Portions of the information called for by Part III of this Form 10-K are hereby incorporated by reference from either the definitive Proxy Statement for our annual meeting of stockholders or an amendment to this Form 10-K, either of which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2019.

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•	federal, state and local statutes, regulations and policies;

•	determinations of the Internal Revenue Service of the fair market value of our solar energy systems;

•	the price of centralized utility-generated electricity and electricity from other sources and technologies;

•	technical and capacity limitations imposed by operators of the power grid;

•	the availability of tax rebates, credits and incentives, including changes to the rates of, or expiration of, federal tax credits and the availability of related safe harbors;

•	our need and ability to raise capital to finance the installation and acquisition of distributed residential solar energy systems, refinance existing debt or otherwise meet our liquidity needs;

•	our expectations concerning relationships with third parties, including the attraction, retention and continued existence of our dealers;

•	our ability to retain or upgrade current customers, further penetrate existing markets or expand into new markets;

•	our investment in our platform and new product offerings and the demand for and expected benefits of our platform and product offerings;

•	the ability of our solar energy systems, energy storage systems or other product offerings to operate or deliver energy for any reason, including if interconnection or transmission facilities on which we rely become unavailable;

•	our ability to maintain our brand and protect our intellectual property and customer data;

•	our ability to manage the cost of solar energy systems, energy storage systems and our service offerings;

•	the willingness of and ability of our dealers and suppliers to fulfill their respective warranty and other contractual obligations;

•	our expectations regarding litigation and administrative proceedings; and

•	our ability to renew or replace expiring, canceled or terminated solar service agreements at favorable rates or on a long-term basis.

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•	we do not compete with our dealers;

•	we receive preferred equipment pricing as a result of our strong supplier relationships;

•	we offer a wide variety of product structures;

•	we provide easy-to-use software to dealers to assist with the installation process and to price potential solar energy systems and energy storage systems;

•	dealers can leverage our brand to support their businesses;

•	we provide comprehensive training to dealers; and

•	we are a stable counterparty our dealers can trust to make payments on time.

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Customer Origination and Consultation. Our dealers serve as a local, direct-to-home sales force providing in-person consultations to source potential customers in each geographic market where we operate. Our dealers reach potential customers through various means, including online, telemarketing, in-store sales, cross-marketing with complementary products and door-to-door canvasing. Using our technology platform and proprietary pricing tool, the dealer and the customer select one of our standard-form solar service agreements for the relevant market and the dealer submits its proposal to us for approval. Before proceeding to the design phase, we call every customer to validate the customer understands the terms of their contract with us as well as the expected benefits of the system.

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Design and Engineering. Prior to the dealer's purchase and installation of the equipment, we and the dealers work together to design each solar energy system and, if applicable, energy storage system. All of our solar energy systems and energy storage systems are designed with equipment from a pre-approved list of manufacturers. We utilize our extensive tools and services platform, standardized procedures and existing databases to help our dealers comply with our pricing requirements, residential solar best practices, contract terms, and state, territorial and local regulations. For each solar service agreement, an individualized power production estimate is created by analyzing geographic, solar and weather data with the design's proposed orientation, components and shading. We continue to pursue technological innovation to streamline our review of design and engineering, to expedite installation and to lower costs for our dealers.

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Installation, Commissioning and Interconnection. The installation and commissioning phase requires the dealer to obtain all necessary permits for installation and complete our commissioning process for the solar energy system and energy storage system (if applicable), which entails submitting supporting documentation and photographs illustrating the installation of the solar energy system and energy storage system (if applicable) to our engineering team for review. Following completion of these steps and our approval of these materials the dealer submits required paperwork to the applicable electric distribution utility to obtain permission to operate the equipment, schedule required regulatory inspections and arrange for interconnection of the solar energy system to the electrical grid. The customer's billing begins at the earlier of (a) 90 days after installation or (b) completion of interconnection.

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Monitoring and Servicing. Our monitoring systems utilize cellular connections that allow us to confirm the continuing operation of the solar energy system and energy storage system (if applicable) and identify and solve maintenance issues through our dealers, third-party service providers or our own personnel. We also collect performance data to improve our pricing, generation estimates and services for our customers.

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Pricing Tool: Customer pricing and quoting is delivered by a combination of cloud-based technologies including Genability, PV Watts (a service of the National Renewable Energy Laboratory) and proprietary applications running on Amazon Web Services and Heroku. This collection of tools is made available to us and our dealers through a web, tablet or mobile device interface. We permit dealers to generate solar service agreement quotes and proposal documents on demand for presentation to prospective customers. Each completed quote is transferred into Salesforce for solar service agreement generation, customer access and reporting.

•	MySunnova: MySunnova is our online portal for customers that allows them to view their solar energy systems' production history, view energy storage system data, pay their bills, manage their online account and contact information, make referrals and contact our customer service team.

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Salesforce: Salesforce is our central repository and system of record for all contracts, process documentation, customer account information, maintenance information and payment tracking for the life of the solar service agreement. This single system allows for integrated and comprehensive reporting for the entire life cycle of the customer, from quote to end of the solar service agreement term. Many of our other systems interact with the Salesforce platform.

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•	FinancialForce: FinancialForce is a cloud-based accounting system built on the Salesforce platform. Because it shares similar architecture to our Salesforce system, FinancialForce allows for integration between our operations and accounting.

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Lease Agreements. Under a lease agreement, or Easy Save Agreement, the customer leases a solar energy system from us at a fixed monthly rate that is typically subject to annual escalation. We own, operate and maintain the solar energy system under our lease agreements. In most cases, lease agreements include a performance guarantee under which we will refund payments or credit the customer if the solar energy system fails to meet a guaranteed minimum level of power production for specified time periods.

•	PPAs. We offer PPAs through our Easy Save Monthly Agreement, for monthly generation billing, and the Easy Save Simple Agreement, for a levelized monthly payment. We own, operate and maintain the solar energy system under our PPAs.

•	Easy Save Monthly Agreements. Pursuant to an Easy Save Monthly Agreement, the customer agrees to pay for all power generated by a solar energy system at a price per kWh that is typically lower than the local utility rate. The monthly rate is typically subject to annual escalation.

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Easy Save Simple Agreements. The Easy Save Simple Agreement is similar to the Easy Save Monthly Agreement except the customer's payments are levelized over the course of a year based on an annual production estimate so the customer's payments are insulated from monthly fluctuations in electricity production subject to a true-up at the end of such period. The fixed monthly rate is typically subject to annual escalation. Should the annual

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Loan Agreements. Pursuant to an Easy Own Agreement, the customer purchases the solar energy system from a dealer using financing provided by us. The customer repays the amount financed plus a finance charge through monthly payments for a typical term of 10 or 25 years. We purchase the Easy Own Agreement from the dealer and agree to operate and maintain the solar energy system. We operate and maintain the solar energy system through our network of dealers. In most cases, Easy Own Agreements include a production guarantee under which we will refund payments or credit the customer if the solar energy system fails to meet a guaranteed minimum level of power production for specified time periods. Customers under our Easy Own Agreements have the option to prepay outstanding principal amounts, in part or in full, without penalty.

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Energy Storage Systems. Our Sunnova SunSafe program offers customers the option of a solar energy system integrated with a solar storage system. Our Sunnova SunSafe Easy Save Agreement and Sunnova SunSafe Easy Own Agreement are similar to our Easy Save Agreement and Easy Own Agreement, respectively, but include energy storage systems with the solar energy systems. The customer may select a term of 10 or 25 years for the SunSafe Easy Own Agreement. These agreements have a production guarantee, similar to the Easy Own Agreements and Easy Save Agreements, except in Guam, Saipan, Hawaii, Puerto Rico and Florida. Additionally, we introduced the Sunnova +SunSafe Agreement to existing customers in several states and territories, under which the customer purchases the energy storage system from a dealer using financing provided by us. Under the Sunnova +SunSafe Agreement, the customer repays the amount financed plus a finance charge through monthly payments for a term of 10 or 15 years. We intend to roll-out these energy storage system offerings to additional geographic regions in the coming years.

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Sunnova Protect Service. For solar energy systems not owned or sold by us, our Sunnova Protect Agreements provide customers maintenance and repairs as well as system monitoring and diagnostics. We provide three levels of service: (a) Basic, which is monitoring only; (b) Premium, which is monitoring plus repair and/or replacement of all equipment under a manufacturer's warranty; and (c) Platinum, which is monitoring, repair and/or replacement of all equipment under and outside the manufacturer's warranty and a production guarantee. The customer may select the level of service and a term of 1, 5, 10 or 20 years. Prior to commencing coverage, we will run a diagnostic evaluation on the customer's solar energy system and will identify any underperforming equipment and estimate production. The customer may elect to repair underperforming equipment, on a time and materials basis, so that it may be included in the coverage going forward. Should the underperforming equipment not be repaired, it will not be covered under the Sunnova Protect Agreement.

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•	growing our customer base and originating new solar service agreements on economic terms;

•	maintaining or lowering our cost of capital;

•	reducing operating costs by optimizing our operations and maintenance processes;

•	maximizing the benefits of our dealer network;

•	finding additional tax equity investors and other sources of institutional capital; and

•	the continued availability of various governmental incentives for the solar industry.

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•	demand for solar energy systems and energy storage systems failing to develop sufficiently or taking longer than expected to develop;

•	residential solar energy technology being available at economically attractive prices as a result of factors outside of our control, including utility prices not rising as quickly as anticipated;

•	issues related to identifying, engaging, contracting, compensating and maintaining relationships with dealers and the negotiation of dealer agreements;

•	issues related to financing, construction, permitting, the environment, governmental approvals and the negotiation of solar service agreements;

•	a reduction in government incentives or adverse changes in policy and laws for the development or use of solar energy, including net metering, SRECs and tax credits;

•	other government or regulatory actions that could impact our business model;

•	negative developments in public perception of the solar energy industry; and

•	competition from other solar companies and energy technologies, including the emergence of alternative renewable energy technologies.

•	availability, substance and magnitude of solar support programs including government targets, subsidies, incentives, renewable portfolio standards and residential net metering rules;

•	the relative pricing of other conventional and non-renewable energy sources, such as natural gas, coal, oil and other fossil fuels, wind, utility-scale solar, nuclear, geothermal and biomass;

•	performance, reliability and availability of energy generated by solar energy systems compared to conventional and other non-solar renewable energy sources;

•	availability and performance of energy storage technology, the ability to implement such technology for use in conjunction with solar energy systems and the cost competitiveness such technology provides to customers as compared to costs for those customers reliant on the conventional electrical grid; and

•	general economic conditions and the level of interest rates.

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•	the construction of a significant number of new power generation plants, whether generated by natural gas, nuclear power, coal or renewable energy;

•	the construction of additional electric transmission and distribution lines;

•	a reduction in the price of natural gas or other natural resources as a result of increased supply due to new drilling techniques or other technological developments, a relaxation of associated regulatory standards or broader economic or policy developments;

•	less demand for electricity due to energy conservation technologies and public initiatives to reduce electricity consumption or to recessionary economic conditions; and

•	development of competing energy technologies that provide less expensive energy.

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•	incur additional indebtedness;

•	make investments or loans;

•	create liens;

•	consummate mergers and similar fundamental changes;

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•	make restricted payments;

•	make investments in unrestricted subsidiaries;

•	enter into transactions with affiliates; and

•	use the proceeds of asset sales.

•	limit our ability to plan for or react to market conditions, to meet capital needs or otherwise to restrict our activities or business plan; and

•	adversely affect our ability to finance our operations, enter into acquisitions or divestitures to engage in other business activities that would be in our interest.

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•	expiration or initiation of any governmental rebates or incentives;

•	significant fluctuations in customer demand for our solar energy services, solar energy systems and energy storage systems;

•	our dealers' ability to complete installations in a timely manner;

•	our and our dealers' ability to gain interconnection permission for an installed solar energy system from the relevant utility;

•	the availability and costs of suitable financing;

•	the amount, timing of sales and potential decreases in value of SRECs;

•	our ability to continue to expand our operations and the amount and timing of expenditures related to this expansion;

•	announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments;

•	changes in our pricing policies or terms or those of our competitors, including centralized electric utilities;

•	actual or anticipated developments in our competitors' businesses, technology or the competitive landscape; and

•	natural disasters or other weather or meteorological conditions.

•	identify attractive acquisition candidates;

•	negotiate acceptable purchase agreements;

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•	obtain any required governmental or third party consents;

•	obtain financing for these acquisitions on economically acceptable terms, which may be more difficult at times when the capital markets are less accessible; and

•	outbid any competing bidders.

•	mistaken assumptions about assets, revenues and costs of the acquired company, including synergies and potential growth;

•	an inability to secure adequate customer commitments to use the acquired systems or facilities;

•	an inability to successfully integrate the assets or businesses we acquire;

•	coordinating geographically disparate organizations, systems and facilities;

•	the assumption of unknown liabilities for which we are not indemnified or for which our indemnity is inadequate;

•	mistaken assumptions about the acquired company's suppliers or dealers or other vendors;

•	the diversion of management's and employees' attention from other business concerns;

•	unforeseen difficulties operating in new geographic areas and business lines;

•	customer or key employee losses at the acquired business; and

•	poor quality assets or installation.

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•	the inability to work successfully with dealers with local expertise to originate international solar service agreements;

•	multiple, conflicting and changing laws and regulations, including export and import laws and regulations, economic sanctions laws and regulations, tax laws and regulations, environmental regulations, labor laws and other government requirements, approvals, permits and licenses;

•	laws and legal systems less developed or less predictable than those in the U.S.;

•	changes in general economic and political conditions in the jurisdictions where we operate, including changes in government incentives relating to power generation and solar electricity;

•	political and economic instability, including wars, acts of terrorism, political unrest, boycotts, curtailments of trade and other business restrictions;

•	difficulties and costs in recruiting and retaining individuals skilled in international business operations;

•	international business practices may conflict with U.S. customs or legal requirements, including anti‑bribery and corruption regulations;

•	financial risks, such as longer sales and payment cycles and greater difficulty collecting accounts receivable or executing self-help remedies, if necessary;

•	deficient or unreliable records relating to real property ownership;

•	potentially lower margins due to a lower average income level;

•	fluctuations in currency exchange rates relative to the U.S. dollar; and

•	the inability to obtain, maintain or enforce intellectual property rights, including inability to apply for or register material trademarks in foreign countries, which could make it easier for competitors to capture increased market position.

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•	public reaction to our press releases, announcements and filings with the SEC;

•	our operating and financial performance;

•	fluctuations in broader securities market prices and volumes, particularly among securities of technology and solar companies;

•	changes in market valuations of similar companies;

•	departures of key personnel;

•	commencement of or involvement in litigation;

•	variations in our quarterly results of operations or those of other technology and solar companies;

•	changes in general economic conditions, financial markets or the technology and solar industries;

•	announcements by us or our competitors of significant acquisitions or other transactions;

•	changes in accounting standards, policies, guidance, interpretations or principles;

•	speculation in the press or investment community;

•	actions by our stockholders;

•	the failure of securities analysts to cover our common stock or changes in their recommendations and estimates of our financial performance;

•	future sales of our common stock; and

•	the other factors described in these "Risk Factors".

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•	permits stockholders or their affiliates and affiliated funds and our non-employee directors to conduct business that competes with us and to make investments in any kind of property in which we may make investments; and

•	provides that if any of our stockholders or any of its affiliates who is also one of our non-employee directors becomes aware of a potential business opportunity, transaction or other matter, they will have no duty to communicate or offer that opportunity to us.

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•	limitations on changes of control and business combinations;

•	limitations on the removal of directors;

•	limitations on the ability of our stockholders to call special meetings;

•	establishing advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders;

•	providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and

•	establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

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•	we decreased the total number of outstanding shares with a 1 for 2.333 reverse stock split effective July 29, 2019 (the "Reverse Stock Split"). All current and past period amounts stated herein have given effect to the Reverse Stock Split;

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we converted 108,138,971 shares (or 46,351,877 shares as adjusted for the Reverse Stock Split) of our Series A convertible preferred stock and 32,958,645 shares (or 14,127,140 shares as adjusted for the Reverse Stock Split) of our Series C convertible preferred stock, which represented all the outstanding shares of our Series A convertible preferred stock and Series C convertible preferred stock, into 60,479,017 shares of our common stock;

•	we converted 23,870 shares of our non-voting Series B common stock, which represented all the outstanding shares of our Series B common stock, into 23,870 shares of our voting Series A common stock.

•	our Series A common stock was redesignated as common stock;

•	we exercised our right to redeem all the senior secured notes for an aggregate principal plus unpaid cash and paid-in-kind interest amount of $57.1 million for cash;

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holders of the convertible note issued in March 2018 for $15.0 million (the "2018 Note") converted the principal amount plus any accrued and unpaid interest as of the date of conversion into 3,319,312 shares (or 1,422,767 shares as adjusted for the Reverse Stock Split) of Series A convertible preferred stock, which in turn converted into 1,422,767 shares of common stock. In addition, holders of the convertible note issued in June 2019 for $15.0 million (the "2019 Note") converted the principal amount plus any accrued and unpaid interest as of the date of conversion into 2,613,818 shares (or 1,120,360 shares as adjusted for the Reverse Stock Split) of Series C convertible preferred stock, which in turn converted into 1,120,360 shares of common stock;

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we implemented an internal reorganization that resulted in SEI owning all the outstanding capital stock of Sunnova Energy Corporation (the "Reorganization"). In connection with the Reorganization, a direct, wholly-owned subsidiary of SEI merged with and into Sunnova Energy Corporation, with Sunnova Energy Corporation surviving as a direct, wholly owned subsidiary of SEI. Each share of each class of Sunnova Energy Corporation stock issued

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•	approximately 50% of the non-vested stock options outstanding at that time, or 995,517 stock options, became exercisable and the vesting terms for all remaining stock options were amended so all stock options will be fully vested on the first anniversary of the closing date of our IPO. We recorded an additional $3.2 million of expense in July 2019 related to the accelerated vesting periods; and

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our Board adopted the 2019 Long-Term Incentive Plan (the "LTIP") to incentivize employees, officers, directors and other service providers of SEI and its affiliates. The LTIP provides for the grant, from time to time, at the discretion of our Board or a committee thereof, of stock options, stock appreciation rights, stock awards, including restricted stock and restricted stock units, performance awards and cash awards. The LTIP provides the aggregate number of shares of common stock that may be issued pursuant to awards shall not exceed 5,229,318 shares. The awards vest over a period of either one year, three years or seven years.

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(1)	Amount includes non-cash effect of equity-based compensation plans of $9.2 million, $3.0 million and $1.5 million for the years ended December 31, 2019, 2018 and 2017, respectively, and partial forgiveness of a loan to an executive officer used to purchase our capital stock of $1.3 million and $0.4 million for the years ended December 31, 2019 and 2018, respectively.

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(1)

Does not include amounts related to the contingent obligation to purchase all of a tax equity investor's units upon exercise of their right to withdraw rights. The withdrawal price for the tax equity investors' interest in the respective fund is equal to the sum of: (a) any unpaid, accrued priority return and (b) the greater of: (i) a fixed price and (ii) the fair market value of such interest at the date the option is exercised. Due to uncertainties associated with estimating the timing and amount of the withdrawal price, we cannot determine the potential future payments that we could have to make under these withdrawal rights. For additional information regarding the withdrawal rights see Note 13,

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(2)	Interest payments related to long-term debt and interest rate swaps are calculated and estimated for the periods presented based on the amount of debt outstanding and the interest rates as of December 31, 2019.

(3)	Negative amount relates to reimbursements of $2.4 million for leasehold improvements.

(4)	Other obligations relate to information technology services and licenses and distributions payable to redeemable noncontrolling interests.

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We are a leading residential solar and energy storage service provider, serving more than 80,000 customers in more than 20 United States ("U.S.") states and territories. Sunnova Energy Corporation was incorporated in Delaware on October 22, 2012 and formed Sunnova Energy International Inc. ("SEI") as a Delaware corporation on April 1, 2019. We completed our initial public offering on July 29, 2019 (our "IPO"); and in connection with our IPO, all of Sunnova Energy Corporation's ownership interests were contributed to SEI. Unless the context otherwise requires, references in this report to "Sunnova," the "Company," "we," "our," "us," or like terms, refer to SEI and its subsidiaries.

We have a differentiated residential solar dealer model in which we partner with local dealers who originate, design and install our customers' solar energy systems and energy storage systems on our behalf. Our focus on our dealer model enables us to leverage our dealers' specialized knowledge, connections and experience in local markets to drive customer origination while providing our dealers with access to high quality products at competitive prices and technical oversight and expertise. We believe this structure provides operational flexibility, reduced exposure to labor shortages and lower fixed costs relative to our peers, furthering our competitive advantage.

We provide our services through long-term residential solar service agreements with a diversified pool of high credit quality customers. Our solar service agreements typically are structured as either a legal-form lease (a "lease") of a solar energy system to the customer, the sale of the solar energy system's output to the customer under a power purchase agreement ("PPA") or the purchase of a solar energy system with financing provided by us (a "loan"). The initial term of our solar service agreements is typically either 10 or 25 years, during which time we provide or arrange for ongoing services to customers, including monitoring, maintenance and warranty services. Our lease and PPA agreements typically include an opportunity for customers to renew for up to an additional 10 years, via two five-year renewal options. Customer payments and rates can be fixed for the duration of the solar service agreement or escalated at a pre-determined percentage annually. We also receive tax benefits and other incentives from leases and PPAs, a portion of which we finance through tax equity, non-recourse debt structures and hedging arrangements in order to fund our upfront costs, overhead and growth investments.

Basis of Presentation

The accompanying annual audited consolidated financial statements ("consolidated financial statements") include our consolidated balance sheets, statements of operations, statements of redeemable noncontrolling interests and stockholders' equity and statements of cash flows and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") from records maintained by us. Our consolidated financial statements reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, Consolidation, we consolidate any VIE of which we are the primary beneficiary. We form VIEs with our investors in the ordinary course of business to facilitate the funding and monetization of certain attributes associated with our solar energy systems. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has (a) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We have considered the provisions within the contractual arrangements that grant us power to manage and make decisions that affect the operation of our VIEs, including determining the solar energy systems contributed to the VIEs, and the installation, operation and maintenance of the solar energy systems. We consider the rights granted to the other investors under the contractual arrangements to be more protective in nature rather than participating rights. As such, we have determined we are the primary beneficiary of our VIEs and evaluate our relationships with our VIEs on an ongoing basis to ensure we continue to be the primary beneficiary. We have eliminated all intercompany accounts and transactions in consolidation.

Corporate Reorganization

In connection with our IPO, we implemented an internal reorganization that resulted in SEI owning all the outstanding capital stock of Sunnova Energy Corporation (the "Reorganization"). In connection with the Reorganization, a direct, wholly-owned subsidiary of SEI merged with and into Sunnova Energy Corporation, with Sunnova Energy Corporation surviving as a direct, wholly owned subsidiary of SEI. Each share of each class of Sunnova Energy Corporation stock issued and outstanding immediately prior to the Reorganization, by virtue of the Reorganization and without any action on the part of the holders thereof, automatically converted into an equivalent corresponding share of stock of SEI, having the same designations, rights,

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powers and preferences and the qualifications, limitations and restrictions with respect to SEI as each such corresponding share of Sunnova Energy Corporation stock being converted had with respect to Sunnova Energy Corporation. Accordingly, upon consummation of the Reorganization, each of Sunnova Energy Corporation's stockholders immediately prior to the consummation of the Reorganization became a stockholder of SEI.

Reverse Stock Split

In connection with our IPO, we decreased the total number of outstanding shares with a 1 for 2.333 reverse stock split effective July 29, 2019 (the "Reverse Stock Split"). All current and past period amounts stated herein have given effect to the Reverse Stock Split.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a significant impact on our consolidated financial statements.

Use of Estimates

The application of GAAP in the preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates.

Cash

We maintain cash, which consists principally of demand deposits, with investment-grade financial institutions. We are exposed to credit risk to the extent cash balances exceed amounts covered by the Federal Deposit Insurance Corporation ("FDIC"). As of December 31, 2019 and 2018, we had cash deposits of $72.4 million and $46.3 million, respectively, in excess of the FDIC's current insured limit of $250,000. We have not experienced any losses on our deposits of cash.

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Restricted Cash

We record cash that is restricted as to withdrawal or use under the terms of certain contractual agreements as restricted cash. Our restricted cash primarily represents cash held to service certain payments under the Sunnova AP 6 Warehouse II, LLC ("AP6WII"), Helios Issuer, LLC ("HELI"), Sunnova LAP Holdings, LLC ("LAPH"), Sunnova EZ-Own Portfolio, LLC ("EZOP"), Sunnova TEP I, LLC ("TEPI"), Sunnova TEP I Holdings, LLC ("TEPIH"), Sunnova TEP II, LLC ("TEPII"), Sunnova TEP II-B, LLC ("TEPIIB"), Sunnova TEP III, LLC ("TEPIII"), Sunnova TEP IV-A, LLC ("TEPIVA"), Sunnova TEP IV-B, LLC ("TEPIVB"), Sunnova TEP Holdings, LLC ("TEPH"), Sunnova TEP II Holdings, LLC ("TEPIIH"), Helios II Issuer, LLC ("HELII"), Helios III Issuer, LLC ("HELIII"), Sunnova RAYS I Issuer, LLC ("RAYSI") and Sunnova TEP Inventory, LLC ("TEPINV") financing arrangements (see Note 8, Long-Term Debt and Note 13, Redeemable Noncontrolling Interests) and balances collateralizing outstanding letters of credit related to one of our operating leases for office space (see Note 17, Commitments and Contingencies). The following table presents the detail of restricted cash as recorded in other current assets and other assets in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Debt and inverter reserves	$	55,407			$	28,225
Tax equity reserves	9,904				4,796
Letters of credit for office lease	725				725
Other	770				594
Total (1)	$	66,806			$	34,340

(1) Of this amount, $10.5 million and $5.2 million is recorded in other current assets as of December 31, 2019 and 2018, respectively.

We are exposed to credit risk to the extent restricted cash balances exceed amounts covered by the FDIC. As of December 31, 2019 and 2018, we had restricted cash deposits of $63.6 million and $31.8 million, respectively, in excess of the FDIC's current insured limit of $250,000. We have not experienced any losses on our deposits of restricted cash.

Accounts Receivable

Accounts Receivable—Trade.    Accounts receivable—trade primarily represents trade receivables from residential customers under PPAs and leases that are generally collected in the subsequent month and recorded at net realizable value. We maintain an allowance for doubtful accounts to reserve for potentially uncollectible accounts receivable. We review our accounts receivable by aging category to identify customers with known disputes or collection issues. We write off accounts receivable when we deem them uncollectible. The following table presents the changes in the allowance for doubtful accounts recorded against accounts receivable—trade, net in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Balance at beginning of period	$	723			$	427
Bad debt expense	1,645				1,119
Write off of uncollectible accounts	(1,498		)		(861		)
Recoveries	90				50
Other, net	—				(12		)
Balance at end of period	$	960			$	723

Accounts Receivable—Other.    Accounts receivable—other primarily represents amounts owed from dealers in a net receivable position primarily as a result of customer contract cancelations or settlement agreements and receivables related to the sale of inventory.

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Inventory

Inventory primarily represents energy storage systems, photovoltaic modules, inverters, meters and other associated equipment purchased and held for use as original parts on new solar energy systems or replacement parts on existing solar energy systems. We record inventory in other current assets in the consolidated balance sheets at the lower of cost and net realizable value. We remove these items from inventory using the weighted-average method and (a) expense to operations and maintenance expense when installed as a replacement part for a solar energy system or (b) capitalize to property and equipment when installed as an original part on a solar energy system. We evaluate our inventory reserves and write down the estimated value of excess and obsolete inventory based upon assumptions about future demand and market conditions. The following table presents the detail of inventory as recorded in other current assets in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Energy storage systems and components	$	33,443			$	8,394
Modules and inverters	10,137				433
Meters	169				360
Total	$	43,749			$	9,187

As of December 31, 2019, we recorded accrued expenses of $15.2 million for inventory purchases.

Concentrations of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, restricted cash, accounts receivable and notes receivable. The concentrated risk associated with cash and restricted cash is mitigated by our policy of banking with creditworthy institutions. Typically, amounts on deposit with certain banking institutions exceed FDIC insurance limits. We do not generally require collateral or other security to support accounts receivable. To reduce credit risk related to our relationship with our dealers, management performs periodic credit evaluations and ongoing assessments of our dealers' financial condition.

Concentration of Services and Equipment from Dealers

We utilize a network of approximately 100 dealers as of December 31, 2019. During the year ended December 31, 2019, two dealers accounted for approximately 49% and 10% of our total expenditures to dealers relating to costs incurred for solar energy systems. During the year ended December 31, 2018, one dealer accounted for approximately 58% of our total expenditures to dealers. During the year ended December 31, 2017, three dealers accounted for approximately 32%, 27% and 13%, respectively, of our total expenditures to dealers. No other dealer accounted for more than 10% of our expenditures for solar energy systems during the years ended December 31, 2019, 2018 and 2017.

Dealer Commitments

Throughout 2019, we entered into exclusivity and other similar agreements with certain key dealers pursuant to which we have agreed to pay an incentive if such dealers install a certain minimum number of solar energy systems within specified periods. These incentives are recorded in other assets in the consolidated balance sheets and are amortized to general and administrative expense in the consolidated statements of operations generally over the term of the customer agreements, which is estimated at an average of 23 years. See Note 17, Commitments and Contingencies.

Fair Value of Financial Instruments

Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions market participants would use in pricing an asset or a liability. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes inputs that may be used to measure fair value as follows:

•	Level 1—Observable inputs that reflect unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

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•	Level 2—Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy must be determined based on the lowest level input that is significant to the fair value measurement. An assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability. Our financial instruments include accounts receivable, notes receivable, accounts payable, accrued expenses, long-term debt and interest rate swaps and swaptions. The carrying values of accounts receivable, accounts payable and accrued expenses approximate the fair values due to the fact that they are short-term in nature (Level 1). We estimate the fair value of our customer notes receivable based on interest rates currently offered under the loan program with similar maturities and terms (Level 3). We estimate the fair value of our fixed-rate long-term debt, excluding the senior secured notes for which we selected the fair value option and the convertible senior notes, based on interest rates currently offered for debt with similar maturities and terms (Level 3). We estimate the fair value of the senior secured notes and convertible senior notes based on a market approach model using Level 3 inputs that incorporates a binomial tree model and a discounted future cash flow model. We determine the fair values of the interest rate derivative transactions based on a discounted cash flow method using contractual terms of the transactions. The floating interest rate is based on observable rates consistent with the frequency of the interest cash flows (Level 2). See Note 7, Customer Notes Receivable, Note 8, Long-Term Debt and Note 9, Derivative Instruments.

Changes in fair value of the senior secured notes are included in other (income) expense in the consolidated statements of operations. The following table summarizes the change in fair value of our financial liabilities accounted for at fair value on a recurring basis using Level 3 inputs as recorded in long-term debt, net—affiliates in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Balance at beginning of period	$	—			$	—
Additions	55,506				—
Change in fair value	730				—
Extinguishment	(56,236		)		—
Balance at end of period	$	—			$	—

Derivative Instruments

Our derivative instruments consist of interest rate swaps and swaptions that are not designated as cash flow hedges or fair value hedges under accounting guidance. We use interest rate swaps and swaptions to manage our net exposure to interest rate changes. We record the derivatives in other current assets, other assets, other current liabilities and other long-term liabilities, as appropriate, in the consolidated balance sheets and the changes in fair value are recorded in interest expense, net in the consolidated statements of operations. We include unrealized gains and losses on derivatives as a non-cash reconciling item in operating activities in the consolidated statements of cash flows. We include realized gains and losses on derivatives as a change in components of operating assets and liabilities in operating activities in the consolidated statements of cash flows. See Note 9, Derivative Instruments.

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Revenue

The following table presents the detail of revenue as recorded in the consolidated statements of operations:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands)
PPA revenue	$	48,041			$	38,950			$	29,171
Lease revenue	40,191				33,079				21,866
Solar renewable energy certificate revenue	38,453				30,630				24,833
Loan revenue	1,645				933				479
Other revenue	3,226				790				507
Total	$	131,556			$	104,382			$	76,856

We recognize revenue from contracts with customers as we satisfy our performance obligations at a transaction price reflecting an amount of consideration based upon an estimated rate of return. We express this rate of return as the solar rate per kilowatt hour ("kWh") in the customer contract. The amount of revenue we recognize does not equal customer cash payments because we satisfy performance obligations ahead of cash receipt or evenly as we provide continuous access on a stand-ready basis to the solar energy system. We reflect the differences between revenue recognition and cash payments received in accounts receivable, other assets or deferred revenue, as appropriate. Revenue allocated to remaining performance obligations represents contracted revenue we have not yet recognized and includes deferred revenue as well as amounts that will be invoiced and recognized as revenue in future periods. Contracted but not yet recognized revenue was approximately $1.1 billion as of December 31, 2019, of which we expect to recognize approximately 4% over the next 12 months. We do not expect the annual recognition to vary significantly over approximately the next 20 years as the vast majority of existing solar service agreements have at least 20 years remaining, given the average age of the fleet of solar energy systems under contract is less than three years.

PPAs.    Customers purchase electricity from us under PPAs. Pursuant to ASC 606, we recognize revenue based upon the amount of electricity delivered as determined by remote monitoring equipment at solar rates specified under the PPAs. All customers must pass our credit evaluation process. The PPAs generally have a term of 25 years with an opportunity for customers to renew for up to an additional 10 years, via two five-year renewal options.

Leases.    We are the lessor under lease agreements for solar energy systems and energy storage systems, which do not meet the definition of a lease under ASC 842 and are accounted for as contracts with customers under ASC 606. We recognize revenue on a straight-line basis over the contract term as we satisfy our obligation to provide continuous access to the solar energy system. All customers must pass our credit evaluation process. The lease agreements generally have a term of 25 years with an opportunity for customers to renew for up to an additional 10 years, via two five-year renewal options.

We provide customers under our lease agreements a performance guarantee that each solar energy system will achieve a certain specified minimum solar energy production output, which is a significant proportion of its expected output. The specified minimum solar energy production output may not be achieved due to natural fluctuations in the weather or equipment failures from exposure and wear and tear outside of our control, among other factors. We determine the amount of the guaranteed output based on a number of different factors, including: (a) the specific site information relating to the tilt of the panels, azimuth (a horizontal angle measured clockwise in degrees from a reference direction) of the panels, size of the system, and shading on site; (b) the calculated amount of available irradiance (amount of energy for a given flat surface facing a specific direction) based on historical average weather data and (c) the calculated amount of energy output of the solar energy system. While actual irradiance levels can significantly change year over year due to natural fluctuations in the weather, we expect the levels to average out over the term of a 25-year lease and to approximate the levels used in determining the amount of the performance guarantee. Generally, weather fluctuations are the most likely reason a solar energy system may not achieve a certain specified minimum solar energy production output.

If the solar energy system does not produce the guaranteed production amount, we are required to refund a portion of the previously remitted customer payments, where the repayment is calculated as the product of (a) the shortfall production amount and (b) the dollar amount (guaranteed rate) per kWh that is fixed throughout the term of the contract. These remittances of a customer's payments, if needed, are payable in January following the end of the first three years of the solar energy system's placed in service date and then every annual period thereafter. See Note 17, Commitments and Contingencies.

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Solar Renewable Energy Certificates.    Each solar renewable energy certificate ("SREC") represents one megawatt hour (1,000 kWh) generated by a solar energy system. SRECs can be sold with or without the actual electricity associated with the renewable-based generation source. We account for the SRECs we generate from our solar energy systems as governmental incentives with no costs incurred to obtain them and do not consider those SRECs output of the underlying solar energy systems. We classify these SRECs as inventory held until sold and delivered to third parties. As we did not incur costs to obtain these governmental incentives, the inventory carrying value for the SRECs was $0 as of December 31, 2019 and 2018. We enter into economic hedges related to expected production of SRECs through forward contracts. The contracts require us to physically deliver the SRECs upon settlement. We recognize the related revenue under ASC 606 upon satisfaction of the performance obligation to transfer the SRECs to the stated counterparty. Payments are typically received within one month of transferring the SREC to the counterparty. The costs related to the sales of SRECs are limited to broker fees (included in cost of revenue—other), which are only paid in connection with certain transactions.

Loans.    See discussion of loan revenue in the "Loans" section below.

Other Revenue.    Other revenue includes certain state incentives, revenue from the direct sale of energy storage systems to customers and sales of service plans. We recognize revenue from state incentives in the periods in which they are incurred. We recognize revenue from the direct sale of energy storage systems in the period in which the storage components are placed in service. Service plans are available to customers whose solar energy system was not originally sold by Sunnova. We recognize revenue from service plan contracts over the life of the contract, which is typically five years.

Loans

We offer a loan program, under which the customer finances the purchase of a solar energy system or energy storage system through a solar service agreement, typically for a term of 10 or 25 years. We recognize cash payments received from customers on a monthly basis under our loan program (a) as interest income, to the extent attributable to earned interest on the contract that financed the customer's purchase of the solar energy system or energy storage system; (b) as a reduction of a note receivable on the balance sheet, to the extent attributable to a return of principal (whether scheduled or prepaid) on the contract that financed the customer's purchase of the solar energy system or energy storage system; and (c) as revenue, to the extent attributable to payments for operations and maintenance services provided by us.

To qualify for the loan program, a customer must pass our credit evaluation process, which requires the customer to have a minimum FICO^® score of 650 to 720 depending on certain circumstances, and we secure the loans with the solar energy systems or energy storage systems financed. In determining the allowance for uncollectible notes receivable, we identify customers with known disputes or collection issues and consider our historical level of credit losses and current economic trends that might impact the level of future credit losses. We write off customer notes receivable when they are deemed uncollectible. In addition, there were no customer notes receivable not accruing interest and $151,000 and $81,000 of past due customer notes receivable as of December 31, 2019 and 2018, respectively. See Note 7, Customer Notes Receivable.

The following table presents the changes in the allowance for losses recorded against customer notes receivable in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Balance at beginning of period	$	710			$	602
Bad debt expense	419				238
Write off of uncollectible accounts	(38		)		(130		)
Balance at end of period	$	1,091			$	710

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Deferred Revenue

Deferred revenue consists of amounts for which the criteria for revenue recognition have not yet been met and includes (a) down payments and partial or full prepayments from customers, (b) differences due to the timing of energy production versus billing for certain types of PPAs and (c) payments for unfulfilled performance obligations from the loan program which will be recognized over the remaining term of the respective solar service agreements. Deferred revenue was $19.0 million as of December 31, 2017. The following table presents the detail of deferred revenue as recorded in other current liabilities and other long-term liabilities in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Loans	$	46,958			$	27,793
PPAs and leases	8,895				6,255
SRECs	3,000				—
Total (1)	$	58,853			$	34,048

(1) Of this amount, $2.1 million and $1.6 million is recorded in other current liabilities as of December 31, 2019 and 2018, respectively.

During the years ended December 31, 2019 and 2018, we recognized revenue of $3.0 million and $2.0 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods.

Performance Guarantee Obligations

We guarantee certain specified minimum solar energy production output under our leases and loan agreements, generally over a term of 25 years. The amounts are generally measured and credited to the customer's account in January following the end of the first three years of the solar energy system's placed in service date and then every annual period thereafter. We monitor the solar energy systems to ensure these outputs are achieved. We evaluate if any amounts are due to our customers based upon not meeting the guaranteed solar energy production outputs at each reporting period end. For leases, these estimated amounts are recorded as a reduction to revenues from customers and a current or long-term liability, as applicable. For loans, these estimated amounts are recorded as an increase to cost of revenue—other and a current or long-term liability, as applicable. See Note 17, Commitments and Contingencies.

Property and Equipment

Solar Energy Systems.    Depreciation and amortization of solar energy systems are calculated using the straight-line method over the estimated useful lives of the solar energy systems and are included in cost of revenue—depreciation.

While solar energy systems are in the design, construction and installation stages prior to being placed in service, the development of the systems is accounted for through construction in progress. The components of the design, construction and installation of the solar energy systems, which are installed on or near residential rooftops, are as follows:

•Dealer's costs (engineering, procurement and construction)

•Direct costs (costs directly related to a solar energy system)

•Indirect costs (costs incurred in the design, construction and installation of the solar energy system but not directly

associated with a particular asset)

Solar energy systems are carried at the cost of acquisition or construction (including design and installation) less certain utility rebates and federal and state tax incentives (including federal investment tax credits, known as "Section 48(a) ITCs") and are depreciated over the useful lives of the assets. We account for the Section 48(a) ITCs in accordance with the deferral gross up method, thus reducing the cost basis of the qualifying solar energy systems by the rate applicable to Section 48(a) ITCs, currently 30% for qualifying solar energy systems that began construction before 2020. However, as discussed in Note 10, Income Taxes, we have a full valuation allowance, which is recorded against deferred income taxes and requires the gross up of the basis of the qualifying solar energy systems back to the full value. Depreciation begins when a solar energy system is placed in service. Costs associated with repair and maintenance of a solar energy system are expensed as incurred. Costs associated with improvements to a solar energy system, which extend the life, increase the capacity or improve the efficiency of the systems, are capitalized and depreciated over the remaining life of the asset.

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Property and Equipment, Excluding Solar Energy Systems.    Property and equipment, including information technology system projects, computers and equipment, leasehold improvements, furniture and fixtures, vehicles and other property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the respective assets and are included in general and administrative expense. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives. Upon disposition, the cost and related accumulated depreciation of the assets are removed from property and equipment and the resulting gain or loss is reflected in the consolidated statements of operations. Repair and maintenance costs are expensed as incurred.

Capitalization of Interest Costs.    We capitalize interest on solar energy systems during the development, design, installation and test phase (construction), generally over a period of four months. We determine which debt instruments represent a reasonable measure of the cost of financing construction in terms of interest costs incurred that otherwise could have been avoided. Interest can only be capitalized for debt instruments related to financing the construction of solar energy systems; interest cannot be capitalized for debt instruments related to the acquisition of solar energy systems already constructed and/or in service. These debt instruments and associated interest costs are included in the calculation of the weighted average interest rate used for determining the capitalization rate. Once a solar energy system is placed in service, capitalized interest, as a component of the total cost of the construction, is depreciated over the estimated useful life of the solar energy system.

Intangibles

Our intangible assets primarily consist of a software license and a trademark related to the design process of solar energy systems and are stated at cost less accumulated amortization. We amortize intangible assets to general and administrative expense over a useful life of three years using the straight-line method. The following table presents the detail of intangible assets as recorded in other assets in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Software license	$	331			$	331
Trademark	68				68
Other	88				—
Intangibles, gross	487				399
Less: accumulated amortization	(420		)		(399		)
Intangibles, net	$	67			$	—

As of December 31, 2019, amortization expense related to intangible assets to be recognized is $29,000 per year for 2020 and 2021, $9,000 for 2022 and $0 thereafter.

Deferred Financing Costs

Deferred financing costs are capitalized and amortized to interest expense, net over the term of the related debt using the effective interest method for term loans or the straight-line method for revolving credit facilities. The unamortized balance of deferred financing costs is included in current portion of long-term debt, current portion of long-term debt—affiliates, long-term debt, net and long-term debt, net—affiliates (see Note 8, Long-Term Debt) for term loans or in other current assets and other assets for revolving credit facilities and debt and equity transactions not yet completed, in the consolidated balance sheets. The following table presents the changes in net deferred financing costs:

	As of December 31,
	2019				2018
	(in thousands)
Balance at beginning of period	$	22,712			$	25,188
Capitalized	12,731				6,598
Amortized	(9,822		)		(9,074		)
Balance at end of period	$	25,621			$	22,712

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AROs

We have AROs arising from contractual requirements to perform certain asset retirement activities at the time the solar energy systems are disposed. We recognize an ARO at the point an obligating event takes place, typically when the solar energy system is placed in service. An asset is considered retired when it is permanently taken out of service, such as through a sale or disposal.

The liability is initially measured at fair value (as a Level 3 measurement) based on the present value of estimated removal and restoration costs and subsequently adjusted for changes in the underlying assumptions and for accretion expense. The accretion expense is recognized in general and administrative expense in the consolidated statements of operations. The corresponding asset retirement costs are capitalized as part of the carrying amount of the solar energy system and depreciated (for which the expense is included in cost of revenue—depreciation) over the solar energy system's remaining useful life. See Note 6, AROs.

Warranty Obligations

In connection with our solar service agreements, we warrant the solar energy systems against defects in workmanship, against component or materials breakdowns and against any damages to rooftops during the installation process. The dealers' warranties on the workmanship, including work during the installation process, and the manufacturers' warranties over component parts have a range of warranty periods which are generally 10 to 25 years. As of December 31, 2019 and 2018, we recorded a warranty reserve of an insignificant amount.

Advertising Costs

We expense advertising costs as they are incurred to general and administrative expense in the consolidated statements of operations. We recognized advertising expense of $1.0 million, $191,000 and $52,000 during the years ended December 31, 2019, 2018 and 2017, respectively.

Defined Contribution Plan

In April 2015, we established the Sunnova Energy Corporation 401(k) Profit Sharing Plan ("401(k) plan") available to employees who meet the 401(k) plan's eligibility requirements. The 401(k) plan allows participants to contribute a percentage of their compensation to the 401(k) plan up to the limits set forth in the Internal Revenue Code. We may make additional discretionary contributions to the 401(k) plan as a percentage of total participant contributions, subject to established limits. Participants are fully vested in their contributions and any safe harbor matching contributions we make. We made safe harbor matching contributions of $736,000, $551,000 and $458,000 during the years ended December 31, 2019, 2018 and 2017, respectively, which are included in general and administrative expense in the consolidated statements of operations.

Income Taxes

We account for income taxes under an asset and liability approach. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss, carryforwards, and other tax credits measured by applying currently enacted tax laws. A valuation allowance is provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized.

We determine whether a tax position taken in a filed tax return, planned to be taken in a future tax return or claim, or otherwise subject to interpretation, is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position, or prospectively approved when such approval may be sought in advance. We use a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates it is more likely than not the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit or obligation as the largest amount that is more than 50% likely of being realized upon ultimate settlement. See Note 10, Income Taxes.

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Comprehensive Income (Loss)

We are required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss). There were no differences between comprehensive loss and net loss as reported in the consolidated statements of operations for the periods presented.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals as considered necessary. Impairment charges are included in operations and maintenance expense for solar energy systems that relate to revenue from contracts with customers and general and administrative expense for all other property and equipment and other long-lived assets. During the years ended December 31, 2019, 2018 and 2017, we recognized net losses on disposals and impairment expense of $1.8 million, $7.6 million and $1.8 million, respectively, of which $1.8 million, $7.4 million and $1.8 million, respectively, is recorded in operations and maintenance expense and an insignificant amount is recorded in general and administrative expense. Of the total amount of net losses on disposals and impairment expense for the years ended December 31, 2019, 2018 and 2017, $54,000, $5.8 million and $823,000, respectively, is related to natural disaster losses. See Note 4, Natural Disaster Losses.

Segment Information

Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is the chief executive officer. Based on the financial information presented to and reviewed by our chief operating decision maker in deciding how to allocate resources and in assessing performance, we have determined we have a single reportable segment: solar energy products and services. Our principal operations, revenue and decision-making functions are located in the U.S.

Basic and Diluted Net Income (Loss) Per Share

Our basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to the common stockholders by the weighted-average number of shares of common stock outstanding for the period. Cumulative dividends owed to convertible preferred stockholders (as defined in Note 14, Stockholders' Equity) decrease (increase) the income (loss) available to common stockholders.

The diluted net income (loss) per share attributable to common stockholders is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method or the if-converted method, as applicable. During periods in which we incur a net loss attributable to common stockholders, stock options are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive. See Note 16, Basic and Diluted Net Loss Per Share.

Equity-Based Compensation

We account for equity-based compensation, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards. Equity-based compensation expense includes the compensation cost for all share-based awards granted to employees, consultants and members of our board of directors (our "Board") based on the grant date fair value estimate. This also applies to awards modified, repurchased or canceled during the periods reported. We use the Black-Scholes option-pricing model to measure the fair value of stock options at the measurement date. We use the closing price of our common stock on the grant date to measure the fair value of restricted stock units at the measurement date. We account for forfeitures as they occur. Equity-based compensation expense is included in general and administrative expense in the consolidated statements of operations. See Note 15, Equity-Based Compensation.

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Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent third-party interests in the net assets of certain consolidated subsidiaries (the "tax equity entities"), which were created to finance the cost of solar energy systems under long-term solar service agreements. The contractual provisions of the financing arrangements represent substantive profit sharing arrangements. We determined the appropriate methodology for attributing income and loss to the redeemable noncontrolling interests is a balance sheet approach referred to as the hypothetical liquidation at book value ("HLBV") method. We, therefore, determine the amount of the redeemable noncontrolling interests in the net assets of the subsidiaries at each balance sheet date using the HLBV method, which is presented in the consolidated balance sheets as redeemable noncontrolling interests. Under the HLBV method, the amounts reported as redeemable noncontrolling interests in the consolidated balance sheets represent the amounts the third parties would hypothetically receive at each balance sheet date under the liquidation provisions of the financing arrangements, assuming the net assets of the subsidiaries were liquidated at the recorded amounts determined in accordance with GAAP and distributed to the third parties. The third parties' interests in the results of operations of the subsidiaries are determined as the difference in the redeemable noncontrolling interests balances in the consolidated balance sheets between the start and end of each reporting period, after taking into account any capital transactions, such as contributions and distributions, between the subsidiaries and the third parties. However, the redeemable noncontrolling interests balance is at least equal to the redemption amount. The estimated redemption value is calculated using the discounted cash flows attributable to the third parties subsequent to the reporting date. We classify redeemable noncontrolling interests with redemption features that are not solely within our control outside of permanent equity in our consolidated balance sheets.

New Accounting Guidance

New accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted as of the specified effective date.

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses, which will require entities to use a forward-looking expected loss approach instead of the incurred loss approach in effect today when estimating the allowance for credit losses. This ASU is effective for annual and interim reporting periods in 2020. In 2018 and 2019, the FASB issued the following ASUs related to ASU 2016-13: ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-05, Financial Instruments—Credit Losses: Targeted Transition Relief and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The supplemental ASUs must be adopted simultaneously with ASU 2016-13. We are currently evaluating the impact of this ASU on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. This ASU is effective for annual and interim reporting periods in 2020. We adopted this ASU in January 2020 and determined it did not have a significant impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which requires certain implementation costs to be capitalized. This ASU is effective for annual and interim reporting periods in 2020. We adopted this ASU in January 2020 and determined it did not have a significant impact on our consolidated financial statements and related disclosures.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to clarify and address implementation issues around the new standards related to credit losses, hedging and recognizing and measuring financial instruments. Amendments in this ASU related to credit losses and hedging have the same effective dates as the respective standards unless an entity has already adopted the standards, in which case the amendments are effective for annual and interim reporting periods in 2020. Amendments in this ASU related to recognizing and measuring financial instruments are effective for annual and interim reporting periods in 2020 (see ASU No. 2016-13 above). We adopted this ASU in January 2020 and determined it did not have a significant impact on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes, to remove certain exceptions and clarify and amend the existing guidance. This ASU is effective for annual and interim reporting periods in 2021. We have not yet determined the potential impact of this ASU on our consolidated financial statements and related disclosures.

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The following table presents the detail of property and equipment, net as recorded in the consolidated balance sheets:

			As of December 31,
	Useful Lives		2019				2018
	(in years)		(in thousands)
Solar energy systems	35		$	1,689,457			$	1,311,458
Construction in progress			143,449				77,847
AROs	30		26,967				17,381
Information technology systems	3		28,320				17,380
Computers and equipment	3-5		1,499				1,251
Leasehold improvements	3-6		1,014				883
Furniture and fixtures	7		735				735
Vehicles	4		1,632				548
Other	5-6		146				52
Property and equipment, gross			1,893,219				1,427,535
Less: accumulated depreciation			(148,159		)		(99,078		)
Property and equipment, net			$	1,745,060			$	1,328,457

Solar Energy Systems.    The amounts included in the above table for solar energy systems and substantially all the construction in progress relate to our customer contracts (including PPAs and leases). These assets had accumulated depreciation of $130.9 million and $87.6 million as of December 31, 2019 and 2018, respectively.

Capitalization of Interest Costs.    We capitalized interest costs of $216,000 during the year ended December 31, 2017, which were included in property and equipment. Due to the structure of our financing arrangements, interest no longer qualified for capitalization after March 2017.

We have insurance coverage related to property damage and business interruption. When a solar energy system is damaged by a natural disaster, we impair all or a portion of the net book value to operations and maintenance expense in the period for which the amount is probable and can be reasonably estimated. Insurance proceeds for property damage, up to the amount of impairment expense recorded for property damage, are estimated and recorded as a receivable (included in accounts receivable—other in the consolidated balance sheet) and a reduction to operations and maintenance expense when the receipt of the proceeds is deemed probable. Insurance proceeds for property damage that exceed the amount of impairment expense recorded and insurance proceeds related to business interruption are recorded when received, as a reduction to operations and maintenance expense. Costs incurred to repair or replace a solar energy system are capitalized (included in property and equipment, net in the consolidated balance sheet) and are classified as an investing cash outflow in the consolidated statement of cash flows. Insurance proceeds received for property damage are classified as an investing cash inflow in the consolidated statement of cash flows. Insurance proceeds received for business interruption are classified as an operating cash inflow in the consolidated statement of cash flows.

Hurricane Harvey in Texas.    In August 2017, Hurricane Harvey made landfall on the coast of Texas causing unprecedented flooding and significant damage to residences and businesses. During 2017, we incurred an insignificant amount of costs for Hurricane Harvey related to maintaining business continuity and assisting employees displaced from their homes. These costs were included in general and administrative expense in the consolidated statement of operations.

Hurricane Maria in Puerto Rico.    In September 2017, Hurricane Maria made landfall in Puerto Rico causing catastrophic wind and water damage to the island's infrastructure, residences and businesses. A majority of Puerto Rico was left without electrical power. In addition, other basic utility and infrastructure services (such as water, communications, ports and other transportation networks) were severely curtailed and the government imposed a mandatory curfew. Prior to the hurricane, we implemented certain business continuity measures. Although our critical business systems experienced minimal outages from the hurricane, our physical operations in Puerto Rico were significantly disrupted primarily due to the lack of electricity and communications and limited accessibility.

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Throughout 2017 and 2018, we completed assessments of solar energy systems in Puerto Rico and submitted requests to the insurance company for recoveries for damage to solar energy systems and business interruption. However, we did not complete all reasonable estimates until December 2018 due to the overall impact of the hurricane on Puerto Rico. Although our solar energy systems are distributed energy sources, most are dependent upon complementary grid power to operate and all are dependent upon cellular communication services for operations and monitoring and evaluation. The outage was the largest and longest in U.S. history. As such, many repairs and estimates of damages and lost customers lagged the restoration of these services. Given the loss of grid power and cellular communication and the fact that much of Puerto Rico was not navigable, assessment of our solar energy systems and status of our customers continued through the fourth quarter of 2018. We recorded adjustments based on the estimated amount of property damage as of December 31, 2017. The final settlement with the insurance company was completed and those funds were received in the fourth quarter of 2018.

As of December 31, 2018, we received $9.8 million of insurance proceeds, of which $5.8 million represented recoveries for damage to solar energy systems and $4.0 million represented recoveries for business interruption. During 2017 and 2018, we reassessed the collectability of the receivables related to the solar energy systems in Puerto Rico and determined there were no significant write-offs or allowances needed.

Wildfires in California.    In October 2017 and November 2018, major wildfires burned throughout California and damaged several customers' homes and solar energy systems. These wildfires did not have a significant impact on our results of operations or financial position. The related impairments and insurance recoveries are included in the table below.

Typhoon Yutu in Saipan.    In October 2018, typhoon Yutu impacted Saipan causing massive wind and water damage to the island's infrastructure, residences and businesses. Several customer homes and solar energy systems were damaged; however, typhoon Yutu did not have a significant impact on our results of operations or financial position. The related impairments and insurance recoveries are included in the table below.

As of December 31, 2019, substantially all solar energy systems damaged by a natural disaster that were deemed economical to repair have been repaired. The impact of the natural disaster losses as recorded in the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017 is as follows:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands)
Operations and maintenance expense:
Impairment of solar energy systems due to natural disaster losses	$	—			$	5,840			$	6,745
Insurance proceeds received/expected to be received—property damage	54				(53		)		(5,922		)
Insurance proceeds received—business interruption	—				(2,693		)		(1,307		)
Other natural disaster-related charges	—				1,679				65
General and administrative expense:
Other natural disaster-related charges	—				750				146
Total	$	54			$	5,523			$	(273	)

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The following table presents the detail of other current assets as recorded in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Prepaid inventory	$	96,167			$	—
Inventory	43,749				9,187
Current portion of customer notes receivable	13,758				7,601
Other prepaid assets	7,380				2,739
Current portion of other notes receivable	982				1,522
Deferred receivables	1,506				555
Restricted cash	10,474				5,190
Total	$	174,016			$	26,794

The following table presents the detail of other current liabilities as recorded in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Interest payable	$	14,680			$	8,150
Current portion of performance guarantee obligations	4,067				2,580
Current portion of lease liability	561				871
Deferred revenue	2,086				1,593
Other	410				20
Total	$	21,804			$	13,214

AROs consist primarily of costs to remove solar energy system assets and costs to restore the solar energy system sites to the original condition, which we estimate based on current market rates. For each solar energy system, we recognize the fair value of the ARO as a liability and capitalize that cost as part of the cost basis of the related solar energy system. The related assets are depreciated on a straight-line basis over 30 years, which is the estimated average time a solar energy system will be installed in a location before being removed, and the related liabilities are accreted to the full value over the same period of time. We revise our estimated future liabilities based on recent actual experiences, including third party cost estimates, average size of solar energy systems and inflation rates, which we evaluate at least annually. Changes in our estimated future liabilities are recorded as either a reduction or addition in the carrying amount of the remaining unamortized asset and the ARO and either decrease or increase our depreciation and accretion expense amounts prospectively. The following table presents the changes in AROs as recorded in other long-term liabilities in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Balance at beginning of period	$	20,033			$	15,347
Additional obligations incurred	4,641				3,607
Accretion expense	1,443				1,183
Change in estimate	4,983				—
Other	(47		)		(104		)
Balance at end of period	$	31,053			$	20,033

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We offer a loan program, under which the customer finances the purchase of a solar energy system or energy storage system through a solar service agreement, typically for a term of 10 or 25 years. As of December 31, 2019, we recorded $311.7 million of notes receivable under the loan program, of which $13.8 million is included in other current assets and $298.0 million is included in customer notes receivable, net in the consolidated balance sheet. As of December 31, 2018, we recorded $179.6 million of notes receivable under the loan program, of which $7.6 million is included in other current assets and $172.0 million is included in customer notes receivable, net in the consolidated balance sheet. As of December 31, 2019 and 2018, we invested $37.1 million and $20.4 million, respectively, in loan solar energy systems and energy storage systems not yet placed in service, which is included in other assets in the consolidated balance sheets. The fair values of our customer notes receivable and the corresponding carrying amounts are as follows:

	As of December 31, 2019								As of December 31, 2018
	Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
	(in thousands)
Customer notes receivable	$	311,732			$	314,222			$	179,632			$	179,990

Interest income from customer notes receivable is recorded in interest income in the consolidated statements of operations. For the years ended December 31, 2019, 2018 and 2017, interest income related to our customer notes receivable was $11.6 million, $6.1 million and $3.0 million, respectively.

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Our subsidiaries with long-term debt include SEI, Sunnova Energy Corporation, Sunnova Asset Portfolio 4, LLC ("AP4"), AP6WII, HELI, LAPH, EZOP, TEPIH, TEPIIH, HELII, RAYSI, HELIII, TEPH and TEPINV. The following table presents the detail of long-term debt, net and long-term debt, net—affiliates as recorded in the consolidated balance sheets:

	Year Ended December 31, 2019 Weighted Average Effective Interest Rates			As of December 31, 2019								Year Ended December 31, 2018 Weighted Average Effective Interest Rates			As of December 31, 2018
				Long-term				Current							Long-term				Current
	(in thousands, except interest rates)
SEI
Convertible senior notes	7.75	%		$	55,000			$	—						$	—			$	—
Debt discount, net				(16,913		)		—							—				—
Deferred financing costs, net				(480		)		—							—				—
Sunnova Energy Corporation
Senior secured notes	10.02	%		—				—				14.89	%		40,000				—
Convertible notes	13.34	%		—				—				12.20	%		—				15,000
Notes payable	3.22	%		—				2,428							—				—
Paid-in-kind				—				—							4,219				1,500
Deferred financing costs, net				—				—							(38		)		—
AP4
Secured term loan	5.61	%		86,369				6,109				5.25	%		101,026				3,036
Debt discount, net				(452		)		—							(202		)		—
Deferred financing costs, net				(196		)		—							(418		)		—
AP6WII
Warehouse credit facility	10.01	%		—				—				8.47	%		54,603				—
Deferred financing costs, net				—				—							(309		)		—
HELI
Solar asset-backed notes	6.56	%		213,632				8,673				6.47	%		224,835				10,522
Debt discount, net				(3,169		)		—							(4,124		)		—
Deferred financing costs, net				(5,586		)		—							(7,217		)		—
LAPH
Secured term loan	7.71	%		41,484				1,392				8.36	%		43,167				1,038
Debt discount, net				(401		)		—							(552		)		—
Deferred financing costs, net				(356		)		—							(482		)		—
EZOP
Warehouse credit facility	6.60	%		121,400				—				9.68	%		58,200				—
Debt discount, net				(2,178		)		—							—				—
TEPIH
Secured term loan	25.17	%		—				—				6.55	%		107,239				3,356
Debt discount, net				—				—							(62		)		—
Deferred financing costs, net				—				—							(4,892		)		—
TEPIIH
Revolving credit facility	6.36	%		234,650				—				8.41	%		57,552				—
Debt discount, net				(2,219		)		—							(1,710		)		—
Deferred financing costs, net				—				—							(1,612		)		—
HELII
Solar asset-backed notes	5.77	%		241,309				13,005				5.60	%		253,687				9,013
Debt discount, net				(49		)		—							(55		)		—
Deferred financing costs, net				(5,873		)		—							(6,425		)		—
RAYSI
Solar asset-backed notes	5.47	%		126,828				6,327							—				—
Debt discount, net				(1,547		)		—							—				—
Deferred financing costs, net				(4,759		)		—							—				—
HELIII
Solar loan-backed notes	4.03	%		135,543				19,030							—				—
Debt discount, net				(2,532		)		—							—				—
Deferred financing costs, net				(2,410		)		—							—				—

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TEPH
Revolving credit facility	6.70	%		90,325				—							—				—
Debt discount, net				(645		)		—							—				—
TEPINV
Revolving credit facility	7.95	%		54,707				40,500							—				—
Debt discount, net				(2,856		)		—							—				—
Deferred financing costs, net				(2,207		)		—							—				—
Total				$	1,346,419			$	97,464						$	916,430			$	43,465

Availability.    As of December 31, 2019, we had $88.3 million of available borrowing capacity under our various financing arrangements, consisting of $78.6 million under the EZOP warehouse credit facility and $9.7 million under the TEPH revolving credit facility. There was no available borrowing capacity under any of our other financing arrangements. As of December 31, 2019, we were in compliance with all debt covenants under our financing arrangements.

Weighted Average Effective Interest Rates.    The weighted average effective interest rates disclosed in the table above are the weighted average stated interest rates for each debt instrument plus the effect on interest expense for other items classified as interest expense, such as the amortization of deferred financing costs, amortization of debt discounts and commitment fees on unused balances for the period of time the debt was outstanding during the indicated periods.

SEI Convertible Senior Notes.    In December 2019, we issued convertible senior notes due January 2027 in an aggregate principal amount of $55.0 million to certain existing investors in a private placement. In addition, we granted the investors of the convertible senior notes an option, subject to our consent, to purchase up to an additional $20.0 million aggregate principal amount of convertible senior notes on the same terms and conditions, which such option will expire in March 2020. The convertible senior notes bear interest at a rate of 7.75% per annum and is due quarterly. If we fail to satisfy certain registration requirements the convertible senior notes will bear additional interest at a rate of 0.25% per annum for each 90-day period such requirements are not met, up to a maximum of 2.00% per annum.

The convertible senior notes are convertible into our common stock at the option of the holders at any time prior to the close of business on the business day immediately preceding December 23, 2021 upon a change of control event. On or after December 23, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may, at their option, convert all or any portion of their convertible senior notes, in multiples of $1,000 principal amount. Upon conversion, we may satisfy our conversion obligation by paying and/or delivering, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at our option, subject to certain terms and conditions. The conversion rate for the convertible senior notes is 76.9231 shares of common stock per $1,000 principal amount of convertible senior notes, plus accrued and unpaid interest, which is equivalent to an initial conversion price (excluding interest) of approximately $13.00 per share of common stock. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the convertible senior notes. On and after December 23, 2022, we have the right to cause the conversion of the convertible senior notes if certain specified common stock price and volume conditions are met.

We may, at our option, redeem for cash all or any portion of the convertible senior notes plus any accrued and unpaid interest to, but excluding, the redemption date at a redemption price equal to the following percentage of aggregate principal amount of convertible senior notes so redeemed:

Period		Percentage
At any time prior to December 23, 2021		120%
At any time on and after December 23, 2021 but prior to December 23, 2023		115%
At any time on and after December 23, 2023		110%

On and after September 23, 2024, the holders of the convertible senior notes have the option to require us to repurchase their convertible senior notes for cash at a purchase price of 110% of the aggregate principal amount repurchased, plus accrued and unpaid interest to the date of repurchase. The convertible senior notes include customary covenants and set forth certain events of default after which the convertible senior notes may be declared immediately due and payable.

For accounting purposes we separated the convertible senior notes into liability and equity components. As of December 31, 2019, the carrying amount of the liability component for the convertible senior notes of approximately $37.6 million (net of an unamortized debt discount of $16.9 million and unamortized issuance costs of $480,000) was determined based on a

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discounted cash flow analysis and a binomial lattice model. The valuation required the use of Level 3 unobservable inputs and subjective assumptions, including but not limited to, the stock price volatility and bond yield. The use of alternative market assumptions and estimation methodologies could have had an effect on these estimates of fair value. As of December 31, 2019, the carrying amount of the equity component for the convertible senior notes of approximately $14.0 million (net of unamortized issuance costs of $179,000), representing the conversion option, was determined by deducting the carrying amount of the liability components from the principal amount of the convertible senior notes. This difference between the principal amount of the convertible senior notes and the liability component represents the debt discount, presented as a reduction to the convertible senior notes in the consolidated balance sheet and is amortized to interest expense, net using the effective interest method over the remaining term of the convertible senior notes. The equity component of the convertible senior notes is included in additional paid-in-capital in the consolidated balance sheet and is not remeasured as long as it continues to meet the conditions for equity classification.

Sunnova Energy Corporation Senior Secured Notes.    In April 2017, we issued senior secured notes due October 2018 in an aggregate principal amount of $80.0 million to certain existing investors. As part of the transaction, certain existing investors were required to commit to fund an additional $40.0 million to us by December 2017 in exchange for shares of Series A convertible preferred stock ("Preferred Stock Commitment"). As discussed below, we received funding for the Preferred Stock Commitment in October 2017. In addition, we were required to evidence the funding of additional subscriptions from existing or new investors for equity interests totaling $80.0 million, including the Preferred Stock Commitment that was already funded, by October 2018. The senior secured notes bore interest at an annual rate of 12.00%, of which 6.00% was payable in cash quarterly and the remaining 6.00% was payable in additional debt securities having the same terms, including maturity dates and interest rates, as the original debt securities, subject to certain conditions. This feature is commonly known as payment-in-kind and utilizing it effectively increases the principal note balance. The lenders of the senior secured notes were related parties and the related transactions have been classified as such in the consolidated balance sheets as of December 31, 2019 and 2018 and in the consolidated statements of operations and consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017 (see Note 12, Related-Party Transactions).

The terms under the senior secured notes contained certain covenants and restrictions, including the requirement that we maintain a minimum liquidity of $8.0 million at the end of each month and on a 30-day average for each month prior to the date certain affiliates of Energy Capital Partners ("ECP") had funded its portion of the Preferred Stock Commitment of $28.2 million, which ECP funded. In November 2017, the terms of the senior secured notes were amended to, among other things, allow for the issuance of Series B convertible preferred stock to certain of Sunnova Energy Corporation's affiliates. In May 2018, the terms of the senior secured notes were amended to extend the maturity date from October 2018 to January 2019. In January 2019, we amended the terms of the senior secured notes to, among other things, extend the maturity date from January 2019 to July 2019. In April 2019, we further amended the terms of the senior secured notes to, among other things, (a) further extend the maturity date from July 2019 to March 2021, (b) decrease the interest rate from 12.00% per annum to 9.50% per annum, of which 4.75% was payable in cash quarterly and the remaining 4.75% was payable in additional debt securities (i.e. payment-in-kind) and (c) include a conversion feature. The April 2019 amendment resulted in a loss on extinguishment under GAAP of $10.6 million related to the difference between the net carrying value of the senior secured notes prior to the amendment and the fair value of the notes after the amendment. In connection with our IPO, we exercised our right to redeem all the senior secured notes for an aggregate amount of $57.1 million for cash. The aggregate redemption price included the principal amount outstanding of $56.2 million plus accrued and unpaid cash interest and pay-in-kind interest to the date of redemption.

For accounting purposes, only the conversion feature was required to be bifurcated and measured at fair value; however, we elected to make a one-time, irrevocable election to utilize the fair value option allowed under ASC 825, Financial Instruments. Under the fair value option election, we recorded the entire hybrid instrument at fair value with changes in fair value recognized in other (income) expense in the consolidated statements of operations. The fair value election resulted in an additional loss of $730,000 due to the change in fair value from April 2019 to July 2019.

Sunnova Energy Corporation Convertible Notes.    In March 2018, we issued a convertible note for $15.0 million to certain of our existing investors, which was subordinated to the senior secured notes, with a maturity date of the earlier of (a) the repayment of the Sunnova senior secured notes or (b) May 2019 (the "2018 Note"). In January 2019, we amended the terms of the 2018 Note to, among other things, extend the maturity date to the earlier of (a) the repayment of the senior secured notes or (b) December 2019. The 2018 Note bore interest at an annual rate of 12.00%, which was only payable by increasing the outstanding principal balance of the 2018 Note quarterly until maturity. Under the terms of the 2018 Note, we could not make cash payments for interest or principal on the 2018 Note until the senior secured notes had been repaid in full. The 2018 Note allowed for the holders to convert the outstanding principal balance (including accrued paid-in-kind interest) into Series A convertible preferred stock at a rate equal to the lesser of $5.3246735 per share (adjusted for subsequent stock splits,

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combinations, recapitalizations or the like affecting the Series A convertible preferred stock) or the lowest purchase price per share of Series A convertible preferred stock issued after the date of the 2018 Note.

In June 2019, we issued a convertible note for $15.0 million to certain of our existing investors, which was subordinated to the senior secured notes, with a maturity date of the earlier of (a) the repayment of our senior secured notes or (b) September 2021 (the "2019 Note"). The 2019 Note bore interest at an annual rate of 12.00%, which was only payable by increasing the outstanding principal balance of the 2019 Note quarterly until maturity. Under the terms of the 2019 Note, we were not permitted to make cash payments for interest or principal on the 2019 Note until the senior secured notes had been repaid in full. The 2019 Note allowed, if a majority of holders had elected, the conversion of the outstanding principal balance (including accrued paid-in-kind interest) into Series C convertible preferred stock at a rate equal to the lesser of $5.80 per share (adjusted for subsequent stock splits, combinations, recapitalizations or the like affecting convertible preferred stock) or the lowest purchase price per share of Series C convertible preferred stock issued after the date of the 2019 Note. In connection with our IPO, holders of the 2018 Note converted the principal amount of the 2018 Note plus any accrued and unpaid interest as of the date of conversion into 3,319,312 shares (or 1,422,767 shares as adjusted for the Reverse Stock Split) of Series A convertible preferred stock, which in turn converted into 1,422,767 shares of common stock. In addition, holders of the 2019 Note converted the principal amount of the 2019 Note plus any accrued and unpaid interest as of the date of conversion into 2,613,818 shares (or 1,120,360 shares as adjusted for the Reverse Stock Split) of Series C convertible preferred stock, which in turn converted into 1,120,360 shares of common stock.

Sunnova Energy Corporation Notes Payable.    In May 2019, we entered into an arrangement to finance $1.9 million in property insurance premiums at an annual interest rate of 5.50% over ten months. In July 2019, we entered into an arrangement to finance $4.7 million in directors and officers insurance premiums at an annual interest rate of 4.94% over eight months.

AP4 Debt.    In July 2014, we entered into a collateral-based financing agreement with Texas Capital Bank, as administrative agent, and the lenders party thereto, to obtain funding for solar energy systems, working capital and general and administrative expenses of Sunnova Energy Corporation and AP4. The initial aggregate principal amount of the commitments under the AP4 financing agreement was $90.0 million, which was increased to $110.0 million in October 2015 and then reduced to $107.1 million in December 2017. Borrowings under the AP4 financing agreement are secured by the assets of AP4, which include certain solar energy systems and the related solar service agreements, accounts receivable and note receivable.

The loans under the AP4 financing agreement bear interest at an annual rate of either LIBOR plus 3.00% or a base rate (defined as, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day; (b) the sum of the federal funds rate for such day plus 0.50%; and (c) adjusted LIBOR for such day plus 1.00%) plus 2.00%. In addition, through December 2016, the AP4 debt accrued a commitment fee at a rate equal to 0.50% per year of the daily unused amount of the commitment. In December 2016, the loans converted to an amortizing term loan and began amortizing quarterly based on a modified mortgage style amortization schedule. The terms under the AP4 financing agreement contain certain covenants and restrictions, including a ratio of consolidated EBITDA (as defined in the AP4 financing agreement) to debt service (as defined in the AP4 financing agreement) that may not be less than 1.25 to 1.00 for any four-quarter period ending as of the end of any fiscal quarter. Furthermore, the borrowers are permitted to pay distributions so long as after giving effect thereto, the debt service coverage ratio is at least 1.0 to 1.0.

In March 2017, the AP4 financing agreement was amended to, among other things, extend the maturity date from July 2019 to July 2020. In December 2017, the AP4 financing agreement was amended to, among other things, admit into the collateral pool and borrow against certain assets previously financed under another subsidiary's financing agreement, the proceeds of which were used to repay a substantial portion of the aggregate outstanding principal amount under the subsidiary's financing agreement. In December 2018, the AP4 financing agreement was amended to, among other things, extend the start date of required excess cash flow payments from January 2019 to June 2019 and add a minimum net worth requirement.

As of March 31, 2019, AP4 was not in compliance with the debt covenant regarding the ratio of consolidated EBITDA to debt service, which is an event of default. In April 2019, AP4 exercised its right to an equity cure, which allowed Sunnova Energy Corporation to contribute approximately $106,000 to AP4 and allowed AP4 to add such amount to consolidated EBITDA for purposes of recalculating the ratio as of March 31, 2019. Subsequent to the equity cure, AP4 is in compliance with the debt covenants under the AP4 financing agreement. In June 2019, we amended the AP4 financing agreement to, among other things, (a) extend the maturity date from July 2020 to January 2021, (b) decrease the applicable margin for LIBOR loans to 2.50% and (c) change the debt covenant regarding the ratio of consolidated EBITDA to debt service to be calculated based on collections from customers and other cash receipts and disbursements (instead of consolidated EBITDA). In connection with this amendment we repaid $5.0 million of outstanding borrowings under this facility. In August 2019, AP4 conveyed its ownership interest in Sunnova Lease Vehicle 3-HI, LLC to Sunnova Energy Corporation and the security interest on the assets

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of Sunnova Lease Vehicle 3-HI, LLC that were previously collateral securing the borrowings under the AP4 financing agreement was released. See Note 18, Subsequent Events.

AP6WII Debt.    In April 2016, AP6WII, a special purpose entity, entered into a secured revolving warehouse credit facility with Goldman Sachs Bank USA. The warehouse credit facility allowed for the pooling and transfer of eligible solar energy systems and related asset receivables on a non-recourse basis subject to certain limited exceptions. The assets and cash flows of AP6WII were not available to satisfy our obligations or any other affiliate of AP6WII and AP6WII was not liable for any of our obligations or any other affiliate of AP6WII. The creditors of AP6WII had no recourse to our other assets except as expressly set forth in the credit agreement.

The aggregate principal amount of commitments under the AP6WII warehouse credit facility was $175.0 million, which could be increased at AP6WII's request and the committed lender's discretion. The proceeds of the loans under the warehouse credit facility were available to purchase or otherwise acquire solar energy systems and certain related solar energy system assets (which we originated) directly from Sunnova Asset Portfolio 6, LLC ("AP6"), a wholly-owned subsidiary of Sunnova Asset Portfolio 6 Holdings, LLC ("AP6H") and sole member of AP6WII, pursuant to a sale and contribution agreement, fund certain reserve accounts that were required to be maintained by AP6WII in accordance with the credit agreement governing the warehouse credit facility, purchase interest rate swaps and swaptions in connection with borrowings and pay fees and expenses incurred in connection with the warehouse credit facility. The amount available for borrowings at any one time under the warehouse credit facility was limited to a borrowing base amount determined at each borrowing and calculated based on the aggregate discounted present value of remaining payments owed to AP6WII in respect of the solar energy systems transferred to AP6WII. The AP6WII credit facility had a maturity date of April 2020.

Interest on the borrowings under the warehouse credit facility was due monthly. During the commitment availability period, borrowings under the AP6WII warehouse credit facility bore interest at an annual rate equal to LIBOR or, if such rate was unavailable, a base rate, plus (a) the ratio of discounted cash flows for all eligible solar energy systems other than those subject to the loan program to the discounted cash flows for all eligible solar energy systems multiplied by 5.00% per year plus (b) the ratio of discounted cash flows for eligible solar energy systems subject to the loan program to the discounted cash flows for all eligible solar energy systems multiplied by 4.25% per year. After the availability period, interest accrued at an annual rate equal to LIBOR or, if such rate was unavailable, a base rate, plus (a) the ratio of discounted cash flows for all eligible solar energy systems other than those subject to the loan program to the discounted cash flows for all eligible solar energy systems multiplied by 5.50% per year plus (b) the ratio of discounted cash flows for eligible solar energy systems subject to the loan program to the discounted cash flows for all eligible solar energy systems multiplied by 4.75% per year. The warehouse credit facility required AP6WII to pay a fee based on the daily unused portion of the commitments under the warehouse credit facility. Since May 2018, the warehouse credit facility required AP6WII to pay an underutilization fee based on the prior twelve month's commitments meeting certain thresholds under the warehouse credit facility. The credit agreement was secured by a first priority security interest in all of AP6WII's assets. Revenues from the solar energy systems were deposited into accounts established pursuant to the warehouse credit facility and applied in accordance with a cash waterfall in the manner specified in the warehouse credit facility. AP6WII was also required to maintain a liquidity reserve account and an inverter replacement reserve account for the benefit of the lenders under the warehouse credit facility, each of which must remain funded at all times to the levels specified in the credit agreement (see Note 2, Significant Accounting Policies).

In connection with the AP6WII warehouse credit facility, certain of our affiliates received a fee for managing and servicing the solar energy systems pursuant to management and servicing agreements. In addition, Sunnova Energy Corporation had guaranteed (a) the manager's obligations to manage the solar energy systems pursuant to the management agreement, (b) the servicer's obligations to service the solar energy systems pursuant to the servicing agreement, (c) Sunnova Intermediate Holdings, LLC's, AP6H's and AP6's obligations to repurchase or substitute certain ineligible solar energy systems eventually sold to AP6WII pursuant to the sale and contribution agreement and (d) certain indemnification obligations related to our affiliates in connection with the AP6WII warehouse credit facility, but did not provide a general guarantee of the creditworthiness of the assets of AP6WII pledged as the collateral for the warehouse credit facility. Under the limited guarantee, Sunnova Energy Corporation was subject to certain financial covenants regarding tangible net worth and unrestricted liquidity (including unrestricted cash and availability under other debt and equity financing arrangements).

In April 2017, the AP6WII warehouse credit facility was amended to, among other things, extend the availability period from April 2017 to April 2019, extend the maturity date from April 2018 to April 2020 and change the borrowing base and interest amounts to be calculated separately for PPAs and leases versus solar energy systems subject to the loan program. In June 2019, we fully repaid the aggregate outstanding principal amount and terminated the AP6WII warehouse credit facility.

HELI Debt and Securitization.    In April 2017, we pooled and transferred eligible solar energy systems and the related asset receivables into HELI, a special purpose entity, that issued $191.8 million in aggregate principal amount of Series 2017-1

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Class A solar asset-backed notes, $18.0 million in aggregate principal amount of Series 2017-1 Class B solar asset-backed notes and $45.0 million in aggregate principal amount of Series 2017-1 Class C solar asset-backed notes (collectively, the "Notes") with a maturity date of September 2049. The Notes were issued at a discount of 0.05% for Class A, 9.28% for Class B and 8.65% for Class C and bear interest at an annual rate equal to 4.94%, 6.00% and 8.00%, respectively. As of December 31, 2019, these solar energy systems had a carrying value of $296.8 million and are included in property and equipment, net in the consolidated balance sheet. The cash flows generated by these solar energy systems are used to service the semi-annual principal and interest payments on the Notes and satisfy HELI's expenses, and any remaining cash can be distributed to Helios Depositor, LLC, HELI's sole member. In connection with the Notes, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to management and servicing agreements. In addition, Sunnova Energy Corporation has guaranteed (a) the manager's obligations to manage the solar energy systems pursuant to the management agreement, (b) the servicer's obligations to service the solar energy systems pursuant to the servicing agreement and (c) Sunnova Asset Portfolio 5, LLC's obligations to repurchase or substitute certain ineligible solar energy systems eventually sold to HELI pursuant to the sale and contribution agreement. HELI is also required to maintain a liquidity reserve account and an inverter replacement reserve account for the benefit of the lenders under the Notes, each of which must remain funded at all times to the levels specified in the Notes (see Note 2, Significant Accounting Policies). The creditors of HELI have no recourse to our other assets except as expressly set forth in the Notes.

LAPH Debt and Securitization.    In April 2017, LAPH and its wholly-owned subsidiaries Sunnova LAP I, LLC and Sunnova LAP II, LLC, entered into a term loan agreement with Credit Suisse AG, New York Branch, as administrative agent, and the lenders party thereto, for an initial aggregate committed principal amount of $260.0 million with a maturity date of December 2018, which was amended (see below). The proceeds of the loans were available to purchase or otherwise acquire solar energy systems (which we originated) directly from Sunnova Asset Portfolio 7 Holdings, LLC ("AP7H"), the sole member of LAPH, pursuant to a sale and contribution agreement, fund certain reserve accounts that are required to be maintained by the borrowers in accordance with the loan agreement and pay fees and expenses incurred in connection with the loan agreement. The amount available for borrowings at any one time under the loan agreement was limited to a borrowing base amount determined at each borrowing and calculated based on the aggregate discounted present value of remaining payments owed to LAPH and its wholly-owned subsidiaries in respect of the solar energy systems transferred to LAPH and its wholly-owned subsidiaries.

Interest on the borrowings under the LAPH loan agreement was due monthly; however, it was amended to be due quarterly in November 2018 (see below). Class A advances under the LAPH loan agreement initially bore interest at an annual rate equal to the weighted-average cost to the lender of any commercial paper (to the extent the lender funds an advance by issuing commercial paper) plus 3.30%. Class B advances bore interest at an annual rate equal to 11.00%. The loan agreement requires the borrowers to pay a fee based on the daily unused portion of the commitments under the loan agreement. Revenues from the solar energy systems will be deposited into accounts established pursuant to the loan agreement and applied in accordance with a cash waterfall in the manner specified in the loan agreement. The borrowers are also required to maintain a liquidity reserve account and an inverter replacement reserve account for the benefit of the lenders under the loan agreement, each of which must remain funded at all times to the levels specified in the loan agreement (see Note 2, Significant Accounting Policies).

In connection with the LAPH loan agreement, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to management and servicing agreements. In addition, Sunnova Energy Corporation has guaranteed (a) the manager's obligations to manage the solar energy systems pursuant to the management agreement, (b) the servicer's obligations to service the solar energy systems pursuant to the servicing agreement, (c) AP7H's obligations to repurchase or substitute certain ineligible solar energy systems sold to LAPH and its wholly-owned subsidiaries pursuant to certain sale and contribution agreements and (d) certain indemnification obligations related to its affiliates in connection with the LAPH loan agreement, but does not provide a general guarantee of the creditworthiness of the assets of LAPH and its wholly-owned subsidiaries pledged as the collateral for the loan agreement. Under the limited guarantee, Sunnova Energy Corporation is subject to certain financial covenants regarding tangible net worth, working capital and restrictions on the use of proceeds from the loan agreement.

In April 2018, the LAPH loan agreement was amended to, among other things, extend the maturity date from December 2018 to May 2019. In November 2018, the LAPH loan agreement was amended to, among other things, decrease the maximum commitment amount of Class A advances to $44.2 million and of Class B advances to $0, extend the maturity date to November 2022, change the interest on Class A advances to an annual rate equal to LIBOR plus 4.50% and change the interest collection period from monthly to quarterly.

EZOP Debt and Securitization.    In April 2017, EZOP, a special purpose entity, entered into a secured revolving warehouse credit facility with Credit Suisse AG, New York Branch, as administrative agent, and the lenders party thereto, for

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an aggregate committed amount of $100.0 million with a maturity date of April 2019. The aggregate committed amount was reduced to $70.0 million in August 2017 and in March 2019 we further amended the EZOP warehouse credit facility to, among other things, extend the maturity date from April 2019 to November 2022 and increase the aggregate committed amount to $200.0 million. The warehouse credit facility allows for the pooling and transfer of eligible loans on a non-recourse basis subject to certain limited exceptions. The proceeds of the loans under the warehouse credit facility are available to purchase or otherwise acquire loans (which we originated) directly from AP7H pursuant to a sale and contribution agreement, fund certain reserve accounts that are required to be maintained by EZOP in accordance with the credit agreement and pay fees and expenses incurred in connection with the warehouse credit facility. The amount available for borrowings at any one time under the warehouse credit facility is limited to a borrowing base amount determined at each borrowing and calculated based on the aggregate discounted present value of remaining payments owed to EZOP in respect of the loans transferred to EZOP.

Interest on the borrowings under the warehouse credit facility is due monthly. Borrowings under the EZOP warehouse credit facility bear interest at an annual rate equal to the weighted-average cost to the lender of any commercial paper (to the extent the lender funds an advance by issuing commercial paper) plus 3.50% during the commitment availability period and 4.50% after the commitment availability period. In March 2019, we amended the EZOP warehouse credit facility to, among other things, adjust the interest rate on borrowings to an annual rate of adjusted LIBOR plus either 2.15% or 3.15% per annum depending on the date of the most recent takeout transaction in respect of assets securing the credit facility. In December 2019, we further amended the EZOP warehouse credit facility to, among other things, adjust the interest rate on borrowings to an annual rate of adjusted LIBOR plus either 2.35% or 3.35% per annum depending on the date of the most recent takeout transaction in respect of assets securing the credit facility. The warehouse credit facility requires EZOP to pay a fee based on the daily unused portion of the commitments under the warehouse credit facility. Revenues from the solar energy systems will be deposited into accounts established pursuant to the warehouse credit facility and applied in accordance with a cash waterfall in the manner specified in the warehouse credit facility. EZOP is also required to maintain a liquidity reserve account and an inverter replacement reserve account for the benefit of the lenders under the warehouse credit facility, each of which must remain funded at all times to the levels specified in the credit agreement (see Note 2, Significant Accounting Policies).

In connection with the EZOP warehouse credit facility, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to management and servicing agreements. In addition, Sunnova Energy Corporation has guaranteed (a) the manager's obligations to manage the solar energy systems pursuant to the management agreement, (b) the servicer's obligations to service the solar energy systems pursuant to the servicing agreement, (c) AP7H's obligations to repurchase or substitute certain ineligible solar energy systems sold to EZOP pursuant to certain sale and contribution agreements and (d) certain indemnification obligations related to its affiliates in connection with the EZOP warehouse credit facility, but does not provide a general guarantee of the creditworthiness of the assets of EZOP pledged as the collateral for the warehouse credit facility. Under the limited guarantee, Sunnova Energy Corporation is subject to certain financial covenants regarding tangible net worth, working capital and restrictions on the use of proceeds from the warehouse credit facility.

TEPIH Debt.    In June 2017, TEPIH entered into a loan agreement with CIT Bank, N.A., as administrative agent, and the lenders party thereto. The TEPIH loan agreement allowed for borrowings based on the present value of certain estimated cash flows from subsidiaries of TEPIH. Under the TEPIH loan agreement, TEPIH could borrow up to an aggregate committed amount of $140.0 million with a required initial borrowing of $15.0 million. The proceeds of the loans under the TEPIH loan agreement were available to purchase or reimburse Sunnova TEP I Developer, LLC ("TEPID"), the sole member of TEPIH, for a portion of the financing of acquired solar energy systems (which we originated) directly from TEPID pursuant to a contribution agreement or purchase and sale agreement, fund certain reserve accounts that were required to be maintained by TEPIH in accordance with the loan agreement and pay fees and expenses incurred in connection with the TEPIH loan agreement. The amount available for borrowings at any one time under the TEPIH loan agreement was limited to a borrowing base amount determined at each borrowing and calculated based on the aggregate discounted present value of remaining payments owed to TEPIH in respect of the solar energy systems owned by certain subsidiaries of TEPIH. The TEPIH loan agreement had a maturity date of five years from the last day of the availability period, which was defined as the earlier of (a) June 2018, (b) the date the aggregate committed amount had been fully utilized or (c) the date an event of default had occurred. In June 2018, the TEPIH loan agreement was amended to extend the availability period from June 2018 to December 2018. In March 2019, we fully repaid the aggregate outstanding principal amount under the TEPIH loan agreement, which was terminated at that time.

Interest on the borrowings under the TEPIH loan agreement was due quarterly. Borrowings under the TEPIH loan agreement bore interest at an annual rate of either LIBOR plus the applicable margin or a base rate (defined as, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day, (b) the sum of the federal funds effective rate for such day plus 0.50% and (c) LIBOR for one month plus 1.00%) plus the applicable margin. The applicable margin increased during the life of the facility and was (a) 3.00% for LIBOR loans and 2.00% for base rate loans from loan inception through the last day of the availability period, (b) 3.25% for LIBOR loans and 2.25% for base rate loans from the last day of the

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availability period through the three year anniversary of the last day of the availability period and (c) 3.50% for LIBOR loans and 2.50% for base rate loans from the three year anniversary of the last day of the availability period through the maturity date.

TEPIIH Debt.    In August 2018, TEPIIH entered into a revolving credit facility with Credit Suisse AG, New York Branch, as administrative agent, and the lenders party thereto. The TEPIIH revolving credit facility allows for borrowings based on the aggregate value of solar assets owned by subsidiaries of TEPIIH subject to certain excess concentration limitations. Under the TEPIIH revolving credit facility, TEPIIH may borrow up to an initial aggregate committed amount of $125.0 million with a maximum commitment amount of $175.0 million. The proceeds from the revolving credit facility are available for funding certain reserve accounts required by the revolving credit facility, making distributions to the parent of TEPIIH and paying fees incurred in connection with closing the revolving credit facility. The TEPIIH revolving credit facility had a maturity date of August 2022. In March 2019, we amended the TEPIIH revolving credit facility to, among other things, extend the maturity date from August 2022 to November 2022, increase the aggregate committed amount to $150.0 million and increase the maximum commitment amount to $250.0 million. In September 2019, we further amended the TEPIIH revolving credit facility to, among other things, cross-collateralize the TEPIIH revolving credit facility with the TEPH revolving credit facility and implement corresponding cross-default provisions.

Interest on the borrowings under the TEPIIH revolving credit facility is due quarterly. Borrowings under the TEPIIH revolving credit facility bear interest at an annual rate of either LIBOR divided by a percentage equal to 100% minus a reserve percentage or a base rate (defined as, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day and (b) the sum of the weighted average of the rates on overnight federal funds transactions with members of the federal reserve system arranged by federal funds brokers as published for such day plus 0.50%) plus an applicable margin. See Note 18, Subsequent Events.

HELII Debt and Securitization.    In November 2018, we pooled and transferred eligible solar energy systems and the related asset receivables into HELII, a special purpose entity, that issued $202.0 million in aggregate principal amount of Series 2018-1 Class A solar asset-backed notes and $60.7 million in aggregate principal amount of Series 2018-1 Class B solar asset-backed notes (collectively, the "Notes II") with a maturity date of July 2048. The Notes II were issued at a discount of 0.02% for Class A and 0.02% for Class B and bear interest at an annual rate equal to 4.87% and 7.71%, respectively. As of December 31, 2019, these solar energy systems had a carrying value of $330.9 million and are included in property and equipment, net in the consolidated balance sheet. The cash flows generated by these solar energy systems are used to service the semi-annual principal and interest payments on the Notes II and satisfy HELII's expenses, and any remaining cash can be distributed to Helios Depositor II, LLC, HELII's sole member. In connection with the Notes II, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to management and servicing agreements. In addition, Sunnova Energy Corporation has guaranteed (a) the manager's obligations to manage the solar energy systems pursuant to the management agreement, (b) the servicer's obligations to service the solar energy systems pursuant to the servicing agreement and (c) Sunnova ABS Holdings, LLC's obligations to repurchase or substitute certain ineligible solar energy systems eventually sold to HELII pursuant to the sale and contribution agreement. HELII is also required to maintain a liquidity reserve account, an inverter replacement reserve account and a cash trap reserve account for the benefit of the lenders under the Notes II, each of which must remain funded at all times to the levels specified in the Notes II (see Note 2, Significant Accounting Policies). The creditors of HELII have no recourse to our other assets except as expressly set forth in the Notes II.

RAYSI Debt and Securitization.    In March 2019, we pooled and transferred eligible solar energy systems and the related asset receivables into RAYSI, a special purpose entity, that issued $118.1 million in aggregate principal amount of Series 2019-1 Class A solar asset-backed notes with a maturity date of April 2044 and $15.0 million in aggregate principal amount of Series 2019-1 Class B solar asset-backed notes with a maturity date of April 2034. The notes were issued with no discount for Class A and at a discount of 6.50% for Class B and bear interest at an annual rate equal to 4.95% and 6.35%, respectively. In June 2019, RAYSI issued $6.4 million in aggregate principal amount of 2019-2 Class B solar asset-backed notes with a maturity date of April 2034 pursuant to a supplemental note purchase agreement at a discount rate of 10.50% and bear interest at an annual rate equal to 6.35%. The notes issued by RAYSI are referred to as the "RAYSI Notes". The cash flows generated by these solar energy systems are used to service the semi-annual principal and interest payments on the RAYSI Notes and satisfy RAYSI's expenses, and any remaining cash can be distributed to Sunnova RAYS Depositor II, LLC, RAYSI's sole member. In connection with the RAYSI Notes, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to management, servicing, facility administration and asset management agreements. In addition, Sunnova Energy Corporation has guaranteed, among other things, (a) the obligations of certain of our subsidiaries to manage and service the solar energy systems pursuant to management, servicing, facility administration and asset management agreements, (b) the managing member's obligations, in such capacity, under the related financing fund's limited liability company agreement and (c) certain of our subsidiaries' obligations to repurchase or substitute certain ineligible solar energy systems eventually sold to RAYSI pursuant to the related sale and contribution agreement. RAYSI is also required to maintain a liquidity reserve account,

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a supplemental reserve account for inverter replacement and financing fund purchase option exercises, a storage system reserve account and a cash trap reserve account for the benefit of the lenders under the RAYSI Notes, each of which must remain funded at all times to the levels specified in the RAYSI Notes. The creditors of RAYSI have no recourse to our other assets except as expressly set forth in the RAYSI Notes.

HELIII Debt.    In June 2019, we pooled and transferred eligible solar loans and the related receivables into HELIII, a special purpose entity, that issued $139.7 million in aggregate principal amount of Series 2019-A Class A solar loan-backed notes, $14.9 million in aggregate principal amount of Series 2019-A Class B solar loan-backed notes and $13.0 million in aggregate principal amount of Series 2019-A Class C solar loan-backed notes (collectively, the "HELIII Notes") with a maturity date of June 2046. The HELIII Notes were issued at a discount of 0.03% for Class A, 0.01% for Class B and 0.03% for Class C and bear interest at an annual rate of 3.75%, 4.49% and 5.32%, respectively. The cash flows generated by these solar loans are used to service the semi-annual principal and interest payments on the HELIII Notes and satisfy HELIII's expenses, and any remaining cash can be distributed to Sunnova Helios III Depositor, LLC, HELIII's sole member. In connection with the HELIII Notes, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to management and servicing agreements. In addition, Sunnova Energy Corporation has guaranteed, among other things, (a) the obligations of certain of our subsidiaries to manage and service the solar energy systems pursuant to management and servicing agreements, (b) the managing member's obligations, in such capacity, under the related financing fund's limited liability company agreement and (c) certain of our subsidiaries' obligations to repurchase or substitute certain ineligible solar loans eventually sold to HELIII pursuant to the related sale and contribution agreement. HELIII is also required to maintain a reserve account, a supplemental reserve account for inverter replacement and a capitalized interest reserve account for the benefit of the holders of the HELIII Notes, each of which must remain funded at all times to the levels specified in the HELIII Notes. The creditors of HELIII have no recourse to our other assets except as expressly set forth in the HELIII Notes.

TEPH Debt.    In September 2019, TEPH, a wholly owned subsidiary of SEI, entered into a revolving credit facility with Credit Suisse AG, New York Branch, as administrative agent, and the lenders party thereto. The TEPH revolving credit facility allows for borrowings based on the aggregate value of solar assets owned by subsidiaries of TEPH subject to certain excess concentration limitations. Under the TEPH revolving credit facility, TEPH may borrow up to an initial aggregate committed amount of $100.0 million with a maximum commitment amount of $150.0 million and a maturity date of November 2022. The proceeds from the revolving credit facility are available for funding certain reserve accounts required by the revolving credit facility, making distributions to the parent of TEPH and paying fees incurred in connection with closing the revolving credit facility. The revolving credit facility is non-recourse to SEI and is secured by net cash flows from PPAs and leases available to the borrower after distributions to tax equity investors and payment of certain operating, maintenance and other expenses. This facility is cross-collateralized with the TEPIIH revolving credit facility and contains corresponding cross-default provisions. Sunnova Energy Corporation guarantees the performance of certain affiliates who manage the collateral related to the credit facility as well as certain indemnity and repurchase obligations. Under the limited guarantee, Sunnova Energy Corporation is subject to certain financial covenants regarding tangible net worth, working capital and restrictions on the use of proceeds from the facility. In December 2019, we amended the TEPH revolving credit facility to, among other things, (a) modify the borrowing base eligibility criteria for certain solar assets relating to the timing of the expected first payments from such solar assets, (b) modify the calculation of the amount required to be deposited into the liquidity reserve account, (c) delay the application of concentration limits for an additional 90 days, (d) temporarily increase the borrowing base applied to certain solar assets and (e) include additional provisions regarding qualified financial contract rules.

Borrowings under the TEPH revolving credit facility are made in Class A loans and Class B loans. The TEPH revolving credit facility has an advance rate equal to approximately 60% of the value of the solar projects in the portfolio that have not yet begun construction and 80% of the value of the solar projects that have reached substantial completion. Interest on the borrowings under the TEPH revolving credit facility is due quarterly. Borrowings under the TEPH revolving credit facility bear interest at an annual rate of either LIBOR divided by a percentage equal to 100% minus a reserve percentage or a base rate (defined as, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day and (b) the sum of the weighted average of the rates on overnight federal funds transactions with members of the federal reserve system arranged by federal funds brokers as published for such day plus 0.50%), plus a margin of between 2.90% and 4.30%, which varies based on criteria including (a) whether the availability period has expired (which is expected to occur in May 2022), (b) whether a takeout transaction has occurred in the last 18 months and (c) the ratio of Class A loans to Class B loans outstanding at such time.

TEPINV Debt.    In December 2019, TEPINV, a special purpose wholly owned subsidiary of SEI, entered into a secured revolving credit facility with Credit Suisse AG, New York Branch, as administrative agent, and the lenders party thereto. Under the TEPINV revolving credit facility, TEPINV may borrow up to an initial aggregate committed amount of $95.2 million with a maximum commitment amount of $137.6 million and a maturity date of the earlier of (a) 27 months from the initial purchase date of eligible equipment, (b) December 2022, (c) the date on which there is no eligible equipment in the facility and (d) such

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earlier date as when the obligations under the TEPINV revolving credit facility become due and payable, upon an acceleration or otherwise. The proceeds from the TEPINV revolving credit facility are available for purchasing certain eligible equipment the borrower intends will allow the related solar energy systems to qualify for the 30% Section 48(a) ITC by satisfying the 5% ITC Safe Harbor outlined in Internal Revenue Service ("IRS") notice 2018-59 (the "5% ITC Safe Harbor"), funding a reserve account required by the TEPINV revolving credit facility and paying fees incurred in connection with closing the TEPINV revolving credit facility.

Borrowings under the TEPINV revolving credit facility are made in Class A loans and Class B loans. The TEPINV revolving credit facility has an advance rate equal to approximately 85% of the value of certain eligible equipment. Interest on the borrowings under the TEPINV revolving credit facility is due monthly. Borrowings under the TEPINV revolving credit facility bear interest at an annual rate of either LIBOR divided by a percentage equal to 100% minus a reserve percentage or a base rate (defined as, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day, (b) the sum of the weighted average of the rates on overnight federal funds transactions with members of the federal reserve system arranged by federal funds brokers as published for such day plus 0.50% and (c) 0%), plus a margin equal to 5.99% on a blended basis. In connection with the TEPINV revolving credit facility, certain of our affiliates receive a fee for managing the equipment pursuant to a management services agreement. In addition, Sunnova Energy Corporation has guaranteed (a) the performance obligations of certain affiliates to perform under affiliate transaction documents entered into in connection with the TEPINV revolving credit facility, (b) certain indemnification obligations related to our affiliates in connection with the TEPINV revolving credit facility, (c) the borrower's obligations under the TEPINV revolving credit facility, subject to a cap of $9.5 million, which equates to 10% of the initial commitments and (d) expenses incurred by the borrower or the administrative agent in enforcing rights under certain affiliate transaction documents or the guarantee. Under the limited guarantee, Sunnova Energy Corporation is subject to certain financial covenants regarding tangible net worth, working capital and restrictions on the use of proceeds from the TEPINV revolving credit facility.

Fair Values of Long-Term Debt.    The fair values of our long-term debt and the corresponding carrying amounts are as follows:

	As of December 31,
	2019								2018
	Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
	(in thousands)
SEI convertible senior notes	$	55,000			$	37,964			$	—			$	—
Sunnova Energy Corporation senior secured notes	—				—				44,219				43,781
Sunnova Energy Corporation convertible notes	—				—				16,500				16,442
Sunnova Energy Corporation notes payable	2,428				2,428				—				—
AP4 secured term loan	92,478				92,478				104,062				104,062
AP6WII warehouse credit facility	—				—				54,603				54,603
HELI solar asset-backed notes	222,305				223,895				235,357				229,766
LAPH secured term loan	42,876				42,876				44,205				44,205
EZOP warehouse credit facility	121,400				121,400				58,200				58,200
TEPIH secured term loan	—				—				110,595				110,595
TEPIIH revolving credit facility	234,650				234,650				57,552				57,552
HELII solar asset-backed notes	254,314				281,850				262,700				274,857
RAYSI solar asset-backed notes	133,155				139,004				—				—
HELIII solar loan-backed notes	154,573				155,701				—				—
TEPH revolving credit facility	90,325				90,325				—				—
TEPINV revolving credit facility	95,207				95,207				—				—
Total (1)	$	1,498,711			$	1,517,778			$	987,993			$	994,063

(1) Amounts exclude the net deferred financing costs and net debt discounts of $54.8 million and $28.1 million as of December 31, 2019 and 2018, respectively.

For the AP4, AP6WII, LAPH, EZOP, TEPIH, TEPIIH, TEPH and TEPINV debt, the estimated fair values as of December 31, 2019 and 2018 approximate the carrying amounts due primarily to the variable nature of the interest rates of the

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underlying instruments. For the notes payable, the estimated fair value as of December 31, 2019 approximates the carrying amount due primarily to the short-term nature of the instruments. For the convertible senior notes as of December 31, 2019, the senior secured notes and convertible notes as of December 31, 2018 and for the HELI, HELII, RAYSI and HELIII debt as of December 31, 2019 and 2018, we determined the estimated fair values based on a yield analysis of similar type debt.

Principal Maturities of Long-Term Debt.    As of December 31, 2019, the principal maturities of our long-term debt were as follows:

	Principal Maturities of Long-Term Debt
	(in thousands)
2020	$	97,464
2021	154,285
2022	504,434
2023	74,649
2024	32,949
2025 and thereafter	634,930
Total	$	1,498,711

Interest Rate Swaps on AP4 Debt.    During the year ended December 31, 2018, AP4 unwound all outstanding interest rate swaps with an aggregate notional amount of $105.2 million and received cash of $666,000. AP4 subsequently entered into an interest rate swap with a notional amount of $105.2 million. In April 2018, the notional amount of the interest rate swap began decreasing to match AP4's estimated quarterly principal payments on the debt. See Note 18, Subsequent Events.

Interest Rate Swaps on AP6WII Debt.    During the years ended December 31, 2019 and 2018, AP6WII entered into interest rate swaps for an aggregate notional amount of $103.5 million and $63.6 million, respectively, to economically hedge its exposure to the variable interest rates on a portion of the outstanding AP6WII debt. During the year ended December 31, 2019, the aggregate outstanding principal amount under the AP6WII warehouse credit facility was fully repaid, AP6WII unwound interest rate swaps with an aggregate notional amount of $84.1 million and recorded a realized loss of $8.7 million. During the year ended December 31, 2018, AP6WII unwound interest rate swaps with an aggregate notional amount of $101.4 million and recorded a realized gain of $5.7 million. No collateral was posted for the interest rate swaps as they are secured under the AP6WII warehouse credit facility.

Interest Rate Swaps on LAPH Debt.    During the year ended December 31, 2018, LAPH entered into interest rate swaps for an aggregate notional amount of $44.2 million to economically hedge its exposure to the variable interest rates on a portion of the outstanding LAPH debt. In January 2019, the notional amount of the interest rate swaps began decreasing to match LAPH's estimated quarterly principal payments on the debt. During the year ended December 31, 2018, LAPH unwound an interest rate swap with a notional amount of $224.2 million and recorded a realized gain of $11.5 million. No collateral was posted for the interest rate swap as it is secured under the LAPH loan agreement.

Interest Rate Swaps on EZOP Debt.    During the years ended December 31, 2019 and 2018, EZOP entered into interest rate swaps for an aggregate notional amount of $255.8 million and $102.6 million, respectively, to economically hedge its exposure to the variable interest rates on a portion of the outstanding EZOP debt. In March 2018, the notional amount of the interest rate swaps began decreasing to match EZOP's estimated monthly principal payments on the debt. During the year ended December 31, 2019, EZOP unwound interest rate swaps with a notional amount of $264.6 million and recorded a realized gain of $81,000. No collateral was posted for the interest rate swap as it is secured under the EZOP warehouse credit facility.

Interest Rate Swaps on TEPIH Debt.    During the year ended December 31, 2018, TEPIH entered into interest rate swaps for an aggregate notional amount of $41.7 million to economically hedge its exposure to the variable interest rates on a portion of the outstanding TEPIH debt. In January 2018, the notional amount of the interest rate swaps began decreasing to match TEPIH's estimated quarterly principal payments on the debt. No collateral was posted for the interest rate swaps as they are secured under the TEPIH loan agreement. During the year ended December 31, 2019, the aggregate outstanding principal amount under the TEPIH loan agreement was fully repaid, TEPIH unwound interest rate swaps with an aggregate notional amount of $102.9 million and recorded a realized loss of $3.5 million.

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Interest Rate Swaps on TEPIIH Debt.    During the years ended December 31, 2019 and 2018, TEPIIH entered into interest rate swaps for an aggregate notional amount of $171.2 million and $54.7 million, respectively, to economically hedge its exposure to the variable interest rates on a portion of the outstanding TEPIIH debt. Beginning in October 2020, the notional amount of the interest rate swaps decreases to match TEPIIH's estimated quarterly principal payments on the debt. No collateral was posted for the interest rate swaps as they are secured under the TEPIIH revolving credit facility. See Note 18, Subsequent Events.

Interest Rate Swaps on TEPH Debt.    During the year ended December 31, 2019, TEPH entered into interest rate swaps for an aggregate notional amount of $103.1 million to economically hedge its exposure to the variable interest rates on a portion of the outstanding TEPH debt. Beginning in July 2022, the notional amount of the interest rate swap decreases to match TEPH's estimated quarterly principal payments on the debt. No collateral was posted for the interest rate swaps as they are secured under the TEPH revolving credit facility.

The following table presents a summary of the outstanding derivative instruments:

	As of December 31,
	2019										2018
	Effective Date		Termination Date		Fixed Interest Rate		Aggregate Notional Amount				Effective Date		Termination Date		Fixed Interest Rate		Aggregate Notional Amount
	(in thousands, except interest rates)
AP4	March 2018		July 2020		2.338%		$	99,762			March 2018		July 2020		2.338%		$	102,921
AP6WII					—%		—				April 2019		April 2019 - April 2029		2.402% - 3.254%		72,025
LAPH	November 2018		October 2036		3.409%		43,298				November 2018		October 2036		3.409%		44,205
EZOP	June 2019 - November 2019		July 2029 - March 2030		1.631% - 2.620%		100,083				March 2018 - April 2019		April 2019 - March 2027		1.900% - 3.014%		55,290
TEPIH					—%		—				June 2017 - December 2018		April 2033 - January 2035		2.350% - 3.104%		99,536
TEPIIH	September 2018 - November 2019		July 2031 - October 2041		1.909% - 3.383%		225,845				September 2018 - December 2018		July 2031 - October 2041		2.995% - 3.383%		54,675
TEPH	September 2019 - January 2023		January 2023 - July 2034		1.620% - 1.928%		55,115								—%		—
Total							$	524,103									$	428,652

The following table presents the fair value of the interest rate swaps as recorded in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Other assets	$	360			$	270
Other current liabilities	(397		)		—
Other long-term liabilities	(27,092		)		(8,161		)
Total, net	$	(27,129	)		$	(7,891	)

We did not designate the interest rate swaps and swaptions as hedging instruments for accounting purposes. As a result, we recognize changes in fair value immediately in interest expense, net. The following table presents the impact of the interest rate swaps and swaptions as recorded in the consolidated statements of operations:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands)
Realized (gain) loss	$	13,195			$	(17,004	)		$	3,295
Unrealized loss	19,237				6,100				5,944
Total	$	32,432			$	(10,904	)		$	9,239

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Our effective income tax rate is 0% for the years ended December 31, 2019, 2018 and 2017. Total income tax differs from the amounts computed by applying the statutory income tax rate to loss before income tax primarily as a result of our valuation allowance. The sources of these differences are as follows:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands)
Loss before income tax	$	(133,434	)		$	(68,409	)		$	(90,182	)
Statutory federal tax rate	21		%		21		%		35		%
Tax benefit computed at statutory rate	(28,021		)		(14,366		)		(31,564		)
State income tax, net of federal benefit	(8,344		)		(4,308		)		(3,406		)
Adjustments from permanent differences:
Enactment of the Tax Cuts and Jobs Act	—				—				6,118
Redeemable noncontrolling interests	(2,293		)		(1,226		)		—
ITC recapture	296				989				—
Other	852				234				1,185
Increase in valuation allowance, net	37,510				18,677				27,667
Total income tax	$	—			$	—			$	—

State, federal and foreign income taxes are $0 for the years ended December 31, 2019, 2018 and 2017. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) are as follows:

	As of December 31,
	2019				2018
	(tax effected, in thousands)
Federal net operating loss carryforward	$	169,379			$	137,810
State net operating loss carryforward	49,565				38,659
ITC carryforward	246,828				226,378
Federal unused interest deduction carryforward	22,559				10,202
Investment in certain financing arrangements	36,999				16,374
Other deferred tax assets	20,801				11,531
Deferred tax assets	546,131				440,954
Fixed asset basis difference	(235,510		)		(188,087		)
Investment in certain financing arrangements	(22,826		)		(5,391		)
Other deferred tax liabilities	(2,819		)		(874		)
Deferred tax liabilities	(261,155		)		(194,352		)
Valuation allowance	(284,976		)		(246,602		)
Net deferred tax asset	$	—			$	—

Enactment of the Tax Cuts and Jobs Act.    In December 2017, the U.S. enacted tax legislation commonly known as the Tax Cuts and Jobs Act. This law significantly changed U.S. corporate income tax laws by, among other things, reducing the U.S. federal corporate income tax rate from a highest marginal rate of 35% to a flat rate of 21% beginning in 2018. During the year ended December 31, 2017, we recognized income tax expense of $6.1 million for the revaluation of the net deferred tax

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asset based on a U.S. federal corporate income tax rate of 21%, which was fully offset by a reduction in the net deferred tax asset valuation allowance.

A full valuation allowance of $285.0 million and $246.6 million was recorded against our net deferred tax assets as of December 31, 2019 and 2018, respectively. We believe it is not more likely than not that future taxable income and the reversal of deferred tax liabilities will be sufficient to realize our net deferred tax assets. Our estimated federal tax net operating loss carryforward as of December 31, 2019 is approximately $806.6 million, which will begin to expire in 2032 if not utilized. We also generated $20.5 million of Section 48(a) ITCs in 2019 for a net $246.8 million through December 31, 2019, which will begin to expire in 2033 if not utilized.

We assessed whether we had any significant uncertain tax positions taken in a filed tax return, planned to be taken in a future tax return or claim, or otherwise subject to interpretation and determined there were none not more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position, or prospectively approved when such approval may be sought in advance. Accordingly, we recorded no reserve for uncertain tax positions. Should a provision for any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to accrue for such in our income tax accounts. There were no such accruals as of December 31, 2019 and 2018 and we do not expect a significant change in gross unrecognized tax benefits in the next twelve months. Our tax years 2012 through 2018 remain subject to examination by the IRS and the states and territories in which we operate.

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As discussed in Note 8, Long-Term Debt, in April 2017, LAPH and EZOP entered into a loan agreement and warehouse credit facility, respectively, that allows for the pooling and transfer of eligible solar energy systems and related asset receivables on a basis that is generally non-recourse. Under the agreements, the loan proceeds of LAPH and EZOP are available to purchase or otherwise acquire solar energy systems and certain related assets directly from AP7H pursuant to a sale and contribution agreement. In September 2019, TEPH entered into a loan agreement that allows TEPH to borrow on the aggregate value of solar assets owned by subsidiaries of TEPH pursuant to a pledge agreement. The following table presents the detail of assets and liabilities of certain subsidiaries as recorded in the consolidated balance sheet:

	As of December 31, 2019
	Sunnova Energy Corporation Consolidated				LAPH Consolidated				EZOP				TEPH Consolidated
	(in thousands)
Assets
Current assets:
Cash	$	82,788			$	1,323			$	2,143			$	14,672
Accounts receivable—trade, net	10,672				497				367				295
Accounts receivable, net—affiliates	—				—				78				—
Accounts receivable—other	6,147				—				—				4
Other current assets	174,016				172				5,314				47,388
Total current assets	273,623				1,992				7,902				62,359
Property and equipment, net	1,745,060				54,558				—				168,348
Customer notes receivable, net	297,975				—				125,950				—
Other assets	169,712				1,815				6,629				5,564
Total assets	$	2,486,370			$	58,365			$	140,481			$	236,271
Liabilities
Current liabilities:
Accounts payable	$	36,190			$	14			$	16			$	247
Accounts payable, net—affiliates	—				1,220				—				80,298
Accrued expenses	39,544				87				44				282
Current portion of long-term debt	97,464				1,392				—				—
Other current liabilities	21,720				818				165				697
Total current liabilities	194,918				3,531				225				81,524
Long-term debt, net	1,308,812				40,727				119,222				89,680
Other long-term liabilities	127,406				7,606				27,796				1,442
Total liabilities	$	1,631,136			$	51,864			$	147,243			$	172,646

Sunnova Debt.    Certain of our affiliates who have representatives on our Board were holders of the senior secured notes and the convertible notes. In connection with our IPO, we redeemed the senior secured notes for cash and the holders of the convertible notes converted the principal amount plus accrued and unpaid interest into shares of common stock. See Note 8, Long-Term Debt. We have classified these related transactions as such in the consolidated balance sheet as of December 31, 2018 and in the consolidated statements of operations and consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017.

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Promissory Notes.    In March 2018, we entered into a bonus agreement with an executive officer providing that each year beginning in January 2019, one-fourth of the outstanding loan balance (and related accrued and unpaid interest) under the promissory notes executed by that officer and an entity controlled by that officer, in favor of Sunnova Energy Corporation, in combined aggregate principal amounts totaling $1.7 million (the "Officer Notes"), was to be forgiven provided that officer remained employed through the applicable forgiveness date, such that the full amount of the Officer Notes would be forgiven as of January 2022. In January 2019, one-fourth of the balance of the Officer Notes was forgiven. In June 2019, as additional bonus compensation, the remaining principal and interest in the amount of $1.4 million associated with the Officer Notes was forgiven and Sunnova Energy Corporation agreed to pay the officer a bonus to reimburse the officer for the expected tax liability associated with such forgiveness of $892,000, which was paid in August 2019.

In February 2017, we formed TEPI, a subsidiary of Sunnova TEP I Manager, LLC, which is the Class B member of TEPI. In March 2017, we admitted a tax equity investor as the Class A member of TEPI. The Class A member of TEPI made an initial capital commitment of $80.0 million and increased this commitment to $91.1 million in November 2017 and to $97.5 million in December 2017. In October 2017, we formed TEPII and in December 2017, we formed TEPIIB, each a subsidiary of Sunnova TEP II Manager, LLC, which is the Class B member of TEPII and TEPIIB. In December 2017, we admitted a tax equity investor as the Class A member of TEPII and TEPIIB. The Class A member of TEPII and TEPIIB made an initial capital commitment of $30.0 million and $40.0 million to TEPII and TEPIIB, respectively, and increased this commitment to $57.0 million for TEPIIB in May 2018. In January 2019, we admitted tax equity investors as the Class A members of TEPIII, a subsidiary of Sunnova TEP III Manager, LLC which is the Class B member of TEPIII. The Class A members of TEPIII made a total capital commitment of $50.0 million. In June 2019, the Class A member of TEPII increased its commitment from $30.0 million to $45.0 million. In August 2019, we admitted a tax equity investor as the Class A member of TEPIVA, a subsidiary of Sunnova TEP IV-A Manager, LLC, which is the Class B member of TEPIVA. The Class A member of TEPIVA made a total capital commitment of $75.0 million. In December 2019, we admitted a tax equity investor as the Class A member of TEPIVB, a subsidiary of Sunnova TEP IV-B Manager, LLC, which is the Class B member of TEPIVB. The Class A member of TEPIVB made a total capital commitment of $50.0 million.

The purpose of the tax equity entities is to own and operate a portfolio of residential solar energy systems and energy storage systems. The terms of the tax equity entities' operating agreements contain allocations of income (loss), Section 48(a) ITCs and cash distributions that vary over time and adjust between the members on an agreed date (referred to as the flip date). The operating agreements specify either a calendar flip date or an internal rate of return ("IRR") flip date. The calendar flip date is based on the passage of a fixed period of time that generally corresponds to the expiration of the recapture period associated with Section 48(a) ITCs or a year thereafter. The IRR flip date is the date on which the tax equity investor has achieved a contractual rate of return. From inception through the flip date, the Class A members' allocation of income (loss) and Section 48(a) ITCs is generally 93% to 99% and the Class B members' allocation of income (loss) and Section 48(a) ITCs is generally 1% to 7%. After the related flip date, the Class A members' allocation of income (loss) will decrease to a range of 1% to 7% and the Class B members' allocation of income (loss) will increase to a range of 93% to 99%.

The redeemable noncontrolling interests are comprised of Class A units, which represent the tax equity investors' interest in the tax equity entities, and are classified between liabilities and equity in the consolidated balance sheets. Both the Class A members and Class B members have written call options to allow either member to redeem the other member's interest in the tax equity entities upon the occurrence of certain contingent events, such as bankruptcy, dissolution/liquidation and forced divestitures of the tax equity entities. Additionally, the Class B members have the option to purchase all Class A units, which is typically exercisable at any time during the nine-month period commencing upon the applicable flip date, and also have the contingent obligation to purchase all Class A units if the Class A members exercise their right to withdraw, which is typically exercisable at any time during the nine-month period commencing upon the applicable flip date. The carrying values of the redeemable noncontrolling interests were equal to the redemption values as of December 31, 2019 and 2018, with the exception of TEPIVA and TEPIVB, for which we are not required to carry a redemption value.

Guarantees.    We are contractually obligated to make certain Class A members whole for losses they may suffer in certain limited circumstances resulting from the disallowance or recapture of Section 48(a) ITCs. We have concluded the likelihood of a significant recapture event is remote and consequently have not recorded a liability for any potential recapture exposure. The maximum potential future payments we could be required to make under this obligation would depend on the IRS successfully asserting upon audit the fair market values of the solar energy systems sold or transferred to the tax equity entities as determined by us exceed the allowable basis for the systems for purposes of claiming Section 48(a) ITCs. The fair market values of the solar energy systems and related Section 48(a) ITCs are determined and the Section 48(a) ITCs are allocated to the Class A members in accordance with the tax equity entities' operating agreements. Due to uncertainties associated with estimating the timing and amounts of distributions, the likelihood of an event that may trigger repayment,

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forfeiture or recapture of Section 48(a) ITCs to such Class A members, and the fact that we cannot determine how the IRS will evaluate system values used in claiming Section 48(a) ITCs, we cannot determine the potential maximum future payments that are required under these guarantees.

From time to time, we incur non-performance fees, which may include, but is not limited to, delays in the installation process and interconnection to the power grid of solar energy systems and other factors. The non-performance fees are settled by either a reimbursement of a portion of the Class A members' capital or an additional payment to the Class A members. During the year ended December 31, 2019, we paid $1.3 million related to non-performance fees. During the years ended December 31, 2018 and 2017, we did not make any reimbursements or payments related to non-performance fees. As of December 31, 2019 and 2018, we recorded a liability of $566,000 and $1.3 million, respectively, related to non-performance fees.

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Series A and Series C Convertible Preferred Stock

The Series A and Series C convertible preferred stock was convertible into our Series A common stock at an initial conversion ratio of 1:1, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to any of our common stock and to broad-based weighted average anti-dilution protection. The Series A and Series C convertible preferred stock was mandatorily convertible into our Series A common stock upon either (a) the closing of a public offering of shares of our common stock with aggregate gross proceeds, net of underwriting discounts and commissions, of not less than $175.0 million at a per share offering price of at least 1.25 times the original purchase price of our Series A convertible preferred stock or (b) the affirmative vote of at least 80% of the shares of Series A and Series C convertible preferred stock voting as a single class and on an "as converted basis". The holders of Series A and Series C convertible preferred stock were entitled to cast the number of votes equal to the number of whole shares of Series A common stock into which the Series A and Series C convertible preferred stock held by such holders is convertible as of the record date for determining stockholders entitled to vote on such matter.

In April 2017, we increased the number of authorized voting shares of our Series A convertible preferred stock from 90,000,000 shares (or 38,576,939 shares as adjusted for the Reverse Stock Split) to 105,000,000 shares (or 45,006,429 shares as adjusted for the Reverse Stock Split). During the year ended December 31, 2017, we issued 9,409,174 shares (or 4,033,061 shares as adjusted for the Reverse Stock Split) of our Series A convertible preferred stock at $5.3246735 per share in exchange for $50.1 million in cash. Additionally, in October 2017, we retired approximately $15.2 million principal and related paid-in-kind amounts of convertible notes in exchange for 2,852,790 shares (or 1,222,799 shares as adjusted for the Reverse Stock Split) of our Series A convertible preferred stock (see Note 8, Long-Term Debt).

In March 2018, we further increased the number of authorized voting shares of our convertible preferred stock to 150,000,000 shares (or 64,294,899 shares as adjusted for the Reverse Stock Split), of which 110,000,000 shares (or 47,149,592 shares as adjusted for the Reverse Stock Split) were designated as Series A convertible preferred stock and 40,000,000 shares (or 17,145,306 shares as adjusted for the Reverse Stock Split) were designated as Series C convertible preferred stock. During the year ended December 31, 2018, we issued 30,344,827 shares (or 13,006,780 shares as adjusted for the Reverse Stock Split) of Series C convertible preferred stock at $5.80 per share in exchange for $176.0 million in cash. See below for non-cash issuance of our Series A convertible preferred stock.

In connection with our IPO, we converted 108,138,971 shares (or 46,351,877 shares as adjusted for the Reverse Stock Split) of our Series A convertible preferred stock and 32,958,645 shares (or 14,127,140 shares as adjusted for the Reverse Stock Split) of our Series C convertible preferred stock, which represented all the outstanding shares of our Series A convertible preferred stock and Series C convertible preferred stock, into 60,479,017 shares of our common stock.

Series B Convertible Preferred Stock

The Series B convertible preferred stock was convertible into our Series A common stock at a rate determined by dividing the original issue price by the conversion price of $3.73 at or after the earlier of (a) November 9, 2018 or (b) immediately prior to the consummation of a sale of Sunnova, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to any of our common stock and to broad-based weighted average anti-dilution protection. The Series B convertible preferred stock was mandatorily convertible into our Series A common stock upon either (a) the closing of the sale of shares of any of our common stock to the public at a price of at least approximately $6.6558 per share (subject to appropriate adjustments) or (b) the affirmative vote of at least 75% of the shares of Series A and Series B convertible preferred stock. Each holder of Series B convertible preferred stock was entitled to cast the number of votes equal to the number of whole shares of Series A common stock into which the Series B convertible preferred stock held by such holder were convertible as of the record date for determining stockholders entitled to vote on such matter.

In November 2017, we authorized 11,000,000 voting shares (or 4,714,959 shares as adjusted for the Reverse Stock Split) of Series B convertible preferred stock. During the year ended December 31, 2017, we issued 10,693,501 shares (or 4,583,576 shares as adjusted for the Reverse Stock Split) at $3.73 per share in exchange for $39.9 million in cash. In January 2018, we issued 30,360 shares (or 13,013 shares as adjusted for the Reverse Stock Split) of Series B convertible preferred stock at $3.73 per share in exchange for $113,000 in cash. In March 2018, we exchanged all outstanding shares of Series B convertible preferred stock, plus accrued paid-in-kind interest thereon, for 11,112,285 shares (or 4,763,086 shares as adjusted for the Reverse Stock Split) of Series A convertible preferred stock. Immediately following the exchange, we canceled all shares of Series B convertible preferred stock. As of December 31, 2018, there was no Series B convertible preferred stock outstanding.

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Series A Common Stock

In November 2017, we increased the number of authorized voting shares of Series A common stock from 150,000,000 shares (or 64,294,899 shares as adjusted for the Reverse Stock Split) to 160,000,000 shares (or 68,581,225 shares as adjusted for the Reverse Stock Split). In March 2018, we increased the number of authorized voting shares of Series A common stock to 180,000,000 shares (or 77,153,879 shares as adjusted for the Reverse Stock Split), of which 150,000,000 shares (or 64,294,899 shares as adjusted for the Reverse Stock Split) have been reserved for the issuance of Series A common stock upon the conversion of Series A or Series C convertible preferred stock. In connection with our IPO, our Series A common stock was redesignated as common stock.

Series B Common Stock

Our Series B non-voting common stock related to our equity-based compensation plans (see Note 15, Equity-Based Compensation). As of December 31, 2018, the number of shares of common stock authorized was 20,000,000 shares (or 9,544,300 shares as adjusted for the Reverse Stock Split). In connection with our IPO, we converted 23,870 shares of our non-voting Series B common stock, which represented all the outstanding shares of our Series B common stock, into 23,870 shares of our voting Series A common stock, which was subsequently redesignated as common stock.

Common Stock

On July 24, 2019, we priced 14,000,000 shares of common stock in our IPO at a public offering price of $12.00 per share and on July 25, 2019 our common stock began trading on the New York Stock Exchange under the symbol "NOVA". On August 19, 2019, we issued and sold an additional 865,267 shares of our common stock at a public offering price of $12.00 per share pursuant to the underwriters' exercise of their option to purchase additional shares. We received aggregate net proceeds from our IPO of approximately $162.3 million, after deducting underwriting discounts and commissions of approximately $10.7 million and offering expenses of approximately $5.4 million. We recorded the offering costs in other assets in our consolidated balance sheets until closing, at which time the costs were reclassified to additional paid-in capital—common stock.

We used a portion of the net proceeds from our IPO to redeem our senior secured notes. See Note 8, Long-Term Debt. We plan to use the remaining net proceeds from our IPO for general corporate purposes, including working capital, operating expenses, capital expenditures and repayment of indebtedness.

Effective December 2013 and January 2015, we established and adopted two stock option plans (collectively, the "Prior Plans") after approval by our Board. The Prior Plans provided the aggregate number of shares of common stock that may be issued pursuant to stock options shall not exceed 26,032 shares. No further awards may be made under the Prior Plans.

Effective March 2016, we established and adopted a new stock option plan (the "2016 Plan") after approval by our Board. The 2016 Plan allowed for the issuance of non-qualified and incentive stock options. The 2016 Plan provided the aggregate number of shares of common stock that may be issued pursuant to stock options shall not exceed 4,288,950 shares. No further awards may be made under the 2016 Plan.

In connection with our IPO, approximately 50% of the non-vested stock options outstanding at that time, or 995,517 stock options, became exercisable and the vesting terms for all remaining stock options were amended so all stock options will be fully vested on the first anniversary of the closing date of our IPO. We recorded an additional $3.2 million of expense in July 2019 related to the accelerated vesting periods. In addition, the stock options awarded under the Prior Plans and the 2016 Plan were adjusted for the Reorganization. The adjusted awards are subject to the same vesting conditions applicable to the awards immediately prior to the Reorganization.

In connection with our IPO, our Board adopted the 2019 Long-Term Incentive Plan (the "LTIP") to incentivize employees, officers, directors and other service providers of SEI and its affiliates. The LTIP provides for the grant, from time to time, at the discretion of our Board or a committee thereof, of stock options, stock appreciation rights, stock awards, including restricted stock and restricted stock units, performance awards and cash awards. The LTIP provides the aggregate number of shares of common stock that may be issued pursuant to awards shall not exceed 5,229,318 shares. The number of shares available for issuance under the LTIP will be increased on the first day of each fiscal year beginning in 2020, in an amount equal to the lesser of (a) a number of shares such that the total number of shares that remain available for additional grants under the LTIP equals five percent of the outstanding shares of our common stock on the last day of the immediately preceding

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fiscal year or (b) such number of shares determined by our Board. Awards granted under the LTIP contain a service condition and cease vesting for employees, consultants and directors upon termination of employment or service. During the year ended December 31, 2019, we granted 1,431,555 restricted stock units to certain employees and a director with a grant date fair value of $17.1 million, which will be recognized ratably over the applicable vesting period of each award (either one year, three years or seven years).

The Prior Plans and the 2016 Plan will only allow for settlement of stock options by the issuance of common stock and restricted stock units issued under the LTIP can generally only be settled by the issuance of common stock. Therefore, we classify the stock options and restricted stock units as equity awards. We recognize the fair value of equity-based compensation awards as compensation cost in the financial statements, beginning on the grant date. We base compensation cost on the fair value of the awards we expect to vest, recognized over the service period, and adjusted for actual forfeitures that occur before vesting. During the years ended December 31, 2019, 2018 and 2017, we recognized $9.2 million, $3.0 million and $1.5 million, respectively, of compensation expense relating to equity-based compensation awards.

Stock Options

During 2017, we, with approval of our Board, granted 950,047 stock options (or 407,204 stock options as adjusted for the Reverse Stock Split) to employees. In April 2017, we, with approval of our Board, granted 20,000 stock options (or 8,572 stock options as adjusted for the Reverse Stock Split) to a non-employee consultant. During 2017, 27,000 stock options (or 11,571 stock options as adjusted for the Reverse Stock Split) were exercised resulting in the issuance of 27,000 shares (or 11,571 shares as adjusted for the Reverse Stock Split) of common stock in exchange for an insignificant amount of cash and 4,750 stock options (or 2,034 stock options as adjusted for the Reverse Stock Split) were net exercised (and thus, no cash was received) resulting in the issuance of 2,663 shares (or 1,141 shares as adjusted for the Reverse Stock Split) of common stock. In May 2017, we modified a stock option agreement with a former employee to require a future expense of $653,000 to be recognized at the earlier of (a) a company liquidity event, as defined, or (b) April 2026, which was recognized in July 2019 in connection with our IPO.

During 2018, we, with approval of our Board, granted 4,222,850 stock options (or 1,810,016 stock options as adjusted for the Reverse Stock Split) to employees. In April 2018, we, with approval of our Board, granted 58,000 stock options (or 24,860 stock options as adjusted for the Reverse Stock Split) to non-employee consultants. During 2018, 3,250 stock options (or 1,393 stock options as adjusted for the Reverse Stock Split) were net exercised (and thus, no cash was received) resulting in the issuance of 1,505 shares (or 644 shares as adjusted for the Reverse Stock Split) of common stock.

During 2019, we, with approval of our Board, granted 94,295 stock options to employees. During 2019, 2,143 stock options were exercised resulting in the issuance of 2,143 shares of common stock in exchange for an insignificant amount of cash.

We used the following assumptions to apply the Black-Scholes option-pricing model to stock options granted during the years ended December 31, 2019, 2018 and 2017:

	Year Ended   December 31,
	2019		2018		2017
Expected dividend yield	0.00%		0.00%		0.00%
Risk-free interest rate	2.62%		2.62%		2.11%
Expected term (in years)	7.94		7.94		8.01
Volatility	81%		81%		68%

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The expected volatility was calculated based on the average historical volatilities of publicly traded peer companies determined by us. The risk-free interest rate used was based on the U.S. treasury yield curve in effect at the time of grant for the expected term of the stock options to be valued. The expected dividend yield is zero as we do not anticipate paying common stock dividends within the relevant time frame. The expected term has been estimated using the average of the contractual term and weighted average life of the stock options. The following table summarizes stock option activity:

	Number of Stock Options			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)		Weighted Average Grant Date Fair Value				Aggregate Intrinsic Value
														(in thousands)
Outstanding, December 31, 2017	3,166,008			$	15.65			8.36						$	124
Granted	1,834,876			$	16.26			9.28		$	3.52
Exercised	(1,393	)		$	1.85									$	6
Forfeited	(191,101	)		$	15.23					$	3.33
Outstanding, December 31, 2018	4,808,390			$	15.90			8.09						$	129
Granted	94,295			$	13.58			9.07		$	3.11
Exercised	(2,143	)		$	1.85									$	20
Forfeited	(596,233	)		$	15.85					$	3.48
Outstanding, December 31, 2019	4,304,309			$	15.86			7.08						$	242
Exercisable, December 31, 2019	3,339,913			$	15.86			6.89						$	242
Vested and expected to vest, December 31, 2019	4,304,309			$	15.86			7.08						$	242
Non-vested, December 31, 2018	3,124,367									$	3.48
Non-vested, December 31, 2019	964,396									$	3.52

The number of stock options that vested during the years ended December 31, 2019 and 2018 was 1,765,410 and 577,594, respectively. The grant date fair value of stock options that vested during the years ended December 31, 2019 and 2018 was $6.0 million and $1.8 million, respectively. As of December 31, 2019, there was $1.5 million of total unrecognized compensation expense related to stock options, which is expected to be recognized over the weighted average period of 0.28 years.

Restricted Stock Units

The following table summarizes restricted stock unit activity:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding, December 31, 2018	—
Granted	1,431,555			$	11.93
Forfeited	(5,416	)		$	12.00
Outstanding, December 31, 2019	1,426,139			$	11.93

No restricted stock units vested during the year ended December 31, 2019. As of December 31, 2019, there was $14.3 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over the weighted average period of 2.50 years.

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The following table sets forth the computation of our basic and diluted net loss per share:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands, except share and per share amounts)
Net loss attributable to stockholders	$	(144,351	)		$	(74,246	)		$	(91,085	)
Dividends earned on Series A convertible preferred stock	(19,271		)		(36,346		)		(29,623		)
Dividends earned on Series B convertible preferred stock	—				—				(580		)
Dividends earned on Series C convertible preferred stock	(5,454		)		(5,948		)		—
Deemed dividends on convertible preferred stock exchange	—				(19,332		)		—
Net loss attributable to common stockholders—basic and diluted	$	(169,076	)		$	(135,872	)		$	(121,288	)
Net loss per share attributable to common stockholders—basic and diluted	$	(4.14	)		$	(15.74	)		$	(14.05	)
Weighted average common shares outstanding—basic and diluted	40,797,976				8,634,477				8,632,936

The following table presents the weighted average shares of common stock equivalents that were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:

	Year Ended   December 31,
	2019			2018			2017
Equity-based compensation awards	4,954,286			4,307,614			3,408,202
Convertible preferred stock	33,960,624			53,112,246			37,977,786
Convertible senior notes	104,320			—			—

Legal.    We are a party to a number of lawsuits, claims and governmental proceedings which are ordinary, routine matters incidental to our business. In addition, in the ordinary course of business, we periodically have disputes with dealers and customers. We do not expect the outcomes of these matters to have, either individually or in the aggregate, a material adverse effect on our financial position or results of operations.

Performance Guarantee Obligations.    As of December 31, 2019, we recorded $6.5 million relating to our guarantee of certain specified minimum solar energy production output under our leases and loans, of which we include $4.1 million in other current liabilities and $2.4 million in other long-term liabilities in the consolidated balance sheet. As of December 31, 2018, we recorded $6.0 million relating to these guarantees, of which $2.6 million is included in other current liabilities and $3.5 million is included in other long-term liabilities in the consolidated balance sheet. The changes in our aggregate performance guarantee obligations are as follows:

	As of December 31,
	2019				2018
	(in thousands)
Balance at beginning of period	$	6,044			$	4,173
Accruals for obligations issued	3,101				3,033
Settlements made in cash	(2,677		)		(1,162		)
Balance at end of period	$	6,468			$	6,044

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Operating and Finance Leases.    We lease real estate and certain office equipment under operating leases and certain other office equipment under finance leases. The following table presents the detail of lease expense and lease income as recorded in general and administrative expense and other operating expense (income), respectively, in the consolidated statements of operations:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands)
Operating lease expense	$	1,248			$	972			$	972
Finance lease amortization expense	8				—				—
Short-term lease expense	48				50				21
Variable lease expense	1,037				704				661
Sublease income	(73		)		(70		)		(41		)
Total	$	2,268			$	1,656			$	1,613

The following table presents the detail of right-of-use assets and lease liabilities as recorded in other assets and other current liabilities/other long-term liabilities, respectively, in the consolidated balance sheets:

	As of December 31,
	2019				2018
	(in thousands)
Right-of-use assets:
Operating leases	$	9,668			$	2,586
Finance leases	5				—
Total right-of-use assets	$	9,673			$	2,586
Current lease liabilities:
Operating leases	$	556			$	871
Finance leases	5				—
Long-term leases liabilities
Operating leases	9,389				2,083
Total lease liabilities	$	9,950			$	2,954

Other information related to leases was as follows:

	Year Ended   December 31,
	2019				2018				2017
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,254			$	875			$	814
Financing cash flows from finance leases	8				—				—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	8,087				—				4,175
Finance leases	13				—				—

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	As of December 31,
	2019			2018
Weighted average remaining lease term (years):
Operating leases	9.41			3.42
Finance leases	0.68			—
Weighted average discount rate:
Operating leases	3.94	%		4.63	%
Finance leases	4.26	%		—	%

Future minimum lease payments under our non-cancelable leases as of December 31, 2019 were as follows:

	Operating Leases				Finance Leases
	(in thousands)
2020	$	1,037			$	5
2021	1,536				—
2022	1,559				—
2023	1,594				—
2024	1,616				—
2025 and thereafter	7,617				—
Total	14,959				5
Amount representing interest	(2,603		)		—
Amount representing leasehold incentives	(2,411		)		—
Present value of future payments	9,945				5
Current portion of lease liability	(556		)		(5		)
Long-term portion of lease liability	$	9,389			$	—

Future minimum lease payments under our non-cancelable leases as of December 31, 2018 were as follows:

	Operating Leases
	(in thousands)
2019	$	989
2020	842
2021	863
2022	512
2023	—
2024 and thereafter	—
Total	3,206
Amount representing interest	(252		)
Present value of future payments	2,954
Current portion of lease liability	(871		)
Long-term portion of lease liability	$	2,083

Letters of Credit.    In connection with various security arrangements for an office lease and merchant banking activities, we have letters of credit outstanding of $725,000 as of December 31, 2019 and 2018. The letters of credit are cash collateralized for the same amount or a lesser amount and this cash is classified as restricted cash.

Guarantees or Indemnifications.    We enter into contracts that include indemnifications and guarantee provisions. In general, we enter into contracts with indemnities for matters such as breaches of representations and warranties and covenants contained in the contract and/or against certain specified liabilities. Examples of these contracts include dealer agreements, debt

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agreements, asset purchases and sales agreements, service agreements and procurement agreements. We are unable to estimate our maximum potential exposure under these agreements until an event triggering payment occurs. We do not expect to make any material payments under these agreements.

Dealer Commitments.    As of December 31, 2019, the net unamortized balance of payments to dealers for exclusivity and other similar arrangements was $32.8 million. Under these agreements, we paid $31.7 million during the year ended December 31, 2019 and could be obligated to make maximum payments, excluding additional amounts payable on a per watt basis if even higher thresholds are met, as follows:

	Dealer Commitments
	(in thousands)
2020	$	24,184
2021	24,200
2022	25,240
2023	1,000
2024	—
2025 and thereafter	—
Total	$	74,624

Purchase Commitments.    In August 2019, we amended an agreement with a supplier in which we agreed to purchase a minimum amount of energy storage systems for five years. These purchases are recorded to inventory within other current assets in the consolidated balance sheets. Under this agreement, we could be obligated to make minimum purchases as follows:

	Purchase Commitments
	(in thousands)
2020	$	22,702
2021	27,359
2022	27,243
2023	27,053
2024	20,152
2025 and thereafter	—
Total	$	124,509

Information Technology Commitments.    We have certain long-term contractual commitments related to information technology software services and licenses. Future commitments as of December 31, 2019 were as follows:

	Information Technology Commitments
	(in thousands)
2020	$	4,962
2021	3,269
2022	10
2023	—
2024	—
2025 and thereafter	—
Total	$	8,241

Restricted Net Assets.    Our various financing agreements contain provisions that restrict the ability of certain of our consolidated subsidiaries to transfer their net assets to SEI. Such restricted net assets amounted to approximately $548.1 million as of December 31, 2019.

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SOLI Debt.    In February 2020, we pooled and transferred eligible solar energy systems and the related asset receivables into Sunnova Sol Issuer, LLC ("SOLI"), a special purpose entity, that issued $337.1 million in aggregate principal amount of Series 2020-1 Class A solar asset-backed notes and $75.4 million in aggregate principal amount of Series 2020-1 Class B solar asset-backed notes (collectively, the "SOLI Notes") with a maturity date of January 2055. The SOLI Notes were issued at a discount of 0.89% for Class A and 0.85% for Class B and bear interest at an annual rate equal to 3.35% and 5.54%, respectively. The cash flows generated by these solar energy systems are used to service the quarterly principal and interest payments on the SOLI Notes and satisfy SOLI's expenses, and any remaining cash can be distributed to Sunnova Sol Depositor, LLC, SOLI's sole member. In connection with the SOLI Notes, certain of our affiliates receive a fee for managing and servicing the solar energy systems pursuant to a transaction management agreement and managing and servicing agreements. In addition, Sunnova Energy Corporation has guaranteed (a) the obligations of certain of our subsidiaries to manage and service the solar energy systems pursuant to management, servicing and transaction management agreements, (b) the managing members' obligations, in such capacity, under the related financing fund's limited liability company agreement and (c) certain of our subsidiaries' obligations to repurchase or substitute certain ineligible solar energy systems eventually sold to SOLI pursuant to the sale and contribution agreement. SOLI is also required to maintain a liquidity reserve account, a tax loss insurance proceeds account and a supplemental reserve account for the benefit of the lenders under the SOLI Notes, each of which must remain funded at all times to the levels specified in the SOLI Notes. The creditors of SOLI have no recourse to our other assets except as expressly set forth in the SOLI Notes.

AP4 Debt, TEPIIH Debt and LAPH Debt.    In February 2020, the aggregate outstanding principal amounts under the AP4 financing agreement and TEPIIH revolving credit facility of $92.0 million and $226.6 million, respectively, were fully repaid using proceeds from the SOLI Notes, all related interest rate swaps were unwound and the debt facilities were terminated. In addition, proceeds from the SOLI Notes were used to repay $32.0 million of LAPH debt.

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The following tables present the selected quarterly financial data for the years ended December 31, 2019 and 2018.

	Three Months Ended
	December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019
	(in thousands, except per share amounts)
Revenue (1)	$	33,614			$	36,615			$	34,612			$	26,715
Total operating expenses, net (1)	$	42,769			$	42,513			$	37,322			$	31,222
Operating loss (1)	$	(9,155	)		$	(5,898	)		$	(2,710	)		$	(4,507	)
Net loss (1)(2)	$	(13,762	)		$	(34,369	)		$	(49,807	)		$	(35,496	)
Net loss attributable to common stockholders—basic and diluted (1)(2)	$	(17,509	)		$	(37,590	)		$	(63,260	)		$	(50,717	)
Net loss per share attributable to common stockholders—basic and diluted (1)(2)	$	(0.21	)		$	(0.62	)		$	(7.32	)		$	(5.87	)

	Three Months Ended
	December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
	(in thousands, except per share amounts)
Revenue (1)	$	25,206			$	30,429			$	28,963			$	19,784
Total operating expenses, net (1)(3)	$	37,623			$	27,025			$	26,528			$	26,936
Operating income (loss) (1)(3)	$	(12,417	)		$	3,404			$	2,435			$	(7,152	)
Net loss (1)(2)	$	(39,102	)		$	(6,647	)		$	(9,224	)		$	(13,436	)
Net loss attributable to common stockholders—basic and diluted (1)(2)	$	(53,017	)		$	(17,865	)		$	(23,269	)		$	(41,721	)
Net loss per share attributable to common stockholders—basic and diluted (1)(2)	$	(6.14	)		$	(2.07	)		$	(2.69	)		$	(4.83	)

(1)	Fluctuations are primarily due to seasonality.

(2)	Fluctuations are primarily due to unrealized gains and losses on derivative instruments.

(3)	Fluctuations are primarily due to timing of estimates of losses from natural disasters and recoveries of business interruption insurance proceeds related to 2018.

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SUNNOVA ENERGY INTERNATIONAL INC.

CONDENSED BALANCE SHEETS

(in thousands, except share amounts and share par values)

	As of December 31,
	2019				2018
Assets
Current assets:
Cash	$	696			$	—
Total current assets	696				—
Investments in subsidiaries	891,330				—
Total assets	$	892,026			$	—
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses	$	83			$	—
Total current liabilities	83				—
Long-term debt, net	37,607				—
Total liabilities	37,690				—
Stockholders' equity:
Common stock, 83,980,885 and 0 shares issued as of December 31, 2019 and 2018, respectively, at $0.0001 par value	8				—
Additional paid-in capital—common stock	987,760				—
Accumulated deficit	(133,432		)		—
Total stockholders' equity	854,336				—
Total liabilities and stockholders' equity	$	892,026			$	—

See accompanying notes to parent company condensed financial statements.

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SUNNOVA ENERGY INTERNATIONAL INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands)

	Year Ended   December 31,
	2019				2018				2017
Revenue	$	—			$	—			$	—
General and administrative expense	418				—				—
Operating loss	(418		)		—				—
Interest expense	83				—				—
Equity in losses of subsidiaries	132,933				—				—
Loss before income tax	(133,434		)		—				—
Income tax	—				—				—
Net loss	$	(133,434	)		$	—			$	—

See accompanying notes to parent company condensed financial statements.

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	Year Ended   December 31,
	2019				2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	—			$	—			$	—
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in subsidiaries	(219,206		)		—				—
Distributions from subsidiaries	2				—				—
Net cash used in investing activities	(219,204		)		—				—
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt	38,087				—				—
Payments of deferred financing costs	(377		)		—				—
Proceeds from issuance of common stock, net	168,204				—				—
Proceeds from equity component of debt instrument, net	13,984				—				—
Other, net	2				—				—
Net cash provided by financing activities	219,900				—				—
Net increase (decrease) in cash and restricted cash	696				—				—
Cash at beginning of period	—				—				—
Cash at end of period	$	696			$	—			$	—
Supplemental cash flow information:
Cash paid for interest	$	—			$	—			$	—
Cash paid for income taxes	$	—			$	—			$	—

See accompanying notes to parent company condensed financial statements.

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On July 24, 2019 Sunnova Energy International Inc. ("SEI") priced 14,000,000 shares of its common stock at a public offering price of $12.00 per share and on July 25, 2019 SEI's common stock began trading on the New York Stock Exchange under the symbol "NOVA". Upon the closing of our initial public offering on July 29, 2019 (our "IPO"), Sunnova Energy Corporation was contributed to SEI and SEI became the holding company of Sunnova Energy Corporation through a reverse merger. In addition, the historical financial statements of Sunnova Energy Corporation became the historical financial statements of SEI. These condensed financial statements include the condensed balance sheets, condensed statements of operations and condensed statements of cash flows and have been prepared on a parent-only basis. These parent-only financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for annual financial statements and therefore, these parent-only financial statements and other information included should be read in conjunction with SEI's consolidated financial statements and related notes contained within this Annual Report on Form 10-K.

As of December 31, 2019 and 2018, our parent company has not issued any guarantees on behalf of its wholly-owned subsidiaries.

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+	Indicates management contract or compensatory plan.

∞	Portions of this exhibit have been omitted.

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