Spruce Power acquires residential solar portfolio across 10 states

Spruce Power, an owner and operator of distributed solar energy assets, announced the acquisition of a residential solar portfolio with  22,500 residential solar contracts from an undisclosed U.S. private equity firm for about $160 million.  Denver-based Spruce Power specializes in subscription-based services designed to make it easy for homeowners and small businesses to own and maintain rooftop solar and battery storage systems.

The portfolio features the customer payment streams from residential solar contracts that originated with the homebuilder, Lennar Corporation, and its solar platform, SunStreet. The rooftop installations are located across 10 states, while the transaction expands Spruce into two new markets, Washington and Oregon.

Christian Fong, chief executive officer of Spruce Power, said the company paid $35 million for the portfolio and assumed $125 million of non-recourse project debt. He noted that with nearly $12 million in cash in the acquired business, Spruce’s net balance sheet cash paid at closing was about $23 million.

“For future acquisitions, that leaves us with over $180 million of Spruce balance sheet cash. We expect this portfolio will make a large, positive and immediate impact on our financial and strategic outlook,” Fong said. “The Spruce Power 4 Portfolio has an average remaining contract life of nearly 15 years, and is expected to generate over $21 million of customer billings in 2023, and about $23 million of average annual billings over the next five years.”

Fong was previously president and director of Spruce Power, and became CEO in January of this year. Its  previous CEO Eric Tech remains active on the company’s board. Fong joined Spruce Power in 2017, growing the company into what it says is the largest privately held residential solar owner/operator in North America. He held prior roles at TerraForm Power, then the world’s largest public independent renewable power producer, or Yieldco.

“This acquisition is the largest in Spruce’s corporate history,” Fong stated. “It grows our ownership of rooftop solar assets and contracts by about 44% overnight to more than 72,000 systems, demonstrating the power of our strategy to grow by acquisition while earning an attractive rate of return on our invested cash.”

On October 20, 2022, Spruce was notified by the New York Stock Exchange (NYSE) that its average closing price of the company’s stock had fallen below $1.00 per share over a period of 30 consecutive trading days, and therefore was in non-compliance with the NYSE continued listing standards. On February 1, 2023, the NYSE confirmed that the Company’s average price for the trailing 30 consecutive trading days ended January 31, 2023, and that day’s final closing price, was above the NYSE’s minimum requirement of $1.00.

In Spruce’s fiscal year 2022 results, the company reported total revenue of $23.2 million and negative $4.9 million of adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, a common financial reporting metric to track a company’s yearly performance, in its first year as a public company.   In Q4 2022, the company completed four tax equity buyouts, representing $1 million of additional EBITDA to the company’s business.  The company reported a cash balance of $240.1 million at December 31, 2022, while its outstanding debt balance was $533.2 million.

As of December 31, 2022, Spruce Power owned approximately 51,000 rooftop solar assets and contracts  across 16 states with an average remaining contractual life of 12.5 years. Combined portfolio generation for the three months ended December 31, 2022, was 76,000 MWh of power.