The Venture Codex

Participated · Debt Financing · Dec 2019

Vivint Solar is a Utah-headquartered solar installer. The company secured a US$200 million revolving asset-based loan. The financing is intended to stockpile equipment to ensure future projects qualify for the full federal investment tax credit (ITC) and to refinance a working capital facility due March 2020. The ITC is set to taper from 30% to 26% for PV projects that begin after 1 January, and purchasing equipment is one of the simplest ways project backers can meet the IRS’s five-percent construction benchmark. Vivint’s chief commercial officer and head of capital markets, Thomas Plagement, said the loan will preserve the 30% ITC rate “well into 2021.” Lenders on the facility include affiliates of Bank of America Securities and Credit Suisse. Vivint Solar installs and finances rooftop solar systems for residential customers, typically using leases and power purchase agreements. The company's core competency is raising capital to fund installations and then collecting lease and PPA payments. At the end of Q1 it reported $213 million in cash and equivalents but also posted a $41 million quarterly loss from operations. The company announced financing of up to $360 million structured as a multi-party forward flow funding arrangement combining project-level debt, a levered tax-equity partnership and a cash equity component. That financing is expected to support an estimated 95–100 MW of solar (roughly two quarters' worth of deployment) and provides up-front cash plus tax-equity for claiming the federal ITC. Vivint previously used a similar structure last year, and the deal was described as providing financial flexibility while signaling banks' confidence despite rising SG&A-driven installation costs in Q1. Vivint Solar is a U.S. residential solar installer that deploys rooftop PV through leases, power purchase agreements and increasingly direct sales. The company secured $100 million in tax equity commitments to fund roughly 70 MW of residential PV capacity for about 10,000 new customers. Vivint reported $363 million in tax equity across four funds in March, which it expects to cover roughly 217 MW of deployment this year. The new $100 million is intended to enable additional deployments into 2018. Vivint said it has reduced installed costs to $2.98 per watt, and it expects to install 210–230 MW over 2017 with a midpoint around 2016 levels. Because Vivint uses a third-party ownership model for the majority of its deployments, raising tax equity is critical to monetize the Investment Tax Credit. Vivint Solar installs and finances residential solar energy systems and offers smart-home energy management products such as its Smart Home system. The company experienced disruption after a failed merger with SunEdison but is working to stabilize via new capital. It closed a combined $303 million financing package comprised of an 18-year fixed-rate $203M debt facility and a $100M follow-on tax-equity investment. The debt will be repaid using contractual cash flows from four existing investment funds that include 214 MW of solar systems. The $100M tax-equity investment will support installation of more than 66 MW of residential arrays. Bank of America Merrill Lynch closed both transactions and has been a partner since Vivint’s IPO in the fall of 2014, and proceeds will be used in part to repay outstanding borrowings under the company’s non-recourse credit facility. Vivint Solar installs residential rooftop solar systems and secures capital to fund deployments. The company finalized $200 million in tax equity commitments from three investors to support its project pipeline, following a $200 million non-recourse term facility it closed in March. The new commitments will back 123 MW of residential solar projects with a total value of $480 million, translating to systems for more than 17,000 customers. Vivint deployed 61 MW in the second quarter and indicated third-quarter deployments would be similar. Its second-quarter results showed decent year-on-year revenue growth and a significant drop in the company’s yearly loss from operations. Management framed the financing as evidence of continued investor support as the company prepares to release its next quarterly results.