1015-00004 · Calloway-Briggs Renewables Inc · Memos & Analyses

insurance-review-memo.docx DOCUMENT M&A / Corporate

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PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 1000 Louisiana Street, Suite 5500 Houston, Texas 77002

MEMORANDUM

I. Executive Summary

This memorandum summarizes Calderwood & Harkness LLP's ("C&H") review of the builder's risk and commercial property insurance program arranged by Blackthorn Risk Advisors LLC ("Blackthorn"), through its Senior Vice President, Garrett Yoon (1200 Smith Street, Suite 1650, Houston, TX 77002), for the benefit of Solstice Plateau Energy Holdings LLC (the "JV," the "Company," or "Solstice Plateau"). Solstice Plateau is the 50/50 joint venture formed between our client, Calloway-Briggs Renewables Inc. ("CBR"), and Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge") to develop, construct, and operate an eight-project, utility-scale solar portfolio aggregating approximately 1,200 MW DC across the states of Texas, New Mexico, and Arizona.

The primary insurance policy under review is Builder's Risk Policy Number BRX-2024-SP-00412 (the "Policy"), issued by Ironclad Mutual Insurance Co. ("Ironclad Mutual" or the "Carrier"), a Chicago-based mutual insurance company with principal offices at 233 South Wacker Drive, Suite 4400, Chicago, IL 60606. The Policy is structured as a portfolio-wide builder's risk policy covering all eight project sites during construction, with commercial property coverage attaching automatically upon achievement of commercial operation at each individual project site.

Overall Conclusion. Based on our review of the Policy, the related declarations pages, endorsements, and exclusions, and the applicable contractual requirements set forth in the JV's LLC Agreement, the Development and Construction Management Agreement, and the Trident National Bank credit facility commitment letter, we conclude that the coverage is generally adequate for the JV's anticipated project construction activities and subsequent operations. The coverage limits, scope of covered perils, and policy structure are broadly consistent with market practice for utility-scale solar construction programs of this size and geographic profile.

However, we have identified several gaps and areas requiring attention, the most significant of which relate to: (i) the absence of additional insured endorsements for both CBR (2300 Travis Street, Suite 4200, Houston, TX 77006) and Lumen Ridge (301 Tresser Boulevard, Suite 1400, Stamford, CT 06901) on the Policy; (ii) the need to add Trident National Bank, N.A. as mortgagee and loss payee upon closing of the credit facility; (iii) confirmation of waiver of subrogation and notice of cancellation provisions consistent with the contractual requirements of the LLC Agreement and the credit facility; and (iv) the absence of pollution liability coverage, which we recommend be procured as a supplemental policy prior to the commencement of construction activities.

Timing Context. This review was conducted in advance of the anticipated closing of the JV, which was originally scheduled for February 15, 2024, and which, as of the date of this memorandum, is now expected to close on or about February 20, 2024. The action items identified herein are organized with reference to that closing date and the expected commencement of construction activities at the initial project sites shortly thereafter. Prompt attention to the high-priority items is warranted to ensure that the insurance program is fully in compliance with all contractual requirements at closing.

II. Background

A. Transaction Overview

Solstice Plateau Energy Holdings LLC is a Delaware limited liability company (Delaware Secretary of State File Number 7849312; Employer Identification Number 93-4158203) formed as the joint venture vehicle between CBR and Lumen Ridge for the purpose of developing, constructing, financing, owning, and operating a portfolio of eight utility-scale solar photovoltaic projects across Texas, New Mexico, and Arizona. The JV is structured as a 50/50 partnership, with CBR and Lumen Ridge each holding a 50% membership interest in the Company.

The total equity commitment to the JV is $300,000,000, divided equally between the two members at $150,000,000 each. CBR's contribution consists of two components: (a) the contribution of the Project Portfolio (described in Section II.B below), comprising eight utility-scale solar development projects with an aggregate capacity of approximately 1,200 MW DC, valued for contribution purposes at $90,000,000; and (b) $60,000,000 in cash. Lumen Ridge is contributing its full $150,000,000 commitment in cash. The respective contribution amounts and forms of consideration were negotiated at arm's length and are set forth in detail in the Amended and Restated Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC, dated as of December 4, 2023 (the "LLC Agreement").

Under the terms of the LLC Agreement and the related Development and Construction Management Agreement, also dated December 4, 2023 (the "DCMA"), CBR will serve as the development and construction manager for the Project Portfolio. In that capacity, CBR is responsible for the day-to-day management and oversight of all development and construction activities at the eight project sites, including procurement of equipment and materials, engagement and supervision of engineering, procurement, and construction ("EPC") contractors, permitting and regulatory compliance, and—as relevant to this memorandum—procurement and maintenance of the JV's insurance program.

The estimated total hard construction costs for the full eight-project portfolio are approximately $720,000,000. These costs will be funded through a combination of the JV's equity capital and project-level debt financing. In that regard, the JV has secured a project-level debt facility commitment of up to $480,000,000 from Trident National Bank, N.A. ("Trident Bank"), the commitment letter for which (reference number TNB-EIF-2024-0193) was executed on January 22, 2024. The Trident Bank relationship is managed by Patricia Henning, Managing Director, Energy & Infrastructure Finance. As discussed in greater detail in Section V.C below, Trident Bank's credit facility commitment letter contains customary insurance requirements applicable to the JV's construction and operations-phase insurance program, and those requirements informed our review of the Policy.

B. Project Portfolio Summary

The eight projects comprising the Solstice Plateau portfolio are summarized in the following table. The projects are located across six counties in three states, with a combined nameplate capacity of 1,200 MW DC and an aggregate site footprint of approximately 14,340 acres.

The five Texas projects (Red Mesa Solar I, Red Mesa Solar II, Cimarron Flats, Lone Star Prairie, and Brazos Point) collectively represent approximately 780 MW DC of the total portfolio capacity and are expected to interconnect to ERCOT. The two New Mexico projects (Sangre del Sol I and Sangre del Sol II) aggregate 260 MW DC and will interconnect through the Western Electricity Coordinating Council footprint. The single Arizona project (Sonoran Ridge) adds 160 MW DC and will also interconnect within the Western region. The geographic diversification of the portfolio across three states provides some mitigation of weather-related risk concentration, although the substantial concentration in West and South Texas (particularly Pecos County and Crockett County) introduces meaningful exposure to severe convective storms and hail events, as discussed further in Section VI.G below.

All eight projects in the portfolio are fully permitted and authorized for construction. The final project to receive its permits was Brazos Point, which received its final local permitting approval from Wharton County on January 10, 2024. The two Sangre del Sol projects in Doña Ana County, New Mexico are situated on land leased from the U.S. Bureau of Land Management ("BLM"), and the applicable BLM right-of-way grants and associated environmental reviews under the National Environmental Policy Act have been completed. The BLM leases for the Sangre del Sol projects contain specific insurance requirements, which are addressed in Section V.D below.

C. Insurance Program Arrangement

Blackthorn Risk Advisors LLC was engaged by the JV, acting through CBR in its capacity as development and construction manager under the DCMA, to serve as the JV's insurance broker of record. Garrett Yoon, Senior Vice President at Blackthorn, served as the lead broker responsible for designing, marketing, and placing the insurance program for the Solstice Plateau portfolio.

Blackthorn marketed the builder's risk and commercial property program to multiple insurance carriers, seeking competitive quotations for a portfolio-wide policy capable of covering the full scope of construction activities across all eight project sites, as well as providing commercial property coverage upon the transition of each project from construction to commercial operation. After evaluating the proposals received, Blackthorn recommended, and the JV accepted, the placement with Ironclad Mutual Insurance Co. as the primary carrier. Policy Number BRX-2024-SP-00412 was bound effective as of the anticipated commencement of construction activities, subject to the policy terms described in Section IV below. Blackthorn prepared a coverage summary and placement memorandum (the "Blackthorn Placement Memo") detailing the terms and conditions of the placement, which was among the documents reviewed by C&H in connection with this memorandum.

III. Scope of Review

In connection with the preparation of this memorandum, C&H reviewed the following documents:

1. Builder's Risk / Commercial Property Insurance Policy issued by Ironclad Mutual Insurance Co. (Policy No. BRX-2024-SP-00412), including all forms, conditions, and coverage grants;

2. Policy binder and declarations pages for Policy No. BRX-2024-SP-00412;

3. Schedule of covered locations and insured values attached to the Policy declarations;

4. All policy endorsements and exclusions appended to or incorporated by reference into the Policy;

5. Certificate of Insurance issued by Ironclad Mutual in connection with the Policy;

6. Blackthorn Risk Advisors LLC coverage summary and placement memorandum prepared by Garrett Yoon (the "Blackthorn Placement Memo");

7. Insurance-related requirements contained in the Trident National Bank, N.A. credit facility commitment letter (reference TNB-EIF-2024-0193), executed January 22, 2024;

8. Insurance provisions contained in the Amended and Restated Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC (execution version dated December 4, 2023) (the "LLC Agreement");

9. Insurance provisions contained in the Development and Construction Management Agreement between Solstice Plateau Energy Holdings LLC and Calloway-Briggs Renewables Inc. (execution version dated December 4, 2023) (the "DCMA"); and

10. Relevant land lease agreements for each of the eight project sites, including the BLM right-of-way grants and associated lease instruments for the Sangre del Sol I and Sangre del Sol II project sites in Doña Ana County, New Mexico.

Our review focused on the following areas of analysis: (a) adequacy of coverage limits relative to estimated hard construction costs and anticipated asset replacement values; (b) scope of covered perils under the all-risk coverage form; (c) identification of named insureds and the status of additional insured parties; (d) analysis of policy exclusions and their potential impact on the JV's risk profile; (e) deductible levels and their reasonableness in light of the JV's risk tolerance and the geographic profile of the portfolio; (f) compliance with the insurance covenants and requirements set forth in the LLC Agreement; (g) compliance with the insurance obligations under the DCMA; (h) compliance with the insurance requirements contained in the Trident National Bank credit facility commitment letter; and (i) compliance with insurance requirements contained in the applicable land lease agreements.

This memorandum does not address the JV's general liability, umbrella/excess liability, workers' compensation, automobile liability, directors' and officers' liability, or professional liability insurance programs, which are being reviewed separately and will be the subject of a subsequent memorandum. Our review is limited to the documents listed above and does not constitute an actuarial analysis or an opinion as to the financial strength or claims-paying ability of Ironclad Mutual Insurance Co.

IV. Summary of Coverage

A. Builder's Risk Coverage

The primary coverage under Policy No. BRX-2024-SP-00412 is a portfolio-wide builder's risk insurance policy structured on an all-risk basis. The key terms and coverage parameters are as follows:

Named Insured: Solstice Plateau Energy Holdings LLC.

Policy Number: BRX-2024-SP-00412.

Carrier: Ironclad Mutual Insurance Co.

Coverage Form: All-risk builder's risk, covering direct physical loss of or damage to covered property at the covered project locations during the construction phase, subject to the policy's terms, conditions, exclusions, and limitations. The all-risk form provides broad coverage for any fortuitous loss or damage to covered property unless specifically excluded, which is the most comprehensive form of property coverage available and is consistent with market standards for construction insurance programs of this nature and scale.

Policy Period: Coverage under the builder's risk portion of the Policy attaches for each covered project location from the date of commencement of construction activities at such location and continues through the earlier to occur of: (i) the date on which such project achieves commercial operation (as defined in the Policy and determined by reference to the project's commercial operation date under the applicable power purchase agreement or interconnection agreement); or (ii) the stated policy expiration date. The Policy includes provisions for extension of the policy period in the event that construction is delayed beyond the originally anticipated schedule, subject to prior written notice to the Carrier and payment of any additional premium.

Covered Locations: The Policy's schedule of covered locations lists all eight project sites in the Solstice Plateau portfolio:

(i) Red Mesa Solar I — Pecos County, Texas

(ii) Red Mesa Solar II — Pecos County, Texas

(iii) Cimarron Flats — Crockett County, Texas

(iv) Lone Star Prairie — Webb County, Texas

(v) Brazos Point — Wharton County, Texas

(vi) Sangre del Sol I — Doña Ana County, New Mexico

(vii) Sangre del Sol II — Doña Ana County, New Mexico

(viii) Sonoran Ridge — Pinal County, Arizona

Each location is identified by its project name, street address or geographic coordinates, county, and state, consistent with the schedule of covered locations and insured values attached to the declarations.

Coverage Limits: The Policy provides a per-occurrence limit and an aggregate limit that are sufficient to cover the estimated hard construction costs of approximately $720,000,000 for the full eight-project portfolio. The per-occurrence limit is set at $750,000,000, providing a margin above the estimated total construction value to account for potential cost escalation and the inclusion of soft costs and delay-related coverages. The aggregate limit for the policy period is $1,500,000,000, which allows for the possibility of multiple loss events during the multi-year construction period without exhausting the available coverage. These limits appear adequate in light of the projected construction costs and the insurable values of the projects at various stages of completion.

Sub-Limits for Specific Perils: The Policy contains sub-limits for certain specified perils and coverage extensions, including the following:

• Windstorm / Named Storm: Sub-limit of $200,000,000 per occurrence, with an annual aggregate of $400,000,000 for windstorm and named storm events. Given the portfolio's concentration in Texas, where tropical weather systems, straight-line winds, and tornado activity represent material construction-phase risks, this sub-limit warrants careful evaluation against potential maximum loss scenarios (see Section VI.G below).

• Flood: Sub-limit of $100,000,000 per occurrence. Flood coverage is written on a National Flood Insurance Program ("NFIP") excess basis where applicable; however, several of the project sites are located in areas designated as Zone X (minimal flood hazard) under FEMA flood maps, and the sub-limit appears reasonable for the portfolio's flood risk profile.

• Earthquake: Sub-limit of $75,000,000 per occurrence. While seismic risk is generally low for the Texas and New Mexico project sites, the Sonoran Ridge project in Pinal County, Arizona is located within a region of moderate seismic activity, and this sub-limit should be periodically reassessed.

• Hail: Sub-limit of $150,000,000 per occurrence, with an annual aggregate of $300,000,000. Hail is a particularly significant peril for utility-scale solar projects, given the vulnerability of photovoltaic panels to hailstone impact damage. The Texas project sites, especially those in West Texas (Pecos County and Crockett County), are situated within areas of elevated hail frequency and severity. This sub-limit is discussed further in Section VI.G.

• Theft of Materials: Sub-limit of $25,000,000 per occurrence for theft, disappearance, or shortage of construction materials, equipment, and supplies at covered locations or in temporary storage.

• Transit Coverage: Sub-limit of $50,000,000 per shipment for coverage of construction materials and equipment during transit to covered project locations, including inland marine transit and ocean cargo transit for imported components.

• Soft Costs: Sub-limit of $50,000,000 for additional soft costs incurred as a result of a covered physical loss, including extended general conditions, architectural and engineering fees, financing costs, real estate taxes, and similar expenses during the period of restoration.

• Delay in Start-Up / Advanced Loss of Profits ("DSU/ALOP"): Sub-limit of $75,000,000, providing coverage for lost revenue and continuing expenses incurred during a delay in the achievement of commercial operation caused by a covered physical loss. The indemnity period and waiting period applicable to DSU/ALOP coverage are discussed further in Section VI.H.

Deductibles: The Policy specifies per-occurrence deductible amounts that vary by peril type. The deductible structure reflects the risk profile of the covered locations and the geographic concentration of the portfolio. Key deductible amounts include:

• Standard Perils (fire, lightning, explosion, vandalism, etc.): $250,000 per occurrence.

• Windstorm / Named Storm: 3% of the total insured value at each affected location per occurrence, subject to a minimum deductible of $1,000,000. This is a percentage-based deductible, which is standard for wind perils in the Gulf Coast and Texas regions and can result in substantial self-insured retentions for high-value project sites.

• Hail: 2% of the total insured value at each affected location per occurrence, subject to a minimum deductible of $500,000. The percentage-based hail deductible is consistent with market practice for solar projects in hail-prone regions, though the effective dollar amount of the deductible will increase as construction progresses and insured values at each location increase.

• Flood: $500,000 per occurrence.

• Earthquake: 2% of the total insured value at each affected location per occurrence, subject to a minimum deductible of $500,000.

• Theft: $100,000 per occurrence.

• Transit: $100,000 per occurrence.

• DSU/ALOP: 45-day waiting period (see Section VI.H for further discussion).

The higher deductibles for wind and hail perils are reflective of the Texas and Desert Southwest geography of the portfolio and are consistent with market norms for renewable energy construction programs in these regions. The JV's management and board should, however, be aware that these percentage-based deductibles can result in significant out-of-pocket retentions in the event of a major wind or hail event, and the JV's capital reserves and construction contingency budgets should account for this self-insured exposure.

Covered Property: The builder's risk coverage extends to the following categories of property at the covered locations:

• Foundations, piling, grading, and earthwork;

• Structures, including racking systems, tracker structures, and support structures;

• Solar photovoltaic panels and modules;

• Inverters, transformers, switchgear, and power conversion equipment;

• Electrical systems, including wiring, cabling, conduit, junction boxes, and interconnection facilities;

• Balance of system components, including monitoring systems, weather stations, SCADA equipment, and communications infrastructure;

• Temporary structures, including construction offices, laydown areas, and temporary fencing;

• Construction materials and supplies stored on-site at covered locations;

• Construction materials and equipment in transit to covered locations (subject to transit sub-limit);

• Contractors' tools, equipment, and temporary works, if scheduled and declared to the Carrier.

The scope of covered property is comprehensive and consistent with industry standards for utility-scale solar construction programs.

B. Commercial Property Coverage (Post-Construction)

The Policy is structured to provide for automatic conversion from builder's risk coverage to commercial property coverage upon the achievement of the commercial operation date ("COD") for each individual project within the portfolio. This conversion feature is a significant advantage of the portfolio-wide policy structure, as it eliminates the need to separately procure and bind a standalone commercial property policy for each project as it transitions from construction to operations.

Upon conversion, the commercial property coverage provides the following:

Valuation Basis: Replacement cost valuation, which means that in the event of a covered loss, the Carrier will pay the cost to repair or replace the damaged property with materials of like kind and quality, without deduction for depreciation. Replacement cost valuation is the standard and preferred basis for operational solar assets and ensures that the JV will be made whole in the event of a significant loss.

Coverage Form: All-risk coverage for operational solar facilities, subject to the same general exclusions applicable to the builder's risk phase (with appropriate modifications for operational-phase risks). The all-risk form provides the broadest available protection against physical loss or damage to the operational solar assets.

Business Interruption / Loss of Revenue Coverage: The commercial property phase of the Policy includes business interruption coverage, which provides indemnification for lost revenue and continuing fixed expenses during the period of restoration following a covered physical loss event. Business interruption coverage is critical for operational solar projects, which generate revenue through power purchase agreements ("PPAs") and whose financial models depend on uninterrupted energy production. The business interruption coverage is subject to an indemnity period (the maximum period for which loss of revenue will be covered following a loss event) and a waiting period (the deductible period before business interruption coverage begins to respond), the specific terms of which are set forth in the Policy.

Equipment Breakdown / Mechanical-Electrical Coverage Endorsement: The Policy includes an equipment breakdown endorsement (sometimes referred to as boiler and machinery coverage) that extends coverage to loss or damage caused by mechanical breakdown, electrical arcing, motor burnout, and similar equipment failures affecting inverters, transformers, switchgear, and other electrical and mechanical equipment at the operational project sites. This endorsement is an important complement to the standard all-risk property coverage, which typically excludes loss caused by internal equipment failure absent an external peril.

C. Named Insureds and Additional Insureds

Current Named Insured. As presently bound, the Policy names only Solstice Plateau Energy Holdings LLC as the named insured. The JV entity is the sole party listed on the declarations page as the insured under the Policy.

Observation. The Policy as currently structured does not include either Calloway-Briggs Renewables Inc. or Lumen Ridge Infrastructure Partners LLC as additional named insureds or as additional insureds by endorsement. This is a notable gap in the insurance program, as discussed in detail in Section VI.A below.

The absence of additional insured status for CBR and Lumen Ridge means that, in the event of a covered loss, neither member of the JV would have independent standing to file a claim under the Policy or to receive direct payment of insurance proceeds. While the JV entity itself is the named insured and the direct owner of the project assets, each member has a substantial equity interest of $150,000,000 in the JV, and standard joint venture practice in the renewable energy industry calls for both members to be listed as additional insureds on all material insurance policies maintained by the JV. Moreover, as discussed in Section V.A, the LLC Agreement specifically requires that both members be named as additional insureds on the JV's property and builder's risk insurance policies.

D. Key Exclusions

The Policy contains a standard set of exclusions that are consistent with market practice for builder's risk and commercial property insurance policies. The principal exclusions include the following:

War and Terrorism. The Policy excludes loss or damage caused by or resulting from war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, and terrorism. Terrorism coverage may be available through a separate Terrorism Risk Insurance Act ("TRIA") endorsement if the JV determines that terrorism coverage is warranted for the portfolio.

Nuclear Hazard. The Policy excludes loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination.

Governmental Action. The Policy excludes loss or damage caused by or resulting from the seizure, confiscation, nationalization, or destruction of property by order of any governmental authority.

Wear and Tear. The Policy excludes loss or damage caused by or resulting from gradual deterioration, wear and tear, inherent vice, latent defect (except as modified by the defective design provisions noted below), rust, corrosion, mold, wet or dry rot, or vermin.

Faulty Workmanship. The Policy excludes loss or damage to the portion of covered property that is itself the subject of faulty or defective workmanship, materials, or construction. However, the Policy does cover resulting damage to otherwise non-defective property caused by faulty workmanship — that is, if defective workmanship in one component causes physical damage to an adjacent, non-defective component, the loss to the non-defective component is covered. This "resulting damage" carve-back is standard and important for construction-phase coverage.

Defective Design. The Policy contains an exclusion for loss arising from defective design, plans, or specifications, with a coverage carve-back for resulting physical damage to otherwise non-defective property. We understand that the Policy incorporates a coverage form similar to the London Engineering Group's LEG3 wording (or a substantially equivalent domestic form), which provides the broadest available coverage for design defect resulting damage. We recommend that the specific design defect endorsement wording be confirmed with Blackthorn and Ironclad Mutual to ensure that LEG3 or its equivalent is in effect.

Pollution. The Policy excludes loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release, or escape of pollutants, contaminants, or hazardous substances. This is a standard pollution exclusion applicable to property policies and is distinct from pollution legal liability coverage, which must be procured separately if desired. As discussed in Section VI.E, we recommend that the JV evaluate and procure a separate pollution liability policy.

Cyber. The Policy contains a standard cyber exclusion, excluding loss or damage caused by or resulting from any cyber event, including unauthorized access to, use of, or interference with any computer system, network, or data. This exclusion is increasingly common in property insurance policies and reflects the insurance industry's effort to segregate cyber risk into standalone cyber insurance products. As discussed in Section VI.F, the JV should evaluate the need for standalone cyber insurance as the projects approach the operational phase and incorporate SCADA and monitoring systems.

Grid Curtailment / Off-Take Interruption. The Policy excludes loss of revenue or business interruption resulting from grid curtailment, off-take interruption, or failure of transmission or distribution infrastructure, except to the extent such curtailment or interruption is directly caused by a covered physical loss event at the insured project location. This exclusion means that revenue losses caused by ERCOT curtailment orders, transmission congestion, or off-taker default, absent an underlying physical damage event at the project site, are not covered under the Policy.

V. Compliance Analysis

A. Compliance with LLC Agreement Insurance Covenants

The LLC Agreement (execution version dated December 4, 2023) contains detailed insurance covenants in Article IX, Section 9.06, which require the JV to maintain specified insurance coverages throughout the construction and operational phases of the project portfolio. Our compliance analysis with respect to the principal provisions of Section 9.06 is as follows:

Builder's Risk and Commercial Property Coverage. Section 9.06(a) of the LLC Agreement requires the JV to maintain builder's risk insurance during the construction phase of each project and commercial property insurance during the operations phase, in each case on an all-risk basis with coverage limits not less than the full replacement cost of the covered project assets. The Policy's builder's risk and commercial property coverage forms, coverage limits, and valuation basis (replacement cost) are confirmed compliant with these requirements.

Additional Insured Status for Both Members. Section 9.06(c) of the LLC Agreement expressly requires that both CBR and Lumen Ridge be named as additional insureds on all material insurance policies maintained by the JV, including the builder's risk and commercial property policies. As noted in Section IV.C above, the Policy as currently bound does not include either CBR or Lumen Ridge as additional insureds. This represents a gap in compliance with the LLC Agreement's insurance covenants, and remediation through an additional insured endorsement should be obtained prior to closing. This issue is addressed in detail in Section VI.A.

Notice of Cancellation or Material Change. Section 9.06(e) of the LLC Agreement requires that all insurance policies maintained by the JV contain a provision requiring the Carrier to provide not less than thirty (30) days' advance written notice of cancellation, non-renewal, or material change in coverage to both members and to the JV. We were unable to confirm from the current policy documents that this 30-day notice requirement is reflected in the Policy. Standard policy language in many insurance contracts provides for only ten (10) days' notice of cancellation for non-payment of premium, which would fall short of the contractual requirement. We recommend that this be confirmed and, if necessary, endorsed to provide the required 30-day notice period. This issue is addressed in Section VI.D.

Waiver of Subrogation. Section 9.06(d) of the LLC Agreement requires that all insurance policies maintained by the JV contain a waiver of subrogation in favor of both members and the JV, ensuring that the Carrier will not seek to recover from either member amounts paid under the Policy in respect of a covered loss. We recommend that the inclusion of a waiver of subrogation endorsement in the Policy be confirmed. This issue is addressed in Section VI.C.

B. Compliance with Development and Construction Management Agreement

Under the DCMA (execution version dated December 4, 2023), CBR, in its capacity as the JV's development and construction manager, is obligated to procure and maintain insurance meeting specified minimum requirements for the benefit of the JV and its projects. The DCMA sets forth minimum coverage limits, deductible thresholds, required policy provisions, and other insurance specifications.

Our review indicates that the coverage limits, deductibles, and scope of covered perils under Policy No. BRX-2024-SP-00412 meet or exceed the minimum requirements specified in the DCMA. Specifically, the Policy's per-occurrence limit, aggregate limit, and peril-specific sub-limits are at or above the minimums set forth in the DCMA, and the deductible levels are within the ranges permitted by the DCMA. We therefore confirm compliance with the DCMA's insurance minimums in these respects.

The DCMA also requires that the builder's risk and commercial property policies contain a waiver of subrogation in favor of both members and the JV. As noted in Section V.A above, we recommend that this be confirmed in the Policy endorsements. This issue overlaps with the LLC Agreement requirement discussed above and is addressed in Section VI.C.

C. Compliance with Trident National Bank Credit Facility Requirements

The Trident National Bank credit facility commitment letter (reference TNB-EIF-2024-0193), executed on January 22, 2024, contains standard lender insurance requirements that are customary for project finance transactions in the renewable energy sector. The key insurance requirements in the Trident Bank commitment letter are as follows:

Mortgagee and Loss Payee Status. Trident Bank is to be named as mortgagee and loss payee on all property insurance and builder's risk insurance policies maintained by the JV and its project-level subsidiaries. As lender, Trident Bank requires this designation to ensure that insurance proceeds in respect of a covered property loss are directed to the lender (or applied in accordance with the lender's loss payee provisions) rather than paid directly to the borrower. The current Policy does not yet reflect Trident Bank as mortgagee or loss payee. This is expected, as the credit facility has not yet closed and no borrowings have been drawn. The mortgagee and loss payee endorsement will need to be added to the Policy upon the closing of the credit facility and as a condition precedent to the first draw under the facility. This issue is addressed in Section VI.B.

Minimum Coverage Limits. Trident Bank requires that builder's risk and commercial property coverage limits be maintained at not less than the full replacement cost of the financed assets. Based on our review, the Policy's coverage limits appear sufficient to meet this requirement. The per-occurrence limit of $750,000,000 exceeds the estimated hard construction costs of $720,000,000 and provides adequate margin to cover the replacement cost of the assets that will be financed under the credit facility. The anticipated project-level borrowings under the $480,000,000 facility are well within the Policy's coverage limits.

Notice of Cancellation. Trident Bank requires not less than thirty (30) days' advance written notice of cancellation, non-renewal, or material modification of all insurance policies. This requirement is consistent with the LLC Agreement's notice requirement discussed in Section V.A above and is addressed in Section VI.D.

Waiver of Subrogation. Trident Bank requires a waiver of subrogation in its favor on all property and builder's risk insurance policies maintained by the JV. This requirement is addressed in Section VI.C.

D. Compliance with Land Lease Requirements

The project sites in the Solstice Plateau portfolio are situated on lands held under various lease and right-of-way arrangements. Of particular note for insurance purposes are the BLM leases for the Sangre del Sol I and Sangre del Sol II project sites in Doña Ana County, New Mexico. The BLM right-of-way grants for these two projects require the lessee (i.e., the JV or its applicable project subsidiary) to maintain specified liability and property insurance coverages throughout the term of the lease, including during both the construction and operations phases.

Our review of the BLM lease insurance requirements indicates that the builder's risk and commercial property coverage provided under Policy No. BRX-2024-SP-00412 is generally consistent with the lease requirements in terms of coverage type and minimum limits. However, the BLM leases may require that the BLM (or the United States government) be named as an additional insured on the lessee's insurance policies. We recommend that this requirement be confirmed and that appropriate additional insured endorsements be obtained to the extent required by the BLM lease terms. This issue is addressed in Section VI, Action Item 9.

The land leases for the Texas and Arizona project sites contain insurance provisions that are less prescriptive than the BLM requirements and are generally satisfied by the coverage provided under the Policy. We did not identify any material insurance compliance issues with respect to the non-BLM land leases.

VI. Identified Gaps and Recommendations

Based on our review of the Policy and the applicable contractual requirements, we have identified the following gaps in the current insurance program and offer the recommendations set forth below for each.

A. Additional Insured Endorsements for CBR and Lumen Ridge

Gap Identified. The Policy currently names only Solstice Plateau Energy Holdings LLC as the insured. Neither Calloway-Briggs Renewables Inc. nor Lumen Ridge Infrastructure Partners LLC is listed as an additional named insured or as an additional insured under any endorsement to the Policy. This is inconsistent with Section 9.06(c) of the LLC Agreement, which expressly requires that both members be named as additional insureds on all material insurance policies maintained by the JV.

Recommendation. We recommend that CBR instruct Blackthorn Risk Advisors to obtain, at the earliest opportunity, an endorsement from Ironclad Mutual Insurance Co. adding both CBR and Lumen Ridge as additional insureds on the builder's risk and commercial property policies under Policy No. BRX-2024-SP-00412. The additional insured endorsement should provide that each member's additional insured status applies with respect to loss or damage to the covered project assets and should not be limited to vicarious liability arising out of the named insured's operations. The endorsement should be effective as of the Policy inception date or, at the latest, as of the JV closing date.

Rationale. This recommendation is particularly important for several reasons. First, each member has a substantial equity interest of $150,000,000 in the JV, and the absence of additional insured status leaves each member without independent contractual rights under the Policy in the event of a covered loss. Second, in the event of a dispute between the members or between a member and the JV, a member that is not an additional insured may be unable to access insurance proceeds that are necessary to protect its investment. Third, naming both members as additional insureds is consistent with standard market practice for joint venture insurance programs in the renewable energy industry and is specifically required by the LLC Agreement. This is a high-priority item that should be resolved prior to the anticipated closing date of February 20, 2024.

B. Lender Loss Payee Endorsement

Gap Identified. Trident National Bank, N.A. is not yet named as mortgagee and loss payee under the Policy. As noted above, this is expected at this stage, as the credit facility has not yet closed. However, the addition of Trident Bank as loss payee will be a condition precedent to the first draw under the credit facility, and the JV and its insurance broker should be prepared to obtain this endorsement promptly upon closing of the credit facility.

Recommendation. We recommend that CBR coordinate with Blackthorn Risk Advisors to arrange for the addition of Trident National Bank, N.A. as mortgagee and loss payee on the Policy via a standard mortgagee endorsement (commonly referred to as a "standard" or "union" mortgagee clause). The endorsement should provide that the lender's interest in insurance proceeds is not invalidated by any act or neglect of the borrower and should include the standard protections afforded to mortgagees under applicable law. The endorsement should be in a form acceptable to Trident Bank and its counsel, and CBR should provide a draft of the endorsement to Trident Bank for review and approval in advance of the first draw under the credit facility.

C. Waiver of Subrogation

Recommendation. We recommend that CBR confirm with Blackthorn Risk Advisors and Ironclad Mutual that the Policy includes a blanket waiver of subrogation endorsement, or alternatively, a specifically scheduled waiver of subrogation, in favor of each of the following parties:

(i) Calloway-Briggs Renewables Inc.;

(ii) Lumen Ridge Infrastructure Partners LLC;

(iii) Solstice Plateau Energy Holdings LLC; and

(iv) Trident National Bank, N.A. (to be added when the credit facility closes).

A waiver of subrogation prevents the Carrier from exercising subrogation rights against the designated parties after paying a claim under the Policy. This protection is required by both the LLC Agreement (Section 9.06(d)) and the Trident Bank credit facility commitment letter. The waiver of subrogation is critical to the JV structure because it prevents the Carrier from suing one member or the lender to recover loss payments, which could otherwise create adversarial dynamics among the JV parties. If the Policy does not currently contain an adequate waiver of subrogation, an endorsement should be obtained prior to closing.

D. Notice of Cancellation

Recommendation. We recommend that CBR confirm with Blackthorn and Ironclad Mutual that the Policy contains a provision requiring not less than thirty (30) days' advance written notice of cancellation, non-renewal, or material modification of coverage to all named insureds, additional insureds, and the lender (once added). Standard insurance policy language frequently provides for only ten (10) days' notice of cancellation for non-payment of premium, and some policies provide as little as ten (10) days' notice for other cancellation events. Both the LLC Agreement and the Trident Bank credit facility commitment letter require a minimum of thirty (30) days' notice, and the Policy should be endorsed to provide this extended notice period if it does not already do so. The notice endorsement should specify that written notice is to be provided to each of the named insured, each additional insured, and the lender at their respective addresses of record.

E. Pollution Liability Coverage

Gap Identified. The builder's risk Policy contains a standard pollution exclusion, and no separate pollution liability policy has been placed for the JV or the project portfolio. Pollution liability coverage, whether in the form of a contractor's pollution liability ("CPL") policy or a site-specific pollution legal liability ("PLL") policy, is not currently part of the JV's insurance program.

Recommendation. While the Phase I and Phase II environmental site assessments conducted by TerraNova Environmental Sciences Inc. (project lead: Dr. Sharon Kessler) for the eight project sites identified no material recognized environmental conditions ("RECs") or controlled recognized environmental conditions ("CRECs"), we recommend that the JV obtain a contractor's pollution liability policy or, alternatively, site-specific pollution legal liability policies as a prudent risk management measure. This recommendation is based on the following considerations:

(i) Construction activities at the eight project sites will involve grading, excavation, and earth-moving operations across approximately 14,340 acres of land, which may disturb pre-existing soil conditions or encounter unanticipated subsurface contamination notwithstanding the clean Phase I/Phase II results;

(ii) The two Sangre del Sol projects in Doña Ana County, New Mexico are located on BLM-administered federal lands, where environmental sensitivity is heightened and the regulatory consequences of a pollution event may be more severe;

(iii) Construction activities will involve the transportation, storage, and use of fuels, lubricants, solvents, and other potentially hazardous materials at and around the project sites; and

(iv) Pollution liability coverage is increasingly expected by lenders, landowners, and off-takers in the renewable energy sector and may be required by Trident Bank as part of the credit facility closing conditions.

We recommend that Blackthorn evaluate the market for an appropriate CPL or PLL policy and present options to the JV's management for consideration prior to the commencement of construction activities.

F. Cyber / Technology Perils

Observation. The Policy contains a standard cyber exclusion that excludes loss or damage caused by or resulting from any cyber event, including unauthorized access to, disruption of, or interference with computer systems, networks, data, or software. This exclusion is consistent with current market practice in the property insurance sector.

Recommendation. Utility-scale solar projects increasingly incorporate sophisticated SCADA (supervisory control and data acquisition) systems, remote monitoring platforms, inverter management software, and grid interconnection controls that are vulnerable to cyber attack, ransomware, and other technology-related perils. While the cyber risk profile during the construction phase is relatively limited, the risk increases significantly as projects transition to the operational phase and become reliant on automated control systems for energy production and grid dispatch. We recommend that the JV evaluate the need for a standalone cyber insurance policy as the projects approach the operational phase. This evaluation should consider the specific SCADA and monitoring technology deployed at each project site, the JV's cybersecurity protocols and controls, and the potential revenue and operational impact of a cyber event. This is a lower-priority item that can be addressed in advance of the first project's commercial operation date.

G. Adequacy of Windstorm/Hail Sub-Limits

Observation. As noted in Section IV.A, the Policy contains sub-limits for windstorm/named storm ($200,000,000 per occurrence) and hail ($150,000,000 per occurrence) events. These sub-limits, while substantial in absolute terms, should be carefully evaluated in the context of the portfolio's geographic concentration. Five of the eight projects in the portfolio, representing approximately 780 MW DC and $468,000,000 in estimated construction costs (pro-rata based on MW), are located in West Texas (Pecos County and Crockett County) and South Texas (Webb County and Wharton County). These regions are characterized by significant exposure to severe convective storms, including hailstorms that can produce large hailstones capable of damaging or destroying solar photovoltaic panels. In recent years, the U.S. solar industry has experienced several high-profile hail loss events in Texas, and the frequency and severity of hail damage to solar installations has been a growing concern among insurers and developers.

Recommendation. We recommend that CBR and the JV's project management team work with Blackthorn Risk Advisors to conduct a detailed review of the windstorm and hail sub-limits in light of the portfolio's Texas exposure. Specifically, Blackthorn should:

(i) Confirm that the sub-limits are adequate to cover a probable maximum loss ("PML") scenario for a severe hailstorm affecting multiple project sites in Pecos County or Crockett County simultaneously;

(ii) Evaluate whether supplemental difference-in-conditions ("DIC") coverage can be obtained to provide additional limits above the Policy's windstorm and hail sub-limits, particularly for the West Texas project cluster; and

(iii) Consider the availability and cost-effectiveness of hail mitigation technologies (e.g., panel stowing protocols, hail-resistant panel specifications) as a complement to insurance coverage.

This review should be completed prior to the commencement of construction activities at the Texas project sites.

H. Delay in Start-Up / Advanced Loss of Profits

Recommendation. We recommend that CBR confirm with Blackthorn Risk Advisors that the delay-in-start-up ("DSU") / advanced loss of profits ("ALOP") coverage included in the Policy is appropriately structured for the JV's construction schedules and PPA milestone dates. Specifically, the following parameters should be reviewed and confirmed:

(i) Indemnity Period: The maximum indemnity period (i.e., the maximum duration for which DSU/ALOP benefits will be payable following a covered loss event causing a delay in commercial operation) should be sufficient to cover the longest reasonably anticipated restoration period for a major loss, taking into account equipment lead times, construction mobilization requirements, and seasonal construction constraints. A minimum indemnity period of 18 to 24 months is typical for utility-scale solar projects.

(ii) Waiting Period: The current 45-day waiting period (analogous to a time-based deductible) should be reviewed against the JV's construction schedules and financial projections to ensure that the waiting period does not create an unreasonable gap in coverage for delay-related losses. A shorter waiting period may be available at a modest additional premium.

(iii) Valuation Methodology: The DSU/ALOP coverage should value the loss based on the projected revenue that the affected project would have generated had it achieved commercial operation on schedule, using the applicable PPA contract price, projected capacity factor, and other relevant assumptions from the JV's financial model.

(iv) Alignment with PPA Milestones: Several of the projects in the portfolio are subject to PPAs with milestone dates and guaranteed commercial operation dates, and delay beyond these milestones may trigger liquidated damages, contract termination rights, or loss of favorable pricing terms. The DSU/ALOP coverage should be structured to account for these contractual consequences of delay.

VII. Summary of Action Items

The following table summarizes the recommendations set forth in Section VI, together with the responsible party, priority level, and target completion date for each action item.

CBR, as development and construction manager under the DCMA, should take the lead in coordinating with Blackthorn Risk Advisors (Garrett Yoon) to implement Action Items 1 through 9 on the timeline set forth above. C&H will assist with the review of any endorsement forms or supplemental policy terms as requested and will coordinate directly with Blackthorn on Action Item 9 regarding the BLM lease requirements.

VIII. Conclusion

Overall, the insurance program arranged by Blackthorn Risk Advisors LLC with Ironclad Mutual Insurance Co. provides a sound foundation of builder's risk and commercial property coverage for the Solstice Plateau Energy Holdings LLC project portfolio. The Policy's all-risk coverage form, portfolio-wide structure, replacement cost valuation, and automatic conversion from builder's risk to commercial property upon commercial operation are all consistent with industry best practices for utility-scale solar construction insurance programs. The coverage limits are adequate for the estimated $720,000,000 in hard construction costs, and the scope of covered perils and sub-limits is generally in line with market standards for a portfolio of this size and geographic profile.

The gaps identified in this memorandum are procedural and readily addressed through standard endorsements and supplemental policy placements. The most critical items requiring immediate attention are:

(a) the additional insured endorsements for both CBR and Lumen Ridge, which are required by the LLC Agreement and should be obtained before the anticipated JV closing date of February 20, 2024;

(b) the waiver of subrogation and 30-day notice of cancellation endorsements, which are similarly required by the LLC Agreement and the Trident Bank credit facility; and

(c) the lender loss payee endorsement for Trident National Bank, which will need to be in place prior to the first draw under the credit facility.

The medium-priority items — pollution liability coverage, windstorm/hail sub-limit review, DSU/ALOP confirmation, and BLM lease insurance compliance — should be addressed prior to the commencement of construction activities at the applicable project sites. The standalone cyber insurance evaluation can be undertaken on a longer timeline, in advance of the first project's commercial operation date.

We recommend that CBR management, specifically Rebecca Whitfield, General Counsel, and Priya Narayanan, Chief Financial Officer, coordinate directly with Blackthorn Risk Advisors (Garrett Yoon, Senior Vice President) to implement the action items set forth in Section VII above on the recommended timeline. C&H is available to review any endorsements, supplemental policies, or revised coverage terms once obtained, and to provide further analysis or guidance as needed in connection with the JV's insurance program.

Derek Okonkwo will serve as the primary point of contact at C&H for all follow-up related to this memorandum and the insurance review workstream. A copy of this memorandum will be provided to the CBR management team upon review and approval by James Prentice.

Please do not hesitate to contact me with any questions or if you would like to discuss any of the foregoing in further detail.

Derek Okonkwo Working Associate, Mergers & Acquisitions Calderwood & Harkness LLP 1000 Louisiana Street, Suite 5500 Houston, Texas 77002

Matter No. 48172.001

This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of the attorneys and client personnel identified above. This memorandum is protected by the attorney-client privilege and the work product doctrine. Any disclosure, copying, distribution, or use of this memorandum or its contents by any person other than the intended recipients is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.

Date:	January 30, 2024
Matter Number:	48172.001
To:	Megan Chu, Lead Associate, Mergers & Acquisitions

James Prentice, Responsible Partner, Mergers & Acquisitions

From:	Derek Okonkwo, Working Associate, Mergers & Acquisitions
Re:	Review of Insurance Program for Solstice Plateau Energy Holdings LLC — Builder's Risk and Commercial Property Coverage
Client:	Calloway-Briggs Renewables Inc.
Project Name	Location (County, State)	Capacity (MW DC)	Acreage
Red Mesa Solar I	Pecos County, TX	200	2,400
Red Mesa Solar II	Pecos County, TX	180	2,100
Cimarron Flats	Crockett County, TX	150	1,800
Lone Star Prairie	Webb County, TX	130	1,560
Brazos Point	Wharton County, TX	120	1,440
Sangre del Sol I	Doña Ana County, NM	150	1,800
Sangre del Sol II	Doña Ana County, NM	110	1,320
Sonoran Ridge	Pinal County, AZ	160	1,920
Total	6 counties, 3 states	1,200	14,340
No.	Action Item	Responsible Party	Priority	Target Date
1	Obtain additional insured endorsements adding CBR and Lumen Ridge as additional insureds on Policy No. BRX-2024-SP-00412	Blackthorn / Ironclad Mutual	High	Prior to JV closing (Feb. 20, 2024)
2	Add Trident National Bank, N.A. as mortgagee and loss payee via standard mortgagee endorsement	Blackthorn / Ironclad Mutual	High	Prior to first draw under credit facility
3	Confirm waiver of subrogation endorsement in favor of CBR, Lumen Ridge, the JV, and Trident Bank (when added)	Blackthorn / Ironclad Mutual	High	Prior to JV closing (Feb. 20, 2024)
4	Endorse Policy to provide 30-day advance written notice of cancellation, non-renewal, or material modification to all named/additional insureds and lender	Blackthorn / Ironclad Mutual	High	Prior to JV closing (Feb. 20, 2024)
5	Evaluate and procure contractor's pollution liability or site-specific pollution legal liability coverage	Blackthorn	Medium	Prior to construction commencement
6	Evaluate need for standalone cyber insurance policy	Blackthorn	Lower	Prior to first project commercial operation
7	Review windstorm/hail sub-limits for adequacy given Texas exposure; evaluate supplemental DIC coverage	Blackthorn	Medium	Prior to construction commencement
8	Confirm DSU/ALOP indemnity period, waiting period, valuation methodology, and alignment with PPA milestones	Blackthorn	Medium	Prior to construction commencement
9	Confirm BLM lease additional insured requirements for Sangre del Sol I and Sangre del Sol II and obtain necessary endorsements	Blackthorn / C&H	Medium	Prior to construction commencement at NM sites

PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1000 Louisiana Street, Suite 5500 Houston, Texas 77002
MEMORANDUM
I. Executive Summary
This memorandum summarizes Calderwood & Harkness LLP's ("C&H") review of the builder's risk and commercial property insurance program arranged by Blackthorn Risk Advisors LLC ("Blackthorn"), through its Senior Vice President, Garrett Yoon (1200 Smith Street, Suite 1650, Houston, TX 77002), for the benefit of Solstice Plateau Energy Holdings LLC (the "JV," the "Company," or "Solstice Plateau"). Solstice Plateau is the 50/50 joint venture formed between our client, Calloway-Briggs Renewables Inc. ("CBR"), and Lumen Ridge Infrastructure Partners LLC ("Lumen Ridge") to develop, construct, and operate an eight-project, utility-scale solar portfolio aggregating approximately 1,200 MW DC across the states of Texas, New Mexico, and Arizona.
The primary insurance policy under review is Builder's Risk Policy Number BRX-2024-SP-00412 (the "Policy"), issued by Ironclad Mutual Insurance Co. ("Ironclad Mutual" or the "Carrier"), a Chicago-based mutual insurance company with principal offices at 233 South Wacker Drive, Suite 4400, Chicago, IL 60606. The Policy is structured as a portfolio-wide builder's risk policy covering all eight project sites during construction, with commercial property coverage attaching automatically upon achievement of commercial operation at each individual project site.
Overall Conclusion. Based on our review of the Policy, the related declarations pages, endorsements, and exclusions, and the applicable contractual requirements set forth in the JV's LLC Agreement, the Development and Construction Management Agreement, and the Trident National Bank credit facility commitment letter, we conclude that the coverage is generally adequate for the JV's anticipated project construction activities and subsequent operations. The coverage limits, scope of covered perils, and policy structure are broadly consistent with market practice for utility-scale solar construction programs of this size and geographic profile.
However, we have identified several gaps and areas requiring attention, the most significant of which relate to: (i) the absence of additional insured endorsements for both CBR (2300 Travis Street, Suite 4200, Houston, TX 77006) and Lumen Ridge (301 Tresser Boulevard, Suite 1400, Stamford, CT 06901) on the Policy; (ii) the need to add Trident National Bank, N.A. as mortgagee and loss payee upon closing of the credit facility; (iii) confirmation of waiver of subrogation and notice of cancellation provisions consistent with the contractual requirements of the LLC Agreement and the credit facility; and (iv) the absence of pollution liability coverage, which we recommend be procured as a supplemental policy prior to the commencement of construction activities.
Timing Context. This review was conducted in advance of the anticipated closing of the JV, which was originally scheduled for February 15, 2024, and which, as of the date of this memorandum, is now expected to close on or about February 20, 2024. The action items identified herein are organized with reference to that closing date and the expected commencement of construction activities at the initial project sites shortly thereafter. Prompt attention to the high-priority items is warranted to ensure that the insurance program is fully in compliance with all contractual requirements at closing.
II. Background
A. Transaction Overview
Solstice Plateau Energy Holdings LLC is a Delaware limited liability company (Delaware Secretary of State File Number 7849312; Employer Identification Number 93-4158203) formed as the joint venture vehicle between CBR and Lumen Ridge for the purpose of developing, constructing, financing, owning, and operating a portfolio of eight utility-scale solar photovoltaic projects across Texas, New Mexico, and Arizona. The JV is structured as a 50/50 partnership, with CBR and Lumen Ridge each holding a 50% membership interest in the Company.
The total equity commitment to the JV is $300,000,000, divided equally between the two members at $150,000,000 each. CBR's contribution consists of two components: (a) the contribution of the Project Portfolio (described in Section II.B below), comprising eight utility-scale solar development projects with an aggregate capacity of approximately 1,200 MW DC, valued for contribution purposes at $90,000,000; and (b) $60,000,000 in cash. Lumen Ridge is contributing its full $150,000,000 commitment in cash. The respective contribution amounts and forms of consideration were negotiated at arm's length and are set forth in detail in the Amended and Restated Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC, dated as of December 4, 2023 (the "LLC Agreement").
Under the terms of the LLC Agreement and the related Development and Construction Management Agreement, also dated December 4, 2023 (the "DCMA"), CBR will serve as the development and construction manager for the Project Portfolio. In that capacity, CBR is responsible for the day-to-day management and oversight of all development and construction activities at the eight project sites, including procurement of equipment and materials, engagement and supervision of engineering, procurement, and construction ("EPC") contractors, permitting and regulatory compliance, and—as relevant to this memorandum—procurement and maintenance of the JV's insurance program.
The estimated total hard construction costs for the full eight-project portfolio are approximately $720,000,000. These costs will be funded through a combination of the JV's equity capital and project-level debt financing. In that regard, the JV has secured a project-level debt facility commitment of up to $480,000,000 from Trident National Bank, N.A. ("Trident Bank"), the commitment letter for which (reference number TNB-EIF-2024-0193) was executed on January 22, 2024. The Trident Bank relationship is managed by Patricia Henning, Managing Director, Energy & Infrastructure Finance. As discussed in greater detail in Section V.C below, Trident Bank's credit facility commitment letter contains customary insurance requirements applicable to the JV's construction and operations-phase insurance program, and those requirements informed our review of the Policy.
B. Project Portfolio Summary
The eight projects comprising the Solstice Plateau portfolio are summarized in the following table. The projects are located across six counties in three states, with a combined nameplate capacity of 1,200 MW DC and an aggregate site footprint of approximately 14,340 acres.
The five Texas projects (Red Mesa Solar I, Red Mesa Solar II, Cimarron Flats, Lone Star Prairie, and Brazos Point) collectively represent approximately 780 MW DC of the total portfolio capacity and are expected to interconnect to ERCOT. The two New Mexico projects (Sangre del Sol I and Sangre del Sol II) aggregate 260 MW DC and will interconnect through the Western Electricity Coordinating Council footprint. The single Arizona project (Sonoran Ridge) adds 160 MW DC and will also interconnect within the Western region. The geographic diversification of the portfolio across three states provides some mitigation of weather-related risk concentration, although the substantial concentration in West and South Texas (particularly Pecos County and Crockett County) introduces meaningful exposure to severe convective storms and hail events, as discussed further in Section VI.G below.
All eight projects in the portfolio are fully permitted and authorized for construction. The final project to receive its permits was Brazos Point, which received its final local permitting approval from Wharton County on January 10, 2024. The two Sangre del Sol projects in Doña Ana County, New Mexico are situated on land leased from the U.S. Bureau of Land Management ("BLM"), and the applicable BLM right-of-way grants and associated environmental reviews under the National Environmental Policy Act have been completed. The BLM leases for the Sangre del Sol projects contain specific insurance requirements, which are addressed in Section V.D below.
C. Insurance Program Arrangement
Blackthorn Risk Advisors LLC was engaged by the JV, acting through CBR in its capacity as development and construction manager under the DCMA, to serve as the JV's insurance broker of record. Garrett Yoon, Senior Vice President at Blackthorn, served as the lead broker responsible for designing, marketing, and placing the insurance program for the Solstice Plateau portfolio.
Blackthorn marketed the builder's risk and commercial property program to multiple insurance carriers, seeking competitive quotations for a portfolio-wide policy capable of covering the full scope of construction activities across all eight project sites, as well as providing commercial property coverage upon the transition of each project from construction to commercial operation. After evaluating the proposals received, Blackthorn recommended, and the JV accepted, the placement with Ironclad Mutual Insurance Co. as the primary carrier. Policy Number BRX-2024-SP-00412 was bound effective as of the anticipated commencement of construction activities, subject to the policy terms described in Section IV below. Blackthorn prepared a coverage summary and placement memorandum (the "Blackthorn Placement Memo") detailing the terms and conditions of the placement, which was among the documents reviewed by C&H in connection with this memorandum.
III. Scope of Review
In connection with the preparation of this memorandum, C&H reviewed the following documents:
1.  Builder's Risk / Commercial Property Insurance Policy issued by Ironclad Mutual Insurance Co. (Policy No. BRX-2024-SP-00412), including all forms, conditions, and coverage grants;
2.  Policy binder and declarations pages for Policy No. BRX-2024-SP-00412;
3.  Schedule of covered locations and insured values attached to the Policy declarations;
4.  All policy endorsements and exclusions appended to or incorporated by reference into the Policy;
5.  Certificate of Insurance issued by Ironclad Mutual in connection with the Policy;
6.  Blackthorn Risk Advisors LLC coverage summary and placement memorandum prepared by Garrett Yoon (the "Blackthorn Placement Memo");
7.  Insurance-related requirements contained in the Trident National Bank, N.A. credit facility commitment letter (reference TNB-EIF-2024-0193), executed January 22, 2024;
8.  Insurance provisions contained in the Amended and Restated Limited Liability Company Agreement of Solstice Plateau Energy Holdings LLC (execution version dated December 4, 2023) (the "LLC Agreement");
9.  Insurance provisions contained in the Development and Construction Management Agreement between Solstice Plateau Energy Holdings LLC and Calloway-Briggs Renewables Inc. (execution version dated December 4, 2023) (the "DCMA"); and
10.  Relevant land lease agreements for each of the eight project sites, including the BLM right-of-way grants and associated lease instruments for the Sangre del Sol I and Sangre del Sol II project sites in Doña Ana County, New Mexico.
Our review focused on the following areas of analysis: (a) adequacy of coverage limits relative to estimated hard construction costs and anticipated asset replacement values; (b) scope of covered perils under the all-risk coverage form; (c) identification of named insureds and the status of additional insured parties; (d) analysis of policy exclusions and their potential impact on the JV's risk profile; (e) deductible levels and their reasonableness in light of the JV's risk tolerance and the geographic profile of the portfolio; (f) compliance with the insurance covenants and requirements set forth in the LLC Agreement; (g) compliance with the insurance obligations under the DCMA; (h) compliance with the insurance requirements contained in the Trident National Bank credit facility commitment letter; and (i) compliance with insurance requirements contained in the applicable land lease agreements.
This memorandum does not address the JV's general liability, umbrella/excess liability, workers' compensation, automobile liability, directors' and officers' liability, or professional liability insurance programs, which are being reviewed separately and will be the subject of a subsequent memorandum. Our review is limited to the documents listed above and does not constitute an actuarial analysis or an opinion as to the financial strength or claims-paying ability of Ironclad Mutual Insurance Co.
IV. Summary of Coverage
A. Builder's Risk Coverage
The primary coverage under Policy No. BRX-2024-SP-00412 is a portfolio-wide builder's risk insurance policy structured on an all-risk basis. The key terms and coverage parameters are as follows:
Named Insured: Solstice Plateau Energy Holdings LLC.
Policy Number: BRX-2024-SP-00412.
Carrier: Ironclad Mutual Insurance Co.
Coverage Form: All-risk builder's risk, covering direct physical loss of or damage to covered property at the covered project locations during the construction phase, subject to the policy's terms, conditions, exclusions, and limitations. The all-risk form provides broad coverage for any fortuitous loss or damage to covered property unless specifically excluded, which is the most comprehensive form of property coverage available and is consistent with market standards for construction insurance programs of this nature and scale.
Policy Period: Coverage under the builder's risk portion of the Policy attaches for each covered project location from the date of commencement of construction activities at such location and continues through the earlier to occur of: (i) the date on which such project achieves commercial operation (as defined in the Policy and determined by reference to the project's commercial operation date under the applicable power purchase agreement or interconnection agreement); or (ii) the stated policy expiration date. The Policy includes provisions for extension of the policy period in the event that construction is delayed beyond the originally anticipated schedule, subject to prior written notice to the Carrier and payment of any additional premium.
Covered Locations: The Policy's schedule of covered locations lists all eight project sites in the Solstice Plateau portfolio:
(i) Red Mesa Solar I — Pecos County, Texas
(ii) Red Mesa Solar II — Pecos County, Texas
(iii) Cimarron Flats — Crockett County, Texas
(iv) Lone Star Prairie — Webb County, Texas
(v) Brazos Point — Wharton County, Texas
(vi) Sangre del Sol I — Doña Ana County, New Mexico
(vii) Sangre del Sol II — Doña Ana County, New Mexico
(viii) Sonoran Ridge — Pinal County, Arizona
Each location is identified by its project name, street address or geographic coordinates, county, and state, consistent with the schedule of covered locations and insured values attached to the declarations.
Coverage Limits: The Policy provides a per-occurrence limit and an aggregate limit that are sufficient to cover the estimated hard construction costs of approximately $720,000,000 for the full eight-project portfolio. The per-occurrence limit is set at $750,000,000, providing a margin above the estimated total construction value to account for potential cost escalation and the inclusion of soft costs and delay-related coverages. The aggregate limit for the policy period is $1,500,000,000, which allows for the possibility of multiple loss events during the multi-year construction period without exhausting the available coverage. These limits appear adequate in light of the projected construction costs and the insurable values of the projects at various stages of completion.
Sub-Limits for Specific Perils: The Policy contains sub-limits for certain specified perils and coverage extensions, including the following:
•  Windstorm / Named Storm: Sub-limit of $200,000,000 per occurrence, with an annual aggregate of $400,000,000 for windstorm and named storm events. Given the portfolio's concentration in Texas, where tropical weather systems, straight-line winds, and tornado activity represent material construction-phase risks, this sub-limit warrants careful evaluation against potential maximum loss scenarios (see Section VI.G below).
•  Flood: Sub-limit of $100,000,000 per occurrence. Flood coverage is written on a National Flood Insurance Program ("NFIP") excess basis where applicable; however, several of the project sites are located in areas designated as Zone X (minimal flood hazard) under FEMA flood maps, and the sub-limit appears reasonable for the portfolio's flood risk profile.
•  Earthquake: Sub-limit of $75,000,000 per occurrence. While seismic risk is generally low for the Texas and New Mexico project sites, the Sonoran Ridge project in Pinal County, Arizona is located within a region of moderate seismic activity, and this sub-limit should be periodically reassessed.
•  Hail: Sub-limit of $150,000,000 per occurrence, with an annual aggregate of $300,000,000. Hail is a particularly significant peril for utility-scale solar projects, given the vulnerability of photovoltaic panels to hailstone impact damage. The Texas project sites, especially those in West Texas (Pecos County and Crockett County), are situated within areas of elevated hail frequency and severity. This sub-limit is discussed further in Section VI.G.
•  Theft of Materials: Sub-limit of $25,000,000 per occurrence for theft, disappearance, or shortage of construction materials, equipment, and supplies at covered locations or in temporary storage.
•  Transit Coverage: Sub-limit of $50,000,000 per shipment for coverage of construction materials and equipment during transit to covered project locations, including inland marine transit and ocean cargo transit for imported components.
•  Soft Costs: Sub-limit of $50,000,000 for additional soft costs incurred as a result of a covered physical loss, including extended general conditions, architectural and engineering fees, financing costs, real estate taxes, and similar expenses during the period of restoration.
•  Delay in Start-Up / Advanced Loss of Profits ("DSU/ALOP"): Sub-limit of $75,000,000, providing coverage for lost revenue and continuing expenses incurred during a delay in the achievement of commercial operation caused by a covered physical loss. The indemnity period and waiting period applicable to DSU/ALOP coverage are discussed further in Section VI.H.
Deductibles: The Policy specifies per-occurrence deductible amounts that vary by peril type. The deductible structure reflects the risk profile of the covered locations and the geographic concentration of the portfolio. Key deductible amounts include:
•  Standard Perils (fire, lightning, explosion, vandalism, etc.): $250,000 per occurrence.
•  Windstorm / Named Storm: 3% of the total insured value at each affected location per occurrence, subject to a minimum deductible of $1,000,000. This is a percentage-based deductible, which is standard for wind perils in the Gulf Coast and Texas regions and can result in substantial self-insured retentions for high-value project sites.
•  Hail: 2% of the total insured value at each affected location per occurrence, subject to a minimum deductible of $500,000. The percentage-based hail deductible is consistent with market practice for solar projects in hail-prone regions, though the effective dollar amount of the deductible will increase as construction progresses and insured values at each location increase.
•  Flood: $500,000 per occurrence.
•  Earthquake: 2% of the total insured value at each affected location per occurrence, subject to a minimum deductible of $500,000.
•  Theft: $100,000 per occurrence.
•  Transit: $100,000 per occurrence.
•  DSU/ALOP: 45-day waiting period (see Section VI.H for further discussion).
The higher deductibles for wind and hail perils are reflective of the Texas and Desert Southwest geography of the portfolio and are consistent with market norms for renewable energy construction programs in these regions. The JV's management and board should, however, be aware that these percentage-based deductibles can result in significant out-of-pocket retentions in the event of a major wind or hail event, and the JV's capital reserves and construction contingency budgets should account for this self-insured exposure.
Covered Property: The builder's risk coverage extends to the following categories of property at the covered locations:
•  Foundations, piling, grading, and earthwork;
•  Structures, including racking systems, tracker structures, and support structures;
•  Solar photovoltaic panels and modules;
•  Inverters, transformers, switchgear, and power conversion equipment;
•  Electrical systems, including wiring, cabling, conduit, junction boxes, and interconnection facilities;
•  Balance of system components, including monitoring systems, weather stations, SCADA equipment, and communications infrastructure;
•  Temporary structures, including construction offices, laydown areas, and temporary fencing;
•  Construction materials and supplies stored on-site at covered locations;
•  Construction materials and equipment in transit to covered locations (subject to transit sub-limit);
•  Contractors' tools, equipment, and temporary works, if scheduled and declared to the Carrier.
The scope of covered property is comprehensive and consistent with industry standards for utility-scale solar construction programs.
B. Commercial Property Coverage (Post-Construction)
The Policy is structured to provide for automatic conversion from builder's risk coverage to commercial property coverage upon the achievement of the commercial operation date ("COD") for each individual project within the portfolio. This conversion feature is a significant advantage of the portfolio-wide policy structure, as it eliminates the need to separately procure and bind a standalone commercial property policy for each project as it transitions from construction to operations.
Upon conversion, the commercial property coverage provides the following:
Valuation Basis: Replacement cost valuation, which means that in the event of a covered loss, the Carrier will pay the cost to repair or replace the damaged property with materials of like kind and quality, without deduction for depreciation. Replacement cost valuation is the standard and preferred basis for operational solar assets and ensures that the JV will be made whole in the event of a significant loss.
Coverage Form: All-risk coverage for operational solar facilities, subject to the same general exclusions applicable to the builder's risk phase (with appropriate modifications for operational-phase risks). The all-risk form provides the broadest available protection against physical loss or damage to the operational solar assets.
Business Interruption / Loss of Revenue Coverage: The commercial property phase of the Policy includes business interruption coverage, which provides indemnification for lost revenue and continuing fixed expenses during the period of restoration following a covered physical loss event. Business interruption coverage is critical for operational solar projects, which generate revenue through power purchase agreements ("PPAs") and whose financial models depend on uninterrupted energy production. The business interruption coverage is subject to an indemnity period (the maximum period for which loss of revenue will be covered following a loss event) and a waiting period (the deductible period before business interruption coverage begins to respond), the specific terms of which are set forth in the Policy.
Equipment Breakdown / Mechanical-Electrical Coverage Endorsement: The Policy includes an equipment breakdown endorsement (sometimes referred to as boiler and machinery coverage) that extends coverage to loss or damage caused by mechanical breakdown, electrical arcing, motor burnout, and similar equipment failures affecting inverters, transformers, switchgear, and other electrical and mechanical equipment at the operational project sites. This endorsement is an important complement to the standard all-risk property coverage, which typically excludes loss caused by internal equipment failure absent an external peril.
C. Named Insureds and Additional Insureds
Current Named Insured. As presently bound, the Policy names only Solstice Plateau Energy Holdings LLC as the named insured. The JV entity is the sole party listed on the declarations page as the insured under the Policy.
Observation. The Policy as currently structured does not include either Calloway-Briggs Renewables Inc. or Lumen Ridge Infrastructure Partners LLC as additional named insureds or as additional insureds by endorsement. This is a notable gap in the insurance program, as discussed in detail in Section VI.A below.
The absence of additional insured status for CBR and Lumen Ridge means that, in the event of a covered loss, neither member of the JV would have independent standing to file a claim under the Policy or to receive direct payment of insurance proceeds. While the JV entity itself is the named insured and the direct owner of the project assets, each member has a substantial equity interest of $150,000,000 in the JV, and standard joint venture practice in the renewable energy industry calls for both members to be listed as additional insureds on all material insurance policies maintained by the JV. Moreover, as discussed in Section V.A, the LLC Agreement specifically requires that both members be named as additional insureds on the JV's property and builder's risk insurance policies.
D. Key Exclusions
The Policy contains a standard set of exclusions that are consistent with market practice for builder's risk and commercial property insurance policies. The principal exclusions include the following:
War and Terrorism. The Policy excludes loss or damage caused by or resulting from war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, and terrorism. Terrorism coverage may be available through a separate Terrorism Risk Insurance Act ("TRIA") endorsement if the JV determines that terrorism coverage is warranted for the portfolio.
Nuclear Hazard. The Policy excludes loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination.
Governmental Action. The Policy excludes loss or damage caused by or resulting from the seizure, confiscation, nationalization, or destruction of property by order of any governmental authority.
Wear and Tear. The Policy excludes loss or damage caused by or resulting from gradual deterioration, wear and tear, inherent vice, latent defect (except as modified by the defective design provisions noted below), rust, corrosion, mold, wet or dry rot, or vermin.
Faulty Workmanship. The Policy excludes loss or damage to the portion of covered property that is itself the subject of faulty or defective workmanship, materials, or construction. However, the Policy does cover resulting damage to otherwise non-defective property caused by faulty workmanship — that is, if defective workmanship in one component causes physical damage to an adjacent, non-defective component, the loss to the non-defective component is covered. This "resulting damage" carve-back is standard and important for construction-phase coverage.
Defective Design. The Policy contains an exclusion for loss arising from defective design, plans, or specifications, with a coverage carve-back for resulting physical damage to otherwise non-defective property. We understand that the Policy incorporates a coverage form similar to the London Engineering Group's LEG3 wording (or a substantially equivalent domestic form), which provides the broadest available coverage for design defect resulting damage. We recommend that the specific design defect endorsement wording be confirmed with Blackthorn and Ironclad Mutual to ensure that LEG3 or its equivalent is in effect.
Pollution. The Policy excludes loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release, or escape of pollutants, contaminants, or hazardous substances. This is a standard pollution exclusion applicable to property policies and is distinct from pollution legal liability coverage, which must be procured separately if desired. As discussed in Section VI.E, we recommend that the JV evaluate and procure a separate pollution liability policy.
Cyber. The Policy contains a standard cyber exclusion, excluding loss or damage caused by or resulting from any cyber event, including unauthorized access to, use of, or interference with any computer system, network, or data. This exclusion is increasingly common in property insurance policies and reflects the insurance industry's effort to segregate cyber risk into standalone cyber insurance products. As discussed in Section VI.F, the JV should evaluate the need for standalone cyber insurance as the projects approach the operational phase and incorporate SCADA and monitoring systems.
Grid Curtailment / Off-Take Interruption. The Policy excludes loss of revenue or business interruption resulting from grid curtailment, off-take interruption, or failure of transmission or distribution infrastructure, except to the extent such curtailment or interruption is directly caused by a covered physical loss event at the insured project location. This exclusion means that revenue losses caused by ERCOT curtailment orders, transmission congestion, or off-taker default, absent an underlying physical damage event at the project site, are not covered under the Policy.
V. Compliance Analysis
A. Compliance with LLC Agreement Insurance Covenants
The LLC Agreement (execution version dated December 4, 2023) contains detailed insurance covenants in Article IX, Section 9.06, which require the JV to maintain specified insurance coverages throughout the construction and operational phases of the project portfolio. Our compliance analysis with respect to the principal provisions of Section 9.06 is as follows:
Builder's Risk and Commercial Property Coverage. Section 9.06(a) of the LLC Agreement requires the JV to maintain builder's risk insurance during the construction phase of each project and commercial property insurance during the operations phase, in each case on an all-risk basis with coverage limits not less than the full replacement cost of the covered project assets. The Policy's builder's risk and commercial property coverage forms, coverage limits, and valuation basis (replacement cost) are confirmed compliant with these requirements.
Additional Insured Status for Both Members. Section 9.06(c) of the LLC Agreement expressly requires that both CBR and Lumen Ridge be named as additional insureds on all material insurance policies maintained by the JV, including the builder's risk and commercial property policies. As noted in Section IV.C above, the Policy as currently bound does not include either CBR or Lumen Ridge as additional insureds. This represents a gap in compliance with the LLC Agreement's insurance covenants, and remediation through an additional insured endorsement should be obtained prior to closing. This issue is addressed in detail in Section VI.A.
Notice of Cancellation or Material Change. Section 9.06(e) of the LLC Agreement requires that all insurance policies maintained by the JV contain a provision requiring the Carrier to provide not less than thirty (30) days' advance written notice of cancellation, non-renewal, or material change in coverage to both members and to the JV. We were unable to confirm from the current policy documents that this 30-day notice requirement is reflected in the Policy. Standard policy language in many insurance contracts provides for only ten (10) days' notice of cancellation for non-payment of premium, which would fall short of the contractual requirement. We recommend that this be confirmed and, if necessary, endorsed to provide the required 30-day notice period. This issue is addressed in Section VI.D.
Waiver of Subrogation. Section 9.06(d) of the LLC Agreement requires that all insurance policies maintained by the JV contain a waiver of subrogation in favor of both members and the JV, ensuring that the Carrier will not seek to recover from either member amounts paid under the Policy in respect of a covered loss. We recommend that the inclusion of a waiver of subrogation endorsement in the Policy be confirmed. This issue is addressed in Section VI.C.
B. Compliance with Development and Construction Management Agreement
Under the DCMA (execution version dated December 4, 2023), CBR, in its capacity as the JV's development and construction manager, is obligated to procure and maintain insurance meeting specified minimum requirements for the benefit of the JV and its projects. The DCMA sets forth minimum coverage limits, deductible thresholds, required policy provisions, and other insurance specifications.
Our review indicates that the coverage limits, deductibles, and scope of covered perils under Policy No. BRX-2024-SP-00412 meet or exceed the minimum requirements specified in the DCMA. Specifically, the Policy's per-occurrence limit, aggregate limit, and peril-specific sub-limits are at or above the minimums set forth in the DCMA, and the deductible levels are within the ranges permitted by the DCMA. We therefore confirm compliance with the DCMA's insurance minimums in these respects.
The DCMA also requires that the builder's risk and commercial property policies contain a waiver of subrogation in favor of both members and the JV. As noted in Section V.A above, we recommend that this be confirmed in the Policy endorsements. This issue overlaps with the LLC Agreement requirement discussed above and is addressed in Section VI.C.
C. Compliance with Trident National Bank Credit Facility Requirements
The Trident National Bank credit facility commitment letter (reference TNB-EIF-2024-0193), executed on January 22, 2024, contains standard lender insurance requirements that are customary for project finance transactions in the renewable energy sector. The key insurance requirements in the Trident Bank commitment letter are as follows:
Mortgagee and Loss Payee Status. Trident Bank is to be named as mortgagee and loss payee on all property insurance and builder's risk insurance policies maintained by the JV and its project-level subsidiaries. As lender, Trident Bank requires this designation to ensure that insurance proceeds in respect of a covered property loss are directed to the lender (or applied in accordance with the lender's loss payee provisions) rather than paid directly to the borrower. The current Policy does not yet reflect Trident Bank as mortgagee or loss payee. This is expected, as the credit facility has not yet closed and no borrowings have been drawn. The mortgagee and loss payee endorsement will need to be added to the Policy upon the closing of the credit facility and as a condition precedent to the first draw under the facility. This issue is addressed in Section VI.B.
Minimum Coverage Limits. Trident Bank requires that builder's risk and commercial property coverage limits be maintained at not less than the full replacement cost of the financed assets. Based on our review, the Policy's coverage limits appear sufficient to meet this requirement. The per-occurrence limit of $750,000,000 exceeds the estimated hard construction costs of $720,000,000 and provides adequate margin to cover the replacement cost of the assets that will be financed under the credit facility. The anticipated project-level borrowings under the $480,000,000 facility are well within the Policy's coverage limits.
Notice of Cancellation. Trident Bank requires not less than thirty (30) days' advance written notice of cancellation, non-renewal, or material modification of all insurance policies. This requirement is consistent with the LLC Agreement's notice requirement discussed in Section V.A above and is addressed in Section VI.D.
Waiver of Subrogation. Trident Bank requires a waiver of subrogation in its favor on all property and builder's risk insurance policies maintained by the JV. This requirement is addressed in Section VI.C.
D. Compliance with Land Lease Requirements
The project sites in the Solstice Plateau portfolio are situated on lands held under various lease and right-of-way arrangements. Of particular note for insurance purposes are the BLM leases for the Sangre del Sol I and Sangre del Sol II project sites in Doña Ana County, New Mexico. The BLM right-of-way grants for these two projects require the lessee (i.e., the JV or its applicable project subsidiary) to maintain specified liability and property insurance coverages throughout the term of the lease, including during both the construction and operations phases.
Our review of the BLM lease insurance requirements indicates that the builder's risk and commercial property coverage provided under Policy No. BRX-2024-SP-00412 is generally consistent with the lease requirements in terms of coverage type and minimum limits. However, the BLM leases may require that the BLM (or the United States government) be named as an additional insured on the lessee's insurance policies. We recommend that this requirement be confirmed and that appropriate additional insured endorsements be obtained to the extent required by the BLM lease terms. This issue is addressed in Section VI, Action Item 9.
The land leases for the Texas and Arizona project sites contain insurance provisions that are less prescriptive than the BLM requirements and are generally satisfied by the coverage provided under the Policy. We did not identify any material insurance compliance issues with respect to the non-BLM land leases.
VI. Identified Gaps and Recommendations
Based on our review of the Policy and the applicable contractual requirements, we have identified the following gaps in the current insurance program and offer the recommendations set forth below for each.
A. Additional Insured Endorsements for CBR and Lumen Ridge
Gap Identified. The Policy currently names only Solstice Plateau Energy Holdings LLC as the insured. Neither Calloway-Briggs Renewables Inc. nor Lumen Ridge Infrastructure Partners LLC is listed as an additional named insured or as an additional insured under any endorsement to the Policy. This is inconsistent with Section 9.06(c) of the LLC Agreement, which expressly requires that both members be named as additional insureds on all material insurance policies maintained by the JV.
Recommendation. We recommend that CBR instruct Blackthorn Risk Advisors to obtain, at the earliest opportunity, an endorsement from Ironclad Mutual Insurance Co. adding both CBR and Lumen Ridge as additional insureds on the builder's risk and commercial property policies under Policy No. BRX-2024-SP-00412. The additional insured endorsement should provide that each member's additional insured status applies with respect to loss or damage to the covered project assets and should not be limited to vicarious liability arising out of the named insured's operations. The endorsement should be effective as of the Policy inception date or, at the latest, as of the JV closing date.
Rationale. This recommendation is particularly important for several reasons. First, each member has a substantial equity interest of $150,000,000 in the JV, and the absence of additional insured status leaves each member without independent contractual rights under the Policy in the event of a covered loss. Second, in the event of a dispute between the members or between a member and the JV, a member that is not an additional insured may be unable to access insurance proceeds that are necessary to protect its investment. Third, naming both members as additional insureds is consistent with standard market practice for joint venture insurance programs in the renewable energy industry and is specifically required by the LLC Agreement. This is a high-priority item that should be resolved prior to the anticipated closing date of February 20, 2024.
B. Lender Loss Payee Endorsement
Gap Identified. Trident National Bank, N.A. is not yet named as mortgagee and loss payee under the Policy. As noted above, this is expected at this stage, as the credit facility has not yet closed. However, the addition of Trident Bank as loss payee will be a condition precedent to the first draw under the credit facility, and the JV and its insurance broker should be prepared to obtain this endorsement promptly upon closing of the credit facility.
Recommendation. We recommend that CBR coordinate with Blackthorn Risk Advisors to arrange for the addition of Trident National Bank, N.A. as mortgagee and loss payee on the Policy via a standard mortgagee endorsement (commonly referred to as a "standard" or "union" mortgagee clause). The endorsement should provide that the lender's interest in insurance proceeds is not invalidated by any act or neglect of the borrower and should include the standard protections afforded to mortgagees under applicable law. The endorsement should be in a form acceptable to Trident Bank and its counsel, and CBR should provide a draft of the endorsement to Trident Bank for review and approval in advance of the first draw under the credit facility.
C. Waiver of Subrogation
Recommendation. We recommend that CBR confirm with Blackthorn Risk Advisors and Ironclad Mutual that the Policy includes a blanket waiver of subrogation endorsement, or alternatively, a specifically scheduled waiver of subrogation, in favor of each of the following parties:
(i) Calloway-Briggs Renewables Inc.;
(ii) Lumen Ridge Infrastructure Partners LLC;
(iii) Solstice Plateau Energy Holdings LLC; and
(iv) Trident National Bank, N.A. (to be added when the credit facility closes).
A waiver of subrogation prevents the Carrier from exercising subrogation rights against the designated parties after paying a claim under the Policy. This protection is required by both the LLC Agreement (Section 9.06(d)) and the Trident Bank credit facility commitment letter. The waiver of subrogation is critical to the JV structure because it prevents the Carrier from suing one member or the lender to recover loss payments, which could otherwise create adversarial dynamics among the JV parties. If the Policy does not currently contain an adequate waiver of subrogation, an endorsement should be obtained prior to closing.
D. Notice of Cancellation
Recommendation. We recommend that CBR confirm with Blackthorn and Ironclad Mutual that the Policy contains a provision requiring not less than thirty (30) days' advance written notice of cancellation, non-renewal, or material modification of coverage to all named insureds, additional insureds, and the lender (once added). Standard insurance policy language frequently provides for only ten (10) days' notice of cancellation for non-payment of premium, and some policies provide as little as ten (10) days' notice for other cancellation events. Both the LLC Agreement and the Trident Bank credit facility commitment letter require a minimum of thirty (30) days' notice, and the Policy should be endorsed to provide this extended notice period if it does not already do so. The notice endorsement should specify that written notice is to be provided to each of the named insured, each additional insured, and the lender at their respective addresses of record.
E. Pollution Liability Coverage
Gap Identified. The builder's risk Policy contains a standard pollution exclusion, and no separate pollution liability policy has been placed for the JV or the project portfolio. Pollution liability coverage, whether in the form of a contractor's pollution liability ("CPL") policy or a site-specific pollution legal liability ("PLL") policy, is not currently part of the JV's insurance program.
Recommendation. While the Phase I and Phase II environmental site assessments conducted by TerraNova Environmental Sciences Inc. (project lead: Dr. Sharon Kessler) for the eight project sites identified no material recognized environmental conditions ("RECs") or controlled recognized environmental conditions ("CRECs"), we recommend that the JV obtain a contractor's pollution liability policy or, alternatively, site-specific pollution legal liability policies as a prudent risk management measure. This recommendation is based on the following considerations:
(i) Construction activities at the eight project sites will involve grading, excavation, and earth-moving operations across approximately 14,340 acres of land, which may disturb pre-existing soil conditions or encounter unanticipated subsurface contamination notwithstanding the clean Phase I/Phase II results;
(ii) The two Sangre del Sol projects in Doña Ana County, New Mexico are located on BLM-administered federal lands, where environmental sensitivity is heightened and the regulatory consequences of a pollution event may be more severe;
(iii) Construction activities will involve the transportation, storage, and use of fuels, lubricants, solvents, and other potentially hazardous materials at and around the project sites; and
(iv) Pollution liability coverage is increasingly expected by lenders, landowners, and off-takers in the renewable energy sector and may be required by Trident Bank as part of the credit facility closing conditions.
We recommend that Blackthorn evaluate the market for an appropriate CPL or PLL policy and present options to the JV's management for consideration prior to the commencement of construction activities.
F. Cyber / Technology Perils
Observation. The Policy contains a standard cyber exclusion that excludes loss or damage caused by or resulting from any cyber event, including unauthorized access to, disruption of, or interference with computer systems, networks, data, or software. This exclusion is consistent with current market practice in the property insurance sector.
Recommendation. Utility-scale solar projects increasingly incorporate sophisticated SCADA (supervisory control and data acquisition) systems, remote monitoring platforms, inverter management software, and grid interconnection controls that are vulnerable to cyber attack, ransomware, and other technology-related perils. While the cyber risk profile during the construction phase is relatively limited, the risk increases significantly as projects transition to the operational phase and become reliant on automated control systems for energy production and grid dispatch. We recommend that the JV evaluate the need for a standalone cyber insurance policy as the projects approach the operational phase. This evaluation should consider the specific SCADA and monitoring technology deployed at each project site, the JV's cybersecurity protocols and controls, and the potential revenue and operational impact of a cyber event. This is a lower-priority item that can be addressed in advance of the first project's commercial operation date.
G. Adequacy of Windstorm/Hail Sub-Limits
Observation. As noted in Section IV.A, the Policy contains sub-limits for windstorm/named storm ($200,000,000 per occurrence) and hail ($150,000,000 per occurrence) events. These sub-limits, while substantial in absolute terms, should be carefully evaluated in the context of the portfolio's geographic concentration. Five of the eight projects in the portfolio, representing approximately 780 MW DC and $468,000,000 in estimated construction costs (pro-rata based on MW), are located in West Texas (Pecos County and Crockett County) and South Texas (Webb County and Wharton County). These regions are characterized by significant exposure to severe convective storms, including hailstorms that can produce large hailstones capable of damaging or destroying solar photovoltaic panels. In recent years, the U.S. solar industry has experienced several high-profile hail loss events in Texas, and the frequency and severity of hail damage to solar installations has been a growing concern among insurers and developers.
Recommendation. We recommend that CBR and the JV's project management team work with Blackthorn Risk Advisors to conduct a detailed review of the windstorm and hail sub-limits in light of the portfolio's Texas exposure. Specifically, Blackthorn should:
(i) Confirm that the sub-limits are adequate to cover a probable maximum loss ("PML") scenario for a severe hailstorm affecting multiple project sites in Pecos County or Crockett County simultaneously;
(ii) Evaluate whether supplemental difference-in-conditions ("DIC") coverage can be obtained to provide additional limits above the Policy's windstorm and hail sub-limits, particularly for the West Texas project cluster; and
(iii) Consider the availability and cost-effectiveness of hail mitigation technologies (e.g., panel stowing protocols, hail-resistant panel specifications) as a complement to insurance coverage.
This review should be completed prior to the commencement of construction activities at the Texas project sites.
H. Delay in Start-Up / Advanced Loss of Profits
Recommendation. We recommend that CBR confirm with Blackthorn Risk Advisors that the delay-in-start-up ("DSU") / advanced loss of profits ("ALOP") coverage included in the Policy is appropriately structured for the JV's construction schedules and PPA milestone dates. Specifically, the following parameters should be reviewed and confirmed:
(i) Indemnity Period: The maximum indemnity period (i.e., the maximum duration for which DSU/ALOP benefits will be payable following a covered loss event causing a delay in commercial operation) should be sufficient to cover the longest reasonably anticipated restoration period for a major loss, taking into account equipment lead times, construction mobilization requirements, and seasonal construction constraints. A minimum indemnity period of 18 to 24 months is typical for utility-scale solar projects.
(ii) Waiting Period: The current 45-day waiting period (analogous to a time-based deductible) should be reviewed against the JV's construction schedules and financial projections to ensure that the waiting period does not create an unreasonable gap in coverage for delay-related losses. A shorter waiting period may be available at a modest additional premium.
(iii) Valuation Methodology: The DSU/ALOP coverage should value the loss based on the projected revenue that the affected project would have generated had it achieved commercial operation on schedule, using the applicable PPA contract price, projected capacity factor, and other relevant assumptions from the JV's financial model.
(iv) Alignment with PPA Milestones: Several of the projects in the portfolio are subject to PPAs with milestone dates and guaranteed commercial operation dates, and delay beyond these milestones may trigger liquidated damages, contract termination rights, or loss of favorable pricing terms. The DSU/ALOP coverage should be structured to account for these contractual consequences of delay.
VII. Summary of Action Items
The following table summarizes the recommendations set forth in Section VI, together with the responsible party, priority level, and target completion date for each action item.
CBR, as development and construction manager under the DCMA, should take the lead in coordinating with Blackthorn Risk Advisors (Garrett Yoon) to implement Action Items 1 through 9 on the timeline set forth above. C&H will assist with the review of any endorsement forms or supplemental policy terms as requested and will coordinate directly with Blackthorn on Action Item 9 regarding the BLM lease requirements.
VIII. Conclusion
Overall, the insurance program arranged by Blackthorn Risk Advisors LLC with Ironclad Mutual Insurance Co. provides a sound foundation of builder's risk and commercial property coverage for the Solstice Plateau Energy Holdings LLC project portfolio. The Policy's all-risk coverage form, portfolio-wide structure, replacement cost valuation, and automatic conversion from builder's risk to commercial property upon commercial operation are all consistent with industry best practices for utility-scale solar construction insurance programs. The coverage limits are adequate for the estimated $720,000,000 in hard construction costs, and the scope of covered perils and sub-limits is generally in line with market standards for a portfolio of this size and geographic profile.
The gaps identified in this memorandum are procedural and readily addressed through standard endorsements and supplemental policy placements. The most critical items requiring immediate attention are:
(a) the additional insured endorsements for both CBR and Lumen Ridge, which are required by the LLC Agreement and should be obtained before the anticipated JV closing date of February 20, 2024;
(b) the waiver of subrogation and 30-day notice of cancellation endorsements, which are similarly required by the LLC Agreement and the Trident Bank credit facility; and
(c) the lender loss payee endorsement for Trident National Bank, which will need to be in place prior to the first draw under the credit facility.
The medium-priority items — pollution liability coverage, windstorm/hail sub-limit review, DSU/ALOP confirmation, and BLM lease insurance compliance — should be addressed prior to the commencement of construction activities at the applicable project sites. The standalone cyber insurance evaluation can be undertaken on a longer timeline, in advance of the first project's commercial operation date.
We recommend that CBR management, specifically Rebecca Whitfield, General Counsel, and Priya Narayanan, Chief Financial Officer, coordinate directly with Blackthorn Risk Advisors (Garrett Yoon, Senior Vice President) to implement the action items set forth in Section VII above on the recommended timeline. C&H is available to review any endorsements, supplemental policies, or revised coverage terms once obtained, and to provide further analysis or guidance as needed in connection with the JV's insurance program.
Derek Okonkwo will serve as the primary point of contact at C&H for all follow-up related to this memorandum and the insurance review workstream. A copy of this memorandum will be provided to the CBR management team upon review and approval by James Prentice.
Please do not hesitate to contact me with any questions or if you would like to discuss any of the foregoing in further detail.
Derek Okonkwo Working Associate, Mergers & Acquisitions Calderwood & Harkness LLP 1000 Louisiana Street, Suite 5500 Houston, Texas 77002
Matter No. 48172.001
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of the attorneys and client personnel identified above. This memorandum is protected by the attorney-client privilege and the work product doctrine. Any disclosure, copying, distribution, or use of this memorandum or its contents by any person other than the intended recipients is strictly prohibited. If you have received this memorandum in error, please notify the sender immediately and destroy all copies.
Date: | January 30, 2024
Matter Number: | 48172.001
To: | Megan Chu, Lead Associate, Mergers & Acquisitions
James Prentice, Responsible Partner, Mergers & Acquisitions
From: | Derek Okonkwo, Working Associate, Mergers & Acquisitions
Re: | Review of Insurance Program for Solstice Plateau Energy Holdings LLC — Builder's Risk and Commercial Property Coverage
Client: | Calloway-Briggs Renewables Inc.
Project Name | Location (County, State) | Capacity (MW DC) | Acreage
Red Mesa Solar I | Pecos County, TX | 200 | 2,400
Red Mesa Solar II | Pecos County, TX | 180 | 2,100
Cimarron Flats | Crockett County, TX | 150 | 1,800
Lone Star Prairie | Webb County, TX | 130 | 1,560
Brazos Point | Wharton County, TX | 120 | 1,440
Sangre del Sol I | Doña Ana County, NM | 150 | 1,800
Sangre del Sol II | Doña Ana County, NM | 110 | 1,320
Sonoran Ridge | Pinal County, AZ | 160 | 1,920
Total | 6 counties, 3 states | 1,200 | 14,340
No. | Action Item | Responsible Party | Priority | Target Date
1 | Obtain additional insured endorsements adding CBR and Lumen Ridge as additional insureds on Policy No. BRX-2024-SP-00412 | Blackthorn / Ironclad Mutual | High | Prior to JV closing (Feb. 20, 2024)
2 | Add Trident National Bank, N.A. as mortgagee and loss payee via standard mortgagee endorsement | Blackthorn / Ironclad Mutual | High | Prior to first draw under credit facility
3 | Confirm waiver of subrogation endorsement in favor of CBR, Lumen Ridge, the JV, and Trident Bank (when added) | Blackthorn / Ironclad Mutual | High | Prior to JV closing (Feb. 20, 2024)
4 | Endorse Policy to provide 30-day advance written notice of cancellation, non-renewal, or material modification to all named/additional insureds and lender | Blackthorn / Ironclad Mutual | High | Prior to JV closing (Feb. 20, 2024)
5 | Evaluate and procure contractor's pollution liability or site-specific pollution legal liability coverage | Blackthorn | Medium | Prior to construction commencement
6 | Evaluate need for standalone cyber insurance policy | Blackthorn | Lower | Prior to first project commercial operation
7 | Review windstorm/hail sub-limits for adequacy given Texas exposure; evaluate supplemental DIC coverage | Blackthorn | Medium | Prior to construction commencement
8 | Confirm DSU/ALOP indemnity period, waiting period, valuation methodology, and alignment with PPA milestones | Blackthorn | Medium | Prior to construction commencement
9 | Confirm BLM lease additional insured requirements for Sangre del Sol I and Sangre del Sol II and obtain necessary endorsements | Blackthorn / C&H | Medium | Prior to construction commencement at NM sites

PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT

MEMORANDUM

Record

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