KBRA Assigns Preliminary Ratings to Sunnova Hestia II Issuer, LLC Solar Loan Backed Notes, Series 2024-GRID1
16 May 2024 | New York
KBRA assigns preliminary ratings to two classes of notes issued by Sunnova Hestia II Issuer, LLC Solar Loan Backed Notes, Series 2024-GRID1, a $168.9 million residential solar loan ABS transaction.
This transaction represents the second securitization under the Hestia program, which contains a partial loan guarantee provided by the U.S. Department of Energy. Projects funded under Project Hestia are, in part, to provide loans for clean energy systems to disadvantaged communities in the US and Puerto Rico. The project is required to provide at least 20% of its loans to customers with credit scores of 680 or less, and at least 10% and a target minimum of 20% to homeowners in Puerto Rico.
The Guaranteed Loan Borrower is collateralized by approximately $260.8 million of residential solar loans approximately $23 million will be prefunded at closing. The $237.8 million residential solar loans in the statistical pool includes PV Solar Loans under Sunnova’s Easy Own Plan Equipment Purchase (“Easy Own”) Agreements (59.8% as of the statistical cutoff date), PV/BESS Solar Loans under its SunSafe Easy Own Plan Equipment Purchase (“SunSafe Easy Own”) Agreements (31.8%), and BESS Solar Loans under its SunSafe Agreements (8.4%). While Sunnova’s residential solar loan agreements offer 10- and 15-year loans, the majority of the aggregate initial pool balance (97.7%) has 25-year original terms.
Sunnova Energy Corporation (“Sunnova”, or the “Company”) is a Houston, TX based independent solar power company that provides low-cost solar electricity to homeowners, and a wholly owned subsidiary of Sunnova Energy International Inc. ("SEI"), a public company. The Company started its operations in January 2013 and began providing solar energy services under its first operating Photovoltaic (“PV”) System in April 2013. Sunnova originates loans to mostly prime credit quality homeowners through its partnerships with local dealers. As of March 31, 2024, the Company has served a total customer count of over 438,000 in more than 50 U.S. states and territories. Sunnova provides its services through long-term residential solar service agreements (”SSA") in the following formats: i) lease agreements, ii) power purchase agreements (“PPA”), and iii) loan agreements. The three types of loan agreements are Easy Own Plan Equipment Purchase Agreements ("PV Solar Loans"), SunSafe Easy Own Plan Equipment Purchase Agreements ("PV/BESS Solar Loans"), and SunSafe Agreements ("BESS Solar Loan"). The collateral included in this securitization includes only loan agreements. The Company originates loans to mostly prime credit quality homeowners through its partnerships with local dealers. The Company has also issued 10 ABS securitizations collateralized by secured residential solar loans and seven transactions collateralized by lease and PPA products.
KBRA applied its General Global Rating Methodology for Asset-Backed Securities and Consumer Loan ABS Global Rating Methodology, as well as Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology, as part of its analysis of the transaction’s underlying collateral pool and the proposed capital structure. KBRA also conducted an operational assessment of Sunnova, as well as a review of the transaction’s legal structure and transaction documents. KBRA will review the operative agreements and legal opinions for the transaction prior to closing.
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