1023-00001 · Ironside Capital Management LP · Dormancy/Quarterly Reviews

gp-quarterly-report-review-q1-2024.docx DOCUMENT Funds

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MEMORANDUM

To: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP

From: Pamela Cross, Responsible Partner, Calderwood & Harkness LLP Theresa Kim, Lead Associate, Calderwood & Harkness LLP

Date: April 18, 2024

Re: Review of Meridian Infrastructure GP IV LLC Quarterly Status Report — Q1 2024 (January 1, 2024 – March 31, 2024) — ICM Cascadia Co-Invest, LP

Matter No.: 1023-00001

I. Executive Summary

This memorandum presents our review of the quarterly status report for the first quarter of 2024 (the "Q1 2024 Report") delivered by Meridian Infrastructure GP IV LLC (the "GP") to Ironside Capital Management LP ("Ironside" or the "Client") pursuant to Section 7.04(b) of the Amended and Restated Agreement of Limited Partnership of ICM Cascadia Co-Invest, LP (the "Vehicle"), dated July 29, 2022 (the "LP Agreement"), and the Side Letter between the GP and Ironside, also dated July 29, 2022 (the "Side Letter"). The Q1 2024 Report covers the period from January 1, 2024 through March 31, 2024.

The Q1 2024 Report is the sixth consecutive quarterly report delivered during the dormancy period, which commenced on January 9, 2023, following the GP's formal declaration of a Material Impediment Event under LP Agreement Section 7.04. As Ironside is aware, the Material Impediment Event was declared in connection with the Portland Metropolitan Water District's initiation of concession renegotiation proceedings affecting the Bull Run Filtration Project concession held by Cascadia Renewables Holdings, Inc. (the "Target" or "Cascadia"), which created uncertainty as to a material component of Cascadia's revenue base and, in the GP's determination, constituted an event that would reasonably be expected to prevent consummation of the acquisition on the terms contemplated by the Equity Purchase Agreement.

The quarter under review was marked by two significant developments that bear directly on the future trajectory of the Vehicle and the underlying acquisition transaction:

(a) On February 15, 2024, the parties to the Equity Purchase Agreement executed a Mutual Standstill and Preservation Agreement (the "Standstill Agreement"), following the expiration on December 31, 2023 of the third extended outside date under the Equity Purchase Agreement (as amended). The Standstill Agreement establishes a framework under which no party may exercise termination rights under the Equity Purchase Agreement during the standstill period, while preserving existing transaction documents and regulatory approvals to the extent still in effect. Either side may exit the standstill on sixty (60) days' written notice.

(b) The FERC Section 203 approval received on December 15, 2022 (Docket No. EC22-143-000), which authorized the indirect transfer of control of Cascadia's fourteen hydroelectric facilities, is subject to a validity period that, as extended by FERC staff, will lapse on June 15, 2024. The GP has indicated that it does not currently intend to seek a further extension of that approval. The lapse of FERC authorization is a consequential development that would add significant time and cost to any future reactivation of the transaction, as discussed in detail in Section III.D(i) below.

Overall Assessment. The Q1 2024 Report is substantially compliant with the reporting requirements set forth in LP Agreement Section 7.04(b) and the enhanced reporting obligations contained in the Side Letter. We have, however, identified certain informational gaps in the report that warrant supplemental inquiry by Ironside, which we discuss in Section V of this memorandum.

Vehicle Status. The Vehicle remains dormant. There have been no capital calls, no distributions, and no investment activity during the quarter or at any point since the commencement of the dormancy period. The unfunded commitment remains $277,500,000, and the total capital called to date remains $22,500,000, reflecting the single capital call made on August 15, 2022.

Critical Upcoming Dates. We draw particular attention to two approaching dates that will require strategic decision-making by Ironside: (i) the FERC Section 203 approval lapse date of June 15, 2024 (approximately 58 days from the date of this memorandum), and (ii) the 18-month dormancy trigger date of July 9, 2024 (approximately 82 days from the date of this memorandum), at which point Ironside's wind-down election right under LP Agreement Section 7.04(c) will ripen. We recommend a client call within the next two weeks to discuss the strategic implications of these dates and the available courses of action.

II. Compliance with Reporting Obligations

A. Timeliness. Section 7.04(b) of the LP Agreement requires the GP to deliver quarterly status reports to each limited partner within forty-five (45) days following the end of each calendar quarter during any dormancy period declared pursuant to Section 7.04(a). This reporting cadence was negotiated at formation as part of the information-rights package to ensure that limited partners receive timely updates on the status of the Material Impediment Event and the GP's efforts to cure or otherwise resolve the impediment.

The first quarter of 2024 ended on March 31, 2024. Applying the 45-day delivery window, the deadline for delivery of the Q1 2024 Report was May 15, 2024.

The Q1 2024 Report was delivered on April 12, 2024, which is thirty-three (33) days after the end of the quarter and twelve (12) days in advance of the contractual deadline. Accordingly, delivery of the Q1 2024 Report was timely.

The report was transmitted via email by Lillian Fong, Partner, Portfolio, at Meridian Infrastructure Partners LP, to Renata Obasi at Ironside, with copies to Pamela Cross at Calderwood & Harkness LLP ("C&H") and Charles A. Delacroix at Breckenridge Sloane & Pratt LLP ("BSP"), counsel to Meridian. This delivery method is consistent with the notice provisions of LP Agreement Section 12.01 and with the established practice for all prior quarterly reports delivered during the dormancy period. We confirm receipt of the report on the same date and note that the delivery record is consistent with prior quarters.

B. Content Requirements

LP Agreement Section 7.04(b), as supplemented by the Side Letter, requires that each quarterly status report during a dormancy period address the following enumerated categories of information:

(i) The current status of the Material Impediment Event and any developments toward its cure or resolution;

(ii) The financial status of the Vehicle, including capital account balances, expenses incurred during the quarter, and the Vehicle's cash position;

(iii) The status of all regulatory approvals required for the consummation of the underlying acquisition transaction, including any approvals that have lapsed, been withdrawn, or are at risk of lapsing;

(iv) The status of the underlying acquisition transaction, including the Equity Purchase Agreement and any related transaction agreements, and any amendments, extensions, terminations, or standstill arrangements affecting such agreements;

(v) The GP's good-faith assessment of the likely timeline for resolution of the Material Impediment Event and, to the extent reasonably determinable, the GP's current expectations regarding the path to closing or, alternatively, to termination and wind-down of the Vehicle; and

(vi) Any material developments affecting the Target, including changes in management, operations, financial condition, litigation, or regulatory status, that are known to the GP and that are reasonably likely to affect the value of the investment or the prospects for consummation of the acquisition.

The Side Letter further requires that the GP provide Ironside with enhanced reporting that includes, to the extent reasonably available, copies of or excerpts from any material communications with regulatory agencies, the Target's board of directors or management, or the Selling Shareholders relating to the Material Impediment Event or the status of the transaction.

Our section-by-section analysis of the Q1 2024 Report's compliance with each of these content requirements is set forth in Sections III through V below. As a general matter, the Q1 2024 Report addresses all six enumerated categories at a level of detail that is generally adequate, though we have identified specific gaps and areas where supplemental information should be requested, as detailed in Section V.

III. Summary of Key Developments Reported in Q1 2024 Report

A. Mutual Standstill and Preservation Agreement (February 15, 2024)

The most significant transactional development reported in the Q1 2024 Report is the execution of the Mutual Standstill and Preservation Agreement on February 15, 2024. This agreement was necessitated by the expiration on December 31, 2023 of the third extended outside date under the Equity Purchase Agreement, which left the EPA parties without a contractually mandated closing timeline and created the risk that one or more parties might exercise termination rights.

The GP reports that following the December 31, 2023 expiration, no party to the Equity Purchase Agreement exercised its termination right under EPA Section 9.01(b) (termination upon expiration of the outside date) during the period between January 1, 2024 and February 15, 2024. This is consistent with our understanding of the parties' positions based on our engagement with BSP in January 2024.

On February 15, 2024, the following parties executed the Standstill Agreement:

• Selling Shareholders: Timberline Growth Equity Fund III, LP (holding approximately 62% of Cascadia's equity, managed by Hugh Callister at Timberline Growth Partners LLC); the Weir Family Trust (holding approximately 18% of Cascadia's equity, with Jonathan M. Weir serving as trustee); and the Management Rollover Pool (holding approximately 20% of Cascadia's equity, comprising approximately 25 members who were expected to roll over 50% of their equity in connection with the transaction);

• Cascadia Renewables Holdings, Inc., in its capacity as the Target company; and

• Cascadia Acquisition Corp., the acquisition vehicle formed by Meridian for purposes of consummating the transaction.

Calderwood & Harkness drafted the Standstill Agreement on behalf of the co-invest interests, in coordination with BSP's drafting on behalf of Meridian and the acquisition vehicle. The execution version of the Standstill Agreement was the subject of our separate memorandum to Ironside dated February 10, 2024, in which we analyzed the key provisions and provided our assessment of the agreement's impact on Ironside's rights and obligations under the LP Agreement.

The GP's description of the Standstill Agreement in the Q1 2024 Report is accurate and consistent with the terms of the executed agreement. The key terms, as summarized in the report, include:

(a) Mutual Standstill on Termination Rights. Each party agrees not to deliver a notice of termination under the EPA during the standstill period. This effectively preserves the EPA in a suspended state and prevents unilateral termination by any party without first exiting the standstill.

(b) Preservation of Transaction Documents and Regulatory Approvals. The parties agree to maintain in effect, to the extent within their respective control, all transaction documents and existing regulatory approvals obtained in connection with the acquisition. This preservation obligation is subject to the caveat that it applies only "to the extent still in effect," which reflects the reality that certain approvals, including the FERC Section 203 approval, are subject to validity periods established by the relevant regulatory authority and not within the unilateral control of the parties.

(c) Framework for Reactivation or Orderly Wind-Down. The Standstill Agreement contemplates two potential paths forward: (i) reactivation of the transaction, which would require the parties to negotiate and execute a Fourth Amendment to the EPA establishing a new outside date and addressing any changes in circumstances since the original signing; or (ii) an orderly wind-down and termination of the EPA, to be negotiated in good faith if the parties determine that reactivation is not feasible or desirable.

Importantly, the Standstill Agreement does not impose an automatic termination date. Rather, either side may exit the standstill by delivering sixty (60) days' written notice to the other parties. This open-ended structure provides flexibility but also means that the transaction could remain in a state of suspended animation for an indefinite period absent affirmative action by one of the parties.

Gap Noted. The GP's report does not discuss the cost-allocation provisions of the Standstill Agreement in any meaningful detail. Specifically, Section 4.02 of the Standstill Agreement addresses the allocation of ongoing costs incurred in connection with the preservation of transaction documents and regulatory approvals during the standstill period. We recommend that Ironside request supplemental confirmation from the GP that no incremental costs are being allocated to the Vehicle during the standstill period beyond the previously reported annualized dormancy operating expenses of approximately $185,000. While the Standstill Agreement as drafted provides that each party shall bear its own costs during the standstill, there is potential ambiguity with respect to shared costs such as regulatory filing maintenance fees and professional service retainers that may be allocated through the acquisition vehicle to the underlying fund and co-invest structures.

B. Equity Purchase Agreement Status

The Equity Purchase Agreement (the "EPA"), originally executed on September 15, 2022, governs the acquisition of 100% of the equity interests in Cascadia Renewables Holdings, Inc. by Cascadia Acquisition Corp. The EPA has been amended three times since its execution:

• First Amendment (November 22, 2022): Extended the initial outside date from December 31, 2022 to March 31, 2023 and made certain technical amendments to the regulatory condition precedent provisions.

• Second Amendment (March 15, 2023): Extended the outside date from March 31, 2023 to June 30, 2023 and added a condition requiring material progress in the Bull Run concession renegotiation as a precondition to closing.

• Third Amendment (June 28, 2023): Extended the outside date from June 30, 2023 to December 31, 2023. This was the final amendment to the EPA prior to the expiration of the outside date.

As noted above, the outside date of December 31, 2023, as established by the Third Amendment, has expired. The Standstill Agreement effectively preserves the EPA in a suspended state; no party has delivered a termination notice under EPA Section 9.01(b) or any other provision of the EPA. The EPA therefore remains technically in effect, though the conditions to closing have not been satisfied and no closing timeline exists.

The GP notes in the Q1 2024 Report that the Selling Shareholders remain engaged in standstill discussions. In particular, the GP reports that Timberline Growth Equity Fund III, LP (the 62% holder, managed by Hugh Callister at Timberline Growth Partners LLC) and the Weir Family Trust (the 18% holder, with Jonathan M. Weir serving as trustee) have both confirmed their continued interest in the transaction, subject to satisfactory resolution of the concession renegotiation. The Management Rollover Pool, which holds approximately 20% of Cascadia's equity and comprises approximately 25 members who were expected to roll over 50% of their equity in connection with the acquisition, continues to hold its equity and has not indicated any intent to exit the transaction.

Gap Noted. The GP's report does not address whether the agreed enterprise value of $1,950,000,000 would be subject to repricing in any reactivation scenario. This enterprise value was established based on Cascadia's FY 2021 EBITDA of $138,000,000, implying an EV/EBITDA multiple of approximately 14.1x. Given that nearly two and a half years have elapsed since the EPA was executed, and given the significant changes in macroeconomic conditions (including interest rate movements), infrastructure asset valuations, and Cascadia's own operating performance during the intervening period, the question of whether the agreed enterprise value remains appropriate is a material consideration for any reactivation analysis. We flag this as a reporting gap in Section V and recommend that Ironside request the GP's views on this topic.

C. Debt Financing Status

The debt financing for the acquisition was arranged pursuant to a commitment letter (the "Debt Commitment Letter") dated September 12, 2022 from Atlas National Bank, N.A. (serving as lead arranger and administrative agent) and Pinnacle Credit Partners LLC (serving as co-lender). The Debt Commitment Letter provided for the following facilities:

• Senior Secured Term Loan: $975,000,000 total, comprising $650,000,000 from Atlas National Bank, N.A. and $325,000,000 from Pinnacle Credit Partners LLC.

• Revolving Credit Facility: $150,000,000, provided by Atlas National Bank, N.A.

The GP reiterates in the Q1 2024 Report that the Debt Commitment Letter expired on October 31, 2023 without further extension. The parties had previously extended the commitment twice — the second extension expiring on October 31, 2023 — and Atlas National Bank and Pinnacle Credit Partners declined to agree to a further extension in light of the uncertain transaction timeline and changed credit market conditions.

In connection with the extension of the Debt Commitment Letter to October 31, 2023, Meridian Infrastructure Partners Fund IV, LP (the main fund vehicle) paid a debt commitment extension fee of $2,437,500, calculated as 0.25% of the $975,000,000 term loan commitment. This fee was borne by the main fund vehicle and was not allocated to the Vehicle. No additional commitment extension fees have been incurred since the Debt Commitment Letter expired.

The GP acknowledges in the Q1 2024 Report that any reactivation of the transaction would require the arrangement of new debt financing, as the prior commitments are no longer in effect. The GP notes that Meridian is monitoring credit market conditions on an ongoing basis but has not initiated any refinancing discussions during Q1 2024. This is consistent with the GP's approach during the dormancy period, which has been to refrain from incurring costs or taking affirmative steps toward reactivation pending resolution of the Bull Run concession renegotiation.

The GP does not provide any indication of expected terms for replacement debt financing or a timeline for initiating refinancing discussions. We note that credit market conditions have changed materially since the original Debt Commitment Letter was executed in September 2022. The base rate environment has shifted significantly, and leveraged lending terms in the infrastructure sector have tightened. Any new debt financing is likely to be available on less favorable terms than those originally committed, which would have implications for the transaction's financial returns and, potentially, for the agreed enterprise value. This consideration reinforces the importance of requesting updated Cascadia financials and the GP's views on enterprise value repricing, as noted in Section V.

D. Regulatory Approvals

(i) FERC Section 203 Approval — Lapse Risk. The Federal Energy Regulatory Commission ("FERC") granted approval under Section 203 of the Federal Power Act for the indirect transfer of control of Cascadia's fourteen hydroelectric facilities on December 15, 2022, in Docket No. EC22-143-000. The approval was conditioned on the completion of license-transfer filings for each of Cascadia's hydroelectric facilities in accordance with the procedures established under 18 C.F.R. Part 9.

The original FERC order contained an eighteen (18) month validity period, meaning the approval would lapse if the authorized transaction was not consummated within that timeframe. Recognizing that the dormancy period and the concession renegotiation would prevent timely closing, Meridian applied to FERC staff for an extension of the validity period. FERC staff granted a letter extension establishing a revised lapse date of June 15, 2024.

The GP's report flags that the FERC Section 203 approval will lapse on June 15, 2024 if the transaction is not consummated or a further extension is not obtained. This is approximately fifty-eight (58) days from the date of this memorandum. Notably, the GP indicates that Meridian does not intend to request a further extension of the FERC approval at this time, given the uncertain transaction timeline and the GP's assessment that FERC staff would be unlikely to grant an additional extension absent a concrete closing timeline.

C&H Assessment. The lapse of the FERC Section 203 approval is, in our view, one of the most significant developments in the overall transaction landscape. If the approval lapses on June 15, 2024, any future reactivation of the transaction would require a new FERC Section 203 filing. Based on our analysis of FERC filing requirements prepared in connection with the original filing (C&H memorandum dated September 12, 2022) and the precedent established in this proceeding, we estimate that a new FERC Section 203 filing would add approximately six (6) to twelve (12) months to any closing timeline. This estimate accounts for the preparation and filing of a new application, the public comment period, staff review, and the issuance of an order. The timeline could be longer if FERC sets the application for hearing or if intervenors raise material issues.

The cost of a new FERC filing would also be meaningful, including filing fees, outside counsel fees (both at C&H and at any specialized FERC counsel), expert fees, and the management time of both Meridian and Cascadia personnel. We estimate these costs at $1.5 million to $3.0 million based on the costs incurred in connection with the original filing, adjusted for the likelihood that a refiling would require additional analysis given the passage of time and any changes in market conditions, ownership structures, or FERC policy.

The need for a FERC refiling materially impacts the feasibility and cost of reactivation and should be a significant factor in Ironside's assessment of the path forward. We recommend that this topic be discussed on the proposed client call referenced in Section V.B below.

(ii) OPUC (Oregon Public Utility Commission) — Stayed Proceedings. The Oregon Public Utility Commission ("OPUC") proceeding related to the transaction remains pending in Docket No. UM-2287. Meridian filed its application with the OPUC on October 14, 2022, seeking approval for the change of control of Cascadia's regulated water-treatment and hydroelectric operations within the State of Oregon. In February 2023, at the joint request of the applicant and the OPUC staff, the Commission issued an order staying the proceedings pending resolution of the Bull Run concession renegotiation and the dormancy period.

The GP reports that there were no developments in the OPUC proceedings during Q1 2024. The stay remains in effect and no party has moved to lift it. In any reactivation scenario, the stay would need to be lifted and the application would likely need to be amended or supplemented to reflect developments since the original filing, including any changes in the terms of the Bull Run concession, updated financial projections for the Target, and any changes in the proposed ownership structure. Based on past OPUC review timelines for comparable transactions, we estimate that the OPUC approval process, from lifting of the stay through issuance of an order, would take approximately four (4) to eight (8) months.

(iii) CFIUS. The Committee on Foreign Investment in the United States ("CFIUS") review has been completed and does not present any ongoing concerns. Clearance was effectively received through the voluntary notice process; the notice was acknowledged by CFIUS on September 20, 2022, and no further action was required. No foreign ownership issues were identified in connection with the transaction, and the CFIUS status remains unchanged. We do not anticipate that a new CFIUS filing would be required in connection with any reactivation, provided the ownership structure of the acquiring entities remains unchanged.

E. Portland Metropolitan Water District Concession Renegotiation

The Bull Run Filtration Project concession renegotiation remains the central issue driving the dormancy period and the Material Impediment Event. As Ironside is aware, the Portland Metropolitan Water District (the "District") initiated renegotiation of the concession on October 28, 2022, citing Oregon Senate Bill 1567 as the legislative basis for its renegotiation authority. The concession, which was originally a forty-year concession executed circa 2018, generates annual revenue of approximately $64 million for Cascadia, representing approximately 13.1% of Cascadia's FY 2021 total revenue of $487 million.

The GP reports that negotiations between the District and Cascadia are continuing and characterizes the pace of discussions as "deliberate but constructive." According to the report, the parties exchanged revised term sheets during Q1 2024, indicating that substantive negotiations are actively underway. However, no tentative agreement or framework has been reached as of the end of Q1 2024. The GP does not provide a timeline for when an agreement might be reached, though the characterization of the discussions as "constructive" is modestly more positive than the language used in prior quarterly reports, which described the discussions as "ongoing" without further qualification.

Gap Noted. The GP does not provide any detail on the substance of the revised terms being discussed, including whether the proposed revisions would affect the annual revenue figure, the duration of the concession, the capital expenditure obligations of the concessionaire, or other material economic terms. Given that the Bull Run concession represents a significant portion of Cascadia's revenue and was a key component of the acquisition underwriting, any material change in the concession terms would have a direct impact on Cascadia's valuation and, by extension, on the economics of the transaction for Ironside. We recommend that Ironside request more granular information on the potential revenue impact of the renegotiation, including the range of outcomes that the GP considers reasonably likely based on the current state of discussions.

F. Target Company Developments — Cascadia Renewables Holdings, Inc.

The GP reports that Cascadia continues to operate its portfolio of renewable energy and water infrastructure assets across the Pacific Northwest. Specifically, Cascadia operates:

• Fourteen (14) hydroelectric facilities located in Oregon, Washington, and Idaho;

• Six (6) wind farms located in Oregon and Washington; and

• Three (3) water-treatment concessions, including the Bull Run Filtration Project, located in Oregon.

Cascadia's management team remains in place, with Jonathan M. Weir continuing to serve as Chief Executive Officer and Sandra K. Llewellyn continuing to serve as Chief Financial Officer. The stability of the management team is a positive indicator for the ongoing operational integrity of the business, though we note that the extended dormancy period and uncertainty regarding the transaction's outcome create retention risk that should be monitored.

The GP reports that there were no material operational disruptions, litigation, or regulatory enforcement actions affecting Cascadia during Q1 2024. This is consistent with the reports from prior quarters and suggests that Cascadia's operations have remained stable notwithstanding the protracted transaction timeline and the uncertainty surrounding the Bull Run concession renegotiation.

Gap Noted. The GP does not provide any updated financial data for Cascadia in the Q1 2024 Report. The most recent financial information referenced in the report remains the FY 2021 audited figures prepared by Halstead & Greer LLP, which reported revenue of $487 million and EBITDA of $138 million. No FY 2022 or FY 2023 financial data — whether audited, reviewed, or management-prepared — is included in or referenced by the report. Given that more than two years have elapsed since the FY 2021 fiscal year end, the absence of updated financial information is a significant gap that impairs Ironside's ability to assess the current value of the Target and the reasonableness of the agreed enterprise value. We flag this as a priority item for supplemental reporting in Section V.

G. Representations and Warranty Insurance Policy Status

The representations and warranty insurance policy (the "R&W Policy") issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) remains in effect, subject to the tolling arrangement described below.

The R&W Policy provides a coverage limit of $195,000,000, representing 10% of the agreed enterprise value of $1,950,000,000. The premium deposit of $4,875,000, calculated as 2.5% of the $195 million coverage limit, was paid on September 2, 2022, and remains on deposit with Northgate.

Pursuant to a Side Letter dated January 20, 2023 between the insured parties and Northgate, the coverage period under the R&W Policy has been tolled during the dormancy period. The tolling arrangement was negotiated to prevent the policy from expiring while the transaction remains in a suspended state and to preserve the availability of R&W coverage in the event of reactivation without requiring a new application and underwriting process.

The GP reports that there were no communications with Northgate during Q1 2024 regarding reactivation of coverage, expiration of the tolling arrangement, or any other matter.

C&H Observation. We note that the tolling arrangement has been in effect for over fourteen months, a period that significantly exceeds the duration originally contemplated when the tolling Side Letter was negotiated. While we obtained confirmation from Northgate (through BSP) that the tolling remains in effect, as discussed in Section VI below, we recommend that Ironside and C&H assess whether Northgate may seek additional premium or amended coverage terms upon any reactivation of the transaction. R&W insurance market conditions have evolved since September 2022, and the extended passage of time may give Northgate grounds to argue that the risk profile has changed materially. In addition, if updated Cascadia financials reveal a material change in the Target's financial condition, Northgate may require supplemental underwriting as a condition to reactivation of coverage. We will address this topic in more detail in the wind-down election analysis memorandum referenced in Section V.B below.

IV. Vehicle Financial Status

A. Capital Account Summary

The financial structure of the Vehicle remains unchanged from the formation date and from all prior quarterly reports. The key figures are as follows:

The single capital call of $22,500,000 was issued on August 15, 2022, shortly after the formation of the Vehicle, and was funded by Ironside in full on August 22, 2022, within the 10-business-day funding period prescribed by LP Agreement Section 4.02(a). No additional capital calls have been issued, and all capital calls remain suspended since January 9, 2023, the date on which the GP declared the Material Impediment Event and commenced the dormancy period.

B. Application of Called Capital (Unchanged from Prior Reports)

The $22,500,000 of called capital was applied as follows, consistent with the capital call notice issued on August 15, 2022 and with the reporting in all prior quarterly reports:

The organizational expenses include legal fees incurred in connection with the formation of the Vehicle (including C&H fees for LP Agreement negotiation and Side Letter drafting), regulatory filings, and formation costs. The placement-agent fee of $1,050,000, representing 0.35% of total committed capital, was paid to Rivermark Capital Markets Inc. in connection with its role as placement agent for the co-invest. The due-diligence costs and deposits of $12,790,000 represent amounts funded toward third-party due-diligence expenses (including environmental, engineering, regulatory, insurance, tax, and financial due diligence) and deposits required under the EPA and related transaction documents.

C. Dormancy Period Expenses

The GP reports that annualized operating expenses during the dormancy period remain approximately $185,000, a figure that has been consistent across all quarterly reports since the commencement of dormancy. The components of these operating expenses include:

• Fund administration services provided by Kendrick Thorne & Associates LLP;

• Registered agent fees payable to Cascade Systems (registered office: 160 Greentree Drive, Suite 101, Dover, Delaware 19904);

• Delaware franchise tax;

• Annual audit fees; and

• K-1 preparation costs.

For Q1 2024, the GP reports operating expenses of approximately $46,000, which is approximately one-quarter of the annualized estimate and consistent with a ratable allocation of expenses across the four quarters of the year.

The GP further reports that the working-capital reserve balance of $3,500,000, less cumulative dormancy expenses incurred since January 2023, remains adequate to cover ongoing dormancy expenses for the foreseeable future. Based on the annualized expense rate of $185,000 and approximately fifteen (15) months of dormancy expenses incurred through March 31, 2024 (approximately $231,250), the implied remaining working-capital reserve balance is approximately $3,268,750, which would fund approximately 17.7 additional years of dormancy expenses at the current run rate. We do not anticipate any need for an additional capital call to fund dormancy expenses.

D. Vehicle Entity Maintenance

The Vehicle remains in good standing and in compliance with all applicable entity maintenance requirements:

• Employer Identification Number (EIN): 88-3921457

• Delaware Secretary of State File Number: 7439218

• FY 2023 Annual Compliance Filings: Completed, as confirmed in C&H's separate Annual Compliance Memorandum dated February 2024.

• FY 2023 K-1: Prepared by Kendrick Thorne & Associates LLP and reviewed by Sylvia Hartwell, Specialist Partner, Tax, at Calderwood & Harkness LLP. C&H's tax review is documented in a separate memorandum dated March 2024.

We confirm that all required Delaware filings, including the annual franchise tax report and the payment of franchise taxes, have been timely submitted and are current through the date of this memorandum.

V. Reporting Gaps and Recommendations

A. Identified Gaps in Q1 2024 Report

Based on our review of the Q1 2024 Report against the requirements of LP Agreement Section 7.04(b) and the Side Letter, we have identified the following gaps in the report's coverage:

1. Updated Cascadia Financials. The Q1 2024 Report does not include FY 2022 or FY 2023 financial information for Cascadia Renewables Holdings, Inc. The most recent financial data referenced in the report remains the FY 2021 audited figures from Halstead & Greer LLP (revenue of $487 million; EBITDA of $138 million). Given that more than two full fiscal years have elapsed since the FY 2021 year-end, the absence of updated financial information is a significant gap. Updated financials — whether audited, reviewed, or management-prepared — are essential for Ironside to evaluate the current value of the Target, assess the reasonableness of the agreed enterprise value, and make an informed decision regarding the exercise of its wind-down election right. We recommend that Ironside request, at a minimum, management-prepared financial statements for FY 2022 and FY 2023, and, to the extent available, the most recent interim financials.

2. Enterprise Value Repricing. The Q1 2024 Report does not discuss whether the agreed enterprise value of $1,950,000,000 (implying an EV/EBITDA multiple of approximately 14.1x based on FY 2021 EBITDA) would be subject to adjustment in any reactivation scenario. Significant time has elapsed since the EPA was executed in September 2022, during which macroeconomic conditions, interest rates, infrastructure asset valuations, and Cascadia's own operating performance have all evolved. The question of whether the Selling Shareholders would accept a revised enterprise value, or alternatively whether the current valuation remains appropriate in light of updated financial performance, is a threshold consideration for any reactivation analysis. We recommend that Ironside request the GP's current views on this topic.

3. Concession Renegotiation Substance. The Q1 2024 Report characterizes the Bull Run concession renegotiation as "deliberate but constructive" and notes that revised term sheets were exchanged, but provides no detail on the specific terms being discussed or their potential impact on Cascadia's revenue, profitability, or contract economics. Given that the concession renegotiation is the root cause of the dormancy period and that the Bull Run concession represents approximately 13.1% of Cascadia's FY 2021 revenue, more granular information is warranted. We recommend that Ironside request a summary of the key terms under discussion, including any proposed changes to revenue, duration, capital expenditure obligations, and performance standards, and the GP's assessment of the range of likely outcomes and their financial impact.

4. Standstill Agreement Cost Allocation. The Q1 2024 Report does not provide sufficient detail on whether any incremental costs beyond the approximately $185,000 of annualized operating expenses are being allocated to the Vehicle in connection with the Standstill Agreement. While the Standstill Agreement provides generally that each party bears its own costs, there may be shared costs (such as regulatory filing maintenance or professional service retainers) that flow through the acquisition vehicle structure. We recommend that Ironside request confirmation that no such costs are being borne by the Vehicle.

5. FERC Re-Filing Contingency Planning. The Q1 2024 Report acknowledges the FERC Section 203 approval lapse date of June 15, 2024 and the GP's current decision not to seek a further extension, but does not address contingency planning for a new FERC Section 203 filing in the event the transaction is reactivated after the approval lapses. Given the significance of the FERC approval (as discussed in Section III.D(i) above), the estimated 6-to-12-month timeline for a new filing, and the associated costs, the absence of contingency planning analysis is a notable gap. We recommend that Ironside request the GP's assessment of the time, cost, and risk associated with a FERC refiling.

B. Recommendations for Ironside

Based on our review of the Q1 2024 Report and our analysis of the overall transaction landscape, we make the following recommendations:

1. Request Supplemental Reporting. Ironside should request supplemental reporting from the GP on items 1 through 5 identified in Section V.A above, citing the enhanced reporting obligations contained in the Side Letter as the basis for such request. We are prepared to draft a letter to the GP (or to BSP, as counsel to Meridian) making this request on Ironside's behalf.

2. Monitor the FERC Section 203 Lapse Date. The FERC Section 203 approval is currently set to lapse on June 15, 2024, approximately fifty-eight (58) days from the date of this memorandum. Ironside should request that Meridian provide at least thirty (30) days' advance notice of its decision regarding any further extension request — i.e., by no later than May 16, 2024 — so that Ironside has adequate time to assess the implications of the GP's decision and, if necessary, advocate for a different course of action. If the GP's decision is to allow the FERC approval to lapse, Ironside should understand the implications for reactivation feasibility before the lapse occurs.

3. Assess the Approaching 18-Month Dormancy Trigger. LP Agreement Section 7.04(c) provides that if the dormancy period continues for a period of eighteen (18) consecutive months without cure of the Material Impediment Event, the limited partners holding a majority of the outstanding limited partnership interests shall have the right to elect a wind-down of the Vehicle (the "Wind-Down Election Right"). The dormancy period commenced on January 9, 2023. The 18-month trigger date is therefore July 9, 2024, which is approximately eighty-two (82) days from the date of this memorandum. Ironside, as the holder of 99.99% of the limited partnership interests, effectively has unilateral authority to exercise this right. We recommend that Ironside begin its internal assessment of whether to exercise the Wind-Down Election Right promptly, so that the decision can be made on a well-informed basis in advance of the July 9 date.

4. Schedule a Call with Meridian Leadership. We recommend that Ironside schedule a call between Marcus J. Calloway and Renata Obasi, on the one hand, and David R. Hargreaves (Senior Managing Partner, Meridian Infrastructure Partners LP) and Lillian Fong (Partner, Portfolio), on the other, to discuss the reactivation/wind-down decision framework in advance of the July 9, 2024 date. This call would provide an opportunity for Ironside to obtain the GP's current views on the feasibility and desirability of reactivation, the GP's assessment of the concession renegotiation timeline, and the GP's perspective on the economic implications of the various paths forward. Ideally, this call should occur within the next two to three weeks, allowing sufficient time for follow-up analysis before the July 9 date.

5. Wind-Down Election Analysis. C&H will prepare a detailed analysis of Ironside's Wind-Down Election Right under LP Agreement Section 7.04(c), including: (a) the procedural requirements for exercise of the right; (b) the consequences of exercise, including the GP's obligations regarding orderly wind-down, disposition or recovery of called capital, and termination of the LP Agreement; (c) the financial considerations for and against exercise, including an assessment of the likelihood and value of reactivation versus the costs and risks of continued dormancy; and (d) the tax implications of a wind-down, including the treatment of organizational expenses, placement-agent fees, and the R&W insurance premium deposit. We expect to deliver this analysis in the form of a separate memorandum no later than June 1, 2024, in advance of the July 9 trigger date.

VI. Status of Prior Report Recommendations

The following summarizes the status of open items from our prior C&H Review Memoranda, specifically those issued in connection with the Q3 2023 Report (C&H Review Memorandum dated October 15, 2023) and the Q4 2023 Report (C&H Review Memorandum dated January 22, 2024):

1. Negotiate Standstill Agreement. Status: Completed. In our Q3 2023 and Q4 2023 Review Memoranda, we recommended that Ironside advocate for the negotiation and execution of a standstill agreement among the EPA parties to prevent unilateral termination following the expiration of the third extended outside date on December 31, 2023. As reported above, the Standstill Agreement was executed on February 15, 2024, on terms consistent with the framework we recommended and substantially reflecting the draft that C&H prepared on behalf of the co-invest interests. This recommendation is now closed.

2. Obtain Confirmation of R&W Tolling Side Letter Enforceability. Status: Completed. In our Q3 2023 Review Memorandum, we recommended that Ironside, through C&H, obtain written confirmation from Northgate Specialty Insurance Co. that the tolling side letter dated January 20, 2023 remains in full force and effect and that Northgate does not consider the tolling to have been terminated or to be subject to any expiration date not reflected in the side letter. Confirmation was obtained from Northgate through BSP in November 2023. The tolling remains in effect as of the date of this memorandum. We recommend periodic reconfirmation, as discussed in Section III.G above. This recommendation is closed, subject to the ongoing monitoring noted.

3. Debt Commitment Expiration Analysis. Status: Completed. In our Q3 2023 Review Memorandum, we recommended that C&H prepare an analysis of the consequences of the expiration of the Debt Commitment Letter and the implications for any future reactivation, including the likely cost and timeline for replacement financing. This analysis was completed and delivered to Ironside in a letter dated November 2, 2023. The key conclusions were that replacement financing would be available but likely on less favorable terms (higher spreads, more restrictive covenants), and that the financing process would add approximately three (3) to five (5) months to any reactivation timeline. This recommendation is closed.

4. Request Updated Cascadia Financials. Status: Open — Carried Forward. In our Q4 2023 Review Memorandum, we recommended that Ironside request updated financial information for Cascadia from the GP. This request was not made during Q1 2024, and the GP did not provide updated financials on its own initiative. We carry this recommendation forward and reiterate it with increased urgency in Section V.A.1 above.

5. Assess FERC Extension Options. Status: Open — Partially Superseded. In our Q4 2023 Review Memorandum, we recommended that Ironside discuss with Meridian the desirability of seeking a further extension of the FERC Section 203 approval beyond the June 15, 2024 lapse date. The GP's report indicates that Meridian does not intend to seek a further extension. While the GP's decision on this point is within its authority, Ironside should understand the implications, as discussed in Section III.D(i) and Section V.B.2 above.

VII. Conclusion

The Q1 2024 Report delivered by Meridian Infrastructure GP IV LLC is timely and substantially compliant with the reporting requirements of LP Agreement Section 7.04(b) and the Side Letter, subject to the informational gaps identified and discussed in Section V above. We find the report to be consistent with the factual record as known to C&H and to provide a generally accurate, if not fully comprehensive, account of the key developments during the quarter.

The two most consequential near-term matters for Ironside are:

(a) The FERC Section 203 approval lapse on June 15, 2024. If the approval lapses without further extension, any future reactivation of the transaction would require a new FERC filing, adding an estimated six (6) to twelve (12) months and $1.5 million to $3.0 million to the reactivation timeline and cost. The lapse of FERC approval represents a qualitative shift in the reactivation calculus and should be a central factor in Ironside's decision-making.

(b) The ripening of Ironside's Wind-Down Election Right on July 9, 2024. On that date, Ironside will have the contractual right to elect a wind-down of the Vehicle if the Material Impediment Event has not been cured. Given Ironside's 99.99% limited partnership interest, this right is effectively unilateral. The exercise (or non-exercise) of this right will be the most consequential decision Ironside makes with respect to the Vehicle. C&H will prepare a detailed analysis of the considerations relevant to that decision, targeted for delivery by June 1, 2024.

Calderwood & Harkness stands ready to advise Ironside on the wind-down election analysis, to engage with Breckenridge Sloane & Pratt on any reactivation discussions as directed by Ironside, and to prepare supplemental reporting requests and other communications to the GP as needed.

We recommend a client call within the next two weeks — ideally during the week of April 29, 2024 — to discuss these matters and to align on the strategic path forward. Theresa Kim will coordinate scheduling with Renata Obasi's office.

We trust this memorandum is responsive to your needs. Please do not hesitate to contact us with any questions or to discuss any aspect of this review.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Pamela Cross Responsible Partner Calderwood & Harkness LLP 125 Broad Street, 44th Floor New York, NY 10004

By: ________

Theresa Kim Lead Associate Calderwood & Harkness LLP

cc: Nicholas Stern, Billing Partner, Calderwood & Harkness LLP Owen Fischer, Working Associate, Calderwood & Harkness LLP Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP (for informational purposes)

Distribution: Ironside Capital Management LP — Privileged and Confidential. This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is provided solely for the use of the addressees and the individuals identified on the copy line. Any distribution, copying, or disclosure of this memorandum or its contents to any person not authorized to receive it is strictly prohibited.

Item	Amount	Percentage
Total Committed Capital	$300,000,000	100.00%
GP Commitment (Meridian Infrastructure GP IV LLC)	$30,000	0.01%
LP Commitment (Ironside Capital Management LP)	$299,970,000	99.99%
Capital Called to Date	$22,500,000	7.50%
Unfunded Commitment	$277,500,000	92.50%
Category	Amount
Organizational Expenses	$285,000
Placement-Agent Fee (Rivermark Capital Markets Inc., 0.35% × $300,000,000)	$1,050,000
R&W Insurance Premium Deposit (Northgate Specialty Insurance Co.)	$4,875,000
Due-Diligence Costs and Deposits	$12,790,000
Working-Capital Reserve	$3,500,000
Total	$22,500,000

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MEMORANDUM
To: Marcus J. Calloway, Founder & Chief Investment Officer, Ironside Capital Management LP Renata Obasi, Senior Managing Director, Infrastructure, Ironside Capital Management LP
From: Pamela Cross, Responsible Partner, Calderwood & Harkness LLP Theresa Kim, Lead Associate, Calderwood & Harkness LLP
Date: April 18, 2024
Re: Review of Meridian Infrastructure GP IV LLC Quarterly Status Report — Q1 2024 (January 1, 2024 – March 31, 2024) — ICM Cascadia Co-Invest, LP
Matter No.: 1023-00001
I. Executive Summary
This memorandum presents our review of the quarterly status report for the first quarter of 2024 (the "Q1 2024 Report") delivered by Meridian Infrastructure GP IV LLC (the "GP") to Ironside Capital Management LP ("Ironside" or the "Client") pursuant to Section 7.04(b) of the Amended and Restated Agreement of Limited Partnership of ICM Cascadia Co-Invest, LP (the "Vehicle"), dated July 29, 2022 (the "LP Agreement"), and the Side Letter between the GP and Ironside, also dated July 29, 2022 (the "Side Letter"). The Q1 2024 Report covers the period from January 1, 2024 through March 31, 2024.
The Q1 2024 Report is the sixth consecutive quarterly report delivered during the dormancy period, which commenced on January 9, 2023, following the GP's formal declaration of a Material Impediment Event under LP Agreement Section 7.04. As Ironside is aware, the Material Impediment Event was declared in connection with the Portland Metropolitan Water District's initiation of concession renegotiation proceedings affecting the Bull Run Filtration Project concession held by Cascadia Renewables Holdings, Inc. (the "Target" or "Cascadia"), which created uncertainty as to a material component of Cascadia's revenue base and, in the GP's determination, constituted an event that would reasonably be expected to prevent consummation of the acquisition on the terms contemplated by the Equity Purchase Agreement.
The quarter under review was marked by two significant developments that bear directly on the future trajectory of the Vehicle and the underlying acquisition transaction:
(a) On February 15, 2024, the parties to the Equity Purchase Agreement executed a Mutual Standstill and Preservation Agreement (the "Standstill Agreement"), following the expiration on December 31, 2023 of the third extended outside date under the Equity Purchase Agreement (as amended). The Standstill Agreement establishes a framework under which no party may exercise termination rights under the Equity Purchase Agreement during the standstill period, while preserving existing transaction documents and regulatory approvals to the extent still in effect. Either side may exit the standstill on sixty (60) days' written notice.
(b) The FERC Section 203 approval received on December 15, 2022 (Docket No. EC22-143-000), which authorized the indirect transfer of control of Cascadia's fourteen hydroelectric facilities, is subject to a validity period that, as extended by FERC staff, will lapse on June 15, 2024. The GP has indicated that it does not currently intend to seek a further extension of that approval. The lapse of FERC authorization is a consequential development that would add significant time and cost to any future reactivation of the transaction, as discussed in detail in Section III.D(i) below.
Overall Assessment. The Q1 2024 Report is substantially compliant with the reporting requirements set forth in LP Agreement Section 7.04(b) and the enhanced reporting obligations contained in the Side Letter. We have, however, identified certain informational gaps in the report that warrant supplemental inquiry by Ironside, which we discuss in Section V of this memorandum.
Vehicle Status. The Vehicle remains dormant. There have been no capital calls, no distributions, and no investment activity during the quarter or at any point since the commencement of the dormancy period. The unfunded commitment remains $277,500,000, and the total capital called to date remains $22,500,000, reflecting the single capital call made on August 15, 2022.
Critical Upcoming Dates. We draw particular attention to two approaching dates that will require strategic decision-making by Ironside: (i) the FERC Section 203 approval lapse date of June 15, 2024 (approximately 58 days from the date of this memorandum), and (ii) the 18-month dormancy trigger date of July 9, 2024 (approximately 82 days from the date of this memorandum), at which point Ironside's wind-down election right under LP Agreement Section 7.04(c) will ripen. We recommend a client call within the next two weeks to discuss the strategic implications of these dates and the available courses of action.
II. Compliance with Reporting Obligations
A. Timeliness.  Section 7.04(b) of the LP Agreement requires the GP to deliver quarterly status reports to each limited partner within forty-five (45) days following the end of each calendar quarter during any dormancy period declared pursuant to Section 7.04(a). This reporting cadence was negotiated at formation as part of the information-rights package to ensure that limited partners receive timely updates on the status of the Material Impediment Event and the GP's efforts to cure or otherwise resolve the impediment.
The first quarter of 2024 ended on March 31, 2024. Applying the 45-day delivery window, the deadline for delivery of the Q1 2024 Report was May 15, 2024.
The Q1 2024 Report was delivered on April 12, 2024, which is thirty-three (33) days after the end of the quarter and twelve (12) days in advance of the contractual deadline. Accordingly, delivery of the Q1 2024 Report was timely.
The report was transmitted via email by Lillian Fong, Partner, Portfolio, at Meridian Infrastructure Partners LP, to Renata Obasi at Ironside, with copies to Pamela Cross at Calderwood & Harkness LLP ("C&H") and Charles A. Delacroix at Breckenridge Sloane & Pratt LLP ("BSP"), counsel to Meridian. This delivery method is consistent with the notice provisions of LP Agreement Section 12.01 and with the established practice for all prior quarterly reports delivered during the dormancy period. We confirm receipt of the report on the same date and note that the delivery record is consistent with prior quarters.
B. Content Requirements
LP Agreement Section 7.04(b), as supplemented by the Side Letter, requires that each quarterly status report during a dormancy period address the following enumerated categories of information:
(i) The current status of the Material Impediment Event and any developments toward its cure or resolution;
(ii) The financial status of the Vehicle, including capital account balances, expenses incurred during the quarter, and the Vehicle's cash position;
(iii) The status of all regulatory approvals required for the consummation of the underlying acquisition transaction, including any approvals that have lapsed, been withdrawn, or are at risk of lapsing;
(iv) The status of the underlying acquisition transaction, including the Equity Purchase Agreement and any related transaction agreements, and any amendments, extensions, terminations, or standstill arrangements affecting such agreements;
(v) The GP's good-faith assessment of the likely timeline for resolution of the Material Impediment Event and, to the extent reasonably determinable, the GP's current expectations regarding the path to closing or, alternatively, to termination and wind-down of the Vehicle; and
(vi) Any material developments affecting the Target, including changes in management, operations, financial condition, litigation, or regulatory status, that are known to the GP and that are reasonably likely to affect the value of the investment or the prospects for consummation of the acquisition.
The Side Letter further requires that the GP provide Ironside with enhanced reporting that includes, to the extent reasonably available, copies of or excerpts from any material communications with regulatory agencies, the Target's board of directors or management, or the Selling Shareholders relating to the Material Impediment Event or the status of the transaction.
Our section-by-section analysis of the Q1 2024 Report's compliance with each of these content requirements is set forth in Sections III through V below. As a general matter, the Q1 2024 Report addresses all six enumerated categories at a level of detail that is generally adequate, though we have identified specific gaps and areas where supplemental information should be requested, as detailed in Section V.
III. Summary of Key Developments Reported in Q1 2024 Report
A. Mutual Standstill and Preservation Agreement (February 15, 2024)
The most significant transactional development reported in the Q1 2024 Report is the execution of the Mutual Standstill and Preservation Agreement on February 15, 2024. This agreement was necessitated by the expiration on December 31, 2023 of the third extended outside date under the Equity Purchase Agreement, which left the EPA parties without a contractually mandated closing timeline and created the risk that one or more parties might exercise termination rights.
The GP reports that following the December 31, 2023 expiration, no party to the Equity Purchase Agreement exercised its termination right under EPA Section 9.01(b) (termination upon expiration of the outside date) during the period between January 1, 2024 and February 15, 2024. This is consistent with our understanding of the parties' positions based on our engagement with BSP in January 2024.
On February 15, 2024, the following parties executed the Standstill Agreement:
•  Selling Shareholders: Timberline Growth Equity Fund III, LP (holding approximately 62% of Cascadia's equity, managed by Hugh Callister at Timberline Growth Partners LLC); the Weir Family Trust (holding approximately 18% of Cascadia's equity, with Jonathan M. Weir serving as trustee); and the Management Rollover Pool (holding approximately 20% of Cascadia's equity, comprising approximately 25 members who were expected to roll over 50% of their equity in connection with the transaction);
•  Cascadia Renewables Holdings, Inc., in its capacity as the Target company; and
•  Cascadia Acquisition Corp., the acquisition vehicle formed by Meridian for purposes of consummating the transaction.
Calderwood & Harkness drafted the Standstill Agreement on behalf of the co-invest interests, in coordination with BSP's drafting on behalf of Meridian and the acquisition vehicle. The execution version of the Standstill Agreement was the subject of our separate memorandum to Ironside dated February 10, 2024, in which we analyzed the key provisions and provided our assessment of the agreement's impact on Ironside's rights and obligations under the LP Agreement.
The GP's description of the Standstill Agreement in the Q1 2024 Report is accurate and consistent with the terms of the executed agreement. The key terms, as summarized in the report, include:
(a) Mutual Standstill on Termination Rights. Each party agrees not to deliver a notice of termination under the EPA during the standstill period. This effectively preserves the EPA in a suspended state and prevents unilateral termination by any party without first exiting the standstill.
(b) Preservation of Transaction Documents and Regulatory Approvals. The parties agree to maintain in effect, to the extent within their respective control, all transaction documents and existing regulatory approvals obtained in connection with the acquisition. This preservation obligation is subject to the caveat that it applies only "to the extent still in effect," which reflects the reality that certain approvals, including the FERC Section 203 approval, are subject to validity periods established by the relevant regulatory authority and not within the unilateral control of the parties.
(c) Framework for Reactivation or Orderly Wind-Down. The Standstill Agreement contemplates two potential paths forward: (i) reactivation of the transaction, which would require the parties to negotiate and execute a Fourth Amendment to the EPA establishing a new outside date and addressing any changes in circumstances since the original signing; or (ii) an orderly wind-down and termination of the EPA, to be negotiated in good faith if the parties determine that reactivation is not feasible or desirable.
Importantly, the Standstill Agreement does not impose an automatic termination date. Rather, either side may exit the standstill by delivering sixty (60) days' written notice to the other parties. This open-ended structure provides flexibility but also means that the transaction could remain in a state of suspended animation for an indefinite period absent affirmative action by one of the parties.
Gap Noted. The GP's report does not discuss the cost-allocation provisions of the Standstill Agreement in any meaningful detail. Specifically, Section 4.02 of the Standstill Agreement addresses the allocation of ongoing costs incurred in connection with the preservation of transaction documents and regulatory approvals during the standstill period. We recommend that Ironside request supplemental confirmation from the GP that no incremental costs are being allocated to the Vehicle during the standstill period beyond the previously reported annualized dormancy operating expenses of approximately $185,000. While the Standstill Agreement as drafted provides that each party shall bear its own costs during the standstill, there is potential ambiguity with respect to shared costs such as regulatory filing maintenance fees and professional service retainers that may be allocated through the acquisition vehicle to the underlying fund and co-invest structures.
B. Equity Purchase Agreement Status
The Equity Purchase Agreement (the "EPA"), originally executed on September 15, 2022, governs the acquisition of 100% of the equity interests in Cascadia Renewables Holdings, Inc. by Cascadia Acquisition Corp. The EPA has been amended three times since its execution:
•  First Amendment (November 22, 2022): Extended the initial outside date from December 31, 2022 to March 31, 2023 and made certain technical amendments to the regulatory condition precedent provisions.
•  Second Amendment (March 15, 2023): Extended the outside date from March 31, 2023 to June 30, 2023 and added a condition requiring material progress in the Bull Run concession renegotiation as a precondition to closing.
•  Third Amendment (June 28, 2023): Extended the outside date from June 30, 2023 to December 31, 2023. This was the final amendment to the EPA prior to the expiration of the outside date.
As noted above, the outside date of December 31, 2023, as established by the Third Amendment, has expired. The Standstill Agreement effectively preserves the EPA in a suspended state; no party has delivered a termination notice under EPA Section 9.01(b) or any other provision of the EPA. The EPA therefore remains technically in effect, though the conditions to closing have not been satisfied and no closing timeline exists.
The GP notes in the Q1 2024 Report that the Selling Shareholders remain engaged in standstill discussions. In particular, the GP reports that Timberline Growth Equity Fund III, LP (the 62% holder, managed by Hugh Callister at Timberline Growth Partners LLC) and the Weir Family Trust (the 18% holder, with Jonathan M. Weir serving as trustee) have both confirmed their continued interest in the transaction, subject to satisfactory resolution of the concession renegotiation. The Management Rollover Pool, which holds approximately 20% of Cascadia's equity and comprises approximately 25 members who were expected to roll over 50% of their equity in connection with the acquisition, continues to hold its equity and has not indicated any intent to exit the transaction.
Gap Noted. The GP's report does not address whether the agreed enterprise value of $1,950,000,000 would be subject to repricing in any reactivation scenario. This enterprise value was established based on Cascadia's FY 2021 EBITDA of $138,000,000, implying an EV/EBITDA multiple of approximately 14.1x. Given that nearly two and a half years have elapsed since the EPA was executed, and given the significant changes in macroeconomic conditions (including interest rate movements), infrastructure asset valuations, and Cascadia's own operating performance during the intervening period, the question of whether the agreed enterprise value remains appropriate is a material consideration for any reactivation analysis. We flag this as a reporting gap in Section V and recommend that Ironside request the GP's views on this topic.
C. Debt Financing Status
The debt financing for the acquisition was arranged pursuant to a commitment letter (the "Debt Commitment Letter") dated September 12, 2022 from Atlas National Bank, N.A. (serving as lead arranger and administrative agent) and Pinnacle Credit Partners LLC (serving as co-lender). The Debt Commitment Letter provided for the following facilities:
•  Senior Secured Term Loan: $975,000,000 total, comprising $650,000,000 from Atlas National Bank, N.A. and $325,000,000 from Pinnacle Credit Partners LLC.
•  Revolving Credit Facility: $150,000,000, provided by Atlas National Bank, N.A.
The GP reiterates in the Q1 2024 Report that the Debt Commitment Letter expired on October 31, 2023 without further extension. The parties had previously extended the commitment twice — the second extension expiring on October 31, 2023 — and Atlas National Bank and Pinnacle Credit Partners declined to agree to a further extension in light of the uncertain transaction timeline and changed credit market conditions.
In connection with the extension of the Debt Commitment Letter to October 31, 2023, Meridian Infrastructure Partners Fund IV, LP (the main fund vehicle) paid a debt commitment extension fee of $2,437,500, calculated as 0.25% of the $975,000,000 term loan commitment. This fee was borne by the main fund vehicle and was not allocated to the Vehicle. No additional commitment extension fees have been incurred since the Debt Commitment Letter expired.
The GP acknowledges in the Q1 2024 Report that any reactivation of the transaction would require the arrangement of new debt financing, as the prior commitments are no longer in effect. The GP notes that Meridian is monitoring credit market conditions on an ongoing basis but has not initiated any refinancing discussions during Q1 2024. This is consistent with the GP's approach during the dormancy period, which has been to refrain from incurring costs or taking affirmative steps toward reactivation pending resolution of the Bull Run concession renegotiation.
The GP does not provide any indication of expected terms for replacement debt financing or a timeline for initiating refinancing discussions. We note that credit market conditions have changed materially since the original Debt Commitment Letter was executed in September 2022. The base rate environment has shifted significantly, and leveraged lending terms in the infrastructure sector have tightened. Any new debt financing is likely to be available on less favorable terms than those originally committed, which would have implications for the transaction's financial returns and, potentially, for the agreed enterprise value. This consideration reinforces the importance of requesting updated Cascadia financials and the GP's views on enterprise value repricing, as noted in Section V.
D. Regulatory Approvals
(i) FERC Section 203 Approval — Lapse Risk.  The Federal Energy Regulatory Commission ("FERC") granted approval under Section 203 of the Federal Power Act for the indirect transfer of control of Cascadia's fourteen hydroelectric facilities on December 15, 2022, in Docket No. EC22-143-000. The approval was conditioned on the completion of license-transfer filings for each of Cascadia's hydroelectric facilities in accordance with the procedures established under 18 C.F.R. Part 9.
The original FERC order contained an eighteen (18) month validity period, meaning the approval would lapse if the authorized transaction was not consummated within that timeframe. Recognizing that the dormancy period and the concession renegotiation would prevent timely closing, Meridian applied to FERC staff for an extension of the validity period. FERC staff granted a letter extension establishing a revised lapse date of June 15, 2024.
The GP's report flags that the FERC Section 203 approval will lapse on June 15, 2024 if the transaction is not consummated or a further extension is not obtained. This is approximately fifty-eight (58) days from the date of this memorandum. Notably, the GP indicates that Meridian does not intend to request a further extension of the FERC approval at this time, given the uncertain transaction timeline and the GP's assessment that FERC staff would be unlikely to grant an additional extension absent a concrete closing timeline.
C&H Assessment. The lapse of the FERC Section 203 approval is, in our view, one of the most significant developments in the overall transaction landscape. If the approval lapses on June 15, 2024, any future reactivation of the transaction would require a new FERC Section 203 filing. Based on our analysis of FERC filing requirements prepared in connection with the original filing (C&H memorandum dated September 12, 2022) and the precedent established in this proceeding, we estimate that a new FERC Section 203 filing would add approximately six (6) to twelve (12) months to any closing timeline. This estimate accounts for the preparation and filing of a new application, the public comment period, staff review, and the issuance of an order. The timeline could be longer if FERC sets the application for hearing or if intervenors raise material issues.
The cost of a new FERC filing would also be meaningful, including filing fees, outside counsel fees (both at C&H and at any specialized FERC counsel), expert fees, and the management time of both Meridian and Cascadia personnel. We estimate these costs at $1.5 million to $3.0 million based on the costs incurred in connection with the original filing, adjusted for the likelihood that a refiling would require additional analysis given the passage of time and any changes in market conditions, ownership structures, or FERC policy.
The need for a FERC refiling materially impacts the feasibility and cost of reactivation and should be a significant factor in Ironside's assessment of the path forward. We recommend that this topic be discussed on the proposed client call referenced in Section V.B below.
(ii) OPUC (Oregon Public Utility Commission) — Stayed Proceedings.  The Oregon Public Utility Commission ("OPUC") proceeding related to the transaction remains pending in Docket No. UM-2287. Meridian filed its application with the OPUC on October 14, 2022, seeking approval for the change of control of Cascadia's regulated water-treatment and hydroelectric operations within the State of Oregon. In February 2023, at the joint request of the applicant and the OPUC staff, the Commission issued an order staying the proceedings pending resolution of the Bull Run concession renegotiation and the dormancy period.
The GP reports that there were no developments in the OPUC proceedings during Q1 2024. The stay remains in effect and no party has moved to lift it. In any reactivation scenario, the stay would need to be lifted and the application would likely need to be amended or supplemented to reflect developments since the original filing, including any changes in the terms of the Bull Run concession, updated financial projections for the Target, and any changes in the proposed ownership structure. Based on past OPUC review timelines for comparable transactions, we estimate that the OPUC approval process, from lifting of the stay through issuance of an order, would take approximately four (4) to eight (8) months.
(iii) CFIUS.  The Committee on Foreign Investment in the United States ("CFIUS") review has been completed and does not present any ongoing concerns. Clearance was effectively received through the voluntary notice process; the notice was acknowledged by CFIUS on September 20, 2022, and no further action was required. No foreign ownership issues were identified in connection with the transaction, and the CFIUS status remains unchanged. We do not anticipate that a new CFIUS filing would be required in connection with any reactivation, provided the ownership structure of the acquiring entities remains unchanged.
E. Portland Metropolitan Water District Concession Renegotiation
The Bull Run Filtration Project concession renegotiation remains the central issue driving the dormancy period and the Material Impediment Event. As Ironside is aware, the Portland Metropolitan Water District (the "District") initiated renegotiation of the concession on October 28, 2022, citing Oregon Senate Bill 1567 as the legislative basis for its renegotiation authority. The concession, which was originally a forty-year concession executed circa 2018, generates annual revenue of approximately $64 million for Cascadia, representing approximately 13.1% of Cascadia's FY 2021 total revenue of $487 million.
The GP reports that negotiations between the District and Cascadia are continuing and characterizes the pace of discussions as "deliberate but constructive." According to the report, the parties exchanged revised term sheets during Q1 2024, indicating that substantive negotiations are actively underway. However, no tentative agreement or framework has been reached as of the end of Q1 2024. The GP does not provide a timeline for when an agreement might be reached, though the characterization of the discussions as "constructive" is modestly more positive than the language used in prior quarterly reports, which described the discussions as "ongoing" without further qualification.
Gap Noted. The GP does not provide any detail on the substance of the revised terms being discussed, including whether the proposed revisions would affect the annual revenue figure, the duration of the concession, the capital expenditure obligations of the concessionaire, or other material economic terms. Given that the Bull Run concession represents a significant portion of Cascadia's revenue and was a key component of the acquisition underwriting, any material change in the concession terms would have a direct impact on Cascadia's valuation and, by extension, on the economics of the transaction for Ironside. We recommend that Ironside request more granular information on the potential revenue impact of the renegotiation, including the range of outcomes that the GP considers reasonably likely based on the current state of discussions.
F. Target Company Developments — Cascadia Renewables Holdings, Inc.
The GP reports that Cascadia continues to operate its portfolio of renewable energy and water infrastructure assets across the Pacific Northwest. Specifically, Cascadia operates:
•  Fourteen (14) hydroelectric facilities located in Oregon, Washington, and Idaho;
•  Six (6) wind farms located in Oregon and Washington; and
•  Three (3) water-treatment concessions, including the Bull Run Filtration Project, located in Oregon.
Cascadia's management team remains in place, with Jonathan M. Weir continuing to serve as Chief Executive Officer and Sandra K. Llewellyn continuing to serve as Chief Financial Officer. The stability of the management team is a positive indicator for the ongoing operational integrity of the business, though we note that the extended dormancy period and uncertainty regarding the transaction's outcome create retention risk that should be monitored.
The GP reports that there were no material operational disruptions, litigation, or regulatory enforcement actions affecting Cascadia during Q1 2024. This is consistent with the reports from prior quarters and suggests that Cascadia's operations have remained stable notwithstanding the protracted transaction timeline and the uncertainty surrounding the Bull Run concession renegotiation.
Gap Noted. The GP does not provide any updated financial data for Cascadia in the Q1 2024 Report. The most recent financial information referenced in the report remains the FY 2021 audited figures prepared by Halstead & Greer LLP, which reported revenue of $487 million and EBITDA of $138 million. No FY 2022 or FY 2023 financial data — whether audited, reviewed, or management-prepared — is included in or referenced by the report. Given that more than two years have elapsed since the FY 2021 fiscal year end, the absence of updated financial information is a significant gap that impairs Ironside's ability to assess the current value of the Target and the reasonableness of the agreed enterprise value. We flag this as a priority item for supplemental reporting in Section V.
G. Representations and Warranty Insurance Policy Status
The representations and warranty insurance policy (the "R&W Policy") issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) remains in effect, subject to the tolling arrangement described below.
The R&W Policy provides a coverage limit of $195,000,000, representing 10% of the agreed enterprise value of $1,950,000,000. The premium deposit of $4,875,000, calculated as 2.5% of the $195 million coverage limit, was paid on September 2, 2022, and remains on deposit with Northgate.
Pursuant to a Side Letter dated January 20, 2023 between the insured parties and Northgate, the coverage period under the R&W Policy has been tolled during the dormancy period. The tolling arrangement was negotiated to prevent the policy from expiring while the transaction remains in a suspended state and to preserve the availability of R&W coverage in the event of reactivation without requiring a new application and underwriting process.
The GP reports that there were no communications with Northgate during Q1 2024 regarding reactivation of coverage, expiration of the tolling arrangement, or any other matter.
C&H Observation. We note that the tolling arrangement has been in effect for over fourteen months, a period that significantly exceeds the duration originally contemplated when the tolling Side Letter was negotiated. While we obtained confirmation from Northgate (through BSP) that the tolling remains in effect, as discussed in Section VI below, we recommend that Ironside and C&H assess whether Northgate may seek additional premium or amended coverage terms upon any reactivation of the transaction. R&W insurance market conditions have evolved since September 2022, and the extended passage of time may give Northgate grounds to argue that the risk profile has changed materially. In addition, if updated Cascadia financials reveal a material change in the Target's financial condition, Northgate may require supplemental underwriting as a condition to reactivation of coverage. We will address this topic in more detail in the wind-down election analysis memorandum referenced in Section V.B below.
IV. Vehicle Financial Status
A. Capital Account Summary
The financial structure of the Vehicle remains unchanged from the formation date and from all prior quarterly reports. The key figures are as follows:
The single capital call of $22,500,000 was issued on August 15, 2022, shortly after the formation of the Vehicle, and was funded by Ironside in full on August 22, 2022, within the 10-business-day funding period prescribed by LP Agreement Section 4.02(a). No additional capital calls have been issued, and all capital calls remain suspended since January 9, 2023, the date on which the GP declared the Material Impediment Event and commenced the dormancy period.
B. Application of Called Capital (Unchanged from Prior Reports)
The $22,500,000 of called capital was applied as follows, consistent with the capital call notice issued on August 15, 2022 and with the reporting in all prior quarterly reports:
The organizational expenses include legal fees incurred in connection with the formation of the Vehicle (including C&H fees for LP Agreement negotiation and Side Letter drafting), regulatory filings, and formation costs. The placement-agent fee of $1,050,000, representing 0.35% of total committed capital, was paid to Rivermark Capital Markets Inc. in connection with its role as placement agent for the co-invest. The due-diligence costs and deposits of $12,790,000 represent amounts funded toward third-party due-diligence expenses (including environmental, engineering, regulatory, insurance, tax, and financial due diligence) and deposits required under the EPA and related transaction documents.
C. Dormancy Period Expenses
The GP reports that annualized operating expenses during the dormancy period remain approximately $185,000, a figure that has been consistent across all quarterly reports since the commencement of dormancy. The components of these operating expenses include:
•  Fund administration services provided by Kendrick Thorne & Associates LLP;
•  Registered agent fees payable to Cascade Systems (registered office: 160 Greentree Drive, Suite 101, Dover, Delaware 19904);
•  Delaware franchise tax;
•  Annual audit fees; and
•  K-1 preparation costs.
For Q1 2024, the GP reports operating expenses of approximately $46,000, which is approximately one-quarter of the annualized estimate and consistent with a ratable allocation of expenses across the four quarters of the year.
The GP further reports that the working-capital reserve balance of $3,500,000, less cumulative dormancy expenses incurred since January 2023, remains adequate to cover ongoing dormancy expenses for the foreseeable future. Based on the annualized expense rate of $185,000 and approximately fifteen (15) months of dormancy expenses incurred through March 31, 2024 (approximately $231,250), the implied remaining working-capital reserve balance is approximately $3,268,750, which would fund approximately 17.7 additional years of dormancy expenses at the current run rate. We do not anticipate any need for an additional capital call to fund dormancy expenses.
D. Vehicle Entity Maintenance
The Vehicle remains in good standing and in compliance with all applicable entity maintenance requirements:
•  Employer Identification Number (EIN): 88-3921457
•  Delaware Secretary of State File Number: 7439218
•  FY 2023 Annual Compliance Filings: Completed, as confirmed in C&H's separate Annual Compliance Memorandum dated February 2024.
•  FY 2023 K-1: Prepared by Kendrick Thorne & Associates LLP and reviewed by Sylvia Hartwell, Specialist Partner, Tax, at Calderwood & Harkness LLP. C&H's tax review is documented in a separate memorandum dated March 2024.
We confirm that all required Delaware filings, including the annual franchise tax report and the payment of franchise taxes, have been timely submitted and are current through the date of this memorandum.
V. Reporting Gaps and Recommendations
A. Identified Gaps in Q1 2024 Report
Based on our review of the Q1 2024 Report against the requirements of LP Agreement Section 7.04(b) and the Side Letter, we have identified the following gaps in the report's coverage:
1. Updated Cascadia Financials. The Q1 2024 Report does not include FY 2022 or FY 2023 financial information for Cascadia Renewables Holdings, Inc. The most recent financial data referenced in the report remains the FY 2021 audited figures from Halstead & Greer LLP (revenue of $487 million; EBITDA of $138 million). Given that more than two full fiscal years have elapsed since the FY 2021 year-end, the absence of updated financial information is a significant gap. Updated financials — whether audited, reviewed, or management-prepared — are essential for Ironside to evaluate the current value of the Target, assess the reasonableness of the agreed enterprise value, and make an informed decision regarding the exercise of its wind-down election right. We recommend that Ironside request, at a minimum, management-prepared financial statements for FY 2022 and FY 2023, and, to the extent available, the most recent interim financials.
2. Enterprise Value Repricing. The Q1 2024 Report does not discuss whether the agreed enterprise value of $1,950,000,000 (implying an EV/EBITDA multiple of approximately 14.1x based on FY 2021 EBITDA) would be subject to adjustment in any reactivation scenario. Significant time has elapsed since the EPA was executed in September 2022, during which macroeconomic conditions, interest rates, infrastructure asset valuations, and Cascadia's own operating performance have all evolved. The question of whether the Selling Shareholders would accept a revised enterprise value, or alternatively whether the current valuation remains appropriate in light of updated financial performance, is a threshold consideration for any reactivation analysis. We recommend that Ironside request the GP's current views on this topic.
3. Concession Renegotiation Substance. The Q1 2024 Report characterizes the Bull Run concession renegotiation as "deliberate but constructive" and notes that revised term sheets were exchanged, but provides no detail on the specific terms being discussed or their potential impact on Cascadia's revenue, profitability, or contract economics. Given that the concession renegotiation is the root cause of the dormancy period and that the Bull Run concession represents approximately 13.1% of Cascadia's FY 2021 revenue, more granular information is warranted. We recommend that Ironside request a summary of the key terms under discussion, including any proposed changes to revenue, duration, capital expenditure obligations, and performance standards, and the GP's assessment of the range of likely outcomes and their financial impact.
4. Standstill Agreement Cost Allocation. The Q1 2024 Report does not provide sufficient detail on whether any incremental costs beyond the approximately $185,000 of annualized operating expenses are being allocated to the Vehicle in connection with the Standstill Agreement. While the Standstill Agreement provides generally that each party bears its own costs, there may be shared costs (such as regulatory filing maintenance or professional service retainers) that flow through the acquisition vehicle structure. We recommend that Ironside request confirmation that no such costs are being borne by the Vehicle.
5. FERC Re-Filing Contingency Planning. The Q1 2024 Report acknowledges the FERC Section 203 approval lapse date of June 15, 2024 and the GP's current decision not to seek a further extension, but does not address contingency planning for a new FERC Section 203 filing in the event the transaction is reactivated after the approval lapses. Given the significance of the FERC approval (as discussed in Section III.D(i) above), the estimated 6-to-12-month timeline for a new filing, and the associated costs, the absence of contingency planning analysis is a notable gap. We recommend that Ironside request the GP's assessment of the time, cost, and risk associated with a FERC refiling.
B. Recommendations for Ironside
Based on our review of the Q1 2024 Report and our analysis of the overall transaction landscape, we make the following recommendations:
1. Request Supplemental Reporting. Ironside should request supplemental reporting from the GP on items 1 through 5 identified in Section V.A above, citing the enhanced reporting obligations contained in the Side Letter as the basis for such request. We are prepared to draft a letter to the GP (or to BSP, as counsel to Meridian) making this request on Ironside's behalf.
2. Monitor the FERC Section 203 Lapse Date. The FERC Section 203 approval is currently set to lapse on June 15, 2024, approximately fifty-eight (58) days from the date of this memorandum. Ironside should request that Meridian provide at least thirty (30) days' advance notice of its decision regarding any further extension request — i.e., by no later than May 16, 2024 — so that Ironside has adequate time to assess the implications of the GP's decision and, if necessary, advocate for a different course of action. If the GP's decision is to allow the FERC approval to lapse, Ironside should understand the implications for reactivation feasibility before the lapse occurs.
3. Assess the Approaching 18-Month Dormancy Trigger. LP Agreement Section 7.04(c) provides that if the dormancy period continues for a period of eighteen (18) consecutive months without cure of the Material Impediment Event, the limited partners holding a majority of the outstanding limited partnership interests shall have the right to elect a wind-down of the Vehicle (the "Wind-Down Election Right"). The dormancy period commenced on January 9, 2023. The 18-month trigger date is therefore July 9, 2024, which is approximately eighty-two (82) days from the date of this memorandum. Ironside, as the holder of 99.99% of the limited partnership interests, effectively has unilateral authority to exercise this right. We recommend that Ironside begin its internal assessment of whether to exercise the Wind-Down Election Right promptly, so that the decision can be made on a well-informed basis in advance of the July 9 date.
4. Schedule a Call with Meridian Leadership. We recommend that Ironside schedule a call between Marcus J. Calloway and Renata Obasi, on the one hand, and David R. Hargreaves (Senior Managing Partner, Meridian Infrastructure Partners LP) and Lillian Fong (Partner, Portfolio), on the other, to discuss the reactivation/wind-down decision framework in advance of the July 9, 2024 date. This call would provide an opportunity for Ironside to obtain the GP's current views on the feasibility and desirability of reactivation, the GP's assessment of the concession renegotiation timeline, and the GP's perspective on the economic implications of the various paths forward. Ideally, this call should occur within the next two to three weeks, allowing sufficient time for follow-up analysis before the July 9 date.
5. Wind-Down Election Analysis. C&H will prepare a detailed analysis of Ironside's Wind-Down Election Right under LP Agreement Section 7.04(c), including: (a) the procedural requirements for exercise of the right; (b) the consequences of exercise, including the GP's obligations regarding orderly wind-down, disposition or recovery of called capital, and termination of the LP Agreement; (c) the financial considerations for and against exercise, including an assessment of the likelihood and value of reactivation versus the costs and risks of continued dormancy; and (d) the tax implications of a wind-down, including the treatment of organizational expenses, placement-agent fees, and the R&W insurance premium deposit. We expect to deliver this analysis in the form of a separate memorandum no later than June 1, 2024, in advance of the July 9 trigger date.
VI. Status of Prior Report Recommendations
The following summarizes the status of open items from our prior C&H Review Memoranda, specifically those issued in connection with the Q3 2023 Report (C&H Review Memorandum dated October 15, 2023) and the Q4 2023 Report (C&H Review Memorandum dated January 22, 2024):
1. Negotiate Standstill Agreement. Status: Completed. In our Q3 2023 and Q4 2023 Review Memoranda, we recommended that Ironside advocate for the negotiation and execution of a standstill agreement among the EPA parties to prevent unilateral termination following the expiration of the third extended outside date on December 31, 2023. As reported above, the Standstill Agreement was executed on February 15, 2024, on terms consistent with the framework we recommended and substantially reflecting the draft that C&H prepared on behalf of the co-invest interests. This recommendation is now closed.
2. Obtain Confirmation of R&W Tolling Side Letter Enforceability. Status: Completed. In our Q3 2023 Review Memorandum, we recommended that Ironside, through C&H, obtain written confirmation from Northgate Specialty Insurance Co. that the tolling side letter dated January 20, 2023 remains in full force and effect and that Northgate does not consider the tolling to have been terminated or to be subject to any expiration date not reflected in the side letter. Confirmation was obtained from Northgate through BSP in November 2023. The tolling remains in effect as of the date of this memorandum. We recommend periodic reconfirmation, as discussed in Section III.G above. This recommendation is closed, subject to the ongoing monitoring noted.
3. Debt Commitment Expiration Analysis. Status: Completed. In our Q3 2023 Review Memorandum, we recommended that C&H prepare an analysis of the consequences of the expiration of the Debt Commitment Letter and the implications for any future reactivation, including the likely cost and timeline for replacement financing. This analysis was completed and delivered to Ironside in a letter dated November 2, 2023. The key conclusions were that replacement financing would be available but likely on less favorable terms (higher spreads, more restrictive covenants), and that the financing process would add approximately three (3) to five (5) months to any reactivation timeline. This recommendation is closed.
4. Request Updated Cascadia Financials. Status: Open — Carried Forward. In our Q4 2023 Review Memorandum, we recommended that Ironside request updated financial information for Cascadia from the GP. This request was not made during Q1 2024, and the GP did not provide updated financials on its own initiative. We carry this recommendation forward and reiterate it with increased urgency in Section V.A.1 above.
5. Assess FERC Extension Options. Status: Open — Partially Superseded. In our Q4 2023 Review Memorandum, we recommended that Ironside discuss with Meridian the desirability of seeking a further extension of the FERC Section 203 approval beyond the June 15, 2024 lapse date. The GP's report indicates that Meridian does not intend to seek a further extension. While the GP's decision on this point is within its authority, Ironside should understand the implications, as discussed in Section III.D(i) and Section V.B.2 above.
VII. Conclusion
The Q1 2024 Report delivered by Meridian Infrastructure GP IV LLC is timely and substantially compliant with the reporting requirements of LP Agreement Section 7.04(b) and the Side Letter, subject to the informational gaps identified and discussed in Section V above. We find the report to be consistent with the factual record as known to C&H and to provide a generally accurate, if not fully comprehensive, account of the key developments during the quarter.
The two most consequential near-term matters for Ironside are:
(a) The FERC Section 203 approval lapse on June 15, 2024. If the approval lapses without further extension, any future reactivation of the transaction would require a new FERC filing, adding an estimated six (6) to twelve (12) months and $1.5 million to $3.0 million to the reactivation timeline and cost. The lapse of FERC approval represents a qualitative shift in the reactivation calculus and should be a central factor in Ironside's decision-making.
(b) The ripening of Ironside's Wind-Down Election Right on July 9, 2024. On that date, Ironside will have the contractual right to elect a wind-down of the Vehicle if the Material Impediment Event has not been cured. Given Ironside's 99.99% limited partnership interest, this right is effectively unilateral. The exercise (or non-exercise) of this right will be the most consequential decision Ironside makes with respect to the Vehicle. C&H will prepare a detailed analysis of the considerations relevant to that decision, targeted for delivery by June 1, 2024.
Calderwood & Harkness stands ready to advise Ironside on the wind-down election analysis, to engage with Breckenridge Sloane & Pratt on any reactivation discussions as directed by Ironside, and to prepare supplemental reporting requests and other communications to the GP as needed.
We recommend a client call within the next two weeks — ideally during the week of April 29, 2024 — to discuss these matters and to align on the strategic path forward. Theresa Kim will coordinate scheduling with Renata Obasi's office.
We trust this memorandum is responsive to your needs. Please do not hesitate to contact us with any questions or to discuss any aspect of this review.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Pamela Cross Responsible Partner Calderwood & Harkness LLP 125 Broad Street, 44th Floor New York, NY 10004
By: ________
Theresa Kim Lead Associate Calderwood & Harkness LLP
cc: Nicholas Stern, Billing Partner, Calderwood & Harkness LLP Owen Fischer, Working Associate, Calderwood & Harkness LLP Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP (for informational purposes)
Distribution: Ironside Capital Management LP — Privileged and Confidential. This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is provided solely for the use of the addressees and the individuals identified on the copy line. Any distribution, copying, or disclosure of this memorandum or its contents to any person not authorized to receive it is strictly prohibited.
Item | Amount | Percentage
Total Committed Capital | $300,000,000 | 100.00%
GP Commitment (Meridian Infrastructure GP IV LLC) | $30,000 | 0.01%
LP Commitment (Ironside Capital Management LP) | $299,970,000 | 99.99%
Capital Called to Date | $22,500,000 | 7.50%
Unfunded Commitment | $277,500,000 | 92.50%
Category | Amount
Organizational Expenses | $285,000
Placement-Agent Fee (Rivermark Capital Markets Inc., 0.35% × $300,000,000) | $1,050,000
R&W Insurance Premium Deposit (Northgate Specialty Insurance Co.) | $4,875,000
Due-Diligence Costs and Deposits | $12,790,000
Working-Capital Reserve | $3,500,000
Total | $22,500,000

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MEMORANDUM

CALDERWOOD & HARKNESS LLP

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