On Friday, the fourth-largest provider of residential loans and leases in the United States moved forward as a public company, launching an initial public offering (IPO) of 17.6 million shares of common stock, with an option for underwriters to purchase an additional 2.6 million shares.
Houston’s Sunnova is estimating an IPO price of $16-$18 per share, which means that it will gross somewhere in the ballpark of $300 million, or around $340 million if the additional shares are also sold.
This is a big move for Sunnova, which deploys and owns residential PV systems in 20 states, and has been operating for seven years as a private company. All of Sunrun’s larger competitors in this space – Sunrun, Vivint Solar and SunPower – are public companies, but thousands of solar installation companies in the United States are not.
While raising a nice nest egg for Sunnova – with gross returns around 3x last year’s revenue – this won’t change much in terms of who owns the company. Along with the IPO there will be several transactions that convert the current owner’s equity to common stock, with the result that Energy Capital Partners, the largest owner, will still own 44% of the company’s common stock, and other existing stockholders will own 35%.
Members of the public seeking to buy in will own 20% of the company.
This could be a big step for Sunnova, which like other third-party solar companies has had to become an expert in raising capital. In its prospectus Sunnova estimates that to date it has raised more than $4 billion in committed capital through debt, tax equity and preferred equity. Per Sunnova’s registration statement:
Our diversified access to capital and long-term relationships with multiple funding sources have enabled us to retain significant assets on our balance sheet, without the need to sell assets to raise cash.
Due to being a private company Sunnova’s movements have been more opaque to pv magazine than those of the nation’s other large third-party solar providers; however there are two significant differences in its business model. As noted by Karl-Eric Stromsta in Greentech Media, the company has an “asset-lite” approach that includes relying entirely on third-party installers, with no in-house installation team.
Another big difference between Sunnova and its competitors is that Sunnova has chosen to finance its installations on its balance sheet, instead of raising money against specific pools of assets, as Tesla/SolarCity, Sunrun and Vivint have done.
This aggregates the debt of the company and its assets into one net sum, which at the end of the first quarter of 2019 stood at $1.77 billion in assets – almost all of which is rooftop PV on its customer’s homes – versus $1.20 billion in liabilities, including $1.07 billion in debt.
Another notable distinction that Sunnova has is its very large presence in Puerto Rico’s rooftop solar provider, where its rooftop PV systems make it the largest generator outside of the system operated by the island’s state-run utility.