The long money is in solar power. Sunnova, the nation’s largest privately held residential solar power installer, is the latest solar builder and financier to receive a strong rating of its collected solar projects in a securitization offering, following on Dividend’s AA rating, Sunrun payments at 98.4% after three years, and CleanFund’s AAA portfolio. The portfolio was preliminarily rated an A- on $202 million of notes, backed by 14,777 unique residential solar installations totaling 108 MW-DC. The Kroll Bond Rating Agency (KBRA) issued the ratings.
Drivers of the portfolio’s rating included “exceptional” delinquency rates between 0.3% and 0.4%, an average FICO score of 735, and a perception of strong competency within the management team at Sunnova. Negative considerations included potential future changes to net metering in Guam (7.2% of this portfolio), complexity within the still-evolving Puerto Rico market, lack of history beyond 2013, heavy geographical concentration, as well the risk that solar system degrade faster than projected.
It is noted that KBRA projected annual degradation at 1.2% annually, while Sunnova and the industry analysis tends to project closer to 0.5% annual degradation. With that, KBRA provided the following estimate
In an increase in assumed default rate attributable to performance guaranty payments of approximately 11.54% under KBRA’s ‘A-’ rating scenarios.
The offering documentation also included a comparison to other similar solar lease/PPA offerings through KBRA – and it shows that the solar securitization industry, since 2015, has been getting high ratings.