MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
To: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
From: Owen Fischer, Working Associate, Calderwood & Harkness LLP Reviewed by: Theresa Kim, Lead Associate; Pamela Cross, Responsible Partner
Date: August 19, 2022
Re: Due Diligence Review — Pending and Threatened Litigation, Administrative Proceedings, and Regulatory Investigations Involving Cascadia Renewables Holdings, Inc. and Subsidiaries
Matter No.: 1023-00001
Purpose. This memorandum summarizes the findings of Calderwood & Harkness LLP's ("C&H") review of pending and threatened litigation, administrative proceedings, and regulatory investigations involving Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH"), an Oregon corporation headquartered at 1100 SW Sixth Avenue, Suite 1800, Portland, OR 97204, and its operating subsidiaries across Oregon, Washington, and Idaho. This review is undertaken in connection with Ironside Capital Management LP's ("Ironside") $300 million co-investment commitment through ICM Cascadia Co-Invest, LP (the "Vehicle" or "ICM Co-Invest") alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV") in the proposed acquisition of 100% of the equity of Cascadia at an agreed enterprise value of $1,950,000,000 (the "Transaction"). Calderwood & Harkness serves as outside counsel to Ironside in connection with the Transaction. This memorandum is protected by the attorney-client privilege and the work-product doctrine and is provided solely for the use of the addressees and their authorized advisors in evaluating the Transaction. It should not be disclosed to third parties without the prior written consent of C&H.
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I. Scope and Methodology
A. Scope of Review
This memorandum sets forth the results of C&H's due diligence review of all pending, threatened, or recently concluded litigation, arbitration proceedings, administrative proceedings, and regulatory investigations involving Cascadia and its direct and indirect subsidiaries (collectively, the "Cascadia Entities"). For purposes of this memorandum, "subsidiaries" includes all entities listed on Schedule 1.1 to the draft Equity Purchase Agreement (the "EPA"), comprising fourteen hydroelectric facility operating companies, six wind farm project companies, three water-treatment concession companies, and certain intermediate holding companies organized under the laws of Oregon, Washington, and Idaho.
The review encompasses the following categories of matters:
(a) all pending civil litigation in state and federal courts in Oregon, Washington, Idaho, and any other jurisdiction in which the Cascadia Entities are parties;
(b) all pending arbitration proceedings under commercial contracts, power-purchase agreements ("PPAs"), concession agreements, or other agreements to which the Cascadia Entities are parties;
(c) all pending administrative proceedings before the Oregon Public Utility Commission ("OPUC"), the Federal Energy Regulatory Commission ("FERC"), the U.S. Environmental Protection Agency ("EPA"), state environmental agencies, the Occupational Safety and Health Administration ("OSHA"), and other federal, state, or local governmental authorities;
(d) all pending or known government investigations, including investigations by the U.S. Securities and Exchange Commission ("SEC"), the U.S. Department of Justice ("DOJ"), and state attorneys general;
(e) all threatened litigation, demand letters, and pre-suit notifications received by any Cascadia Entity within the prior twelve months that have not yet ripened into filed proceedings; and
(f) all material litigation, arbitration, administrative, and regulatory matters that were resolved, settled, or dismissed within the five-year period preceding the date of this memorandum (the "Lookback Period").
B. Sources Reviewed
In preparing this memorandum, C&H reviewed the following sources of information:
(i) Management Disclosures. Written disclosures and responses to due diligence questionnaires provided by Cascadia's Chief Financial Officer, Sandra K. Llewellyn, including litigation schedules dated July 15, 2022, as supplemented on August 2, 2022 and August 11, 2022 (collectively, the "Management Litigation Schedules").
(ii) Virtual Data Room. Documents posted to the virtual data room maintained by Cascadia's outside counsel, Ridgeway, Ashford & Malone PC (lead partner Nina R. Castellano) (the "Data Room"). As of the date of this memorandum, C&H has reviewed 347 documents in folders 7.1 (Pending Litigation), 7.2 (Settled/Resolved Matters), 7.3 (Regulatory Proceedings), 7.4 (Demand Letters and Threatened Claims), 7.5 (Insurance Policies — Litigation Related), and 7.6 (Government Correspondence). A complete index of all Data Room documents reviewed in connection with this memorandum is attached as Appendix E.
(iii) Management Interviews. In-person and telephonic interviews conducted by C&H personnel with Cascadia's Chief Executive Officer, Jonathan M. Weir (August 3, 2022); CFO Sandra K. Llewellyn (August 3, 2022, August 8, 2022); General Counsel Margaret A. Pham (August 4, 2022, August 10, 2022, August 15, 2022); and Deputy General Counsel Raymond T. Okada (August 10, 2022, August 15, 2022). Detailed notes of each interview are maintained in the C&H matter file.
(iv) Public Court Records and Docket Searches. Searches of state and federal court dockets conducted through August 17, 2022, including searches of the Oregon Judicial Department Online Records (Oregon eCourt), the Washington Courts Case Search system, the Idaho Supreme Court Data Repository, PACER (for the U.S. District Courts for the District of Oregon, Western and Eastern Districts of Washington, and District of Idaho), and the U.S. Court of Appeals for the Ninth Circuit. Searches were conducted using the names of all Cascadia Entities, key officers, and known affiliates.
(v) Regulatory Docket Searches. Searches of the FERC eLibrary system, the OPUC filing archives, the Oregon Department of Environmental Quality ("ODEQ") compliance database, the Washington Department of Ecology enforcement database, the Idaho Department of Environmental Quality ("IDEQ") public records portal, and the OSHA establishment search tool.
(vi) EPA and State Environmental Agency Databases. Review of the EPA Enforcement and Compliance History Online ("ECHO") database and the EPA Comprehensive Environmental Response, Compensation, and Liability Information System ("CERCLIS") database for all Cascadia facility locations.
C. Time Period
This review covers: (a) all matters pending as of August 19, 2022; (b) all matters resolved within the Lookback Period (August 19, 2017 through August 19, 2022); and (c) all matters threatened as of the date of this memorandum.
D. Coordination with Other Counsel
C&H has coordinated its review with the following counsel to avoid duplication and ensure comprehensive coverage:
• Breckenridge Sloane & Pratt LLP ("BSP"), counsel to Meridian Infrastructure Partners and Fund IV, lead partner Charles A. Delacroix. BSP is conducting its own due diligence review on behalf of Fund IV. C&H and BSP have coordinated on shared diligence requests submitted to Cascadia through a joint request protocol dated July 12, 2022. Where BSP has identified matters in its review that are relevant to this memorandum, those matters have been incorporated herein.
• Garvey Lennox LLP ("GL"), counsel to Timberline Growth Equity Fund III, LP ("Timberline"), the current majority equity holder of Cascadia. GL's lead partner for the Transaction is Steven F. Yun. GL has coordinated the preparation and delivery of seller disclosure schedules and has facilitated access to certain historical litigation files not initially posted to the Data Room.
• Ridgeway, Ashford & Malone PC ("RAM"), outside counsel to Cascadia, lead partner Nina R. Castellano. RAM has served as Cascadia's primary outside counsel for corporate and transactional matters and has been responsible for populating and maintaining the Data Room. RAM has also facilitated access to Cascadia's local defense counsel handling individual litigation matters.
E. Related Workstreams
Certain categories of matters intersect with other C&H due diligence workstreams. To avoid unnecessary duplication, the following workstreams are addressed in separate companion memoranda, and this memorandum includes cross-references where appropriate:
• Environmental Liabilities. The companion environmental due diligence memorandum (to be dated August 29, 2022) addresses environmental compliance, remediation obligations, and associated litigation in greater detail, referencing the Phase I and Phase II Environmental Site Assessment reports prepared by Clearwater Environmental Consulting Inc. ("Clearwater") for all 23 Cascadia operating facilities.
• Regulatory Permits and Licenses. The companion regulatory permits memorandum (dated August 18, 2022) addresses the status of all material federal, state, and local permits, licenses, and approvals held by the Cascadia Entities, including FERC hydroelectric licenses, OPUC certificates of public convenience and necessity, water rights, and air quality permits.
• Employment and Benefits. The companion employment due diligence memorandum (to be dated August 26, 2022) addresses employment-related litigation, wage-and-hour compliance, employee benefits, collective bargaining agreements, and related matters.
• intellectual Property. The companion intellectual property due diligence memorandum (to be dated August 23, 2022) addresses the Cascadia Entities' intellectual property portfolio and any related disputes or proceedings.
F. Caveats and Limitations
This memorandum is based on information available to C&H as of August 19, 2022, and is subject to update and revision. In particular:
(a) C&H's review of the EPA disclosure schedules is ongoing as of the date of this memorandum. The seller disclosure schedules being prepared by GL are expected to be delivered in substantially final form by August 30, 2022. Any matters disclosed in the final disclosure schedules that are not addressed herein will be addressed in a supplement to this memorandum.
(b) Certain Data Room documents remain under review. Documents posted to the Data Room after August 15, 2022 have not been fully reviewed for purposes of this memorandum.
(c) The exposure assessments and risk ratings contained herein reflect C&H's independent judgment based on the information reviewed, but they necessarily involve subjective evaluation and should not be construed as guarantees or predictions of outcomes.
(d) This memorandum does not address matters that may arise after the date hereof, including proceedings that may be initiated in connection with the Transaction itself (e.g., regulatory approval applications, Hart-Scott-Rodino filings, or third-party challenges to the acquisition).
II. Executive Summary
Based on our review, the litigation and regulatory landscape affecting the Cascadia Entities is within the range that would be expected for a Pacific Northwest renewable-energy and water-infrastructure platform of Cascadia's scale and complexity. As background, Cascadia reported fiscal year 2021 revenue of approximately $487 million and adjusted EBITDA of approximately $138 million. The company operates fourteen hydroelectric generating facilities with an aggregate installed capacity of approximately 612 megawatts, six wind farms with an aggregate installed capacity of approximately 480 megawatts, and three water-treatment concessions serving municipal populations in the Portland and Boise metropolitan areas. Cascadia employs approximately 1,850 full-time employees across its three-state operating footprint.
Overall Litigation Volume. The Cascadia Entities are parties to a total of nineteen pending litigation matters across state and federal courts and one pending arbitration proceeding. This volume is moderate for an infrastructure company of Cascadia's size and is consistent with the general experience of similarly situated renewable-energy operators in the Pacific Northwest. No single pending matter presents exposure that we assess to be material relative to the enterprise value of $1.95 billion or Cascadia's FY 2021 adjusted EBITDA of $138 million.
Aggregate Estimated Exposure. Based on our review of the pending matters and independent assessment, we estimate aggregate litigation exposure across all pending matters to fall within the range of approximately $8.5 million (low estimate, reflecting favorable outcomes across all matters) to approximately $28.7 million (high estimate, reflecting unfavorable outcomes across all matters without mitigation). Our base-case estimate, weighting probabilities of adverse outcomes, is approximately $14.2 million. This represents approximately 0.73% of enterprise value and approximately 10.3% of FY 2021 adjusted EBITDA. In all cases, these estimates are net of expected insurance recoveries.
Criminal Proceedings. No pending criminal proceedings involving any Cascadia Entity, officer, or director were identified.
SEC and DOJ Investigations. No pending SEC or DOJ investigations involving any Cascadia Entity, officer, or director were identified.
Key Regulatory Proceedings. Cascadia is subject to ongoing regulatory oversight by the OPUC and FERC. Pending regulatory proceedings relate principally to rate cases and license compliance matters that are ordinary course in nature. No enforcement actions by the OPUC or FERC were identified. Certain regulatory filings in connection with the Transaction — including an anticipated FERC §203 application and an OPUC application for approval of the transfer of utility assets — are expected to be filed in October 2022 and are discussed in Section IV below.
Threatened Litigation. A limited number of demand letters and pre-suit notifications were identified. None appears likely to result in material litigation exposure if filed.
Key Matters Warranting Monitoring. While no individual matter rises to the level of high risk, the following matters warrant ongoing monitoring through the closing of the Transaction:
• A construction subcontractor dispute related to the Clearwater Ridge Wind Farm involving claimed damages of approximately $9.3 million (discussed in Section III.A.2);
• An easement and nuisance dispute with neighboring landowners near the Whidbey Pass Wind Farm in Washington involving potential restrictions on operations (discussed in Section III.B.1);
• An environmental citizen suit brought by Columbia Basin Conservation Alliance in the U.S. District Court for the District of Oregon relating to fish passage at the Sandy River Hydroelectric Facility (discussed in Section III.D.1); and
• A pending arbitration under a power-purchase agreement with Pacific Northwest Energy Cooperative regarding force majeure and pricing adjustment provisions (discussed in Section III.E).
Recommendation. Based on our review, the litigation and regulatory matters identified in this memorandum do not present impediments to the closing of the Transaction. We recommend that (a) all identified matters be reflected in the EPA disclosure schedules and reviewed against the final form of the litigation representation and warranty in the EPA; (b) the identified matters be considered in connection with the representations and warranties insurance policy to be issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814, coverage limit of $195 million, representing 10% of enterprise value); and (c) the indemnification provisions of the EPA appropriately address the allocation of pre-closing and post-closing litigation liabilities. Specific recommendations for EPA negotiation points are set forth in Section VIII below.
III. Pending Litigation
A. State Court Proceedings — Oregon
The Cascadia Entities are parties to eight pending litigation matters in Oregon state courts. These matters are summarized below and are set forth in detail in Appendix A.
1. Personal Injury / Premises Liability Claims. Cascadia's hydroelectric facilities include certain areas that are accessible to the public for recreational purposes, including trails, viewing areas, and boat launches maintained under agreements with the U.S. Forest Service and the Oregon Parks and Recreation Department. The operation of these public access areas gives rise to periodic personal injury claims, which Cascadia's General Counsel Margaret A. Pham characterized during our August 4, 2022 interview as "a routine cost of doing business for any operator that maintains public access areas near water-based infrastructure."
As of the date of this memorandum, two personal injury / premises liability claims are pending in Oregon state courts:
(a) *Brannigan v. Cascadia Hydro Operations, LLC*, Case No. 22CV-08471, Multnomah County Circuit Court. This action was filed on March 14, 2022 by Kevin J. Brannigan, an Oregon resident, against Cascadia Hydro Operations, LLC, the Cascadia subsidiary that operates the Bull Run Hydroelectric Facility located approximately 26 miles east of Portland. The plaintiff alleges that on September 18, 2021, he suffered a fractured femur and associated soft-tissue injuries after slipping on an allegedly unmarked wet surface on the pedestrian viewing platform adjacent to the Bull Run dam spillway. The complaint asserts claims for negligence and premises liability and seeks compensatory damages in an unspecified amount "in excess of $150,000," together with medical expenses, lost wages, and pain and suffering. Cascadia filed its answer on May 2, 2022, denying liability and asserting affirmative defenses including comparative fault and assumption of risk. The matter is currently in the early stages of fact discovery; the discovery cutoff is set for February 15, 2023, and no trial date has been scheduled. Defense counsel is Pemberton & Hale LLP (Portland, OR), which serves as Cascadia's regular Oregon litigation defense firm.
The matter is being defended under Cascadia's commercial general liability policy issued by Evergreen Mutual Insurance Company (Policy No. EGL-CRH-2021-40117, policy period October 1, 2021 to October 1, 2022), which provides per-occurrence coverage of $5 million and an aggregate limit of $25 million, subject to a self-insured retention of $250,000 per occurrence. Evergreen Mutual has accepted the defense and has issued a reservation of rights letter dated May 19, 2022, reserving its rights with respect to the assumption-of-risk defense only.
Exposure Assessment: Low. Based on the allegations, the nature of the injuries, and the available defenses (particularly comparative fault, given the recreational context), we estimate the likely exposure in this matter to be in the range of $150,000 to $400,000, inclusive of defense costs. This is well within the range of ordinary premises liability claims for infrastructure operators and is within Cascadia's self-insured retention.
(b) *Delgado v. Cascadia Hydro Operations, LLC*, Case No. 21CV-34892, Clackamas County Circuit Court. This action was filed on November 3, 2021 by Maria L. Delgado, individually and as guardian ad litem for her minor child, Sofia R. Delgado (age 9 at the time of the incident), against Cascadia Hydro Operations, LLC. The plaintiff alleges that on July 4, 2021, her daughter suffered lacerations and a minor concussion after falling on a rocky embankment near the boat launch area at the Clackamas River Hydroelectric Facility. The complaint asserts claims for negligence, premises liability, and negligent maintenance, and seeks compensatory damages of $275,000. Cascadia filed its answer on January 10, 2022 and asserted affirmative defenses including comparative fault of the parent and recreational use immunity under ORS 105.682. The parties participated in a mediation session on June 22, 2022 before mediator Paul D. Ashworth, but were unable to reach resolution. Discovery is substantially complete, and the matter is set for a settlement conference on October 14, 2022, with a trial date of January 23, 2023.
This matter is also being defended under the Evergreen Mutual general liability policy, and Evergreen Mutual has accepted the defense without reservation of rights. Defense counsel is Pemberton & Hale LLP.
Exposure Assessment: Low. Given the strength of the recreational use immunity defense under Oregon law and the comparative fault arguments available, we estimate the likely exposure in this matter to be in the range of $75,000 to $200,000. The involvement of a minor plaintiff adds some settlement value, but the injuries are relatively minor. Cascadia's General Counsel indicated during our August 10, 2022 interview that she expects this matter to settle at or below $150,000 prior to trial.
2. Contract Disputes — Construction and Procurement. Cascadia's ongoing capital expenditure program, which includes the development of new wind farm capacity and maintenance of existing hydroelectric infrastructure, gives rise to contractual disputes with construction contractors and equipment suppliers from time to time. As of the date of this memorandum, two contract disputes are pending in Oregon state courts:
(a) *Ridgeline Construction Group, Inc. v. Cascadia Wind Holdings, LLC*, Case No. 22CV-12893, Deschutes County Circuit Court. This action was filed on May 6, 2022 by Ridgeline Construction Group, Inc. ("Ridgeline"), a Washington-based construction contractor, against Cascadia Wind Holdings, LLC, the Cascadia subsidiary that developed the Clearwater Ridge Wind Farm, an 82-megawatt facility located in Deschutes County, Oregon, that commenced commercial operations on January 15, 2022.
Ridgeline served as the general contractor for the balance-of-plant construction work at the Clearwater Ridge Wind Farm under an EPC-style construction agreement dated March 8, 2020 (the "Ridgeline Agreement"), with an original contract price of $47.2 million. The dispute arises from Ridgeline's claims that it incurred approximately $9.3 million in additional costs due to (i) allegedly deficient geotechnical data provided by Cascadia in the project specifications, necessitating redesign and additional foundation work for 14 turbine locations; (ii) change orders directed by Cascadia's project manager that were not memorialized in formal change order documentation as required by the Ridgeline Agreement; and (iii) delays caused by Cascadia's failure to timely deliver certain interconnection and substation equipment. Ridgeline asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and quantum meruit for the value of additional work performed.
Cascadia has filed an answer and counterclaim. The counterclaim seeks $3.8 million in damages for (i) Ridgeline's failure to complete the punch list items within the contractually required period; (ii) defective workmanship on certain turbine foundation grouting and access road grading work; and (iii) liquidated damages for delay in achieving substantial completion, which occurred 47 days after the contractual substantial completion date. Cascadia also asserts that Ridgeline's change order claims are barred by the Ridgeline Agreement's change order notification requirements and a no-damages-for-delay clause.
The matter is currently in the fact discovery phase. The court issued a case management order on July 14, 2022, setting a discovery cutoff of April 30, 2023, an expert disclosure deadline of June 15, 2023, and a trial date of October 16, 2023. Cascadia's defense and prosecution of the counterclaim is being handled by Pemberton & Hale LLP, with additional construction law expertise provided by Whitfield, Gregg & Navarro LLP (Portland, OR).
Exposure Assessment: Moderate. This is the most significant pending litigation matter involving the Cascadia Entities by claimed amount. The $9.3 million in damages claimed by Ridgeline, if awarded in full, would represent approximately 0.48% of enterprise value and approximately 6.7% of FY 2021 adjusted EBITDA. However, based on our review of the Ridgeline Agreement and the pleadings, we believe Cascadia has strong contractual defenses, particularly with respect to the change order notification requirements and the no-damages-for-delay clause. Our independent assessment of the net exposure (taking into account Cascadia's counterclaim) is a range of $1.5 million to $4.0 million, with a base-case estimate of approximately $2.5 million. Cascadia's General Counsel and Deputy General Counsel expressed confidence during our August 15, 2022 interview that the matter would ultimately be resolved within the $2.0 million to $3.5 million range, either through settlement or adjudication. This matter is not covered under Cascadia's general liability insurance but may be addressed under Cascadia's builder's risk policy or professional liability coverage; we are reviewing the applicable policy terms.
(b) *Cascadia Wind Holdings, LLC v. Nordic Turbine Systems A/S*, Case No. 22CV-09317, Multnomah County Circuit Court. This action was filed on April 11, 2022 by Cascadia Wind Holdings, LLC against Nordic Turbine Systems A/S ("Nordic"), a Danish wind turbine manufacturer, seeking approximately $1.7 million in damages for warranty claims related to gearbox defects in eight Model NTS-4.2 turbines installed at the Cascade Foothills Wind Farm, a 72-megawatt facility in Linn County, Oregon. Cascadia alleges that the gearbox defects constitute breaches of Nordic's equipment warranty under the Turbine Supply Agreement dated June 15, 2018. Nordic removed the action to the U.S. District Court for the District of Oregon based on diversity jurisdiction, and the federal court subsequently remanded the action to Multnomah County Circuit Court on July 28, 2022, finding that the forum selection clause in the Turbine Supply Agreement designated Oregon state courts as the exclusive forum. Nordic has filed an answer denying the warranty claims and asserting that the gearbox issues resulted from improper operation and maintenance by Cascadia's turbine operations team. No counterclaims have been asserted. The matter is in the early stages of discovery.
Exposure Assessment: Low (net positive to Cascadia). Cascadia is the plaintiff in this matter, and the claim, if successful, would result in a recovery to Cascadia. Based on our review of the warranty provisions and the technical data available, we believe Cascadia has a reasonable likelihood of prevailing on at least a portion of the warranty claims. There is some risk of a defense verdict based on the operation-and-maintenance defense, but the gearbox defect pattern is well documented and appears to be consistent with a manufacturing defect. No exposure to Cascadia beyond the litigation costs of prosecuting the claim, which we estimate at approximately $200,000 to $350,000 through trial.
3. Employment Litigation. Detailed analysis of employment-related litigation matters is provided in the companion employment due diligence memorandum (to be dated August 26, 2022). For completeness, we note the following matters here by cross-reference only:
(a) *Patterson v. Cascadia Hydro Operations, LLC, Case No. 22CV-05189, Marion County Circuit Court. This is a wrongful termination claim filed on February 7, 2022 by Dale R. Patterson, a former facility manager at the North Santiam Hydroelectric Facility, who alleges that his termination in November 2021 was in retaliation for his internal complaints regarding alleged safety violations at the facility. Patterson seeks compensatory damages of $425,000, including lost wages, emotional distress, and attorney's fees, as well as punitive damages in an unspecified amount. Cascadia denies the allegations and contends that Patterson was terminated for documented performance deficiencies. The matter is in the discovery phase. Exposure Assessment: Low to Moderate.* We defer to the employment memorandum for a detailed analysis.
(b) *Moreno et al. v. Cascadia Water Services, LLC, Case No. 22CV-15472, Multnomah County Circuit Court. This is a putative wage-and-hour class action filed on June 21, 2022 by three named plaintiffs, current and former hourly maintenance employees of Cascadia Water Services, LLC, the Cascadia subsidiary that operates the Portland Metropolitan Water Treatment Facility under a concession agreement with the Portland Metropolitan Water District. The plaintiffs allege that Cascadia failed to properly compensate employees for off-the-clock pre-shift and post-shift activities, including donning and doffing of required safety equipment, in violation of ORS 652 and ORS 653. The putative class is estimated to include approximately 120 current and former employees. Cascadia has not yet filed a responsive pleading; the deadline to respond is September 6, 2022. Exposure Assessment: To be determined; see employment memorandum.* Based on preliminary analysis, the aggregate claimed damages, if a class is certified and Cascadia is found liable, could be in the range of $1.5 million to $3.5 million, but the viability of class certification is uncertain. We note this matter for monitoring purposes and defer detailed analysis to the employment memorandum.
B. State Court Proceedings — Washington
The Cascadia Entities are parties to four pending litigation matters in Washington state courts. These matters are summarized below and set forth in detail in Appendix A.
1. Property and Easement Disputes. Cascadia's wind farm operations in Washington require extensive easement and right-of-way agreements with neighboring landowners for access roads, transmission lines, and turbine setback areas. The rural settings of these facilities and the ongoing nature of wind farm operations give rise to periodic disputes with neighboring property owners.
(a) *Hargrove Family Trust v. Cascadia Wind Holdings — Washington, LLC*, Case No. 22-2-04187-15, Kittitas County Superior Court. This action was filed on March 28, 2022 by the Hargrove Family Trust (the "Trust"), the owner of approximately 640 acres of agricultural land adjacent to the Whidbey Pass Wind Farm, a 95-megawatt facility in Kittitas County, Washington, operated by Cascadia Wind Holdings — Washington, LLC. The Trust alleges that (i) Cascadia's use of certain access roads across the Trust's property exceeds the scope of an easement granted in a 2015 Easement and Right-of-Way Agreement (the "Easement Agreement"); (ii) Cascadia has constructed improvements within the easement area that are not authorized by the Easement Agreement, including a widened gravel road and a temporary equipment staging area; and (iii) noise and shadow flicker from turbines located within 1,500 feet of the Trust's residential structures constitute a private nuisance under Washington law. The Trust seeks injunctive relief limiting Cascadia's use of the easement, damages for trespass in the amount of $850,000, and abatement of the alleged nuisance.
Cascadia filed its answer on May 16, 2022, denying the trespass and nuisance claims and asserting that all improvements and uses are within the scope of the Easement Agreement. Cascadia also asserts that the Easement Agreement's noise and setback provisions, negotiated at arm's length in 2015, represent a complete defense to the nuisance claim. The parties have engaged in informal settlement discussions, but no resolution has been reached. Discovery is ongoing, and the court has scheduled a case management conference for September 22, 2022.
Exposure Assessment: Low to Moderate. The damages claimed are relatively modest ($850,000), and we believe Cascadia has strong contractual defenses based on the Easement Agreement terms. However, the more significant concern is the potential for injunctive relief that could restrict Cascadia's access to or operations at portions of the Whidbey Pass Wind Farm. If the court were to narrow the scope of the easement or order abatement of the alleged nuisance, there could be operational impacts, including the potential need to curtail certain turbines or relocate access routes. We estimate the monetary exposure at $200,000 to $500,000, but we flag the injunctive risk as a matter warranting ongoing monitoring. Cascadia's Washington defense counsel, Everett & Tanaka PLLC (Seattle, WA), has advised that the injunctive claims face significant hurdles given the contractual framework and that a preliminary injunction motion has not been filed.
(b) *Cascadia Wind Holdings — Washington, LLC v. Okanogan County Board of Equalization, consolidated with two additional landowner disputes concerning transmission line easement scope in Okanogan County (Case Nos. 21-2-00893-24 and 22-2-00214-24, Okanogan County Superior Court). These matters involve disputes over the permitted use and maintenance of transmission line easements serving the Methow Valley Wind Farm. The aggregate claimed damages across both matters are approximately $320,000. These matters are in early procedural stages. Exposure Assessment: Low.*
2. Tax Assessment Appeals. Property tax valuations for wind farm facilities are a recurring source of administrative and judicial proceedings, as county assessors and taxpayers frequently disagree on the appropriate valuation methodology for capital-intensive renewable energy assets, including the treatment of production tax credits ("PTCs"), depreciation schedules, and the income and cost approaches to value.
(a) Kittitas County Tax Assessment Appeals (Tax Years 2020 and 2021). Cascadia Wind Holdings — Washington, LLC has appealed property tax assessments for the Whidbey Pass Wind Farm for tax years 2020 and 2021 before the Washington Board of Tax Appeals (BTA Docket Nos. 21-048 and 22-019). The Kittitas County Assessor valued the Whidbey Pass facility at $142.3 million for tax year 2020 and $138.7 million for tax year 2021; Cascadia contends that the appropriate valuations are $118.5 million and $115.2 million, respectively, based on a discounted cash flow analysis that accounts for the facility's remaining useful life and the step-down of PTCs. The additional assessed tax at issue is approximately $1.1 million for tax year 2020 and $980,000 for tax year 2021. Both appeals are pending before the BTA; a hearing is scheduled for November 2022.
Exposure Assessment: Low. Property tax valuation disputes of this nature are routine for wind farm operators and typically resolve through negotiated settlements at valuations between the assessor's and taxpayer's positions. Based on our review of comparable BTA decisions and industry valuation benchmarks, we estimate the likely outcome to be a settlement in the range of $400,000 to $700,000 in aggregate additional tax for the two tax years, which is within the range of Cascadia's existing property tax accruals.
C. State Court Proceedings — Idaho
Cascadia's Idaho operations are smaller in scale than its Oregon and Washington operations, consisting of two hydroelectric facilities on the Snake River (the Twin Falls Hydroelectric Facility and the Shoshone Falls Hydroelectric Facility) and one water-treatment concession (the Boise Metropolitan Water Treatment Facility). As of the date of this memorandum, one pending state court proceeding was identified in Idaho:
(a) *Cascadia Hydro Operations — Idaho, LLC v. Twin Falls County Assessor, Case No. CV42-1020-00005, Twin Falls County District Court. This is a property tax valuation appeal for tax year 2021 with respect to the Twin Falls Hydroelectric Facility. The disputed additional assessment is approximately $285,000. The matter is in early procedural stages. Exposure Assessment: Low.* This matter is similar in nature to the Washington property tax appeals discussed in Section III.B.2 and is expected to resolve in the ordinary course.
No other material pending state court proceedings involving the Cascadia Entities in Idaho were identified in our review.
D. Federal Court Proceedings
The Cascadia Entities are parties to two pending matters in federal courts, in addition to the employment matters cross-referenced in Section III.A.3.
1. Environmental Citizen Suits.
(a) *Columbia Basin Conservation Alliance v. Cascadia Hydro Operations, LLC*, Case No. 3:21-cv-01874-MO, U.S. District Court for the District of Oregon (Portland Division). This action was filed on November 12, 2021 by the Columbia Basin Conservation Alliance ("CBCA"), a regional environmental non-governmental organization, against Cascadia Hydro Operations, LLC, the operator of the Sandy River Hydroelectric Facility (the "Sandy River Facility"), a 38-megawatt run-of-river hydroelectric facility located on the Sandy River in Clackamas County, Oregon.
CBCA's complaint asserts claims under Section 505 of the Clean Water Act, 33 U.S.C. § 1365, alleging that the Sandy River Facility's operations result in discharges of elevated water temperature and sediment levels downstream of the facility's diversion dam in violation of the facility's NPDES permit (Permit No. OR-0028461) and Oregon water quality standards. The complaint also asserts claims under Section 11(g) of the Endangered Species Act, 16 U.S.C. § 1540(g), alleging that the facility's fish passage structures are inadequate to protect listed species of steelhead and coho salmon, resulting in unauthorized "take" in violation of Section 9 of the ESA, 16 U.S.C. § 1538. CBCA seeks declaratory and injunctive relief, including an order requiring Cascadia to implement enhanced fish passage measures and to install water temperature mitigation systems, as well as civil penalties under the CWA and attorney's fees.
Cascadia filed its answer on February 4, 2022, denying the substantive allegations and asserting, among other defenses, that (i) the facility is in compliance with its NPDES permit and the applicable FERC hydroelectric license (FERC Project No. 2638); (ii) the fish passage structures were designed and constructed in accordance with the specifications set forth in the FERC license and approved by the National Marine Fisheries Service ("NMFS") in a 2017 Biological Opinion; and (iii) CBCA failed to comply with the mandatory 60-day notice requirement under the CWA for certain of its claims. On April 22, 2022, Cascadia filed a motion for partial summary judgment on the CWA claims, arguing that the 60-day notice was deficient. The motion is fully briefed, and oral argument is scheduled for September 9, 2022.
The case is assigned to Judge Michael O. Sanderson. Fact discovery is ongoing, with a cutoff of March 31, 2023. Expert disclosures are due May 15, 2023, and the bench trial is currently scheduled for September 2023.
Cascadia's defense in this matter is being handled by Ashbrook & Tillotson LLP (Portland, OR), a firm specializing in environmental and natural resources litigation. The U.S. Department of Justice, Environment and Natural Resources Division, has not intervened. NMFS has filed an amicus brief supporting the adequacy of the fish passage structures as approved in the 2017 Biological Opinion.
Exposure Assessment: Low to Moderate. The principal risk in this matter is the potential for injunctive relief that could require Cascadia to make significant capital investments in fish passage infrastructure and water temperature mitigation systems. Cascadia's internal engineering estimates suggest that the full scope of CBCA's requested injunctive relief, if granted, could require capital expenditures of $4.5 million to $7.2 million, together with ongoing annual operational costs of approximately $350,000 to $500,000. However, we view the likelihood of the court ordering the full scope of the requested relief as low, given (i) NMFS's supportive amicus brief; (ii) the 2017 Biological Opinion approving the existing fish passage structures; and (iii) the strength of Cascadia's compliance defenses. Cascadia's defense counsel has expressed confidence that the partial summary judgment motion on the CWA claims will be granted, which would narrow the case substantially. Our base-case assessment of the probable additional capital cost, if any, resulting from this litigation is $1.0 million to $3.0 million. Civil penalties, if imposed, are likely to be modest. We defer to the environmental due diligence memorandum for additional analysis of the environmental compliance context.
2. FERC-Related Proceedings. No litigation proceedings pending in federal court arise directly from FERC regulatory matters. As noted above, Cascadia anticipates filing a FERC §203 application (FERC Docket Number EC22-143-000) for approval of the transfer of Cascadia's hydroelectric licenses in connection with the Transaction. This filing is anticipated to occur on or about October 19, 2022, which post-dates this memorandum. Regulatory proceedings before FERC are discussed in Section IV.B below. We note that the §203 application may generate interventions or protests from interested parties, including environmental organizations, competing market participants, or other stakeholders, and we recommend monitoring of the FERC docket following the filing.
No enforcement proceedings, show-cause orders, or compliance orders issued by FERC against any Cascadia Entity were identified in our review.
3. Intellectual Property Claims. No pending intellectual property litigation involving any Cascadia Entity was identified in our review of federal and state court dockets. A detailed analysis of the Cascadia Entities' intellectual property portfolio, including trademarks, patents, trade secrets, and software licenses, is provided in the companion intellectual property due diligence memorandum (to be dated August 23, 2022). Cascadia's General Counsel confirmed during our August 4, 2022 interview that no cease-and-desist letters or infringement claims have been received within the Lookback Period.
E. Arbitration Proceedings
One arbitration proceeding involving a Cascadia Entity is currently pending:
(a) *Pacific Northwest Energy Cooperative v. Cascadia Wind Holdings, LLC*, American Arbitration Association, Case No. 01-22-0004-5721. This arbitration was initiated on January 19, 2022 by Pacific Northwest Energy Cooperative ("PNEC"), a rural electric cooperative, against Cascadia Wind Holdings, LLC, arising under a Power Purchase Agreement dated April 30, 2016 (the "PNEC PPA") pursuant to which Cascadia sells the output of the Cascade Foothills Wind Farm (72 MW) to PNEC.
The dispute centers on two related issues: (i) PNEC alleges that Cascadia improperly invoked force majeure under Section 10.1 of the PNEC PPA in connection with curtailments during the February 2021 Pacific Northwest ice storm (the "February 2021 Event"), and that Cascadia is liable for approximately $2.1 million in replacement power costs incurred by PNEC during the curtailment period; and (ii) PNEC disputes the application of the contract's pricing adjustment mechanism under Section 7.3, which provides for annual escalation based on a weighted index of the Consumer Price Index and the Pacific Northwest wholesale power index, contending that Cascadia's calculation of the 2021 and 2022 escalation factors resulted in overcharges to PNEC of approximately $1.4 million.
Cascadia filed a counterclaim seeking approximately $870,000 in unpaid invoices that PNEC has withheld pending resolution of the pricing dispute.
The arbitration is being conducted under the AAA Commercial Arbitration Rules before a three-member panel. Cascadia's arbitration counsel is Ridgeway, Ashford & Malone PC (lead attorney David M. Thornberg). The arbitration panel was constituted on May 3, 2022. A preliminary hearing was held on June 14, 2022, and the panel has established a procedural schedule providing for document exchange through November 2022, a hearing on the merits in February 2023, and a final award expected by April 2023.
Exposure Assessment: Moderate. The aggregate amount at issue (PNEC's claims of $3.5 million, net of Cascadia's counterclaim of $870,000) yields a net potential adverse exposure to Cascadia of approximately $2.6 million. Based on our review of the PNEC PPA terms and the pleadings submitted to date, we believe Cascadia has a reasonable basis for its force majeure defense — the February 2021 Event was an extraordinary weather event that caused widespread disruption across the Pacific Northwest grid — and that the pricing adjustment calculation is consistent with the contractual formula. However, force majeure disputes are inherently fact-intensive, and the outcome will depend in significant part on the panel's interpretation of the scope of the force majeure clause and the adequacy of Cascadia's mitigation efforts. Our base-case estimate of the probable net adverse outcome is $0 to $1.5 million, recognizing that there is a reasonable probability that Cascadia will prevail on the force majeure claim and recover at least a portion of its counterclaim.
No other pending arbitration proceedings involving the Cascadia Entities were identified.
IV. Administrative and Regulatory Proceedings
A. Oregon Public Utility Commission (OPUC)
Cascadia Hydro Operations, LLC holds certificates of public convenience and necessity from the OPUC for its Oregon hydroelectric generating facilities that sell power at regulated rates. Cascadia is therefore subject to ongoing regulatory oversight by the OPUC, including rate case proceedings, compliance reviews, and reporting obligations.
Pending Rate Case. Cascadia's most recent general rate case, OPUC Docket No. UE 392, was concluded on March 15, 2022, with the issuance of OPUC Order No. 22-107, approving a 3.2% increase in Cascadia's regulated retail rates effective May 1, 2022. No party has appealed the order, and the period for seeking rehearing or judicial review has expired. There are no additional rate case proceedings currently pending.
Transaction-Related Application. Cascadia anticipates filing an application with the OPUC for approval of the transfer of utility assets in connection with the Transaction. This application is expected to be filed under OPUC Docket Number UM-2287 on or about October 14, 2022. The filing will post-date this memorandum, and we will update our analysis upon review of the application and any interventions or protests filed in response. C&H is coordinating with BSP and RAM on the preparation of the application. We note that OPUC approval is a condition to closing under the draft EPA and that the OPUC review process typically takes six to twelve months, which has been factored into the anticipated closing timeline.
Compliance Matters. Our review of OPUC docket records and Cascadia's correspondence files did not identify any pending OPUC enforcement actions, notices of probable violation, or formal compliance proceedings involving any Cascadia Entity. Cascadia's most recent OPUC compliance filing, the Annual Electric Utility Report for fiscal year 2021, was filed on March 31, 2022, and no deficiencies have been noted by OPUC staff.
Historical Orders. We reviewed the OPUC orders issued with respect to Cascadia during the Lookback Period and did not identify any orders imposing penalties, sanctions, or extraordinary conditions on Cascadia's operations.
B. Federal Energy Regulatory Commission (FERC)
Cascadia Hydro Operations, LLC and its Idaho subsidiary hold FERC hydroelectric licenses for all fourteen of Cascadia's hydroelectric generating facilities (FERC Project Nos. 2638, 2641, 2644, 2647, 2650, 2653, 2656, 2659, 2662, 2665, 2668, 2671, 2674, and 2677). The licenses have varying terms, with expiration dates ranging from 2031 to 2048. The current status of each license and any pending license amendment proceedings are addressed in detail in the companion regulatory permits memorandum (dated August 18, 2022).
Transaction-Related Filing. As noted above, Cascadia anticipates filing an application under Section 203 of the Federal Power Act for FERC approval of the transfer of Cascadia's hydroelectric licenses in connection with the Transaction. This application is expected to be filed under FERC Docket Number EC22-143-000 on or about October 19, 2022. FERC approval is a condition to closing under the draft EPA. C&H is coordinating with RAM on the preparation of the application.
Compliance Audits. Cascadia undergoes periodic compliance audits by FERC's Division of Dam Safety and Inspections with respect to its hydroelectric facilities. The most recent dam safety inspection reports were issued between January and June 2022 for all fourteen facilities. Nine facilities received "satisfactory" ratings with no deficiencies noted. Five facilities received "satisfactory with recommendations" ratings, with the recommendations relating to (i) minor updates to emergency action plans at two facilities; (ii) vegetation management within the dam safety zone at two facilities; and (iii) replacement of certain aging instrumentation at the Sandy River Facility. Cascadia has submitted compliance responses to all five recommendations and has committed to completing the recommended actions by December 31, 2022. None of the recommendations constitutes an enforcement action or order.
Enforcement Actions. No FERC enforcement actions, show-cause orders, or civil penalty proceedings involving any Cascadia Entity were identified in our review.
License Amendment Proceedings. One license amendment proceeding is currently pending: Cascadia Hydro Operations, LLC has applied for an amendment to the license for the Clackamas River Hydroelectric Facility (FERC Project No. 2641) to authorize installation of a new fish screen system (FERC Docket No. P-2641-058). The application was filed on June 2, 2022, and is pending review by FERC staff. No interventions or protests have been filed. This proceeding is routine and is not expected to result in any adverse action.
C. State Environmental Agency Proceedings
Oregon Department of Environmental Quality (ODEQ). Our review of the ODEQ compliance database and Cascadia's internal records identified two matters of note:
(i) A Notice of Non-Compliance ("NON") was issued by ODEQ on February 14, 2022 to Cascadia Hydro Operations, LLC with respect to the Sandy River Facility's NPDES permit (Permit No. OR-0028461), relating to two reported exceedances of water temperature limits in July and August 2021. Cascadia submitted a corrective action plan on April 1, 2022, which ODEQ accepted on May 18, 2022. No fine or penalty has been assessed; the NON was closed upon ODEQ's acceptance of the corrective action plan. The water temperature exceedances are related to the issues underlying the Columbia Basin Conservation Alliance litigation discussed in Section III.D.1 above. We note that the NON, while resolved, may be cited by CBCA as evidence of permit non-compliance in the federal litigation.
(ii) A routine compliance inspection of the Portland Metropolitan Water Treatment Facility was conducted by ODEQ on April 12, 2022. The inspection report, issued on May 30, 2022, noted no violations. One observation was made regarding the condition of a secondary containment berm in the chemical storage area; Cascadia Water Services, LLC completed the recommended repairs on June 15, 2022.
Washington Department of Ecology. No notices of violation, consent orders, or enforcement actions involving any Cascadia Entity in Washington were identified in our review.
Idaho Department of Environmental Quality (IDEQ). No notices of violation, consent orders, or enforcement actions involving any Cascadia Entity in Idaho were identified in our review.
Additional analysis of environmental compliance matters, including the Clearwater Environmental Consulting Phase I and Phase II reports, is provided in the companion environmental due diligence memorandum (to be dated August 29, 2022).
D. OSHA and Workplace Safety
Our review of the OSHA establishment search tool and Cascadia's internal safety records identified two OSHA matters during the Lookback Period:
(i) Citation No. 1608342. On September 3, 2021, OSHA issued a citation to Cascadia Wind Holdings, LLC following an investigation of a workplace accident at the Clearwater Ridge Wind Farm on July 14, 2021, in which a technician suffered a non-fatal electrical shock injury during turbine commissioning activities. The citation alleged a "serious" violation of 29 C.F.R. § 1910.333(b)(2) (lockout/tagout procedures for energized electrical work) and proposed a penalty of $14,502. Cascadia entered into an informal settlement agreement with OSHA on December 8, 2021, under which Cascadia paid a reduced penalty of $10,150 and agreed to implement enhanced lockout/tagout training and auditing procedures at all wind farm facilities. The settlement has been fully executed, the penalty paid, and the required training completed.
(ii) Citation No. 1623897. On March 22, 2022, OSHA issued a citation to Cascadia Hydro Operations, LLC following a routine inspection of the Clackamas River Hydroelectric Facility. The citation alleged an "other-than-serious" violation of 29 C.F.R. § 1910.22(a)(3) (housekeeping and walking-working surface maintenance) based on observed oil residue on the powerhouse floor. The proposed penalty was $1,036. Cascadia paid the penalty on April 18, 2022, and addressed the housekeeping deficiency.
No OSHA citations or investigations are currently pending. Exposure Assessment: Low. The two OSHA matters identified are minor in nature and typical for industrial facilities of this kind.
E. Tax Audits and Proceedings
Federal Tax Audits. No pending federal tax audits or proceedings involving any Cascadia Entity were identified. Cascadia's federal income tax returns for tax years 2018 through 2021 have been prepared by Halstead & Greer LLP (200 Market Street, Suite 1500, Portland, OR 97201), Cascadia's auditor and tax advisor. Cascadia's General Counsel confirmed during our August 10, 2022 interview that Cascadia has not received any IRS examination notices for any open tax year. We note that the IRS statute of limitations remains open for tax years 2019 through 2021 (and 2018, to the extent of net operating loss carryforwards claimed in subsequent years).
State Tax Audits. No pending state income or franchise tax audits were identified. Property tax valuation appeals are discussed in Sections III.B.2 and III.C above.
Production Tax Credits. Cascadia has claimed federal production tax credits ("PTCs") under Section 45 of the Internal Revenue Code with respect to its wind farm facilities. The aggregate PTCs claimed during the Lookback Period are approximately $78.4 million. No IRS challenge to the PTC claims has been received. We note that the validity and transferability of the PTCs is an important diligence item for the Transaction and is addressed in greater detail in C&H's tax due diligence memorandum (to be prepared in coordination with Ironside's tax advisors).
V. Threatened Litigation and Pre-Suit Demands
A. Demand Letters and Pre-Litigation Notices
Our review of Cascadia's correspondence files and Data Room documents identified three demand letters or pre-litigation notices received by Cascadia within the twelve months preceding the date of this memorandum that have not ripened into filed proceedings:
(a) Environmental Contamination Allegation — Bonneville Heights Landowner Group. On April 7, 2022, Cascadia Hydro Operations, LLC received a demand letter from Greenleaf & Associates, P.C. (Portland, OR) on behalf of the "Bonneville Heights Landowner Group," a group of eleven residential property owners located near the Bonneville Creek Hydroelectric Facility in Hood River County, Oregon. The letter alleges that sediment and stormwater runoff from the facility's access roads and construction staging areas have contaminated a seasonal creek that flows through the landowners' properties, causing property damage and diminished property values. The letter demands $1.2 million in damages and states that the landowners intend to file suit if a resolution is not reached within 90 days. Cascadia's General Counsel responded on May 12, 2022, denying the allegations and requesting supporting documentation. As of the date of this memorandum, no further correspondence has been received, and no suit has been filed. Cascadia management's assessment is that the claims lack merit and that the likelihood of suit is low to moderate. The potential factual overlap with environmental compliance issues is noted, and we cross-reference the environmental due diligence memorandum for additional analysis.
(b) Municipal Contract Dispute — City of Beaverton. On June 15, 2022, the City of Beaverton, Oregon, through its City Attorney's office, sent a demand letter to Cascadia Water Services, LLC alleging that Cascadia had failed to meet certain performance benchmarks under a Water Distribution Services Agreement dated January 1, 2019 (the "Beaverton Agreement"), specifically relating to response times for service outage repair requests during the period from January through April 2022. The letter asserts that Cascadia owes the City approximately $285,000 in liquidated damages under Section 8.4 of the Beaverton Agreement. Cascadia's Deputy General Counsel responded on July 8, 2022, disputing the calculation of the alleged performance shortfall and contending that certain outages were attributable to force majeure events (the February 2022 winter storm) excluded under the agreement. Discussions between the parties are ongoing, and Cascadia management's assessment is that the matter is likely to be resolved through negotiation without litigation.
(c) Equipment Warranty Claim — Cascade Transformer Supply Co. On March 30, 2022, Cascade Transformer Supply Co. ("CTS"), a Portland-based electrical equipment supplier, sent a demand letter to Cascadia Wind Holdings, LLC contesting Cascadia's backcharge of $147,000 for the cost of replacing a defective step-up transformer at the Cascade Foothills Wind Farm, asserting that the backcharge was not authorized under the applicable supply agreement and that the transformer failure was caused by improper installation by Cascadia's subcontractor. Cascadia responded on April 25, 2022, providing documentation of the transformer defect and the supply agreement warranty provisions. No further correspondence has been received. Cascadia management's assessment is that the claim is without merit and that the likelihood of CTS pursuing litigation is low.
Portland Metropolitan Water District. We note for completeness that Cascadia management has indicated that the Portland Metropolitan Water District (the "Water District") is expected to issue a notice of its intent to renegotiate certain terms of the Concession Agreement dated June 1, 2013 (the "PMWD Concession") under which Cascadia Water Services, LLC operates the Portland Metropolitan Water Treatment Facility. This notice is anticipated to be issued on or about October 28, 2022. As this anticipated notice post-dates this memorandum and no pre-litigation notice or demand from the Water District had been received as of August 19, 2022, it is not analyzed herein but should be addressed in the update to this memorandum.
B. Government Investigations
Based on our review of Cascadia's records, management disclosures, public databases, and the results of our management interviews, no pending government investigations involving any Cascadia Entity, officer, or director were identified. Specifically:
• No SEC investigations, informal inquiries, or Wells notices were identified.
• No DOJ investigations, grand jury subpoenas, or civil investigative demands were identified.
• No state attorney general investigations or inquiries were identified.
• No investigations by any other federal, state, or local governmental authority (other than the routine