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A War Between Two Rooftop Solar Installers That Undercut an IPO


By Christopher Martin and Brian Eckhouse

(Bloomberg) Sunnova Energy International Inc. was set to pull off one of the biggest rooftop solar IPOs in recent history. Earlier this week, the company was estimating its value at almost $1 billion and offering shares for $16 to $18.

Instead, the Houston-based solar panel installer priced at $12, and the stock tanked in its trading debut Thursday.

To understand how this initial public offering went awry, rewind to Tuesday. That’s when Sunnova’s chief rival Sunrun Inc. circulated a note suggesting that some metrics Sunnova was sharing with investors may be misleading. In the note, Sunrun said Sunnova was falsely claiming that it had lower costs and higher customer margins than its own.

“It left a bad taste in investors’ mouths,” Joe Osha, an analyst at JMP Securities, said in a phone interview Thursday. “These solar companies already have complicated financials, and Sunnova muddied the waters with their claim of a superior business model.”

Read More: Sunnova Raises $168 Million After Scaling Back U.S. IPO

Sunnova’s shares fell 6.3% to $11.25 on Thursday. Sunnova Chief Executive Officer John Berger declined to comment on Sunrun’s note, attributing the decline in the company’s share price to a broader move down in solar stocks. Sunrun declined to comment beyond the note.

The battle between Sunrun and Sunnova underscores just how heated the competition has become among rooftop solar installers who are looking to attract investors as incentives in some of the industry’s largest markets fade. The high-profile struggles of some companies that owned large solar farms, including the renewable energy giant SunEdison Inc. that went bankrupt, have meanwhile soured many investors on the industry.

In its note, Sunrun said Sunnova had been comparing its customer economics to that of Sunrun in a “misleading or inaccurate” way. The dispute lies in how each of the companies calculates costs and profitability. Sunrun said it includes general and administrative costs when it calculates the value of each of its customers and that Sunnova excludes those overhead expenses.

“We welcome companies who are eager to bring affordable solar energy to more American households and create jobs,” Sunrun said. “At the same time, we believe Sunnova has made certain comparisons of its customer economics to Sunrun that may be misleading or inaccurate because the metrics being compared are inconsistent or different.”

For Sunnova’s part, Berger said he’ll “let investors be the judge.” The whole industry is “competing against monopoly utilities,” he said, “and there are plenty of opportunities to go around.”

63,000 Customers

Backed by the private equity firm Energy Capital Partners, Sunnova operates in more than 20 U.S. markets including New York and Puerto Rico, according to its prospectus. The company has more than 63,000 customers and offers solar leases and loans, as well as standalone energy-storage services. The company had a net loss of $68 million on revenue of $104 million last year, according to its filings with the U.S. Securities and Exchange Commission.

Sunrun has almost 200,000 solar customers, according to its website. The San Francisco-based company reported almost $800 million in revenue last year.

Sunnova’s offering was led by Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. The shares are trading on the New York Stock Exchange under the symbol NOVA.



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