Securitising sunshine
Sunnova breathed new life into renewable energy financing with a US$244m securitisation backed by US government-guaranteed loans, helping to make home solar systems more affordable and boosting a project aimed at reducing fossil-fuel power generation.
In addition to drawing new investors to the sector, the Texas-based company’s offering achieved several milestones for solar power projects in the structured finance market.
Called Sunnova Hestia I Issuer 2023-GRID1, it was the debut solar deal supported by the Department of Energy’s clean energy funding programme, which has grown to a US$400bn mandate. It was also the first solar securitisation to achieve a Triple A rating.
The deal “is massively important to where I think a lot of people believe US energy should be moving”, said Stephen Viscovich, co-head of origination at Atlas SP – the securitisation’s lead-left and structurer.
The DoE financing scheme is intended to put renewable power in more American homes, including low-income families and households in Puerto Rico whose electricity access has been disrupted by storms in recent years. These two groups have had low access to solar power due to their credit risk.
“By definition you have taken an entirely unprofitable pool of customers, and you made them profitable, and this helps expand access of residential solar financing to an entirely new customer base,” said Spencer Hunsberger, head of energy origination at Atlas.
While the DoE’s backing of its Hestia programme lowers its overall funding cost, the project will also help create more “virtual power plants” to reduce greenhouse emissions – one of the government’s energy goals. Through expansion of solar panels on rooftops, storage systems and related software, more homes will have the capability to release electricity into the grid during high demand periods instead of utilities switching on generators that run on fossil fuels.
In September 2023, the DoE and Sunnova inked an agreement under which the agency will provide a 90% guarantee on US$3.3bn of Sunnova’s loans over three years, via the DoE’s clean energy programme.
Sunnova and joint leads, Atlas and Citigroup, quickly brought the deal to market the following month, meeting with over 60 investors to familiarise them with the unique pass-through structure.
The five-year fixed-rate offering featured a US$219.6m 1-A note whose payments are guaranteed by the DoE and a US$24.4m 2-A tranche which is not guaranteed. Kroll rated the 1-A class AAA and the 2-A paper BB.
Racking up over US$2.2bn in orders from 48 investors, both classes were more than nine times subscribed and both notes came as much as 35bp tighter than initial price thoughts, pricing at Treasuries plus 150bp and plus 615bp, respectively.
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