CALDERWOOD & HARKNESS LLP Attorneys at Law
1100 Louisiana Street, Suite 4500 Houston, Texas 77002 Telephone: (713) 555-9400 Facsimile: (713) 555-9401 www.calderwoodharkness.com
July 14, 2025
VIA EMAIL AND OVERNIGHT COURIER
Evelyn Crumveth, Esq. Hargrove & Linden LLP 300 Congress Avenue, Suite 2200 Austin, Texas 78701
Re: Power Purchase Agreement — Saguaro Flats Solar LLC and Meridian DataCore Solutions Inc. Saguaro Flats Solar Project, Pecos County, Texas Calderwood & Harkness Matter No. 1015-00002
Dear Ms. Ashford:
This firm represents Calloway-Briggs Renewables Inc. ("CBR") and its wholly owned project subsidiary, Saguaro Flats Solar LLC ("Seller"), in connection with the negotiation and documentation of a long-term power purchase agreement with Meridian DataCore Solutions Inc. ("Buyer" or "Meridian"). We understand that your firm has been engaged to represent Meridian in this transaction, and we look forward to working with you and your colleagues as we move toward execution of the definitive agreements.
Enclosed with this letter is the Seller's initial form of Power Purchase Agreement (the "PPA"), dated as of July 14, 2025, together with Exhibits A through F thereto. We respectfully request that Hargrove & Linden review the enclosed draft on behalf of Meridian and provide a redline markup and comments at your earliest convenience so that the parties may proceed expeditiously toward execution. We have endeavored to prepare a comprehensive draft that reflects commercially reasonable terms consistent with current market practice for utility-scale solar transactions in ERCOT, and we believe the draft provides a strong foundation for productive negotiations.
Enclosed Documents
The following documents are enclosed herewith and are being transmitted simultaneously by electronic mail in Microsoft Word format to facilitate your review and markup:
1. Power Purchase Agreement (Seller's Form — First Draft), dated July 14, 2025;
2. Exhibit A — Facility Description and Site;
3. Exhibit B — Contract Price and Escalation Schedule;
4. Exhibit C — Form of Guaranty (Buyer Corporate Guarantee);
5. Exhibit D — Form of Letter of Credit (Seller Availability LC);
6. Exhibit E — Insurance Requirements; and
7. Exhibit F — Form of Lender Consent Agreement.
The foregoing constitute the complete set of documents comprising the initial draft of the PPA package. Should you have any difficulty opening or reviewing any of the enclosed materials, please do not hesitate to contact us immediately.
Project Overview
By way of background, the PPA relates to the Saguaro Flats Solar Project (the "Project"), a ground-mounted, single-axis tracking solar photovoltaic generating facility with a nameplate capacity of 195 MWdc / 150 MWac, reflecting a DC-to-AC ratio of approximately 1.30. The Project is situated on approximately 1,400 acres of leased land in Pecos County, Texas, located on FM Road 1776, approximately 12 miles southeast of Fort Stockton. The Project site is leased from Redrock Mesa Ranch LP pursuant to a 35-year ground lease that was executed in 2024 and provides for two 10-year extension options.
The Project will interconnect to the ERCOT grid 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, and the Large Generation Interconnection Agreement ("LGIA") between Saguaro Flats Solar LLC and West Texas Wires LLC was fully executed on May 15, 2025. Network upgrade costs identified in the LGIA have been incorporated into the Project's capital budget and are not expected to present any material schedule risk.
On the permitting front, the Pecos County Commissioners' Court approved the Project's Conditional Use Permit on February 10, 2025, under Permit No. CUP-2025-012. All material federal, state, and local permits necessary for construction and operation of the Project have been obtained or are in the process of being obtained, and Seller does not anticipate any material permitting impediments.
Sunbelt Power Construction LLC has been engaged as the engineering, procurement, and construction ("EPC") contractor under a fixed-price, turnkey EPC contract that provides for guaranteed completion and performance guarantees. The expected Commercial Operation Date ("COD") for the Project is April 1, 2027, which is consistent with the timeline contemplated in the enclosed draft PPA.
Summary of Key Commercial Terms
We provide below a summary of the principal commercial terms reflected in the enclosed draft PPA for your reference. This summary is intended as a convenience only and is qualified in its entirety by the terms and conditions set forth in the draft PPA itself.
Structure and Term
The PPA is structured as a virtual (financial) power purchase agreement, taking the form of a contract for differences ("CfD") that settles against the ERCOT West Hub locational marginal price. Seller and Buyer will not engage in any physical delivery of energy; rather, periodic settlement payments will be calculated based on the difference between the applicable contract price and the relevant hub price, multiplied by the metered output of the Project during each settlement period. This structure is consistent with the approach commonly utilized by corporate offtakers in the ERCOT market and provides both parties with price certainty while preserving Seller's ability to participate directly in the ERCOT wholesale market.
The PPA has a term of twenty (20) years, commencing on the Commercial Operation Date (expected to be April 1, 2027) and expiring on March 31, 2047, unless earlier terminated in accordance with the terms of the PPA. Based on the contract price and estimated annual generation described below, the aggregate nominal contract value over the full 20-year term is approximately $140,000,000.
Contract Price. The initial contract price under the PPA is $20.00 per MWh, which shall remain fixed and unadjusted for Contract Years 1 through 5 (i.e., through March 31, 2032). Beginning in Contract Year 6, the contract price will escalate at a rate of 1.50% per annum on a compounding basis for the remainder of the term. The year-by-year pricing schedule, including the calculated escalated prices for each Contract Year from Year 6 through Year 20, is set forth in detail in Exhibit B to the PPA.
For reference, the estimated P50 annual net generation of the Project is approximately 350,000 MWh per year, as determined by Heliograph Energy Consulting LLC in its independent resource assessment dated March 2025. Based on this generation estimate and the contract pricing described above, the estimated annual revenue under the PPA is approximately $7,000,000 in Contract Year 1, increasing modestly over the term in line with the annual escalator.
Availability Guarantee. Seller proposes a guaranteed availability of not less than 95.0%, measured on a rolling twelve-month basis. Availability will be calculated as the quotient of Available Hours divided by Period Hours during each twelve-month measurement period, with the following categories of hours excluded from the calculation: (a) hours during which the Facility is unavailable due to a Force Majeure event; (b) hours during which the Facility is curtailed at the direction of ERCOT or the applicable transmission service provider; and (c) scheduled maintenance hours, subject to a cap of 200 hours per Contract Year.
In the event that Seller's actual availability falls below the 95.0% guaranteed threshold during any twelve-month measurement period, Seller will pay availability liquidated damages to Buyer in the amount of 0.50% of trailing twelve-month revenue for each 1.0% (or pro rata portion thereof) by which actual availability falls below the guaranteed level. Availability liquidated damages are subject to an annual cap of 5.0% of trailing twelve-month revenues.
A Buyer termination right arises only in the event that the Facility's actual availability falls below 85.0% in any two consecutive twelve-month measurement periods, and Seller has failed to cure such shortfall within the applicable cure period specified in the PPA. We note that Seller views these availability thresholds and liquidated damages provisions as consistent with prevailing market practice for utility-scale solar PPAs in the ERCOT market and as supportive of the bankability requirements of Seller's project-finance lenders. We would be happy to discuss the basis for these provisions in further detail during our initial call.
Change of Control
The draft PPA provides that any change of control of Seller — defined as a direct or indirect transfer of more than 50% of the equity interests in Saguaro Flats Solar LLC to a person or entity that is not an affiliate of CBR — requires not less than 30 days' prior written notice to Buyer. A change of control does not, in and of itself, give rise to a Buyer termination right. However, if the successor entity or new controlling person fails to satisfy a Minimum Credit Threshold (defined as either a tangible net worth of at least $100,000,000 or an investment-grade credit rating from at least one nationally recognized statistical rating organization), Buyer may elect to terminate the PPA upon written notice delivered within 60 days following receipt of the change of control notice.
In keeping with the principle of mutuality, Seller has also included reciprocal change of control protections applicable to Buyer. Specifically, a change of control of Meridian DataCore Solutions Inc. that results in a successor entity that fails to satisfy the applicable Buyer Minimum Credit Threshold would give rise to a Seller termination right on substantially similar terms.
Credit Support. Under the draft PPA, Seller will provide an irrevocable standby letter of credit in favor of Buyer in the initial amount of $7,000,000, which is equal to approximately one year of estimated PPA revenues. The letter of credit is to be issued by Tralvendo National Bank, N.A. (or another Eligible LC Bank, as defined in the PPA), and the form of letter of credit is attached to the PPA as Exhibit D. To incentivize strong Seller performance, the required letter of credit amount will reduce to $3,500,000 following the fifth anniversary of COD, provided that no Seller Event of Default is then outstanding or continuing.
Correspondingly, Seller requests that Buyer provide a corporate guaranty from Meridian DataCore Solutions Inc. (as the creditworthy parent or principal entity of the Buyer) in an amount not to exceed $14,000,000, which is equal to approximately two years of estimated PPA revenues. The proposed form of corporate guaranty is attached to the PPA as Exhibit C. The guaranty amount is intended to backstop Buyer's settlement payment obligations under the CfD and reflects a level of credit support that Seller's lenders have indicated is necessary to support the project financing.
Lender Consent. The PPA includes, as Exhibit F, a Form of Lender Consent Agreement, which provides for Buyer's consent to the collateral assignment of the PPA by Seller to its project-finance lenders. The Lender Consent Agreement contains customary lender protections, including step-in rights, extended cure rights in favor of the collateral agent, and the right of the lenders (or their designee) to enter into a replacement PPA with Buyer on substantially similar terms in the event of a termination of the PPA resulting from a Seller Event of Default.
For context, Saguaro Flats Solar LLC is the borrower under a $108,000,000 senior secured construction-to-term loan facility, for which Tralvendo National Bank, N.A. serves as Administrative Agent. The lenders' counsel for the project financing is Whitfield Stroval & Cade LLP (contact: Marcus Whitfield). Execution of the Lender Consent Agreement by Buyer is a condition precedent to the closing of the construction loan facility, and Seller respectfully requests Buyer's cooperation in negotiating the Lender Consent Agreement on a parallel track with the PPA itself. We anticipate that Whitfield Stroval & Cade LLP will be in contact with your office separately regarding the form of Lender Consent Agreement once the PPA negotiations are underway.
Governing Law and Dispute Resolution
The PPA is governed by and shall be construed in accordance with the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-law provisions that would result in the application of the laws of another jurisdiction. Disputes arising under or in connection with the PPA are to be resolved first through a 30-day good-faith negotiation period between senior representatives of the parties. If the dispute is not resolved during such negotiation period, it shall be submitted to binding arbitration administered by the American Arbitration Association ("AAA") in New York, New York, under the AAA Commercial Arbitration Rules, before a panel of three arbitrators selected in accordance with those Rules. Notwithstanding the foregoing, either party may seek interim or permanent injunctive relief from the courts of the State of New York located in the Borough of Manhattan or the United States District Court for the Southern District of New York, and each party consents to the exclusive jurisdiction of such courts for purposes of any such proceeding.
Timeline and Scheduling
As you may be aware, the parties share the objective of executing the PPA by no later than September 15, 2025. Timely execution is important for several reasons: (a) the targeted closing of the construction loan facility is October 1, 2025, and an executed PPA with a creditworthy offtaker is a condition precedent to financial close; (b) Seller anticipates issuing a full Notice to Proceed to Sunbelt Power Construction LLC on or about October 15, 2025, following loan closing; and (c) any delay in the construction commencement date would jeopardize the targeted COD of April 1, 2027, and could result in the loss of certain time-sensitive tax incentives and interconnection queue position benefits.
In light of the foregoing schedule, we respectfully request that Hargrove & Linden circulate Buyer's redline and comments to the enclosed draft PPA by early August 2025, ideally no later than August 8, 2025. This will provide approximately three and a half weeks for your initial review and will preserve adequate time for the parties to negotiate and resolve any open issues prior to the September 15 target execution date.
Additionally, we believe it would be productive to schedule an introductory call among outside counsel for both parties, together with the respective business and commercial teams, to discuss the draft PPA at a high level and identify key negotiation priorities and potential areas of concern. We would suggest scheduling such a call during the week of July 21, 2025, at a mutually convenient time. Please let us know your availability, and we will coordinate with our client to propose specific times.
Contact Information
The primary contact for this engagement at Calderwood & Harkness LLP is the undersigned, Patricia Dunmore, Responsible Partner:
Patricia Dunmore Partner, Energy & Infrastructure Group Calderwood & Harkness LLP Direct: (713) 555-9418
Email: pdunmore@calderwoodharkness.com
Day-to-day matters and document exchanges should be directed to Brett Callahan, Lead Associate:
Brett Callahan Associate, Energy & Infrastructure Group Calderwood & Harkness LLP Direct: (713) 555-9432
Email: bcallahan@calderwoodharkness.com
A copy of this letter and all enclosures has been provided to our client, Rachel Muñoz, General Counsel, Calloway-Briggs Renewables Inc., 4200 Travis Street, Suite 1800, Houston, Texas 77002.
We look forward to working with you and your team on this matter. The Saguaro Flats Solar Project represents a significant transaction for both parties, and we are confident that, with diligent and good-faith negotiation, we can arrive at a mutually acceptable agreement that serves the commercial objectives of both Seller and Buyer. Please do not hesitate to contact me or Brett Callahan if you have any questions regarding the enclosed draft PPA or if you require any additional information regarding the Project.
Thank you for your attention to this matter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Patricia Dunmore Partner, Energy & Infrastructure Calderwood & Harkness LLP
Enclosures:
1. Power Purchase Agreement (Seller's Form — First Draft), dated July 14, 2025
2. Exhibit A — Facility Description and Site
3. Exhibit B — Contract Price and Escalation Schedule
4. Exhibit C — Form of Guaranty (Buyer Corporate Guarantee)
5. Exhibit D — Form of Letter of Credit (Seller Availability LC)
6. Exhibit E — Insurance Requirements
7. Exhibit F — Form of Lender Consent Agreement
cc:
Rachel Muñoz, General Counsel, Calloway-Briggs Renewables Inc. Janet Okafor, SVP, Origination & Commercial, Calloway-Briggs Renewables Inc. Brett Callahan, Calderwood & Harkness LLP David Stanton, Calderwood & Harkness LLP