United States securities and exchange commission logo
September 22, 2021
Robert Lane
Chief Financial Officer
Sunnova Energy International Inc.
20 East Greenway Plaza, Suite 540
Houston, Texas 77046
Re: Sunnova Energy
International Inc.
Form 10-K for the
Fiscal Year ended December 31, 2020
Filed February 25,
2021
File No. 001-38995
Dear Mr. Lane:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year ended December 31, 2020
Key Financial and Operational Metrics, page 71
1. We note that you
identify Adjusted Operating Cash Flow as a non-GAAP liquidity
measure. However,
relative to the corresponding GAAP measure, Net cash used in
operating activities,
it appears that you are adding back (and thereby excluding) costs
associated with
increases to the working capital accounts and derivative settlements, while
also recharacterizing
certain investing cash inflows (increasing your non-GAAP measure),
e.g. proceeds from
customer notes receivable; and showing a positive adjustment (also
increasing your
non-GAAP measure) for certain investing cash outflows, e.g. exclusivity
and bonus payments made
to dealers, which seems to have the effect of both designating a
source that is not
otherwise apparent and excluding the expenditure.
Please revise as
necessary to comply with Item 10(e)(ii)(A) of Regulation S-K, which
stipulates that
non-GAAP liquidity measures must not exclude charges or liabilities that
Robert Lane
FirstName LastNameRobert
Sunnova Energy InternationalLane
Inc.
Comapany 22,
September NameSunnova
2021 Energy International Inc.
September
Page 2 22, 2021 Page 2
FirstName LastName
required, or will require, cash settlement absent an ability to settle
in another manner.
As you appear to comingle activity pertaining to all three of the GAAP
classifications of
operating, investing and financing, it appears you would also need to
relabel the measure,
if retained, to adhere to Item 10(e)(ii)(E) of Regulation S-K and to
reflect some manner of
association with the various GAAP classifications.
Please disclose each of the GAAP measures for the principal categories
of cash flows
along with any non-GAAP liquidity measure that you choose to present.
Note 2 Significant Accounting Policies
Dealer Commitments, page 103
2. We note your disclosure indicating that you enter into exclusivity and
other similar
agreements with certain dealers pursuant to which you agree to pay an
incentive if such
dealers install a certain minimum number of solar energy systems
within specified
periods. You explain that these incentives are recorded in your other
assets account and
are amortized to general and administrative expense over an average of
23 years based on
the terms, or duration of the customer agreements.
However, you have disclosure on page 6, referring to an arrangement
with Lennar
Corporation, in which the counterparty has agreed to engage you or
your subsidiaries
exclusively as their solar and storage service provider, and has
extended to you the
opportunity to leverage its existing customer relationships by
offering solar service
agreements to customers who do not yet have a solar energy system. You
also have
disclosure on pages 9 and 10, describing an arrangement with Trinity
Solar, Inc.,
involving exclusivity and requiring bonus payments over a four-year
period, and
indicating that you have similar arrangements with several other key
dealers.
Please describe any distinction that you make for payments made to the
counterparties in
these arrangements based on their nature, e.g. incentive vs.
exclusivity, in determining
whether the payments should be capitalized as incremental costs of
obtaining a contract
pursuant to FASB ASC 340-40-25, or other guidance.
Tell us the numbers and values of new contracts each period for (i)
contracts associated
with the incentive structures and (ii) contracts attributable to
relationships based on
exclusivity; and explain your rationale for amortizing exclusivity
payments over an
average of 23 years based on the terms of customer agreements, rather
than terms
reflecting the periods of exclusivity, or expensing the amounts as
incurred.
Note 3 Property and Equipment , page 111
3. We note that you depreciate your solar energy systems over 35 years
while your PPA's
and lease agreements generally have 25 year terms.
Tell us how you considered the remaining economic utility of your
solar energy systems
Robert Lane
Sunnova Energy International Inc.
September 22, 2021
Page 3
at the end of the lease agreements in determining the depreciation
timeframe, including
your assessment of each of the following concerns -
the potential obsolescence of your systems and your limited
history of renewals, as
disclosed in your risk factors on page 32;
the ability to re-market a 25 year-old solar energy system in
the event that the
customer does not renew the lease;
the recoverability of amounts capitalized as solar energy
system costs related
to construction and installation, which would have little if any
utility if the system is
removed and reinstalled elsewhere at the end of the original
lease term; and
with respect to your lease and PPA renewal projections, whether
a customer would
agree to re-lease or enter into another PPA for a system with
diminished utility.
Note 9 Derivative Instruments, page 126
4. We note your disclosure on page 16 indicating that you have hedged a
portion of the state
renewable energy certificates (SRECs) that you expect to earn from the
production of
energy by your solar systems under fixed price forward contracts.
Please provide us with
the underlying hedge documentation that you prepared to comply with
FASB ASC 815-
20-25-3, pertaining to 2020; and the disclosures regarding these
contracts that you propose
to comply with FASB ASC 815-10-50.
5. Please expand your disclosures to describe the derivative contracts
and any hedging
arrangements associated with the derivative breakage fees from
financing structure
changes mentioned on page 71, along with the circumstances that have
precipitated the
charges and your accounting and presentation policy.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact John Cannarella, Staff Accountant, at (202) 551-3337 or
Karl Hiller,
Branch Chief, at (202) 551-3686 with any questions.
FirstName LastNameRobert Lane Sincerely,
Comapany NameSunnova Energy International Inc.
Division of
Corporation Finance
September 22, 2021 Page 3 Office of
Energy & Transportation
FirstName LastName