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Table of Contents
<br />Provisions in our government contracts may harm our business, financial condition and operating results.
<br />A significant majority of our fully -contracted backlog and awarded projects is attributable to customers that are governmental entities. Our contracts with the federal government
<br />and its agencies, and with state, provincial, and local governments, customarily contain provisions that give the government substantial rights and remedies, many of which are
<br />not typically found in commercial contracts, including provisions that allow the government to:
<br />• terminate existing contracts, in whole or in part, for any reason or no reason,
<br />• reduce or modify contracts or subcontracts,
<br />• decline to award future contracts if actual or apparent organizational conflicts of interest are discovered, or to impose organizational conflict mitigation measures as a
<br />condition of eligibility for an award,
<br />• suspend or debar the contractor from doing business with the government or a specific government agency, and
<br />• pursue criminal or civil remedies under the False Claims Act, False Statements Act, and similar remedy provisions unique to government contracting.
<br />Under general principles of government contracting law, if the government terminates a contract for convenience, the terminated company may recover only its incurred or
<br />committed costs, settlement expenses, and profit on work completed prior to the termination. If the government terminates a contract for default, the defaulting company is
<br />entitled to recover costs incurred and associated profits on accepted items only and may be liable for excess costs incurred by the government in procuring undelivered items
<br />from another source. In most of our contracts with the federal government, the government has agreed to make a payment to us in the event that it terminates the agreement
<br />early. The termination payment is designed to compensate us for the cost of construction plus financing costs and profit on the work completed.
<br />In ESPCs for governmental entities, the methodologies for computing energy savings may be less favorable than for non -governmental customers and may be modified during
<br />the contract period. We may be liable for price reductions if the projected savings cannot be substantiated. In addition to the right of the federal government to terminate its
<br />contracts with us, federal government contracts are conditioned upon the continuing approval by Congress of the necessary spending to honor such contracts. Congress often
<br />appropriates funds for a program on a September 30 fiscal -year basis even though contract performance may take more than one year. Consequently, at the beginning of many
<br />major Governmental programs, contracts often may not be fully funded, and additional monies are then committed to the contract only if, as and when appropriations are made
<br />by Congress for future fiscal years. Similar practices are likely to also affect the availability of funding for our contracts with Canadian, as well as state, provincial, and local
<br />government entities. If one or more of our government contracts were terminated or reduced, or if appropriations for the funding of one or more of our contracts is delayed or
<br />terminated, our business, financial condition and operating results could be adversely affected.
<br />The projects we undertake for our customers generally require significant capital, which our customers or we may finance through third parties, and such financing may
<br />not be available to our customers or to as on favorable terms, if at all.
<br />Our projects for customers are typically financed by third parties. For small-scale renewable energy plants that we own, as well as certain larger projects for customers, such as
<br />the battery storage project with SCE, we typically rely on a combination of our working capital and debt to finance construction costs. If we or our customers are unable to raise
<br />funds on acceptable terms when needed or if we do not have sufficient working capital or availability under our existing financing arrangements, we may be unable to secure
<br />customer contracts, the size of contracts we do obtain may be smaller or we could be required to delay the development and construction of projects, reduce the scope of those
<br />projects or otherwise restrict our operations. Delays in customer projects could also subject us to claims by customers. Furthermore, the terms of financing arrangements that we
<br />may enter into, including increases in interest rates as compared to historical rates, have in the past and could in the future impact the profitability of our projects. In addition,
<br />any inability by us or our customers to raise the funds necessary to finance our projects or construction costs could materially harm our business, financial condition, and
<br />operating results.
<br />Project development or construction activities may require us to make significant investments without first obtaining project financing or having final customer contracts,
<br />which could increase our costs and impair our ability to recover our investments.
<br />We are at times required to spend significant sums for preliminary engineering, permitting, legal and other expenses before we can determine whether a projet is feasible,
<br />economically attractive, or capable of being built or financed. We will often choose to bear the costs of such efforts prior to obtaining project financing, prior to getting final
<br />regulatory approval and prior to our final sale to a customer, if any. We have for example in the past commenced, and may in the future commence, development of certain
<br />projects, such as battery and solar projects, prior to having entered into final binding contracts with the customer or financing party.
<br />We expect to invest a significant amount of capital to develop projects whether owned by us or by third parties. If we are unable to complete the development of a projector
<br />enter into contracts with the customer, we may write -down or write-off some or all of these capitalized investments, which would have an adverse impact on our net income in
<br />the period in which the loss is recognized and could have an adverse impact our ability to finance our operations.
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