Confidential · Sponsor internal · Reg D Rule 506(b) program · Not an offer to sell securities

i8
INNOV8 RESOURCES
Internal · CL-2
Sterling Analyst Note · 02 June 2026

Program 1 (IPS) Capital-Stack Reading
— reconciliation of Jack's two cash-flow workbooks

A new lender has asked whether they could underwrite the full ~$800M capitalization in a single facility. Before quoting, this note reconciles what Jack Whitmore / Galileo Capital actually modeled against the live IPS senior-debt mechanics, then states the rate posture any bid will be measured against — what we can absorb, what we target, what we want.

5.5%
Stated Coupon
IPS workbook input — Budget L3
10–13%
All-In Absorb
With broker + warrant — what we can carry
≤9%
Target
New normalized target — what we underwrite to
~6%
Goal
Strategic preference — what we want
Calibration · supersedes 2026-06-02 morning reading

An earlier internal note (MIG c455ede0) suggested Jack hadn't modeled IPS at all. That reading was incomplete — only the May 21 Program 2 workbook was reviewed. The May 17 workbook (located after operator pointer) does model IPS, explicitly labeled "Investment Properties Solutions — IMMG" in its Table of Contents. This note is the corrected reading (MIG 1ee6832d).

01 · Two-Workbook Architecture
Jack's modeling is split across two separate files — not consolidated into one stack.
Workbook Dated Scope Master Rate Models
36 Mo. Innov8 Gases Cash Flow 15 wells $240M investment 17 May 2026 Program 1 / IPS package 5.5% senior 15 wells · 36-month draw & service · IPS-only
84 Mo. Innov8 Gases Cash Flow 100 Wells $555M Total Capitalization 21 May 2026 Program 2 (Sukuk + Equity + Debt) 12% master 100 wells · 84-month · Sukuk $125M + Senior $30M only

Both workbooks list Galileo Capital Advisors SA (Lausanne, Switzerland; Rafael Toledano) as preparer. The Program 1 workbook explicitly carries the IPS / IMMG label on TOC line 2 — Jack did model the IPS facility; it just lives in its own dedicated file.

02 · Program 1 — Confirmed Mechanics
What the 17 May workbook actually shows, traced to source cells.
03 · Two-Layer Rate Structure Inside Program 1
Jack's Program 1 workbook actually contains two distinct rate layers.
Layer Sheet Rate Structure Cash-flow drag
IPS Senior Facility DOE_Loan 5.5% 7-yr term, 84 monthly payments, first draw M9 Master rate flows from Budget L3; balance/payment cells unpopulated in source — debt-service line not yet wired
Equipment Financing Sleeve Processing_Equipment_Loans 12% 24-mo accumulated interest, then 5-yr amortization, due in 7 years Template populated with zeros — ready for plant-loan principal inputs but not yet driving the cash flow

Jack labels the senior layer "DOE-style" because IPS structurally mimics DOE rates — the actual lender is IPS, not the U.S. Department of Energy. The 12% equipment-financing sleeve is a separate facility for processing & liquefaction kit and is currently a template, not a live cash-flow driver.

04 · What Jack's Model Does NOT Show Explicitly
IPS economics include mechanics handled off-balance or in legal docs only.
Not in cash flow — handled off-balance or in legal docs
  • Broker fee — taken at each draw ("fees-in-place" structure). No line item in Sources/Uses on either workbook. Exact percentage TBD until the IPS term sheet is in hand; this note uses 10–11% one-time as a sponsor-side assumption anchor. Sponsor receives less than face at each draw; interest accrues on the gross notional from the draw date. (facts.yaml fact_070)
  • Lender Warrant — 10% equity kicker — not in the cap table or distribution waterfall. Governed separately by the Lender Warrant Agreement v7.3. (facts.yaml fact_022)
  • Self-funded interest reserve (IPS "all-finance / no-interest" pool that pre-funds debt-service from facility proceeds) — not modeled as a separate reserve account or as a cash-flow stub.

The only sponsor-side capital match that does appear in Sources/Uses is the $4M Equity Escrow Deposit (5% of each draw). This means a straight read of Jack's 5.5% rate understates the all-in cost of IPS capital by the amortized value of the broker fee + warrant + reserve mechanics. 5.5% is the stated coupon — not what IPS capital actually costs in the bank. See §06 for the rate-posture ladder. (facts.yaml fact_069 locks the 5.5%-stated-coupon-is-not-all-in framing.)

05 · Galileo Residual-Value Memo — Collateral Coverage
Built into the same workbook as a separate valuation tab.

The Residual_Value_after_3_Years tab is a standalone Galileo Capital Advisors valuation memorandum (SO-FIT regulated under Swiss FINMA AMLA art. 2 §3) prepared for the IPS lender. Key figures:

Collateral coverage

Valuation range at IPS maturity: $1.3B–$1.6B core / $1.6B–$2.0B strategic buyer. Against a $240M senior facility this is ~5.4×–8.3× asset-coverage at conservative DCF, more at strategic-buyer pricing. This is the basis on which IPS will underwrite — and the basis any displacement lender will reference.

06 · Rate Posture — Absorb / Target / Goal
Three reference points any displacement bid is measured against.

The interesting framing for any lender conversation isn't "can you beat the 5.5% coupon" — that's the workbook input, not the cost. It's a three-point posture:

Posture Rate (all-in, 3-yr) What it means
Absorb floor 10–13% Current IPS structure as offered (5.5% stated + broker fee + 10% warrant). The model carries this — collateral coverage 5.4×–8.3× from the $1.3B–$1.6B Galileo residual valuation. We can absorb this, but it is the floor of what we'll absorb, not the rate we're underwriting to.
Target ≤9% New normalized rate target. Any displacement bid, syndication structure, or Program 2 debt sleeve is measured here. Materially better on cost of capital than the absorb floor and removes the warrant dilution; tightens DSCR meaningfully.
Goal ~6% Strategic preference — what we actually want. Requires a single larger counterparty willing to compress broker + warrant layers, or a syndicated structure that wholesales out the fee stack. Materially improves return-to-Holdco at exit and frees equity capacity for Program 2.
How the absorb floor was estimated
  • 5.5% stated coupon — Jack's master rate (Budget L3); see §04 for why this is not the all-in cost
  • +3.3–3.7% broker-fee amortization — 10–11% one-time fee, taken at each draw (fees-in-place), amortized over 3-yr effective life. Exact fee % TBD on the IPS term sheet.
  • +1.5–4.0% warrant value amortization — 10% Lender Warrant valued against exit. At a $1.0B exit it amortizes to ~1.5%/yr; at a $2.0B strategic exit to ~4.0%/yr.
  • ~0% interest reserve — reserve is funded out of facility proceeds (already inside the stated coupon drag); not additive.
  • = ~10.3%–13.2% all-in band (sponsor-side bear/base estimate)
Caveat — assumption-bound, not a quoted IPS effective rate

The 10–13% absorb floor is a sponsor-side estimate, not a number on an IPS term sheet. The warrant value is the biggest swing input — at a $1.0B exit it amortizes to ~1.5%/yr; at a $2.0B strategic exit to ~4.0%/yr. Before sharing externally, verify (a) actual broker fee % on the IPS term sheet, (b) IPS exit-trigger formula in the Lender Warrant Agreement v7.3, (c) whether broker fee is structured as fees-in-place (sponsor receives less at each draw) vs. cash-out at closing.

For the new lender conversation: the productive ask is not "beat 5.5%" but "can you deliver at or below 9% all-in — including your own fees and any equity participation — at $800M aggregate?" An offer at or near 6% all-in is the strategic preference. An offer in the 7–9% range is the working target. Anything above ~10% is approximately neutral against the IPS structure on cost of capital, but still potentially attractive on covenant burden, structural simplicity, and equity-dilution avoidance — those have to be priced separately.

07 · Source Files
Every claim above traces to one of these — extracts saved under proposals/innov8-resources/financials/.
financials/2026-05-17/Table_of_Contents.csv
Workbook label "Investment Properties Solutions — IMMG" (L2); version "36 Month Innov8 Gases Cash Flow 15 Wells $245 million Investment" (L4).
financials/2026-05-17/Budget_First_84_months.csv
Master interest-rate input (5.5% at L3); draw schedule = $240M across M1–M9; sponsor equity escrow $4M; consulting fees −$2.461M.
financials/2026-05-17/DOE_Loan.csv
Eight 7-year plant-loan stubs at 5.5%; first draw M9; balance/payment cells unpopulated (debt-service not yet wired into the master Budget).
financials/2026-05-17/Processing__Equipment_Loans.csv
12% annual return rate; "24-month interest accumulation then 5-year amortization, due in 7 years"; template populated with zeros — separate sleeve from senior.
financials/2026-05-17/Residual_Value_after_3_Years.csv
Galileo Capital Advisors valuation memorandum — EBITDA $198M/yr; 16-yr life; DCF $1.3B–$1.7B; strategic buyer $1.6B–$2.0B.
financials/2026-05-22/Table_of_Contents.csv
Program 2 workbook label "84 Mo. Innov8 Gases Cash Flow 100 Wells $555M Total Capitalization"; preparer Galileo Capital Advisors SA.
financials/2026-05-22/Budget_First_84_months.csv
Program 2 master rate 12% (L3); Sources of Funds carries $155M debt only ($125M Sukuk + $30M Senior); no IPS line item in this workbook.
proposals/innov8-resources/facts.yaml
fact_022 (Program 1 financing-only architecture), fact_023 (Program 2 capitalization), fact_024 (Reg D 506(b)), fact_025 (LP allocation policy).