John Berger, chairman and chief executive officer of Sunnova Energy Corp., speaks during the 2019 CERAWeek by IHS Markit conference in Houston, Texas, U.S., on Thursday, March 14, 2019.
Aaron M. Sprecher | Bloomberg | Getty Images
The residential solar company Sunnova Energy took a beating this week as investors dumped their shares after the announcement of a stock offering plan rattled confidence in the company.
Sunnova shares plummeted 26.7% Thursday after the residential solar company announced a $100 million at-the-market stock offering program. Sunnova’s market cap declined by $382 million in the worst day for the company since March 2020 and the second worst day since its initial public offering in 2019.
CEO John Berger tried to reassure investors that Sunnova’s finances are sound and the company does not intend to sell its stock to raise capital anytime soon.
“This is just an arrow in the quiver just in case and the ratings agencies like to see it,” Berger told CNBC in an interview Thursday. “We don’t need to deal with the ratings agencies anytime soon, but it’s a smart thing to have — but we don’t need it.”
“I’m going to focus on generating our own cash rather than tapping into an equity, particularly something that’s now 25% discounted,” Berger said. Sunnova had a total of $494 million in cash as of Dec. 31, 2023, according to its quarterly report.
The announcement came after Sunnova posted a net loss that deepened to $234 million in the fourth quarter, compared to $62 million in the year ago period. Residential solar companies have struggled in the face of high interest rates that have made installations more costly to households.
Berger and Sunnova CFO Robert Lane described the stock offering as “good housekeeping.” Sunnova does not see a need to raise capital through 2026, Lane told analysts during the company’s earnings call Thursday.
Berger said in retrospect he would have waited on the stock offering plan: “Good housekeeping sure was expensive,” the CEO told CNBC after Thursday’s selloff.
Sunnova is also exploring asset sales and slashing costs using automation and artificial intelligence to keep the company’s headcount from growing, Berger said on the company’s conference call.
Solar under pressure
Sunnova is just the latest residential solar company to take a beating after its quarterly report. Its competitor Sunrun is down 22% this week after company posted another quarterly loss. SolarEdge has tumbled nearly 18% this week after issuing weak guidance for the first quarter.
Sunnova shares over the past year
The solar market faces an uncertain outlook this year. Investors had hoped aggressive interest rate cuts would act as a catalyst for the sector but that now seem less likely. Federal Reserve officials have made clear they are in no hurry to cut rates, with the market expecting the first reduction in June at the earliest rather than previous forecasts of March or May.
Berger does not see interest rates affecting Sunnova this year. He said the major utilities, which are also rate sensitive, are charging their customers more, which has allowed Sunnova to increase its prices without impacting demand.
“We have pricing power I’ve never seen this strong,” Berger said.
The CEO also addressed a December report that consumers have filed complaints in Texas alleging predatory sales tactics against the elderly. Two Republican members of Congress sent a letter on Dec. 7 to the Department of Energy calling for more scrutiny of Sunnova’s business practices. Sunnova’s stock dropped 16% after the lawmakers sent the letter.
“Whether our dealers did something or not, we typically have gone through and made sure that we’ve made good with the customer. In some of these cases, it’s difficult to find injury,” Berger said. The CEO said it is illegal to decline to sell to someone because of their age.
“There’s a lot of alternative facts that have been put forth in those cases, but it doesn’t excuse us from continuing to try to do better and we’re going to continue to do that,” Berger said.
— CNBC’s Pippa Stevens and Chris Hayes contributed to this report.
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