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Table of Contents
<br />whether the permits will attract significant opposition or whether the permitting process will be lengthened due to complexities and appeals. We have over the past few years
<br />experienced longer lead times in the permitting process for projects and such delays have and may further impair or delay our ability to develop projects. Delays could also
<br />increase the cost so substantially that the projects are no longer attractive to us. If we were to commence construction in anticipation of obtaining the final, non -appealable
<br />permits needed for a project, we would be subject to the risk of being unable to complete the project if all the permits were not obtained. If this were to occur, we would likely
<br />lose a significant portion of our investment in the project and could incur a loss as a result. Further, the continued operations of our projects require continuous compliance with
<br />permit conditions. This compliance may require capital commitments or result in reduced operations. Any failure to procure, maintain and comply with necessarypermits would
<br />adversely affect ongoing development, construction and continuing operation of our projects.
<br />In addition, the projects we perform for governmental agencies are governed by particular qualification and contracting regimes. Certain states require qualification with an
<br />appropriate state agency as a precondition to performing work or appearing as a qualified energy service provider for state, county, and local agencies within the state. For
<br />example, the Commonwealth of Massachusetts and the states of Colorado and Washington pre -qualify energy service providers and provide contract documents that serve as
<br />the starting point for negotiations with potential governmental clients. Most of the work that we perform for the federal government is performed under IDIQ agreements
<br />between a government agency and us or one of our subsidiaries. These IDIQ agreements allow us to contract with the relevant agencies to implement energy projects, but no
<br />work may be performed unless we and the agency agree on a task order or delivery order governing the provision of a specific project. The government agencies enter into
<br />contracts for specific projects on a competitive basis. We and our subsidiaries are currently party to an IDIQ agreement with the U.S. Department of Energy expiring in 2028.
<br />We are also party to similar agreements with other federal agencies, including the U.S. Army Corps of Engineers and the U.S. General Services Administration. If we are unable
<br />to maintain or renew our IDIQ qualification or similar federal or state qualification regimes, our business could be materially harmed.
<br />Many of our small-scale renewable energy projects are, and other future projects may be, subject to or affected by U.S. federal energy regulation or other regulations that
<br />govern the operation, ownership, and sale of the facility, or the sale of electricity from the facility.
<br />PUHCA and the FPA regulate public utility holding companies and their subsidiaries and place constraints on the conduct of their business. The FPA regulates wholesale sales
<br />of electricity and the transmission of electricity in interstate commerce by public utilities. Under PURPA, most of our current small-scale renewable energy projects are small
<br />power "qualifying facilities" (facilities meeting statutory size, fuel, and filing requirements) that are exempt from regulations under PUHCA, most provisions of the FPA and
<br />state rate and financial regulation. Some of our renewable energy projects which are operating as exempt wholesale generators or operating under a special exemption from
<br />PUHCA are currently subject to rate regulation for wholesale power sales by the Federal Energy Regulatory Commission ("FERC") under the FPA and must comply with
<br />certain FERC reporting requirements. Also, we may acquire interests in or develop additional generating projects that are not qualifying facilities. Non -qualifying facility
<br />projects would be fully subject to FERC corporate and rate regulation and would be required to obtain FERC acceptance of their rate schedules for wholesale sales of energy,
<br />capacity, and ancillary services, which requires substantial disclosures to and discretionary approvals from FERC. FERC may revoke or revise an entity's authorization to make
<br />wholesale sales at negotiated, or market -based, rates if FERC determines that we can exercise market power in transmission or generation, create barriers to entry or engage in
<br />abusive affiliate transactions or market manipulation. In addition, many public utilities (including any non -qualifying facility generator in which we may invest) are subject to
<br />FERC reporting requirements that impose administrative burdens and that, if violated, can expose the company to civil penalties or other risks.
<br />All of our wholesale electric power sales are subject to certain market behavior rules. These rules change from time to time, by virtue of FERC rulemaking proceedings and
<br />FERC-ordered amendments to utilities' or power pools' FERC tariffs. If we are deemed to have violated these rules, we will be subject to potential disgorgement of profits
<br />associated with the violation and/or suspension or revocation of our market -based rate authority, as well as potential criminal and civil penalties. If we were to lose market -
<br />based rate authority for any non -qualifying facility project we may acquire or develop in the future, we would be required to obtain FERC's acceptance of a cost -based rate
<br />schedule and could become subject to, among other things, the burdensome accounting, record keeping and reporting requirements that are imposed on public utilities with cost -
<br />based rate schedules. This could have an adverse effect on the rates we charge for power from our projects and our cost of regulatory compliance. Wholesale electric power
<br />sales are subject to increasing regulation. The terms and conditions for power sales, and the right to enter and remain in the wholesale electric sector, are subject to FERC
<br />oversight. Due to major regulatory restructuring initiatives at the federal and state levels, the U.S. electric industry has undergone substantial changes over the past decade. We
<br />cannot predict the future design of wholesale power markets, or the ultimate effect ongoing regulatory changes will have on our business. Other proposals to further regulate the
<br />sector may be made and legislative or other attention to the electric power market restructuring process may delay or reverse the movement towards competitive markets.
<br />If we become subject to additional regulation under PUHCA, FPA, or other regulatory frameworks, if existing regulatory requirements become more onerous, or if other
<br />material changes to the regulation of the electric power markets take place, our business, financial condition, and operating results could be adversely affected.
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