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Vivint Solar ‘turned the corner’ on financial challenges after raising $327M, analyst says

By Liesl Nielsen, | Posted - Aug 9th, 2018 @ 9:09pm

LEHI — Vivint Solar may have “turned the corner” on financial challenges, one analyst said in a report, after the Lehi company posted solid quarterly results Tuesday and raised $327 million in an arrangement that’s the first of its kind in the residential solar industry.

Wall Street analysts, including Joseph Osha, a securities analyst for investment banking and asset management firm JMP Securities, upgraded the solar company’s stocks after Vivint Solar’s second quarter results exceeded expectations, according to a report from Reuters.

“The business is clearly growing more slowly, but to give these guys credit, the (solar) companies left standing at this point are the ones that are really able to manage their businesses with an eye toward maintaining liquidity and sustainability,” Osha told Reuters.

And Vivint Solar CEO David Bywater also believes the company’s found a path to financial flexibility and sustainable funding — to the tune of hundreds of millions.

Vivint calls it a “multi-party forward flow transaction” that includes project-level debt, a levered tax equity partnership and the company’s first cash equity investment. In layman’s terms, that means the company has found a way to monetize something immediately that usually would take 20 or 30 years to show results.

Vivint allows customers to install solar through a third-party purchase agreement that doesn’t require money up front, then the customer can buy energy through the company at a discounted rate. However, it costs Vivint a lot to install the solar energy systems, and it takes a couple of decades to earn the monetary reward, according to Bywater.

The “multi-party forward flow transaction” allows Vivint to monetize a customer’s contract up front with the help of different partners.

“Traditionally, these different pieces of financing have come together one at a time,” said Vivint’s vice president of investor relations Rob Kain. “This (financing tool) brings a lot of money to the company to help us keep putting these systems on customers’ roofs.”

In fact, the $327 million gives Vivint enough cash margin for about 95 megawatts of future solar energy systems. Combined with other funding the company recently acquired, Vivint now has enough money to install more than 170 megawatts of residential solar energy systems.

The amount of homes powered by a single megawatt varies depending on location and conditions, but the Solar Energy Industries Association estimates one megawatt can power 164 homes.

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“The reason I’m so bullish about this is because this is a young industry that’s growing up. We are about being built to last … and this just sets us apart from the crowd with regards to financial stability,” Bywater said. “And you can do it, and it doesn’t impact the customer at all. The customer experience is the exact same.”

However, though analysts reacted well to Vivint’s reports, stocks did not react at all. The company’s stocks traded around the $5 mark the day of Vivint’s announcement — a significant increase, though, from several years ago when Vivint stocks reached a new low in the $2 range. But Bywater and Kain believe the stocks will work themselves out eventually and improve drastically.

“If we keep executing, the stock will take care of itself. Our focus is more on the day-to-day business and making sure we help our customers,” Kain said.

Vivint’s news, however, comes on the heels of some controversy surrounding the solar company, including a New Mexico lawsuit that accused the solar company of fraud and unfair business practices, as well as two other lawsuits that accused Vivint Solar employees of creating a racist and hostile work environment.

The company hopes, however, that this “turning point” analysts mentioned is the sign of a new dawn — at least in the financial arena.

“That’s super positive and a distinct contrast from the past,” Bywater said.

Liesl Nielsen

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