Sunnova and Mosaic are the latest victims of residential solar decline
Potential cuts to the investment tax credit (ITC) in the budget bill could devastate the business of residential solar. That’s before factoring in the ongoing challenges of the home solar market the last few years, which has brought down two more big players: Sunnova and Solar Mosaic.
Sunnova files for bankruptcy.
Sunnova Energy filed for Chapter 11 bankruptcy protection in the United States on Sunday – a huge blow to the solar market, but not a shocker. Sunnova’s debt was mounting while demand was weakening. In February, Sunnova laid off 300 employees to reduce costs, mostly within its commercial organization, to prioritize “its highest-value customer segments to drive efficiency and higher cash generation.”
Leadership eyed the domestic content tax credit adder as one potential path out of this. But now the ITC for residential solar leases is on the chopping block altogether.
Last week, the company announced 718 more layoffs, just before the bankruptcy filing. The company listed its estimated assets and liabilities in the range of $10 billion to $50 billion and has a total debt of $10.67 billion as of December 31.
Solar Mosaic bankruptcy
Solar Mosaic is a fintech platform for U.S. residential solar and energy-efficient home improvements that was crushing loan originations not that long ago. Installers who rely on Mosaic for financing were notified of stopped payments earlier this month, and June 6 Mosaic went to the next step and filed voluntary petitions for relief under Chapter 11.
Through the Chapter 11 process, Mosaic “intends to complete a restructuring and recapitalization supported by certain of the Company’s existing lenders, including Forbright Bank (“Forbright”) acting as Administrative Agent on behalf of lenders, while simultaneously conducting a comprehensive marketing process of its platform and other assets of the Company.”
Macroeconomic challenges facing the entire residential solar industry, including high interest rates and legislation that threatens to eliminate tax credits for residential solar, have impacted the flow of capital. Prior to filing for Chapter 11, Mosaic took actions to strategically and operationally reorganize the business to meet its current liquidity needs. Mosaic determined a Court-supervised process was the best way to maintain its loan servicing platform, effectuate a full sale and marketing process for its assets, and maximize value for its stakeholders.
Throughout the Court-supervised process, Mosaic expects to remain fully operational without disruption, and plans to maintain its loan servicing operation.
“Today’s announcement marks a significant step for Mosaic to address our financial position amid the macroeconomic challenges facing the residential solar industry as well as the recent legislation passed by the House that rolls back residential solar tax credits,” said Patrick Moore, Mosaic Chief Executive Officer. “Throughout this process, we remain focused on maintaining stability for our customers, business partners, and employees.”
Mosaic will receive $45 million in debtor-in-possession financing from its existing lenders, including $15 million in new money financing which, following court approval, is expected to fund the company’s ongoing operations and administrative expenses during the Chapter 11 cases.
What installers should do next?
Solar installers should always have more than one option. Putting all of your eggs in one basket, especially at a chaotic time like this, is not a good idea.
“One option that can help immediately if installers don’t have backup financing ready is to look into local credit unions,” says Josh Tinaglia, finance program manager with BayWa r.e. “They don’t have a burdensome, if any, onboarding process for installers so they could begin using those now. In the mid to long term, I recommend all installers find another suitable fintech to rely on for financing their homeowner’s projects.”
