provision that reduces Seller's available revenue — whether through increased availability liquidated damages ("LD") exposure, revenue erosion from curtailment, force majeure-related production losses, or Buyer payment defaults — could cause a covenant breach under the credit agreement. This reality drives many of the lender bankability requirements discussed in Section III below and underscores the importance of disciplined negotiation of each PPA provision that touches revenue adequacy.
Over the full 20-year PPA term, the aggregate nominal PPA value is approximately $140,000,000, based on total contracted volume at P50 of approximately 7,000,000 MWh. This contracted revenue stream, after application of the escalator from Year 6 onward, provides the amortization runway and cash flow waterfall from which lenders expect to be repaid in full.
C. Project Description (for Context)
The following Project details are provided for context and to ensure that all parties are working from a consistent factual baseline:
Project Company: Saguaro Flats Solar LLC, a Delaware limited liability company (EIN: 93-1284506), 100% owned by Calloway-Briggs Renewables Inc. The Project Company is the "Seller" under the PPA.
Project Specifications: 195 MWdc / 150 MWac ground-mounted single-axis tracking solar photovoltaic facility.
Site: Approximately 1,400 acres located on FM Road 1776, Pecos County, Texas, approximately 12 miles southeast of Fort Stockton, Texas. The Project site is subject to a 35-year ground lease (with extension options) from Redrock Mesa Ranch LP, the fee owner of the underlying real property.
Interconnection: The Project will interconnect at the Ft. Stockton 345 kV Substation via transmission facilities owned and operated by West Texas Wires LLC. The Project holds ERCOT Queue Position ERCOT-GI-2024-0437. A Large Generator Interconnection Agreement ("LGIA") was executed on May 15, 2025, with West Texas Wires LLC as the transmission owner and ERCOT as the independent system operator. The Project will settle in the ERCOT market at the ERCOT West Hub delivery point.
EPC Contractor: Sunbelt Power Construction LLC, under a fixed-price turnkey engineering, procurement, and construction contract with a contract price of $142,500,000. Notice to Proceed ("NTP") to Sunbelt is targeted for October 15, 2025, approximately two weeks following construction loan closing.
Independent Engineer: Gresham Engineering Advisors Inc. has been retained by Tralvendo to serve as the lenders' independent engineer for the Project. Gresham will review the PPA's technical provisions (including the availability calculation methodology, performance testing protocols, and degradation assumptions) as part of its independent engineer's report, which is a condition precedent to construction loan closing.
Expected Commercial Operation Date ("COD"): April 1, 2027
PPA Expiration: March 31, 2047 (20-year term from COD)
III. Lender Bankability Requirements — Detailed Analysis
This Section III addresses each of the major categories of PPA provisions that Tralvendo and the syndicate lenders will evaluate as part of the bankability review. For each category, we describe the lender's requirement, assess the current status of the Seller's Form PPA, and provide our recommendations for the negotiation with Buyer's counsel and for alignment with the credit agreement.
A. Consent to Collateral Assignment
1. Requirement. In any project finance transaction, the PPA serves as the primary collateral supporting the senior secured debt facility. Accordingly, lenders require that the Buyer consent — either within the PPA itself or through a separate tri-party agreement — to the Seller's collateral assignment of its rights, title, and interest under the PPA to the Administrative Agent, for the benefit of the lender syndicate, as security for the obligations under the credit agreement.
This consent is typically accomplished through two mechanisms operating in tandem:
(a) A provision within the PPA itself that expressly permits the Seller to assign, pledge, mortgage, or otherwise encumber its rights under the PPA in favor of its project finance lenders, without requiring the Buyer's prior written consent (though notice to the Buyer is customary); and
(b) A standalone Lender Consent and Direct Agreement (commonly referred to as a "Consent and Agreement" or "Direct Agreement"), executed as a tri-party agreement among the Seller, the Buyer, and the Administrative Agent. This agreement formally acknowledges the collateral assignment, establishes the Administrative Agent's rights vis-à-vis the Buyer, and contains the step-in rights, cure rights, and new-PPA rights discussed in Sections III.B through III.D below.
The collateral assignment of the PPA is foundational to the entire security package. Without it, the lenders have no privity with the Buyer and no ability to protect their interest in the revenue contract in the event of a Seller default, bankruptcy, or other credit event. Tralvendo has confirmed that the collateral assignment of the PPA, together with an executed Lender Consent Agreement, are non-negotiable conditions precedent to construction loan closing.
2. Current Draft Status
The Seller's Form PPA, as circulated on July 14, 2025, includes in the Assignment article (Article XV) a provision permitting the Seller to assign the PPA as collateral security to its project finance lenders without the Buyer's prior written consent, subject to delivery of written notice to the Buyer within ten (10) business days of such assignment. This provision is consistent with market practice and provides a reasonable starting point for negotiation.
Additionally, the Seller's Form PPA attaches as Exhibit F a Form of Lender Consent Agreement, which serves as the template for the tri-party agreement described above. Exhibit F will be the subject of separate, detailed negotiation with both Buyer's counsel (Hargrove & Linden LLP) and lender's counsel (Whitfield Stroval & Cade LLP). This memorandum addresses the PPA-level provisions related to collateral assignment; the specific terms of the Lender Consent Agreement are discussed below in the context of step-in rights, cure rights, and new-PPA rights.
3. Recommendations. We recommend the following with respect to the collateral assignment provisions of the PPA:
(a) Breadth of Assignment Provision. Confirm that the PPA assignment provision is broadly drafted to cover not only the initial assignment to Tralvendo as Administrative Agent, but also any subsequent assignment to a successor Administrative Agent, replacement agent, or individual lender exercising remedies. The provision should also cover any refinancing scenario in which Tralvendo's facility is replaced by a new lender group. We recommend language along the following lines: "Seller may, without Buyer's consent, collaterally assign, pledge, mortgage, or otherwise encumber all of Seller's right, title, and interest in, to, and under this Agreement to any Financing Party, including any Administrative Agent, lender, bondholder, noteholder, or other provider of debt or tax equity financing (or any agent, trustee, or representative thereof), or any refinancing, replacement, or successor thereof."
(b) No Buyer Approval Right over Lender Identity. The PPA must not contain any provision that would give the Buyer a right to approve or disapprove the identity of the lenders, the Administrative Agent, or any successor or replacement thereof. Buyer's interest is in the performance of the PPA by the Seller; the identity of the parties providing debt financing to the Seller is not a legitimate concern for the Buyer and any approval right could impede refinancing or syndication. If Buyer's counsel seeks to insert such a provision in the redline, it should be firmly resisted.
(c) Buyer Covenant to Execute Lender Consent Agreement. The PPA should include a covenant by the Buyer to execute the Lender Consent Agreement, in the form attached as Exhibit F (or as subsequently agreed), as a condition precedent to the effectiveness of the PPA or, at a minimum, as a condition precedent to the achievement of COD. From a lender's perspective, the preferable approach is to require execution of the Lender Consent Agreement concurrently with execution of the PPA — this ensures that lenders have the benefit of the Buyer's direct obligations from the inception of the contractual relationship and avoids any risk that the Buyer will refuse to execute the Lender Consent Agreement at a later date after having secured the benefit of the PPA.
(d) Separate Negotiation of Exhibit F. We note that the standalone Lender Consent Agreement (Exhibit F) will be negotiated separately with Whitfield Stroval & Cade LLP (on behalf of Tralvendo and the syndicate) and Hargrove & Linden LLP (on behalf of Buyer). This memorandum addresses the PPA-level provisions that support and reference the Lender Consent Agreement; the detailed terms of Exhibit F are discussed in the context of specific lender protections below and will be the subject of a separate negotiation memorandum to follow.
B. Lender Step-In Rights
1. Requirement. Lender step-in rights are among the most critical protections in any project finance PPA. Upon the occurrence of a Seller event of default under the PPA, the lenders must have the contractual right to "step in" to the Seller's position under the PPA — either directly or through a designee — in order to cure the default and continue performance of the Seller's obligations. This is critical to preserve the PPA as the revenue contract if the Project Company (Saguaro Flats Solar LLC) becomes unable to perform, whether due to financial distress, operational failure, management dysfunction, or insolvency.
Without step-in rights, the Buyer could terminate the PPA upon a Seller default, thereby destroying the principal collateral supporting the lenders' $108,000,000 in outstanding debt commitments. The step-in right enables the lenders (or their designee, which may be a professional asset manager, a replacement operator, or a special-purpose entity formed by the lenders) to take control of the Project's operations, cure the default, and preserve the revenue stream.
As a corollary to the step-in right, Tralvendo typically requires a minimum 90-day cure period — measured from the date the Administrative Agent receives written notice from the Buyer of the Seller's default — before the Buyer may exercise any right to terminate the PPA for a Seller default. This 90-day period is necessary to allow the lenders sufficient time to evaluate the default, determine whether to exercise step-in rights, identify and engage a replacement operator or designee if necessary, and effectuate the cure. In complex operational defaults (e.g., persistent availability shortfalls or equipment failures), 90 days may be the minimum time required to mobilize the resources necessary for a cure.
2. Current Draft Status
The Seller's Form PPA provides for the following cure periods for Seller defaults in the Default and Termination article:
• Monetary Defaults (e.g., failure to pay availability LDs or other amounts due under the PPA): 30-day cure period following written notice from Buyer.
• Non-Monetary Defaults (e.g., failure to maintain required insurance, breach of operational covenants, failure to maintain permits): 60-day cure period following written notice from Buyer, provided that if the default is not capable of cure within 60 days, the cure period is extended so long as Seller is diligently pursuing the cure.
The Form of Lender Consent Agreement (Exhibit F) includes step-in rights for the Administrative Agent and its designees; however, the lender cure period in the current draft of Exhibit F is only 60 days following receipt of notice by the Administrative Agent. This falls short of Tralvendo's stated requirement of 90 days.
It is important to note that the cure periods under the PPA itself and under the Lender Consent Agreement operate sequentially in most market-standard formulations: the Buyer first provides notice to the Seller (triggering the Seller's cure period under the PPA), and must simultaneously provide notice to the Administrative Agent (triggering the lender cure period under the Lender Consent Agreement). The lender cure period should extend beyond the expiration of the Seller's cure period, providing the lenders with an additional window to act after the Seller has failed to cure.
3. Recommendations. We recommend the following:
(a) Extend the Lender Cure Period to 90 Days. The lender cure period in the Lender Consent Agreement (Exhibit F) should be extended from 60 days to 90 days following receipt of notice by the Administrative Agent of the Seller's default. Tralvendo has indicated that this is a firm requirement and not subject to negotiation. Given the geographic remoteness of the Project site (Pecos County, Texas) and the complexity of mobilizing replacement operations, 90 days is a reasonable and market-standard period for a utility-scale solar project finance transaction.
(b) Concurrent Notice to Administrative Agent. The PPA itself (not just the Lender Consent Agreement) must provide that the Buyer may not terminate the PPA for a Seller default without first providing concurrent written notice to the Administrative Agent and allowing the lender cure period to expire without cure. This should be a condition precedent to the Buyer's exercise of any termination right for Seller default. Without this dual-notice requirement embedded in the PPA, there is a risk that a Buyer could argue that the Lender Consent Agreement is a separate agreement and that the PPA's termination provisions operate independently. Embedding the notice requirement in the PPA eliminates this risk.
(c) Tolling of Buyer's Termination Right. The PPA should include a provision tolling the Buyer's right to terminate during any period in which the lenders (or their designee) are diligently pursuing a cure of the Seller's default. This tolling provision is important because certain non-monetary defaults — such as securing replacement permits, resolving environmental compliance issues, or restoring equipment to operational status — may require cure efforts that extend beyond 90 days even with the exercise of reasonable diligence. The tolling provision ensures that the Buyer cannot terminate the PPA while the lenders are actively and in good faith working to cure the default.
(d) Step-In Does Not Trigger Change of Control. The PPA must expressly provide that the exercise of lender step-in rights — including the appointment of a designee to operate the Project — does not constitute a "change of control" of the Seller for purposes of the PPA's change of control provisions (discussed in Section III.F below). This carve-out is essential to prevent a circular result in which the lenders' exercise of their protective rights inadvertently triggers a separate Buyer termination right under the change of control provision.
C. Lender Cure Rights
1. Requirement. Distinct from the step-in right (which involves the lenders or their designee taking operational control of the Project), lender cure rights refer to the lenders' right to cure specific Seller defaults by direct action — most commonly, by making a direct payment to the Buyer to cure a monetary default.
For example, if the Seller fails to pay availability LDs owed to the Buyer, the lenders require the right to make that payment directly to the Buyer on behalf of the Seller. Such payment by the lenders must be treated as a cure by the Seller for all purposes under the PPA, thereby eliminating the default and preventing the Buyer from exercising any termination right based on that default.
Lenders also require the right to cure non-monetary defaults to the extent such defaults are curable. Examples include:
• Insurance lapses: If the Seller fails to maintain the insurance coverages required under the PPA, the lenders (or the Administrative Agent) should have the right to procure replacement insurance on behalf of the Seller and have such procurement treated as a cure.
• Permit failures: If the Seller fails to maintain required governmental permits or approvals, the lenders should have the right to take steps to cure the permit deficiency, including by engaging consultants or filing applications on behalf of the Seller.
• Reporting defaults: If the Seller fails to deliver required reports, data, or certificates to the Buyer, the lenders should have the right to deliver such reports on behalf of the Seller.
2. Current Draft Status
The Lender Consent Agreement draft (Exhibit F) includes cure rights that permit the Administrative Agent to cure Seller monetary defaults by direct payment to the Buyer. However, the current draft does not expressly address cure of non-monetary defaults. This is a gap that must be addressed, as lenders will require the broadest possible cure rights to protect their investment.
3. Recommendations.
(a) Expand Cure Rights to Cover All Curable Defaults. The cure rights language in the Lender Consent Agreement should be expanded to cover both monetary and non-monetary defaults explicitly. The provision should state that the Administrative Agent (or any lender or designee) may cure any default of the Seller under the PPA, whether monetary or non-monetary in nature, provided that the default is susceptible of cure.
(b) Cure Constitutes Cure by Seller. The Lender Consent Agreement (and, ideally, the PPA itself) should specify that any cure effected by the Administrative Agent, any lender, or any designee constitutes a cure by the Seller for all purposes under the PPA. This eliminates any argument by the Buyer that a cure performed by a third party (rather than the Seller itself) does not satisfy the PPA's cure provisions.
(c) Lender Access to Project Site. To effectuate cures of non-monetary defaults (particularly operational defaults), the lenders or their designees may need physical access to the Project site. The Lender Consent Agreement should include a provision granting the Administrative Agent and its representatives a right of access to the Project site for purposes of cure, inspection, and assessment of the Project's condition. This right of access should be exercisable upon reasonable notice and subject to Buyer's reasonable safety and security requirements, but should not be subject to Buyer's consent or approval.
D. New-PPA Right / Replacement PPA
1. Requirement. In the scenario where the PPA is terminated due to a Seller default despite the lenders' cure efforts — for example, if the default is not capable of cure within the applicable cure period, or if the Seller's financial condition has deteriorated to the point of insolvency — the lenders require a contractual right to enter into a new PPA with the Buyer on substantially the same terms as the terminated PPA (a "New PPA" or "Replacement PPA"). The counterparty to the New PPA would be a new project company formed by the lenders or a lender-designated entity that has acquired the Project through foreclosure, UCC sale, or other exercise of remedies.
The New PPA right is the ultimate backstop protection for the lenders. It preserves the revenue contract — and therefore the collateral value of the Project — even after a termination of the original PPA. Without this right, a PPA termination would leave the Project stranded without a revenue contract, rendering the lenders' security interest in the Project effectively worthless. The difference between a solar project with a 20-year contracted PPA and a solar project without a PPA is, in most cases, the difference between a project with value exceeding the outstanding debt balance and a project with a liquidation value of salvage equipment only.
2. Current Draft Status
Exhibit F to the Seller's Form PPA includes a New PPA right. Under the current draft, if the PPA is terminated for a Seller default, the Buyer is obligated to enter into a New PPA with a lender-designated entity upon request by the Administrative Agent, provided that such request is made within 30 days of the effective date of termination. Tralvendo has previously indicated a preference for a 60-day request period, noting that in a post-termination scenario, the lenders may need additional time to evaluate the Project's condition, engage a replacement operator, form a new project company, and prepare to assume operational responsibilities.
3. Recommendations.
(a) Extend the New-PPA Request Period to 60 Days. We recommend extending the request period for a New PPA from 30 days to 60 days following the effective date of PPA termination. The 30-day period in the current draft is insufficient given the complexity of the actions required — including formation of a successor entity, engagement of a replacement asset manager, assessment of the Project's operational and financial condition, and negotiation of interim operational arrangements. A 60-day period is consistent with market practice in comparable utility-scale solar project finance transactions.
(b) New PPA on Substantially Identical Terms. The New PPA must be on terms substantially identical to the terminated PPA, including:
• The same contract price and escalator structure ($20.00/MWh fixed for Years 1–5 of the original term, 1.50% per annum escalator for Years 6–20, adjusted for the remaining term at the time of termination);
• A term equal to the remaining term of the original PPA (i.e., from the effective date of the New PPA through March 31, 2047);
• The same settlement structure at the ERCOT West Hub delivery point;
• The same availability guarantee, LD structure, and termination triggers;
• The same force majeure provisions; and
• The same insurance and credit support requirements.
(c) No Additional Conditions. The Buyer should not be permitted to impose additional conditions, requirements, or obligations on the New PPA or the lender-designated counterparty beyond those contained in the original PPA. Any attempt by the Buyer to use the New PPA negotiation as an opportunity to extract improved terms (e.g., a lower price, increased LD caps, or additional credit support) should be firmly resisted.
(d) Creditworthiness of New PPA Counterparty. We acknowledge that the Buyer has a reasonable interest in ensuring that the counterparty to the New PPA has sufficient financial capacity and operational capability to perform the Seller's obligations. To address this concern while preserving the lenders' flexibility, we recommend that the new counterparty be required to satisfy the same Minimum Credit Threshold applicable to successors under the PPA's change of control provision: a tangible net worth ("TNW") of at least $100,000,000 or an investment-grade credit rating from Pinnacle Ratings Group or an equivalent nationally recognized statistical rating organization. This objective standard provides the Buyer with reasonable assurance of counterparty creditworthiness without giving the Buyer subjective discretion to reject a lender-designated entity.
E. Minimum DSCR Covenant and Revenue Protection
1. Requirement. As noted in Section II.B above, the credit agreement with Tralvendo includes a minimum DSCR covenant of 1.30x, and the projected initial DSCR is only 1.35x — a margin of approximately 0.05x. This narrow cushion means that lenders will scrutinize every PPA provision with the potential to reduce or eliminate revenue below the level needed to maintain 1.30x DSCR. The key areas of concern are:
• Availability LD exposure — payments from the Seller to the Buyer that directly reduce net revenue available for debt service;
• Curtailment risk — reductions in actual generation (and therefore revenue) due to ERCOT-directed or economic curtailment;
• Force majeure relief — circumstances under which production may be reduced without corresponding compensation; and
• Buyer payment default risk — the risk that the Buyer fails to make timely payments under the PPA, reducing the Seller's cash available for debt service.
Each of these areas is addressed in turn below.
2. Availability Guarantee — DSCR Impact Analysis
The Seller's proposed availability guarantee in the Form PPA is structured as follows:
• Availability Threshold: ≥ 95.0% on a rolling 12-month basis
• LD Rate: 0.50% of trailing 12-month revenue for each 1.0% shortfall below the availability threshold
• LD Cap: 5.0% of trailing 12-month revenue
The Buyer's anticipated position, based on preliminary term discussions and market intelligence regarding Hargrove & Linden's typical negotiation posture for corporate offtakers, is expected to include:
• Higher Availability Threshold: 97.0% (rolling 12-month basis)
• Higher LD Cap: 10.0% of trailing 12-month revenue
The DSCR impact of various LD cap scenarios is set forth below, based on P50 generation and Year 1 pricing (trailing 12-month revenue of $7,000,000):
Critical observation: Even at the Seller's proposed 5.0% LD cap, the maximum LD exposure of $350,000 would reduce the DSCR to approximately 1.28x — below the 1.30x covenant level. This is an inherent tension in the financial model that must be addressed with Tralvendo. The saving grace is that the maximum LD scenario assumes the worst-case availability shortfall in every measurement period, which is a low-probability event. However, lenders will model the downside case, and they will note that the maximum LD exposure exceeds the DSCR cushion.
The Buyer's proposed 10.0% LD cap would result in maximum LD exposure of $700,000 and a DSCR of approximately 1.21x — significantly below the 1.30x covenant and clearly unacceptable from a bankability perspective. Similarly, the Buyer's proposed 97.0% availability threshold (compared to Seller's 95.0%) would increase the frequency with which LDs are triggered, even if the shortfall in any given period is modest, thereby increasing the expected (as opposed to maximum) LD cost.
In addition to the LD cap and threshold, the availability-based termination trigger is a critical bankability provision. The Seller's Form PPA provides that the Buyer may terminate the PPA if availability falls below 85.0% in two consecutive 12-month measurement periods. We understand that the Buyer may propose a termination right if availability falls below 90.0% in any single 12-month period. The single-period test at a 90.0% threshold creates excessive termination risk that lenders will find unacceptable, as it fails to account for temporary anomalies, one-time equipment failures, or other transient events that may depress availability in a single year but do not reflect a systemic operational problem.
3. Recommendations on Availability for Bankability
(a) LD Cap. From a lender perspective, the lower the LD cap, the better for DSCR protection. The Seller's proposed 5.0% cap is already tight when modeled against the DSCR covenant, but it is materially better than the Buyer's 10.0% proposal. We recommend maintaining the LD cap at or below 5.0% of trailing 12-month revenue. If a compromise is needed to reach agreement with the Buyer, a cap of 7.5% may be acceptable, but this must be modeled with Tralvendo's financial advisor to confirm that the resulting DSCR stress-case remains within acceptable parameters for the lender group. We note that any increase in the LD cap above 5.0% may require a corresponding increase in the equity contribution or a reduction in the debt commitment to maintain the DSCR cushion, which would have significant economic implications for the Project.
(b) Availability Threshold. We recommend that the availability threshold not exceed 96.0% to limit the frequency of LD triggers. A 97.0% threshold, as the Buyer is expected to propose, would mean that even minor, routine availability shortfalls (e.g., due to inverter replacements, tracker maintenance, or weather-related downtime) could trigger LD obligations. A 95.0% threshold (Seller's position) is the most favorable for bankability; a 96.0% threshold represents a reasonable compromise.
(c) Termination Trigger. We recommend that the termination trigger remain at availability below 85.0% over two consecutive 12-month measurement periods (the Seller's position), rather than the Buyer's expected proposal of below 90.0% in any single 12-month period. The two-consecutive-period test at 85.0% is the market standard for utility-scale solar PPAs in project finance transactions and provides an appropriate balance between the Buyer's legitimate interest in reliable supply and the lenders' need to protect against premature PPA termination. A single-period test at 90.0% would be particularly problematic given the Project's location in West Texas, where intermittent severe weather events (dust storms, hail, extreme heat) could cause temporary availability reductions in any given year.
(d) Scheduled Maintenance Exclusion. The scheduled maintenance exclusion of 200 hours per year should be expressly referenced in the availability calculation methodology and confirmed with Gresham Engineering Advisors Inc. (the lenders' independent engineer). This exclusion ensures that planned maintenance activities — which are essential to the long-term operational performance of the facility — do not count against the availability measurement and do not trigger LD obligations. The PPA should define "Scheduled Maintenance" with sufficient specificity to avoid disputes with the Buyer over whether particular maintenance activities qualify for the exclusion.
4. Curtailment Risk
Curtailment — the reduction of the Project's output below its available capacity, whether directed by ERCOT or driven by economic considerations — is a significant risk for any solar project in the ERCOT market, particularly in West Texas where solar generation capacity has grown rapidly in recent years. The PPA must clearly allocate curtailment risk between the Seller and the Buyer, and lenders will expect that the allocation protects the Seller's revenue stream to the greatest extent possible.
Under the PPA's settlement structure, which we understand to be a virtual PPA or contract for differences ("CfD") settled at the ERCOT West Hub node, the Seller generates electricity and sells it into the ERCOT real-time market, receiving the locational marginal price at the Project's bus. The CfD settlement is a financial swap: the Seller pays the Buyer the floating ERCOT West Hub price and receives the fixed contract price ($20.00/MWh, escalating). The net effect is that the Seller receives the fixed contract price for all actually generated MWh, regardless of the floating market price.
However, when curtailment occurs — whether directed by ERCOT for reliability reasons or undertaken by the Seller for economic reasons (e.g., when real-time prices are negative) — the Seller does not generate electricity and therefore does not receive the market price. Critically, under a CfD structure, the settlement difference payment (fixed price minus floating price) applies only to actually generated volumes. Curtailed MWh are not settled. This means that curtailment directly reduces the Seller's revenue.
Lenders will expect that the PPA includes a curtailment compensation mechanism to protect the Seller against revenue erosion from curtailment events that are beyond the Seller's control. We recommend the following:
(a) Curtailment Compensation Threshold. If annual curtailment exceeds a specified threshold — we recommend 5% of expected annual generation (i.e., 5% of 350,000 MWh = 17,500 MWh) — the Buyer should bear the economic cost of the excess curtailment. This could be structured as a payment from the Buyer to the Seller equal to the contract price multiplied by the curtailed MWh in excess of the threshold, or alternatively, as a deemed generation provision under which curtailed MWh in excess of the threshold count toward contracted volumes for payment purposes.
(b) Distinction Between Curtailment Types. The PPA should distinguish between:
• ERCOT-Directed Curtailment (i.e., curtailment ordered by ERCOT for grid reliability or congestion management reasons): the economic risk should be borne by the Buyer above the threshold;
• Economic Curtailment (i.e., curtailment undertaken by the Seller when real-time prices are negative or below marginal cost): the allocation may be shared, but lenders will want protections against scenarios where sustained negative pricing forces the Project offline for extended periods; and
• Buyer-Directed Curtailment (if the PPA permits the Buyer to curtail): any Buyer-directed curtailment should be fully compensated — the Buyer should pay the contract price for all Buyer-curtailed MWh.
(c) No Deemed Generation Obligation for Curtailed Hours. We recommend confirming that the PPA does not create a deemed generation obligation for curtailed hours that could result in the Seller being obligated to pay the CfD settlement difference on volumes it did not actually generate. Under the CfD structure, if real-time prices are above the contract price during a period of curtailment, a deemed generation provision could result in the Seller owing the difference between the market price and the contract price on MWh it did not generate and for which it received no market revenue. This would create an affirmative payment obligation that could further erode DSCR. The PPA should be reviewed carefully to ensure that the CfD settlement applies only to actually generated and delivered volumes.
F. Change of Control — Lender Requirements
1. Requirement. Change of control provisions in the PPA must be structured to avoid creating obstacles to the lenders' exercise of their remedies. Tralvendo's credit agreement requires prior written lender consent to any change of control of the Seller (Saguaro Flats Solar LLC) or its parent (CBR). The PPA must not include change of control provisions that conflict with or are more restrictive than the credit agreement's requirements, and — critically — the exercise of lender remedies (including foreclosure on the Seller's equity interests, UCC sale, step-in, or appointment of a receiver) must not be treated as a "change of control" under the PPA.
This issue has particular significance for the Saguaro Flats transaction because Ridgepoint Capital Partners LP holds 68% of CBR's common equity. As a private equity sponsor, Ridgepoint will at some point seek to exit its investment in CBR — whether through a sale to a strategic buyer, a secondary sale to another financial sponsor, an initial public offering, or a recapitalization. Any such exit strategy could trigger change of control provisions in the PPA if those provisions are drafted to apply to indirect transfers at the CBR parent level. The PPA must be structured to accommodate Ridgepoint's eventual exit without creating PPA termination risk or requiring Buyer consent that could be withheld or conditioned on commercially unreasonable terms.
2. Current Positions
The Seller's and Buyer's current and expected positions on change of control are as follows:
Seller's Position (Form PPA):
• A change of control of the Seller requires 30-day prior written notice to the Buyer;
• The Buyer may terminate the PPA only if the successor entity fails to meet the Minimum Credit Threshold (TNW ≥ $100,000,000 or investment-grade credit rating from Pinnacle Ratings Group or equivalent);
• No consent right; no consent fee.
Buyer's Expected Position (based on preliminary term discussions and Hargrove & Linden's typical negotiation approach for corporate PPA offtakers):
• A change of control of the Seller requires prior written consent of the Buyer (not to be unreasonably withheld);
• A $1,500,000 consent fee payable to the Buyer upon any change of control;
• A 60-day termination right for the Buyer following a change of control, exercisable in the Buyer's sole discretion.
3. Recommendations.
(a) Lender Remedies Carve-Out. The PPA must include an express carve-out providing that any transfer of the Seller's direct or indirect equity interests in connection with lender foreclosure, exercise of remedies, UCC Article 9 sale, step-in, appointment of a receiver, or enforcement of the lender's security interest does not constitute a change of control for purposes of the PPA and does not require Buyer consent, Buyer notice, or any payment to the Buyer. This carve-out is non-negotiable from a lender bankability perspective and must appear both in the PPA and in the Lender Consent Agreement.
(b) Oppose the Consent Fee. The Buyer's proposed $1,500,000 consent fee has no precedent in project finance PPA practice and should be firmly opposed. Change of control consent fees are occasionally seen in commercial real estate leases and franchise agreements, but they are not a feature of power purchase agreements in the renewable energy sector. The imposition of such a fee would complicate Ridgepoint's exit strategy, add friction to any refinancing that involves a change in the Seller's equity ownership, and create a windfall for the Buyer that is unrelated to any actual cost or harm suffered by the Buyer as a result of the change of control. If the Buyer insists on some form of change of control protection, the appropriate mechanism is the objective creditworthiness test described below — not a cash payment.
(c) Objective Creditworthiness Test. We recommend that the sole gating condition for any change of control be an objective creditworthiness test: the successor entity must have a tangible net worth of at least $100,000,000 or an investment-grade credit rating from Pinnacle Ratings Group or equivalent. This test provides the Buyer with meaningful assurance that any successor counterparty has the financial capacity to perform the Seller's obligations under the PPA, while avoiding the subjectivity and delay inherent in a consent right (which, even when qualified by a "reasonably withheld" standard, can give rise to disputes about the reasonableness of the Buyer's decision). The objective test is also consistent with the Buyer's credit support interests: if the successor meets the Minimum Credit Threshold, the Buyer's economic position under the PPA is unchanged.
(d) Harmonization with Credit Agreement. The PPA's change of control definition must be harmonized with the credit agreement's change of control definition to avoid a scenario in which a transfer triggers a default or consent requirement under one agreement but not the other. Both definitions should apply to transfers of more than 50% of the direct or indirect equity interests in Saguaro Flats Solar LLC to a person that is not an affiliate of the transferor. We recommend discussing with Tralvendo whether the credit agreement's change of control definition should also be aligned to cover CBR-level transfers — this is particularly relevant if Ridgepoint sells its 68% stake in CBR to a third party, which would effect an indirect change of control at the Saguaro Flats Solar LLC level even though no equity interests in Saguaro Flats Solar LLC itself are directly transferred.
G. Credit Support Adequacy
1. Buyer Creditworthiness and Guaranty
Meridian DataCore Solutions Inc. is a publicly traded company listed on the Nasdaq Stock Market (ticker: MDCS) with the following financial profile as of the most recent public filings and market data:
Meridian is currently an investment-grade credit, and its financial profile is consistent with a creditworthy PPA counterparty. However, lenders must assess Buyer credit risk over the full 20-year PPA term (through March 31, 2047). Corporate credit profiles can change dramatically over two decades — investment-grade companies can and do experience downgrades, financial distress, and even bankruptcy. The history of the technology sector, in which Meridian operates as a data center solutions provider, includes numerous examples of companies that were considered blue-chip credits but subsequently experienced significant credit deterioration.
For this reason, lenders will require credit support that survives rating downgrades and provides the Seller (and, by extension, the lenders) with financial protection against Buyer credit deterioration. The Seller has requested a corporate guaranty from Meridian capped at $14,000,000 — representing approximately two years of estimated PPA revenue — which would guarantee Meridian's payment obligations under the PPA. The Buyer has not yet responded to this request. We anticipate that Buyer's counsel will push back on the guaranty or seek to reduce the cap amount.
Lenders will likely require either: (a) a Buyer corporate guaranty at a level sufficient to cover at least 12–24 months of estimated PPA payments; or (b) an alternative credit support mechanism (such as a letter of credit or cash collateral) if the Buyer's credit rating falls below investment grade at any point during the PPA term.
2. Seller Credit Support
The Seller has proposed to post a letter of credit from Tralvendo National Bank, N.A. in the amount of $7,000,000 initially, reducing to $3,500,000 after Year 5 if no Seller default has occurred. This letter of credit secures the Seller's performance obligations under the PPA, primarily the Seller's obligation to pay availability LDs.
An important structural consideration arises from the fact that the LC is issued by Tralvendo itself — the same institution that serves as Administrative Agent and a syndicate lender. This creates a potential inter-creditor issue: the LC obligation secured by the Seller in favor of the Buyer could be viewed as a claim on the Project's cash flows that is senior to or pari passu with the debt service obligations. Coordination is needed between Calderwood & Harkness, Whitfield Stroval & Cade, and Tralvendo to ensure that the LC obligation is properly addressed in the credit agreement's waterfall, the inter-creditor arrangements, and the permitted indebtedness and lien baskets.
3. Recommendations.
(a) Buyer Corporate Guaranty. We strongly advocate for the inclusion of a Buyer corporate guaranty in the PPA, capped at $14,000,000. This is a standard lender bankability requirement for PPAs with non-utility offtakers. While Meridian is currently investment-grade, the 20-year term of the PPA exposes the lenders to long-term Buyer credit risk that must be mitigated through structural credit support. The guaranty should be an unconditional, irrevocable guaranty of Meridian's payment obligations under the PPA, enforceable by the Seller (and, through the Lender Consent Agreement, by the Administrative Agent upon step-in). The $14,000,000 cap represents a reasonable level of coverage — approximately two years of estimated PPA revenue — and should be non-negotiable.
(b) Credit-Support Step-Up Provision. In addition to (or as an alternative to) the corporate guaranty, the PPA should include a credit-support step-up provision: if the Buyer's credit rating from Pinnacle Ratings Group (or equivalent) falls below BBB− at any point during the PPA term, the Buyer must post a letter of credit in an amount equal to 12 months of estimated PPA payments (approximately $7,000,000 at current pricing, adjusted for the escalator in later years) within 30 business days of the downgrade. The LC should be issued by a major commercial bank with a credit rating of at least A− from Pinnacle Ratings Group or equivalent. This step-up provision provides the lenders with tangible credit support precisely when it is most needed — i.e., when the Buyer's credit profile has deteriorated to a point where the Buyer's unsecured payment obligation is no longer sufficient.
(c) Seller's LC — Credit Agreement Coordination. We recommend confirming with Tralvendo that the Seller's LC issuance is consistent with the credit agreement's permitted indebtedness and lien baskets. The LC represents a contingent obligation of the Seller (and a direct obligation of Tralvendo as issuer) that must be accommodated within the credit agreement's covenant structure. We also recommend clarifying in the credit agreement's cash flow waterfall that LC-related cash collateral or reimbursement obligations are subordinate to scheduled debt service payments.
(d) Lender Benefit from Buyer Credit Support. The Buyer corporate guaranty and any Buyer LC should be acknowledged in the Lender Consent Agreement so that the lenders benefit from this credit support in a step-in scenario. Specifically, the Lender Consent Agreement should provide that upon a lender step-in, the Administrative Agent (or its designee) succeeds to the Seller's rights under the Buyer guaranty and any Buyer LC, and the Buyer's obligations under such credit support continue in full force and effect notwithstanding the step-in or any change of control resulting from the exercise of lender remedies.
H. Force Majeure
1. Requirement. Force majeure provisions in the PPA must be carefully structured to balance the Seller's legitimate need for relief from obligations it cannot perform due to circumstances beyond its control against the lenders' paramount interest in preserving the revenue stream. The overarching principles from a lender bankability perspective are:
• Force majeure should never excuse payment obligations — under any circumstances. If the Buyer is unable to take delivery of energy due to a force majeure event, the Buyer must nevertheless continue to make payments under the PPA (or, at minimum, the PPA must include a deemed generation provision or take-or-pay structure that ensures continued cash flow during force majeure periods).
• Force majeure hours must be excluded from the availability calculation to protect the Seller from LD exposure for events beyond its control. If force majeure renders the Project unable to generate electricity (e.g., due to a natural disaster, grid outage, or severe weather), those hours should not count against the Seller's availability guarantee.
• Force majeure should not provide an open-ended excuse for prolonged non-performance that could leave the Project without revenue indefinitely. There must be a maximum duration beyond which the force majeure excuse expires and the parties' rights are clarified, including through termination with appropriate payment protections for the lenders.
2. Current Draft Status
The Seller's Form PPA addresses force majeure as follows:
• Force majeure events are excluded from the availability calculation — i.e., hours during which the Project is unavailable due to a qualifying force majeure event do not count against the availability threshold for purposes of the availability guarantee. This is consistent with market practice and with lender expectations.
• Payment obligations are not excused by force majeure. This provision is clearly stated in the Form PPA and is a fundamental lender requirement.
3. Recommendations.
(a) Confirm Non-Excusal of Buyer Payment Obligations. We recommend confirming — and if necessary, strengthening the language to ensure — that force majeure does not excuse the Buyer's payment obligations under the PPA under any circumstances. This is a firm lender requirement. The Buyer may argue that if a force majeure event prevents the Buyer from accepting delivery of energy (e.g., destruction of Buyer's data center facilities), the Buyer's payment obligation should be suspended. This argument must be rejected. Under a CfD / virtual PPA structure, the Buyer is not physically accepting delivery of energy — the Buyer is making financial settlement payments based on market prices and contracted prices. There is no physical delivery obligation that can be prevented by force majeure on the Buyer's side.
(b) Clarity of Force Majeure Availability Carve-Out. Confirm that the force majeure carve-out from the availability calculation is clear and not subject to dispute. The provision should specify that (i) the Seller must provide prompt written notice to the Buyer of the force majeure event and its expected duration, (ii) the Seller must use commercially reasonable efforts to mitigate the effects of the force majeure event and resume performance as promptly as practicable, and (iii) the hours of unavailability attributable to force majeure are excluded from both the numerator and denominator of the availability calculation (or, alternatively, are treated as available hours for purposes of the calculation).
(c) Maximum Force Majeure Extension Period. Include a maximum force majeure extension period of 365 consecutive days, after which either party may terminate the PPA by written notice to the other party. This prevents the PPA from remaining in a state of suspended performance indefinitely due to a catastrophic force majeure event (e.g., a natural disaster that renders the Project site permanently unsuitable for solar generation). Upon such termination, the Buyer must pay a Termination Payment to the Seller (as described in Section III.I below), calculated in the same manner as a Buyer termination payment. This protects the lenders' investment by ensuring that even a force majeure-related termination generates a cash payment sufficient to cover the outstanding debt balance.
(d) Standard Exclusions. The force majeure definition should exclude changes in market conditions, commodity prices, fluctuations in electricity demand, changes in the Buyer's business plans or operations, or general economic hardship. These are standard exclusions in project finance PPAs and prevent the Buyer from invoking force majeure as a pretext for escaping a PPA that has become economically unfavorable.
I. Termination and Termination Payment
1. Requirement. Any termination of the PPA by the Buyer — whether for Seller default, change of control, extended force majeure, or any other ground — must trigger a Termination Payment from the Buyer to the Seller in an amount sufficient to cover the outstanding debt service and breakage costs associated with the senior secured facility. The Termination Payment is the lenders' ultimate financial protection: if the PPA is terminated and the revenue stream is extinguished, the Termination Payment must be sufficient to repay the lenders in full.
Lenders require that the Termination Payment formula be set forth in the PPA with sufficient specificity that the amount can be calculated and is not subject to negotiation or dispute at the time of termination. The Termination Payment should cover, at minimum, the present value of remaining PPA revenues or the outstanding principal balance of the senior secured loan, whichever is greater.
2. Recommendations.
(a) Termination Payment Formula. Include a defined Termination Payment calculation in the PPA, structured as the greater of:
(i) the present value of the remaining contracted revenue stream under the PPA (calculated as the sum of the projected annual PPA revenues for each remaining year of the PPA term, discounted to present value using a discount rate no higher than the Project's weighted average cost of capital, which we estimate at approximately 7.5% based on the current financing structure); and
(ii) the aggregate outstanding balance of the senior secured indebtedness as of the date of termination, including accrued and unpaid interest, fees, and prepayment or breakage costs (as certified by the Administrative Agent).
The "greater of" formulation is important because the outstanding loan balance and the present value of future revenues may diverge over the PPA term, particularly in the later years when the loan has been substantially amortized but significant contracted revenue remains.
(b) Timing of Payment. The Termination Payment should be payable within 30 days of the effective date of termination. This provides the Buyer with a brief period to arrange for payment while ensuring that the lenders receive funds promptly. Any extended payment period (e.g., 90 or 180 days) creates cash flow risk for the lenders and should be resisted.
(c) Payment to Administrative Agent. The Lender Consent Agreement should provide that Termination Payments are payable directly to the Administrative Agent or into the Project's collateral account (as designated by the Administrative Agent), not to the Seller free and clear of the lenders' security interest. This ensures that the Termination Payment funds are captured by the collateral waterfall and applied first to the outstanding debt obligations. Without this provision, there is a risk — particularly in a Seller insolvency scenario — that the Termination Paymen