EX-99.10 16 tm2526385d1_ex99-10.htm EXHIBIT 99.10

 

Exhibit 99.10

 

  CCS POWER FINANCE CO, LLC
   
  CONSOLIDATED FINANCIAL STATEMENTS
   
  As of and for the Years Ended December 31, 2024 and December 31, 2023
   
  With Independent Auditors’ Report Therein

 

 

 

 

 

CCS POWER FINANCE CO, LLC
TABLE OF CONTENTS

 

 

 

INDEPENDENT AUDITORS’ REPORT 2-3
   
CONSOLIDATED FINANCIAL STATEMENTS  
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Changes in Members’ Equity 6
Consolidated Statements of Cash Flows 7
Notes to the Consolidated Financial Statements 8-23

   

1

 

 

     
  KPMG LLP  
  Suite 4000  
  1735 Market Street  
  Philadelphia, PA 19103-7501  

 

Independent Auditors’ Report

 

The Members and Board of Directors
CCS Power Finance Co, LLC:

 

Opinion

 

We have audited the consolidated financial statements of CCS Power Finance Co, LLC and its subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2024 and 2023, and the related consolidated statements of operations, changes in members’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Emphasis of Matter

 

As discussed in Note 1b to the consolidated financial statements, the Company has elected to change its method of accounting for interest rate swaps to remove the application of the simplified hedge accounting alternative available for private companies. The Company also elected to change its method of accounting for goodwill to remove the application of the amortization of goodwill on a straight-line basis over a 10-year life for private companies. Consequently, the Company’s consolidated financial statements for 2024 and 2023 have been revised. Our opinion is not modified with respect to this matter.

 

Responsibilities of Management for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the consolidated financial statements are issued.

 

  KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.  

 

 

 

 

 

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

 

In performing an audit in accordance with GAAS, we:

 

lExercise professional judgment and maintain professional skepticism throughout the audit.

 

lIdentify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

 

lObtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

 

lEvaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

 

lConclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

 

 

Philadelphia, Pennsylvania

May 9, 2025, except for modifications disclosed in Note 1b and Note 14, for which the date is August 14, 2025.

 

 

 

 

CCS POWER FINANCE CO, LLC

 YEARS ENDED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

 

 

 

    December 31,
2024 		   December 31,
2023		  
ASSETS              
Current assets:              
Cash and cash equivalents   $ 20,897   $ 34,359  
Financial assurance - short term     200     986  
Trade accounts receivable, net     1,928     8,451  
Unbilled accounts receivable     12,079     12,174  
Risk management asset - short term     —     188  
Other current assets     3,377     4,020  
Total current assets     38,481     60,178  
               
Financial assurance - long term     147     327  
Property and equipment, net     12,547     12,103  
Intangible assets, net     119,078     136,744  
Goodwill     126,746     126,746  
Lease Right of Use Asset     1,886     2,585  
Other assets     1,065     89  
Total assets     299,950     338,772  
               
LIABILITIES AND MEMBERS’ EQUITY              
Current liabilities:              
Trade accounts payable     2,780     2,478  
Accrued customer payments     48,033     49,895  
Accrued payroll, benefits, and other     5,957     8,740  
Debt - short term     16,413     6,156  
Lease Liability - short term     550     752  
Total current liabilities     73,733     68,021  
               
Debt - long term     85,494     90,795  
Debt due to related parties     16,500     10,560  
Accrued liabilities due to related parties     1,773     252  
Deferred tax liabilities     18,407     19,677  
Lease Liability - long term     1,705     2,254  
Other liabilities     208     802  
Total liabilities     197,820     192,361  
               
Members’ equity     102,130     146,411  
Total members’ equity     102,130     146,411  
Total liabilities and members’ equity   $ 299,950   $ 338,772  

  

The accompanying notes are an integral part of these consolidated financial statements.4

 

 

CCS POWER FINANCE CO, LLC 

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

 

 

 

For the years ended December 31,   2024   2023  
Revenue   $ 132,460   $ 183,067  
Cost of revenue     86,590     110,041  
Gross profit     45,870     73,026  
               
Operating expenses              
Compensation     34,989     33,098  
General & administrative     12,908     14,239  
Amortization & depreciation     22,121     19,238  
Related party advisory fees     10     227  
Transaction & other expenses     3,023     1,702  
Operating income (loss)     (27,181 )   4,522  
               
Interest expense     12,664     12,342  
Loss before income taxes     (39,845 )   (7,820 )
               
Provision for income tax expense (benefit)     (1,411 )   290  
Net loss   $ (38,434 ) $ (8,110 )

  

The accompanying notes are an integral part of these consolidated financial statements.5

 

 

CCS POWER FINANCE CO, LLC 

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY 

(IN THOUSANDS)

 

 

 

   Total Members’
Equity		 
Balance at December 31, 2022  $168,220 
Distributions   (13,699)
Net loss   (8,110)
Balance at December 31, 2023  $146,411 
Distributions   (5,847)
Net loss   (38,434)
Balance at December 31, 2024  $102,130 

 

The accompanying notes are an integral part of these consolidated financial statements.6

 

 

CCS POWER FINANCE CO, LLC 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

 
For the years ended December 31,   2024      2023  
Cash flows from operating activities              
Net loss   $ (38,434 ) $ (8,110 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:              
Amortization & depreciation     22,121     19,238  
Amortization of operating lease right-of-use assets     699     574  
Amortization of debt issuance costs     1,112     1,112  
Deferred taxes     (1,270 )   (3,510 )
Changes in operating assets & liabilities:              
Trade accounts receivable, net and unbilled accounts receivable     6,616     29,768  
Other current assets     833     614  
Financial assurance short and long term     966     (937 )
Other assets     (976 )   158  
Trade accounts payable     302     (3,380 )
Accrued customer payments     (1,862 )   (19,255 )
Accrued payroll, benefits, and other     (2,783 )   695  
Other current liabilities     (202 )   15  
Accrued liabilities due to related parties     1,521     252  
Other liabilities     (1,143 )   (631 )
Net cash provided by (used in) operating activities     (12,500 )   16,603  
               
Cash flows from investing activities              
Capital expenditures     (4,899 )   (5,919 )
Net cash (used in) investing activities     (4,899 )   (5,919 )
               
Cash flows from financing activities              
Issuance of related party debt     5,940     10,560  
Borrowing under revolving credit facility     10,000     -  
Principal repayment     (6,156 )   (513 )
Distributions     (5,847 )   (13,699 )
Net cash provided by (used in) financing activities     3,937     (3,652 )
               
Net change in cash and cash equivalents     (13,462 )   7,032  
Cash and cash equivalents at beginning of period     34,359     27,327  
Cash and cash equivalents at end of period   $ 20,897   $ 34,359  
               
Supplemental disclosures of cash flow information              
Cash paid for taxes     681     4,488  
Cash paid for interest     11,171     11,497  

  

The accompanying notes are an integral part of these consolidated financial statements.7

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 1—Description of Business and basis of consolidation

 

Description of Business – Enerwise Global Technologies, LLC d/b/a CPower (hereinafter “we”, “us”, “our”, “Enerwise”) is a Delaware Limited Liability Corporation. Enerwise provides intelligent energy management solutions to utilities, independent system operators (“ISOs”) and regional transmission organizations (“RTO”) that manage programs and/or auctions in which commercial and industrial (“C&I”) customers participate. The Enerwise solutions are delivered through the management of C&I megawatts in open and regulated markets.

 

On December 21, 2018, Enerwise and its parent company, CPower Holdings, LLC entered into a Stock Purchase Agreement (the “Acquisition Agreement”) with CPower Acquisition Company, LLC (“CPower A”) whereby all outstanding shares were acquired by CPower A, which represented a transfer of ownership.

 

Effective January 31, 2019 Enerwise Global Technologies d/b/a CPower converted from a Delaware Corporation to a Delaware Limited Liability Company.

 

On February 1, 2019, CPower A transferred 98% common ownership interest of Enerwise to CCS Power Finance Co, LLC (“Power Finance”) which constituted a common control transaction under Accounting Standards Codification (ASC) 805 Business Combinations, as the two entities are under the control of the same parent. The transfer of ownership was recorded at historical cost and the consolidated financial statements include Enerwise activity commencing on January 1, 2019.

 

Principles of Consolidation – The consolidated financial statements include the accounts of CCS Power Finance Co., LLC, CCS Acquisition Holdco, LLC, CPower Acquisition Company, LLC and Enerwise Global Technologies, LLC d/b/a CPower (collectively referred to as the “Company”) and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Intercompany transactions and balances are eliminated upon consolidation.

 

Note 1(b) – Changes in Accounting Principle

 

The Company changed its method of accounting for interest rate swap agreements to remove the application of the simplified hedge accounting alternative available for private companies. These consolidated financial statements have been revised to remove the application of hedge accounting resulting in changes in the fair value of interest rate swaps now being recognized in earnings. This change has been applied retrospectively to all periods presented, with the impact to periods prior to 2023 being recognized as a decrease to accumulated other comprehensive loss and a corresponding increase to retained earnings, both of which are under members’ equity in the consolidated balance sheets.

 

The Company changed its method of accounting for goodwill to remove the application of the amortization of goodwill on a straight-line basis over a 10-year life for private companies. These consolidated financial statements have been revised to remove the application of the amortization of goodwill on a straight-line basis over a 10-year life. This change has been applied retrospectively to all periods presented, with the impact to periods prior to 2023 being recognized as a decrease to amortization expense and a corresponding increase to members’ equity.

  

8

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 1(b) – Changes in Accounting Principle (continued)

 

The effects of this change in accounting principle on the Company’s consolidated financial statements as of and for the year ended December 31, 2023 are as follows:

 

   2023 Previously       2023 Effect of 
Financial Statement Line Item  Reported   2023 As Revised   Change 
Consolidated Balance Sheet               
Goodwill  $62,998  $126,746  $63,748 
Members’ equity   82,663    146,411    63,748 
Consolidated Statement of Operations               
Amortization & depreciation   31,912    19,238    (12,674)
Interest expense   11,822    12,342    520 
Net Loss   (20,264)   (8,110)   12,154 
Consolidated Statement of Comprehensive Loss               
Net Loss   (20,264)   N/A    N/A 
Unrealized (loss) gain on derivative instruments   (520)   N/A    N/A 
Comprehensive loss   (20,784)   N/A    N/A 
Consolidated Statement of Changes in Members’ Equity               
Net Loss   (20,264)   (8,110)   12,154 
Other comprehensive loss   (520)   -    520 
Members’ equity   82,663    146,411    63,748 
Consolidated Statement of Cash Flows               
Net Loss   (20,264)   (8,110)   12,154 
Amortization & depreciation   31,912    19,238    (12,674)
Changes in Other current assets   234    614    380 
Changes in Other assets   18    158    140 

 

The effects of this change in accounting principle on the Company’s consolidated financial statements as of and for the year ended December 31, 2024 are as follows:

 

   2024 Previously       2024 Effect of 
Financial Statement Line Item  Reported   2024 As Revised   Change 
Consolidated Balance Sheet               
Goodwill  $50,324  $126,746  $76,422 
Members’ equity   25,707    102,130    76,423 
Consolidated Statement of Operations               
Amortization & depreciation   34,796    22,121    (12,675)
Interest expense   12,476    12,664    188 
Net Loss   (50,921)   (38,434)   12,487 
Consolidated Statement of Comprehensive Loss               
Net Loss   (50,921)   N/A    N/A 
Unrealized (loss) gain on derivative instruments   (188)   N/A    N/A 
Comprehensive loss   (51,109)   N/A    N/A 
Consolidated Statement of Changes in Members’ Equity               
Net Loss   (50,921)   (38,434)   12,487 
Other comprehensive loss   (188)   -    188 
Members’ equity   25,707    102,130    76,423 
Consolidated Statement of Cash Flows               
Net Loss   (50,921)   (38,434)   12,487 
Amortization & depreciation   34,796    22,121    (12,675)
Changes in Other current assets   645    833    188 

  

9

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 2—Significant accounting policies

 

Use of estimates – The preparation of consolidated financial statements in conformity with U.S. GAAP, which requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Significant estimates include the valuation of intangible assets resulting from acquisitions, provisions required for allowance for doubtful accounts, non-collectible accounts receivable, revenues, accrued customer payments, and tax reserves.

 

The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.

 

Cash and cash equivalents – The Company considers cash equivalents to be all highly liquid investments with an original maturity of three months or less when purchased. Cash and cash equivalents consist of cash deposited in banks.

 

Financial assurance - The Company maintains funds in conjunction with open markets to collateralize the performance of its positions. The balances are deposited directly with the ISOs, RTOs, utilities, their designated agent or through letters of credit. These amounts have been classified on the consolidated balance sheet as short term or long term based on the underlying restriction.

 

Allowance for doubtful accounts – The Company reviews the outstanding accounts receivable on a monthly basis, as well as uncollectable account adjustments experienced in the past, and establishes an allowance for doubtful accounts when necessary. Account balances are reduced against the allowance for doubtful accounts when the Company determines it is probable the receivable will not be recovered.

 

10

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 2—Significant accounting policies (continued)

 

Property and equipment, net – Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the depreciable assets. Leasehold improvements are depreciated over the shorter of the lease term or useful life. Improvements are capitalized while repairs and maintenance are expensed as incurred. Costs associated with internally developed software are recorded in Work in Progress subcategory and reclassified to Software subcategory once ready for its intended use. Balances of major classes of property and equipment are as follows (in thousands):

 

   Estimated
Useful Life		   2024   2023 
Property and equipment               
Equipment   3   $504   $480 
Software   3    18,430    15,921 
Furniture & Fixtures   5    2    2 
Leasehold Improvements   3-10    205    126 
Work in Progress   N/A    4,282    1,994 
Total        23,423    18,523 
Less accumulated depreciation        (10,876)   (6,421)
Property and equipment, net       $12,547   $12,103 

 

The Company recorded $4,455 thousand and $1,572 thousand of depreciation expense for the years ended December 31, 2024 and December 31, 2023, respectively. These amounts are included in amortization and depreciation in the Consolidated Statements of Operations.

 

Risks and uncertainties – The Company’s performance is subject to a variety of factors, including the economy, the regulatory environment, and the electricity markets. As with any operations within the power and utilities industry, the Company is subject to risk, including customer performance, market and regulatory compliance, operator error, or catastrophic events such as fires, earthquakes, floods, extreme weather, explosions, pandemics or other similar occurrences affecting a power supply and demand. The occurrence of any of these events could significantly impact the revenues generated or significantly increase the expenses incurred.

 

Fair value of financial instruments – The Company uses financial instruments in the normal course of business, including Cash and cash equivalents, Financial assurance, Trade accounts receivable, Unbilled accounts receivable, Trade accounts payable, Accrued customer payments, and Accrued payroll, benefits and other. The carrying values of these financial instruments approximate their respective fair values at the Consolidated Balance Sheet date due to the short-term maturity of these assets and liabilities.

 

ASC 820, Fair Value Measurements and Disclosures describe three levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

  

11

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 2—Significant accounting policies (continued)

 

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and agreement prices for the underlying instruments, as well as other relevant economic measures. Substantially all assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

 

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

Derivative Instruments

 

The Company’s debt obligations are exposed to interest rate changes and we may seek to control a portion of these risks using derivative instruments. We do not enter speculative or leveraged transactions, nor do we hold or issue derivatives for trading purposes. We generally intend to hold the derivatives until maturity.

 

The Company has elected to not apply hedge accounting under ASC Topic 815, Derivatives and Hedging, to report its derivative instruments. The interest rate swap contract is recognized as either an asset or liability, depending on the derivative’s fair value, where gains and losses associated with the change in value are recognized directly as a component of interest expense in the accompanying consolidated statements of operations.

 

In May 2019, the Company entered into, and designated as cash flow hedging, two pay-fixed, receive-floating amortizing interest rate swaps with notional amounts of $30,000 thousand each, totaling $60,000 thousand. These notional amounts matched the corresponding principal of the borrowings of which these swaps were effectively hedging the interest payments. As such, the notional values amortized quarterly based on the terms of the agreements to match the principal borrowings as they are repaid. On April 12, 2022, the Company terminated one of its interest rate swaps. Effective, July 31, 2023, the terms and conditions of the remaining swap were amended to fix the floating interest rate on the term loan attributable to changes in the USD -SOFR swap rate, transitioning from the EUR-LIBOR swap rate. At December 2023, the Company’s remaining interest rate swap had a notional amount of $16,850 thousand, respectively, with a fixed interest rate of 1.915%. That remaining swap matured on April 30, 2024. Refer to Note 9—Borrowings and credit agreements, for further information regarding the underlying borrowings. During the years ended December 31, 2024 and December 31, 2023, the Company received $194 thousand and $621 thousand, respectively, from settlement of the swap with the counterparties.

 

Such instruments represent a level 2 fair value on the fair value hierarchy. With its maturity in April 2024, the reported settlement value of the derivative was $0 as of December 31, 2024. The reported settlement value of the derivative, which is classified as Risk management asset – short term on the Consolidated Balance Sheet was $188 thousand as of December 31, 2023.

  

12

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 2—Significant accounting policies (continued)

 

The Company’s interest rate swap agreement exposed us to credit risk to the extent that the counterparty possibly failed to perform its contractual obligation. The amount of the credit risk exposure was equal to the settlement value of the derivative when it was in a gain position. As of December 31, 2023, the settlement value was in a gain position until swap maturity in April 2024. The counterparty credit risk was currently not considered in the valuation of the derivative instrument as the simplified hedge accounting practical expedient does not require the assessment of counterparty risk; however, the counterparty was with an Aa2 credit rated institution based on the global rating agency of Moody’s Investors Service.

 

Revenue recognition and cost of revenue – The Company derives the majority of its revenues from participation in utility, RTO, or ISO programs, which require the Company to provide electric capacity through demand reduction when a utility, RTO, or ISO calls an event to curtail electrical usage. Revenues are earned based on the Company’s ability to deliver capacity. In order to provide capacity, the Company manages a portfolio of C&I end users’ electric loads. Capacity amounts are verified through the results of actual events or tests, which take place throughout the calendar year. Cash payments are received from RTOs, ISOs, and utilities for participation throughout the year.

 

Within certain markets, the Company may utilize the incremental auctions held prior to the commencement of the delivery year or may enter into bilateral agreements with other market demand or supply-side providers to fulfill a portion of the megawatts previously awarded (“Wholesale Capacity”). If the Company is released from its obligations to fulfill commitment through an auction or a bilateral agreement, the Company recognizes revenue net of related cost of revenue over the delivery year.

 

The Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers, (referred collectively herein as “Topic 606”). The Company applies the as-invoiced practical expedient to recognize revenues, except in circumstances where the invoiced amount does not represent the value transferred to the customer. Revenues derived from Wholesale Capacity are presented net of costs.

  

13

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 2—Significant accounting policies (continued)

 

Disaggregated revenue by type for the years ended December 31, 2024 and December 31, 2023 was as follows (in thousands):

 

   2024   2023 
Demand Response  $137,199   $182,415 
Wholesale Capacity   (4,739)   652 
Total Revenues  $132,460   $183,067 

 

Impairment of long-lived assets – The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount should be assessed by comparing their carrying value to the undiscounted estimated future net operating cash flows expected to be derived from such assets. If such evaluation indicates a potential impairment, a discounted cash flow analysis is used to measure fair value in determining the amount of these assets that should be written off.

 

Goodwill is tested for impairment annually, during the fourth quarter, and when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has identified one reporting unit for the purpose of goodwill impairment testing. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying value. If, based on the qualitative assessment, it is determined that it is more likely than not that the fair value of its reporting unit is less than its carrying value, a quantitative impairment test is performed. The quantitative impairment test involves comparing the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the difference between its carrying value and fair value.

 

During the years ended December 31, 2024 and December 31, 2023, no impairment charges were recognized.

 

Income taxes - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements’ carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. Management has evaluated all other tax positions that could have a significant effect on the consolidated financial statements and determined the Company has no uncertain income tax positions at December 31, 2024. Accordingly, no related penalties or interest were recognized in the consolidated financial statements.

 

Recent Accounting Pronouncements

 

In June 2016, FASB issued ASU 2016-13, Financial Instruments—Credit Losses (ASU 2016-13). ASU 2016-13 introduces the current expected credit loss model, which requires an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under ASU 2016-13, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. In addition to ASU 2016-13, the FASB issued ASU 2019-04 which provides further clarification. ASU 2016-13 and related ASUs are effective for the Company for fiscal years beginning after December 15, 2022. The Company adopted ASU 2016-13 and related ASUs effective on January 1, 2023. The adoption of the aforementioned ASUs did not have a material impact on the Company’s financial statements.

 

14

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 2—Significant accounting policies (continued)

 

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04) to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR).

 

In addition to ASU 2020-04, the FASB issued ASU 2021-01 which provides further clarification, and ASU 2022-06, which defers the effective date of adoption. ASU 2020-04 was subject to election as of March 20, 2020 and can be elected for annual periods through December 31, 2024. The Company adopted ASU 2020-04 and related ASUs effective on January 1, 2023. The Company completed its evaluation of significant contracts under these ASUs. Certain reviewed contracts have been amended to apply a new reference rate. The adoption of ASU 2020-04 and related ASUs did not have a material impact on the Company’s financial statements.

 

In December 2023, FASB issued ASU 2024-01, Income Taxes (Topic 740): Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires certain quantitative rate reconciliation disclosures for public entities. Additionally, this ASU requires all entities to disclose income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company for fiscal years beginning after December 15, 2025. The Company is currently evaluating the impact of the standard on the Company’s consolidated financial statements.

 

Note 3— Intangible Assets and Goodwill

 

The Company’s intangible assets, as of December 31, 2024 and December 31, 2023, consisted of the following (in thousands):

 

   Estimated Useful
Life (in Years)		   2024   2023 
Customer and Partner Relationships   12   $174,990   $174,990 
Trade Name   20    25,000    25,000 
Developed Technology   12    22,000    22,000 
Total Intangibles        221,990    221,990 
Accumulated Amortization        (102,912)   (85,246)
Intangibles, net       $119,078   $136,744 
                
Goodwill       $126,746   $126,746 

 

The Company amortizes intangible assets using the straight-line method and reviews for impairment if it determines there was a triggering event. The Company recorded $17,666 thousand of intangible amortization expense for each year ended December 31, 2024 and December 31, 2023. These amounts are included in Amortization and depreciation in the Consolidated Statements of Operations. Estimated aggregate intangible amortization expense for each of the next five years is $17,666 thousand.

 

Goodwill is not amortized but is tested for impairment annually, during the fourth quarter, and when events or changes in circumstances indicate that the carrying value may not be recoverable.

  

15

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 4—Accounts receivable, net

 

Trade accounts receivable, net of the allowance for doubtful accounts of $0 thousand, as of December 31, 2024 and December 31, 2023 totaled $1,928 thousand and $8,451 thousand, respectively. The balances represent revenues earned and invoiced or with a right to invoice. The balances primarily consist of amounts owed to the Company from the Utility, ISO or RTO.

 

Unbilled accounts receivable as of December 31, 2024 and December 31, 2023 totaled $12,079 and $12,174 thousand, respectively. Unbilled accounts receivable represents amounts that the Company will invoice pursuant to the Company’s future billings for services rendered though the balance sheet date.

 

Note 5—Income taxes

 

The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating loss carryforwards.

 

Effective January 31, 2019 Enerwise Global Technologies d/b/a CPower converted from a Delaware Corporation to a Delaware Limited Liability Company, taxed as a partnership and considered a pass-through entity for tax purposes.

 

Under ASC Topic 740, Enerwise Global Technologies, LLC recognized the effect of the change in tax status on the net deferred tax assets and liabilities as of January 31, 2019. As a result, Enerwise’s parent company CPower Acquisition Company, LLC, which is taxed as a C Corporation, recognized deferred tax assets and liabilities from its interest in Enerwise Global Technologies, LLC and its assumption of certain of its tax attributes. CCS Power Finance Co, LLC is a disregarded entity for tax purposes. The provision for income taxes reflects the activity of its subsidiaries, as described in Note 1, Description of Business and Basis of Consolidation.

 

The income tax provision for the years ended December 31, 2024 and 2023, consist of the following (in thousands):

 

   2024   2023 
Current:          
Federal expense  $36   $3,209 
State and local expense   (176)   591 
Total current tax expense   (140)   3,800 
           
Deferred:          
Federal benefit   (960)   (2,978)
State and local expense   (310)   (532)
Total deferred tax expense   (1,271)   (3,510)
Total provision for income taxes  $(1,411)  $290 

  

16

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 5—Income taxes (continued)

 

Deferred tax assets (liabilities) for the years ended December 31, 2024 and 2023, consist of the following (in thousands):

 

   2024   2023 
Deferred tax assets:          
Net operating loss carryforwards  $3,635   $1,002 
163j interest   1,840   $523 
Deferred tax assets   5,475    1,525 
           
Deferred tax liabilities:          
Investment basis difference   (23,845)   (21,198)
174 Expense   (16)   - 
Deferred tax liabilities   (23,861)   (21,198)
           
Net deferred income tax liabilities   (18,385)   (19,673)
Valuation allowance   (21)   (4)
Total net deferred income tax liabilities, net of valuation allowance  $(18,407)  $(19,677)

 

Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, the Company considers all available positive and negative evidence affecting specific deferred tax assets, including the Company’s past and anticipated future performance, the reversal of deferred tax liabilities, the length of carryback and carry-forward periods, and the implementation of tax planning strategies. Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets.

 

The Company has determined that based on all available evidence, $21 thousand and $4 thousand of valuation allowance is necessary for years ended December 31, 2024 and 2023, respectively. The Company’s current income and forecast were used in making these determinations.

 

The Company has a deferred tax asset for the federal and state net operating loss carryforwards of $3,260 thousand and $375 thousand, respectively, as of December 31, 2024. The federal net operating loss deferred tax asset, $978 thousand will begin expiring in the year 2031 and $2,282 thousand has an indefinite carryforward subject to an annual limitation of 80% of Federal taxable income. The state net operating loss carryforward deferred asset begin expiring in the year 2032.

 

As of December 31, 2024, the Company had determined no liabilities for uncertain tax positions should be recorded. The Company’s tax years ended December 31, 2021 through December 31, 2024 are subject to examination by the federal and state tax authorities.

 

Note 6—Accrued customer payments and trade accounts payable

 

Accrued customer payments as of December 31, 2024 and December 31, 2023 consisted of program participant payments. The Company pays participants within a specified period after receipt of payment from the utility, ISO or RTO.

  

17

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 6—Accrued customer payments and trade accounts payable (continued)

 

Trade accounts payable as of December 31, 2024 and December 31, 2023 consisted of vendor payables and trade accruals. The Company pays vendors within a specified period, typically within 30 days of invoice date.

 

Note 7—Concentrations of credit risk

 

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of Cash, Financial assurance, Trade accounts receivable, and Unbilled accounts receivable. Cash accounts are generally held at major financial institutions. Financial assurance, Trade accounts receivable, and Unbilled accounts receivable is concentrated within Utility, ISO, RTO. This industry concentration may impact the Company’s overall exposure to credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic, industry or other conditions.

 

Financial assurance, Trade accounts receivable, and Unbilled accounts receivable are concentrated within entities engaged in the energy industry. These industry concentrations may impact the Company’s overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic, industry or other conditions.

 

As of and for the years ended December 31, 2024 and December 31, 2023, three ISOs/RTOs/utilities accounted for 71% and 76% of revenues, and 59% and 42% of accounts receivable, respectively. Loss of revenues from any of these ISOs/RTOs/utilities would be material to the Company’s operations.

 

Note 8—Borrowings and credit agreements

 

On May 17, 2019, the Company entered into a credit agreement with a group of lenders (Credit Agreement) which was funded on the same date. The Credit Agreement consists of the following:

 

a)a $120,000 thousand five-year term loan (the Term Loan); and

 

b)a $20,000 thousand five-year revolving credit facility (the Revolver) used to (i) finance working capital and for general corporate purposes, (ii) support obligations under certain agreements and (iii) satisfy certain collateral requirements with respect to maintenance and operations.

 

The interest rates on outstanding loans under the Credit Agreement were adjusted for each interest period based on an election made by the company between 1) adjusted Eurodollar rate plus a spread of 3.50% and 2) Alternate Base Rate. The Alternate Base Rate was defined as the greatest of the following plus a spread of 2.50%: (a) Base Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1.00%, and (c) Adjusted Eurodollar Rate in effect on such day plus 1.00%; Base Rate is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1.00%, and (c) Adjusted Eurodollar Rate in effect on such day plus 1.00%. The elections and interest rates were determined on a monthly basis.

 

The Company entered into two interest rate swap agreements to hedge 50% of the outstanding principal amount of the Term Loan. The interest rate swap agreements provided for the Company to pay a fixed rate and receive a floating rate. The floating rate was based on a one-month LIBOR.

  

18

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 8—Borrowings and credit agreements (continued)

 

Mandatory amortization of the Term Loan ranged from 0.50% to 3.50% of the original outstanding principal amount, payable quarterly.

 

On April 14, 2022, the Company executed an amendment to the existing Credit Agreement (“Amended Credit Agreement”) whereby maturity has been extended until December 31, 2026, and an additional $180,000 thousand of commitment under the Revolver is made available for issuance of letters of credit to provide credit support to contractual counterparties or other similar payment or performance assurance. Debt issuance costs totaled $4,458 thousand. One of the two interest rate swap agreements terminated effective April 12, 2022. The remaining interest rate swap matured on April 30, 2024.

 

The interest rates on outstanding loans under the Amended Credit Agreement are adjusted for each interest period based on an election made by the company, which historically has been on a monthly basis, between (a) ABR Borrowing defined as Base Rate plus 2.25% and (b) SOFR Borrowing defined as Adjusted Term SOFR plus 3.25%. ABR is defined as the greatest (a) the rate that the Administrative Agent announces from time to time as its prime or base commercial lending rate, as in effect from time to time or (b) the sum of (i) the Federal Funds Effective Rate in effect on such day plus (ii) 0.50% and (c) the sum of (i) the Adjusted Term SOFR for a one-month tenor in effect on such day plus (ii) 1.00%. Adjusted Term SOFR is defined as SOFR reference rate for a tenor comparable to the applicable interest period plus 0.07% for a one month election. The interest rate in effect at December 31, 2024 and December 31, 2023 for the Term Loan and Revolver is 7.89% and 8.67%, respectively. Interest is payable on the Term Loan and Revolver on a monthly basis.

 

As of December 31, 2024 and December 31, 2023, there were $94,131 thousand and $100,287 thousand outstanding under the Term Loan, respectively, and $10,000 thousand and $0 thousand outstanding under the Revolver. As of December 31, 2024 and December 2023, $48,975 thousand and $43,643 thousand, respectively, of the Revolver have been used to issue standby letters of credit to collateralize performance of the Company’s positions with ISOs, RTOs, and utilities in which it operates. As such, the amount available under the Revolver is $141,025 and $156,357 as of December 31, 2024 and December 2023. See Note 11 – Commitments and Contingencies. The Credit Agreement contains certain financial, affirmative and negative covenants, the Company was in compliance with all covenants throughout 2024 and 2023.

 

At December 31, 2024 and December 31, 2023, the unamortized debt issuance and deferred financing costs totaled $2,224 thousand and $3,336 thousand, respectively. The amortization of these costs are reflected as a component of Interest expense, net on the accompanying statements of operations. For the years ended December 31, 2024 and December 31, 2023, amortization of such costs totaled $1,112 thousand each year.

 

As of December 31, 2024, minimum principal payments for the next two years for the Term Loan are as follows (in thousands) with final payment due upon maturity:

 

   2025   2026 
Minimum principal payments  $6,413   $87,719 

 

19

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 8—Borrowings and credit agreements (continued)

 

Pursuant to the Amended Credit Agreement and driven by PJM base residual capacity prices for the 2023/2024 delivery year, the Company’s parent CCS Intermediate Holdco, LLC, which is indirectly majority owned by CCS Class A Member, LLC a wholly owned subsidiary of LS Power Equity Partners IV, LP, is required to make an equity contribution totaling $16,500 thousand, in equal installments over a 12 month period commencing in June 2023. To fulfill this equity contribution obligation, CCS Intermediate Holdco, LLC entered into a related party subordinated loan with the Company. See Note 13 – Related Party Transactions. As of December 31, 2024 and December 31, 2023, CCS Intermediate Holdco, LLC, has made $5,940 thousand and $10,560 thousand, respectively, in total contributions to the Company.

 

Note 9—Employee savings and retirement plan

 

The Company has a defined contribution employee benefit plan qualifying under Section 401(k) of the Internal Revenue Code (the “Plan”). The Company may make discretionary matching contributions equal to 50% of employee contributions up to 6% and this match is payable on a monthly basis for the years ended December 31, 2024 and December 31, 2023.

 

The Company recorded $678 thousand and $557 thousand of matching contribution expense for years ended December 31, 2024 and December 31, 2023, respectively. These amounts are included in Compensation in the Consolidated Statements of Operations. Unpaid matching contributions totaled $153 thousand and $129 thousand as of December 31, 2024 and 2023, respectively. Such balances are included in Accrued Payroll, Benefits and Other in the accompanying Consolidated Balance Sheet.

 

Note 10—Leases

 

The Company has three non-cancellable operating leases for office space under various terms ranging from 2-10 years, effective from 2018, 2020, and 2023. These lease agreements provide for increasing rent over the lease term and contain renewal options. As of December 31, 2024, the Company does not intend to take renewal options on any of the leases.

 

Upon adoption of ASC 842 on January 1, 2022, the Company recognized an operating lease liability and related right-of-use (ROU) asset in the amount of $4,423 thousand and $3,956 thousand, respectively. The Company has made an election not to recognize ROU assets and lease liabilities in the consolidated balance sheets for its short-term leases, which have a lease term of 12 months or less.

 

ROU assets and operating lease liabilities are recognized at the present value of the future lease payments on the lease commencement date. For the initial measurement of lease liabilities, the Company uses the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, over a similar term an amount equal to the payments for the lease. The Company recognizes lease expense for all operating leases on a straight-line basis over the lease term.

 

20

 

 

CCS POWER FINANCE CO, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023
Note 10—Leases (continued)

 

Lease payments are payable monthly. Lease payments under certain agreements may escalate over the lease term by a variable percentage. The Company has no leases which contain residual value guarantees provided by the Company.

 

  For the year ended
December 31, 2024		 
Lease cost    
     
Operating lease cost  $797 
Short-term lease cost   - 
Total lease cost  $797 
      
Other information:     
      
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows from operating leases  $850 
      
Right-of-use assets obtained in exchange for new operating lease liabilities  $- 
      
Weighted average remaining lease term (in years)   3.92yrs
Weighted average discount rate   3.75%

 

As of December 31, 2024, annual payments based on the maturities of the Company’s operating leases are expected to be as follows (in thousands):

 

2025   $ 622  
2026     593  
2027     567  
2028     590  
2029     50  
Total operating lease payments     2,422  
Less: present value adjustment     (167 )
Total operating lease liabilities   $ 2,255  

 

Note 11—Commitments and contingencies

 

Guarantees – The Company has guaranteed the electrical capacity it has committed to deliver pursuant to certain long-term contracts or open market biddings with ISOs, RTOs and utilities. Such guarantees may be secured by cash, letters of credit, performance bonds, or third-party guarantees.

 

21

 

  

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 11—Commitments and contingencies (continued)

 

Off-balance sheet arrangements - Standby letters of credit

 

In the ordinary course of business, the Company has entered into collateral arrangements in the form of standby letters of credit issued under its Revolver, in favor of the ISOs, RTOs and utilities with which it operates. At December 31, 2024 and December 31, 2023, these collateral arrangements totaled $48,975 thousand and $43,643 thousand, respectively.

 

Note 12—Related party transactions

 

The Company is indirectly majority owned by CCS Class A Member, LLC, which is a wholly owned subsidiary of LS Power Equity Partners IV, LP (“LS Power”). LS Power is a related party to an agreement with provisions for repayment of travel and certain administrative and legal expenses. Expenses related to these provisions for the years ended December 31, 2024 and December 31, 2023 totaled $10 thousand and $227 thousand, respectively, recorded in Related party advisory fees on the Consolidated Statement of Operations.

 

On June 30, 2023, the Company entered into a subordinated loan agreement with the Company’s parent, CCS Intermediate Holdco, LLC (which is indirectly majority owned by CCS Class A Member, LLC), to receive equity contributions pursuant to the Amended Credit Agreement. See Note 9 – Borrowings and credit agreements. The principal amount of the subordinated loan totals $16,500 thousand. The note bears interest of 9.25% per annum and matures on March 31, 2027 with no required principal payments due until maturity. As of December 31, 2024, the subordinated loan payable balance consisted of $16,500 thousand principal outstanding plus $1,773 thousand in accrued interest. As of December 31, 2023, the subordinated loan payable balance consisted of $10,560 thousand principal outstanding plus $252 thousand in accrued interest.

 

Certain members of management have loans with an affiliate of the Company for the purchase of stock in that affiliate. The loans are full recourse loans and are not recorded in the Company’s financial statements as the Company is not a party to those loans.

 

Members of management of Enerwise have been awarded incentive units in CCS Power Holdings, LLC. Such units vest upon change of control as defined by the incentive agreement, which as of December 31, 2024 is deemed remote, accordingly no fair value has been assigned to such units and thus no expense has been recorded for these units.

 

Note 13 - Equity

 

In accordance with the Power Finance LLC agreement, the Company is permitted to make distributions to its parent at the parent’s discretion, while maintaining compliance with the Amended Credit Agreement. Distributions for the years ended December 31, 2024 and December 31, 2023 totaled $5,847 thousand and $13,699 thousand, respectively.

 

22

 

 

CCS POWER FINANCE CO, LLC 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2024 AND DECEMBER 31, 2023

 

Note 14—Subsequent events

 

In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through August 14, 2025, the date these consolidated financial statements were available to be issued. On May 7, 2025, the Company obtained a waiver from its lenders related to a financial covenant under the Amended Credit Agreement for the quarter ending on June 30, 2025. On August 13, 2025, LS Power contributed $40M as a cash contribution to CCS Finance Co., LLC. The Company has concluded that no other subsequent events have occurred that would require recognition or disclosure in the consolidated financial statements.

  

23