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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

The Company measures certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. Our fair value measurements use the following hierarchy, which prioritizes valuation inputs based on the extent to which the inputs are observable in the market.

•Level 1 - Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

•Level 2 - Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs are observable in active markets are Level 2 valuation techniques.

•Level 3 - Valuation techniques in which one or more significant inputs are unobservable. Such inputs reflect our estimate of assumptions that market participants would use to price an asset or liability.

The Company holds various financial instruments that are not required to be recorded at fair value. For cash, restricted cash, accounts receivable, accounts payable, and short-term debt, the carrying amounts approximate fair value due to the short maturity of these instruments.

The following table provides the financial instruments measured at fair value on a recurring basis:


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
Derivative assets:
Interest rate swaps	$	—	$	2,184	$	—	$	2,184
Total assets at fair value	—		2,184		—		2,184

Liabilities
Other current liabilities
Interest rate swaps	—		922		—		922
Forward starting interest rate swap	—		1,042		—		1,042
Alignment shares liability	—		—		49,116		49,116
Other long-term liabilities:
Contingent consideration liability	—		—		2,925		2,925
Total liabilities at fair value	—		1,964		52,041		54,005


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market fund	$	101,842	$	—	$	—	$	101,842
Derivative assets:
Interest rate swaps	—		3,953		—		3,953
Total assets at fair value	101,842		3,953		—		105,795

Liabilities
Alignment shares liability	—		—		66,145		66,145
Other long-term liabilities:
Contingent consideration liability	—		—		2,875		2,875
Total liabilities at fair value	—		—		69,020		69,020

Alignment Shares Liability

As of March 31, 2023, the Company had 1,006,250 alignment shares outstanding, all of which are held by CBRE Acquisition Sponsor, LLC (the "Sponsor"), certain former officers of CBAH (such officers, together with the Sponsor, the “Sponsor Parties”) and former CBAH directors. The alignment shares will automatically convert into shares of Class A common stock based upon the Total Return (as defined in Exhibit 4.4 to our 2022 Annual Report on Form 10-K) on the Class A common stock as of the relevant measurement date over each of the seven fiscal years following the Merger.

Upon the consummation of the Merger, alignment shares have no continuing service requirement and do not create an unconditional obligation requiring the Company to redeem the instruments by transferring assets. In addition, the shares convert to a variable number of Class A common stock depending on the trading price of the Class A common stock and dividends paid/payable to the holders of Class A common stock. Therefore, the shares do not represent an obligation or a conditional obligation to issue a variable number of shares with a monetary value based on any of the criteria in ASC 480, Distinguishing

Liabilities From Equity. The Company determined that the alignment shares meet the definition of a derivative because they contain (i) an underlying (Class A common stock price), (ii) a notional amount (a fixed number of Class B common stock), (iii) no or minimal initial net investment (the Sponsor paid a de minimis amount which is less than the estimated fair value of the shares), and (iv) net settleable through a conversion of the alignment shares into Class A shares. As such, the Company

concluded that the alignment shares meet the definition of a derivative, which will be presented at fair value each reporting period, with changes in fair value recorded through earnings.

The Company estimates the fair value of outstanding alignment shares using a Monte Carlo simulation valuation model utilizing a distribution of potential outcomes based on a set of underlying assumptions such as stock price, volatility, and risk-free interest rate. As volatility of 69% and risk-free interest rate of 3.60% are not observable inputs, the overall fair value measurement of alignment shares is classified as Level 3. Unobservable inputs can be volatile and a change in those inputs might result in a significantly higher or lower fair value measurement of alignment shares.


	For the three months ended March 31, 2023			For the three months ended March 31, 2022
	Shares	$		Shares	$
Beginning balance	1,207,500	$	66,145	1,408,750	$	127,474
Alignment shares converted	(201,250)	(11)		(201,250)	(15)
Fair value remeasurement	—	(17,018)		—	(46,346)
Ending balance	1,006,250	$	49,116	1,207,500	$	81,113

Interest Rate Swaps

The Company holds interest rate swaps that are considered derivative instruments, and are not designated as cash flow hedges or fair value hedges under accounting guidance. The Company uses interest rate swaps to manage its net exposure to interest rate changes. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded on an active market but valued using readily observable market inputs and the overall fair value measurement is classified as Level 2. As of March 31, 2023 and December 31, 2022, the notional amounts were $137.5 million and $141.6 million, respectively. The change in fair value of interest rate swaps resulted in a loss of $2.7 million, which was recorded as interest expense in the condensed consolidated statements of operations for the three months ended March 31, 2023. The change in fair value of interest rate swaps for three months ended March 31, 2022 was not material.

Forward Starting Interest Rate Swap

The Company entered into a forward starting interest rate swap on January 31, 2023, with an effective date of January 31, 2025 and a termination date of January 31, 2035. This transaction had a notional amount of $250.0 million, was designated as a cash flow hedge of the Company's forecasted fixed-rate or floating-rate debt issuances and was determined to be fully effective during the three months ended March 31, 2023. As such, no amount of ineffectiveness has been included in net income. The amount included in other comprehensive income would be reclassified to current earnings should all or a portion of the hedge no longer be considered effective. We expect the hedge to remain fully effective during the remaining term of the swap. The change in fair value of the forward starting interest rate swap resulted in a loss of $0.8 million, net of tax, which was recorded in the condensed consolidated statements of comprehensive income for the three months ended March 31, 2023.

Contingent Consideration

Solar Acquisition

In connection with the acquisition of a portfolio of sixteen solar energy facilities with a combined nameplate capacity of 61.5 MW on December 22, 2020 (the "Solar Acquisition"), contingent consideration of $3.1 million may be payable upon achieving certain market power rates and $7.4 million upon achieving certain power volumes generated by the acquired solar energy facilities. The Company estimated the fair value of the contingent consideration for future earnout payments using a Monte Carlo simulation model. Significant assumptions used in the measurement include the estimated volumes of power generation of acquired solar energy facilities during the 18-36-month period since the acquisition date, market power rates during the 36-month period, and the risk-adjusted discount rate associated with the business. As the inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3.

Liability for the contingent consideration associated with production volumes expired on June 30, 2022. Liability for the contingent consideration associated with power rates is included in other long-term liabilities in the condensed consolidated

balance sheets at the estimated fair value of $2.9 million as of March 31, 2023 and December 31, 2022. For the three months ended March 31, 2023, the Company recorded a loss on fair value remeasurement of contingent consideration associated with power rates of $0.1 million within operating income in the condensed consolidated statements of operations. For the three months ended March 31, 2022, the Company recorded $0.2 million and $0.5 million loss on fair value remeasurement of contingent consideration associated with power rates and production volumes, respectively, in the condensed consolidated statements of operations. Loss was recorded due to changes in significant assumptions used in the measurement, including the actual versus estimated volumes of power generation of acquired solar energy facilities and market power rates.

Other

There were no other contingent consideration liabilities recorded during the three months ended March 31, 2023. Gain on fair value remeasurement of other contingent consideration of $0.5 million was recorded within operating income in the condensed consolidated statements of operations for the three months ended March 31, 2022.

Redeemable Warrant Liability

As part of the Merger with CBAH in December 2021, the Company assumed the Redeemable Warrant Liability of $47.6 million. On October 17, 2022, the Company redeemed all outstanding Redeemable Warrants. Prior to the redemption, Redeemable Warrants were recorded as liabilities on the condensed consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statements of operations at each reporting date. There were no Redeemable Warrants outstanding during the three months ended March 31, 2023. For the three months ended March 31, 2022, the Company recorded $18.5 million gain from fair value remeasurement in the condensed consolidated statements of operations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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