Sunnova Energy International, a residential solar energy provider, has filed for an Initial Public Offering (IPO). The company has its head office in the Greenway Plaza area of Houston.
The company leases rooftop solar energy systems to residential customers usually in the form of a 25-year lease. Customers get the benefit of cheaper electricity costs while the company retains ownership of the system, allowing it to claim federal tax credits.
$1 billion market cap?
Two weeks ago, Reuters reported that the company was planning an IPO that would value the company at $1 billion. In the current SEC filing there is no indication of the number or price of the shares being sold.
The company CEO is John Berger. He worked for Enron and founded residential solar energy company SunCap Financial in 2010. He sold that business to NRG Energy before starting Sunnova in 2012. The company is primarily backed by Energy Capital Partner, a PE firm that has raised over $13 billion in funds since 2006. They also led a consortium to take Calpine private in a $5.6 billion transaction in 2018.
For the 12 months ended 31 March 2019, the business had revenues of $111 million and adjusted EBITDA of $44.6 million. The company has 63,000 customers in 20+ states and territories. However, most of its revenue comes from customers in New Jersey (29%), California (26%) and Puerto Rico (14%).
Revenue grew by 35% in 2018 and the company expects the number of residential solar energy systems in the overall US market to increase from 2.2 million in 2018 to 5.4 million in 2024, a 16% compounded annual growth rate.
Problems in Puerto Rico
The business in Puerto Rico is causing some operational heartache. In September 2017, hurricanes Irma and Maria made landfall, resulting in;
- damage to many of the company’s solar energy systems.
- damage to Puerto Rico’s electrical grid. This meant that those solar energy systems that didn’t have a battery back up operated at a reduced capacity, even though the system itself was not damaged.
- residents leaving the island, and suspending lease payments to the company.
In addition regulators in Puerto Rico have started administrative proceedings against the company after finding that it had enrolled 436 customers illegally by attaching signatures to contracts they hadn’t signed. Sunnova disputes the findings but is unable to state what impact this might have on the business.
The CFO of Sunnova is Rob Lane. He joined the company a month ago, from Spark Energy. The previous CFO, Jordan Kozar, left in November 2018.
The company plans to list on the NYSE under the symbol ‘NOVA’. BofA Merrill Lynch, J.P. Morgan, Goldman Sachs and Credit Suisse are the joint bookrunners on the deal.
The filing comes a day after another Houston company, Castle Biosciences, filed for an IPO.