1016-00008 · Dunmore Energy Holdings · Analysis

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PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Sylvia Hartwell, Partner, Calderwood & Harkness LLP

FROM: Robert Jansen, Associate, Calderwood & Harkness LLP

DATE: March 20, 2026

RE: Lender Consent Requirements Under Credit Agreement — Ridgeway Wind Energy LLC / Redstone Capital Bank, N.A. — Proposed IRC § 6418 Transfer of Production Tax Credits

Matter No.: 1016-00008

Billing Code: 09417.00001

I. Executive Summary

This memorandum analyzes whether the proposed transfer of Production Tax Credits ("PTCs") generated by the Ridgeway Wind Project (as defined below) under Section 6418 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), to Pinnacle Atlantic Partners LP ("Pinnacle") triggers consent requirements under the Credit Agreement, dated as of March 28, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), between Ridgeway Wind Energy LLC (the "Borrower" or "Ridgeway Wind") and Redstone Capital Bank, N.A. (the "Lender" or "Redstone"). You asked me to review the relevant financing documents and assess the risks associated with proceeding without lender consent, as well as to evaluate the treatment of the transfer consideration under the Depositary Agreement (as defined below). This memorandum sets forth my analysis and recommendations.

Principal Finding. Section 7.14 of the Credit Agreement broadly restricts the "transfer, sale, or assignment of tax attributes" without the prior written consent of Redstone Capital Bank. An IRC § 6418 transfer election — which effects a statutory transfer of eligible tax credits from an eligible taxpayer to an unrelated transferee taxpayer for cash consideration — almost certainly falls within the scope of this restriction. Although the Credit Agreement was negotiated prior to the widespread emergence of the transferable credit market created by the Inflation Reduction Act of 2022 (the "IRA"), the expansive drafting of Section 7.14, including its catch-all language referencing the "transfer, sale, assign[ment], pledge, or otherwise dispos[ition] of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project," leaves little room for an argument that the proposed transaction falls outside its reach.

Secondary Finding. The transfer consideration received by Ridgeway Wind Energy LLC in connection with the IRC § 6418 transfer may be captured by the revenue account waterfall established under the Depositary Agreement, dated as of March 28, 2023 (the "Depositary Agreement"), between Ridgeway Wind Energy LLC and Redstone Capital Bank, N.A. The definition of "Project Revenues" in the Depositary Agreement is broadly worded and, depending on interpretation, could encompass cash received in exchange for tax credits. If the transfer consideration is treated as Project Revenues, it would be subject to the standard waterfall priority, potentially constraining the Borrower's access to those funds and limiting the amount available for distribution to equity. The treatment of the proposed 15% indemnity holdback escrowed with Commonwealth Fiduciary Trust Company adds further complexity.

Recommendation. Based on the foregoing, I recommend that Calderwood & Harkness, on behalf of the Borrower and its parent entities, engage Redstone Capital Bank at the earliest practicable date to accomplish the following objectives:

(a) obtain prior written consent of Redstone for the proposed IRC § 6418 transfer of PTCs to Pinnacle Atlantic Partners LP;

(b) negotiate a consent letter, side letter, or formal amendment to the Credit Agreement and/or Depositary Agreement clarifying the treatment of PTC transfer proceeds under the Depositary Agreement waterfall and establishing a framework for future IRC § 6418 transfers during the remaining PTC eligibility period (through TY2034); and

(c) confirm, in writing, that the consummation of the proposed IRC § 6418 transfer, including the execution and delivery of the Transfer Agreement and ancillary documentation, will not constitute or give rise to a Default or Event of Default under the Credit Agreement.

The balance of this memorandum sets forth the factual background, detailed legal analysis, and recommended course of action.

II. Background

A. The Ridgeway Wind Project

The Ridgeway Wind Project (the "Project") is a 250 megawatt ("MW") onshore wind generation facility located on approximately 28,000 acres of leased ranchland situated approximately 14 miles northeast of Miles City, Custer County, Montana. The Project is owned and operated by Ridgeway Wind Energy LLC, a Delaware limited liability company (Delaware Secretary of State file number 7603517). The sole member of Ridgeway Wind is Dunmore Renewables Inc., a Delaware corporation (Delaware Secretary of State file number 7491826), which in turn is a wholly owned subsidiary of Dunmore Energy Holdings Ltd., an exempted company organized under the laws of the Cayman Islands (Registrar of Companies registry number CR-284319).

The Project consists of 83 wind turbines, each with a rated capacity of 3.0 MW, together with one additional 1.0 MW substation backup generation unit, associated balance-of-plant infrastructure, a project substation, collector system, operations and maintenance facilities, meteorological towers, and related improvements. Construction of the Project commenced on April 6, 2023, and the Project achieved its Commercial Operations Date ("COD") on November 14, 2025, in accordance with the terms of the Credit Agreement and the Engineering, Procurement, and Construction Agreement.

The total development and construction cost of the Project was approximately $412,000,000. The independent energy resource assessment prepared by Meridian Technical Advisors LLC (authored by Dr. Paul Marlowe Commerce Bank, PE), dated February 2023 and relied upon in the original financing, established a net capacity factor at the P50 confidence level of 38.2%.

The Project's primary revenue stream is derived from a 20-year fixed-price Power Purchase Agreement (the "PPA") with Great Plains Municipal Power Authority (the "Offtaker") at a contract price of $38.50 per megawatt-hour ("MWh"), executed on June 12, 2023. The PPA term commenced on the COD and extends through November 2045, subject to customary termination provisions. The Project is interconnected to the Midcontinent Independent System Operator ("MISO") grid pursuant to MISO Queue Position J-1147 and a Generator Interconnection Agreement with NorthStar Transmission Holdings LLC, executed September 3, 2024. The interconnection arrangements provide for full network resource integration service.

The Project is located within a census tract that qualifies as an "energy community" within the meaning of IRC § 45(b)(11)(B), as amended by the IRA, based on the historical employment and tax revenue metrics for Custer County, Montana, attributable to fossil fuel extraction, processing, and related activities. This energy community designation entitles the Project to a 10% adder to the base PTC amount, a qualification that is significant to the economic analysis of the proposed transfer and to the representations Redstone may require as a condition of consent (discussed further in Section V.A below).

B. The Financing Arrangements

The Project was financed through a construction-to-term loan facility provided by Redstone Capital Bank, N.A. (Office of the Comptroller of the Currency Charter No. 18742), a nationally chartered commercial bank headquartered in Charlotte, North Carolina. The Credit Agreement, dated as of March 28, 2023, governs the terms of the loan facility. Contemporaneously with the execution of the Credit Agreement, the parties also entered into the Depositary Agreement, dated as of March 28, 2023, between Ridgeway Wind Energy LLC, as borrower, and Redstone Capital Bank, N.A., as depositary bank and lender.

The original committed loan amount under the Credit Agreement is $288,400,000, representing approximately 70% of total project costs (i.e., $412,000,000 × 0.70 = $288,400,000). The equity contribution of $123,600,000 (representing approximately 30% of total project costs) was funded by Dunmore Renewables Inc. prior to and during construction in accordance with the equity contribution agreement and the funding schedule set forth in the Credit Agreement.

As of March 1, 2026, the outstanding principal balance under the Credit Agreement is $271,600,000. Principal amortization is scheduled to occur on a sculpted basis over the remaining term of the facility, with a final maturity date of March 28, 2041. The Credit Agreement is governed by New York law, without regard to conflict of laws principles (other than Section 5-1401 of the New York General Obligations Law).

The Borrower's obligations under the Credit Agreement are secured by a first-priority perfected security interest in substantially all of the Borrower's assets, including, without limitation, real property interests (leasehold mortgages), personal property (UCC filings), project contracts (PPA, EPC Agreement, O&M Agreement, turbine supply agreements, and land leases), deposit accounts, and all proceeds thereof. The security package also includes a pledge by Dunmore Renewables Inc. of 100% of the membership interests in Ridgeway Wind Energy LLC, together with customary equity pledges, account control agreements, and direct agreements (consents and acknowledgments) with material project counterparties.

C. The Proposed IRC § 6418 Transfer

Ridgeway Wind Energy LLC proposes to make a transfer election under IRC § 6418 (as enacted by Section 13801 of the IRA) to transfer PTCs generated by the Project to Pinnacle Atlantic Partners LP ("Pinnacle" or the "Transferee"), a Delaware limited partnership (Delaware Secretary of State file number 7255043). Pinnacle is a diversified financial services holding company with an average annual federal income tax liability of approximately $480 million and a demonstrated track record as an active participant in the IRC § 6418 transferable credit market, having completed approximately $1.2 billion in prior § 6418 credit purchases across multiple asset classes, including wind, solar, and energy storage.

Pinnacle is advised in the proposed transaction by Hargrove, Liddell & Strauss LLP, with Nathaniel Strauss serving as lead partner and Catherine Yoon as senior associate. Calderwood & Harkness represents Ridgeway Wind Energy LLC and its affiliates.

The key economic terms of the proposed transfer, as reflected in the term sheet under negotiation, are summarized below:

Estimated Annual PTC Generation. Based on the Project's expected annual electricity generation of 836,220,000 kWh (consistent with the P50 net capacity factor of 38.2% applied to the Project's 250 MW nameplate capacity, adjusted for availability, curtailment, and line losses), the estimated annual PTC amount is $25,295,655. This figure reflects the current effective PTC rate of $0.03025 per kWh, calculated as follows:

• Base PTC rate: $0.0055 per kWh (as adjusted for inflation under IRC § 45(b)(2))

• Bonus credit multiplier: 5x (applicable because the Project satisfies prevailing wage and apprenticeship requirements under IRC § 45(b)(6)–(7))

• Energy community adder: 10% (applicable under IRC § 45(b)(11)(B) based on Custer County qualification)

• Effective rate: $0.0055 × 5.0 × 1.10 = $0.03025 per kWh

Proposed Transfer Price. Pinnacle has indicated a proposed transfer price of $0.92 per $1.00 of eligible credit, consistent with current market pricing for high-quality wind PTCs with strong credit eligibility support and recapture insurance coverage.

Estimated Year 1 Transfer Consideration. Based on the foregoing, the estimated Year 1 transfer consideration is $23,271,803 (i.e., $25,295,655 × 0.92).

Estimated 10-Year Aggregate Transfer Consideration. Over the full 10-year PTC eligibility period (TY2025 through TY2034), the estimated aggregate transfer consideration is approximately $232,760,000. This figure assumes stable annual generation, no material recapture events, and continuation of the energy community adder throughout the eligibility period. Actual amounts will be subject to annual true-up based on actual generation and applicable credit rates.

Payment Timing. Under the proposed structure, Pinnacle would make a lump-sum payment for each taxable year's estimated credits, payable within 30 days after the later of (a) the filing of Ridgeway Wind's IRS pre-filing registration statement on the IRS Energy Credits Online portal (under Treas. Reg. § 1.6418-4) and (b) the applicable annual true-up date as defined in the Transfer Agreement.

Indemnity Holdback. As is customary in the IRC § 6418 market, 15% of each annual payment would be escrowed with Commonwealth Fiduciary Trust Company (the "Escrow Agent") for a period of 36 months following the applicable payment date, serving as security for the Borrower's indemnification obligations to Pinnacle in the event of a credit recapture, disallowance, or reduction. The estimated Year 1 holdback amount is $3,490,770 (i.e., $23,271,803 × 0.15).

PTC Eligibility Period. The PTCs subject to the proposed transfer relate to taxable years 2025 through 2034, inclusive, representing the full 10-year period during which the Project is eligible to generate PTCs under IRC § 45.

III. Analysis of Section 7.14 — Restriction on Transfer of Tax Attributes

A. Text of Section 7.14

Section 7.14 of the Credit Agreement, captioned "Tax Attributes," is a negative covenant that imposes a broad restriction on the Borrower's ability to transfer tax-related benefits associated with the Project. The operative language of Section 7.14 provides, in relevant part:

"The Borrower shall not, without the prior written consent of the Lender (which consent may be granted or withheld in the Lender's sole and absolute discretion), transfer, sell, assign, pledge, or otherwise dispose of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project, or enter into any agreement, arrangement, or understanding (whether written or oral) providing for or contemplating any such transfer, sale, assignment, pledge, or disposition."

Several features of this provision are noteworthy. First, the provision does not separately define the term "tax attributes" or provide an enumerated list of the specific tax items covered. Instead, it employs a cascade of overlapping terms — "tax attributes, tax credits, tax benefits, or similar rights or entitlements" — that is plainly intended to sweep broadly. Second, the consent standard is "sole and absolute discretion," which affords Redstone maximum latitude in determining whether to grant consent and on what conditions. Third, the restriction applies not only to the consummation of a transfer but also to the execution of any "agreement, arrangement, or understanding" contemplating such a transfer, which means that even executing a binding term sheet or letter of intent with Pinnacle could implicate the provision.

It is worth noting that Section 7.14 was negotiated and executed in March 2023. Although the IRA was enacted on August 16, 2022, and IRC § 6418 became effective for taxable years beginning after December 31, 2022, the Treasury Department and IRS did not publish proposed regulations under § 6418 until June 14, 2023 (REG-101610-23, 88 Fed. Reg. 40496), and final regulations were not published until March 5, 2024 (T.D. 9993, 89 Fed. Reg. 17534). Accordingly, at the time the Credit Agreement was executed, the practical mechanics of the transferable credit market were not yet fully developed, and it is likely that neither party specifically contemplated an IRC § 6418 transfer when drafting Section 7.14. This historical context, however, does not narrow the plain language of the provision; if anything, the breadth of the drafting suggests an intent to capture any future mechanisms by which tax benefits associated with the Project might be monetized or transferred to third parties.

B. Whether an IRC § 6418 Transfer Falls Within Section 7.14

The central question is whether an election by the Borrower under IRC § 6418 to transfer PTCs to Pinnacle constitutes a "transfer, sale, assign[ment], pledge, or other[] dispos[ition] of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project" within the meaning of Section 7.14. For the reasons set forth below, I conclude that it almost certainly does.

Nature of an IRC § 6418 Transfer. IRC § 6418(a) provides that, in the case of an "eligible taxpayer" that makes a transfer election for a taxable year, the eligible taxpayer may transfer all (or any portion specified in the election) of an "eligible credit" determined with respect to such taxpayer to a "transferee taxpayer" that is not related (within the meaning of IRC § 267(b) or § 707(b)) to the eligible taxpayer. The transfer must be made for "cash consideration" paid by the transferee taxpayer to the eligible taxpayer, and the amount of such consideration is not includible in the gross income of the eligible taxpayer and is not deductible by the transferee taxpayer. See IRC § 6418(b).

Under the Treasury Regulations, specifically Treas. Reg. § 1.6418-2, the transferor (here, Ridgeway Wind) retains the obligation to determine the eligible credit on its own federal income tax return, including all computational and substantive eligibility determinations. However, once the transfer election is properly made and the pre-filing registration requirements of Treas. Reg. § 1.6418-4 are satisfied, the transferee (here, Pinnacle) takes the transferred credit into account as if the transferee had directly earned the credit. The effect is that the economic benefit of the credit — i.e., the dollar-for-dollar reduction in federal income tax liability — shifts from the transferor to the transferee in exchange for cash.

Characterization Under Section 7.14. Applying the operative language of Section 7.14 to the IRC § 6418 mechanism, the analysis proceeds as follows:

"Transfer." The IRC § 6418 election is expressly denominated a "transfer" in the statute itself. See IRC § 6418(a) (providing that the eligible taxpayer may "transfer" an eligible credit). The Borrower, by making the election, causes the economic benefit of the PTCs to pass from Ridgeway Wind to Pinnacle in exchange for cash consideration. This is a "transfer" of "tax credits" within the plain and ordinary meaning of those terms as used in Section 7.14.

"Sale." The consideration paid by Pinnacle ($0.92 per $1.00 of credit) is structured as a purchase price. The transaction is commonly referred to in the market as a "credit sale," and Pinnacle is commonly referred to as a "credit buyer." While the IRS does not formally characterize the § 6418 election as a "sale" for all federal income tax purposes (indeed, the special treatment under § 6418(b) — exclusion from gross income and non-deductibility — differs from a traditional sale), the commercial substance of the transaction is a sale of tax credits for cash. For purposes of interpreting a contractual provision under New York law, the label used in the Code is not dispositive; what matters is the substance of the transaction. The substance here is a sale.

"Assign[ment]." The transfer election causes the credit, as determined on the transferor's return, to be "taken into account" on the transferee's return. This is functionally equivalent to an assignment of the economic benefit of the credit, even though the computational obligation remains with the transferor.

"Otherwise dispose of." Even if one were to argue, against the weight of the foregoing analysis, that the IRC § 6418 election is technically not a "transfer," "sale," or "assignment" because of its unique statutory character, the catch-all phrase "or otherwise dispose of" in Section 7.14 would independently capture the transaction. New York courts have consistently held that catch-all clauses of this nature are to be given broad effect and are intended to reach transactions that do not fit neatly within the specifically enumerated categories. See, e.g., In re Calpine Corp., 365 B.R. 392, 407 (Bankr. S.D.N.Y. 2007) (interpreting "otherwise dispose of" broadly in the context of a negative covenant).

Subject Matter: "Tax Credits" and "Tax Benefits." PTCs are, by definition, "tax credits" — they are credits against federal income tax liability determined under IRC § 45. The term "tax credits" in Section 7.14 unambiguously encompasses PTCs. Similarly, the economic benefit of PTCs (i.e., the reduction in federal income tax liability they produce) constitutes a "tax benefit" within the meaning of Section 7.14. The additional reference to "similar rights or entitlements" further ensures that any tax-related economic benefit generated by the Project — whether labeled a credit, deduction, exemption, or otherwise — falls within the covenant's scope.

Nexus to the Project. Section 7.14 applies to tax attributes, credits, and benefits "generated by or arising from the Project." There is no question that the PTCs at issue are generated by the Project; they are determined based on the kilowatt-hours of electricity produced by the Ridgeway Wind Project and sold to an unrelated party under the PPA. The nexus requirement is clearly satisfied.

Conclusion. Based on the foregoing, the IRC § 6418 transfer of PTCs by Ridgeway Wind Energy LLC to Pinnacle Atlantic Partners LP almost certainly constitutes a "transfer" (or, alternatively, a "sale," "assignment," or "other disposition") of "tax credits" (or, alternatively, "tax attributes," "tax benefits," or "similar rights or entitlements") "generated by or arising from the Project" within the meaning of Section 7.14. Accordingly, the prior written consent of Redstone Capital Bank is required before Ridgeway Wind may execute the proposed Transfer Agreement or make the § 6418 election.

I note that no reasonable counter-argument would, in my view, succeed in taking the proposed transaction outside the scope of Section 7.14. The most plausible counter-argument — that the IRC § 6418 election is a statutory mechanism that operates by force of law rather than by contractual transfer, and therefore should not be treated as a "transfer" or "disposition" in the traditional sense — fails for at least two reasons. First, the election is voluntary; the Borrower affirmatively chooses to make the transfer and receives cash consideration in exchange. The election does not occur automatically by operation of law. Second, even if the characterization argument had some merit, the catch-all "otherwise dispose of" language would capture the transaction regardless.

C. Potential Consequences of Non-Compliance

The consequences of proceeding with the IRC § 6418 transfer without obtaining Redstone's prior written consent could be severe. Specifically:

Breach of Covenant. Executing the Transfer Agreement with Pinnacle, or making the IRC § 6418 election, without prior written consent would constitute a breach of Section 7.14. Under Section 8.01 of the Credit Agreement, a breach of any negative covenant contained in Article VII constitutes an Event of Default if such breach is not cured within the applicable cure period (if any). Section 7.14 does not, on its face, provide for a grace or cure period; the act of transferring or entering into an agreement to transfer is itself the breach.

Acceleration and Cross-Default Risk. Upon the occurrence and continuance of an Event of Default, Redstone Capital Bank may, at its election, declare all outstanding principal ($271,600,000 as of March 1, 2026) and accrued but unpaid interest immediately due and payable. In addition, to the extent the Borrower has any other indebtedness outstanding (including hedging obligations or other credit support arrangements), a cross-default provision triggered by the Credit Agreement default could cascade into defaults under those instruments as well.

Enforcement of Security Interests. Redstone holds a first-priority perfected security interest in substantially all of the Borrower's assets. Upon an Event of Default, Redstone would be entitled to exercise its remedies under the security documents, including foreclosure on the leasehold mortgage, enforcement of the UCC security interest in personal property, exercise of rights under account control agreements, and exercise of step-in rights with respect to material project contracts (including the PPA and the O&M Agreement).

Practical Impairment. Even if Redstone were unlikely to exercise its acceleration rights in practice — given the performing nature of the loan and the strong credit profile of the Project — the mere existence of an uncured Event of Default would have significant practical consequences. An uncured default would impair Ridgeway Wind's ability to: (i) make future draws under any available revolving commitments; (ii) obtain waivers for other matters that may arise during the life of the Project; (iii) pursue a refinancing or repricing of the existing debt; and (iv) satisfy distribution conditions, thereby blocking distributions to Dunmore Renewables Inc. and upstream to Dunmore Energy Holdings Ltd.

Reputational Risk. Proceeding without consent would also damage the Borrower's relationship with Redstone and could adversely affect the broader relationship between Dunmore Energy Holdings and its banking counterparties. This is particularly relevant given that Dunmore is actively developing additional renewable energy projects that may require financing from Redstone or its affiliates.

D. Scope of Consent — Conditions Redstone May Impose

Assuming the Borrower seeks consent from Redstone (as we recommend), Redstone has considerable leverage given the "sole and absolute discretion" standard in Section 7.14. Based on market practice in similar situations and our experience with Redstone's renewable energy lending team, we anticipate that Redstone may condition its consent on some or all of the following:

(i) Mandatory Prepayment or Restricted Account Deposit. Redstone may require that a specified portion of the annual transfer consideration be applied to mandatory prepayment of outstanding principal or deposited into a restricted reserve account under the Depositary Agreement. This is the condition most likely to generate significant negotiation, as the Borrower and its equity sponsors will want to maximize the amount of transfer proceeds available for distribution.

(ii) Transferee Approval. Redstone may require approval of the identity and creditworthiness of the proposed transferee. Given Pinnacle's substantial financial profile (approximately $480 million in average annual federal income tax liability and $1.2 billion in prior § 6418 credit purchases), this condition should be readily satisfiable. Redstone may nevertheless request financial statements, credit references, or other due diligence materials with respect to Pinnacle.

(iii) Financial Covenant Maintenance. Redstone may require the Borrower to demonstrate that, on a pro forma basis, the proposed transfer does not cause a breach of any financial covenant, including the minimum Debt Service Coverage Ratio ("DSCR") and the Loan Life Coverage Ratio ("LLCR"). This condition should also be readily satisfiable, as the transfer generates additional cash flow to the project company.

(iv) Enhanced Reporting and Certification. Redstone may require periodic reporting on the status of the IRC § 6418 transfer, including copies of the pre-filing registration statement, annual transfer election documentation, payment confirmations, and escrow account statements. Redstone may also require annual officer's certificates confirming continued compliance with prevailing wage, apprenticeship, and energy community requirements.

(v) Consent Fee. Redstone may charge a consent fee, which is standard market practice. Consent fees in comparable transactions have ranged from 10 to 25 basis points of the outstanding principal balance. Applied to the $271,600,000 outstanding balance, a 15 basis point consent fee would be approximately $407,400.

In addition to the foregoing, Redstone may require a broader amendment to Section 7.14 — rather than a one-time consent letter — to establish a pre-approved framework for IRC § 6418 transfers during the remaining PTC eligibility period through TY2034. Such an amendment could define the parameters of permitted transfers (e.g., minimum transfer price, approved transferee criteria, maximum annual transfer amount), thereby eliminating the need to seek individual consent for each taxable year's transfer.

Finally, Redstone may seek to obtain a security interest in the Transfer Agreement itself and in the transfer consideration receivable, including any amounts held in the indemnity holdback escrow with Commonwealth Fiduciary Trust Company. To the extent Redstone asserts a lien on the escrow, this could create intercreditor issues with Pinnacle's rights under the Transfer Agreement, as Pinnacle will expect to have a first-priority interest in the holdback as security for the Borrower's indemnification obligations. This issue will need to be carefully negotiated among the parties.

IV. Analysis of Depositary Agreement Waterfall Provisions

A. Overview of the Depositary Agreement

The Depositary Agreement, dated as of March 28, 2023, between Ridgeway Wind Energy LLC and Redstone Capital Bank, N.A., establishes a comprehensive account structure and cash management framework governing all revenues and expenditures of the Project. The Depositary Agreement creates the following principal accounts (among others), each maintained at Redstone Capital Bank:

• Revenue Account — the initial deposit account into which all Project Revenues (as defined in the Depositary Agreement) are required to be deposited;

• Operating Account — the account from which budgeted operating expenses are paid;

• Debt Service Reserve Account — a reserve account required to be funded and maintained at a specified target balance (typically six months of debt service);

• Major Maintenance Reserve Account — a reserve account for scheduled and unscheduled major maintenance expenditures; and

• Distribution Account — the account from which distributions to the Borrower's member (Dunmore Renewables Inc.) are made, subject to satisfaction of the Distribution Conditions.

The Depositary Agreement establishes a defined priority waterfall pursuant to which funds on deposit in the Revenue Account are disbursed on each monthly or quarterly transfer date. Funds may not be transferred to a lower-priority account until all higher-priority obligations have been satisfied.

B. Treatment of PTC Transfer Consideration Under the Waterfall

The critical question for the Borrower is whether the cash consideration received from Pinnacle in connection with the IRC § 6418 transfer constitutes "Project Revenues" as defined in the Depositary Agreement, and is therefore subject to the waterfall. The Depositary Agreement defines "Project Revenues" in the following terms (quoting the relevant provision):

"Project Revenues" means all revenues, receipts, income, and other amounts received by or on behalf of the Borrower in connection with the ownership, operation, or maintenance of the Project, including, without limitation, (a) all amounts payable under the Power Purchase Agreement, (b) all payments for capacity, energy, ancillary services, and renewable energy certificates, (c) insurance proceeds (other than proceeds of title insurance), (d) liquidated damages and warranty payments, (e) interest earned on amounts on deposit in any Account, and (f) any other amounts received by the Borrower from any source in connection with the Project."

The analysis of whether PTC transfer consideration falls within this definition requires consideration of both the enumerated categories and the residual catch-all clause.

Argument That Transfer Proceeds Constitute "Project Revenues." Under the broadest reading of the definition, PTC transfer consideration could be characterized as "revenues, receipts, income, [or] other amounts received by or on behalf of the Borrower in connection with the ownership, operation, or maintenance of the Project." The PTCs arise directly from the Project's generation of electricity, and the transfer consideration is cash received by the Borrower as a direct economic consequence of the Project's operations. Clause (f) of the definition — "any other amounts received by the Borrower from any source in connection with the Project" — is particularly broad and could capture the transfer consideration. Under this reading, Redstone would argue that the cash received from Pinnacle is functionally a revenue stream derived from the Project and should be subject to the same waterfall controls as PPA revenues, capacity payments, and REC proceeds.

Argument That Transfer Proceeds Are Not "Project Revenues." The counter-argument is more nuanced but potentially meritorious. First, the IRC § 6418 transfer consideration is a payment for a tax attribute — specifically, a credit against federal income tax liability — not a payment for electricity, capacity, renewable energy certificates, or ancillary services. The enumerated categories in clauses (a) through (e) of the definition are all tied to the physical operations of the Project (energy sales, capacity, ancillary services, RECs, insurance, warranties) or to the financial management of the accounts (interest income). Tax credit transfer consideration does not fit naturally within any enumerated category. Second, the IRC § 6418 transfer consideration was not contemplated when the Depositary Agreement was executed in March 2023; the transferable credit market was in its infancy, and neither party negotiated for the inclusion or exclusion of such amounts. Third, under IRC § 6418(b), the transfer consideration is explicitly excluded from the transferor's gross income for federal income tax purposes, underscoring its unique character as a tax-related payment rather than operating revenue. Fourth, to the extent the catch-all in clause (f) is read in accordance with the principle of ejusdem generis, it should be limited to amounts of the same general character as those in clauses (a) through (e) — i.e., amounts related to the Project's physical operations and not to the monetization of tax benefits.

Likely Interpretation Under New York Law. The Credit Agreement and Depositary Agreement are governed by New York law. New York courts apply well-established principles of contract interpretation, giving effect to the plain and ordinary meaning of defined terms and declining to create ambiguity where the language is clear. See, e.g., Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002) ("A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.").

The outcome of this interpretive question is not certain. The broad catch-all language of clause (f) creates a plausible argument that the transfer consideration is captured, but the absence of any specific reference to tax credits, tax-related payments, or § 6418 proceeds — combined with the enumerative structure of the definition, which is oriented toward operating revenues — supports the argument that the proceeds fall outside the definition. My assessment is that the question is sufficiently ambiguous to warrant proactive clarification with Redstone rather than reliance on a unilateral interpretation that may be contested.

Critically, even if the transfer consideration is determined not to constitute "Project Revenues" under the current definition, Redstone is likely to negotiate for its inclusion — either by amendment to the Depositary Agreement or as a condition of consent under Section 7.14 — as part of the consent process. Redstone's lending team will reasonably view the PTC transfer proceeds as a significant new cash flow stream associated with the Project and will want to ensure that such proceeds are subject to the lender's cash management controls.

C. Waterfall Priority Analysis

If PTC transfer consideration is treated as Project Revenues, the funds would be deposited into the Revenue Account and disbursed in accordance with the standard waterfall priority. Based on our review of the Depositary Agreement, the waterfall operates as follows:

1. Operating Expenses. First, amounts necessary to fund budgeted operating expenses (including O&M costs, insurance premiums, property taxes, land lease payments, and administrative expenses) are transferred to the Operating Account.

2. Debt Service. Second, amounts necessary to pay scheduled principal and interest on the outstanding indebtedness under the Credit Agreement are transferred to the Debt Service Account.

3. Debt Service Reserve Replenishment. Third, to the extent the Debt Service Reserve Account is below its required target balance, amounts necessary to replenish the reserve to the target level are transferred to the Debt Service Reserve Account.

4. Major Maintenance Reserve. Fourth, amounts necessary to fund the Major Maintenance Reserve Account in accordance with the Major Maintenance Reserve budget are transferred to the Major Maintenance Reserve Account.

5. Distribution Conditions Satisfaction. Fifth, a determination is made as to whether the Distribution Conditions (no Event of Default, DSCR above the minimum threshold, all reserve accounts fully funded) have been satisfied.

6. Distribution Account. Sixth, if and only if the Distribution Conditions are satisfied, remaining funds are transferred to the Distribution Account and become available for distribution to Dunmore Renewables Inc.

Practical Impact. The estimated Year 1 transfer consideration of $23,271,803 is a substantial sum. If this amount is deposited into the Revenue Account and subjected to the waterfall, a significant portion could be absorbed by waterfall obligations at levels (1) through (4) before any distributions are made. In practice, however, the Project's primary revenue stream — the PPA at $38.50/MWh — is designed to be sufficient, on its own, to fund the waterfall through the Distribution Account in a base-case scenario (consistent with the project's original DSCR projections at the P50 case). To the extent PPA revenues alone are sufficient to satisfy items (1) through (5), the PTC transfer proceeds would effectively "flow through" the waterfall and arrive at the Distribution Account as surplus cash. However, this outcome depends on actual project performance in any given period, and during periods of below-average generation or unexpected operating expenses, the transfer consideration could be partially or wholly absorbed by senior waterfall obligations.

For these reasons, the treatment of transfer consideration under the waterfall has significant economic implications for the equity sponsors and warrants careful negotiation. The ideal outcome for the Borrower would be to secure an agreement with Redstone that PTC transfer proceeds are either (a) excluded from the "Project Revenues" definition and deposited into a separate account outside the waterfall, or (b) included in "Project Revenues" but with an express carve-out allowing a specified portion to be distributed to equity, subject to customary distribution conditions.

D. Implications of the 15% Indemnity Holdback

An additional complication arises from the proposed 15% indemnity holdback. Under the contemplated Transfer Agreement, 15% of each annual payment from Pinnacle — estimated at $3,490,770 for Year 1 — would be deposited into an escrow account maintained by Commonwealth Fiduciary Trust Company (the "Escrow Agent") and held for a period of 36 months following the applicable payment date. The holdback serves as security for the Borrower's indemnification obligations to Pinnacle in the event that any portion of the transferred credits is recaptured, disallowed, or reduced by the IRS.

Several questions arise with respect to the treatment of the holdback under the Depositary Agreement:

Is the Escrowed Amount a "Project Revenue"? If the full gross payment from Pinnacle is treated as a Project Revenue upon receipt by the Borrower, then the 15% holdback amount may need to be deposited into the Revenue Account before being transferred to the escrow. This would be logistically problematic, as the funds would need to pass through the waterfall before being segregated for escrow purposes. Alternatively, if the holdback is structured such that Pinnacle pays 85% directly to the Borrower and 15% directly to the Escrow Agent, the question becomes whether the 15% amount is treated as having been "received by or on behalf of the Borrower" (and therefore a Project Revenue) or as a contingent asset not yet received.

Redstone's Security Interest. To the extent the escrowed amounts constitute property of the Borrower, they may fall within the scope of Redstone's first-priority security interest in the Borrower's assets. Redstone may argue that it is entitled to a perfected security interest in the escrow account and the Borrower's right to receive distributions from the escrow upon release. This assertion would need to be coordinated with Pinnacle and its counsel at Hargrove, Liddell & Strauss, as Pinnacle will likely insist on a first-priority interest in the holdback as security for the indemnity obligations owed to it. An intercreditor arrangement or escrow tri-party agreement may be needed to address competing lien claims.

Release Mechanics. Upon the expiration of the 36-month holdback period (assuming no indemnification claims), the escrowed funds would be released to the Borrower. At that point, the released amounts would clearly constitute funds received by the Borrower, and their treatment under the Depositary Agreement waterfall would need to be addressed. If the released amounts are Project Revenues, they would flow through the waterfall in the period of release. If they are not, they would be available for distribution or other use outside the waterfall.

These issues are complex but manageable with appropriate documentation. I recommend that the consent request to Redstone include a proposed framework for the treatment of the holdback, including a proposed escrow tri-party agreement that addresses lien priority, release mechanics, and waterfall treatment.

V. Other Credit Agreement Provisions Potentially Implicated

A. Representations and Warranties

The Borrower's consent request under Section 7.14 is likely to trigger a requirement for bring-down representations and warranties. Based on our review of the Credit Agreement and customary lender expectations, Redstone may require the Borrower to represent and warrant, as a condition of consent, the following:

• The Project satisfies, and has at all times since the beginning of construction satisfied, the prevailing wage requirements of IRC § 45(b)(7) and the apprenticeship requirements of IRC § 45(b)(8), which together underpin the 5x bonus credit multiplier applicable to the PTCs. Any failure to satisfy these requirements would reduce the effective PTC rate by 80% (from $0.03025/kWh to approximately $0.00605/kWh) and correspondingly reduce the economic value of the transfer.

• Custer County, Montana, qualifies as an "energy community" within the meaning of IRC § 45(b)(11)(B), entitling the Project to the 10% adder to the PTC base amount. Any loss of energy community status would reduce the estimated annual PTC amount and the transfer consideration.

• No "recapture event" (as defined in the Transfer Agreement or as may be required by Redstone) has occurred or is reasonably expected to occur. Recapture events may include, among others, a change in the tax-exempt status of a purchaser of electricity under the PPA, a transfer of the Project to a disqualified person, or a failure to maintain compliance with the prevailing wage and apprenticeship requirements during the relevant recapture period.

• The Borrower is not aware of any pending or threatened IRS examination, audit, or investigation relating to the Project's eligibility for PTCs, the computation of PTCs, or the validity of the proposed IRC § 6418 transfer election.

These representations are substantive and require careful coordination with Howard Ellison at Grayson Birch & Co. LLP, who is preparing the PTC eligibility memorandum for the Project. We should ensure that the representations the Borrower makes to Redstone are consistent with the conclusions in the Grayson Birch memorandum and do not expose the Borrower to undue risk of breach.

B. Financial Covenants

The Credit Agreement contains customary financial covenants, including a minimum Debt Service Coverage Ratio (the "DSCR Covenant"). We should confirm whether the receipt of PTC transfer consideration affects the calculation of DSCR under the Credit Agreement.

If the transfer consideration is included in the DSCR numerator — i.e., treated as cash flow available for debt service — the proposed transaction would be beneficial to covenant compliance, as the additional $23.3 million in Year 1 proceeds would significantly increase the coverage ratio above the minimum threshold. Conversely, if the transfer consideration is excluded from the DSCR calculation (e.g., because it is not "Project Revenues" under the Depositary Agreement or because the DSCR definition is tied to operating cash flow rather than total receipts), the covenant analysis is neutral — neither helped nor harmed by the transfer.

In either case, the proposed transaction does not present a risk of covenant breach. However, the treatment of transfer proceeds in the DSCR calculation should be addressed as part of the consent or amendment discussions with Redstone, as a clear resolution will be important for ongoing compliance monitoring and for the Borrower's financial modeling.

C. Negative Pledge and Additional Indebtedness

Two additional provisions of the Credit Agreement warrant review in connection with the proposed transfer:

Indebtedness Covenant. The Credit Agreement prohibits the Borrower from incurring additional "Indebtedness" (as defined therein) without the prior written consent of Redstone, subject to customary exceptions. We should confirm that the Transfer Agreement and the Borrower's indemnification obligations to Pinnacle thereunder do not constitute "Indebtedness" under the Credit Agreement. The indemnification obligations are contingent obligations — they arise only if the IRS recaptures, disallows, or reduces the transferred credits — and are not, in my view, properly characterized as debt. Nevertheless, we should review the Credit Agreement's definition of "Indebtedness" carefully, as some definitions include "contingent obligations" or "guarantees" broadly. If the indemnity obligations could be construed as Indebtedness, a specific carve-out should be included in the consent letter or amendment.

Negative Pledge Covenant. The Credit Agreement contains a negative pledge covenant that prohibits the Borrower from granting any lien, security interest, or encumbrance on its assets (other than Permitted Liens) without the prior written consent of Redstone. The indemnity holdback escrow arrangement with Commonwealth Fiduciary Trust Company could be construed as the grant of a security interest in the escrowed funds to Pinnacle. Similarly, the proposed recapture insurance policy from Northfield Specialty Insurance Co. may involve an assignment of insurance proceeds or other encumbrances. We should confirm that neither arrangement implicates the negative pledge covenant or, if it does, that appropriate carve-outs are obtained as part of the consent.

D. Permitted Distributions

The Credit Agreement conditions distributions from the Borrower to its member (Dunmore Renewables Inc.) on the satisfaction of specified "Distribution Conditions," which typically include:

(a) no Event of Default shall have occurred and be continuing (or would result from the proposed distribution);

(b) the DSCR shall be equal to or greater than the minimum required ratio (typically 1.20x or higher) on both a historical and projected basis;

(c) all reserve accounts (including the Debt Service Reserve Account and the Major Maintenance Reserve Account) shall be funded to their required target balances; and

(d) the Borrower shall have delivered a Distribution Conditions Certificate to Redstone, certified by an authorized officer, confirming satisfaction of the foregoing conditions.

If the PTC transfer proceeds flow through the waterfall to the Distribution Account, the Borrower will need to confirm that all Distribution Conditions are satisfied before making distributions to Dunmore Renewables Inc. and, ultimately, upstream to Dunmore Energy Holdings Ltd. As noted in Section III.C above, an uncured Event of Default resulting from a failure to obtain Section 7.14 consent would block all distributions — which is a powerful incentive to obtain consent before proceeding with the transfer.

Even assuming consent is obtained and no Event of Default exists, the Borrower should confirm that the DSCR calculations, reserve account balances, and other distribution conditions can be satisfied in the period during which distributions are contemplated. Given the Project's strong PPA revenue profile and the additional cash flow from the transfer, distribution conditions should be comfortably met, but the analysis should be refreshed each quarter in connection with the Borrower's ongoing compliance reporting.

VI. Recommended Course of Action

Based on the analysis set forth above, I recommend the following course of action, which should be coordinated across the engagement team, including the Borrower's in-house counsel, the tax advisors at Grayson Birch & Co. LLP, and the insurance advisors at Corbin Hale & Associates Inc.

A. Early Engagement with Redstone Capital Bank

I recommend that Calderwood & Harkness, on behalf of the Borrower, contact Redstone Capital Bank's renewable energy relationship management team at the earliest practicable date — and in any event before any definitive documentation is executed with Pinnacle Atlantic Partners LP. Early engagement serves several purposes: it preserves the Borrower's good-faith standing under the Credit Agreement, allows time for negotiation of consent terms, and avoids the risk that Redstone learns of the proposed transfer from market sources or from Pinnacle's advisors before being approached by the Borrower.

As part of the initial engagement, we should prepare and submit a comprehensive consent request package that includes the following materials:

(i) A summary memorandum describing the proposed IRC § 6418 transfer structure, including the statutory framework, the election mechanics, and the treatment of transfer consideration under the Code and Treasury Regulations.

(ii) A description of the identity and financial profile of the proposed transferee, Pinnacle Atlantic Partners LP, including its organizational structure, average annual federal income tax liability, prior § 6418 credit purchase experience, and such other financial information as Pinnacle may consent to share (subject to appropriate confidentiality protections).

(iii) A financial summary of the estimated annual transfer consideration and 10-year aggregate economics, including the assumptions underlying the projections (annual generation, effective PTC rate, transfer price, holdback structure, and payment timing).

(iv) A confirmation that the proposed transfer does not affect the Project's physical operations, the PPA with Great Plains Municipal Power Authority, the interconnection arrangements with NorthStar Transmission Holdings LLC, or any other material project contract.

(v) A draft of the Transfer Agreement between Ridgeway Wind and Pinnacle (when available), together with the proposed escrow agreement with Commonwealth Fiduciary Trust Company and any other ancillary documentation.

B. Negotiate a Consent Letter or Amendment

Our primary objective should be to secure either (a) a standalone consent letter specifically approving the proposed IRC § 6418 transfer to Pinnacle for TY2025 or (b) a broader amendment to Section 7.14 of the Credit Agreement and the related provisions of the Depositary Agreement establishing a pre-approved framework for IRC § 6418 transfers during the remaining PTC eligibility period (through TY2034). The latter approach is strongly preferable, as it would eliminate the need to seek individual consent for each taxable year's transfer and provide certainty to all parties — including Pinnacle, which will require comfort that the Borrower's lender consent obligations have been satisfied on a forward-looking basis.

The amendment should address the following matters:

• A definition of "Permitted IRC § 6418 Transfers," specifying the conditions under which the Borrower may make transfer elections without further consent (e.g., minimum transfer price of $0.90 per $1.00 of credit, transferee must meet specified creditworthiness criteria, maximum annual transfer amount equal to all PTCs generated by the Project).

• The treatment of PTC transfer consideration under the Depositary Agreement, including whether such proceeds are included in "Project Revenues" and, if so, the priority at which they are disbursed in the waterfall.

• The treatment of the indemnity holdback and escrow, including the lien priority of Redstone and Pinnacle in the escrowed funds and the waterfall treatment of holdback amounts upon release.

• Enhanced reporting obligations, including delivery of annual certificates confirming the amount of credits transferred, the transfer price, the consideration received, the holdback amount, and continued compliance with prevailing wage, apprenticeship, and energy community requirements.

If Redstone conditions consent on the application of a portion of transfer proceeds to mandatory prepayment or a restricted account deposit, we should negotiate for a reasonable allocation. Our initial position should be that transfer proceeds are treated as surplus revenue after satisfaction of all waterfall obligations and are available for distribution to equity, with no mandatory prepayment requirement. If Redstone insists on a mandatory prepayment component, we should seek to limit it to a small percentage of annual transfer consideration (e.g., 10% or less) or to a temporary arrangement for the first two to three years of the transfer.

C. Coordinate with Grayson Birch & Co. LLP

Howard Ellison at Grayson Birch & Co. LLP is preparing the PTC eligibility memorandum for the Project, which will address the computational methodology for determining PTCs, the Project's satisfaction of prevailing wage and apprenticeship requirements, the energy community qualification for Custer County, Montana, and the absence of any recapture events. This memorandum will be a critical component of both the consent request to Redstone and the due diligence package for Pinnacle.

We should coordinate closely with Mr. Ellison to ensure that the representations and warranties Redstone may require as a condition of consent — particularly with respect to credit eligibility, prevailing wage compliance, and energy community status — are fully consistent with the conclusions in the Grayson Birch memorandum. Any discrepancies or qualifications should be identified and addressed before the consent request is submitted.

D. Coordinate with Corbin Hale & Associates and Northfield Specialty Insurance Co.

Steven Rask at Corbin Hale & Associates Inc. is advising the Borrower on the procurement of tax credit recapture insurance from Northfield Specialty Insurance Co. (the "Recapture Policy"). The proposed Recapture Policy would provide coverage against losses arising from IRS recapture, disallowance, or reduction of transferred PTCs, up to a specified policy limit.

Redstone may view the Recapture Policy favorably as a form of credit enhancement, insofar as it reduces the risk that the Borrower will be required to make indemnification payments to Pinnacle (which could draw on project cash flow and impair the Borrower's ability to service debt). Accordingly, we should include a summary of the proposed Recapture Policy coverage — including the insurer, policy limits, covered events, deductible structure, and premium — in the consent request package submitted to Redstone.

We should also confirm with Mr. Rask and Northfield that the terms of the Recapture Policy do not conflict with any provision of the Credit Agreement, including the negative pledge covenant and the restrictions on assignments of insurance proceeds. If the policy involves an assignment of proceeds or a collateral assignment in favor of Pinnacle, this will need to be coordinated with the lien priority arrangements discussed in Section IV.D above.

E. Timeline Considerations

Several timeline factors bear on the sequencing of the consent process:

• IRS Pre-Filing Registration. The Borrower's pre-filing registration on the IRS Energy Credits Online portal for TY2025 is currently pending. Under Treas. Reg. § 1.6418-4, the IRC § 6418 transfer election cannot be made, and the Transfer Agreement cannot close, without a valid registration number issued by the IRS. The timing of the registration issuance is not within the Borrower's control, but we understand from Grayson Birch that the IRS has been processing registration applications within approximately 45 to 60 days.

• Definitive Documentation with Pinnacle. Hargrove, Liddell & Strauss LLP is expected to circulate a markup of the term sheet within the next two weeks, followed by the first draft of the definitive Transfer Agreement. Negotiation and execution of the definitive documentation will likely require an additional 45 to 60 days from receipt of the initial draft.

• Lender Consent Timing. Lender consent should be obtained before or contemporaneously with execution of the definitive Transfer Agreement. Obtaining consent after execution would be problematic, as the mere act of entering into the Transfer Agreement could itself constitute a breach of Section 7.14 (which restricts entering into any "agreement, arrangement, or understanding" contemplating a transfer of tax attributes).

Accordingly, I recommend the following target timeline:

• Weeks 1–3 (by approximately April 10, 2026): Prepare and submit the consent request package to Redstone Capital Bank.

• Weeks 4–9 (approximately April 10 through May 15, 2026): Negotiate consent terms with Redstone; prepare initial drafts of consent letter or amendment.

• Weeks 6–12 (approximately May 1 through June 15, 2026): Finalize and execute consent letter or amendment; coordinate with execution of definitive Transfer Agreement with Pinnacle.

This timeline is aggressive but achievable, and it is consistent with the expected schedule for term sheet markup and negotiation of definitive documentation with Hargrove, Liddell & Strauss LLP. If delays arise in the consent process, we may need to defer execution of the Transfer Agreement to avoid a Section 7.14 breach.

VII. Conclusion

Based on the analysis set forth in this memorandum, my conclusions and recommendations are as follows:

First, lender consent under Section 7.14 of the Credit Agreement is almost certainly required before Ridgeway Wind Energy LLC may execute an IRC § 6418 transfer of PTCs to Pinnacle Atlantic Partners LP. The broad language of Section 7.14 — encompassing the "transfer, sale, assign[ment], pledge, or other[] dispos[ition] of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project" — plainly captures the proposed transaction, and the "sole and absolute discr

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Sylvia Hartwell, Partner, Calderwood & Harkness LLP
FROM: Robert Jansen, Associate, Calderwood & Harkness LLP
DATE: March 20, 2026
RE: Lender Consent Requirements Under Credit Agreement — Ridgeway Wind Energy LLC / Redstone Capital Bank, N.A. — Proposed IRC § 6418 Transfer of Production Tax Credits
Matter No.: 1016-00008
Billing Code: 09417.00001
I. Executive Summary
This memorandum analyzes whether the proposed transfer of Production Tax Credits ("PTCs") generated by the Ridgeway Wind Project (as defined below) under Section 6418 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), to Pinnacle Atlantic Partners LP ("Pinnacle") triggers consent requirements under the Credit Agreement, dated as of March 28, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), between Ridgeway Wind Energy LLC (the "Borrower" or "Ridgeway Wind") and Redstone Capital Bank, N.A. (the "Lender" or "Redstone"). You asked me to review the relevant financing documents and assess the risks associated with proceeding without lender consent, as well as to evaluate the treatment of the transfer consideration under the Depositary Agreement (as defined below). This memorandum sets forth my analysis and recommendations.
Principal Finding. Section 7.14 of the Credit Agreement broadly restricts the "transfer, sale, or assignment of tax attributes" without the prior written consent of Redstone Capital Bank. An IRC § 6418 transfer election — which effects a statutory transfer of eligible tax credits from an eligible taxpayer to an unrelated transferee taxpayer for cash consideration — almost certainly falls within the scope of this restriction. Although the Credit Agreement was negotiated prior to the widespread emergence of the transferable credit market created by the Inflation Reduction Act of 2022 (the "IRA"), the expansive drafting of Section 7.14, including its catch-all language referencing the "transfer, sale, assign[ment], pledge, or otherwise dispos[ition] of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project," leaves little room for an argument that the proposed transaction falls outside its reach.
Secondary Finding. The transfer consideration received by Ridgeway Wind Energy LLC in connection with the IRC § 6418 transfer may be captured by the revenue account waterfall established under the Depositary Agreement, dated as of March 28, 2023 (the "Depositary Agreement"), between Ridgeway Wind Energy LLC and Redstone Capital Bank, N.A. The definition of "Project Revenues" in the Depositary Agreement is broadly worded and, depending on interpretation, could encompass cash received in exchange for tax credits. If the transfer consideration is treated as Project Revenues, it would be subject to the standard waterfall priority, potentially constraining the Borrower's access to those funds and limiting the amount available for distribution to equity. The treatment of the proposed 15% indemnity holdback escrowed with Commonwealth Fiduciary Trust Company adds further complexity.
Recommendation. Based on the foregoing, I recommend that Calderwood & Harkness, on behalf of the Borrower and its parent entities, engage Redstone Capital Bank at the earliest practicable date to accomplish the following objectives:
(a) obtain prior written consent of Redstone for the proposed IRC § 6418 transfer of PTCs to Pinnacle Atlantic Partners LP;
(b) negotiate a consent letter, side letter, or formal amendment to the Credit Agreement and/or Depositary Agreement clarifying the treatment of PTC transfer proceeds under the Depositary Agreement waterfall and establishing a framework for future IRC § 6418 transfers during the remaining PTC eligibility period (through TY2034); and
(c) confirm, in writing, that the consummation of the proposed IRC § 6418 transfer, including the execution and delivery of the Transfer Agreement and ancillary documentation, will not constitute or give rise to a Default or Event of Default under the Credit Agreement.
The balance of this memorandum sets forth the factual background, detailed legal analysis, and recommended course of action.
II. Background
A. The Ridgeway Wind Project
The Ridgeway Wind Project (the "Project") is a 250 megawatt ("MW") onshore wind generation facility located on approximately 28,000 acres of leased ranchland situated approximately 14 miles northeast of Miles City, Custer County, Montana. The Project is owned and operated by Ridgeway Wind Energy LLC, a Delaware limited liability company (Delaware Secretary of State file number 7603517). The sole member of Ridgeway Wind is Dunmore Renewables Inc., a Delaware corporation (Delaware Secretary of State file number 7491826), which in turn is a wholly owned subsidiary of Dunmore Energy Holdings Ltd., an exempted company organized under the laws of the Cayman Islands (Registrar of Companies registry number CR-284319).
The Project consists of 83 wind turbines, each with a rated capacity of 3.0 MW, together with one additional 1.0 MW substation backup generation unit, associated balance-of-plant infrastructure, a project substation, collector system, operations and maintenance facilities, meteorological towers, and related improvements. Construction of the Project commenced on April 6, 2023, and the Project achieved its Commercial Operations Date ("COD") on November 14, 2025, in accordance with the terms of the Credit Agreement and the Engineering, Procurement, and Construction Agreement.
The total development and construction cost of the Project was approximately $412,000,000. The independent energy resource assessment prepared by Meridian Technical Advisors LLC (authored by Dr. Paul Marlowe Commerce Bank, PE), dated February 2023 and relied upon in the original financing, established a net capacity factor at the P50 confidence level of 38.2%.
The Project's primary revenue stream is derived from a 20-year fixed-price Power Purchase Agreement (the "PPA") with Great Plains Municipal Power Authority (the "Offtaker") at a contract price of $38.50 per megawatt-hour ("MWh"), executed on June 12, 2023. The PPA term commenced on the COD and extends through November 2045, subject to customary termination provisions. The Project is interconnected to the Midcontinent Independent System Operator ("MISO") grid pursuant to MISO Queue Position J-1147 and a Generator Interconnection Agreement with NorthStar Transmission Holdings LLC, executed September 3, 2024. The interconnection arrangements provide for full network resource integration service.
The Project is located within a census tract that qualifies as an "energy community" within the meaning of IRC § 45(b)(11)(B), as amended by the IRA, based on the historical employment and tax revenue metrics for Custer County, Montana, attributable to fossil fuel extraction, processing, and related activities. This energy community designation entitles the Project to a 10% adder to the base PTC amount, a qualification that is significant to the economic analysis of the proposed transfer and to the representations Redstone may require as a condition of consent (discussed further in Section V.A below).
B. The Financing Arrangements
The Project was financed through a construction-to-term loan facility provided by Redstone Capital Bank, N.A. (Office of the Comptroller of the Currency Charter No. 18742), a nationally chartered commercial bank headquartered in Charlotte, North Carolina. The Credit Agreement, dated as of March 28, 2023, governs the terms of the loan facility. Contemporaneously with the execution of the Credit Agreement, the parties also entered into the Depositary Agreement, dated as of March 28, 2023, between Ridgeway Wind Energy LLC, as borrower, and Redstone Capital Bank, N.A., as depositary bank and lender.
The original committed loan amount under the Credit Agreement is $288,400,000, representing approximately 70% of total project costs (i.e., $412,000,000 × 0.70 = $288,400,000). The equity contribution of $123,600,000 (representing approximately 30% of total project costs) was funded by Dunmore Renewables Inc. prior to and during construction in accordance with the equity contribution agreement and the funding schedule set forth in the Credit Agreement.
As of March 1, 2026, the outstanding principal balance under the Credit Agreement is $271,600,000. Principal amortization is scheduled to occur on a sculpted basis over the remaining term of the facility, with a final maturity date of March 28, 2041. The Credit Agreement is governed by New York law, without regard to conflict of laws principles (other than Section 5-1401 of the New York General Obligations Law).
The Borrower's obligations under the Credit Agreement are secured by a first-priority perfected security interest in substantially all of the Borrower's assets, including, without limitation, real property interests (leasehold mortgages), personal property (UCC filings), project contracts (PPA, EPC Agreement, O&M Agreement, turbine supply agreements, and land leases), deposit accounts, and all proceeds thereof. The security package also includes a pledge by Dunmore Renewables Inc. of 100% of the membership interests in Ridgeway Wind Energy LLC, together with customary equity pledges, account control agreements, and direct agreements (consents and acknowledgments) with material project counterparties.
C. The Proposed IRC § 6418 Transfer
Ridgeway Wind Energy LLC proposes to make a transfer election under IRC § 6418 (as enacted by Section 13801 of the IRA) to transfer PTCs generated by the Project to Pinnacle Atlantic Partners LP ("Pinnacle" or the "Transferee"), a Delaware limited partnership (Delaware Secretary of State file number 7255043). Pinnacle is a diversified financial services holding company with an average annual federal income tax liability of approximately $480 million and a demonstrated track record as an active participant in the IRC § 6418 transferable credit market, having completed approximately $1.2 billion in prior § 6418 credit purchases across multiple asset classes, including wind, solar, and energy storage.
Pinnacle is advised in the proposed transaction by Hargrove, Liddell & Strauss LLP, with Nathaniel Strauss serving as lead partner and Catherine Yoon as senior associate. Calderwood & Harkness represents Ridgeway Wind Energy LLC and its affiliates.
The key economic terms of the proposed transfer, as reflected in the term sheet under negotiation, are summarized below:
Estimated Annual PTC Generation. Based on the Project's expected annual electricity generation of 836,220,000 kWh (consistent with the P50 net capacity factor of 38.2% applied to the Project's 250 MW nameplate capacity, adjusted for availability, curtailment, and line losses), the estimated annual PTC amount is $25,295,655. This figure reflects the current effective PTC rate of $0.03025 per kWh, calculated as follows:
• Base PTC rate: $0.0055 per kWh (as adjusted for inflation under IRC § 45(b)(2))
• Bonus credit multiplier: 5x (applicable because the Project satisfies prevailing wage and apprenticeship requirements under IRC § 45(b)(6)–(7))
• Energy community adder: 10% (applicable under IRC § 45(b)(11)(B) based on Custer County qualification)
• Effective rate: $0.0055 × 5.0 × 1.10 = $0.03025 per kWh
Proposed Transfer Price. Pinnacle has indicated a proposed transfer price of $0.92 per $1.00 of eligible credit, consistent with current market pricing for high-quality wind PTCs with strong credit eligibility support and recapture insurance coverage.
Estimated Year 1 Transfer Consideration. Based on the foregoing, the estimated Year 1 transfer consideration is $23,271,803 (i.e., $25,295,655 × 0.92).
Estimated 10-Year Aggregate Transfer Consideration. Over the full 10-year PTC eligibility period (TY2025 through TY2034), the estimated aggregate transfer consideration is approximately $232,760,000. This figure assumes stable annual generation, no material recapture events, and continuation of the energy community adder throughout the eligibility period. Actual amounts will be subject to annual true-up based on actual generation and applicable credit rates.
Payment Timing. Under the proposed structure, Pinnacle would make a lump-sum payment for each taxable year's estimated credits, payable within 30 days after the later of (a) the filing of Ridgeway Wind's IRS pre-filing registration statement on the IRS Energy Credits Online portal (under Treas. Reg. § 1.6418-4) and (b) the applicable annual true-up date as defined in the Transfer Agreement.
Indemnity Holdback. As is customary in the IRC § 6418 market, 15% of each annual payment would be escrowed with Commonwealth Fiduciary Trust Company (the "Escrow Agent") for a period of 36 months following the applicable payment date, serving as security for the Borrower's indemnification obligations to Pinnacle in the event of a credit recapture, disallowance, or reduction. The estimated Year 1 holdback amount is $3,490,770 (i.e., $23,271,803 × 0.15).
PTC Eligibility Period. The PTCs subject to the proposed transfer relate to taxable years 2025 through 2034, inclusive, representing the full 10-year period during which the Project is eligible to generate PTCs under IRC § 45.
III. Analysis of Section 7.14 — Restriction on Transfer of Tax Attributes
A. Text of Section 7.14
Section 7.14 of the Credit Agreement, captioned "Tax Attributes," is a negative covenant that imposes a broad restriction on the Borrower's ability to transfer tax-related benefits associated with the Project. The operative language of Section 7.14 provides, in relevant part:
"The Borrower shall not, without the prior written consent of the Lender (which consent may be granted or withheld in the Lender's sole and absolute discretion), transfer, sell, assign, pledge, or otherwise dispose of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project, or enter into any agreement, arrangement, or understanding (whether written or oral) providing for or contemplating any such transfer, sale, assignment, pledge, or disposition."
Several features of this provision are noteworthy. First, the provision does not separately define the term "tax attributes" or provide an enumerated list of the specific tax items covered. Instead, it employs a cascade of overlapping terms — "tax attributes, tax credits, tax benefits, or similar rights or entitlements" — that is plainly intended to sweep broadly. Second, the consent standard is "sole and absolute discretion," which affords Redstone maximum latitude in determining whether to grant consent and on what conditions. Third, the restriction applies not only to the consummation of a transfer but also to the execution of any "agreement, arrangement, or understanding" contemplating such a transfer, which means that even executing a binding term sheet or letter of intent with Pinnacle could implicate the provision.
It is worth noting that Section 7.14 was negotiated and executed in March 2023. Although the IRA was enacted on August 16, 2022, and IRC § 6418 became effective for taxable years beginning after December 31, 2022, the Treasury Department and IRS did not publish proposed regulations under § 6418 until June 14, 2023 (REG-101610-23, 88 Fed. Reg. 40496), and final regulations were not published until March 5, 2024 (T.D. 9993, 89 Fed. Reg. 17534). Accordingly, at the time the Credit Agreement was executed, the practical mechanics of the transferable credit market were not yet fully developed, and it is likely that neither party specifically contemplated an IRC § 6418 transfer when drafting Section 7.14. This historical context, however, does not narrow the plain language of the provision; if anything, the breadth of the drafting suggests an intent to capture any future mechanisms by which tax benefits associated with the Project might be monetized or transferred to third parties.
B. Whether an IRC § 6418 Transfer Falls Within Section 7.14
The central question is whether an election by the Borrower under IRC § 6418 to transfer PTCs to Pinnacle constitutes a "transfer, sale, assign[ment], pledge, or other[] dispos[ition] of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project" within the meaning of Section 7.14. For the reasons set forth below, I conclude that it almost certainly does.
Nature of an IRC § 6418 Transfer. IRC § 6418(a) provides that, in the case of an "eligible taxpayer" that makes a transfer election for a taxable year, the eligible taxpayer may transfer all (or any portion specified in the election) of an "eligible credit" determined with respect to such taxpayer to a "transferee taxpayer" that is not related (within the meaning of IRC § 267(b) or § 707(b)) to the eligible taxpayer. The transfer must be made for "cash consideration" paid by the transferee taxpayer to the eligible taxpayer, and the amount of such consideration is not includible in the gross income of the eligible taxpayer and is not deductible by the transferee taxpayer. See IRC § 6418(b).
Under the Treasury Regulations, specifically Treas. Reg. § 1.6418-2, the transferor (here, Ridgeway Wind) retains the obligation to determine the eligible credit on its own federal income tax return, including all computational and substantive eligibility determinations. However, once the transfer election is properly made and the pre-filing registration requirements of Treas. Reg. § 1.6418-4 are satisfied, the transferee (here, Pinnacle) takes the transferred credit into account as if the transferee had directly earned the credit. The effect is that the economic benefit of the credit — i.e., the dollar-for-dollar reduction in federal income tax liability — shifts from the transferor to the transferee in exchange for cash.
Characterization Under Section 7.14. Applying the operative language of Section 7.14 to the IRC § 6418 mechanism, the analysis proceeds as follows:
"Transfer." The IRC § 6418 election is expressly denominated a "transfer" in the statute itself. See IRC § 6418(a) (providing that the eligible taxpayer may "transfer" an eligible credit). The Borrower, by making the election, causes the economic benefit of the PTCs to pass from Ridgeway Wind to Pinnacle in exchange for cash consideration. This is a "transfer" of "tax credits" within the plain and ordinary meaning of those terms as used in Section 7.14.
"Sale." The consideration paid by Pinnacle ($0.92 per $1.00 of credit) is structured as a purchase price. The transaction is commonly referred to in the market as a "credit sale," and Pinnacle is commonly referred to as a "credit buyer." While the IRS does not formally characterize the § 6418 election as a "sale" for all federal income tax purposes (indeed, the special treatment under § 6418(b) — exclusion from gross income and non-deductibility — differs from a traditional sale), the commercial substance of the transaction is a sale of tax credits for cash. For purposes of interpreting a contractual provision under New York law, the label used in the Code is not dispositive; what matters is the substance of the transaction. The substance here is a sale.
"Assign[ment]." The transfer election causes the credit, as determined on the transferor's return, to be "taken into account" on the transferee's return. This is functionally equivalent to an assignment of the economic benefit of the credit, even though the computational obligation remains with the transferor.
"Otherwise dispose of." Even if one were to argue, against the weight of the foregoing analysis, that the IRC § 6418 election is technically not a "transfer," "sale," or "assignment" because of its unique statutory character, the catch-all phrase "or otherwise dispose of" in Section 7.14 would independently capture the transaction. New York courts have consistently held that catch-all clauses of this nature are to be given broad effect and are intended to reach transactions that do not fit neatly within the specifically enumerated categories. See, e.g., In re Calpine Corp., 365 B.R. 392, 407 (Bankr. S.D.N.Y. 2007) (interpreting "otherwise dispose of" broadly in the context of a negative covenant).
Subject Matter: "Tax Credits" and "Tax Benefits." PTCs are, by definition, "tax credits" — they are credits against federal income tax liability determined under IRC § 45. The term "tax credits" in Section 7.14 unambiguously encompasses PTCs. Similarly, the economic benefit of PTCs (i.e., the reduction in federal income tax liability they produce) constitutes a "tax benefit" within the meaning of Section 7.14. The additional reference to "similar rights or entitlements" further ensures that any tax-related economic benefit generated by the Project — whether labeled a credit, deduction, exemption, or otherwise — falls within the covenant's scope.
Nexus to the Project. Section 7.14 applies to tax attributes, credits, and benefits "generated by or arising from the Project." There is no question that the PTCs at issue are generated by the Project; they are determined based on the kilowatt-hours of electricity produced by the Ridgeway Wind Project and sold to an unrelated party under the PPA. The nexus requirement is clearly satisfied.
Conclusion. Based on the foregoing, the IRC § 6418 transfer of PTCs by Ridgeway Wind Energy LLC to Pinnacle Atlantic Partners LP almost certainly constitutes a "transfer" (or, alternatively, a "sale," "assignment," or "other disposition") of "tax credits" (or, alternatively, "tax attributes," "tax benefits," or "similar rights or entitlements") "generated by or arising from the Project" within the meaning of Section 7.14. Accordingly, the prior written consent of Redstone Capital Bank is required before Ridgeway Wind may execute the proposed Transfer Agreement or make the § 6418 election.
I note that no reasonable counter-argument would, in my view, succeed in taking the proposed transaction outside the scope of Section 7.14. The most plausible counter-argument — that the IRC § 6418 election is a statutory mechanism that operates by force of law rather than by contractual transfer, and therefore should not be treated as a "transfer" or "disposition" in the traditional sense — fails for at least two reasons. First, the election is voluntary; the Borrower affirmatively chooses to make the transfer and receives cash consideration in exchange. The election does not occur automatically by operation of law. Second, even if the characterization argument had some merit, the catch-all "otherwise dispose of" language would capture the transaction regardless.
C. Potential Consequences of Non-Compliance
The consequences of proceeding with the IRC § 6418 transfer without obtaining Redstone's prior written consent could be severe. Specifically:
Breach of Covenant. Executing the Transfer Agreement with Pinnacle, or making the IRC § 6418 election, without prior written consent would constitute a breach of Section 7.14. Under Section 8.01 of the Credit Agreement, a breach of any negative covenant contained in Article VII constitutes an Event of Default if such breach is not cured within the applicable cure period (if any). Section 7.14 does not, on its face, provide for a grace or cure period; the act of transferring or entering into an agreement to transfer is itself the breach.
Acceleration and Cross-Default Risk. Upon the occurrence and continuance of an Event of Default, Redstone Capital Bank may, at its election, declare all outstanding principal ($271,600,000 as of March 1, 2026) and accrued but unpaid interest immediately due and payable. In addition, to the extent the Borrower has any other indebtedness outstanding (including hedging obligations or other credit support arrangements), a cross-default provision triggered by the Credit Agreement default could cascade into defaults under those instruments as well.
Enforcement of Security Interests. Redstone holds a first-priority perfected security interest in substantially all of the Borrower's assets. Upon an Event of Default, Redstone would be entitled to exercise its remedies under the security documents, including foreclosure on the leasehold mortgage, enforcement of the UCC security interest in personal property, exercise of rights under account control agreements, and exercise of step-in rights with respect to material project contracts (including the PPA and the O&M Agreement).
Practical Impairment. Even if Redstone were unlikely to exercise its acceleration rights in practice — given the performing nature of the loan and the strong credit profile of the Project — the mere existence of an uncured Event of Default would have significant practical consequences. An uncured default would impair Ridgeway Wind's ability to: (i) make future draws under any available revolving commitments; (ii) obtain waivers for other matters that may arise during the life of the Project; (iii) pursue a refinancing or repricing of the existing debt; and (iv) satisfy distribution conditions, thereby blocking distributions to Dunmore Renewables Inc. and upstream to Dunmore Energy Holdings Ltd.
Reputational Risk. Proceeding without consent would also damage the Borrower's relationship with Redstone and could adversely affect the broader relationship between Dunmore Energy Holdings and its banking counterparties. This is particularly relevant given that Dunmore is actively developing additional renewable energy projects that may require financing from Redstone or its affiliates.
D. Scope of Consent — Conditions Redstone May Impose
Assuming the Borrower seeks consent from Redstone (as we recommend), Redstone has considerable leverage given the "sole and absolute discretion" standard in Section 7.14. Based on market practice in similar situations and our experience with Redstone's renewable energy lending team, we anticipate that Redstone may condition its consent on some or all of the following:
(i) Mandatory Prepayment or Restricted Account Deposit. Redstone may require that a specified portion of the annual transfer consideration be applied to mandatory prepayment of outstanding principal or deposited into a restricted reserve account under the Depositary Agreement. This is the condition most likely to generate significant negotiation, as the Borrower and its equity sponsors will want to maximize the amount of transfer proceeds available for distribution.
(ii) Transferee Approval. Redstone may require approval of the identity and creditworthiness of the proposed transferee. Given Pinnacle's substantial financial profile (approximately $480 million in average annual federal income tax liability and $1.2 billion in prior § 6418 credit purchases), this condition should be readily satisfiable. Redstone may nevertheless request financial statements, credit references, or other due diligence materials with respect to Pinnacle.
(iii) Financial Covenant Maintenance. Redstone may require the Borrower to demonstrate that, on a pro forma basis, the proposed transfer does not cause a breach of any financial covenant, including the minimum Debt Service Coverage Ratio ("DSCR") and the Loan Life Coverage Ratio ("LLCR"). This condition should also be readily satisfiable, as the transfer generates additional cash flow to the project company.
(iv) Enhanced Reporting and Certification. Redstone may require periodic reporting on the status of the IRC § 6418 transfer, including copies of the pre-filing registration statement, annual transfer election documentation, payment confirmations, and escrow account statements. Redstone may also require annual officer's certificates confirming continued compliance with prevailing wage, apprenticeship, and energy community requirements.
(v) Consent Fee. Redstone may charge a consent fee, which is standard market practice. Consent fees in comparable transactions have ranged from 10 to 25 basis points of the outstanding principal balance. Applied to the $271,600,000 outstanding balance, a 15 basis point consent fee would be approximately $407,400.
In addition to the foregoing, Redstone may require a broader amendment to Section 7.14 — rather than a one-time consent letter — to establish a pre-approved framework for IRC § 6418 transfers during the remaining PTC eligibility period through TY2034. Such an amendment could define the parameters of permitted transfers (e.g., minimum transfer price, approved transferee criteria, maximum annual transfer amount), thereby eliminating the need to seek individual consent for each taxable year's transfer.
Finally, Redstone may seek to obtain a security interest in the Transfer Agreement itself and in the transfer consideration receivable, including any amounts held in the indemnity holdback escrow with Commonwealth Fiduciary Trust Company. To the extent Redstone asserts a lien on the escrow, this could create intercreditor issues with Pinnacle's rights under the Transfer Agreement, as Pinnacle will expect to have a first-priority interest in the holdback as security for the Borrower's indemnification obligations. This issue will need to be carefully negotiated among the parties.
IV. Analysis of Depositary Agreement Waterfall Provisions
A. Overview of the Depositary Agreement
The Depositary Agreement, dated as of March 28, 2023, between Ridgeway Wind Energy LLC and Redstone Capital Bank, N.A., establishes a comprehensive account structure and cash management framework governing all revenues and expenditures of the Project. The Depositary Agreement creates the following principal accounts (among others), each maintained at Redstone Capital Bank:
• Revenue Account — the initial deposit account into which all Project Revenues (as defined in the Depositary Agreement) are required to be deposited;
• Operating Account — the account from which budgeted operating expenses are paid;
• Debt Service Reserve Account — a reserve account required to be funded and maintained at a specified target balance (typically six months of debt service);
• Major Maintenance Reserve Account — a reserve account for scheduled and unscheduled major maintenance expenditures; and
• Distribution Account — the account from which distributions to the Borrower's member (Dunmore Renewables Inc.) are made, subject to satisfaction of the Distribution Conditions.
The Depositary Agreement establishes a defined priority waterfall pursuant to which funds on deposit in the Revenue Account are disbursed on each monthly or quarterly transfer date. Funds may not be transferred to a lower-priority account until all higher-priority obligations have been satisfied.
B. Treatment of PTC Transfer Consideration Under the Waterfall
The critical question for the Borrower is whether the cash consideration received from Pinnacle in connection with the IRC § 6418 transfer constitutes "Project Revenues" as defined in the Depositary Agreement, and is therefore subject to the waterfall. The Depositary Agreement defines "Project Revenues" in the following terms (quoting the relevant provision):
"Project Revenues" means all revenues, receipts, income, and other amounts received by or on behalf of the Borrower in connection with the ownership, operation, or maintenance of the Project, including, without limitation, (a) all amounts payable under the Power Purchase Agreement, (b) all payments for capacity, energy, ancillary services, and renewable energy certificates, (c) insurance proceeds (other than proceeds of title insurance), (d) liquidated damages and warranty payments, (e) interest earned on amounts on deposit in any Account, and (f) any other amounts received by the Borrower from any source in connection with the Project."
The analysis of whether PTC transfer consideration falls within this definition requires consideration of both the enumerated categories and the residual catch-all clause.
Argument That Transfer Proceeds Constitute "Project Revenues." Under the broadest reading of the definition, PTC transfer consideration could be characterized as "revenues, receipts, income, [or] other amounts received by or on behalf of the Borrower in connection with the ownership, operation, or maintenance of the Project." The PTCs arise directly from the Project's generation of electricity, and the transfer consideration is cash received by the Borrower as a direct economic consequence of the Project's operations. Clause (f) of the definition — "any other amounts received by the Borrower from any source in connection with the Project" — is particularly broad and could capture the transfer consideration. Under this reading, Redstone would argue that the cash received from Pinnacle is functionally a revenue stream derived from the Project and should be subject to the same waterfall controls as PPA revenues, capacity payments, and REC proceeds.
Argument That Transfer Proceeds Are Not "Project Revenues." The counter-argument is more nuanced but potentially meritorious. First, the IRC § 6418 transfer consideration is a payment for a tax attribute — specifically, a credit against federal income tax liability — not a payment for electricity, capacity, renewable energy certificates, or ancillary services. The enumerated categories in clauses (a) through (e) of the definition are all tied to the physical operations of the Project (energy sales, capacity, ancillary services, RECs, insurance, warranties) or to the financial management of the accounts (interest income). Tax credit transfer consideration does not fit naturally within any enumerated category. Second, the IRC § 6418 transfer consideration was not contemplated when the Depositary Agreement was executed in March 2023; the transferable credit market was in its infancy, and neither party negotiated for the inclusion or exclusion of such amounts. Third, under IRC § 6418(b), the transfer consideration is explicitly excluded from the transferor's gross income for federal income tax purposes, underscoring its unique character as a tax-related payment rather than operating revenue. Fourth, to the extent the catch-all in clause (f) is read in accordance with the principle of ejusdem generis, it should be limited to amounts of the same general character as those in clauses (a) through (e) — i.e., amounts related to the Project's physical operations and not to the monetization of tax benefits.
Likely Interpretation Under New York Law. The Credit Agreement and Depositary Agreement are governed by New York law. New York courts apply well-established principles of contract interpretation, giving effect to the plain and ordinary meaning of defined terms and declining to create ambiguity where the language is clear. See, e.g., Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002) ("A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.").
The outcome of this interpretive question is not certain. The broad catch-all language of clause (f) creates a plausible argument that the transfer consideration is captured, but the absence of any specific reference to tax credits, tax-related payments, or § 6418 proceeds — combined with the enumerative structure of the definition, which is oriented toward operating revenues — supports the argument that the proceeds fall outside the definition. My assessment is that the question is sufficiently ambiguous to warrant proactive clarification with Redstone rather than reliance on a unilateral interpretation that may be contested.
Critically, even if the transfer consideration is determined not to constitute "Project Revenues" under the current definition, Redstone is likely to negotiate for its inclusion — either by amendment to the Depositary Agreement or as a condition of consent under Section 7.14 — as part of the consent process. Redstone's lending team will reasonably view the PTC transfer proceeds as a significant new cash flow stream associated with the Project and will want to ensure that such proceeds are subject to the lender's cash management controls.
C. Waterfall Priority Analysis
If PTC transfer consideration is treated as Project Revenues, the funds would be deposited into the Revenue Account and disbursed in accordance with the standard waterfall priority. Based on our review of the Depositary Agreement, the waterfall operates as follows:
1. Operating Expenses. First, amounts necessary to fund budgeted operating expenses (including O&M costs, insurance premiums, property taxes, land lease payments, and administrative expenses) are transferred to the Operating Account.
2. Debt Service. Second, amounts necessary to pay scheduled principal and interest on the outstanding indebtedness under the Credit Agreement are transferred to the Debt Service Account.
3. Debt Service Reserve Replenishment. Third, to the extent the Debt Service Reserve Account is below its required target balance, amounts necessary to replenish the reserve to the target level are transferred to the Debt Service Reserve Account.
4. Major Maintenance Reserve. Fourth, amounts necessary to fund the Major Maintenance Reserve Account in accordance with the Major Maintenance Reserve budget are transferred to the Major Maintenance Reserve Account.
5. Distribution Conditions Satisfaction. Fifth, a determination is made as to whether the Distribution Conditions (no Event of Default, DSCR above the minimum threshold, all reserve accounts fully funded) have been satisfied.
6. Distribution Account. Sixth, if and only if the Distribution Conditions are satisfied, remaining funds are transferred to the Distribution Account and become available for distribution to Dunmore Renewables Inc.
Practical Impact. The estimated Year 1 transfer consideration of $23,271,803 is a substantial sum. If this amount is deposited into the Revenue Account and subjected to the waterfall, a significant portion could be absorbed by waterfall obligations at levels (1) through (4) before any distributions are made. In practice, however, the Project's primary revenue stream — the PPA at $38.50/MWh — is designed to be sufficient, on its own, to fund the waterfall through the Distribution Account in a base-case scenario (consistent with the project's original DSCR projections at the P50 case). To the extent PPA revenues alone are sufficient to satisfy items (1) through (5), the PTC transfer proceeds would effectively "flow through" the waterfall and arrive at the Distribution Account as surplus cash. However, this outcome depends on actual project performance in any given period, and during periods of below-average generation or unexpected operating expenses, the transfer consideration could be partially or wholly absorbed by senior waterfall obligations.
For these reasons, the treatment of transfer consideration under the waterfall has significant economic implications for the equity sponsors and warrants careful negotiation. The ideal outcome for the Borrower would be to secure an agreement with Redstone that PTC transfer proceeds are either (a) excluded from the "Project Revenues" definition and deposited into a separate account outside the waterfall, or (b) included in "Project Revenues" but with an express carve-out allowing a specified portion to be distributed to equity, subject to customary distribution conditions.
D. Implications of the 15% Indemnity Holdback
An additional complication arises from the proposed 15% indemnity holdback. Under the contemplated Transfer Agreement, 15% of each annual payment from Pinnacle — estimated at $3,490,770 for Year 1 — would be deposited into an escrow account maintained by Commonwealth Fiduciary Trust Company (the "Escrow Agent") and held for a period of 36 months following the applicable payment date. The holdback serves as security for the Borrower's indemnification obligations to Pinnacle in the event that any portion of the transferred credits is recaptured, disallowed, or reduced by the IRS.
Several questions arise with respect to the treatment of the holdback under the Depositary Agreement:
Is the Escrowed Amount a "Project Revenue"? If the full gross payment from Pinnacle is treated as a Project Revenue upon receipt by the Borrower, then the 15% holdback amount may need to be deposited into the Revenue Account before being transferred to the escrow. This would be logistically problematic, as the funds would need to pass through the waterfall before being segregated for escrow purposes. Alternatively, if the holdback is structured such that Pinnacle pays 85% directly to the Borrower and 15% directly to the Escrow Agent, the question becomes whether the 15% amount is treated as having been "received by or on behalf of the Borrower" (and therefore a Project Revenue) or as a contingent asset not yet received.
Redstone's Security Interest. To the extent the escrowed amounts constitute property of the Borrower, they may fall within the scope of Redstone's first-priority security interest in the Borrower's assets. Redstone may argue that it is entitled to a perfected security interest in the escrow account and the Borrower's right to receive distributions from the escrow upon release. This assertion would need to be coordinated with Pinnacle and its counsel at Hargrove, Liddell & Strauss, as Pinnacle will likely insist on a first-priority interest in the holdback as security for the indemnity obligations owed to it. An intercreditor arrangement or escrow tri-party agreement may be needed to address competing lien claims.
Release Mechanics. Upon the expiration of the 36-month holdback period (assuming no indemnification claims), the escrowed funds would be released to the Borrower. At that point, the released amounts would clearly constitute funds received by the Borrower, and their treatment under the Depositary Agreement waterfall would need to be addressed. If the released amounts are Project Revenues, they would flow through the waterfall in the period of release. If they are not, they would be available for distribution or other use outside the waterfall.
These issues are complex but manageable with appropriate documentation. I recommend that the consent request to Redstone include a proposed framework for the treatment of the holdback, including a proposed escrow tri-party agreement that addresses lien priority, release mechanics, and waterfall treatment.
V. Other Credit Agreement Provisions Potentially Implicated
A. Representations and Warranties
The Borrower's consent request under Section 7.14 is likely to trigger a requirement for bring-down representations and warranties. Based on our review of the Credit Agreement and customary lender expectations, Redstone may require the Borrower to represent and warrant, as a condition of consent, the following:
• The Project satisfies, and has at all times since the beginning of construction satisfied, the prevailing wage requirements of IRC § 45(b)(7) and the apprenticeship requirements of IRC § 45(b)(8), which together underpin the 5x bonus credit multiplier applicable to the PTCs. Any failure to satisfy these requirements would reduce the effective PTC rate by 80% (from $0.03025/kWh to approximately $0.00605/kWh) and correspondingly reduce the economic value of the transfer.
• Custer County, Montana, qualifies as an "energy community" within the meaning of IRC § 45(b)(11)(B), entitling the Project to the 10% adder to the PTC base amount. Any loss of energy community status would reduce the estimated annual PTC amount and the transfer consideration.
• No "recapture event" (as defined in the Transfer Agreement or as may be required by Redstone) has occurred or is reasonably expected to occur. Recapture events may include, among others, a change in the tax-exempt status of a purchaser of electricity under the PPA, a transfer of the Project to a disqualified person, or a failure to maintain compliance with the prevailing wage and apprenticeship requirements during the relevant recapture period.
• The Borrower is not aware of any pending or threatened IRS examination, audit, or investigation relating to the Project's eligibility for PTCs, the computation of PTCs, or the validity of the proposed IRC § 6418 transfer election.
These representations are substantive and require careful coordination with Howard Ellison at Grayson Birch & Co. LLP, who is preparing the PTC eligibility memorandum for the Project. We should ensure that the representations the Borrower makes to Redstone are consistent with the conclusions in the Grayson Birch memorandum and do not expose the Borrower to undue risk of breach.
B. Financial Covenants
The Credit Agreement contains customary financial covenants, including a minimum Debt Service Coverage Ratio (the "DSCR Covenant"). We should confirm whether the receipt of PTC transfer consideration affects the calculation of DSCR under the Credit Agreement.
If the transfer consideration is included in the DSCR numerator — i.e., treated as cash flow available for debt service — the proposed transaction would be beneficial to covenant compliance, as the additional $23.3 million in Year 1 proceeds would significantly increase the coverage ratio above the minimum threshold. Conversely, if the transfer consideration is excluded from the DSCR calculation (e.g., because it is not "Project Revenues" under the Depositary Agreement or because the DSCR definition is tied to operating cash flow rather than total receipts), the covenant analysis is neutral — neither helped nor harmed by the transfer.
In either case, the proposed transaction does not present a risk of covenant breach. However, the treatment of transfer proceeds in the DSCR calculation should be addressed as part of the consent or amendment discussions with Redstone, as a clear resolution will be important for ongoing compliance monitoring and for the Borrower's financial modeling.
C. Negative Pledge and Additional Indebtedness
Two additional provisions of the Credit Agreement warrant review in connection with the proposed transfer:
Indebtedness Covenant. The Credit Agreement prohibits the Borrower from incurring additional "Indebtedness" (as defined therein) without the prior written consent of Redstone, subject to customary exceptions. We should confirm that the Transfer Agreement and the Borrower's indemnification obligations to Pinnacle thereunder do not constitute "Indebtedness" under the Credit Agreement. The indemnification obligations are contingent obligations — they arise only if the IRS recaptures, disallows, or reduces the transferred credits — and are not, in my view, properly characterized as debt. Nevertheless, we should review the Credit Agreement's definition of "Indebtedness" carefully, as some definitions include "contingent obligations" or "guarantees" broadly. If the indemnity obligations could be construed as Indebtedness, a specific carve-out should be included in the consent letter or amendment.
Negative Pledge Covenant. The Credit Agreement contains a negative pledge covenant that prohibits the Borrower from granting any lien, security interest, or encumbrance on its assets (other than Permitted Liens) without the prior written consent of Redstone. The indemnity holdback escrow arrangement with Commonwealth Fiduciary Trust Company could be construed as the grant of a security interest in the escrowed funds to Pinnacle. Similarly, the proposed recapture insurance policy from Northfield Specialty Insurance Co. may involve an assignment of insurance proceeds or other encumbrances. We should confirm that neither arrangement implicates the negative pledge covenant or, if it does, that appropriate carve-outs are obtained as part of the consent.
D. Permitted Distributions
The Credit Agreement conditions distributions from the Borrower to its member (Dunmore Renewables Inc.) on the satisfaction of specified "Distribution Conditions," which typically include:
(a) no Event of Default shall have occurred and be continuing (or would result from the proposed distribution);
(b) the DSCR shall be equal to or greater than the minimum required ratio (typically 1.20x or higher) on both a historical and projected basis;
(c) all reserve accounts (including the Debt Service Reserve Account and the Major Maintenance Reserve Account) shall be funded to their required target balances; and
(d) the Borrower shall have delivered a Distribution Conditions Certificate to Redstone, certified by an authorized officer, confirming satisfaction of the foregoing conditions.
If the PTC transfer proceeds flow through the waterfall to the Distribution Account, the Borrower will need to confirm that all Distribution Conditions are satisfied before making distributions to Dunmore Renewables Inc. and, ultimately, upstream to Dunmore Energy Holdings Ltd. As noted in Section III.C above, an uncured Event of Default resulting from a failure to obtain Section 7.14 consent would block all distributions — which is a powerful incentive to obtain consent before proceeding with the transfer.
Even assuming consent is obtained and no Event of Default exists, the Borrower should confirm that the DSCR calculations, reserve account balances, and other distribution conditions can be satisfied in the period during which distributions are contemplated. Given the Project's strong PPA revenue profile and the additional cash flow from the transfer, distribution conditions should be comfortably met, but the analysis should be refreshed each quarter in connection with the Borrower's ongoing compliance reporting.
VI. Recommended Course of Action
Based on the analysis set forth above, I recommend the following course of action, which should be coordinated across the engagement team, including the Borrower's in-house counsel, the tax advisors at Grayson Birch & Co. LLP, and the insurance advisors at Corbin Hale & Associates Inc.
A. Early Engagement with Redstone Capital Bank
I recommend that Calderwood & Harkness, on behalf of the Borrower, contact Redstone Capital Bank's renewable energy relationship management team at the earliest practicable date — and in any event before any definitive documentation is executed with Pinnacle Atlantic Partners LP. Early engagement serves several purposes: it preserves the Borrower's good-faith standing under the Credit Agreement, allows time for negotiation of consent terms, and avoids the risk that Redstone learns of the proposed transfer from market sources or from Pinnacle's advisors before being approached by the Borrower.
As part of the initial engagement, we should prepare and submit a comprehensive consent request package that includes the following materials:
(i) A summary memorandum describing the proposed IRC § 6418 transfer structure, including the statutory framework, the election mechanics, and the treatment of transfer consideration under the Code and Treasury Regulations.
(ii) A description of the identity and financial profile of the proposed transferee, Pinnacle Atlantic Partners LP, including its organizational structure, average annual federal income tax liability, prior § 6418 credit purchase experience, and such other financial information as Pinnacle may consent to share (subject to appropriate confidentiality protections).
(iii) A financial summary of the estimated annual transfer consideration and 10-year aggregate economics, including the assumptions underlying the projections (annual generation, effective PTC rate, transfer price, holdback structure, and payment timing).
(iv) A confirmation that the proposed transfer does not affect the Project's physical operations, the PPA with Great Plains Municipal Power Authority, the interconnection arrangements with NorthStar Transmission Holdings LLC, or any other material project contract.
(v) A draft of the Transfer Agreement between Ridgeway Wind and Pinnacle (when available), together with the proposed escrow agreement with Commonwealth Fiduciary Trust Company and any other ancillary documentation.
B. Negotiate a Consent Letter or Amendment
Our primary objective should be to secure either (a) a standalone consent letter specifically approving the proposed IRC § 6418 transfer to Pinnacle for TY2025 or (b) a broader amendment to Section 7.14 of the Credit Agreement and the related provisions of the Depositary Agreement establishing a pre-approved framework for IRC § 6418 transfers during the remaining PTC eligibility period (through TY2034). The latter approach is strongly preferable, as it would eliminate the need to seek individual consent for each taxable year's transfer and provide certainty to all parties — including Pinnacle, which will require comfort that the Borrower's lender consent obligations have been satisfied on a forward-looking basis.
The amendment should address the following matters:
• A definition of "Permitted IRC § 6418 Transfers," specifying the conditions under which the Borrower may make transfer elections without further consent (e.g., minimum transfer price of $0.90 per $1.00 of credit, transferee must meet specified creditworthiness criteria, maximum annual transfer amount equal to all PTCs generated by the Project).
• The treatment of PTC transfer consideration under the Depositary Agreement, including whether such proceeds are included in "Project Revenues" and, if so, the priority at which they are disbursed in the waterfall.
• The treatment of the indemnity holdback and escrow, including the lien priority of Redstone and Pinnacle in the escrowed funds and the waterfall treatment of holdback amounts upon release.
• Enhanced reporting obligations, including delivery of annual certificates confirming the amount of credits transferred, the transfer price, the consideration received, the holdback amount, and continued compliance with prevailing wage, apprenticeship, and energy community requirements.
If Redstone conditions consent on the application of a portion of transfer proceeds to mandatory prepayment or a restricted account deposit, we should negotiate for a reasonable allocation. Our initial position should be that transfer proceeds are treated as surplus revenue after satisfaction of all waterfall obligations and are available for distribution to equity, with no mandatory prepayment requirement. If Redstone insists on a mandatory prepayment component, we should seek to limit it to a small percentage of annual transfer consideration (e.g., 10% or less) or to a temporary arrangement for the first two to three years of the transfer.
C. Coordinate with Grayson Birch & Co. LLP
Howard Ellison at Grayson Birch & Co. LLP is preparing the PTC eligibility memorandum for the Project, which will address the computational methodology for determining PTCs, the Project's satisfaction of prevailing wage and apprenticeship requirements, the energy community qualification for Custer County, Montana, and the absence of any recapture events. This memorandum will be a critical component of both the consent request to Redstone and the due diligence package for Pinnacle.
We should coordinate closely with Mr. Ellison to ensure that the representations and warranties Redstone may require as a condition of consent — particularly with respect to credit eligibility, prevailing wage compliance, and energy community status — are fully consistent with the conclusions in the Grayson Birch memorandum. Any discrepancies or qualifications should be identified and addressed before the consent request is submitted.
D. Coordinate with Corbin Hale & Associates and Northfield Specialty Insurance Co.
Steven Rask at Corbin Hale & Associates Inc. is advising the Borrower on the procurement of tax credit recapture insurance from Northfield Specialty Insurance Co. (the "Recapture Policy"). The proposed Recapture Policy would provide coverage against losses arising from IRS recapture, disallowance, or reduction of transferred PTCs, up to a specified policy limit.
Redstone may view the Recapture Policy favorably as a form of credit enhancement, insofar as it reduces the risk that the Borrower will be required to make indemnification payments to Pinnacle (which could draw on project cash flow and impair the Borrower's ability to service debt). Accordingly, we should include a summary of the proposed Recapture Policy coverage — including the insurer, policy limits, covered events, deductible structure, and premium — in the consent request package submitted to Redstone.
We should also confirm with Mr. Rask and Northfield that the terms of the Recapture Policy do not conflict with any provision of the Credit Agreement, including the negative pledge covenant and the restrictions on assignments of insurance proceeds. If the policy involves an assignment of proceeds or a collateral assignment in favor of Pinnacle, this will need to be coordinated with the lien priority arrangements discussed in Section IV.D above.
E. Timeline Considerations
Several timeline factors bear on the sequencing of the consent process:
• IRS Pre-Filing Registration. The Borrower's pre-filing registration on the IRS Energy Credits Online portal for TY2025 is currently pending. Under Treas. Reg. § 1.6418-4, the IRC § 6418 transfer election cannot be made, and the Transfer Agreement cannot close, without a valid registration number issued by the IRS. The timing of the registration issuance is not within the Borrower's control, but we understand from Grayson Birch that the IRS has been processing registration applications within approximately 45 to 60 days.
• Definitive Documentation with Pinnacle. Hargrove, Liddell & Strauss LLP is expected to circulate a markup of the term sheet within the next two weeks, followed by the first draft of the definitive Transfer Agreement. Negotiation and execution of the definitive documentation will likely require an additional 45 to 60 days from receipt of the initial draft.
• Lender Consent Timing. Lender consent should be obtained before or contemporaneously with execution of the definitive Transfer Agreement. Obtaining consent after execution would be problematic, as the mere act of entering into the Transfer Agreement could itself constitute a breach of Section 7.14 (which restricts entering into any "agreement, arrangement, or understanding" contemplating a transfer of tax attributes).
Accordingly, I recommend the following target timeline:
• Weeks 1–3 (by approximately April 10, 2026): Prepare and submit the consent request package to Redstone Capital Bank.
• Weeks 4–9 (approximately April 10 through May 15, 2026): Negotiate consent terms with Redstone; prepare initial drafts of consent letter or amendment.
• Weeks 6–12 (approximately May 1 through June 15, 2026): Finalize and execute consent letter or amendment; coordinate with execution of definitive Transfer Agreement with Pinnacle.
This timeline is aggressive but achievable, and it is consistent with the expected schedule for term sheet markup and negotiation of definitive documentation with Hargrove, Liddell & Strauss LLP. If delays arise in the consent process, we may need to defer execution of the Transfer Agreement to avoid a Section 7.14 breach.
VII. Conclusion
Based on the analysis set forth in this memorandum, my conclusions and recommendations are as follows:
First, lender consent under Section 7.14 of the Credit Agreement is almost certainly required before Ridgeway Wind Energy LLC may execute an IRC § 6418 transfer of PTCs to Pinnacle Atlantic Partners LP. The broad language of Section 7.14 — encompassing the "transfer, sale, assign[ment], pledge, or other[] dispos[ition] of any tax attributes, tax credits, tax benefits, or similar rights or entitlements generated by or arising from the Project" — plainly captures the proposed transaction, and the "sole and absolute discr

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