Q4 2020 Sunnova Energy International Inc Earnings Call

[music].

Good morning, and welcome to Synovus fourth quarter, and full year, 'twenty and 'twenty earnings Conference call.

Today's call is being recorded and we have allocated an hour for prepared remarks and question and answer.

At this time I would like to turn the conference over to Rodney Mcmahon ice President and Investor Relations at Sunoco. Thank you. Please go ahead.

Thank you operator, and good morning, everyone yesterday, we released our earnings press release and posted a slide presentation to the Investor Relations portion of our website, which will be referenced during this call. Joining me today are John Berger, Synovus, Chairman and Chief Executive Officer, and Robert Lane, Executive Vice President and Chief Financial Officer.

Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These include remarks about future expectations beliefs estimates plans and prospects.

Such statements are subject to a variety of risks uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements and.

Such risks and other factors are set forth in our press releases and filings with the Securities and Exchange Commission, we do not undertake any duty to update such forward looking statements. Additionally, during today's call. We will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a <unk>.

Substitute for results prepared in accordance with GAAP.

A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release I will now turn the call over to John.

Thank you Rodney and.

Good morning, and thank you for joining US we're pleased to report we closed out the year with another quarter of strong results, which allowed us to achieve our 2020 guidance objectives. This makes 'twenty and 'twenty. The second consecutive year, we have met our increased guidance targets demonstrating the strong forward visibility and predictability of our business even through nearly a year.

<unk> of the pandemic.

And the fourth quarter of 2020, we experienced record setting growth as we added more customers and any other quarter and the company's history and.

Eclipsing our record set just last quarter as we move through 'twenty and 'twenty. One we will continue to focus on optimizing recurring operational cash flow.

And our CF through exceptional customer growth stable unit economics declining costs on a per customer basis, and our declining cost of capital.

On slide three you will see the details of our strong operational results, where we increased our customer base and greatly expanded our dealer network.

We continued our rapid growth by adding approximately 29000 customers and 2020, which is a 57% increase.

The number of customers added in 2019.

This exceptional growth is fueled by our 435 dealers and sub dealers.

We will continue to power our differentiated low cost model.

We have nearly tripled our number of dealers over the past 12 months by selectively, adding 280 dealers and sub dealers and that timeframe.

This robust dealer growth is driven by the attractiveness of snowbirds business model and technology platform to successful establish entrepreneurs and the industry.

The benefits of becoming a <unk> dealer are more apparent than ever as reflected by the fact that nearly half of the 280 dealer and sub dealer additions in 2020 occurred and the fourth quarter.

On storage life to date, we've now performed over 1100 battery retrofits and increase of 226 from September 30th 2020.

Our storage attachment rate on origination decreased from the previous quarter, primarily due to the supply constraints and the energy storage system or E. S. S market as we saw demand greatly outpace available inventory over the past several months. However.

We are glad to report that we've seen the battery supply constraint subside over the last few weeks as battery manufacturers ramp up production and new SaaS providers and are the market.

As a result, our storage attachment rate has been improving over the last few weeks.

When considering how we have progressed and creating value with our storage service offerings. We believe a better metric is the storage penetration rate on our full customer base, which nearly tripled in 2020 to nine 2% we expect to.

Penetration rate to increase into the mid to upper teens by the end of the year on a base of what we expect to be roughly 200000 customers.

Turning to slide four we provide a summary of our 'twenty and 'twenty financial results, which are further expanded on slide five.

Our total customer count adjusted EBITDA, the principal and interest, we collect and solar loans and our adjusted operating cash flow were all within guidance ranges. Despite the unique challenges we faced in 2020.

While many companies retracted our guidance, we never wavered from the targets, we set even though we raised our targets just days before the global pandemic impacted all of our lives.

This achievement was made possible by our flexible technology enabled service business model and the quick response of our dealers to modify the way they do business, which allowed person over to not only survive, but thrive in this environment.

On slide six.

You will see both our gross contracted customer value or <unk>, and our net contracted customer value or in CTV are experiencing significant increases year over year.

This translates directly into shareholder value creation.

Using what is now a conservative discount rate of 4% and CCD increased from $1 2 billion on December 31, 2019 to $1 7 billion on December 31 2020.

This equates to roughly $17 per share as of December 31, 2020.

Which is approximately a 20% increase year over year, and a 29% increase since our IPO.

These increases and and <unk> per share clearly show that despite our toward growth, we are creating value for shareholders looking.

Looking forward, we expect <unk> per share to experience more gradual increases in 'twenty and 'twenty, one due to the Sun Street acquisition.

And we fully expect that trend to pick up as we anticipate and <unk> per share to increase more rapidly once the accretive nature of the sensory acquisition fully takes hold and 2022.

Please note, both our <unk> and N CTV metrics represent only our existing contracted cash flow base after MSA piece, which.

Which we collect and used to service customers and.

And after payments to tax equity providers.

It excludes all future contract renewals and assumes we sell no complementary products or energy services to existing customers.

And it assumes no growth of our customer base.

While these items are not reflected in our contracted customer values. They do have a significant value and will become more meaningful and snow, but as the number of services sold per customer growth.

And while a discount rate of 4%, it's the lowest rate, we used and our contracted customer value calculations, even that rate assumes a higher cost of capital and what the market is currently reflecting given the fact that our latest securitization achieved roughly a 2% cost of capital on the fully burdened cost stack.

I will now turn the call over to Rob to walk you through our financial results, our recent financing activities and our guidance in greater detail.

Thank you John Slide eight shows the period over period changes and our key financial performance metrics year over year, <unk> revenues and adjusted EBITDA are up 22% and 23% respectively. When.

When viewed together with the principal and interest we receive on our solar loans are adjusted EBITDA and P&I increased 44% year over year, which compares favorably to our 37% increase and net customer count.

Slide nine summarizes our recent financing activity.

In 2020, Sonoco raised over $2 billion, and new financing highlighted by $800 million, and new Securitizations and $415 million and new tax equity funds multiple expansions of our third party operated warehouse facilities and a new $60 million purpose built loan facility. We also raised.

$339 million and equity and convertible debt, the latter of which half of this week all been converted to common stock.

Additionally, while we have been raising the capital to grow the business. We have also been paying down previously issued securitizations to the tune of $77 million and principle in 'twenty and 'twenty.

And our securitized debt is structured with a much shorter term compared to the average contract life of our service offerings, which leads to heavy amortization on the front and.

This results and a significant increase in shareholder value as a securitization ages, which grows both in <unk> per share and our ocs metrics, we expect paydowns to further increase this year.

There is and increased appetite for the low risk long term utility like cash flows we generate.

It is more subtle and this is something which we can take a bit more credit for is the way in which investors are appreciating and rewarding the strong underwriting criteria credit performance corporate balance sheet and the great customer service and over provides regardless of contract type.

For example, just last week, so and Overclothes on its first loan securitization of the year.

Transaction was sized at $189 million, so opening bid interest of more than 12 times the opportunity available to investors and achieved an industry, leading 2.08% weighted average cost of capital, including its a tranche, which priced at a one 8% coupon.

And that is the best the industry has seen to date hands down.

Slide 10 puts this latest securitization success and contexts. So Nova has issued each securitization since its first ABS and 2017.

Each success and securitization has yielded a lower weighted average cost of capital than its predecessor as a result, we've been able to drive down the weighted average cost of debt since our first securitization.

The current weighted average cost of debt represents approximately 100% of our fully burdened cost for each new customer as represented by our recent securitization.

This means and as we achieve positive our ocs and the corporate capital. We require is a small portion of our working capital.

Because of the ITC extension and late December we did not need the corporate capital for Safe Harbor and are therefore comfortable with our current liquidity. Despite our significant growth rate and pending acquisition of sundry. However, we will be opportunistic with regards to corporate capital and we will look to maintain our long term debt to asset ratio of 55.

And to 60% measured over several years.

Turning to slide 11, and the reason, we retain our residuals and preferring not to sell off our cash flows is to flow value to the corporate balance sheet to capturing more margin to loan payoffs and fewer defaults right now our most punitive securitization in terms of both interest expense and amortization sweep is.

2017 dash one so one of our first steps will be to put those assets into a new securitization market permitting by the middle of this year.

This will allow us to refinance and re securitize. This derisked pool of collateral while dramatically lowering both the interest rate and the amortization sweep. We expect this first step and refinancing to further increase our ocs.

We are also working with our lenders to modify our warehouses to reflect both the increased quality of our asset credit metrics and the demand from the securitization markets as we look to our new Securitizations. We are working to increase the advanced rate on the investment grade tranche, primarily by continuing to focus on customer service securing customer payments.

And increasing loan payoffs as we grow and mature so nova intends to continue methodically directing more and more cash flows to the balance sheet, we intend to continually thick and these cash flows by incorporating structural improvements to our securitizations and we.

We believe this will put us in the best position to be able to issue a green bond within the next 18 months.

On slide 12, we provide additional color around unit economics for the full year 2020, our fully burdened unlevered return on new origination was eight 7%, while the weighted average cost of debt from the three securitization free price last year, including our June securitization and helped reopened the market was $3.

6%.

This resulted in a five 1% achieved spread in 2020.

Our fourth quarter fully burdened Unlevered return was nine 7%.

We think a great deal about what the proper metrics are for this business as we have discussed in the past we used a number of legacy metrics that can become misleading when applying numerator and denominator that do not match up well when costs are addressed without any context as to the true return on investment.

And that is always befuddled bus is net system value or NSP, often expressed and a per watt basis.

As we have mentioned in the past we feel this metric is increasingly less useful to investors, especially as the numerator expands to include such items as batteries that are missionary kilowatt hours and items like load management hardware and new roofs that have no official energy value.

Loans present, another issue altogether as the net system value metric does not properly capture the repayment rates and therefore loan growth and accurately decrease and SP.

And and other factors such as significant differences across states and Standalone storage and secondary generation and neither NSV per system, nor NSV per watt provide investors with the insights that might have existed in a single state solar only lease and PPA only market.

And therefore, we will and on a strong NSV showing and the fourth quarter and discontinued the calculation and disclosure of this metric going forward as we believe that disclosing the fully burdened unlevered return provides much greater insight for investors as to the value creation per dollar invested.

On slide 14, we are raising our 2021 guidance, we now expect customer additions of 55000 to 58000 and the <unk>.

Primary driver of this increase is approximately 9000, new customers, we project to add to our planned acquisition of Sun Street.

This represents nearly a 100% planned increase in customer growth compared to 2020.

At the same time, we expect total services per customer will decline slightly as the existing Sun Street customers on average have received fewer services and synovus legacy customer base.

We expect services per customer to rise again, once we have an opportunity to offer the full suite of synovus services to both existing and new Sun Street customers.

We expect the financial uplift from Sun Street to really hit its stride in 2022.

Nonetheless, we are also increasing our 2021 adjusted EBITDA and recurring operating cash flow guidance due to a higher growth deleveraging higher than expected cash flow and the acquisition of Sun Street.

We are moving the midpoint of our Oc a forecast to breakeven and believe we are and an excellent position to be potentially our ocs positive in 'twenty and 'twenty, one and fully expect significant <unk> growth and 2022 and beyond.

We are maintaining our guidance on the principal and interest received from solar loans and solar loans are not generally sold and the new home market and we are maintaining our guidance range for adjusted operating cash flow or <unk>.

Although we do expect the increase and adjusted EBITDA as well as our extremely strong interest rate on our most recent securitization to accrete to Mcf. We also expect to increase the advanced rate on our warehouses, which will increase our working capital interest expense as the stronger borrowers should enhance our liquidity. We believe this is a.

A prudent move and this interest rate environment.

We expect to spend approximately $30 million and integration and transaction costs on Sun Street over 'twenty and 'twenty, one and 2022.

We will closely monitor these costs and be fully transparent with their progress going forward. These expenses are included in our liquidity forecast.

While the addition of Sun Street is moderately accretive to 2021 financial metrics, we expect to see a more material impact in 2022.

<unk> 2021 will be a partial year of ownership and it will take some time for the impact of customer growth to manifest and the financial results, but we believe that scaling the business, keeping now and cost and adding some street will result in a 75% increase and our 'twenty and 'twenty two adjusted EBITDA plus the principal and interest we receive on solar.

Net loans compared to 2021.

Further we are maintaining our year over year increase and customer growth of 40% for 'twenty and 'twenty two over our revised 2021 levels.

We are highly confident and our ability to hit our 2021 targets just as we did in 2020 and 2019 the nature of our business provides excellent visibility, which is reflected and the fact that approximately 82% of the midpoint of our 2021 targeted revenue and solar loan P&I are already contracted through existing.

And customers as of January 31, 2021.

Based on our forecast, we expect to capture approximately 15% of our adjusted EBITDA and P&I and the first quarter of 2021, increasing to 25% and Q2, 30% and Q3 and 30% and Q4.

We expect our customer additions to occur more towards the back half of the year with approximately 30% of our forecasted customer additions weighted to the first half of the year with the balance over the last six months.

This was primarily due to the timing of the Sun Street acquisition, the battery supply situation and the Onboarding of new dealers and the first half of the year.

Our customer base and business model is expected to continue to produce industry, leading operating leverage. This was reflected by the fact that our adjusted operating expense per weighted average customer declined by just under 10% and 2020. We expect this metric to continue to decline on a per customer basis, even with the meter replacing.

<unk> cost of just over $10 million, and 2021 and $9 million in 'twenty and 'twenty, two and total we expect to reduced our adjusted operating expenses per customer by an additional 25% between 'twenty and 'twenty and 'twenty and 'twenty two even after updating our forecast for significant increases and growth in 2021 and 2020.

Two.

I will now turn the call back over to John.

Thanks, Rob last week, we announced a definitive agreement with <unk> Corporation, one of the nation's leading homebuilders to acquire Sun Street, the residential solar platform.

In addition to our acquisition of Sun Street, We will also become law and <unk> exclusive residential solar and storage service provider for all new home communities across the country.

This all stock transaction and partnership will position Sonoma as a market leader and the homebuilder space as well as a leader and the development and management of micro grids.

Slide 16 through 18 and provide an overview of the acquisition partnership and Sun Street itself as well as a summary of the advantages of the agreement.

The three main reasons, we acquired Sun Street were to significantly increase our growth both in new customers and through the up selling of existing customers.

To reduce cost per customer more quickly.

And to build a partnership around what we see as the ultimate endpoint for our industry micro grids for large scale communities.

Beginning on slide 20, you.

You will see how energy options for homeowners have evolved over time from the traditional energy service model reliant entirely upon centralized electric grids to.

To the new energy paradigm of distributed solar and solar plus storage and.

As more energy technologies converge and the home.

Residential solar and battery storage and energy management are quickly transitioning from being destroyed it product sales to our managed integrated technology service from Sonoma.

By utilizing the latest technologies and solar storage and secondary generation and demand control, we're returning our customers' homes and to partially or even fully self sufficient nano grids.

Whereby our customers will no longer need to solely rely on centralized power to power their lives.

We are aggregating these nano grids and to what we call the Sonoma and network. This network will create value for consumers, so nova stakeholders and even the centralized grids.

On slide 21, and 'twenty two.

You will see how we plan to scale. These nano grids to deliver grid services and and ultimately into micro grids to deliver consumer grid and community value.

As we develop these community micro grids.

We will be able to provide even more energy savings energy resilience and energy independence.

And example of grid services is our recent clearing of 85 megawatts and the ISO new England forward capacity auction.

The largest deal and our industry's history.

Our ability to wind capacity and a competitive auction with the largest aggregation of distributed renewables to date demonstrates our commitment to leading the energy transition and the region.

More importantly, <unk>.

<unk> is looking forward to supporting ISO new England on their path to a clean resilient power system, while providing homeowners with the affordable and reliable energy they deserve.

Overall, synovus commitment price debt nearly $3 per kilowatt month across the region, which.

Which translates into a first year value of approximately $2 million and approximately $38 million of gross value across the 20 year term, assuming similar pricing and cleared megawatts.

This win is a convincing demonstration of our growing scale and the ability to create long term value per shareholders with the software and services that make up the Sonoma network and platform.

We.

Main firm and our conviction that the transition to distributed solar plus energy storage technologies will be one of the most significant events of our lifetime and we are proud to be at the forefront of bringing these energy solutions and opportunities together for homeowners to create a cleaner and more resilient new energy future.

<unk> founding vision was to be amongst the world's first and largest wireless power companies.

Where we would create value for our shareholders, our customers and our communities, while making a positive and substantial impact upon the world by redefining the way people source and use energy.

And as you can see.

We are bringing this vision to life through efficient execution and the build out of our energy service and software platform the Sunoco network.

Okay.

And as demonstrated by last week's energy crisis.

Here and our home state of Texas.

Time for a better energy service and distributed energy service offerings is now.

We feel strongly that the current discussion shouldnt be solely centered around renewables versus fossil fuels.

It should be about the power of decentralized generation and services and how we can bring homeowners the most affordable sustainable and reliable energy they need.

The energy paradigm is shifting from being highly centralized and more decentralized.

And eventually looking more like the Internet does today.

Instead of having 100% centralized resources and control and.

Intelligence is pushing to the grid edge with endpoints, taking on generation energy management and grid support roles.

U S power industry is heading towards a hybrid of centralized and decentralized.

That will become more durable more reliable or decarbonize and more personalized to the consumers. It serves.

Whether it's wildfires in California Hurricanes in Florida are winter storms in Texas now more than ever it's clear the way, we power our homes and businesses must change.

With that operator, please open the line for questions.

Ladies and gentlemen, and order to ask a question. Please press star one on your telephone keypads and again to ask a question. Please press star one on your telephone keypads and we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Brian Lee from Goldman Sachs and company.

Hey, guys. Good morning, Thanks for taking the questions I hope everyone's doing well out there and Texas.

In the.

And the guidance here John.

9000, and I think you mentioned.

Customer additions coming from the Sun Street acquisition here and the 'twenty one guidance so.

Two parts on that it.

It would imply there is $2 3 million.

Two to 3000, new customers that are just organically being added to the guidance here on top with the Sun Street.

Accretion, so just wondering and thats about a 5% to 6% and.

Growth versus the prior guidance, what's driving that more bullish view here, even outside of Sun Street, and then the second and final question on guidance is.

And the 9000 and Sun Street, that's about it.

Accounting for three fourths of the year since you don't own it for the entire year. So the run rate is maybe 12 13000 customers a year is that the way we should think about the run rate heading into kind of a full year potential and 22 impact I guess with some growth on top of that.

Hi, Brian Thanks.

Both of the your calculations are correct. So in terms of the the first what's driving us.

Dealer and sub dealer growth rate, obviously was tremendous and we've been talking about it for the last couple of quarters Force.

Foreshadowing that we thought that the fourth and the first quarter would be quite significant we were right and we're more right than we thought.

And so we see and increasing number of contractors coming onboard and being dealers with us and sub dealers.

The other is that we are increasingly offering new technologies, we talked a lot about storage, we are seeing that loosen up quite significantly we see.

New providers coming into the marketplace and phase, we made that announcement and the last year acquiring.

And that making that first purchase solar edge is coming to market and a few months as you know so there's a lot happening <unk> got great new products coming out. So there's a lot to sell these customers and I think thats really what will you need to focus on more and more is how do we go back and upsell these customers more and more energy services and.

It is becoming very clear to me.

And that's not fully reflected in our back half and certainly into 2022 that these other services such as and products such as load management set.

Secondary generation.

All of these things coming together are going to provide a lot more growth on a per customer basis to both our net new customers that were coming in with these new dealers and then also upselling. These new customers and that was again, a prime driver for the <unk> transaction and buying Sun Street, we are getting a ton of.

New customers to run through great leads and upsell batteries low control EV charging and secondary generation by Gen sets.

There is a list that keeps growing and we should have all of those secondary technologies in place by next year, if not most by the end of this year.

The next is on Sun Street, Yes, we fully expect to be very clear about this we kept 40% in as a relative conservative for 2022, but it is off the new base, that's roughly about 100% growth from last year and so yes, we that's the right way to think about Sun Street, but.

We expect that business to pick up as we mentioned on the Sun Street call.

And that we expect new homebuilders come onboard as well to further drive the growth and that platform.

Okay. That's great and then maybe the second question you mentioned the dealer that when I was a big number here and <unk>. It sounds like it's going to be a big number and <unk> as well.

So the 165 dealers you added that's about more than five times the previous best quarter here, you mentioned technology, but beyond that and.

The other drivers as to why you saw the huge uptick here and <unk> and Youre seeing more momentum and then also any sense on kind of mix whether its gi.

<unk> fees or size of dealers or maybe if you can also.

Touch upon the exclusivity of some of the new deal dealers if you have that.

Information at hand.

And the new adds and <unk> here.

Yes, certainly in terms of sizing it it's been a mixture some very large ones. Some mid size and then some smaller ones that are growing at obviously, a much faster rate coming off a lower base, if you will and and some of the sub dealers being added to some of our large.

Wholesale dealers and in terms of the regions.

It's been across the board I would say that primarily and the west we're seeing a huge amount of market share pick up there.

The interesting thing is that we can now say that we will launch and a number of states at least 10, new states this year.

And that's going to be primarily and the on the east coast and and in the Midwest.

We see a lot more demand there and then we had expected even towards the end of last year. So we're seeing a broad basing of growth. If you will across the board. That's also going into the storage attachment and by the way we continue to see a lot of interest and storage and markets.

Like Texas, Obviously has got just and the last few days include.

Including last night, with our highest ever and a single day.

Credit acceptance in terms of number of customers and our company's history.

And a lot is driven by Texas, there is a huge amount of interest and storage generators anything as yet and this seems I think is that makes sense right that this is the solution. We are the solution that people are looking for instead of politicians bickering about who did what.

And to cause the catastrophe what fuel didn't show up.

Of the 2017, ABS refi, you're talking about here and Q2, it looks like that was a 300 million dollar deal or so Don out of whack over 5%. So.

Maybe a 300 basis point improvement given where you just did the last one and how much more capital and cash flow.

And you see from from that if you can execute similar to what you just did and February.

Yeah. Thanks for the question Brian.

There's a little bit more art and I mean, when we first book those assets and those are some of our oldest assets we had.

We have some puts and takes and there are there are production estimates are much better now than they were there will probably gonna receive the ads.

A million dollars in there before we take it to a market, but I think we're more keyed remembers that the advanced right. There was so much lower I mean, our entire advanced right for that securitization is basically what we did in the investment grade or.

Or the a tranche advanced right now.

And the sweep is also much more punitive and that securitization. It's as you know the.

The final trance, usually has a very heavy sweep of any excess cash flows after scheduled amortization and interest payments and been made and the securitization.

It's usually about 75% that one has a 90% sweep on it so we expect to pick up cash flow, there and with the reduction interest rate and yes, we're thinking about the same thing and that you are about those 300 basis points.

Possibly more given just how strong the demand is and frankly.

We're crawl really gives the biggest penalties is in the first five years and some of the assets life, that's where it tends to pack the default. So it should be viewed very much as a D risks asset class too.

To call. This is includes assets that have gone through Maria where we've been made holes and includes includes really acids, where we have some of our longest most.

Most loyal customers. So we expect that this can be a very strong securitization when.

And when we ended up taken it to market.

Alright, thanks, guys and pass it on.

Thanks for.

Your next question comes from the line of Joseph Alicia and.

Peace Securities.

Okay, and then can actually high on free Joan and I. Appreciate you taking that question. This morning and wanted to first just kind of touch back on and say Patrick understanding that yeah patterns and price guide to return to and a little bit more than a normal level day any any color you can buy it on how you see that and the next corner too as well.

Well as per.

<unk> next year and went to U E bring on that new customer base with the transaction.

Yes, certainly.

It's moving up quite significantly quite quickly back to where it was we're not all the way back there, but I do expect that to happen over the next few weeks and.

And I'm also seeing a lot of.

Dealers get it.

And that people need storage I can tell you again referencing back that catastrophe last week here in Texas and.

<unk> and more people are turning and and soon and saying, Okay I get why customers because I want it myself or want storage.

And so I see a point here, where storage could really accelerate we're starting to see some signs were even and markets.

That I wouldn't have guessed have a very high storage attached right. The dealers are getting very good at.

And making sure and communicating effectively to consumers about what that and.

Battery and that storage service can do for them and and they're picking it up so I wouldn't be surprised if we end up going into 2022 and is substantially higher than repeat that storage attachment ray or at least to be able to talk towards that and 2022 and I think part of that is I wanted to foreshadow.

Is our penetration rate on storage.

On a base of 200000 customers maybe more at the end of the year, we're projecting that to be the mid to high teens, that's a pretty it's a very significant growth rate on the storage side of things I also can tell you that that extends into secondary generation as well such as Jen sets that market is on fire.

Simply the manufacturers like <unk> simply cannot make them fast enough.

And I see a lot of demand and a tremendous amount of demand and we're going to we're going to.

Take a piece of that market as well and a large piece and incorporate jen sets and with our solution offerings and possibly fuel cells with our deal within face.

And the fuel sorry were testing the fuel cells and the field. So we see a quite a strong market for the storage and we're quite happy to see a lot of.

Providers come to the market, because we need to supply to meet the demand.

Okay, and I'm offering for me and just kind of wondering when you look at that the existing customer base with that and are transaction. When you look at it kind of ramping up at number and services per per customer and just kind of how you see that trending and the and the next year and it would be helpful. Thank you.

Yeah. Thanks so.

Look we've got a lot to do we've got a lot of opportunity we're gonna take a.

North of 40000, and I think 46000 customers that are currently exist about 31 32000 of those are under lease agreements and turn.

Agreements and we're going to go to them because none of them have batteries and we're going to be able to sell the batteries from and so low controlled <unk> looking at EV charge and coming on a little bit later as well and so we see a tremendous amount of opportunity just and those customers and then we have 250000 customers and counting.

And our customers that never bought even solar and we're going to upsell them plus or lead flow is going through the roof. A lot more people are attracted to this and over brand. We're getting a lot of partners coming through and were feeding those leads as fast as we can do our dealers, which is another reason I should've mentioned and earlier that more and more dealers are showing up is.

We have a lot of leads and more and more are coming and it's not a small increase I expect to double triple or even more than that and we'd flow.

This year from last year, and so all of that is giving us a very strong opportunity to up sell these new customers that are coming and both the existing base and the potential basics coming with our friends over and <unk> and that is of course. In addition to what we already have and what we're doing and up selling our existing customer day.

Race of roughly 100000 customers now so.

A lot of a lot of work to do and a lot of opportunity and we're going to get after it.

Great. Thank you.

Thank you.

Your next question comes from Alright, Lee from B M.

<unk>.

Hey, good morning, Thanks for taking the question can you hear me.

Absolutely and good to hear Ya.

Yes, I just wanted to ask just on the storage try and you're talking about you know increase demand from consumers Cosmos.

Cos multiple market for you might not have historically seen red the solar for instance, like Texas, Florida et cetera.

Would you say increasingly and many market storage is becoming.

Anchor product for the broader sale of called color plus storage and and trying to the home is storage attach potentially and not even the right way to think about it and these markets.

I don't think we're there yet I think we're going there fairly quickly.

And.

I would expect to see that over the next couple of quarters again, we're seeing a lot of dealers understand and and finally get on board and say, Okay. I've got this is what consumers want.

And we can make some more money here, let's go do this.

It's hard to change people don't like to change you have to change your operations the bigger the dealer. It's it's a really involved process and so I understand.

At the same time. This is what people want this is what they demand. This is a much better energy service. So I do think by 2022 next year.

And we will have and.

And increasing a large number of states that that will absolutely would be the case as of now we do have 100 per cent attachment rates and all around and and markets and we continue to see the attachment rates and areas that experience.

And have experienced more recently natural disasters, like Florida, Texas, California, with wildfires to have their rapidly rising attachment right and and interest from consumers as well.

Got it and on the 10th Street acquisition and <unk> partnership.

Could you just talk about your expectations around increasing M. C. C V from 14 K per customer to 18 to 20 K per customer by 2025.

This acquisition and.

Ah celebrate that and how do you think about the strategy and timing of those up so acquisitions start ups opportunities post acquisition clothes.

And certainly so we do see and that is primarily if not all driven by upsell opportunities as I've been speaking about with the stores that you just asked about secondary generation load management EV charging and some of the other software services that we're gonna be able to provide either we do provider will per.

<unk> and and not too distant future to our customers and so we do see that increase coming as I just mentioned.

And answering hillary's question.

We will immediately get on as soon as we close the transaction with the customers that are coming from San Street, and so that will be something that will help to start to see in the back half of the year, certainly and 2022, we see the increase and.

And and number value if you will per customer.

The other part of that is the Unlevered returns you'll notice it was a pretty decent jump.

And and our in our margins.

Those are fully burdened and.

And we do expect to continue to see a decent amount of strength, there and particularly I think that's interesting as it relates to the cost of capital dropping so much and I'm happy to answer questions about that because I know, there's some concerns out there from the rise of the risk free rate and so forth and and put a lot of those concerns and proper context.

And and answer them, but we do expect to and continue to see us providing more and more scale and that's the other thing that sons free gave us was more of the ability to scale, our operations and drop our costs and therefore increase are fully burden on leather returned so any which way you look at it margins are pretty strong and we'd like the trend.

Got it one last question for my and all that and I'll pass it back to to Q here could you just talk about what else is needed to pursue further grid services beyond.

And your seapower partnership with hotel.

Power markets.

What would you need to be able to directly contractor utilities and <unk> and.

And are there any potential software partnerships that you're engaging and discussions here on.

Well, we don't want to talk about the software partnerships, but yes, there are and certainly at the end of the day could incorporate that as part of our software platform as well, but most likely we would partner and and the next year or so.

But that's that's not as.

And necessary and it's certainly something that will be a part of what we do but right now we have a number of transactions that we are working on and that we expect to announce over the coming months.

Per successful and winning those which we do expect so so there's not a lot and we need to add right now other than we need we need more people.

We are growing quite rapidly we're building a great team and looking to have a lot of and.

Excited hardworking folks to come join us and have a family, but other than that we've really got a strong platform and just continue to build on it and the customer base that we have is fantastic.

And as we have a higher and higher penetration rate of storage that customer base is a lot more valuable to folks like new England, and <unk> and other independent system operators and utilities.

Got it thank you.

And the next question comes from the lineup Phillips from Roth Capital Partners.

Hi, Rohan and thanks for taking my questions.

First one is on.

A guy guidance when you think about your and non son Street growth and 21.

And you look back at your Geography's for Q4 20.

Uhm.

We saw tremendous growth and Puerto Rico, and California, but a lot of other geographies, where it and states were flat obviously due to COVID-19, but when you think about the nonsense regret and.

This year do you expect Puerto Rico to continue to grow with that clip.

And can you talk through also.

The attach rates that you're seeing and Puerto Rico, and California's specifically thanks, Sean.

And so yeah first of all we do have 100 per cent attachment right and Puerto Rico, we haven't heard per cent attachment and Hawaii and pretty close to that if not that and Guam side Pan.

I would tell you that the way that we conservatively count customers again caution this and the past is is that we do break out by state and no one else does where state R. U S territory and that can give.

And give you the information that I think you and and others would like and we're happy to provide that but be very careful about looking quarter over quarter trends or even six months over six months trends it can be very.

Deceptive either way and one of those is is that we had a constriction and battery supply and the third quarter. As you will know that started to loosen up somewhat in the fourth quarter and therefore, we got the batteries and we're able to put these customers and service. So those sales were made.

A longtime prior to that and the earlier part of last year and as soon as we got batteries where to put them and service, we still have some of that and and the backlog. So that tells you again when we forecast out to go answer that question is we have a tremendous amount of backlog already sold that in and our.

Editors definition of a customer would already be a customer we don't count it until that customers paying us and and and service and so things like battery supply issues can move a customer becoming a customer and our metric from one quarter to the next and that's exactly what happened with Puerto Rico, and you'll probably see that again and Q1 here until we get that that backlog.

And the battery customers kind of caught up if you will which we expect to do by next quarter.

Great. Thanks for the color and also thanks for the detail on the on Slide 12 for the you did economics for full year of 2020. Looking ahead do you expect to continue to provide that color perhaps on Ah.

Truly 12 months spaces, and how do you expect that fully burdened unlevered returned to trend and and maybe and you alluded to this and the prior answer or.

And so the private question, but ultimately where does that.

Full year spread implied spread trend given with.

And you're given were rising rates are going.

Or how rates are rising and.

Offset by the production and Premium's just talk through that slide a bit if you can.

And you look ahead basis. Thanks.

Certainly Phil and thanks for noticing and pointing that out.

We will provide that and we will provide that and and a trailing basis as well as and and we'll continue to update that we do expect that the fully burden Unlevered return again, as we're getting more and more scale and our costs.

That will probably stay in the range that it's been of roughly eight and a half to maybe 11% somewhere in that range.

That's our expectation obviously, we'll do everything we can to continue to push that up and we are getting as reflected and they're better and better.

Terms on the tax equity marketplace and that is giving us a lower cost of capital. So we we we see all the trends and the margin staying strong at this point in time and.

And we fully expect that to continue and will continue to provide that visibility and I just want to point out that between the recurring operational cash flow and these on fully on fully burden Unlevered returns everybody is getting a complete view of every penny that spent.

Complete view and so there's nothing else that goes and some other metric or is not mentioned and and put in the corner someplace on on non-GAAP metrics. This is giving you a full picture.

<unk>.

Answer your question on the interest rates side, I think I think it's very materially important there's a loss a lot of misunderstanding here. So I wanted to set the record straight I do have several points here. So this will be obviously a reported phone call that y'all can I'll play back. So you don't have to take notes but.

The majority of the value that we achieve as an industry is on the risk premium and.

And our view, we still have even with that record securitization that Rob mentioned and they're opening comments, we still have at least 100 basis points of excess risk premium left and that's our long term view on this asset class and we got a significant amount of cushion.

Again, Rob mentioned this or that is heavily front and waited and therefore, we're paying our debt off at a very brisk pace.

And here's where I don't think that there is a full understanding are weighted average life of that Ah that a term of that is nine to 10 years, it's really closer to nine.

When you look at our.

Term securitisations once we refinance the 17, one we're not gonna have any that do for over six years. So we've lost a lot of this that in and it is heavily front and waited so looking out towards a 20 year treasury or 30 year Treasury is not correct. It's more of looking at somewhere and the five to 10 year range.

So when you when you term securitize like we did and that five to seven year range, we are locking and terming out our cost of that for the vast majority if not potentially all of it given the quickening payoff right, especially on our loan Securitizations as that one we just did a few days ago, our customer value is essentially index.

And to hydrocarbon and centralized power I don't think that's fully understood. So is inflationary pressures if they were to continue to push up like the price of oil is pushing up the grid power rates and Hawaii for instance, more and more customers have a huge financial incentive that's growing to pay us and therefore, that's why our delinquency and default rates were it's part of.

The reason continue to plummet continue to improve and so we're getting more and more cash again to pay this debt off faster and faster growth is more important to the equity than any sort of move and interest rates, even going from a 10 year risk free of 60 basis points or so to roughly about 144 basis points of this morning or even higher.

I just want to point that out look at the MLP market and in the decade before last as an example, this and increasing more of our revenues are earnings are coming from services, not necessarily financing and and I'll point to that.

That grid service contract is not baked into our and lender unlevered returns or any of our forecasting and that's additional cash. We also are getting additional services off customers as we've gone through several times payoffs are accelerating on our on our debt Rob made reference to that we expect that to continue to accelerate as we move through the year.

We can raise prices that and industry as we move forward in time, if that risk free materially goes up.

And then we hedge the interest rates and our warehouses. So actually as we've been hedging there is a possibility that we could have additional cash flow upfront. We don't plan for it last year, we had some cash flow that went out because we broke the hedges you pay those out as you do the term securitization. So it's not all bad for us as rates move up it certainly not.

Any sort of catastrophe and some others have referenced and I would also make mention of this.

The if.

If you look at the spread between the five year and the 10 year Treasury. It looks a course that 10 year treasuries moved up but are referenced right on the spread of that securitization was 60 basis points and now the five year is 67 basis points. So even if you took the tenure out you are talking about 77 basis points.

And we printed and almost a 2% were discounting at a 4% we've got a massive amount of headroom here that we're not putting and any of the calculations and mainly due to conservatism and concerned about rising rates, we have plenty of room for rates to rise faster and certainly will cause a lot more impact and other companies and other parts of the economy.

First and therefore, I think would would put a cap on on rates before we have and material issue and impact here and it wouldn't surprise me to see that risk premium come in over the course of the next few securitisations, both ours and our competitors and the next few months. So we've got a lot of cushion built in.

And.

Great. Thanks for all the color.

Okay. Thank you.

Mark from J P. Morgan.

Yes. Good morning, Thanks for a second and our questions. John that was that was extremely helpful. Thank you.

I I just had one.

One question and remaining and it's regarding the Safe Harbor inventory can you just remind us how much you have left realize you didn't do or you might not have done as much at the end of 2020, but how much is still leftover from 2019 and and <unk>.

What are your plans for that inventory going forward and now that the I T. C has been extended.

I think our plans are to deploy it as fast as possible to reduce our interest costs, but Rob and we've got about 60 and 70 per cent of that left I think that we're going to one great thing about me about some street acquisition is that we've got another area to deploy those assets into.

So, we probably will probably get a.

And use that up much fast and we expect we had bought what we thought was going to be about about two and then.

Two and a half years worth of inventory.

Would be very surprised if we had anything laugh when we get to the end of this year.

Okay. That's that's it for me thank you very much.

Based upon.

And our next question comes from the lineup been cow.

And.

Good morning, Thank you guys.

I have a few questions.

First of all on the pricing.

For the <unk> the way value.

Quick math was.

Like $10000 per customer and they do 10000 homes.

So you paid $160 million and stock I guess around the bill for $110 million the first year.

Of.

I know, there's only about 9000 homes, but.

And I, just keep that run right.

Is that how you guys did the math there and then like follow up questions on the urn outside.

And tried to read through the K.

Slow but.

Could you talk to US I think it's a five year erdahl for the for the customer growth book, you give us any color on what that means and how how that is targeted and I have a couple of photos.

Yes, certainly.

Yeah, I think it's a three year are now is that right.

For your earn out on production yeah. Okay. So that is a tie and obviously a line mannar and ourselves with.

And.

And it is.

Getting being conservative with the equity as you as you expect and demand and then but.

Is essentially saying look you have to hit these targets that we've laid out and these are continued growth targets as we move forward in time to get the full earn out there. So the way to the way to think about it the way we thought about it was essentially we can pay for this transaction and again, it's in stock and and.

<unk> and Stuart Miller, Executive Chairman, Illinois, and made it very clear he sees this as a longterm investment.

This is not the stock was going to see the market anytime soon.

To be blunt about it and we see this as a long term relationship as we do with many relationships with the Nova and we're just excited about what this can do and also moving soon to we will do a master planned community.

With the micro grids with and or I don't know exactly when but it's something we will be working on.

Immediately post clothes, so that's part of the earn out as well and so I think that's pretty interest is highly interesting.

Yeah, we're not just going to talk Stewart and I about it philosophically about doing micro grids, and we put our money where amount business and said look we've got to make this happen or the earn out doesn't happen. So he's obviously lenore is very incentivised and making that happens. So I wanted to point that earn lp's out and essentially the rest of this as you are right we pay for the acquisition fairly quickly.

And your math is Directionally correct.

That doesn't count all the existing customers that we get the opportunity to upsell right, we essentially get a lot of that I wouldn't say.

Say free, but it's fairly fairly clear that there's not a lot of value that's needed to be ascribed to that as opposed to what's reflected in the valuations of.

Possibly a bit with with our current equity valuation and certainly.

Pretty significant optionality.

<unk>, an existing customer base and our competitors equity pricing. So I think this transaction frankly is hands down a tremendous good transaction for this nova shareholders, which obviously includes myself and Rob here.

So it's it's a very very compelling valuation from anything else, we saw out there and the marketplace.

I have two two more through more just on the tax equity I saw that too and the two.

$200 million.

Could you talk about how about that.

Staged if you have it and if I Miss I'm, sorry, and then just you talked about interest rates and as well and that was talking about that book how that impacts the the.

The cost of tax equity unrelated to with our maybe that's free rug.

Yeah, Abby to take it we were.

And we're basically getting tax equity on commercial terms on arm's-length commercial terms.

With with <unk>.

But it was very important to both of US one day of always use some street as as a place to exercise some of their tax capacity and the past so we're preserving that and certainly for us.

We want to continue to use tax equity to help lower the costs to the consumer and will continue to do that as well so it's up and it really benefits.

And Ah benefits, both of us and and multiple ways.

And basically we have an overall commitment and we'll we'll cut funds really sort of deadline on funds.

As as we need to so.

Most of our timing of our securitization is really based on one were able to close off our tax equity funds and I think we have a little bit more flexibility.

With lenore on on that timing and.

And and it's also I would point out and a minimum commitment lenore could certainly use more and.

And at the same time, we have other tax equity funds and really liked the homebuilder space as well.

Our priority is to make sure that every single one of ours.

<unk> homes has and immediate home.

Of.

For tax equity and and that goes really to give them priority to.

To make that happen, but as far as the the interest rates. We really don't think it's again going to add that much of an impact exactly going back to all the points and John and made.

We think it bears.

The one thing that.

And that.

We might hear is or we have heard is okay. You have a very low interest rates right now what happens if interest rates increase and you have.

Fewer and fewer homebuyers and really the ideas and we're still has historically, we've been and historic closed now for quite some time for the past several years the homebuilder market really is.

Only increase because of historically low interest rates and even if interest rates go up it's not going to prevent folks.

From buying new homes, we're not going and getting up to egregious interest rates, where it doesn't make sense anymore for folks to for folks and finance new homes and at the same time, it's not going to.

It is also I'm really not gonna do anything to really dramatically affect our cost of capital either as John said, you have been and I would add to that is we certainly didn't get a see any decline and tax equity cost is rates plummeted. So why would we expect to see that as they come back up right. So it's really just been immune to it and I think our competitors and made some commentary to that.

The other thing about the homebuilder market is.

We have as and industries, such a low penetration rate and then we have a very small even with this acquisition market share right within their so.

We can have a lot of things go wrong, and the overall economy and homebuilding industry and so forth and we could still be growing at a rapid rate just trying to catch up and to some decent penetration rates as an industry and as a company. So we feel we feel confident and.

The move.

I guess.

Oh on Cribs services the way I think it is and it's all margin going forward.

And I wonder.

Because I think someone asked earlier about yoga differ opportunities with utilities and bye level bilateral agreements and what.

Different different jurisdictions, but.

How is it with customers and making them.

And part of.

Offering their their house other solar system or their battery into the services and and do you ever see that and <unk>.

Adamant for that to grow cause I think a lot of people are excited about the opportunity.

Yeah, that's a great question than what I would say is that we will share some of the economics, maybe not on this type of transaction was capacity.

Market transaction, but as we move forward in time, there is a lot to be.

Figured out there as far as when do you have control over the the the.

The nano grid right the system on the customers home to be able to do some of these other like energy grid services and really just again think about it as a micro grid too and when you could help your neighbor out and so forth one of the deficits by the way just personally I was pumping out so much solar power.

Was powering almost my entire at least half and my block and not block My circuit shouldn't have been shut down by by Centerpoint are caught and and that's a shame that they didn't have that information flow and that was power that was generation, obviously was and cute need and so we've got to do a better job and we can with pulling all of these new tech.

Allergies together Jen sets batteries solar load management, and then we can share some of those economics with the customer and still have your right. This is 100% margin, but still have very nice accretion. If you will with regards to an addition margin which were already doing.

Pretty well at particularly is what we're seeing now and margins we went through and the prior questions. So I see that if you're not part of a network of your trying to do this on a you know a.

A cash sale or something like that I don't think that's going to look very good to the customer in terms of economics, I think you're gonna have to be a part of of of the network like this and other network to relieve you have a compelling.

Proposition for the customer. So I think this is another area that needs to be fully.

Explore talked about more and so forth and saying wait a minute if that's going to provide more consolidation and the industry towards these big service providers likes and over.

And my last two off just you've been running and got it and with all of the job market activity. So I'm Street generosity partnership what does your report and think about your ability to continue to grow.

I guess.

And Ah.

Through acquisition.

The the throttled and you have on that front and then.

I'll just leave it there.

Yeah I.

Look the statistics are not good on M&A across the economy, right and and there's you learn that then almost three fourths of these or not and accretive to shareholders. Ultimately so I think there needs to be a healthy degree of apprehension.

Apprehension, maybe even fear some time with C E OS and particular Cfos are always there to govern us.

But that's why this took so long for US. It took years right took eight years for me to find the right deal with the right partner with just a fantastic group of people that run.

Great Company, and <unk> and the and the pricing was writers who went through and and they took and they are invested and long situs withholding the stock for years. So all of that had to make sense for me to do this and if it wasn't something that made that kind of compelling really hugely compelling since I'm not going to do it so I don't and <unk>.

Arms of the Board the Board Trust me on that.

They are interested in continuing to grow and look at other opportunities. We are doing that obviously, we're not going to talk and any detail about that but I've also been very clear we are going to be very disciplined and pricing we were and understand how we integrate these companies were going to do it very well very efficiently and we're also going to stick to our.

Business model and our strategic plan and we're not going to go off and the rough and started doing and acquisition, you're not going to wake up one morning, some place and the World and go I can't believe that John signed off on this or the board signed off on this this is going to be a very disciplined company and it always has been and always will.

Great. Thank you.

Thanks Man.

Your next question comes from Michael Weinstein credits.

Hi, guys and thanks for taking my call and.

Bones versus leases the loan mix.

And he talked about you I originally thought.

All about a higher loan mix 2021, and only up to about 40%.

And the phone and are we talking about returning back to and maybe a 20 to 30 per cent loan mix more leases involved and how much tax equity visibility do half of 2021 and from one of our anyway.

Yeah, Hi, Michael So and the tax equity side, we are extremely comfortable we have.

Has done a hell of a job we've got a very good runway a tax equity. This still is on our gives us multiple years of runway and tax equity and the minimum amount that was in the and the transaction. Obviously post clothes will be it will start trashing and using that capital is just that is rob set of the minimum amount and.

We fully expect to continue to grow our relationship with Lenore and have more tax equity provided there I'm not aware, it's possible that exists out there of anybody else, having a multiyear tax equity relationships. So our runway on tax equity is awesome at this point in time and we continue.

To go out there and search for more tax equity partners, but we're we're in great shape and Rob's done a fantastic job there in terms of alone lease slash PPA mix.

Yeah. It was actually more kind of in the mid forties as we talked about and October 29th of last year.

I would say that we can't predict what that Nick's will be the only thing that I demand as it we make a good unlevered return and therefore, and making great returns, whether it's alone or Elise and we certainly are are doing that as witnessed by our improvement and our unlevered returns and we've talked to some of that our language around even the grid service.

Side is consistent across contract types and so we've really done a and really led the industry here and I think the entire industry is going to have to go to this point, where you're agnostic on financing type I just want to know and you should you should want to know and investors want to know are you, making money or not and and on a fully burden basis and we are so we're and.

Not going to get into forecasting what the end of the mix will be because quite quite plainly, we don't really care and if the payoff rate continues to accelerate there's actually a little bit more of an inclination of us to take and loans, rather and lease and ppas.

And I would say that yes leases are very attractive and the homebuilder market and that's going to push that rate of split down a little bit on the loan side, but I don't know if we're going to go back to 30% or so.

Something of that nature.

Back to say that the market is going to stay more loan supposedly it's roughly about 70 30.

Per cent away from us and.

I expect the market to continue to be roughly and the mix, where we are right now, but could we be higher and a couple of quarters on loans versus lease we could could we'd be lower because of the homebuilder, that's possible as well and the only other thing I would add on that is.

As you all continue to build your models and.

Really appreciate having some of the most thoughtful analysts and the industry covering us is that when you do see a start to pick up that loan piece keep in mind that that means that.

You should expect the P&I to be a little bit higher and the revenue to be not quite as high all things considered we know a lot of analysts are focused on EBITDA without looking at the P&I, but as we've stated.

And and the pre IPO meetings right.

We look at it altogether because of that agnostic view.

On on earnings sorry.

On financing.

And he also maybe and could you break out the amount of growth.

40% this year from Lenore and how much it is from other sources.

If you're talking about for 2022.

Yeah exactly sorry.

Yeah sure.

We haven't broken that out yet, but I would expect that the homebuilder business would grow at the 40% and then.

The rest of the business would grow at some at roughly that as well. So that's not really much of a non answer but at the end of the day, we feel we've looked at it and said Hey look this it looks pretty good and the trend trajectory.

If I had to take a guess about where we get more if we were to hurdle that 40, I would say it probably comes off the existing retrofit business just because it's so much bigger so the math works and that way, but that would be.

And my part.

Gotcha.

And he's pretty free about grade services.

Giving you and like I.

I guess people need to be and Ah Lisa.

Beneficial and released and in order to be part of the network.

Is it possible for owners to join so nobody network and get the advantage of goods and services aggregated saw you guys and.

Future, absolutely and we've led that and so actually.

To cut you a little bit there Michael is is that we see and we have the same language lonely or PPA. So you don't you don't have to choose one or the other to really get the benefits here with US you do have it with other people, but you don't have to do that with us.

And just one final question on the alone versus least debate, which we seem to get it to every day with clients.

Is do you seen advantage and or maybe a financial advantage first and over and one of the other overtime.

And to the future.

This tax credit program start to sunset et cetera.

And do you think.

Equipment prices come down and do you think that one will be better for sent over there and the other and.

Loans or.

Yeah, I think that has you have to guess or estimate what happens and the world, which is increasingly harder to do right with the tell me what the politicians and Washington are going to do this this year versus next year and so forth and so.

And that goes into the ITC right, there's a permanent ITC and lease and PPA, there's not and alone I think and hope that and and I expect that to be corrected.

For at least when they do and it <unk> extension of and the next five years, so that would make those roughly equivalent from a policy standpoint, again, which I think I think should be done and I think we'll be done.

With regards to the different.

Financing or cash flow attributes of the loans versus leases.

I do like the mix I liked the longterm contracted cash flows that you do get more cash over a period of time as a company with a lease or PPA.

But on the loan side of things are you tend to.

And the one side of things you tend to get that cash much faster and so therefore, we're paying down our debt faster, we're we're putting equity to sorry cash flow to the equity faster and so that combination again, it's unique to us we love it and I just want to also point out that we're capturing the full spread so when you have originate something and you flip it and somebody else.

The folks that your original selling it to whether it's alone or.

Asset level of equity on lease and PPA, they're not they're not stupid. They know what they're doing they're pricing that in and where where the other ones that are keeping and I think this will and be an industry trend keeping the asset whether it's alone lease or PPA ringing out the cash because we see faster payoffs, we see that we're taking care of the customers better so the delinquency and.

Fall data is going lower and lower and therefore, we're collecting more cash out of that spread and originating and selling it off and so that's working and obviously the assets are appreciating far more than I think any of us thought at a far quicker pace and and going through what we went through last year with the pandemic crisis and showing the.

The debt capital market investors about with a fantastic performance of the paper and not just us, but the entire industry right. Michael I think all of that is clearly going to lead to a tremendous amount of cash to our equity and so.

Capitalization strategy is working and it's working phenomenally well.

Okay, great. Thanks, John.

Thank you.

And your last question comes and.

Price from Raymond Jane.

Hey, good morning, and this is Graham price on for <unk> motion US you reference the recent text and screwed crisis and with that and mine was just wondering and do you plan to participate and the Earth grid services market.

Kind of the way you want you're already doing on the east coast.

Hey, Graham.

We won't go market by market, there's a lot of markets out there and particularly us that have a lot of.

Customer base in involved in but it's safe to say, if it's if it's and our footprint, which card is we are active and it and we're trying to get.

The deals that makes sense for us and our customers.

There's probably going to be some changes and <unk>. We don't have enough time to go through all those at this point in time, but.

Hopefully that will facilitate and they need to understand that we are the solution distributed power.

And the service that we provide is the solution is certainly a big part of the solution that the politicians and Austin not to pay a lot of attention to more <unk> and some of the other things that have been floated out there like capacity market et cetera.

So we think that actually what we provide here and Texas will become more valuable if logic prevails, which I know it doesn't always do particularly with the government, but his logic prevails.

And we think that there's a lot more opportunities and Texas then there and then there was prior to the last weeks catastrophe and event.

The other thing about that is a lot more people understand that we are the solution, so regardless and with government does they're going to they're moving into our direction and coming and looking for service and like I said the number of leads and interest has really exploded over the last few days as you would expect to see from from from folks at and my fellow Texans.

Got it. Thanks, that's that's helpful. And then I guess more broadly just curious if you have any expectations for how the ITC discussions and Congress might progress and maybe if you see any chance of a long term extension that.

And it makes Graham we still do I think it's a matter of of when not if that happens most likely it looks like it's going to happen either.

Probably and infrastructure bill or a separate bill some time and the next few months. So the first half of this year, there's a lot of pressure that.

That the Democrats are putting upon themselves to get things passed because the margin of <unk>.

Majority is so thin that any sort of issue such as the death of a member or something like that could really cause a lot of turmoil and monkey rich a lot of the plan. So <unk>.

More and more I think the impetuses for to do something sooner rather than later.

And I also think that the refund ability is going to happen as well I think that's been talked about so much that I would be really surprised if it was and a part of a long term extension of roughly five years.

Either at 26% or 30% I've heard more 30%, but.

It's possible it could be 26, and we can also see something more permanent I do think that that would be the right way to go and certainly to provide that permanent on the loan side of things of the personal ownership not just the lease and PPA would be fair I have heard less about that I don't know if that really happens, but we will get a longterm.

<unk> and and I think we will get refund ability for at least a year or two.

Got it thanks Yep, that's it for me.

Thanks for him.

Okay.

At this time and I will now turn the call back to Mister John Berger for closing remarks.

Thank you everyone.

A couple of things to and on here first I wanted to thank all of my employees and my dealers for an unbelievable job through a lot of hardships.

Last year to raise guidance right before the pandemic crisis fell upon us to have the capital markets fall completely apart both the debt and equity markets to not know how you are going to sell without having to and be able to go to the home and to then still persevere and hit the numbers.

And have a fantastic year, it's just unbelievable and I really from the bottom of my heart appreciate all the sacrifice and effort that went in my employees and dealers secondly.

Last week was and utter catastrophe here and Texas and for my fellow Texans.

And it gives.

Meaning to what we do we.

We are integrating all of these new energy technologies together solar.

Inverters batteries secondary generation supplies like Jen sets fuel cells load management, we're putting all those together as a company and we're delivering them and as simple fashion and.

And services that these combined technologies can produce for our customers and we support this service was fast efficient service when things go wrong, which they do that's who we are.

That's what texts and should have had last week, all my federal Texans and it's what all Americans will want over the next few years and we're looking forward to serving all of you.

With this new energy service.

And I hope that what happened and Texas.

Is a warning that the system must change.

And we are the solution and the way forward to a better energy service at a better price. Thank you.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation you may know all disconnect.

Okay.

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