1023-00001 · Ironside Capital Management LP · Wind-Down & Reactivation

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CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, NY 10004

MEMORANDUM — PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT WORK PRODUCT

Matter Number: 1023-00001

August 15, 2024

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

RE: Revised Concession Framework Between Portland Metropolitan Water District and Cascadia Renewables Holdings, Inc. — Preliminary Impact on Bull Run Filtration Project Revenue and Overall Transaction Economics

CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP at the request and for the exclusive benefit of Ironside Capital Management LP. It contains information that is legally privileged under applicable law. This memorandum is intended solely for the use of the individuals to whom it is addressed. Do not distribute, copy, or disclose this memorandum or any portion of its contents without prior written authorization from Calderwood & Harkness LLP. If you have received this memorandum in error, please notify us immediately and destroy all copies.

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I. Executive Summary

On June 30, 2024, the Portland Metropolitan Water District ("PMWD") and Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH") reached a tentative framework on revised terms for the Bull Run Filtration Project concession agreement (the "Revised Framework"). This development represents the most significant substantive progress on the concession renegotiation since PMWD first initiated the process nearly two years ago, and it has direct and material implications for Ironside Capital Management LP's ("Ironside") co-investment in the pending Cascadia acquisition.

The original concession agreement was executed in 2018 as a 40-year design-build-operate-maintain arrangement between Cascadia and PMWD. PMWD's formal renegotiation was initiated by written notice dated October 28, 2022, in which the District cited changed regulatory requirements under Oregon Senate Bill 1567 (2022) ("SB 1567"), which imposed new enhanced filtration standards and water-quality monitoring obligations on municipal water-treatment facilities throughout the state. The concession renegotiation was the precipitating event for the Material Impediment Event declaration issued by Meridian Infrastructure GP IV LLC (the "GP") on January 9, 2023, which in turn triggered the dormancy of ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Co-Invest Vehicle"), the co-investment vehicle through which Ironside committed $300 million to participate alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV") in the acquisition of Cascadia.

The Bull Run concession generates approximately $64 million in annual revenue for Cascadia, representing approximately 13.1% of Cascadia's fiscal year 2021 revenue of $487 million, and constitutes a significant component of Cascadia's $138 million fiscal year 2021 EBITDA. These were the baseline financial metrics upon which the originally agreed enterprise value of $1,950,000,000 was predicated. Given the concession's outsized contribution to both revenue and earnings, any material revision to its terms carries implications that extend well beyond the Bull Run project itself and into the overall transaction economics.

This memorandum provides a preliminary analysis of the key terms of the Revised Framework, to the extent they are known based on summary information provided to date by counsel for Meridian Infrastructure Partners LP ("Meridian") and limited disclosures from counsel for Cascadia. The memorandum assesses the estimated revenue and EBITDA impact of the contemplated changes and evaluates the implications for the originally agreed enterprise value and the economics of Ironside's co-investment. We also identify critical information gaps, interaction with existing transaction documents (including the Equity Purchase Agreement, as amended, and the Mutual Standstill and Preservation Agreement), regulatory re-filing requirements, financing considerations, and recommended near-term actions for Ironside.

Conclusion. The Revised Framework, while representing a positive step toward resolving the critical impediment that has kept the Vehicle dormant for approximately 19 months, is expected to reduce Bull Run concession revenue by an estimated $9 million to $16 million annually (with a midpoint of approximately $12.5 million, or roughly 19.5%). This revenue reduction, when flowed through to EBITDA at the concession's historically high margin profile, would reduce Cascadia's run-rate EBITDA from $138 million to an illustrative range of approximately $128.6 million to $129.9 million, implying a potential enterprise value reduction of approximately $120 million to $140 million if the originally agreed 14.1x EV/EBITDA multiple is held constant. The actual valuation impact could be greater if the renegotiated concession terms also warrant a lower comparable multiple due to reduced contract quality, increased regulatory risk, or shortened weighted-average contract life. These preliminary findings should inform Ironside's assessment of the reactivation feasibility memorandum that Meridian is expected to circulate to co-investors on or about September 1, 2024, and any renegotiation of the acquisition price in connection with a potential transaction reactivation.

II. Background

A. The Bull Run Filtration Project Concession — Original Terms

The Bull Run Filtration Project is a large-scale municipal water-treatment facility located in the Bull Run watershed area east of Portland, Oregon, serving the greater Portland metropolitan area. The project was conceived as a public-private partnership to address longstanding federal and state regulatory mandates requiring enhanced filtration of the Bull Run surface water supply.

In 2018, Cascadia and PMWD entered into a 40-year concession agreement (the "Original Concession Agreement") pursuant to which Cascadia assumed responsibility for the design, construction, operation, and maintenance of the Bull Run Filtration Project. The Original Concession Agreement was structured as a design-build-operate-maintain ("DBOM") arrangement, a model commonly used for large-scale water infrastructure projects in the United States. Under the terms of the Original Concession Agreement, Cascadia committed to designing and constructing the filtration facility to specified performance standards, and thereafter operating and maintaining the facility for the duration of the concession term.

Annual revenue under the Original Concession Agreement was approximately $64 million per year, generated through a composite payment structure consisting of three principal components:

(a) Availability Payments. Fixed periodic payments from PMWD to Cascadia, payable monthly, contingent upon the facility meeting specified availability thresholds. Availability payments constituted the majority of annual concession revenue and provided a predictable, utility-like cash flow profile.

(b) Volumetric Charges. Variable payments tied to the volume of water processed through the filtration facility, subject to minimum and maximum volume bands. Volumetric charges provided an element of revenue variability but were historically stable given the relatively consistent water demand in the Portland metropolitan service area.

(c) Periodic Capital-Recovery Adjustments. Scheduled adjustments to the payment stream to reflect Cascadia's capital deployment for facility construction and periodic major maintenance cycles, structured to allow Cascadia to recover its capital investment over the concession term with an embedded return component.

The Bull Run concession represents Cascadia's single largest water-infrastructure contract by revenue and is one of three water-treatment concessions across its Oregon, Washington, and Idaho platform. The other two water-treatment concessions — the Bend Regional Water Treatment Plant (Oregon) and the Boise River Filtration Facility (Idaho) — are smaller in scale and generate combined annual revenue of approximately $31 million based on fiscal year 2021 figures.

As of 2024, the Original Concession Agreement had approximately 34 years remaining on its 40-year term, making it one of the longest-duration contracts in Cascadia's portfolio. The weighted-average remaining life of Cascadia's overall contract portfolio (encompassing its 14 hydroelectric facilities, 6 wind farms, and 3 water-treatment concessions) was approximately 22 years as of the time the transaction was originally agreed; the Bull Run concession, at 34 years remaining, was a significant contributor to this long-duration profile. The long-duration character of the portfolio was a central element of the investment thesis that underpinned the transaction.

Revenue from the Bull Run concession was a key driver of Cascadia's fiscal year 2021 EBITDA of $138 million, upon which the agreed enterprise value of $1,950,000,000 was predicated. The implied EV/EBITDA multiple of approximately 14.1x ($1,950 million divided by $138 million) reflected a premium valuation consistent with Cascadia's contracted, long-duration, infrastructure-like revenue profile and favorable regulatory positioning in the Pacific Northwest renewable energy and water infrastructure markets.

B. The Renegotiation — Chronology

The following timeline summarizes the key events in the concession renegotiation and the related developments in the Cascadia acquisition:

October 28, 2022. PMWD delivered formal written notice to Cascadia of its intent to renegotiate the terms of the Original Concession Agreement. The notice cited Oregon Senate Bill 1567 (2022), which was signed into law on July 1, 2022, and which imposed new regulatory requirements on municipal water-treatment facilities throughout the state, including enhanced filtration standards, expanded water-quality monitoring and reporting obligations, and mandated capital upgrades to existing facilities. PMWD took the position that SB 1567 constituted a regulatory change of sufficient magnitude to trigger the renegotiation provisions contained in Article XII of the Original Concession Agreement.

November 10, 2022. Meridian Infrastructure Partners LP, acting through Meridian Infrastructure GP IV LLC, notified Ironside Capital Management LP and the other co-investors in the Vehicle of the material adverse development presented by PMWD's renegotiation notice. Meridian's notification characterized the development as having the potential to materially affect the revenue, earnings, and cash flow profile of Cascadia's single largest water-infrastructure asset and, consequently, the overall economics of the pending acquisition.

November 22, 2022. In response to the uncertainty created by the PMWD renegotiation notice, the parties to the Equity Purchase Agreement ("EPA"), which had been executed on September 15, 2022, agreed to the First Amendment to the EPA. The First Amendment extended the outside date for closing from December 31, 2022 to March 31, 2023, providing additional time for the concession renegotiation to advance while preserving the transaction framework.

January 9, 2023. After receiving additional information regarding the scope of PMWD's renegotiation demands — which indicated that PMWD was seeking substantial rate reductions, enhanced performance guarantees, and significant capital-upgrade obligations to be borne by Cascadia — the GP determined that the concession renegotiation constituted a Material Impediment Event under Section 7.04 of the Amended and Restated Limited Partnership Agreement of ICM Cascadia Co-Invest, LP (the "LP Agreement"). The GP issued a formal declaration of a Material Impediment Event and simultaneously issued a capital-call suspension notice, effectively placing the Vehicle into dormancy. The declaration was made following consultation with Calderwood & Harkness LLP and Breckenridge Sloane & Pratt LLP, and with the concurrence of Ironside and the other co-investors.

March 15, 2023. With the concession renegotiation still unresolved and no clear timeline for resolution, the EPA parties agreed to the Second Amendment to the EPA, which extended the outside date from March 31, 2023 to June 30, 2023.

June 28, 2023. The Third Amendment to the EPA further extended the outside date from June 30, 2023 to December 31, 2023. At the time of the Third Amendment, the concession renegotiation between PMWD and Cascadia had entered a protracted phase, with the parties exchanging proposals and counterproposals but failing to reach agreement on key economic terms.

December 31, 2023. The EPA outside date, as extended by the Third Amendment, expired without further extension. No party exercised termination rights under the EPA prior to the expiration of the outside date; the transaction framework remained in place but without a binding agreement to close.

February 15, 2024. Recognizing the potential value of the transaction to all parties notwithstanding the unresolved concession renegotiation, the EPA parties executed a Mutual Standstill and Preservation Agreement (the "Standstill Agreement"). The Standstill Agreement preserved the transaction framework, maintained exclusivity, and imposed mutual standstill obligations, but did not fix the economic terms of the transaction or obligate any party to consummate the acquisition. The Standstill Agreement was negotiated by Calderwood & Harkness LLP (for Ironside), Breckenridge Sloane & Pratt LLP (for Meridian), Garvey Lennox LLP (for the Selling Shareholders), and Ridgeway, Ashford & Malone PC (for Cascadia).

June 30, 2024. PMWD and Cascadia reached the tentative Revised Framework, representing the parties' agreement in principle on revised economic and operational terms for the Bull Run concession. The Revised Framework has not yet been documented in definitive form, and there is no binding obligation on either party to finalize the amendments.

C. Current Transaction Status

As of the date of this memorandum, the transaction status is as follows:

Vehicle Status. ICM Cascadia Co-Invest, LP remains dormant pursuant to the Material Impediment Event declaration of January 9, 2023. Of the $300 million in total commitments by Ironside, $22.5 million in capital has been called (the initial capital call was made on August 15, 2022, prior to the Material Impediment Event declaration), and $277.5 million in commitments remain unfunded. The called capital is held in the Vehicle's escrow account at Greaves Bancorp

Debt Commitment. The debt commitment letter from Atlas National Bank, N.A. (as lead arranger) and Pinnacle Credit Partners LLC (as co-lender for $325 million of the total commitment), which provided for a $975 million senior secured term loan and a $150 million revolving credit facility to finance the acquisition, expired on October 31, 2023 without further extension. No replacement debt commitment has been obtained. Any reactivation of the transaction would require a fresh debt commitment, which would need to be arranged at then-prevailing market terms and sized to reflect the revised Cascadia financial profile.

Regulatory Approvals. The Federal Energy Regulatory Commission ("FERC") approval under Section 203 of the Federal Power Act (Docket No. EC22-143-000), which was received on December 15, 2022, lapsed on June 15, 2024 upon expiration of the 18-month extension period. A new FERC application would be required in any reactivation scenario. The Oregon Public Utility Commission ("OPUC") proceedings (Docket No. UM-2287), which relate to regulatory approval of the change of control of Cascadia's Oregon-regulated utility operations, remain stayed since February 2023 and would need to be un-stayed and completed. The Committee on Foreign Investment in the United States ("CFIUS") clearance, which was effectively received during the original regulatory approval process, is not expected to require further action absent material changes to the ownership structure of the acquiring entities.

Wind-Down Election Right. Ironside's wind-down election right under Section 7.04(c) of the LP Agreement ripened on July 9, 2024, which marked the 18-month anniversary of the Material Impediment Event declaration. Ironside has not exercised this right, consistent with Calderwood & Harkness's recommendation dated July 25, 2024 that Ironside defer the exercise of the wind-down election pending developments on the concession framework and Meridian's expected reactivation feasibility analysis. The wind-down election right remains available to Ironside and represents an important source of leverage in any reactivation negotiations.

Meridian Reactivation Feasibility Memo. Meridian is expected to circulate a reactivation feasibility memorandum to co-investors, including Ironside, on or about September 1, 2024. Calderwood & Harkness understands from informal communications with Breckenridge Sloane & Pratt LLP (Charles A. Delacroix) that the memorandum will outline Meridian's preliminary assessment of the path to reactivation, including proposed adjustments to transaction economics, a timeline for obtaining fresh regulatory approvals and financing, and updated financial projections for Cascadia.

III. Summary of the Revised Framework — Key Terms

The following is a summary of the key terms of the Revised Framework, based on information available to Calderwood & Harkness as of the date of this memorandum. Our information sources include: (i) a summary term sheet provided by Meridian's counsel, Breckenridge Sloane & Pratt LLP (Charles A. Delacroix), on July 18, 2024; (ii) a limited supplemental briefing from Cascadia's counsel, Ridgeway, Ashford & Malone PC (Nina R. Castellano), provided at a joint counsel call on August 2, 2024; and (iii) a high-level overview from Meridian's financial advisor, Blackthorn Advisory Group LLC, shared informally with Calderwood & Harkness on August 8, 2024. We have not been provided with the underlying negotiation documents, detailed rate schedules, or draft amendment language. Accordingly, our analysis is necessarily preliminary, and all conclusions are subject to revision upon receipt of additional information and definitive documentation.

A. Scope of Concession and Regulatory Compliance

The Revised Framework retains Cascadia as the concessionaire for the Bull Run Filtration Project and preserves the fundamental DBOM structure of the Original Concession Agreement. Cascadia will continue to be responsible for the operation and maintenance of the filtration facility and will retain the revenue-generating rights associated with the concession for the duration of the (potentially adjusted) concession term.

However, the Revised Framework incorporates new regulatory compliance obligations mandated by Oregon SB 1567 (2022). Specifically, the revised terms are expected to require Cascadia to:

(a) upgrade the Bull Run Filtration Project's treatment processes to meet enhanced filtration performance standards established by SB 1567, including new minimum removal rates for specified contaminants and pathogen categories;

(b) implement additional water-quality monitoring and reporting protocols, including continuous real-time monitoring of certain water-quality parameters and expanded quarterly reporting to the Oregon Health Authority and PMWD;

(c) undertake specified capital improvements to the filtration facility's physical plant to accommodate the enhanced filtration standards, including potential installation of additional treatment stages or supplemental filtration technologies; and

(d) bear certain incremental capital expenditures associated with the foregoing facility upgrades, which were not contemplated under the Original Concession Agreement as executed in 2018 (the regulatory landscape having materially changed with the passage of SB 1567 in 2022).

The allocation of SB 1567 compliance costs between Cascadia and PMWD is a central economic issue in the renegotiation and is addressed further in Section III.D below.

B. Revenue Adjustments

The Revised Framework contemplates material modifications to the payment structure governing PMWD's obligations to Cascadia. Based on the summary information available, these modifications include:

(a) Availability Payment Adjustments. The fixed availability payment component is expected to be reduced from its current level, reflecting PMWD's position that the Original Concession Agreement's availability payment rates were set at a time when the regulatory compliance burden was materially lower. The precise magnitude of the availability payment reduction is not yet finalized and remains subject to ongoing negotiation between PMWD and Cascadia.

(b) Volumetric Charge Rate Revisions. The volumetric charge rates are expected to be revised, with indications suggesting a modest reduction in the per-unit volumetric rate. Additionally, the volume bands (minimum and maximum thresholds) may be adjusted to reflect updated demand projections for the Portland metropolitan service area.

(c) Inflation Escalator Provisions. The inflation escalator applicable to both availability payments and volumetric charges may be revised. Under the Original Concession Agreement, the escalator was indexed to a blended Consumer Price Index / Producer Price Index formula with annual adjustments. The Revised Framework may modify the escalator formula, the base index, or the frequency of adjustments.

(d) Capital-Recovery Mechanism. A revised capital-recovery mechanism is contemplated to address the incremental SB 1567 compliance capital expenditures (see Section III.D below). The extent to which this mechanism offsets the revenue reductions described above is a critical variable.

Based on the summary information available and our preliminary analysis, Calderwood & Harkness estimates that the annual concession revenue under the Revised Framework would fall within a range of approximately $48 million to $55 million, compared to the current level of approximately $64 million under the Original Concession Agreement. This represents a reduction of approximately $9 million to $16 million per year, or approximately 14% to 25% of current annual concession revenue. The wide range of the estimate reflects the significant uncertainty surrounding several key variables — most notably, the final availability payment rates, the volumetric charge rates and volume assumptions under the new regulatory parameters, and the degree to which the capital-recovery mechanism provides incremental revenue to offset compliance costs.

We emphasize that these estimates are preliminary. The precise revenue impact depends on the finalization of detailed rate schedules, the capital-recovery mechanism for SB 1567 compliance costs, the inflation escalator provisions, and other terms that remain under active negotiation. Full financial modeling will require access to the definitive concession amendment and updated financial projections from Cascadia management.

C. Concession Term

The Revised Framework addresses the duration of the concession, which is a variable of considerable importance both to the Bull Run project's standalone economics and to the weighted-average remaining contract life of Cascadia's overall portfolio.

Under the Original Concession Agreement, the concession had a 40-year term commencing in 2018, with approximately 34 years remaining as of 2024. The Revised Framework contemplates three potential outcomes with respect to the concession term, which remain under discussion:

(a) Maintenance of the Original Term. The 40-year term would be maintained, with approximately 34 years remaining. This outcome would preserve the long-duration character of the contract and its contribution to the weighted-average remaining life of the Cascadia portfolio.

(b) Modest Extension. The concession term would be extended by a period of 3 to 7 years (to a total of approximately 43 to 47 years) to compensate Cascadia for the incremental capital expenditure burden imposed by SB 1567. A term extension would provide Cascadia with a longer period over which to recover its additional capital investment, partially mitigating the economic impact of the revenue reductions. Cascadia is understood to favor this outcome.

(c) Shortened Term. PMWD has, at certain points during the renegotiation, expressed a preference for a shortened concession term (potentially reducing the total term to 30 to 35 years, leaving approximately 24 to 29 years remaining). A shortened term would reduce the total revenue stream available to Cascadia and could materially affect the weighted-average remaining contract life of the Cascadia portfolio.

Any change in the concession term directly affects both the total present value of the concession's revenue stream and the weighted-average remaining contract life of Cascadia's portfolio — a metric that was central to the investment thesis and the premium valuation multiple assigned to Cascadia. A reduction in the weighted-average remaining contract life would, all else being equal, tend to support a lower valuation multiple.

D. Capital Recovery and Capex Obligations

As noted above, the Revised Framework contemplates that Cascadia will bear certain incremental capital expenditures to bring the Bull Run Filtration Project into compliance with SB 1567. The quantum of these expenditures has not yet been disclosed by Cascadia management, and Calderwood & Harkness has not been provided with any detailed engineering estimates or capital budgets.

The Revised Framework does contemplate a mechanism for partial recovery of SB 1567-related capital expenditures through one or both of the following:

(a) Rate Adjustments. Incorporation of a capital-recovery component into the revised availability payment or volumetric charge rates, effectively allowing Cascadia to pass through a portion of compliance capex to PMWD ratepayers over the remaining concession term.

(b) Separate Capital-Recovery Payments. A distinct payment stream from PMWD to Cascadia, outside of the standard availability payment and volumetric charge structure, dedicated to reimbursement of specified SB 1567 compliance capital expenditures.

The critical question is the extent to which the capital-recovery mechanism will reimburse Cascadia for SB 1567 compliance costs. If the mechanism provides full or near-full recovery, the net economic impact on Cascadia would be limited primarily to the revenue reductions described in Section III.B. If, however, the recovery is partial — as appears more likely based on the preliminary information available — Cascadia would bear a meaningful unreimbursed capital expenditure burden, which would further reduce free cash flow and, depending on accounting treatment and magnitude, could affect EBITDA.

Cascadia's CEO, Jonathan M. Weir, and CFO, Sandra K. Llewellyn, have not yet disclosed detailed capex estimates for SB 1567 compliance to Meridian or to the co-investors. Calderwood & Harkness understands from Breckenridge Sloane & Pratt LLP that Meridian has requested this information from Cascadia and expects to receive preliminary estimates in connection with the reactivation feasibility memorandum. The availability and reliability of these estimates will be an important factor in any comprehensive assessment of the Revised Framework's economic impact.

E. Termination and Default Provisions

The Revised Framework is expected to include updated provisions relating to termination, default, and force majeure, reflecting the regulatory landscape introduced by SB 1567. Specifically:

(a) Termination for Convenience. The updated termination-for-convenience provisions are expected to be revised to address circumstances in which future regulatory changes (beyond SB 1567) materially alter the economic balance of the concession. The structure, notice requirements, and compensation formulas applicable to termination for convenience are important risk factors that will need to be analyzed carefully upon receipt of definitive documentation.

(b) Force Majeure. The force majeure definition is expected to be updated to incorporate regulatory-change concepts derived from the SB 1567 experience, potentially including a broader definition of qualifying regulatory-change events and revised allocation of risk between Cascadia and PMWD in the event of future regulatory changes.

(c) Default and Cure Provisions. The Revised Framework is expected to include revised default triggers and cure periods. The details of these provisions are not yet available. Calderwood & Harkness will conduct a detailed analysis of the default and cure provisions upon receipt of the definitive term sheets or draft amendment language.

F. Status: Tentative / Non-Binding

It is important to emphasize that the Revised Framework represents a tentative agreement in principle between PMWD and Cascadia. No definitive documentation has been executed, and the parties have not entered into a binding commitment to finalize amendments to the Original Concession Agreement on the terms described above. There is no assurance that the parties will reach final agreement, that the terms of the definitive amendment will mirror the tentative framework, or that the amendment, once executed, will be approved by the PMWD Board of Commissioners or any other relevant governmental authority. The Revised Framework should accordingly be treated as indicative rather than definitive for purposes of Ironside's planning and decision-making.

IV. Preliminary Revenue and EBITDA Impact Analysis

This section presents Calderwood & Harkness's preliminary analysis of the revenue and EBITDA impact of the Revised Framework on Cascadia's financial profile, and specifically on the financial metrics upon which the originally agreed enterprise value was predicated. We reiterate that this analysis is based on limited and preliminary information, that the estimates presented herein are illustrative, and that a comprehensive financial analysis will require the definitive concession amendment, updated Cascadia financial projections, and the engagement of financial advisors with detailed modeling capabilities.

A. Revenue Impact — Bull Run Concession

The revenue impact on the Bull Run concession under the Revised Framework is estimated as follows:

• Original annual concession revenue: approximately $64 million per year.

• Estimated annual concession revenue under Revised Framework: approximately $48 million to $55 million per year.

• Estimated annual revenue reduction: approximately $9 million to $16 million per year.

• Midpoint estimate of annual revenue reduction: approximately $12.5 million per year (a reduction of approximately 19.5% from the original level).

• Midpoint estimated annual concession revenue under Revised Framework: approximately $51.5 million per year.

The range reflects the uncertainty surrounding several key variables, as discussed in Section III.B above. The low end of the revenue reduction range ($9 million, implying revised revenue of approximately $55 million) reflects a scenario in which the availability payment reductions are relatively modest, volumetric charge adjustments are limited, and the capital-recovery mechanism provides meaningful incremental revenue. The high end of the range ($16 million, implying revised revenue of approximately $48 million) reflects a scenario in which availability payment reductions are substantial, volumetric charges are meaningfully reduced, and the capital-recovery mechanism is less robust.

These estimates are based on the summary terms of the Revised Framework as provided by Meridian's counsel, Breckenridge Sloane & Pratt LLP (lead partner Charles A. Delacroix), during the July 18, 2024 briefing, and on limited supplemental information provided by Cascadia's counsel, Ridgeway, Ashford & Malone PC (lead partner Nina R. Castellano), during the August 2, 2024 joint counsel call. Calderwood & Harkness has not had access to detailed rate schedules, financial models, or the underlying negotiation documents. Full financial modeling will require the definitive concession amendment, updated Cascadia financial projections, and detailed analysis of the capital-recovery mechanism.

B. Cascadia Aggregate Revenue Impact

The impact on Cascadia's aggregate revenue is estimated as follows:

• FY 2021 total revenue: $487 million (per the audited financial statements prepared by Halstead & Greer LLP).

• Estimated net reduction in annual revenue (midpoint): approximately $12.5 million, reflecting the reduction in Bull Run concession revenue from approximately $64 million to approximately $51.5 million.

• Adjusted total revenue (illustrative, midpoint): approximately $474.5 million (a decrease of approximately $12.5 million, or approximately 2.6%, from the FY 2021 baseline).

This analysis assumes that Cascadia's other revenue streams remain unchanged at their FY 2021 levels. Those other revenue streams encompass 14 hydroelectric generation facilities located across Oregon, Washington, and Idaho; 6 wind farm operations in Oregon and Washington; and the 2 remaining water-treatment concessions (the Bend Regional Water Treatment Plant and the Boise River Filtration Facility). This is, of course, a simplifying assumption, and in practice, Cascadia's revenue from these sources may have changed materially since FY 2021. A comprehensive update of Cascadia's financial performance for fiscal years 2022 and 2023 — and, ideally, a year-to-date 2024 interim period — would be necessary for any reactivation analysis. Calderwood & Harkness understands that audited financial statements for FY 2022 and FY 2023 have been prepared by Halstead & Greer LLP but have not yet been made available to Ironside or the other co-investors. As discussed in Section VII below, we recommend that Ironside request these financial statements as a priority.

C. EBITDA Impact

Estimating the EBITDA impact of the concession revenue reduction requires assumptions about the margin profile of the Bull Run concession. The Bull Run concession, as a long-term availability-payment-based infrastructure contract, operates at high EBITDA margins. This is characteristic of contracted infrastructure assets generally, and of water-treatment concessions in particular, where the concessionaire's cost base is predominantly fixed (facility operating costs, personnel, maintenance) and does not vary proportionally with revenue.

Based on Calderwood & Harkness's understanding of the cost structure of comparable water-treatment concessions and the limited information available regarding the Bull Run concession's operating cost profile, we have applied an illustrative EBITDA margin range of 65% to 75% to the estimated revenue reduction. This range is intended to bracket the likely incremental EBITDA margin — that is, the proportion of the lost revenue that would have flowed through to EBITDA — rather than the average EBITDA margin across the entire concession revenue base.

The illustrative EBITDA impact at the midpoint revenue reduction estimate of $12.5 million per year is as follows:

• At 65% incremental EBITDA margin: $12.5 million × 65% = approximately $8.1 million EBITDA reduction.

• At 75% incremental EBITDA margin: $12.5 million × 75% = approximately $9.4 million EBITDA reduction.

• Adjusted EBITDA range (illustrative, midpoint): approximately $128.6 million to $129.9 million, compared to the FY 2021 EBITDA of $138 million.

It is important to note that the EBITDA impact may be further affected by the incremental SB 1567 compliance capital expenditure obligations. To the extent that SB 1567-related capex is not fully recovered through the rate mechanism or separate capital-recovery payments, the unreimbursed portion would reduce Cascadia's free cash flow. Depending on the magnitude and accounting treatment of these expenditures, they could also affect reported EBITDA (e.g., if incremental operating or maintenance costs associated with the upgraded facility are classified as operating expenses rather than capitalized). This additional impact cannot be quantified at this time due to the absence of detailed capex estimates from Cascadia management.

D. Sensitivity Table

The following sensitivity table presents the estimated EBITDA impact across the range of potential revenue reductions and at varying incremental EBITDA margin assumptions:

The sensitivity table illustrates that the EBITDA impact ranges from a low of approximately $5.4 million (in the most favorable revenue-reduction / lowest-margin scenario) to a high of approximately $12.0 million (in the most adverse revenue-reduction / highest-margin scenario). The adjusted EBITDA correspondingly ranges from approximately $126.0 million to $132.6 million, compared to the FY 2021 EBITDA of $138 million upon which the original transaction valuation was based.

V. Implications for Transaction Valuation

A. Originally Agreed Enterprise Value

The enterprise value originally agreed under the Equity Purchase Agreement (executed September 15, 2022) was $1,950,000,000 (one billion nine hundred fifty million dollars). This enterprise value was predicated on Cascadia's fiscal year 2021 financial performance, as reflected in the audited financial statements prepared by Halstead & Greer LLP, with EBITDA of $138 million serving as the primary valuation metric. The implied EV/EBITDA multiple was approximately 14.1x ($1,950 million ÷ $138 million = 14.13x).

The 14.1x multiple reflected the market's assessment, at the time of the transaction agreement, of Cascadia's quality attributes, including: the long-duration, contracted nature of its revenue streams; its diversified platform across hydroelectric, wind, and water infrastructure assets; its favorable regulatory positioning in Oregon, Washington, and Idaho; and the specific characteristics of the Bull Run concession as the cornerstone asset of the water-treatment portfolio.

B. Adjusted Enterprise Value — Illustrative Range

Applying the originally agreed 14.1x EV/EBITDA multiple to the adjusted EBITDA range estimated in Section IV above yields the following illustrative adjusted enterprise values:

• At midpoint revenue reduction, 65% margin (adjusted EBITDA: $129.9M): $129.9M × 14.1x = approximately $1,832 million.

• At midpoint revenue reduction, 75% margin (adjusted EBITDA: $128.6M): $128.6M × 14.1x = approximately $1,814 million.

• Implied range of adjusted enterprise value (midpoint): approximately $1,814 million to $1,832 million.

• Implied reduction from originally agreed enterprise value: approximately $118 million to $136 million (approximately $120 million to $140 million when rounded).

The full sensitivity range, applying the 14.1x multiple across all scenarios in the sensitivity table, yields enterprise value estimates ranging from approximately $1,777 million (high-end revenue reduction at 75% margin, adjusted EBITDA of $126.0 million) to approximately $1,870 million (low-end revenue reduction at 60% margin, adjusted EBITDA of $132.6 million). This implies a potential reduction from the originally agreed enterprise value of between approximately $80 million and $173 million, depending on the scenario.

Important caveat regarding the applicable multiple. The foregoing analysis holds the 14.1x EV/EBITDA multiple constant — that is, it assumes that the appropriate valuation multiple for Cascadia is unchanged from the multiple implied by the original transaction. This is a simplifying assumption that may not hold. The appropriate multiple may itself change, and specifically may be lower, given the following factors:

(a) Reduced Contract Quality. The Revised Framework introduces greater regulatory risk into the Bull Run concession by subjecting it to SB 1567 compliance obligations and by potentially establishing a precedent for future regulatory renegotiations. The concession's risk profile is arguably less favorable than under the Original Concession Agreement.

(b) Shorter Weighted-Average Contract Life (if term is reduced). If the concession term is shortened (see Section III.C above), the weighted-average remaining contract life of Cascadia's portfolio would decline, reducing the long-duration premium that supported the original valuation.

(c) Increased Regulatory Risk. The SB 1567 renegotiation experience demonstrates that Cascadia's Oregon water-treatment concessions are subject to material regulatory-change risk, which may cause market participants to assign a lower multiple to the affected revenue streams.

(d) Market Multiple Compression. Infrastructure asset valuations have experienced some multiple compression since the September 2022 execution of the EPA, reflecting changes in interest rates, inflation expectations, and capital market conditions. The appropriate multiple for a transaction closing in 2025 may be lower than the multiple that was appropriate in 2022 regardless of the concession renegotiation.

If, for example, the applicable multiple were reduced by one full turn to 13.1x, the adjusted enterprise value at midpoint adjusted EBITDA of approximately $129.3 million (70% margin assumption) would be approximately $1,694 million — a reduction of approximately $256 million, or approximately 13.1%, from the originally agreed $1,950 million. Conversely, if certain SB 1567 capex costs are fully recoverable through the rate mechanism and the concession term is modestly extended, the net economic impact could be more modest, and the case for maintaining a comparable multiple would be stronger.

Calderwood & Harkness does not render financial advisory or valuation opinions and does not express a view on the appropriate EV/EBITDA multiple. We present this analysis to illustrate the range of potential outcomes and to highlight the significance of the multiple assumption for the overall valuation analysis.

C. Impact on Equity Value and Co-Invest Economics

The implications of the adjusted enterprise value for equity value and for the economics of Ironside's co-investment through the Vehicle are as follows:

Original Equity Value. The originally agreed equity value was $1,050,000,000, calculated as the enterprise value of $1,950 million less assumed net debt of $900 million (consisting of existing Cascadia indebtedness to be refinanced in the acquisition).

Adjusted Equity Value. If the enterprise value is reduced by approximately $120 million to $140 million (as estimated in the midpoint scenario above), and assuming net debt remains at approximately $900 million, the adjusted equity value would be approximately $910 million to $930 million. This represents a reduction of approximately $120 million to $140 million from the original equity value of $1,050 million, or approximately 11.4% to 13.3%.

The impact on the co-investment economics of the Vehicle and its constituent investors is as follows:

ICM Cascadia Co-Invest, LP (Ironside's Co-Investment). The Vehicle's original share of equity was 28.57%, representing a commitment of $300 million against total equity of $1,050 million. At the adjusted equity value range of approximately $910 million to $930 million, the Vehicle's 28.57% share would equate to approximately $260 million to $266 million in equity value. Ironside's $300 million commitment would therefore potentially exceed the implied value of its equity interest in a reactivated transaction, raising questions about whether a full $300 million commitment is appropriate or whether the commitment quantum should be reduced to reflect the adjusted economics.

Fund IV. Fund IV's original share of equity was 71.43%, representing a commitment of $750 million against total equity of $1,050 million. At the adjusted equity value range, Fund IV's 71.43% share would equate to approximately $650 million to $664 million in equity value.

The economics of Ironside's co-investment would need to be comprehensively reassessed in any reactivation scenario. Key considerations include:

(a) whether the 10% carried interest payable to Meridian Infrastructure GP IV LLC above the 8% preferred return (compounded quarterly) remains appropriate given the revised economics, or whether the waterfall structure should be renegotiated;

(b) whether a price adjustment mechanism should be negotiated in connection with the reactivation to protect Ironside against further deterioration in the Bull Run concession economics during the period between reactivation and closing;

(c) whether Ironside's commitment quantum ($300 million) should be reduced proportionally to reflect the reduced equity value, and if so, whether such a reduction would trigger any adjustment provisions under the LP Agreement or the co-investment allocation letter; and

(d) the impact of the extended dormancy period on Ironside's internal rate of return and multiple-of-invested-capital targets, given that $22.5 million in called capital has been deployed since August 2022 without generating returns.

D. Impact on Sources and Uses

The originally agreed sources and uses for the transaction were as follows:

Original Sources:

Original Uses:

A reduced enterprise value would require corresponding adjustments to the equity contributions, the debt quantum, or both. Several important considerations apply:

(a) The original debt commitment from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC expired on October 31, 2023 and has not been extended or replaced. Any reactivation of the transaction would require Meridian to obtain a fresh debt commitment, which would be negotiated at then-prevailing market terms and conditions. Current debt market conditions — including higher base interest rates, wider credit spreads for infrastructure-sector leveraged finance, and more conservative underwriting standards — may result in a smaller debt quantum, higher pricing, or more restrictive covenants than were available under the original commitment.

(b) The sizing of any new debt commitment would need to reflect the revised Cascadia financial profile, including the reduced Bull Run concession revenue and EBITDA, the incremental SB 1567 compliance capex obligations, and any changes in the concession term that affect the duration and predictability of Cascadia's cash flows.

(c) Transaction costs may increase in a reactivation scenario due to the need for new regulatory filings (including a new FERC §203 application), updated environmental and technical due diligence, new or updated financing documentation, and additional legal fees associated with renegotiation of the acquisition agreement and co-investment structures.

(d) The working capital escrow amount may require adjustment depending on changes in Cascadia's working capital position since the original transaction agreement.

VI. Additional Considerations

A. Information Gaps and Diligence Requirements

Calderwood & Harkness has identified a number of significant information gaps that must be addressed before a comprehensive assessment of the Revised Framework's impact on the transaction can be completed. These include:

1. Definitive Concession Amendment Documentation. The Revised Framework is a tentative agreement in principle, and definitive documentation has not been prepared or executed. Calderwood & Harkness will need to review the definitive amendment (or the complete draft thereof) to confirm the accuracy of the summary terms upon which this preliminary analysis is based and to identify any additional provisions that may affect the economic analysis.

2. Updated Cascadia Financial Statements. Cascadia's financial performance since FY 2021 has not been updated for co-investor review. Calderwood & Harkness recommends that Ironside request the FY 2022 and FY 2023 audited financial statements, which we understand have been prepared by Halstead & Greer LLP. Additionally, interim 2024 financial data should be requested to provide a current baseline for any reactivation analysis. The FY 2021 figures used in this memorandum are more than three years old and may not accurately reflect Cascadia's current financial profile.

3. Incremental SB 1567 Compliance Capex Estimates. Cascadia management (CEO Jonathan M. Weir; CFO Sandra K. Llewellyn) has not yet disclosed detailed capital expenditure estimates for SB 1567 compliance to Meridian or to the co-investors. These estimates are essential for assessing the net economic impact of the Revised Framework, particularly the extent to which compliance costs will be borne by Cascadia versus recovered through the rate mechanism.

4. Rate Schedule Details. The detailed rate schedules that will govern the revised availability payments and volumetric charges have not been finalized or shared. These schedules are necessary for precise revenue modeling.

5. Capital-Recovery Mechanism Details. The mechanics of the capital-recovery mechanism (including timing, amount, conditions, and any clawback provisions) need to be specified before the net economic benefit to Cascadia can be assessed.

6. Updated Environmental Assessments. To the extent SB 1567 imposes new environmental standards or requires modifications to the Bull Run facility's environmental compliance profile, updated environmental assessments from Clearwater Environmental Consulting Inc. (which prepared the original Phase I and Phase II environmental site assessments for the transaction) may be required.

7. Updated Market and Comparable Analysis. An updated analysis of comparable infrastructure transactions and prevailing valuation multiples would be necessary to inform the discussion of the appropriate EV/EBITDA multiple in any reactivation negotiation.

B. Interaction with EPA and Standstill Agreement

The Revised Framework's implications must be analyzed in the context of the existing transaction documents, and particularly the Equity Purchase Agreement and the Mutual Standstill and Preservation Agreement.

Equity Purchase Agreement. The EPA was executed on September 15, 2022 by and among the Selling Shareholders (Timberline Growth Equity Fund III, LP, the Weir Family Trust, and the Management Rollover Pool), Cascadia, and the Buyer parties (Fund IV, the Co-Invest Vehicle, and the Merger Sub). The EPA has been amended three times (First Amendment, November 22, 2022; Second Amendment, March 15, 2023; Third Amendment, June 28, 2023). The outside date, as extended by the Third Amendment, expired on December 31, 2023. While the EPA has not been formally terminated — and the Standstill Agreement preserves the transaction framework — the economic terms of the EPA (including the $1,950,000,000 enterprise value) are not binding in the current posture. Reactivation of the transaction would likely require either:

(a) reinstatement of the EPA (through a Fourth Amendment or similar mechanism) with revised economic terms, including an adjusted enterprise value and updated representations, warranties, and closing conditions reflecting the Revised Framework and the passage of time since the original agreement; or

(b) negotiation and execution of a replacement acquisition agreement incorporating the revised transaction economics.

Either path would require the agreement of the Selling Shareholders, whose composition and interests are as follows:

• Timberline Growth Equity Fund III, LP (62% of Cascadia equity), represented by Garvey Lennox LLP (lead partner Steven F. Yun);

• Weir Family Trust (18% of Cascadia equity), of which Cascadia CEO Jonathan M. Weir serves as trustee; and

• Management Rollover Pool (20% of Cascadia equity, with the expectation that approximately 50% of the management equity — or approximately 10% of total Cascadia equity — would be rolled over into the post-closing capital structure).

Any price adjustment would need to be negotiated with these parties. Timberline, as the majority shareholder and a financial sponsor seeking a portfolio exit, may have different economic incentives and negotiating flexibility than the Weir Family Trust or the Management Rollover Pool.

Mutual Standstill and Preservation Agreement. The Standstill Agreement, executed February 15, 2024, preserves the transaction framework, maintains exclusivity, and imposes mutual standstill obligations. However, the Standstill Agreement expressly does not fix the economic terms of the transaction, does not obligate any party to consummate the acquisition, and does not constitute a binding commitment to reactivate the transaction. The Standstill Agreement provides a structured framework for the parties to negotiate reactivation terms, but each party retains the right to decline to proceed.

C. Regulatory Refilings

Reactivation of the transaction would require the following regulatory actions:

FERC §203 Approval. The FERC authorization under Section 203 of the Federal Power Act (Docket No. EC22-143-000), which was received on December 15, 2022, lapsed on June 15, 2024 upon expiration of the 18-month extension period. A new FERC application would be required in any reactivation scenario. Based on Calderwood & Harkness's experience with comparable FERC filings, the new application process would likely take approximately 4 to 8 months from filing to receipt of authorization, depending on FERC staffing and workload, the complexity of any changes to the transaction structure, and whether any intervenors file protests or requests for hearing. The new application would need to reflect any changes in the transaction structure, the identity of the financing sources, and the revised concession terms.

OPUC Proceedings. The OPUC proceedings (Docket No. UM-2287), relating to regulatory approval of the change of control of Cascadia's Oregon-regulated utility operations, remain stayed since February 2023 pursuant to a joint motion of the parties. Un-staying and completing the OPUC approval process would be necessary. The OPUC docket would need to be updated to reflect any changes in the transaction structure, the revised concession terms, and the current financial profile of the acquiring entities. OPUC review timelines are typically 6 to 12 months from the un-staying of the proceeding, although the previously completed record may expedite the process.

CFIUS. CFIUS clearance was effectively received during the original regulatory approval process, and no further action is expected to be required absent material changes to the ownership structure of the acquiring entities. To the extent that the reactivated transaction involves any change in the identity or ownership of the co-investors or their respective beneficial owners, a supplemental CFIUS filing may be required. Calderwood & Harkness does not currently anticipate that a supplemental filing will be necessary.

The aggregate timeline for regulatory refilings — assuming a new FERC application and un-staying of the OPUC proceeding — would likely add approximately 6 to 12 months to the reactivation timeline, depending on the extent to which these processes can be conducted in parallel.

D. Financing Considerations

As noted in Section V.D, the original debt commitment from Atlas National Bank, N.A. (as lead arranger) and Pinnacle Credit Partners LLC (as co-lender for $325 million of the total commitment) expired on October 31, 2023 without extension. The expired commitment provided for a $975 million senior secured term loan and a $150 million revolving credit facility.

New financing would need to be arranged in connection with any reactivation. The terms, sizing, and pricing of a new debt commitment will be affected by several factors, including:

(a) Current Debt Market Conditions. Interest rates have risen materially since the original debt commitment was obtained in 2022. The benchmark SOFR rate, which underpins floating-rate infrastructure debt, has increased significantly. Credit spreads for infrastructure-sector leveraged loans have also widened relative to their 2022 levels. These factors would likely result in higher all-in borrowing costs for the acquisition financing.

(b) Revised Cascadia Financial Profile. The reduced Bull Run concession revenue and EBITDA, together with the incremental SB 1567 compliance capex obligations, would affect lenders' assessment of Cascadia's creditworthiness and debt-service capacity. Lenders would likely apply more conservative leverage ratios (i.e., lower total debt / EBITDA) in light of the reduced and less certain EBITDA, which could result in a smaller debt quantum being available.

(c) Capital Structure Changes. Any reduction in the enterprise value, combined with potentially more conservative leverage, would affect the relative proportions of debt and equity in the capital structure. A larger equity contribution as a percentage of total capitalization may be required, which would in turn affect the equity returns and the co-investment economics.

(d) Lender Appetite. It is not certain that Atlas National Bank and Pinnacle Credit Partners would be willing to provide a new commitment on comparable terms, or at all. The financing process may need to be broadened to include additional or alternative lenders.

Blackthorn Advisory Group LLC, Meridian's financial advisor, would presumably be involved in updated financial modeling and a potential new financing process. Calderwood & Harkness recommends that Ironside monitor the financing workstream closely and consider engaging its own financial advisor to provide independent analysis of the revised capital structure and financing terms.

E. R&W Insurance

The representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) provides coverage with a limit of $195 million, which was originally set at 10% of the agreed enterprise value of $1,950 million. The policy is tolled during the dormancy period pursuant to the Side Letter dated January 20, 2023, which was negotiated among the parties and the insurer at the time of the Material Impediment Event declaration.

Upon reactivation, the status and coverage terms of the R&W policy would need to be confirmed with Northgate Specialty Insurance Co. Key considerations include:

(a) whether the policy remains available on its original terms following the extended dormancy period, or whether the insurer will seek to impose additional conditions, revised exclusions, or increased premiums;

(b) whether the coverage limit (originally $195 million at 10% of enterprise value) should be adjusted to reflect a reduced enterprise value; a proportional adjustment at 10% of an adjusted enterprise value of approximately $1.81 billion to $1.83 billion (midpoint scenario) would yield a coverage limit of approximately $181 million to $183 million;

(c) whether the scope of covered representations and warranties would need to be updated to reflect the Revised Framework, the passage of time, and any new or modified representations regarding SB 1567 compliance and the amended concession terms; and

(d) whether the retention (deductible) and other policy parameters remain appropriate.

Calderwood & Harkness will coordinate with the insurance broker (we understand the original placement was handled through Ridgeway Benefits Consulting) and Northgate Specialty to obtain updated terms upon reactivation.

F. Tax Implications

Sylvia Hartwell of Calderwood & Harkness's Tax group is conducting a separate updated tax analysis addressing the structural tax considerations associated with reactivation versus wind-down of the Vehicle. The revised concession economics under the Revised Framework may affect several aspects of the tax structuring, including:

(a) the allocation of income, gain, loss, and deductions among the partners of the Co-Invest Vehicle under the LP Agreement's al

CALDERWOOD & HARKNESS LLP 125 Broad Street, 44th Floor New York, NY 10004
MEMORANDUM — PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT WORK PRODUCT
Matter Number: 1023-00001
August 15, 2024
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
RE: Revised Concession Framework Between Portland Metropolitan Water District and Cascadia Renewables Holdings, Inc. — Preliminary Impact on Bull Run Filtration Project Revenue and Overall Transaction Economics
CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP at the request and for the exclusive benefit of Ironside Capital Management LP. It contains information that is legally privileged under applicable law. This memorandum is intended solely for the use of the individuals to whom it is addressed. Do not distribute, copy, or disclose this memorandum or any portion of its contents without prior written authorization from Calderwood & Harkness LLP. If you have received this memorandum in error, please notify us immediately and destroy all copies.
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I. Executive Summary
On June 30, 2024, the Portland Metropolitan Water District ("PMWD") and Cascadia Renewables Holdings, Inc. ("Cascadia" or "CRH") reached a tentative framework on revised terms for the Bull Run Filtration Project concession agreement (the "Revised Framework"). This development represents the most significant substantive progress on the concession renegotiation since PMWD first initiated the process nearly two years ago, and it has direct and material implications for Ironside Capital Management LP's ("Ironside") co-investment in the pending Cascadia acquisition.
The original concession agreement was executed in 2018 as a 40-year design-build-operate-maintain arrangement between Cascadia and PMWD. PMWD's formal renegotiation was initiated by written notice dated October 28, 2022, in which the District cited changed regulatory requirements under Oregon Senate Bill 1567 (2022) ("SB 1567"), which imposed new enhanced filtration standards and water-quality monitoring obligations on municipal water-treatment facilities throughout the state. The concession renegotiation was the precipitating event for the Material Impediment Event declaration issued by Meridian Infrastructure GP IV LLC (the "GP") on January 9, 2023, which in turn triggered the dormancy of ICM Cascadia Co-Invest, LP (the "Vehicle" or the "Co-Invest Vehicle"), the co-investment vehicle through which Ironside committed $300 million to participate alongside Meridian Infrastructure Partners Fund IV, LP ("Fund IV") in the acquisition of Cascadia.
The Bull Run concession generates approximately $64 million in annual revenue for Cascadia, representing approximately 13.1% of Cascadia's fiscal year 2021 revenue of $487 million, and constitutes a significant component of Cascadia's $138 million fiscal year 2021 EBITDA. These were the baseline financial metrics upon which the originally agreed enterprise value of $1,950,000,000 was predicated. Given the concession's outsized contribution to both revenue and earnings, any material revision to its terms carries implications that extend well beyond the Bull Run project itself and into the overall transaction economics.
This memorandum provides a preliminary analysis of the key terms of the Revised Framework, to the extent they are known based on summary information provided to date by counsel for Meridian Infrastructure Partners LP ("Meridian") and limited disclosures from counsel for Cascadia. The memorandum assesses the estimated revenue and EBITDA impact of the contemplated changes and evaluates the implications for the originally agreed enterprise value and the economics of Ironside's co-investment. We also identify critical information gaps, interaction with existing transaction documents (including the Equity Purchase Agreement, as amended, and the Mutual Standstill and Preservation Agreement), regulatory re-filing requirements, financing considerations, and recommended near-term actions for Ironside.
Conclusion. The Revised Framework, while representing a positive step toward resolving the critical impediment that has kept the Vehicle dormant for approximately 19 months, is expected to reduce Bull Run concession revenue by an estimated $9 million to $16 million annually (with a midpoint of approximately $12.5 million, or roughly 19.5%). This revenue reduction, when flowed through to EBITDA at the concession's historically high margin profile, would reduce Cascadia's run-rate EBITDA from $138 million to an illustrative range of approximately $128.6 million to $129.9 million, implying a potential enterprise value reduction of approximately $120 million to $140 million if the originally agreed 14.1x EV/EBITDA multiple is held constant. The actual valuation impact could be greater if the renegotiated concession terms also warrant a lower comparable multiple due to reduced contract quality, increased regulatory risk, or shortened weighted-average contract life. These preliminary findings should inform Ironside's assessment of the reactivation feasibility memorandum that Meridian is expected to circulate to co-investors on or about September 1, 2024, and any renegotiation of the acquisition price in connection with a potential transaction reactivation.
II. Background
A. The Bull Run Filtration Project Concession — Original Terms
The Bull Run Filtration Project is a large-scale municipal water-treatment facility located in the Bull Run watershed area east of Portland, Oregon, serving the greater Portland metropolitan area. The project was conceived as a public-private partnership to address longstanding federal and state regulatory mandates requiring enhanced filtration of the Bull Run surface water supply.
In 2018, Cascadia and PMWD entered into a 40-year concession agreement (the "Original Concession Agreement") pursuant to which Cascadia assumed responsibility for the design, construction, operation, and maintenance of the Bull Run Filtration Project. The Original Concession Agreement was structured as a design-build-operate-maintain ("DBOM") arrangement, a model commonly used for large-scale water infrastructure projects in the United States. Under the terms of the Original Concession Agreement, Cascadia committed to designing and constructing the filtration facility to specified performance standards, and thereafter operating and maintaining the facility for the duration of the concession term.
Annual revenue under the Original Concession Agreement was approximately $64 million per year, generated through a composite payment structure consisting of three principal components:
(a) Availability Payments. Fixed periodic payments from PMWD to Cascadia, payable monthly, contingent upon the facility meeting specified availability thresholds. Availability payments constituted the majority of annual concession revenue and provided a predictable, utility-like cash flow profile.
(b) Volumetric Charges. Variable payments tied to the volume of water processed through the filtration facility, subject to minimum and maximum volume bands. Volumetric charges provided an element of revenue variability but were historically stable given the relatively consistent water demand in the Portland metropolitan service area.
(c) Periodic Capital-Recovery Adjustments. Scheduled adjustments to the payment stream to reflect Cascadia's capital deployment for facility construction and periodic major maintenance cycles, structured to allow Cascadia to recover its capital investment over the concession term with an embedded return component.
The Bull Run concession represents Cascadia's single largest water-infrastructure contract by revenue and is one of three water-treatment concessions across its Oregon, Washington, and Idaho platform. The other two water-treatment concessions — the Bend Regional Water Treatment Plant (Oregon) and the Boise River Filtration Facility (Idaho) — are smaller in scale and generate combined annual revenue of approximately $31 million based on fiscal year 2021 figures.
As of 2024, the Original Concession Agreement had approximately 34 years remaining on its 40-year term, making it one of the longest-duration contracts in Cascadia's portfolio. The weighted-average remaining life of Cascadia's overall contract portfolio (encompassing its 14 hydroelectric facilities, 6 wind farms, and 3 water-treatment concessions) was approximately 22 years as of the time the transaction was originally agreed; the Bull Run concession, at 34 years remaining, was a significant contributor to this long-duration profile. The long-duration character of the portfolio was a central element of the investment thesis that underpinned the transaction.
Revenue from the Bull Run concession was a key driver of Cascadia's fiscal year 2021 EBITDA of $138 million, upon which the agreed enterprise value of $1,950,000,000 was predicated. The implied EV/EBITDA multiple of approximately 14.1x ($1,950 million divided by $138 million) reflected a premium valuation consistent with Cascadia's contracted, long-duration, infrastructure-like revenue profile and favorable regulatory positioning in the Pacific Northwest renewable energy and water infrastructure markets.
B. The Renegotiation — Chronology
The following timeline summarizes the key events in the concession renegotiation and the related developments in the Cascadia acquisition:
October 28, 2022. PMWD delivered formal written notice to Cascadia of its intent to renegotiate the terms of the Original Concession Agreement. The notice cited Oregon Senate Bill 1567 (2022), which was signed into law on July 1, 2022, and which imposed new regulatory requirements on municipal water-treatment facilities throughout the state, including enhanced filtration standards, expanded water-quality monitoring and reporting obligations, and mandated capital upgrades to existing facilities. PMWD took the position that SB 1567 constituted a regulatory change of sufficient magnitude to trigger the renegotiation provisions contained in Article XII of the Original Concession Agreement.
November 10, 2022. Meridian Infrastructure Partners LP, acting through Meridian Infrastructure GP IV LLC, notified Ironside Capital Management LP and the other co-investors in the Vehicle of the material adverse development presented by PMWD's renegotiation notice. Meridian's notification characterized the development as having the potential to materially affect the revenue, earnings, and cash flow profile of Cascadia's single largest water-infrastructure asset and, consequently, the overall economics of the pending acquisition.
November 22, 2022. In response to the uncertainty created by the PMWD renegotiation notice, the parties to the Equity Purchase Agreement ("EPA"), which had been executed on September 15, 2022, agreed to the First Amendment to the EPA. The First Amendment extended the outside date for closing from December 31, 2022 to March 31, 2023, providing additional time for the concession renegotiation to advance while preserving the transaction framework.
January 9, 2023. After receiving additional information regarding the scope of PMWD's renegotiation demands — which indicated that PMWD was seeking substantial rate reductions, enhanced performance guarantees, and significant capital-upgrade obligations to be borne by Cascadia — the GP determined that the concession renegotiation constituted a Material Impediment Event under Section 7.04 of the Amended and Restated Limited Partnership Agreement of ICM Cascadia Co-Invest, LP (the "LP Agreement"). The GP issued a formal declaration of a Material Impediment Event and simultaneously issued a capital-call suspension notice, effectively placing the Vehicle into dormancy. The declaration was made following consultation with Calderwood & Harkness LLP and Breckenridge Sloane & Pratt LLP, and with the concurrence of Ironside and the other co-investors.
March 15, 2023. With the concession renegotiation still unresolved and no clear timeline for resolution, the EPA parties agreed to the Second Amendment to the EPA, which extended the outside date from March 31, 2023 to June 30, 2023.
June 28, 2023. The Third Amendment to the EPA further extended the outside date from June 30, 2023 to December 31, 2023. At the time of the Third Amendment, the concession renegotiation between PMWD and Cascadia had entered a protracted phase, with the parties exchanging proposals and counterproposals but failing to reach agreement on key economic terms.
December 31, 2023. The EPA outside date, as extended by the Third Amendment, expired without further extension. No party exercised termination rights under the EPA prior to the expiration of the outside date; the transaction framework remained in place but without a binding agreement to close.
February 15, 2024. Recognizing the potential value of the transaction to all parties notwithstanding the unresolved concession renegotiation, the EPA parties executed a Mutual Standstill and Preservation Agreement (the "Standstill Agreement"). The Standstill Agreement preserved the transaction framework, maintained exclusivity, and imposed mutual standstill obligations, but did not fix the economic terms of the transaction or obligate any party to consummate the acquisition. The Standstill Agreement was negotiated by Calderwood & Harkness LLP (for Ironside), Breckenridge Sloane & Pratt LLP (for Meridian), Garvey Lennox LLP (for the Selling Shareholders), and Ridgeway, Ashford & Malone PC (for Cascadia).
June 30, 2024. PMWD and Cascadia reached the tentative Revised Framework, representing the parties' agreement in principle on revised economic and operational terms for the Bull Run concession. The Revised Framework has not yet been documented in definitive form, and there is no binding obligation on either party to finalize the amendments.
C. Current Transaction Status
As of the date of this memorandum, the transaction status is as follows:
Vehicle Status. ICM Cascadia Co-Invest, LP remains dormant pursuant to the Material Impediment Event declaration of January 9, 2023. Of the $300 million in total commitments by Ironside, $22.5 million in capital has been called (the initial capital call was made on August 15, 2022, prior to the Material Impediment Event declaration), and $277.5 million in commitments remain unfunded. The called capital is held in the Vehicle's escrow account at Greaves Bancorp
Debt Commitment. The debt commitment letter from Atlas National Bank, N.A. (as lead arranger) and Pinnacle Credit Partners LLC (as co-lender for $325 million of the total commitment), which provided for a $975 million senior secured term loan and a $150 million revolving credit facility to finance the acquisition, expired on October 31, 2023 without further extension. No replacement debt commitment has been obtained. Any reactivation of the transaction would require a fresh debt commitment, which would need to be arranged at then-prevailing market terms and sized to reflect the revised Cascadia financial profile.
Regulatory Approvals. The Federal Energy Regulatory Commission ("FERC") approval under Section 203 of the Federal Power Act (Docket No. EC22-143-000), which was received on December 15, 2022, lapsed on June 15, 2024 upon expiration of the 18-month extension period. A new FERC application would be required in any reactivation scenario. The Oregon Public Utility Commission ("OPUC") proceedings (Docket No. UM-2287), which relate to regulatory approval of the change of control of Cascadia's Oregon-regulated utility operations, remain stayed since February 2023 and would need to be un-stayed and completed. The Committee on Foreign Investment in the United States ("CFIUS") clearance, which was effectively received during the original regulatory approval process, is not expected to require further action absent material changes to the ownership structure of the acquiring entities.
Wind-Down Election Right. Ironside's wind-down election right under Section 7.04(c) of the LP Agreement ripened on July 9, 2024, which marked the 18-month anniversary of the Material Impediment Event declaration. Ironside has not exercised this right, consistent with Calderwood & Harkness's recommendation dated July 25, 2024 that Ironside defer the exercise of the wind-down election pending developments on the concession framework and Meridian's expected reactivation feasibility analysis. The wind-down election right remains available to Ironside and represents an important source of leverage in any reactivation negotiations.
Meridian Reactivation Feasibility Memo. Meridian is expected to circulate a reactivation feasibility memorandum to co-investors, including Ironside, on or about September 1, 2024. Calderwood & Harkness understands from informal communications with Breckenridge Sloane & Pratt LLP (Charles A. Delacroix) that the memorandum will outline Meridian's preliminary assessment of the path to reactivation, including proposed adjustments to transaction economics, a timeline for obtaining fresh regulatory approvals and financing, and updated financial projections for Cascadia.
III. Summary of the Revised Framework — Key Terms
The following is a summary of the key terms of the Revised Framework, based on information available to Calderwood & Harkness as of the date of this memorandum. Our information sources include: (i) a summary term sheet provided by Meridian's counsel, Breckenridge Sloane & Pratt LLP (Charles A. Delacroix), on July 18, 2024; (ii) a limited supplemental briefing from Cascadia's counsel, Ridgeway, Ashford & Malone PC (Nina R. Castellano), provided at a joint counsel call on August 2, 2024; and (iii) a high-level overview from Meridian's financial advisor, Blackthorn Advisory Group LLC, shared informally with Calderwood & Harkness on August 8, 2024. We have not been provided with the underlying negotiation documents, detailed rate schedules, or draft amendment language. Accordingly, our analysis is necessarily preliminary, and all conclusions are subject to revision upon receipt of additional information and definitive documentation.
A. Scope of Concession and Regulatory Compliance
The Revised Framework retains Cascadia as the concessionaire for the Bull Run Filtration Project and preserves the fundamental DBOM structure of the Original Concession Agreement. Cascadia will continue to be responsible for the operation and maintenance of the filtration facility and will retain the revenue-generating rights associated with the concession for the duration of the (potentially adjusted) concession term.
However, the Revised Framework incorporates new regulatory compliance obligations mandated by Oregon SB 1567 (2022). Specifically, the revised terms are expected to require Cascadia to:
(a) upgrade the Bull Run Filtration Project's treatment processes to meet enhanced filtration performance standards established by SB 1567, including new minimum removal rates for specified contaminants and pathogen categories;
(b) implement additional water-quality monitoring and reporting protocols, including continuous real-time monitoring of certain water-quality parameters and expanded quarterly reporting to the Oregon Health Authority and PMWD;
(c) undertake specified capital improvements to the filtration facility's physical plant to accommodate the enhanced filtration standards, including potential installation of additional treatment stages or supplemental filtration technologies; and
(d) bear certain incremental capital expenditures associated with the foregoing facility upgrades, which were not contemplated under the Original Concession Agreement as executed in 2018 (the regulatory landscape having materially changed with the passage of SB 1567 in 2022).
The allocation of SB 1567 compliance costs between Cascadia and PMWD is a central economic issue in the renegotiation and is addressed further in Section III.D below.
B. Revenue Adjustments
The Revised Framework contemplates material modifications to the payment structure governing PMWD's obligations to Cascadia. Based on the summary information available, these modifications include:
(a) Availability Payment Adjustments. The fixed availability payment component is expected to be reduced from its current level, reflecting PMWD's position that the Original Concession Agreement's availability payment rates were set at a time when the regulatory compliance burden was materially lower. The precise magnitude of the availability payment reduction is not yet finalized and remains subject to ongoing negotiation between PMWD and Cascadia.
(b) Volumetric Charge Rate Revisions. The volumetric charge rates are expected to be revised, with indications suggesting a modest reduction in the per-unit volumetric rate. Additionally, the volume bands (minimum and maximum thresholds) may be adjusted to reflect updated demand projections for the Portland metropolitan service area.
(c) Inflation Escalator Provisions. The inflation escalator applicable to both availability payments and volumetric charges may be revised. Under the Original Concession Agreement, the escalator was indexed to a blended Consumer Price Index / Producer Price Index formula with annual adjustments. The Revised Framework may modify the escalator formula, the base index, or the frequency of adjustments.
(d) Capital-Recovery Mechanism. A revised capital-recovery mechanism is contemplated to address the incremental SB 1567 compliance capital expenditures (see Section III.D below). The extent to which this mechanism offsets the revenue reductions described above is a critical variable.
Based on the summary information available and our preliminary analysis, Calderwood & Harkness estimates that the annual concession revenue under the Revised Framework would fall within a range of approximately $48 million to $55 million, compared to the current level of approximately $64 million under the Original Concession Agreement. This represents a reduction of approximately $9 million to $16 million per year, or approximately 14% to 25% of current annual concession revenue. The wide range of the estimate reflects the significant uncertainty surrounding several key variables — most notably, the final availability payment rates, the volumetric charge rates and volume assumptions under the new regulatory parameters, and the degree to which the capital-recovery mechanism provides incremental revenue to offset compliance costs.
We emphasize that these estimates are preliminary. The precise revenue impact depends on the finalization of detailed rate schedules, the capital-recovery mechanism for SB 1567 compliance costs, the inflation escalator provisions, and other terms that remain under active negotiation. Full financial modeling will require access to the definitive concession amendment and updated financial projections from Cascadia management.
C. Concession Term
The Revised Framework addresses the duration of the concession, which is a variable of considerable importance both to the Bull Run project's standalone economics and to the weighted-average remaining contract life of Cascadia's overall portfolio.
Under the Original Concession Agreement, the concession had a 40-year term commencing in 2018, with approximately 34 years remaining as of 2024. The Revised Framework contemplates three potential outcomes with respect to the concession term, which remain under discussion:
(a) Maintenance of the Original Term. The 40-year term would be maintained, with approximately 34 years remaining. This outcome would preserve the long-duration character of the contract and its contribution to the weighted-average remaining life of the Cascadia portfolio.
(b) Modest Extension. The concession term would be extended by a period of 3 to 7 years (to a total of approximately 43 to 47 years) to compensate Cascadia for the incremental capital expenditure burden imposed by SB 1567. A term extension would provide Cascadia with a longer period over which to recover its additional capital investment, partially mitigating the economic impact of the revenue reductions. Cascadia is understood to favor this outcome.
(c) Shortened Term. PMWD has, at certain points during the renegotiation, expressed a preference for a shortened concession term (potentially reducing the total term to 30 to 35 years, leaving approximately 24 to 29 years remaining). A shortened term would reduce the total revenue stream available to Cascadia and could materially affect the weighted-average remaining contract life of the Cascadia portfolio.
Any change in the concession term directly affects both the total present value of the concession's revenue stream and the weighted-average remaining contract life of Cascadia's portfolio — a metric that was central to the investment thesis and the premium valuation multiple assigned to Cascadia. A reduction in the weighted-average remaining contract life would, all else being equal, tend to support a lower valuation multiple.
D. Capital Recovery and Capex Obligations
As noted above, the Revised Framework contemplates that Cascadia will bear certain incremental capital expenditures to bring the Bull Run Filtration Project into compliance with SB 1567. The quantum of these expenditures has not yet been disclosed by Cascadia management, and Calderwood & Harkness has not been provided with any detailed engineering estimates or capital budgets.
The Revised Framework does contemplate a mechanism for partial recovery of SB 1567-related capital expenditures through one or both of the following:
(a) Rate Adjustments. Incorporation of a capital-recovery component into the revised availability payment or volumetric charge rates, effectively allowing Cascadia to pass through a portion of compliance capex to PMWD ratepayers over the remaining concession term.
(b) Separate Capital-Recovery Payments. A distinct payment stream from PMWD to Cascadia, outside of the standard availability payment and volumetric charge structure, dedicated to reimbursement of specified SB 1567 compliance capital expenditures.
The critical question is the extent to which the capital-recovery mechanism will reimburse Cascadia for SB 1567 compliance costs. If the mechanism provides full or near-full recovery, the net economic impact on Cascadia would be limited primarily to the revenue reductions described in Section III.B. If, however, the recovery is partial — as appears more likely based on the preliminary information available — Cascadia would bear a meaningful unreimbursed capital expenditure burden, which would further reduce free cash flow and, depending on accounting treatment and magnitude, could affect EBITDA.
Cascadia's CEO, Jonathan M. Weir, and CFO, Sandra K. Llewellyn, have not yet disclosed detailed capex estimates for SB 1567 compliance to Meridian or to the co-investors. Calderwood & Harkness understands from Breckenridge Sloane & Pratt LLP that Meridian has requested this information from Cascadia and expects to receive preliminary estimates in connection with the reactivation feasibility memorandum. The availability and reliability of these estimates will be an important factor in any comprehensive assessment of the Revised Framework's economic impact.
E. Termination and Default Provisions
The Revised Framework is expected to include updated provisions relating to termination, default, and force majeure, reflecting the regulatory landscape introduced by SB 1567. Specifically:
(a) Termination for Convenience. The updated termination-for-convenience provisions are expected to be revised to address circumstances in which future regulatory changes (beyond SB 1567) materially alter the economic balance of the concession. The structure, notice requirements, and compensation formulas applicable to termination for convenience are important risk factors that will need to be analyzed carefully upon receipt of definitive documentation.
(b) Force Majeure. The force majeure definition is expected to be updated to incorporate regulatory-change concepts derived from the SB 1567 experience, potentially including a broader definition of qualifying regulatory-change events and revised allocation of risk between Cascadia and PMWD in the event of future regulatory changes.
(c) Default and Cure Provisions. The Revised Framework is expected to include revised default triggers and cure periods. The details of these provisions are not yet available. Calderwood & Harkness will conduct a detailed analysis of the default and cure provisions upon receipt of the definitive term sheets or draft amendment language.
F. Status: Tentative / Non-Binding
It is important to emphasize that the Revised Framework represents a tentative agreement in principle between PMWD and Cascadia. No definitive documentation has been executed, and the parties have not entered into a binding commitment to finalize amendments to the Original Concession Agreement on the terms described above. There is no assurance that the parties will reach final agreement, that the terms of the definitive amendment will mirror the tentative framework, or that the amendment, once executed, will be approved by the PMWD Board of Commissioners or any other relevant governmental authority. The Revised Framework should accordingly be treated as indicative rather than definitive for purposes of Ironside's planning and decision-making.
IV. Preliminary Revenue and EBITDA Impact Analysis
This section presents Calderwood & Harkness's preliminary analysis of the revenue and EBITDA impact of the Revised Framework on Cascadia's financial profile, and specifically on the financial metrics upon which the originally agreed enterprise value was predicated. We reiterate that this analysis is based on limited and preliminary information, that the estimates presented herein are illustrative, and that a comprehensive financial analysis will require the definitive concession amendment, updated Cascadia financial projections, and the engagement of financial advisors with detailed modeling capabilities.
A. Revenue Impact — Bull Run Concession
The revenue impact on the Bull Run concession under the Revised Framework is estimated as follows:
• Original annual concession revenue: approximately $64 million per year.
• Estimated annual concession revenue under Revised Framework: approximately $48 million to $55 million per year.
• Estimated annual revenue reduction: approximately $9 million to $16 million per year.
• Midpoint estimate of annual revenue reduction: approximately $12.5 million per year (a reduction of approximately 19.5% from the original level).
• Midpoint estimated annual concession revenue under Revised Framework: approximately $51.5 million per year.
The range reflects the uncertainty surrounding several key variables, as discussed in Section III.B above. The low end of the revenue reduction range ($9 million, implying revised revenue of approximately $55 million) reflects a scenario in which the availability payment reductions are relatively modest, volumetric charge adjustments are limited, and the capital-recovery mechanism provides meaningful incremental revenue. The high end of the range ($16 million, implying revised revenue of approximately $48 million) reflects a scenario in which availability payment reductions are substantial, volumetric charges are meaningfully reduced, and the capital-recovery mechanism is less robust.
These estimates are based on the summary terms of the Revised Framework as provided by Meridian's counsel, Breckenridge Sloane & Pratt LLP (lead partner Charles A. Delacroix), during the July 18, 2024 briefing, and on limited supplemental information provided by Cascadia's counsel, Ridgeway, Ashford & Malone PC (lead partner Nina R. Castellano), during the August 2, 2024 joint counsel call. Calderwood & Harkness has not had access to detailed rate schedules, financial models, or the underlying negotiation documents. Full financial modeling will require the definitive concession amendment, updated Cascadia financial projections, and detailed analysis of the capital-recovery mechanism.
B. Cascadia Aggregate Revenue Impact
The impact on Cascadia's aggregate revenue is estimated as follows:
• FY 2021 total revenue: $487 million (per the audited financial statements prepared by Halstead & Greer LLP).
• Estimated net reduction in annual revenue (midpoint): approximately $12.5 million, reflecting the reduction in Bull Run concession revenue from approximately $64 million to approximately $51.5 million.
• Adjusted total revenue (illustrative, midpoint): approximately $474.5 million (a decrease of approximately $12.5 million, or approximately 2.6%, from the FY 2021 baseline).
This analysis assumes that Cascadia's other revenue streams remain unchanged at their FY 2021 levels. Those other revenue streams encompass 14 hydroelectric generation facilities located across Oregon, Washington, and Idaho; 6 wind farm operations in Oregon and Washington; and the 2 remaining water-treatment concessions (the Bend Regional Water Treatment Plant and the Boise River Filtration Facility). This is, of course, a simplifying assumption, and in practice, Cascadia's revenue from these sources may have changed materially since FY 2021. A comprehensive update of Cascadia's financial performance for fiscal years 2022 and 2023 — and, ideally, a year-to-date 2024 interim period — would be necessary for any reactivation analysis. Calderwood & Harkness understands that audited financial statements for FY 2022 and FY 2023 have been prepared by Halstead & Greer LLP but have not yet been made available to Ironside or the other co-investors. As discussed in Section VII below, we recommend that Ironside request these financial statements as a priority.
C. EBITDA Impact
Estimating the EBITDA impact of the concession revenue reduction requires assumptions about the margin profile of the Bull Run concession. The Bull Run concession, as a long-term availability-payment-based infrastructure contract, operates at high EBITDA margins. This is characteristic of contracted infrastructure assets generally, and of water-treatment concessions in particular, where the concessionaire's cost base is predominantly fixed (facility operating costs, personnel, maintenance) and does not vary proportionally with revenue.
Based on Calderwood & Harkness's understanding of the cost structure of comparable water-treatment concessions and the limited information available regarding the Bull Run concession's operating cost profile, we have applied an illustrative EBITDA margin range of 65% to 75% to the estimated revenue reduction. This range is intended to bracket the likely incremental EBITDA margin — that is, the proportion of the lost revenue that would have flowed through to EBITDA — rather than the average EBITDA margin across the entire concession revenue base.
The illustrative EBITDA impact at the midpoint revenue reduction estimate of $12.5 million per year is as follows:
• At 65% incremental EBITDA margin: $12.5 million × 65% = approximately $8.1 million EBITDA reduction.
• At 75% incremental EBITDA margin: $12.5 million × 75% = approximately $9.4 million EBITDA reduction.
• Adjusted EBITDA range (illustrative, midpoint): approximately $128.6 million to $129.9 million, compared to the FY 2021 EBITDA of $138 million.
It is important to note that the EBITDA impact may be further affected by the incremental SB 1567 compliance capital expenditure obligations. To the extent that SB 1567-related capex is not fully recovered through the rate mechanism or separate capital-recovery payments, the unreimbursed portion would reduce Cascadia's free cash flow. Depending on the magnitude and accounting treatment of these expenditures, they could also affect reported EBITDA (e.g., if incremental operating or maintenance costs associated with the upgraded facility are classified as operating expenses rather than capitalized). This additional impact cannot be quantified at this time due to the absence of detailed capex estimates from Cascadia management.
D. Sensitivity Table
The following sensitivity table presents the estimated EBITDA impact across the range of potential revenue reductions and at varying incremental EBITDA margin assumptions:
The sensitivity table illustrates that the EBITDA impact ranges from a low of approximately $5.4 million (in the most favorable revenue-reduction / lowest-margin scenario) to a high of approximately $12.0 million (in the most adverse revenue-reduction / highest-margin scenario). The adjusted EBITDA correspondingly ranges from approximately $126.0 million to $132.6 million, compared to the FY 2021 EBITDA of $138 million upon which the original transaction valuation was based.
V. Implications for Transaction Valuation
A. Originally Agreed Enterprise Value
The enterprise value originally agreed under the Equity Purchase Agreement (executed September 15, 2022) was $1,950,000,000 (one billion nine hundred fifty million dollars). This enterprise value was predicated on Cascadia's fiscal year 2021 financial performance, as reflected in the audited financial statements prepared by Halstead & Greer LLP, with EBITDA of $138 million serving as the primary valuation metric. The implied EV/EBITDA multiple was approximately 14.1x ($1,950 million ÷ $138 million = 14.13x).
The 14.1x multiple reflected the market's assessment, at the time of the transaction agreement, of Cascadia's quality attributes, including: the long-duration, contracted nature of its revenue streams; its diversified platform across hydroelectric, wind, and water infrastructure assets; its favorable regulatory positioning in Oregon, Washington, and Idaho; and the specific characteristics of the Bull Run concession as the cornerstone asset of the water-treatment portfolio.
B. Adjusted Enterprise Value — Illustrative Range
Applying the originally agreed 14.1x EV/EBITDA multiple to the adjusted EBITDA range estimated in Section IV above yields the following illustrative adjusted enterprise values:
• At midpoint revenue reduction, 65% margin (adjusted EBITDA: $129.9M): $129.9M × 14.1x = approximately $1,832 million.
• At midpoint revenue reduction, 75% margin (adjusted EBITDA: $128.6M): $128.6M × 14.1x = approximately $1,814 million.
• Implied range of adjusted enterprise value (midpoint): approximately $1,814 million to $1,832 million.
• Implied reduction from originally agreed enterprise value: approximately $118 million to $136 million (approximately $120 million to $140 million when rounded).
The full sensitivity range, applying the 14.1x multiple across all scenarios in the sensitivity table, yields enterprise value estimates ranging from approximately $1,777 million (high-end revenue reduction at 75% margin, adjusted EBITDA of $126.0 million) to approximately $1,870 million (low-end revenue reduction at 60% margin, adjusted EBITDA of $132.6 million). This implies a potential reduction from the originally agreed enterprise value of between approximately $80 million and $173 million, depending on the scenario.
Important caveat regarding the applicable multiple. The foregoing analysis holds the 14.1x EV/EBITDA multiple constant — that is, it assumes that the appropriate valuation multiple for Cascadia is unchanged from the multiple implied by the original transaction. This is a simplifying assumption that may not hold. The appropriate multiple may itself change, and specifically may be lower, given the following factors:
(a) Reduced Contract Quality. The Revised Framework introduces greater regulatory risk into the Bull Run concession by subjecting it to SB 1567 compliance obligations and by potentially establishing a precedent for future regulatory renegotiations. The concession's risk profile is arguably less favorable than under the Original Concession Agreement.
(b) Shorter Weighted-Average Contract Life (if term is reduced). If the concession term is shortened (see Section III.C above), the weighted-average remaining contract life of Cascadia's portfolio would decline, reducing the long-duration premium that supported the original valuation.
(c) Increased Regulatory Risk. The SB 1567 renegotiation experience demonstrates that Cascadia's Oregon water-treatment concessions are subject to material regulatory-change risk, which may cause market participants to assign a lower multiple to the affected revenue streams.
(d) Market Multiple Compression. Infrastructure asset valuations have experienced some multiple compression since the September 2022 execution of the EPA, reflecting changes in interest rates, inflation expectations, and capital market conditions. The appropriate multiple for a transaction closing in 2025 may be lower than the multiple that was appropriate in 2022 regardless of the concession renegotiation.
If, for example, the applicable multiple were reduced by one full turn to 13.1x, the adjusted enterprise value at midpoint adjusted EBITDA of approximately $129.3 million (70% margin assumption) would be approximately $1,694 million — a reduction of approximately $256 million, or approximately 13.1%, from the originally agreed $1,950 million. Conversely, if certain SB 1567 capex costs are fully recoverable through the rate mechanism and the concession term is modestly extended, the net economic impact could be more modest, and the case for maintaining a comparable multiple would be stronger.
Calderwood & Harkness does not render financial advisory or valuation opinions and does not express a view on the appropriate EV/EBITDA multiple. We present this analysis to illustrate the range of potential outcomes and to highlight the significance of the multiple assumption for the overall valuation analysis.
C. Impact on Equity Value and Co-Invest Economics
The implications of the adjusted enterprise value for equity value and for the economics of Ironside's co-investment through the Vehicle are as follows:
Original Equity Value. The originally agreed equity value was $1,050,000,000, calculated as the enterprise value of $1,950 million less assumed net debt of $900 million (consisting of existing Cascadia indebtedness to be refinanced in the acquisition).
Adjusted Equity Value. If the enterprise value is reduced by approximately $120 million to $140 million (as estimated in the midpoint scenario above), and assuming net debt remains at approximately $900 million, the adjusted equity value would be approximately $910 million to $930 million. This represents a reduction of approximately $120 million to $140 million from the original equity value of $1,050 million, or approximately 11.4% to 13.3%.
The impact on the co-investment economics of the Vehicle and its constituent investors is as follows:
ICM Cascadia Co-Invest, LP (Ironside's Co-Investment). The Vehicle's original share of equity was 28.57%, representing a commitment of $300 million against total equity of $1,050 million. At the adjusted equity value range of approximately $910 million to $930 million, the Vehicle's 28.57% share would equate to approximately $260 million to $266 million in equity value. Ironside's $300 million commitment would therefore potentially exceed the implied value of its equity interest in a reactivated transaction, raising questions about whether a full $300 million commitment is appropriate or whether the commitment quantum should be reduced to reflect the adjusted economics.
Fund IV. Fund IV's original share of equity was 71.43%, representing a commitment of $750 million against total equity of $1,050 million. At the adjusted equity value range, Fund IV's 71.43% share would equate to approximately $650 million to $664 million in equity value.
The economics of Ironside's co-investment would need to be comprehensively reassessed in any reactivation scenario. Key considerations include:
(a) whether the 10% carried interest payable to Meridian Infrastructure GP IV LLC above the 8% preferred return (compounded quarterly) remains appropriate given the revised economics, or whether the waterfall structure should be renegotiated;
(b) whether a price adjustment mechanism should be negotiated in connection with the reactivation to protect Ironside against further deterioration in the Bull Run concession economics during the period between reactivation and closing;
(c) whether Ironside's commitment quantum ($300 million) should be reduced proportionally to reflect the reduced equity value, and if so, whether such a reduction would trigger any adjustment provisions under the LP Agreement or the co-investment allocation letter; and
(d) the impact of the extended dormancy period on Ironside's internal rate of return and multiple-of-invested-capital targets, given that $22.5 million in called capital has been deployed since August 2022 without generating returns.
D. Impact on Sources and Uses
The originally agreed sources and uses for the transaction were as follows:
Original Sources:
Original Uses:
A reduced enterprise value would require corresponding adjustments to the equity contributions, the debt quantum, or both. Several important considerations apply:
(a) The original debt commitment from Atlas National Bank, N.A. and Pinnacle Credit Partners LLC expired on October 31, 2023 and has not been extended or replaced. Any reactivation of the transaction would require Meridian to obtain a fresh debt commitment, which would be negotiated at then-prevailing market terms and conditions. Current debt market conditions — including higher base interest rates, wider credit spreads for infrastructure-sector leveraged finance, and more conservative underwriting standards — may result in a smaller debt quantum, higher pricing, or more restrictive covenants than were available under the original commitment.
(b) The sizing of any new debt commitment would need to reflect the revised Cascadia financial profile, including the reduced Bull Run concession revenue and EBITDA, the incremental SB 1567 compliance capex obligations, and any changes in the concession term that affect the duration and predictability of Cascadia's cash flows.
(c) Transaction costs may increase in a reactivation scenario due to the need for new regulatory filings (including a new FERC §203 application), updated environmental and technical due diligence, new or updated financing documentation, and additional legal fees associated with renegotiation of the acquisition agreement and co-investment structures.
(d) The working capital escrow amount may require adjustment depending on changes in Cascadia's working capital position since the original transaction agreement.
VI. Additional Considerations
A. Information Gaps and Diligence Requirements
Calderwood & Harkness has identified a number of significant information gaps that must be addressed before a comprehensive assessment of the Revised Framework's impact on the transaction can be completed. These include:
1. Definitive Concession Amendment Documentation. The Revised Framework is a tentative agreement in principle, and definitive documentation has not been prepared or executed. Calderwood & Harkness will need to review the definitive amendment (or the complete draft thereof) to confirm the accuracy of the summary terms upon which this preliminary analysis is based and to identify any additional provisions that may affect the economic analysis.
2. Updated Cascadia Financial Statements. Cascadia's financial performance since FY 2021 has not been updated for co-investor review. Calderwood & Harkness recommends that Ironside request the FY 2022 and FY 2023 audited financial statements, which we understand have been prepared by Halstead & Greer LLP. Additionally, interim 2024 financial data should be requested to provide a current baseline for any reactivation analysis. The FY 2021 figures used in this memorandum are more than three years old and may not accurately reflect Cascadia's current financial profile.
3. Incremental SB 1567 Compliance Capex Estimates. Cascadia management (CEO Jonathan M. Weir; CFO Sandra K. Llewellyn) has not yet disclosed detailed capital expenditure estimates for SB 1567 compliance to Meridian or to the co-investors. These estimates are essential for assessing the net economic impact of the Revised Framework, particularly the extent to which compliance costs will be borne by Cascadia versus recovered through the rate mechanism.
4. Rate Schedule Details. The detailed rate schedules that will govern the revised availability payments and volumetric charges have not been finalized or shared. These schedules are necessary for precise revenue modeling.
5. Capital-Recovery Mechanism Details. The mechanics of the capital-recovery mechanism (including timing, amount, conditions, and any clawback provisions) need to be specified before the net economic benefit to Cascadia can be assessed.
6. Updated Environmental Assessments. To the extent SB 1567 imposes new environmental standards or requires modifications to the Bull Run facility's environmental compliance profile, updated environmental assessments from Clearwater Environmental Consulting Inc. (which prepared the original Phase I and Phase II environmental site assessments for the transaction) may be required.
7. Updated Market and Comparable Analysis. An updated analysis of comparable infrastructure transactions and prevailing valuation multiples would be necessary to inform the discussion of the appropriate EV/EBITDA multiple in any reactivation negotiation.
B. Interaction with EPA and Standstill Agreement
The Revised Framework's implications must be analyzed in the context of the existing transaction documents, and particularly the Equity Purchase Agreement and the Mutual Standstill and Preservation Agreement.
Equity Purchase Agreement. The EPA was executed on September 15, 2022 by and among the Selling Shareholders (Timberline Growth Equity Fund III, LP, the Weir Family Trust, and the Management Rollover Pool), Cascadia, and the Buyer parties (Fund IV, the Co-Invest Vehicle, and the Merger Sub). The EPA has been amended three times (First Amendment, November 22, 2022; Second Amendment, March 15, 2023; Third Amendment, June 28, 2023). The outside date, as extended by the Third Amendment, expired on December 31, 2023. While the EPA has not been formally terminated — and the Standstill Agreement preserves the transaction framework — the economic terms of the EPA (including the $1,950,000,000 enterprise value) are not binding in the current posture. Reactivation of the transaction would likely require either:
(a) reinstatement of the EPA (through a Fourth Amendment or similar mechanism) with revised economic terms, including an adjusted enterprise value and updated representations, warranties, and closing conditions reflecting the Revised Framework and the passage of time since the original agreement; or
(b) negotiation and execution of a replacement acquisition agreement incorporating the revised transaction economics.
Either path would require the agreement of the Selling Shareholders, whose composition and interests are as follows:
• Timberline Growth Equity Fund III, LP (62% of Cascadia equity), represented by Garvey Lennox LLP (lead partner Steven F. Yun);
• Weir Family Trust (18% of Cascadia equity), of which Cascadia CEO Jonathan M. Weir serves as trustee; and
• Management Rollover Pool (20% of Cascadia equity, with the expectation that approximately 50% of the management equity — or approximately 10% of total Cascadia equity — would be rolled over into the post-closing capital structure).
Any price adjustment would need to be negotiated with these parties. Timberline, as the majority shareholder and a financial sponsor seeking a portfolio exit, may have different economic incentives and negotiating flexibility than the Weir Family Trust or the Management Rollover Pool.
Mutual Standstill and Preservation Agreement. The Standstill Agreement, executed February 15, 2024, preserves the transaction framework, maintains exclusivity, and imposes mutual standstill obligations. However, the Standstill Agreement expressly does not fix the economic terms of the transaction, does not obligate any party to consummate the acquisition, and does not constitute a binding commitment to reactivate the transaction. The Standstill Agreement provides a structured framework for the parties to negotiate reactivation terms, but each party retains the right to decline to proceed.
C. Regulatory Refilings
Reactivation of the transaction would require the following regulatory actions:
FERC §203 Approval. The FERC authorization under Section 203 of the Federal Power Act (Docket No. EC22-143-000), which was received on December 15, 2022, lapsed on June 15, 2024 upon expiration of the 18-month extension period. A new FERC application would be required in any reactivation scenario. Based on Calderwood & Harkness's experience with comparable FERC filings, the new application process would likely take approximately 4 to 8 months from filing to receipt of authorization, depending on FERC staffing and workload, the complexity of any changes to the transaction structure, and whether any intervenors file protests or requests for hearing. The new application would need to reflect any changes in the transaction structure, the identity of the financing sources, and the revised concession terms.
OPUC Proceedings. The OPUC proceedings (Docket No. UM-2287), relating to regulatory approval of the change of control of Cascadia's Oregon-regulated utility operations, remain stayed since February 2023 pursuant to a joint motion of the parties. Un-staying and completing the OPUC approval process would be necessary. The OPUC docket would need to be updated to reflect any changes in the transaction structure, the revised concession terms, and the current financial profile of the acquiring entities. OPUC review timelines are typically 6 to 12 months from the un-staying of the proceeding, although the previously completed record may expedite the process.
CFIUS. CFIUS clearance was effectively received during the original regulatory approval process, and no further action is expected to be required absent material changes to the ownership structure of the acquiring entities. To the extent that the reactivated transaction involves any change in the identity or ownership of the co-investors or their respective beneficial owners, a supplemental CFIUS filing may be required. Calderwood & Harkness does not currently anticipate that a supplemental filing will be necessary.
The aggregate timeline for regulatory refilings — assuming a new FERC application and un-staying of the OPUC proceeding — would likely add approximately 6 to 12 months to the reactivation timeline, depending on the extent to which these processes can be conducted in parallel.
D. Financing Considerations
As noted in Section V.D, the original debt commitment from Atlas National Bank, N.A. (as lead arranger) and Pinnacle Credit Partners LLC (as co-lender for $325 million of the total commitment) expired on October 31, 2023 without extension. The expired commitment provided for a $975 million senior secured term loan and a $150 million revolving credit facility.
New financing would need to be arranged in connection with any reactivation. The terms, sizing, and pricing of a new debt commitment will be affected by several factors, including:
(a) Current Debt Market Conditions. Interest rates have risen materially since the original debt commitment was obtained in 2022. The benchmark SOFR rate, which underpins floating-rate infrastructure debt, has increased significantly. Credit spreads for infrastructure-sector leveraged loans have also widened relative to their 2022 levels. These factors would likely result in higher all-in borrowing costs for the acquisition financing.
(b) Revised Cascadia Financial Profile. The reduced Bull Run concession revenue and EBITDA, together with the incremental SB 1567 compliance capex obligations, would affect lenders' assessment of Cascadia's creditworthiness and debt-service capacity. Lenders would likely apply more conservative leverage ratios (i.e., lower total debt / EBITDA) in light of the reduced and less certain EBITDA, which could result in a smaller debt quantum being available.
(c) Capital Structure Changes. Any reduction in the enterprise value, combined with potentially more conservative leverage, would affect the relative proportions of debt and equity in the capital structure. A larger equity contribution as a percentage of total capitalization may be required, which would in turn affect the equity returns and the co-investment economics.
(d) Lender Appetite. It is not certain that Atlas National Bank and Pinnacle Credit Partners would be willing to provide a new commitment on comparable terms, or at all. The financing process may need to be broadened to include additional or alternative lenders.
Blackthorn Advisory Group LLC, Meridian's financial advisor, would presumably be involved in updated financial modeling and a potential new financing process. Calderwood & Harkness recommends that Ironside monitor the financing workstream closely and consider engaging its own financial advisor to provide independent analysis of the revised capital structure and financing terms.
E. R&W Insurance
The representations and warranties insurance policy issued by Northgate Specialty Insurance Co. (Policy No. NSW-RI-2022-09814) provides coverage with a limit of $195 million, which was originally set at 10% of the agreed enterprise value of $1,950 million. The policy is tolled during the dormancy period pursuant to the Side Letter dated January 20, 2023, which was negotiated among the parties and the insurer at the time of the Material Impediment Event declaration.
Upon reactivation, the status and coverage terms of the R&W policy would need to be confirmed with Northgate Specialty Insurance Co. Key considerations include:
(a) whether the policy remains available on its original terms following the extended dormancy period, or whether the insurer will seek to impose additional conditions, revised exclusions, or increased premiums;
(b) whether the coverage limit (originally $195 million at 10% of enterprise value) should be adjusted to reflect a reduced enterprise value; a proportional adjustment at 10% of an adjusted enterprise value of approximately $1.81 billion to $1.83 billion (midpoint scenario) would yield a coverage limit of approximately $181 million to $183 million;
(c) whether the scope of covered representations and warranties would need to be updated to reflect the Revised Framework, the passage of time, and any new or modified representations regarding SB 1567 compliance and the amended concession terms; and
(d) whether the retention (deductible) and other policy parameters remain appropriate.
Calderwood & Harkness will coordinate with the insurance broker (we understand the original placement was handled through Ridgeway Benefits Consulting) and Northgate Specialty to obtain updated terms upon reactivation.
F. Tax Implications
Sylvia Hartwell of Calderwood & Harkness's Tax group is conducting a separate updated tax analysis addressing the structural tax considerations associated with reactivation versus wind-down of the Vehicle. The revised concession economics under the Revised Framework may affect several aspects of the tax structuring, including:
(a) the allocation of income, gain, loss, and deductions among the partners of the Co-Invest Vehicle under the LP Agreement's al

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