Market Data 
The 28-year-old data analyst had spent dozens of hours trying to better understand Sunnova Energy’s financial statements. He had downloaded one of Sunnova’s recent quarterly Supplemental Workbook data updates via Excel file from their investor relations website. He was frustrated that the read-only sheet clearly had dozens of rows and columns that were hidden from view and locked.
But he was inspired. “Copy and paste was not disabled. Big mistake,” says the analyst, who works for a firm with a large short position in Sunnova shares. He copied the entire spreadsheet into a new sheet, where he could now “unhide” the hidden cells.
What he found looked to be a more complete set of Sunnova’s financial statements, more granular in detail and line items. Hundreds of excel formulas connect data in the complete version with final numbers. A sheet called “Plugs” appears to represent required changes in value. There was no question of its authenticity; the file metadata shows it to have been created by Robert Lane, Sunnova’s former CFO, who resigned in May 2024. The last person to modify it was financial reporting chief Kat Scherer, who had even left notes in the file instructing users not to forget how to calculate the “total weighted average number of systems.”
“My thought was that someone’s getting fired over this,” says the analyst, who doesn’t yet want to be named because he is working with a whistleblower and is short Sunnova shares, which have fallen from $12 last September to 30 cents as the company teeters on the verge of bankruptcy. Houston-based Sunnova, which recently announced it would not pay interest on $400 million of its senior notes, is in negotiations with creditors over restructuring of some $8 billion in debt, some coming due as early as next year.
Like other solar companies, Sunnova faces an uncertain future, and has garnered particular scrutiny over $3 billion in loan guarantees from the Biden Administration’s Department of Energy to market rooftop solar in Puerto Rico. The hidden spreadsheet data could indicate that Sunnova had been overstating its solar system statistics and obfuscating maintenance costs. “In my opinion, and based on my own analysis, Sunnova is engaged in fraudulent efforts to drive up the appraised value of the solar systems in order to fabricate larger amounts of federal investment tax credits,” says the analyst.
Sunnova downplays the discovery, which anyone can still replicate by downloading the file from their website. A spokesperson responds: “The Excel spreadsheet you have is neither a ‘secret,’ nor does it contain data ‘hidden’ from investors. Rather, as exists at virtually all companies, it is an internal accounting document that contains raw data from Sunnova’s accounting system.” Sunnova further states that external auditor PWC recently signed off on their financials and internal controls.
However as class action lawyers and creditors prepare for the battles that bankruptcies typically bring, the hidden spreadsheets, if valid, could deepen troubles for the solar power company.
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Residential solar developers have very complicated financial statements because it’s not easy to finance small scale solar systems that require a big upfront investment plus complicated 25-year contracts with homeowners, then have to generate solar power for a decade or more just to break even. Developers offset that long payback period by milking federal green energy tax credits, which can amount to 40% of total capital invested and can be claimed almost immediately to offset taxable income. Sunnova over the past decade has raised billions in so-called tax equity, and billions more by issuing asset backed securities collateralized by pools of thousands of solar systems and their contracts. It was an easier business to finance back when interest rates were near zero.
Vultures are now circling Sunnova; KKR recently gave it an emergency $185 million loan secured by everything the company hadn’t already borrowed against. Oaktree in March bought up $400 million of Sunnova’s distressed corporate debt, trading around 40 cents on the dollar. Yet even those sharp pencils might be surprised by some of what can be found among the hidden data in the Excel file. The most intriguing new detail seen so far concerns how Sunnova categorizes its systems:
In its most recent presentation to investors, Sunnova reported 137,506 leased solar panel systems and 101,047 solar systems sold via loans, out of 441,151 total systems.
However, when we look at the more granular hidden data it shows something else — that 54,709 of the leased systems and 22,909 of the loan systems are not solar panels, but rather battery or “storage” systems, lumped in with the solar systems.
Why not just break out these 80,000 battery systems, which account for more than 20% of their total reported systems, rather than lump them together?
Shortsellers, including Carson Block of Muddy Waters Research and Jim Chanos have contended since 2022 that residential solar companies have sought to inflate the value of their systems. Now, based on Sunnova’s restricted data, there’s reason to believe they’ve been padding their publicly released “total systems” numbers by including lower value batteries (and even home security systems) as individual systems to boost unit growth and appear more valuable. This could help them raise more money.
Was Sunnova doublecounting “systems?” Batteries are rarely bought without solar panels. Should an existing solar customer who decides to add batteries be counted as one customer or two? Sunnova clearly decided on the latter if the hidden spreadsheet data is to be believed. A note in the spreadsheet from financial reporting chief Kat Scherer includes the instruction that all systems get added together to formulate plugs to make up “total weighted average number of systems.” It says: “Reminder: Beginning Q1 2021, include ALL customers (unique and non-unique) in these numbers and only show the total row.”
Sunnova denies any bait-and-switch, replying to Forbes that the “Plugs” columns in their sheet “show how data from our internal accounting system is aggregated to create the metrics we publicly disclose.” As for the note, it is merely “an internal reminder that Sunnova now discloses both the number of customers and the weighted average number of customers (the latter of which includes both unique and non-unique customers).”
Furthermore, says Sunnova: “With respect to the solar/solar+storage question, these two products are combined in the working Excel sheet to show the aggregate/total “solar energy systems” number, which is one way we show it in the quarterly workbook we share as part of the quarterly earnings process. The financials reflect all associated revenue, costs, etc. And we also show this total number broken down by the lease, loan, PPA, and cash. This is what investors are most interested in because the system (solar/solar + storage) regardless of configuration is the generating asset.”
Yes it’s complicated, says Prof. Emeritus David Larcker, of Stanford Business School, who co-wrote a paper last year teasing apart the risks inherent to the interconnected capital structures used by residential solar companies — with the objective of encouraging the boards of directors at these companies to take greater interest. Says Larcker, “Let’s unravel some of the expenditures. How many billions? What was the monitoring? Was there some reconciliation, was the money spent appropriately? The tax credit is especially complicated. It’s a tricky thing. If there’s a hiccup somewhere along the line it can have far reaching consequences because there’s a lot of these systems.”
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Access to this previously restricted data, and knowing how many battery systems Sunnova really has, will help investors shed light on what appears to be a dangerously rising trend of costs for operations and maintenance or O&M. These expenses are the biggest cost after buying and installing the solar panels in the first place. O&M includes sending out workers to fix damage from hail storms or nesting squirrels, or replace an inverter. It’s dangerous, technical work, largely done by the same teams that install the panels. But as demand for new panels dried up with rising interest rates and thousands of solar technicians have been laid off. This reduces economies of scale, and may be increasing costs in ways that would surprise investors.
What should O&M cost? Last year Kroll rating agency issued a “pre-sale” report on a new Sunnova asset backed security (collateralized by contracts on a pool of thousands of rooftop solar systems). Buyers of this ABS care a lot about long-term O&M estimates because those costs directly eat into cash flow available to pay their distributions. Kroll (which rates 11 Sunnova solar lease ABS issues and 12 solar loan issues worth $5.8 billion) figured that the O&M would cost $29/kw per year for systems without battery storage and $35/kw for systems with storage.
To put that into perspective, based on the hidden data, Sunnova has roughly 365,000 solar systems and at least 80,000 battery systems. The company reports total electric generation capacity deployed of 2.892 million kilowatts and average system size of 7.5 kw. Given that 82% of systems are solar-only, at the Kroll estimate of $29/kw that comes to $70 million a year in O&M (for the systems without batteries). For the 18% of systems with batteries, the estimated cost of $35/kw/year adds O&M of $17 million. That would give us a reasonable O&M total — based on Kroll assumptions — of $87 million per year.
And yet Sunnova publicly reports a much higher expense for O&M. In its 2024 10-k line item for O&M, Sunnova recorded an expense of $105 million. Sunnova also included a note in its 10-k stating that it had decided to allocate $56 million in O&M-related personnel costs to general and administrative (G&A), rather than O&M. If instead you add those together you get $161 million in O&M. That breaks down to O&M of about $55/kw per year, well in excess of the Kroll assumptions.
This matters to the whistleblower (who Forbes first spoke with for a 2023 story), and other short sellers like Carson Block of Muddy Waters, who believe that residential solar companies like Sunnova have obscured and reallocated O&M costs in order to make future cash flows to investors look higher – thus inflating the implied value of their systems – thousands of which collateralize each ABS issue. Sunnova’s G&A has exploded from $180 million in 2021 to $460 million last year.
This could also matter to holders of $6 billion in asset backed securities that pay Sunnova a fixed fee for maintenance. The company says that because the costs to the ABS are fixed, “normal maintenance and servicing associated with ABS transactions is included as an operations and maintenance expense.” Sunnova adds that “the ABS is thus unaffected by differences between anticipated and actual G&A and O&M costs.”
The whistleblower and his analysts point out that, according to tax laws, if Sunnova is covering excess O&M costs on behalf of the special purpose vehicles set up to control the ABS, then these SPVs are not actually “arms-length” and could perhaps end up being consolidated into an eventual Sunnova bankruptcy. According to FINRA bond data, the ABS issues do not appear to have traded recently, but Sunnova’s 11.75% corporate bond maturing 2028 recently changed hands at a depressed 42 cents on the dollar.
“Looking at who is exposed to this, it’s a pretty big number,” says Stanford Prof. Larcker. Tech giants with lots of taxable profits like Alphabet/Google for example, have been huge “tax equity” investors, putting up billions in upfront capital to help get solar systems built, and generating quick returns mostly in the form of transferable federal investment tax credits often amounting to 40% of the upfront cost of the systems.
It’s important that those systems are well accounted for. What tax equity investors want to avoid is referred to by numerous solar finance specialists as the Warren Buffett Moment — In 2019 Berkshire Hathaway had to record a $377 million tax expense to reverse tax credits it had gained through investing in DC Solar—a Benicia, California–based company that took in $912 million from investors like Buffett who thought they were buying into 17,000 portable solar-powered generators. Except the generators didn’t exist. Jeff and Paulette Carpoff, the husband-and-wife founders of DC Solar, are now doing 30 and 11 years in the federal pen, respectively.
Although distressed debt specialist Oaktree reportedly bought up $400 million in Sunnova corporate debt in mid-March, others are reducing exposure. That includes Atlas Securitized Products, a division of Apollo Global, which last month cut off a credit line to Sunnova and demanded accelerated repayment of $172 million outstanding. A recent SEC filing by Atlas warns that Sunnova will be in default on the loans unless it reorganizes its service operation “into a bankruptcy-remote business” by April 25.
Get ready for a “gut check,” says Larcker. Given last year’s bankruptcy and liquidation of SunPower, the cratering of all residential solar stocks, and the questions around Trump plans to kill some green subsidies, he says, “It’s going to be a nervous time for a lot of participants.”
Do you have any insights onto how residential solar company do their accounting? Found anything interesting in Sunnova’s supplemental spreadsheets? Drop us a line at [email protected]
