OVERVIEW - How is SVB's collapse affecting the Sunrun-led climate tech flock?

Last week’s failure of tech-focused Silicon Valley Bank (SVB) is expected to have a notable impact, to say the least, on climate tech start-ups given the fact that SVB counts more than 1,550 “prominent clients” in the climate technology and sustainability sector.

As widely reported, the California Department of Financial Protection and Innovation closed the Santa Clara, California-based bank on Friday, March 10, and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The latter, in turn, immediately transferred all insured deposits of SVB to the newly-created Deposit Insurance National Bank of Santa Clara (DINB), which is expected to reopen the climate lender’s main office and all branches on Monday and maintain its normal business hours.

Silicon Valley Bank’s collapse is the first for a FDIC-insured institution in 2023 and follows the failure of Kansas-based Almena State Bank in October 2020. According to a statement from FDIC, SVB had some USD 209.0 billion (EUR 195.8bn) in total assets and around USD 175.4 billion in total deposits at the end of 2022. The amount of deposits in excess of the insurance limits was not immediately clear.

SVB is a popular bank among cleantech firms, particularly start-ups. A bit over a year ago, it made a commitment to provide at least USD 5 billion by 2027 in loans, investments and other financing in support of sustainability efforts, including in the sectors of renewables, energy storage and grid infrastructure, energy efficiency and demand management, green buildings and sustainable transportation, among others. SVB had also pledged to achieve carbon neutral operations, including business travel, and 100% renewable electricity by 2025.

This overview summarises the initial reactions made by companies from the renewable energy industry led by home solar and battery storage installer Sunrun Inc (NASDAQ:RUN), whose partnership with SVB is even promoted on the bank’s website.

SUNRUN

Almost 10 years ago, in 2014, SVB made a USD-25-million commitment toward a non-recourse term loan facility and just as much toward a USD-50-million working capital revolver to Sunrun. By 2020, it had provided almost USD 240 million of financing across five debt transactions to the benefit of the solar installer, according to information on SVB’s website.

On Friday, Sunrun, now the country’s largest residential solar company, made a statement with regard to the situation in response to investor questions. At the time, the firm disclosed it had less than USD 80 million of cash deposits with SVB.

Sunrun went on to say that SVB is a lender in the company’s parent USD-600-million recourse credit facility, involving a total of 13 lenders, and its USD-1.8-billion non-recourse senior aggregation warehouse facility with nine lenders. The recourse credit facility was fully utilised at the end of the quarter and continues to be, while the non-recourse senior aggregation warehouse facility currently has about USD 710 million undrawn. Of that, SVB’s undrawn commitment amounts to USD 40 million.

The company considers SVB to be representing a small percentage of its overall hedging facilities as measured by notional value of less than 15%.

“While SVB is a facilitator of interest rate hedges (i.e., interest rates swaps), to our knowledge they are not ultimately the backer of these derivatives, as they involve numerous other large banks. As such, we do not expect material exposure to SVB from our interest rate hedging activities, although we will continue to evaluate the legal structures associated with these derivatives,” Sunrun noted, adding that SVB is not a tax equity provider to it.

“We will continue to evaluate Sunrun’s exposure in other areas of the business, for instance, potential impacts to our commercial and strategic partners,” the company’s statement concludes.

Sunrun's stock sank as much as 17% in New York on Friday.

SUNNOVA AND SPRUCE POWER

Sunnova Energy International Inc (NYSE:NOVA), the solar-plus-battery storage service provider with headquarters in Houston, Texas, said in its own statement that its exposure to SVB as immaterial. “Sunnova does not hold cash deposits or securities with SVB and does not utilize SVB for any treasury management services,” it said.

One Sunnova unit is party to a credit facility in which SVB participates as a lender with USD 15 million in unfunded commitments. This so-called Back-Leverage Facility is one of three current warehouse facilities entered into by Sunnova subsidiaries and their cumulative commitment amounts of USD 1.35 billion at present.

Distributed solar operator Spruce Power Holding Corporation (NYSE:SPRU) has also made an initial assessment that its exposure to SVB is immaterial. It disclosed it has less than USD 1 million of cash deposit exposure in operating accounts held with SVB.

“Several of Spruce Power’s subsidiaries are borrowers in non-recourse senior debt credit facilities in place with SVB as either a sole lender or as a party to group of lenders. While in some instances SVB is a counterparty to interest rate hedge instruments associated with these facilities, after initial review the company has determined that such exposure represents immaterial operational and financial impact,” it explained.

OTHERS

Clean energy software firm Stem Inc (NYSE:STEM) has estimated that less than 5% of its cash and short-term investments could be impacted by SVB’s failure.

“We have no credit facilities or other financial relationships with SVB. Stem maintains its cash and short-term investments with a diverse group of large national financial institutions. We do not expect the closure to have any impact on our operations. We will continue to monitor the situation and any impact on Stem or our customers, partners, and suppliers,” it stated.

Meanwhile, both solar technology major SunPower Corp (NASDAQ:SPWR) and solar project developer Emeren Group Ltd (NYSE:SOL) were quick to confirm they have no financial exposure to SVB.

(USD 1.0 = EUR 0.937)

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