(Reuters) -Residential solar company Sunnova Energy International (NYSE:NOVA) on Thursday said the U.S. government would provide a partial loan guarantee of up to $3 billion to back financing for its rooftop solar systems.
Shares of the company soared 15% following the announcement to $18.19 in afternoon trading.
By lowering the cost of solar financing for up to 115,000 homeowners, the Department of Energy (DOE) investment seeks to expand access to clean energy to new customers and boost grid resiliency as the U.S. seeks to decarbonize its power sector by 2035.
The company last month said it was in discussion with the DOE's Loan Program Office (LPO) regarding potential issuance of an indirect guarantee of 90% for up to $3.3 billion in solar loans.
DOE's Loan Program Office aims to speed development of the clean energy sector with loans to companies that may struggle to obtain private financing given large capital needs, early-stage technologies or innovative business models.
To be eligible for loans, customers must use Sunnova technology that tracks their power usage. The aim is to facilitate creation of virtual power plants, networks of small energy-producing or storage devices pooled together to serve the electricity grid.
Sunnova's DOE loan guarantee is aligned with the Biden administration's effort to funnel clean energy investment dollars to disadvantaged communities. The company seeks to provide at least 20% of the loans to customers with credit scores of 680 or less. While still considered "good" credit, that level often demands less favorable terms from lenders.
"The DOE financing would accelerate the adoption of solar and storage, decrease greenhouse gas emissions, and expand the availability of reliable, clean, and affordable energy to those communities who benefit the most from low-cost energy," Sunnova CEO William Berger said in a statement.
Sunnova expects the DOE loan guarantee to support up to $4 billion to $5 billion in the company's loan originations, reduce its weighted average cost of capital and generate interest savings.
The transaction is expected to close in the second quarter and Sunnova plans to issue its first securitization under the program in the first half of 2023.