PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
MEMORANDUM
TO: James Prentice, Responsible Partner, Mergers & Acquisitions, Calderwood & Harkness LLP Megan Chu, Lead Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
FROM: Derek Okonkwo, Working Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
DATE: October 25, 2023
RE: Title and Real Property Due Diligence Summary — Proposed 50/50 Joint Venture between Calloway-Briggs Renewables Inc. ("CBR") and Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge") (the joint venture entity to be known as Solstice Plateau Energy Holdings LLC ("Solstice Plateau" or the "JV")) — C&H Matter No. 48172.001
CC: Rebecca Whitfield, General Counsel, Calloway-Briggs Renewables Inc. Daniel Estrada, SVP — Corporate Development, Calloway-Briggs Renewables Inc.
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I. EXECUTIVE SUMMARY
This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") review of title commitments, ALTA/NSPS land title surveys, and related real property documentation provided by Meridian Land Title Company ("Meridian" or the "Title Company"), based in Dallas, Texas, for the eight utility-scale solar photovoltaic development projects (collectively, the "Project Portfolio" or the "Projects") currently owned and controlled by Calloway-Briggs Renewables Inc. ("CBR"). Pursuant to the terms of the non-binding term sheet executed by CBR and Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge") on September 25, 2023, CBR intends to contribute the Project Portfolio to Solstice Plateau Energy Holdings LLC ("Solstice Plateau" or the "JV"), the newly formed Delaware limited liability company that will serve as the 50/50 joint venture vehicle for the parties' collaborative development, construction, financing, and operation of the Projects.
The Project Portfolio encompasses approximately 14,340 acres of leased land across six counties in three states (Texas, New Mexico, and Arizona), with a combined total nameplate capacity of approximately 1,200 MW DC. The anticipated agreed portfolio valuation falls within the range of $87,000,000 to $96,000,000, as discussed in the non-binding term sheet. We note that the formal fairness analysis to be prepared by Ridgeline Barrow & Co. is expected to be dated on or about November 15, 2023, and will establish a definitive valuation; for purposes of this memorandum, we reference the anticipated valuation range and, where a single figure is required, use the midpoint estimate of approximately $90,000,000.
Overall Conclusion: Based on our review of the title commitments, surveys, underlying lease instruments, recorded documents, UCC and lien search results, and related materials, we conclude that CBR's land control over the eight project sites is adequate for the intended development, construction, and operation of all eight Projects, subject to certain standard pre-printed title exceptions, identified encumbrances, and recommended curative actions detailed herein. We have not identified any title defects that would constitute material impediments to the closing of the contribution transaction or to the subsequent development of the Projects, provided that the curative items noted in Sections III, V, and VII below are resolved prior to or at the time of the contribution closing.
The curative items identified are generally routine in nature for transactions of this type and include: (i) termination of an existing blanket UCC-1 financing statement covering two of the Texas project sites; (ii) initiation and completion of the Bureau of Land Management ("BLM") assignment consent process for the two New Mexico project sites located on federal land; (iii) delivery of landlord assignment notices and, where applicable, written landlord consents for the six private ground lease sites; and (iv) various confirmations and endorsements related to mineral surface waivers, flood zones, easements, and other site-specific matters. A comprehensive action item list is set forth in Section VII.
II. SCOPE OF REVIEW
A. Documents Reviewed
In preparing this memorandum, C&H reviewed the following categories of documents, all of which were provided through the electronic data room established for this transaction or delivered directly by Meridian Land Title Company, CBR, and their respective advisors:
1. Title Commitments. Commitments for title insurance issued by Meridian Land Title Company for each of the eight project sites. The commitment effective dates range from September 4, 2023 to October 17, 2023. Each commitment was issued by Meridian's Dallas, Texas office and underwritten by a nationally recognized title insurance underwriter. A complete schedule of title commitment numbers, effective dates, and proposed coverage amounts is set forth in Appendix A.
2. ALTA/NSPS Land Title Surveys. ALTA/NSPS land title surveys for each of the eight project sites, prepared by licensed professional land surveyors engaged by Meridian Land Title Company in the applicable state jurisdictions. Survey dates range from August 2023 to October 2023. A complete schedule of surveys, survey dates, surveyor names, and license numbers is set forth in Appendix B.
3. Ground Lease Agreements and BLM Lease Instruments. Private ground lease agreements for the six Texas and Arizona project sites, together with BLM right-of-way grants and solar energy lease instruments for the two New Mexico project sites. A schedule of all lease and grant instruments, including recording information, is set forth in Appendix C.
4. Memoranda of Lease. Memoranda of lease recorded in the applicable county real property records for each private ground lease site, establishing constructive notice of CBR's leasehold interests.
5. Fee Ownership Chain-of-Title Abstracts. Underlying fee ownership chain-of-title abstracts for each project site, tracing ownership of the fee interest (and, where applicable, the severed mineral estate) through the relevant chain of title as reflected in the county records.
6. UCC Search Results. Uniform Commercial Code search results at both the state level (Secretary of State filings) and the county level (county clerk filings) for each project site, covering CBR as debtor and, where applicable, the fee owners of the project sites.
7. Tax Lien and Judgment Search Results. Federal and state tax lien search results and judgment search results for the applicable counties, covering CBR and the fee owners of the project sites.
8. Existing Easements, Rights-of-Way, and Access Agreements. Copies of all existing easements, rights-of-way, and access agreements identified in the title commitments or otherwise disclosed by CBR, including utility easements, pipeline easements, road easements, water well easements, drainage easements, and transmission line rights-of-way.
9. Recorded Instruments Referenced as Exceptions. Copies of all recorded instruments referenced as specific exceptions in Schedule B of each title commitment, including mineral reservations, surface waiver agreements, deed restrictions, and other encumbrances.
B. Jurisdictions and Counties Covered
The eight Projects are located across six counties in three states as follows:
Texas (five projects; four counties):
• Pecos County: Red Mesa Solar I; Red Mesa Solar II
• Crockett County: Cimarron Flats
• Webb County: Lone Star Prairie
• Wharton County: Brazos Point
New Mexico (two projects; one county):
• Doña Ana County: Sangre del Sol I; Sangre del Sol II (both on BLM-administered federal land)
Arizona (one project; one county):
• Pinal County: Sonoran Ridge
C. Limitations and Qualifications
This memorandum is subject to the following limitations and qualifications:
1. Not a Formal Title Opinion. This memorandum is a summary of our due diligence review and is prepared for internal use by the C&H deal team and CBR's in-house counsel and corporate development personnel. It does not constitute and should not be relied upon as a formal title opinion, and it is not intended to serve as a substitute for the title insurance to be procured in connection with the closing of the contribution transaction.
2. Governing Law. The title commitments, lease instruments, and recorded documents reviewed herein are governed by the laws of the State of Texas, the State of New Mexico, the State of Arizona, and federal law (with respect to BLM-administered lands), as applicable. Our review has been conducted with reference to the applicable law in each jurisdiction, but we have not undertaken a comprehensive analysis of any state-specific title insurance regulatory requirements beyond those relevant to the identified issues.
3. Mineral Rights and Subsurface Interests. Our review of mineral rights and subsurface interests is limited to the extent such interests are disclosed in the title commitments and the recorded instruments provided to us. A separate, comprehensive mineral title examination is not within the scope of this engagement. Where mineral estates have been severed from the surface estate, we have reviewed the recorded surface waiver agreements to the extent available, but we recommend that CBR's mineral counsel independently verify the enforceability and scope of such waivers.
4. Environmental and Permitting Matters. Environmental conditions, permitting status, and regulatory compliance for the project sites are addressed in a separate Environmental Due Diligence Summary Memorandum prepared by C&H's environmental practice group, dated October 20, 2023 (the "Environmental Memo"). This memorandum should be read in conjunction with the Environmental Memo for a complete picture of diligence findings.
5. Reliance on Documents Provided. This memorandum is based solely on the documents provided to C&H through the electronic data room and directly by Meridian, CBR, and their advisors. We have not independently verified the accuracy or completeness of any factual representations made in the documents reviewed, nor have we conducted any independent investigation of the project sites, including physical inspections.
III. PROJECT-BY-PROJECT TITLE REVIEW
A. Red Mesa Solar I — Pecos County, Texas
1. Project Overview
Red Mesa Solar I is the largest project in the portfolio by nameplate capacity and represents the anchor development within the two-project Red Mesa complex in Pecos County. The project site consists of undeveloped ranchland in western Pecos County, Texas, situated approximately 35 miles southwest of the city of Fort Stockton. The site is characterized by flat to gently rolling terrain suitable for utility-scale solar photovoltaic development.
2. Title Commitment Summary
Meridian Land Title Company issued a commitment for leasehold owner's title insurance for the Red Mesa Solar I project site, effective as of September 12, 2023 (Commitment No. MLC-2023-TX-04871). The commitment identifies Mesa Verde Land & Cattle Co., Ltd., a Texas limited partnership, as the fee owner of the subject property in fee simple. CBR's leasehold interest is established pursuant to a Ground Lease Agreement dated March 15, 2021, between Mesa Verde Land & Cattle Co., Ltd., as Lessor, and Calloway-Briggs Renewables Inc., as Lessee. A Memorandum of Lease was recorded in the Official Public Records of Pecos County, Texas on March 22, 2021, at Document No. 2021-003478, providing constructive notice of CBR's leasehold interest. The insurable interest reflected in the commitment is the leasehold estate of CBR under the ground lease.
3. Survey Summary
An ALTA/NSPS land title survey of the Red Mesa Solar I project site was completed on September 8, 2023 by Trent M. Gallagher, RPLS (Texas Registration No. 5891), of Gallagher & Associates Land Surveying, Inc., Fort Stockton, Texas. The survey was prepared in accordance with the 2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys, including Table A optional items 1, 2, 3, 4, 6(a), 6(b), 7(a), 7(b)(1), 8, 9, 11(a), 13, 16, 17, 18, and 19.
The survey confirms that the boundaries of the leased premises are consistent with the legal description set forth in the ground lease and the title commitment. No boundary overlaps, gaps, or encroachments by or onto adjacent properties were identified. The survey depicts the locations of all recorded easements identified in Schedule B of the title commitment and confirms that no improvements currently exist on the property (the land is undeveloped). The survey identifies the flood zone designation as Zone X (areas determined to be outside the 0.2% annual chance floodplain), per FEMA Flood Insurance Rate Map Panel No. 48371C0575D, effective date June 16, 2009.
4. Schedule B Exceptions and Encumbrances
The title commitment for Red Mesa Solar I identifies the following exceptions in Schedule B:
Standard Pre-Printed Exceptions:
(a) Rights or claims of parties in possession not shown by the public records.
(b) Encroachments, overlaps, boundary line disputes, and any other matters that would be disclosed by an accurate survey and inspection of the premises (to be deleted upon receipt of satisfactory survey).
(c) Easements or claims of easements not shown by the public records.
(d) Any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records.
(e) Taxes or special assessments which are not shown as existing liens by the public records.
We note that the standard pre-printed exceptions listed above are customary for Texas title commitments and are expected to be modified or deleted in the final title policy through the provision of appropriate affidavits, the satisfactory ALTA survey, and payment of current taxes.
Specific Exceptions:
(a) Oil and Gas Mineral Reservation. Reservation of all oil, gas, and other minerals in and under the subject property by Harlan D. Whitfield, as grantor, in a Special Warranty Deed recorded at Volume 412, Page 891, Official Public Records of Pecos County, Texas, dated August 3, 1987. A Surface Waiver Agreement was executed between Mesa Verde Land & Cattle Co., Ltd. (successor to Whitfield) and CBR, recorded at Document No. 2021-003612, Official Public Records of Pecos County, Texas, dated April 10, 2021, whereby the mineral interest holder waived the right to use the surface of the property for mineral exploration or development during the term of the ground lease. The mineral reservation is therefore subject to the recorded surface waiver.
(b) Utility Easement. Non-exclusive easement for electric transmission line purposes granted to West Texas Electric Cooperative, Inc. by instrument recorded at Volume 528, Page 204, Official Public Records of Pecos County, Texas, dated February 19, 2004. The easement runs along the northern boundary of the property in a corridor approximately 100 feet wide. Based on our review of the project design layout provided by CBR's engineering team, the existing transmission corridor does not interfere with the planned solar array footprint and may, in fact, provide a beneficial interconnection proximity.
(c) County Road Right-of-Way. Right-of-way for Pecos County Road 314 along the western boundary of the property, as depicted on the survey. The road right-of-way is approximately 60 feet wide and provides the primary access route to the project site.
Tax Status: Ad valorem property taxes for the subject property are current as of the effective date of the title commitment. No delinquent taxes, penalties, or interest were identified.
5. UCC and Lien Searches
A UCC search conducted at the Texas Secretary of State's office and at the Pecos County Clerk's office identified one active UCC-1 Financing Statement filed against CBR as debtor by First National Energy Lending Corp. ("FNELC"), CBR's existing project-level credit facility lender. The filing, Initial Filing No. 23-0048761, was filed on June 5, 2022, and covers, among other collateral, CBR's leasehold interest in the Red Mesa Solar I project site. This is a blanket filing that also covers CBR's leasehold interest in the adjacent Red Mesa Solar II project site. FNELC's security interest must be released and the UCC-1 terminated via the filing of a UCC-3 Termination Statement at or prior to the closing of the contribution to the JV. We understand from CBR that arrangements are being made to pay down the outstanding balance under the FNELC facility and obtain the requisite termination statement.
No federal or state tax liens, judgment liens, or mechanic's liens were identified against CBR or Mesa Verde Land & Cattle Co., Ltd. in connection with the Red Mesa Solar I project site.
6. Curative Items / Recommendations
(a) UCC-3 Termination. Obtain a UCC-3 Termination Statement from First National Energy Lending Corp. with respect to Initial Filing No. 23-0048761, to be filed with the Texas Secretary of State at or prior to the closing of the contribution transaction.
(b) Surface Waiver Confirmation. Confirm that the Surface Waiver Agreement recorded at Document No. 2021-003612 is binding on the heirs, successors, and assigns of the mineral interest holder and that it runs with the land for the term of the ground lease (including any extensions). We recommend requesting a title endorsement from Meridian addressing the surface waiver.
B. Red Mesa Solar II — Pecos County, Texas
1. Project Overview
Red Mesa Solar II is the companion project to Red Mesa Solar I and occupies adjacent ranchland to the south and east of the Red Mesa Solar I site. The two projects share a common access road and are expected to benefit from coordinated development and shared interconnection infrastructure. The project site is similarly characterized by undeveloped, flat terrain.
2. Title Commitment Summary
Meridian issued a commitment for leasehold owner's title insurance for the Red Mesa Solar II project site, effective as of September 12, 2023 (Commitment No. MLC-2023-TX-04872). The fee owner is the same entity as for Red Mesa Solar I — Mesa Verde Land & Cattle Co., Ltd. The leasehold interest is established pursuant to a separate Ground Lease Agreement dated March 15, 2021, between Mesa Verde Land & Cattle Co., Ltd. and CBR. A Memorandum of Lease was recorded in the Official Public Records of Pecos County, Texas on March 22, 2021, at Document No. 2021-003479. The insurable interest is CBR's leasehold estate.
3. Survey Summary
An ALTA/NSPS survey of the Red Mesa Solar II project site was completed on September 10, 2023 by Trent M. Gallagher, RPLS (Texas Registration No. 5891). The survey confirms boundaries consistent with the lease description, identifies no encroachments or boundary disputes, and depicts the shared access road easement connecting the Red Mesa Solar II site to Red Mesa Solar I and to Pecos County Road 314. No improvements exist on the property. The flood zone designation is Zone X (minimal flood hazard), per FEMA Flood Insurance Rate Map Panel No. 48371C0575D.
4. Schedule B Exceptions and Encumbrances
Standard Pre-Printed Exceptions: Same as Red Mesa Solar I (see Section III.A.4 above).
Specific Exceptions:
(a) Mineral Reservation. Similar oil and gas mineral reservation as Red Mesa Solar I, originating from the same grantor (Harlan D. Whitfield) in the chain of title. A Surface Waiver Agreement was recorded at Document No. 2021-003613, Official Public Records of Pecos County, Texas, dated April 10, 2021, on substantially the same terms as the Red Mesa Solar I surface waiver.
(b) Pipeline Easement. Non-exclusive easement for pipeline purposes granted to Permian Basin Pipeline Company, LLC, recorded at Document No. 2018-006214, Official Public Records of Pecos County, Texas, dated November 30, 2018. The pipeline easement traverses the southeast corner of the Red Mesa Solar II site in a corridor approximately 50 feet wide. Based on our review of the project design layout, the pipeline easement is located in a setback area and does not affect the planned solar array footprint. CBR has obtained a letter from Permian Basin Pipeline Company, LLC, dated August 14, 2023, confirming that the pipeline company has no objection to solar development operations on the adjacent portions of the property, provided that CBR does not disturb or encroach upon the pipeline easement corridor.
(c) Shared Access Road Easement. Non-exclusive easement for ingress and egress connecting the Red Mesa Solar II site to the Red Mesa Solar I site and to Pecos County Road 314, recorded at Document No. 2021-003480, Official Public Records of Pecos County, Texas, dated March 22, 2021.
Tax Status: Ad valorem property taxes are current; no delinquencies identified.
5. UCC and Lien Searches
The same blanket UCC-1 Financing Statement filed by FNELC (Initial Filing No. 23-0048761) that encumbers the Red Mesa Solar I leasehold also covers the Red Mesa Solar II leasehold interest. As noted above, this filing must be terminated prior to or at closing. No other UCC filings, judgment liens, or tax liens were identified.
6. Curative Items / Recommendations
(a) UCC-3 Termination. Same action item as Red Mesa Solar I. A single UCC-3 Termination Statement filed against Initial Filing No. 23-0048761 will release the security interest covering both Red Mesa project sites.
(b) Pipeline Easement Confirmation. Retain on file the no-objection letter from Permian Basin Pipeline Company, LLC. We recommend that the no-objection letter be referenced in the closing deliverables and that CBR confirm that the pipeline company's consent is not revocable without cause.
(c) Surface Waiver Confirmation. Same recommendation as Red Mesa Solar I — confirm the surface waiver runs with the land and is binding on successors and assigns.
C. Cimarron Flats — Crockett County, Texas
1. Project Overview
The Cimarron Flats project is located in Crockett County, Texas, approximately 20 miles northwest of the city of Ozona. The site consists of undeveloped ranchland with flat terrain well-suited for solar development. The area has a strong solar irradiance profile consistent with West Texas development sites.
2. Title Commitment Summary
Meridian issued a commitment for leasehold owner's title insurance, effective as of September 28, 2023 (Commitment No. MLC-2023-TX-05129). The fee owner is identified as the J.B. Henderson Family Trust, acting through its trustee, Patricia A. Henderson. The leasehold interest is established pursuant to a Ground Lease Agreement dated June 1, 2021, between the J.B. Henderson Family Trust and CBR. A Memorandum of Lease was recorded in the Official Public Records of Crockett County, Texas on June 10, 2021, at Volume 681, Page 312. The insurable interest is CBR's leasehold estate.
3. Survey Summary
An ALTA/NSPS survey was completed on September 20, 2023 by Michael R. Duran, RPLS (Texas Registration No. 6243), of Duran Surveying, LLC, Ozona, Texas. The survey confirms boundaries consistent with the lease description, identifies no boundary disputes or encroachments, and depicts the locations of recorded easements. No improvements exist on the property. The flood zone designation is Zone X (minimal flood hazard).
4. Schedule B Exceptions and Encumbrances
Standard Pre-Printed Exceptions: Same standard Texas pre-printed exceptions as described in Section III.A.4 above.
Specific Exceptions:
(a) Severed Mineral Estate with Surface Use Restriction. The mineral estate underlying the Cimarron Flats site was severed from the surface estate by instrument recorded at Volume 298, Page 44, Official Public Records of Crockett County, Texas, dated January 15, 1972. The J.B. Henderson Family Trust, as fee owner and surface estate holder, negotiated a Surface Use Restriction within the Ground Lease Agreement with CBR, pursuant to which the Trust agreed that it would not exercise (and would not permit any mineral lessee to exercise) surface use rights for mineral exploration or production during the term of the ground lease, and further granted CBR a recorded Surface Waiver Agreement (recorded at Volume 681, Page 320, Official Public Records of Crockett County, Texas, dated June 10, 2021).
(b) Ranch Road Easement. Non-exclusive easement for ingress and egress benefiting the adjacent Henderson Ranch property, recorded at Volume 512, Page 77, Official Public Records of Crockett County, Texas, dated March 8, 1998. The easement provides for a private ranch road approximately 20 feet wide along the eastern boundary of the site. Based on our review of the project design layout, the ranch road easement is located within the project setback area and does not conflict with the planned solar array configuration.
Tax Status: Ad valorem taxes are current; no delinquencies.
5. UCC and Lien Searches
No UCC-1 Financing Statements were identified against CBR's leasehold interest in the Cimarron Flats project site. No federal or state tax liens, judgment liens, or mechanic's liens were identified against CBR or the J.B. Henderson Family Trust in connection with this site.
6. Curative Items / Recommendations
No material curative items were identified for the Cimarron Flats project site. We recommend that standard title policy endorsements be obtained, including an ALTA 13.1 (Leasehold), ALTA 17 (Access and Entry), ALTA 25 (Survey), and ALTA 9 (Restrictions, Encroachments, Minerals) endorsement covering the severed mineral estate and surface waiver. Additionally, we recommend obtaining a tax parcel endorsement confirming the tax identification number for the leased premises.
D. Lone Star Prairie — Webb County, Texas
1. Project Overview
The Lone Star Prairie project is situated in Webb County, Texas, approximately 25 miles northeast of the city of Laredo. The site consists primarily of undeveloped brushland with generally flat topography. A small seasonal creek traverses the southwestern portion of the property, which accounts for the limited flood zone area discussed below.
2. Title Commitment Summary
Meridian issued a commitment for leasehold owner's title insurance, effective as of October 5, 2023 (Commitment No. MLC-2023-TX-05344). The fee owner is identified as Garza Tierra Holdings, LP, a Texas limited partnership. The leasehold interest is established pursuant to a Ground Lease Agreement dated August 20, 2021, between Garza Tierra Holdings, LP, as Lessor, and CBR, as Lessee. A Memorandum of Lease was recorded in the Official Public Records of Webb County, Texas on August 30, 2021, at Document No. 2021-012847. CBR's leasehold estate is the insurable interest.
3. Survey Summary
An ALTA/NSPS survey was completed on September 28, 2023 by Alejandro F. Reyes, RPLS (Texas Registration No. 6578), of Reyes Land Surveying, Inc., Laredo, Texas. The survey confirms boundaries consistent with the lease description and identifies no encroachments or boundary disputes. The survey depicts the seasonal creek corridor and the associated flood zone area.
The flood zone designation is predominantly Zone X (minimal flood hazard). However, an area of approximately 40 acres in the southwestern portion of the site falls within Zone A (100-year flood plain), as shown on FEMA Flood Insurance Rate Map Panel No. 48479C1225D, effective date September 26, 2008. Critically, CBR's engineering team has confirmed that this Zone A area has been excluded from the planned solar array footprint in the project design, and the area is designated as a vegetated buffer zone in the site plan.
4. Schedule B Exceptions and Encumbrances
Standard Pre-Printed Exceptions: Same standard Texas pre-printed exceptions as described in Section III.A.4 above.
Specific Exceptions:
(a) Water Well Easement. Non-exclusive easement for water well access benefiting the adjacent ranch property owned by Rancho del Norte, LLC, recorded at Document No. 2015-009112, Official Public Records of Webb County, Texas, dated May 12, 2015. The water well is located in the southeastern setback area of the project site and does not impact the planned solar array layout or construction activities.
(b) Mineral Reservation with Surface Waiver. Reservation of mineral rights by a prior grantor, with a Surface Waiver Agreement executed and recorded at Document No. 2021-012903, Official Public Records of Webb County, Texas, dated September 5, 2021, in connection with the execution of the ground lease. The surface waiver restricts surface use for mineral exploration or production during the lease term.
Tax Status: Ad valorem property taxes are current; no delinquencies.
5. UCC and Lien Searches
No UCC-1 Financing Statements were identified against CBR's leasehold interest in the Lone Star Prairie project site. No tax liens, judgment liens, or mechanic's liens were identified.
6. Curative Items / Recommendations
(a) Flood Zone Exclusion Documentation. Confirm that the exclusion of the approximately 40-acre Zone A flood area from the project development footprint is formally documented in CBR's project design plans and site development agreement. Retain copies of the relevant design documents in the transaction closing file.
(b) Flood Zone Endorsement. Obtain a flood zone endorsement (or equivalent) on the leasehold owner's title insurance policy, to the extent available from Meridian, identifying the Zone A area and confirming coverage.
E. Brazos Point — Wharton County, Texas
1. Project Overview
Brazos Point is located in Wharton County, Texas, approximately 15 miles southwest of the city of Wharton. The site is situated in the coastal plain region of southeastern Texas and consists primarily of former agricultural land. A creek corridor runs along the northern edge of the property, creating a limited flood zone area. The project is the only site in the portfolio for which the local development permit had not yet been issued as of the date of this memorandum; however, we note parenthetically that the permit was subsequently issued by Wharton County on January 10, 2024.
2. Title Commitment Summary
Meridian issued a commitment for leasehold owner's title insurance, effective as of October 10, 2023 (Commitment No. MLC-2023-TX-05492). The fee owner is identified as Wharton Agricultural Partners, LLC, a Texas limited liability company. The leasehold interest is established pursuant to a Ground Lease Agreement dated November 1, 2021, between Wharton Agricultural Partners, LLC, as Lessor, and CBR, as Lessee. A Memorandum of Lease was recorded in the Official Public Records of Wharton County, Texas on November 10, 2021, at Document No. 2021-015783. CBR's leasehold estate is the insurable interest.
3. Survey Summary
An ALTA/NSPS survey was completed on October 2, 2023 by Sarah K. Noriega, RPLS (Texas Registration No. 6712), of Noriega Survey Group, PLLC, Houston, Texas. The survey confirms that the boundaries of the leased premises are consistent with the legal description. No encroachments or boundary issues were identified.
The flood zone designation is predominantly Zone X (minimal flood hazard). However, a small area along the creek corridor at the northern edge of the property falls within Zone AE (areas subject to inundation by the 1% annual chance flood event with base flood elevations determined), as shown on FEMA Flood Insurance Rate Map Panel No. 48481C0350E, effective date November 4, 2015. This Zone AE area has been excluded from the project development footprint in CBR's site plan.
4. Schedule B Exceptions and Encumbrances
Standard Pre-Printed Exceptions: Same standard Texas pre-printed exceptions as described in Section III.A.4 above.
Specific Exceptions:
(a) Drainage Easement. Drainage easement along the creek corridor at the northern boundary of the property, granted to the Wharton County Drainage District by instrument recorded at Document No. 2009-008431, Official Public Records of Wharton County, Texas, dated July 22, 2009. The drainage easement is consistent with the flood zone exclusion area and does not impact the development footprint.
(b) Agricultural Use Restriction. A restrictive covenant in a prior deed, recorded at Volume 892, Page 56, Official Public Records of Wharton County, Texas, dated March 14, 1995, restricting the use of the property to agricultural purposes. The restriction contains an express expiration provision, stating that the restriction shall terminate and be of no further force or effect after the twentieth (20th) anniversary of the date of recording (i.e., March 14, 2015). Based on our review, the agricultural use restriction has expired by its own terms and should no longer encumber the property. However, we recommend obtaining written confirmation from Meridian Land Title Company that the restriction is no longer effective.
(c) Electric Utility Transmission Easement. Non-exclusive easement for electric transmission line purposes granted to Fenmore Corporation Houston Electric, LLC, recorded at Document No. 2012-004592, Official Public Records of Wharton County, Texas, dated February 8, 2012. The easement runs along the eastern boundary of the property in a corridor approximately 150 feet wide. This existing transmission infrastructure is compatible with the project's interconnection plans, as CBR intends to interconnect the Brazos Point project to the ERCOT grid via the existing CenterPoint transmission line.
Tax Status: Ad valorem property taxes are current; no delinquencies. The property is currently classified for agricultural valuation (Ag-Use exemption) for property tax purposes. CBR should anticipate a potential "rollback" or additional tax assessment upon conversion of the property to solar energy use, although this is a financial matter rather than a title defect.
5. UCC and Lien Searches
No UCC-1 Financing Statements were identified against CBR's leasehold interest in the Brazos Point project site. No tax liens, judgment liens, or mechanic's liens were identified. Taxes are current.
6. Curative Items / Recommendations
(a) Agricultural Use Restriction Confirmation. Obtain written confirmation from Meridian Land Title Company (and, if necessary, a release or affidavit for recording) that the agricultural use restriction recorded at Volume 892, Page 56 has expired by its own terms as of March 14, 2015 and is no longer an encumbrance on the property.
(b) Title Endorsements. Coordinate with Meridian on the issuance of affirmative endorsements for access (ALTA 17) and survey (ALTA 25), as well as any endorsement addressing the expired restriction.
(c) Flood Zone Endorsement. Same recommendation as Lone Star Prairie — obtain a flood zone endorsement identifying the Zone AE area.
F. Sangre del Sol I — Doña Ana County, New Mexico
1. Project Overview
Sangre del Sol I is one of two projects in the portfolio located on federally administered land managed by the Bureau of Land Management (BLM), Las Cruces District Office, New Mexico. The site is situated in the Chihuahuan Desert region of southern Doña Ana County, approximately 40 miles northwest of the city of Las Cruces. The terrain is undeveloped desert land characterized by flat topography and excellent solar irradiance. The BLM issued a right-of-way grant to CBR for solar energy development purposes, subject to the standard terms and conditions applicable to BLM solar energy authorizations under 43 C.F.R. Part 2800.
2. Title Commitment Summary
Meridian issued a commitment for leasehold/right-of-way owner's title insurance, effective as of October 3, 2023 (Commitment No. MLC-2023-NM-01247). Because the underlying fee interest is held by the United States of America (through the BLM), there is no private fee ownership to insure. The title commitment is structured to provide coverage for CBR's leasehold and right-of-way interest under the BLM grant. The BLM Right-of-Way Grant (Serial No. NM-148762) was issued on February 22, 2022, and a certified copy was recorded in the Doña Ana County Clerk's Office on March 8, 2022, at Document No. 2022-004891.
3. Survey Summary
A land title survey of the Sangre del Sol I project site was completed on September 15, 2023 by Carlos M. Trujillo, PLS (New Mexico License No. 18924), of Trujillo Surveying & Mapping, LLC, Las Cruces, New Mexico. The survey was prepared in accordance with BLM survey specifications and ALTA/NSPS standards to the extent applicable on federal land. The survey confirms that the boundaries of the right-of-way area are consistent with the legal description in the BLM grant instrument. No encroachments were identified, and the terrain is undeveloped desert land with no existing improvements.
4. Schedule B Exceptions and Encumbrances
Standard Federal Land Exceptions:
(a) All mineral rights in and under the subject property are reserved to the United States of America pursuant to applicable federal law and regulation.
(b) The right of the United States, acting through the BLM, to re-enter and take possession of the right-of-way area upon termination, revocation, or abandonment of the right-of-way grant, as provided in the terms and conditions of the grant instrument and applicable regulations (43 C.F.R. § 2807.17 et seq.).
(c) All terms, conditions, and stipulations set forth in BLM Right-of-Way Grant Serial No. NM-148762, including rent obligations, bonding requirements, and reporting requirements.
Specific Exceptions:
(a) Existing BLM Grazing Permit. BLM Grazing Permit No. NM-G-049821, held by Caballo Ranches, Inc., authorizing livestock grazing on a portion of the Sangre del Sol I right-of-way area. The BLM right-of-way grant provides that the grazing permit is subordinate to the solar energy authorization and that the grazing permit holder has been notified that grazing activities must cease upon commencement of construction of the solar facility. Caballo Ranches, Inc. received formal notification from the BLM Las Cruces District Office on April 15, 2022.
(b) Archaeological/Cultural Resource Avoidance Area. An approximately 15-acre area within the southwest portion of the right-of-way area has been designated as a cultural resource avoidance zone pursuant to the BLM Environmental Assessment (EA No. DOI-BLM-NM-L000-2021-0087-EA), dated December 10, 2021. CBR is prohibited from ground disturbance within this avoidance zone, and the area has been incorporated into the project design as a permanent exclusion zone.
5. UCC and Lien Searches
Because the underlying fee interest is federal land, UCC filings are not applicable to the federal interest itself. However, a UCC search was conducted at the New Mexico Secretary of State's office against CBR as debtor to identify any security interests in CBR's right-of-way/leasehold interest. The search returned clean results — no UCC-1 Financing Statements were identified against CBR's interest in the Sangre del Sol I site. No state-level tax liens or judgment liens were identified.
6. Curative Items / Recommendations
(a) BLM Grazing Permit Termination Timeline. Confirm that the BLM grazing permit termination timeline for Caballo Ranches, Inc. aligns with CBR's anticipated construction commencement schedule. If construction is expected to begin prior to the typical seasonal grazing period, coordinate with the BLM Las Cruces District Office to ensure that grazing has ceased and the grazing permittee has vacated the right-of-way area in advance of mobilization.
(b) BLM Assignment Consent. Obtain confirmation from the BLM that the Right-of-Way Grant (Serial No. NM-148762) is assignable to Solstice Plateau Energy Holdings LLC, or that BLM consent to the assignment can be obtained prior to closing. BLM regulations (43 C.F.R. § 2807.21) require the prior written approval of the BLM authorized officer for any assignment or transfer of a right-of-way grant. BLM consent to assignment is identified as a closing condition under the non-binding term sheet, and we recommend that CBR initiate the BLM assignment application process promptly. C&H's federal lands counsel should be engaged to assist with the preparation and submission of the assignment application.
(c) Cultural Resource Avoidance Zone. Confirm that the 15-acre cultural resource avoidance zone has been incorporated into all project design documents and construction plans, and that appropriate flagging and monitoring protocols are in place to prevent inadvertent disturbance.
G. Sangre del Sol II — Doña Ana County, New Mexico
1. Project Overview
Sangre del Sol II is the companion project to Sangre del Sol I and occupies adjacent BLM-administered land to the east. The two projects share a common access road constructed pursuant to BLM authorization and are designed for coordinated development and shared operations. The site is undeveloped desert land with terrain and characteristics substantially similar to Sangre del Sol I.
2. Title Commitment Summary
Meridian issued a commitment for leasehold/right-of-way owner's title insurance, effective as of October 3, 2023 (Commitment No. MLC-2023-NM-01248). The structure mirrors the Sangre del Sol I commitment — no private fee ownership to insure; the commitment covers CBR's right-of-way interest under BLM Right-of-Way Grant Serial No. NM-148889, issued on March 15, 2022, and recorded in the Doña Ana County Clerk's Office on April 2, 2022, at Document No. 2022-005234.
3. Survey Summary
A land title survey was completed on September 18, 2023 by Carlos M. Trujillo, PLS (New Mexico License No. 18924). The survey confirms boundaries consistent with the BLM grant legal description. No encroachments were identified. The terrain is undeveloped desert land with the shared access road depicted along the western boundary connecting to Sangre del Sol I.
4. Schedule B Exceptions and Encumbrances
Standard Federal Land Exceptions: Same as Sangre del Sol I (mineral rights reserved to the United States; BLM right of re-entry; terms and conditions of the BLM grant).
Specific Exceptions:
(a) Federal Mineral Reservation. All mineral rights reserved to the United States of America, consistent with the Sangre del Sol I reservation. No surface use for mineral development activities is anticipated or authorized on the right-of-way area.
(b) Existing Transmission Line Right-of-Way. An existing right-of-way for an electric transmission line (115 kV), held by Southwest Transmission Partners, Inc., crosses the southern portion of the Sangre del Sol II right-of-way area in an east-west alignment. The transmission line was constructed pursuant to a separate BLM right-of-way grant issued prior to CBR's authorization. The existing transmission corridor is compatible with the project design and may serve as a potential point of interconnection for the Sangre del Sol II project, reducing the need for new transmission infrastructure.
(c) No Grazing Permits. Unlike Sangre del Sol I, no active BLM grazing permits were identified on the Sangre del Sol II right-of-way area.
5. UCC and Lien Searches
UCC searches at the New Mexico Secretary of State's office returned clean results — no filings against CBR's right-of-way/leasehold interest. No state-level tax liens or judgment liens were identified.
6. Curative Items / Recommendations
(a) BLM Assignment Consent. Same requirement as Sangre del Sol I. BLM consent to the assignment of Right-of-Way Grant Serial No. NM-148889 to Solstice Plateau Energy Holdings LLC must be obtained as a closing condition. We recommend that the assignment applications for both Sangre del Sol I and Sangre del Sol II be filed concurrently to streamline the BLM review process.
(b) Transmission Line Right-of-Way Holder Confirmation. Confirm that Southwest Transmission Partners, Inc. has no objection to solar development activities in proximity to the existing transmission line corridor. We recommend obtaining a written acknowledgment or no-objection letter from Southwest Transmission Partners, Inc. and coordinating with CBR's interconnection team regarding the potential use of the existing transmission infrastructure for project interconnection.
H. Sonoran Ridge — Pinal County, Arizona
1. Project Overview
Sonoran Ridge is the sole Arizona project in the portfolio and is located in Pinal County, Arizona, approximately 50 miles south of the city of Phoenix, near the community of Casa Grande. The site consists of undeveloped agricultural and desert land within the Central Arizona Irrigation and Drainage District. The terrain is flat and well-suited for utility-scale solar development. The site benefits from some of the highest solar irradiance levels in the portfolio.
2. Title Commitment Summary
Meridian Land Title Company issued a commitment for leasehold owner's title insurance, effective as of October 17, 2023 (Commitment No. MLC-2023-AZ-00683). The fee owner is identified as Sonoran Desert Holdings, LLC, an Arizona limited liability company. The leasehold interest is established pursuant to a Ground Lease Agreement dated October 1, 2021, between Sonoran Desert Holdings, LLC, as Lessor, and CBR, as Lessee. A Memorandum of Lease was recorded in the Pinal County Recorder's Office on October 12, 2021, at Document No. 2021-087452. The insurable interest is CBR's leasehold estate.
3. Survey Summary
An ALTA/NSPS survey was completed on October 8, 2023 by Jennifer L. Swanson, RLS (Arizona Registration No. 48312), of Copper State Land Surveying, LLC, Casa Grande, Arizona. The survey confirms that the boundaries of the leased premises are consistent with the legal description in the ground lease and the title commitment. No encroachments or boundary issues were identified. The property is undeveloped agricultural/desert land with no existing improvements. The flood zone designation is Zone X (minimal flood hazard), per FEMA Flood Insurance Rate Map Panel No. 04021C2780G, effective date September 30, 2014.
4. Schedule B Exceptions and Encumbrances
Standard Pre-Printed Exceptions: Standard pre-printed exceptions for Arizona title commitments, including rights of parties in possession, survey matters, taxes not yet due and payable, unrecorded easements, and matters disclosed by survey. These standard exceptions are expected to be modified or deleted in the final policy with the provision of appropriate documentation.
Specific Exceptions:
(a) Mineral Reservation by Fee Owner. Reservation of all mineral rights in and under the subject property by Sonoran Desert Holdings, LLC, as set forth in the Ground Lease Agreement. A Surface Waiver Agreement was negotiated concurrently with the ground lease and recorded in the Pinal County Recorder's Office on October 12, 2021, at Document No. 2021-087453, whereby Sonoran Desert Holdings, LLC waived the right to use the surface of the leased premises for mineral exploration or development during the term of the ground lease.
(b) Irrigation District Assessment Lien. The subject property is located within the boundaries of the Central Arizona Irrigation and Drainage District ("CAIDD"). The property is subject to routine annual irrigation district assessments levied by CAIDD. The assessment lien for the current tax year is identified in the title commitment. Based on information provided by Meridian, the assessment is current and no delinquency exists.