{
  "docId": "019dd923-622c-750b-8b98-fa7fcd640a8d",
  "docSlug": "522270211ac4",
  "documentTitle": "Sunnova Energy International Inc. (NOVA)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Spruce Point Capital Management",
  "documentKindSlug": "activist-deck",
  "documentKindLabel": "Activist deck",
  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2020-09-29 00:00:00",
  "orientation": "landscape",
  "aspectRatio": 1.3333334,
  "pageNumber": 6,
  "pageCount": 91,
  "prevPage": 5,
  "nextPage": 7,
  "slideType": "executive_summary",
  "function": "diagnose_problem",
  "density": "overcrowded",
  "nDataPoints": 5,
  "notes": "The slide explicitly references a 'Porter's Five Forces Analysis' in the sub-header.",
  "elementsJson": [
    "headline_text",
    "paragraph",
    "bullet_list"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b98-fa7fcd640a8d/6",
  "deckHref": "/decks/019dd923-622c-750b-8b98-fa7fcd640a8d",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b98-fa7fcd640a8d.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-fa7fcd640a8d#slide-6",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "Sunnova Energy International (“NOVA” or “the Company”) is a residential solar financing business caught in the rising tide of solar energy. In reality, Sunnova is a specialty finance company with undifferentiated offerings that operates in a competitive industry facing secular headwinds.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-0397-72dc-a88e-d623bcd6d4e1",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.2,
        "w": 0.96,
        "x": 0.02,
        "y": 0.53
      },
      "kind": "list",
      "text": "As solar systems become more affordable, the industry is shifting from 3rd party ownership (leases and PPAs) where Sunnova realizes 96% of its revenue, to 100% customer ownership. Purchases with cash and loans allow customers to realize the largest savings. In the long-run, customers should favor the option allowing them to capture the greatest financial benefit. New entrants into the loan market, including Loanpal, continue to gain market share, representing 30% of new loans in Q1 2020 and 17% of all solar financing. Shifting a larger portion of financings through loans may cannibalize highly profitable solar renewable energy certificate (SREC) revenue. Losing the investment tax credit will further hurt the economics of Sunnova’s business. Even if the current 30% level is renewed, industry headwinds look to inhibit the Company’s growth.",
      "attrs": null,
      "subkind": "bullet",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "1251d65c-353f-4148-b145-31e90ce7d4e3",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.2,
        "w": 0.96,
        "x": 0.02,
        "y": 0.77
      },
      "kind": "list",
      "text": "Sunnova is a small player relative to peers. The merger between Sunrun and Vivint Solar creates the largest player in the industry, well-positioned to capture cost savings and compete more aggressively for new customers to achieve greater scale. Value proposition does not differentiate Sunnova from its peers: Customer relationships: any solar company offering long-term financing and servicing contracts can claim strong relationships. Asset ownership: Sunnova has $1.98bn in solar assets compared to Sunrun’s $4.64bn and Vivint Solar’s $1.85bn. Local dealer network: increases counterparty risk; independent salesforce would be expected to direct customer where they are paid the best. We have found several examples of concerning sales practices and other activities by Sunnova and dealer partners. Sungevity, another Energy Capital Partner investment, filed bankruptcy after claiming a similar asset-light business model, industry-leading customer acquisition platform and channel partner network.",
      "attrs": null,
      "subkind": "bullet",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "4d657661-e126-4e34-8e87-0acfae7b76af",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "share price: $5.00 - $8.00",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd953-0397-72dc-a88e-db07cc466147",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.35,
        "w": 0.96,
        "x": 0.02,
        "y": 0.17
      },
      "kind": "paragraph",
      "text": "Sunnova Energy International (“NOVA” or “the Company”) is a residential solar financing business caught in the rising tide of solar energy. In reality, Sunnova is a specialty finance company with undifferentiated offerings that operates in a competitive industry facing secular headwinds. We believe management masks its poor and unsustainable economics with potentially misleading and assumption-based non-GAAP metrics and aggressive accounting. Unlike its solar peers and other financing businesses, Sunnova promotes Adjusted EBITDA, which we believe is the entirely wrong metric to evaluate a business heavily dependent on consumer financing. This is supported by our conversations with a former Sunnova executive, and industry experts who shared our conclusion. Gross contracted customer value is highly dependent on management’s estimates which are based on limited historical data and should not provide investors with confidence. CEO William Berger’s biography omits his previous role at Enron, whose aggressive financial accounting and reporting led to its demise. In addition, CFO Lane obscures his tenure at Madison Williams, a bankrupt broker backed by two investors later charged with fraud. As growth slows and margins deteriorate, the Company’s cash flow profile continues to worsen. We believe the potential misconception of Sunnova as a solar business, as opposed to a financing business, results in sell-side analysts ascribing irrationally high price targets and support its extreme overvaluation. The upcoming catalyst of management’s lockup expiring at the end of September, combined with Energy Capital Partners continuing to liquidate its equity stake, will result in additional downside risk.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "8d5a5ed9-8f90-403b-bed9-d0cdde463192",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.12,
        "w": 0.68,
        "x": 0.28,
        "y": 0.03
      },
      "kind": "title",
      "text": "Spruce Point Estimates 70% - 80% Downside ($5.00 - $8.00/share) For NOVA",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "48d9f167-0cf9-4fa1-bdb7-6df93d55b0a4",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.03,
        "w": 0.5,
        "x": 0.02,
        "y": 0.5
      },
      "kind": "title",
      "text": "Solar Industry Trends Provide Significant Headwinds For Sunnova",
      "attrs": null,
      "subkind": "subtitle",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "00fa6061-93ca-4f0f-8393-d1af721b22c9",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.03,
        "w": 0.96,
        "x": 0.02,
        "y": 0.74
      },
      "kind": "title",
      "text": "Undifferentiated Business Model, Ill-Positioned In A Highly Competitive Industry Based On A Porter’s Five Forces Analysis",
      "attrs": null,
      "subkind": "subtitle",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "0f723d50-2855-4f84-bc08-e74094b10fbe",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [
    {
      "name": "Porter's Five Forces",
      "slug": "porters-five-forces",
      "agent": "Architect",
      "layer": "slide",
      "matchId": "8445f3d0-073c-4b8b-9bfe-2a6bdae3ee3d",
      "evidence": "This slide mentions 'Porter's Five Forces Analysis' and lists the five forces: Threat of New Entrants, Threat of Substitutes, Industry Rivalry, Bargaining Power of Customers, Bargaining Power of Suppliers.",
      "confidence": 0.7
    }
  ],
  "frameworks": [
    {
      "name": "Porter's Five Forces",
      "slug": null,
      "matchId": "f98051ee-2065-490b-a5ed-33967bab409c",
      "evidence": "Explicitly mentioned in the sub-header of the final section.",
      "confidence": 1
    }
  ],
  "arcBeats": [
    {
      "to": 9,
      "from": 6,
      "beatId": "473f3679-aa6e-43ce-af9a-a32030bd53aa",
      "arcName": "Problem-Agitate-Solution",
      "arcSlug": "problem-agitate-solution",
      "beatName": "Problem (Identify pain)",
      "beatSlug": "problem-agitate-solution-problem-identify-pain",
      "evidence": "The document identifies the problems with Sunnova's business model, including unsustainable economics and aggressive accounting.",
      "position": 0,
      "confidence": 0.8,
      "parentBeatName": "Complication",
      "parentBeatSlug": "complication"
    }
  ],
  "loops": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}