Sunnova Energy International, an energy-as-a-service provider, announced it has secured a $3 billion partial loan guarantee agreement with the U.S. Department of Energy (DOE) Loan Programs Office (LPO), equating to a 90% guarantee of up to $3.3 billion of term loans. The funds will support loans originated by Sunnova under its new “Project Hestia.”
The partial guarantee from the DOE LPO is expected to support over $5 billion in Sunnova solar loan originations, reduce the company’s weighted average cost of capital, and generate interest savings.
Project Hestia is designed to increase access to solar and virtual power plant (VPP) services for disadvantaged communities who otherwise may not be able to secure loans for residential solar projects. The company will receive indirect and partially guaranteed cash flows for the loans associated with these customer accounts.
A VPP is a virtual aggregation of small-scale, distributed energy resources (DERs) including PV, energy storage, electric vehicle chargers, and demand-responsive devices such as water heaters, thermostats, and appliances.
To be eligible for Project Hestia, each installation must be outfit with Sunnova’s energy management system, which customers can access via smartphone or other electronic devices. The system will make recommendations for demand response behaviors, offering customers opportunities to save on energy costs while helping balance the grid during times of peak demand.
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.
“Today marks the beginning of an exciting chapter in our pursuit of a cleaner and more equitable energy landscape. With our collaboration with the U.S. Department of Energy, we are embarking on a journey that expands clean energy access and delivers economic benefit to Americans in disadvantaged communities,” said William J. (John) Berger, chief executive officer, Sunnova Energy.
Sunnova has agreed to provide monthly servicing reports, and hardware and software deployment information to DOE. It will also measure the reduction in greenhouse gases associated with the project. As part of the conditional loan, Sunnova will be required to deliver collateral pools that realize agreed criteria related to FICO distributions for disadvantaged communities.
The company said it anticipates utilizing the loan guarantee in connection with its first Project Hestia asset backed securitization, Hestia I, in the fourth quarter of 2023.
“We expect the Hestia I issuance to generate spreads commensurate with the expected credit uplift and introduce new, investment-grade investors to Sunnova’s long-term strategy,” said Robert Lane, executive vice president and chief financial officer at Sunnova.
DOE has set a goal for the U.S. to deploy VPPs encompassing 80-160 GW of distributed energy resources by 2030, tripling the current scale of VPPs, to “support rapid electrification while redirecting grid spending from peaker plants to VPP participants and reducing overall grid costs.”
DOE’s report on the VPP target is titled “Pathways to Commercial Liftoff: Virtual Power Plants.”
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