May 9, 2019
Walter A. Baker
Executive Vice President, General Counsel, and Secretary
Sunnova Energy International Inc.
20 East Greenway Plaza, Suite 475
Houston, TX 77046
Re: Sunnova Energy International Inc.
Draft Registration Statement on Form S-1
Submitted April 12, 2019
CIK 0001772695
Dear Mr. Baker:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments we may ask you to provide us information so that we may
better
understand your disclosure.
Please respond to this letter by providing the requested information
and either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe that our comments apply to your facts and
circumstances or do
not believe that an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1 submitted April 12, 2019
Prospectus Summary, page 1
1. Please ensure that the information you include in your summary is
balanced. To the
extent that you cite competitive strengths in your summary, please
review each one and
revise as necessary to provide balancing information. In this regard, we
note that you
have only included a cross-reference to risk factors.
2. Please revise to include a chart that summarizes your organizational
structure and equity
ownership prior to the consummation of the offering.
Walter A. Baker
FirstName LastNameWalter A. Baker
Sunnova Energy International Inc.
Comapany NameSunnova Energy International Inc.
May 9, 2019
May 9, 2019 Page 2
Page 2
FirstName LastName
Summary Consolidated Financial Data, page 12
3. In regard to your disclosure related to the non-GAAP measure Adjusted
EBITDA, please
address the following:
We note you use Adjusted EBITDA as a performance measure; however,
in your
discussion of the uses and limitations of this measure, you appear
to highlight and
refer to cash, cash requirements, ability to service debt, and
ability to generate cash
flows to make distributions. Please revise your disclosure to
address the uses and
limitations of this measure as a performance measure. If you
believe Adjusted
EBITDA may also be a liquidity measure, please revise your
disclosure to also
reconcile it to the most directly comparable GAAP liquidity
measure - Cash used in
operating activities, and ensure it complies with the requirements
of a liquidity
measure.
We note that you include cash received under loan agreements
(principal and interest)
in Adjusted EBITDA due to differences in revenue recognition among
your types of
solar service agreements. It appears that the only portion of
payments received under
loan agreements recognized as revenue relate to the operations and
maintenance
services provided by you to the customer. In that regard, it is
not clear why it is
appropriate to include payments received for principal and
interest in your
determination of Adjusted EBITDA. Please tell us in more detail
about the underlying
economics of your solar service agreements that take the form of a
loan; clarify how
Adjusted EBITDA, with this adjustment, is useful in evaluate your
operating
performance; and how you considered Question 100.04 of the SEC's
Non-GAAP
Compliance and Disclosure Interpretations.
Our growth is dependent on our dealer network..., page 19
4. Disclosure indicates that Trinity Solar, Inc. accounted for 50% and
22% of your
originations for the years ended December 31, 2018 and December 31,
2017. Please file
your exclusivity agreement with Trinity Solar, Inc. as an exhibit to
the registration
statement. See Item 601(b)(10) of Regulation S-K.
Certain of our solar energy systems are located in, and we conduct business in
.. . ., page 33
5. Please revise this risk factor to disclose specifics regarding the
significance of Puerto Rico
to your business.
Disruption to our solar monitoring systems could negatively impact . . ., page
38
6. We note your disclosure that your ability to accurately charge your
customers for the
energy produced depends on customers maintaining a cellular
connection. Please revise
this risk factor to explain in greater detail the cellular connection
that is necessary. Please
consider including corresponding disclosure in the business section.
Walter A. Baker
FirstName LastNameWalter A. Baker
Sunnova Energy International Inc.
Comapany NameSunnova Energy International Inc.
May 9, 2019
May 9, 2019 Page 3
Page 3
FirstName LastName
Risk Factors
Our amended and restated bylaws and our amended and restated certificate of . .
.., page 54
7. We note that your forum selection provision identifies the Court of
Chancery of the State
of Delaware as the exclusive forum for certain litigation, including
any "derivative
action." We also note your disclosure that your new amended and
restated certificate of
incorporation will also provide that the federal district courts of
the United States will be
the exclusive forum for resolving any complaint asserting a cause of
action arising under
the Securities Act. We note that you have conflicting disclosure about
the applicability of
your exclusive forum provision to the Securities Act. Please revise to
clearly disclose
whether this provision applies to actions arising under the Securities
Act or Exchange
Act. In that regard, we note that Section 27 of the Exchange Act
creates exclusive federal
jurisdiction over all suits brought to enforce any duty or liability
created by the Exchange
Act or the rules and regulations thereunder, and Section 22 of the
Securities Act creates
concurrent jurisdiction for federal and state courts over all suits
brought to enforce any
duty or liability created by the Securities Act or the rules and
regulations thereunder. If
the provision applies to Securities Act claims, please also revise
your prospectus to state
that there is uncertainty as to whether a court would enforce such
provision. If this
provision does not apply to actions arising under the Securities Act
or Exchange Act,
please also ensure that the exclusive forum provision in the governing
documents states
this clearly.
Use of Proceeds, page 63
8. You disclose that you intend to use a portion of the net proceeds for
repayment of
indebtedness. Please tell us what consideration you gave as to whether
pro forma
information, including pro forma earnings per share, should be
provided related to the
repayment of these loans. Please also address the need to provide pro
forma information
related to the entrance of a new working capital credit facility
concurrent with the
completion of this offering as disclosed on page 86. Refer to Rule
11-01(a)(8) of
Regulation S-X.
9. If any material part of the proceeds is to be used to discharge
indebtedness, please state
the interest rate and maturity of the indebtedness. If the
indebtedness to be discharged
was incurred within one year, describe the use of the proceeds of the
indebtedness other
than short term borrowings used for working capital. See Instruction 4
to Item 504 of
Regulation S-K.
Walter A. Baker
FirstName LastNameWalter A. Baker
Sunnova Energy International Inc.
Comapany NameSunnova Energy International Inc.
May 9, 2019
May 9, 2019 Page 4
Page 4
FirstName LastName
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Securitizations, page 74
10. We note you engage in securitizations of your solar energy systems.
Please clarify for us
and in your disclosures whether you include the associated ITC
incentives as part of your
securitizations. If so, please tell us and disclose your accounting
policy for the sale of the
ITCs.
11. We note your reference to "cash traps." Please revise your disclosure
to explain the
function of cash traps, including how cash traps are used for the
benefit of lenders.
Financing Arrangements, page 86
12. Please file as exhibits to your registration statement the agreements
associated with your
various financing arrangements. See Item 601(b)(10) of Regulation S-K.
Contractual Obligations, page 90
13. Please revise your table of contractual obligations to include the
payments you are
obligated to make under your interest rate swap agreements. As the
table is aimed at
increasing transparency of cash flow, we believe these types of
payments should be
included in the table. If you have already included these amounts,
please revise your
disclosure to clarify that fact. Please also disclose any assumptions
used to derive
estimated interest payments and estimated payments under interest rate
swaps.
Developments in Energy Storage Solutions, page 99
14. Please revise your disclosure to discuss how and why the recent
developments in energy
storage technology may reduce the variability of solar energy
availability to your
customers.
Industry Overview
Federal Tax Credits, page 100
15. Please provide support for your statement, "Decreasing system costs
and rising retail
residential rates are expected to mitigate the impact of the reduced
investment tax credit."
Demonstrated access to diversified funding sources, page 105
16. Please revise to include a discussion of the various funding sources.
Stable and diversified business model, page 105
17. Please revise to include disclosure regarding the percentage of your
solar systems that are
located in New Jersey, California, and Puerto Rico.
Walter A. Baker
FirstName LastNameWalter A. Baker
Sunnova Energy International Inc.
Comapany NameSunnova Energy International Inc.
May 9, 2019
May 9, 2019 Page 5
Page 5
FirstName LastName
Customer Agreements, page 109
18. Please disclose your customer default rates.
19. We note your disclosure on page 111 regarding the situation where a
customer elects to
sell his or her home and the new homeowner rejects the reassignment of
the customer
contract. Please revise your disclosure to discuss the obligations of
the customer under
the agreements. Please also discuss the obligations of the customer
under the agreements
where the prospective purchaser does not meet the requisite credit
criteria.
Competition, page 116
20. Please revise to disclose the approximate number of companies that
have a business model
similar to your own.
Facilities, page 118
21. Please file the lease agreement for your corporate headquarters as an
exhibit to the
registration statement. See Item 601(b)(10) of Regulation S-K.
Employment Agreements, page 125
22. Please file the employment agreements of your named executive officers
as exhibits to the
registration statement. See Item 601(b)(10) of Regulation S-K.
Certain Relationships and Related Party Transactions, page 134
23. Please file as exhibits to your registration statement the agreements
associated with the
related party transactions that you discuss in your registration
statement.
Description of Capital Stock
Registration Rights, page 141
24. Please disclose whether there are any maximum cash penalties under the
registration
rights agreements, if applicable. Please also disclose any additional
penalties resulting
from delays in registering your common stock. Refer to ASC
825-20-50-1.
General, page F-1
25. Please include interim financial statements for the period ended March
31, 2019. Please
similarly update your financial information throughout the filing. See
Rule 8-08 of
Regulation S-X.
Walter A. Baker
Sunnova Energy International Inc.
May 9, 2019
Page 6
Financial Statements
Consolidated Statements of Operations, page F-7
26. We note your presentation of Gross Profit in your Consolidated
Statements of Operations.
Please explain to us why your Operations and maintenance expense is
not included in the
determination of Gross Profit.
(2) Significant Accounting Policies
Fair Value of Financial Instruments, page F-13
27. You disclose on page F-14 that you estimate the fair values of your
Easy Own notes
receivable and fixed-rate long-term debt using significant
unobservable inputs (Level 3).
ASC 820-10-50-2(c) requires a reconciliation of the beginning and
ending balances for
recurring fair value measurements categorized within Level 3 of the
fair value hierarchy.
Please tell us where in the filing you have complied with this
requirement or otherwise
expand your disclosure accordingly.
Revenue, page F-14
28. Please tell us how you considered the disclosure requirements set
forth in ASC 606-10-50-
13(b), which requires disclosure of the aggregate amount of the
transaction price allocated
to the performance obligations that are unsatisfied as of the end of
the reporting period as
well as an explanation of when you expect to recognize such revenue.
29. We note solar renewable energy certificate (SREC) revenue represents a
significant
percentage of your total revenues. We further note you account for
your SRECs as
inventory and that you enter into forward derivative contracts related
to expected
production of SRECs. Please explain why you believe there are no
direct or indirect costs
associated with your production of SRECs that should be reflected in
cost of revenues. It
appears your business exists in part by virtue of government
incentives and you
contemplate and monitor the production of SRECs as a major component
of your
business.
You may contact Jeffery R. Gordon, Staff Accountant, at (202) 551-3866
or Kevin W.
Stertzel, Staff Accountant, at (202) 551-3723 if you have questions regarding
comments on the
financial statements and related matters. Please contact Edward M. Kelly,
Senior Counsel, at
(202) 551-3728 or Frank Pigott, Staff Attorney, at (202) 551-3570 with any
other questions.
Sincerely,
FirstName LastNameWalter A. Baker
Comapany NameSunnova Energy International Inc. Division of
Corporation Finance
Office of
Manufacturing and
May 9, 2019 Page 6
FirstName LastName
Construction