Sunnova Energy International, Inc. (Sunnova) (NYSE: NOVA), a leading Energy as a Service (EaaS) provider, today announced a conditional commitment by the U.S. Department of Energy (DOE) Loan Programs Office (LPO) to provide an up to $3.0 billion partial loan guarantee, which equates to a 90% guarantee of up to $3.3 billion of financing to support loans originated by Sunnova under a new solar loan channel named “Project Hestia.”
Project Hestia would provide disadvantaged individuals and communities with increased access to Sunnova services by indirectly and partially guaranteeing the cash flows associated with those consumers’ loans. To be eligible, each energy system must be outfitted with Sunnova’s purpose-built technology, accessible by smart phone or other personal electronic device. The technology is designed to improve customer insights regarding their power usage and will facilitate demand response behavior. Sunnova believes this approach is expected to expand access to Sunnova’s EaaS offerings, lay the foundation for future virtual power plant (VPP) activities, decrease greenhouse gas emissions, and increase the demand response impact of residential power systems.
“Project Hestia would make possible a historic private sector investment in disadvantaged American communities and energy infrastructure,” said William J. (John) Berger, Chief Executive Officer of Sunnova. “The DOE financing would accelerate the adoption of solar and storage, decrease greenhouse gas emissions, and expand the availability of reliable, clean, and affordable energy to those communities who benefit the most from low-cost energy.”
If issued, the DOE loan guarantee would support the origination of Sunnova loans associated with solar, storage, or other Sunnova Adaptive Home™ technologies that utilize Sunnova’s purpose-built demand response and VPP enabling software. Sunnova anticipates the DOE loan guarantee will support up to $4.0 – $5.0 billion in Sunnova loan originations, reduce the company’s weighted average cost of capital, and generate interest savings.
“DOE’s conditional commitment is expected to support grid reliability, improve access to clean energy, and enhance ratings and advance rates on our senior bonds,” said Robert Lane, Executive Vice President and Chief Financial Officer at Sunnova. “This financing would allow Sunnova to realize issuance spreads commensurate with the expected credit uplift and introduce new, investment-grade investors to Sunnova’s long-term strategy.”
The DOE loan guarantee would be issued pursuant to Title XVII of the Energy Policy Act of 2005. Project Hestia is designed to accelerate the deployment of new digital engagement and behavior modification technologies. The Sunnova app and portal aims to reduce greenhouse gas emissions, enhance the integration of load controllers and smart appliances, and support grid stability by giving consumers near real-time insight into their residential energy system and quantifying the location-specific emissions impact of changes in consumer behavior.
Sunnova has agreed to provide monthly servicing reports supplemented by hardware and software deployment information to DOE. Sunnova has also agreed to measure the reduction in greenhouse gases associated with Project Hestia. To advance economic and environmental benefits for disadvantaged communities, Sunnova would also be required to deliver collateral pools that realize agreed criteria related to FICO distributions, and certain concentrations of customers located in disadvantaged communities.
While this conditional commitment demonstrates LPO’s intent to support the project, several steps remain for Project Hestia to reach critical milestones, and certain conditions must be satisfied before the DOE loan guarantee is issued, including finalization of definitive financing documents.
The transaction is expected to close in the second quarter of 2023. Sunnova plans to issue its first securitization under the program in 1H 2023.
Sunnova was advised by ATLAS SP Partners and Citi on the transaction. Baker Botts acted as legal advisor to Sunnova and Kramer Levin acted as legal advisor to the financial advisors.
