It is official: The U.S. Department of Energy (DOE) Loan Programs Office (LPO) signed an historic agreement last week to partially guarantee over $3 billion in loans originated by residential solar + storage installation company Sunnova via its new solar loan channel, “Project Hestia.” We first reported on this conditional agreement in April.
The aim of Project Hestia is to provide disadvantaged homeowners and communities with increased access to Sunnova’s solar/battery storage services by indirectly and partially guaranteeing the cash flows associated with consumers’ loans. This equates to a 90% guarantee of up to $3.3 billion of term loans.
“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 of Sunnova Energy. “This partnership reflects our commitment to innovation with purpose.”
We say it is historic because:
- It is the single largest commitment ever made by the Federal Government to solar power.
- It is the DOE’s first loan guarantee agreement for a Virtual Power Plant (VPP).
Beyond just deploying renewable energy systems to lower electric bills, the technology and program will improve homeowner understanding of their power usage and boost demand response behavior. This then lays the foundation for future virtual power plant (VPP) activities, which both helps the grid and, often, results in more financial benefit for the system owner.
What’s more, Sunnova will provide DOE with monthly servicing reports supplemented by hardware and software deployment information, so that everyone can better understand the impact of modifying energy use behaviors through Sunnova’s technology. To measure project benefits, Sunnova will also measure and report on the reduction in greenhouse gases associated with Project Hestia.
Sunnova anticipates the loan guarantee agreement will support over an estimated $5.0 billion in Sunnova loan originations, reduce the company’s weighted average cost of capital, and generate interest savings.
To advance economic and environmental benefits for disadvantaged communities, Sunnova intends to use Project Hestia to finance collateral pools that realize agreed criteria related to FICO distributions, and certain concentrations of customers located in disadvantaged communities.
“This is an important step in structured solar investments that will accelerate solar adoption and bring our best-in-class service to more underrepresented customers,” said Robert Lane, Executive Vice President and Chief Financial Officer at Sunnova. “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.”
The first Hestia asset-backed securitization, Hestia I, is estimated to come online in the fourth quarter of 2023.
The DOE loan guarantee agreement is issued pursuant to Title XVII of the Energy Policy Act of 2005.
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