The following discussion and analysis contain forward-looking statements that
are subject to risks, uncertainties and assumptions. Our actual results and
timing of selected events may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including but not
limited to those discussed under "Special Note Regarding Forward-Looking
Statements" above and "Special Note Regarding Forward-Looking Statements", "Risk
Factors" and elsewhere in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission ("SEC") on February 24, 2022 and elsewhere in
this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive
and rapidly changing environment and new risks emerge from time to time. It is
not possible for our management to predict all risks, nor can we assess the
impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements we may make. In light of these
risks, uncertainties and assumptions, the forward-looking events and
circumstances discussed in this Quarterly Report on Form 10-Q may not occur and
actual results could differ materially and adversely from those anticipated or
implied in the forward-looking statements. Unless the context otherwise
requires, the terms "Sunnova," "the Company," "we," "us" and "our" refer to SEI
and its consolidated subsidiaries.

Company Overview



We are a leading residential energy service provider, serving over 207,000
customers in more than 25 United States ("U.S.") states and territories. Our
goal is to be the source of clean, affordable and reliable energy with a simple
mission: to power energy independence so homeowners have the freedom to live
life uninterrupted. We were founded to deliver customers a better energy service
at a better price; and, through our energy service offerings, we are disrupting
the traditional energy landscape and the way the 21st century customer generates
and consumes electricity.

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, energy storage systems and related products and services 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, as well as technical oversight and expertise. We believe
this structure provides operational flexibility, reduces exposure to labor
shortages and lowers fixed costs relative to our peers, furthering our
competitive advantage.

We offer customers products to power their homes with affordable solar energy
and related products and services. We are able to offer savings compared to
utility-based retail rates with little to no up-front expense to the customer in
conjunction with solar and solar plus energy storage, and, in the case of the
latter, are able to also provide energy resiliency. Our solar service agreements
typically take the form of a lease, power purchase agreement ("PPA") or loan;
however, we also offer service plans for systems we did not originate. We make
it possible in some states for a customer to obtain a new roof and other
ancillary products as part of their solar loan. We also allow customers
originated through our homebuilder channel the option of purchasing the system
when the customer closes on the purchase of a new home. The initial term of our
solar service agreements is typically between 10 and 25 years. Service is an
integral part of our agreements and includes operations and maintenance,
monitoring, repairs and replacements, equipment upgrades, on-site power
optimization for the customer (for both supply and demand), the ability to
efficiently switch power sources among the solar panel, grid and energy storage
system, as appropriate, and diagnostics. During the life of the contract, we
have the opportunity to integrate related and evolving home servicing and
monitoring technologies to upgrade the flexibility and reduce the cost of our
customers' energy supply.

In the case of leases and PPAs, we also currently receive tax benefits and other
incentives from federal, state and local governments, 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. We have an established track record of attracting capital from
diverse sources. From our inception through March 31, 2022, we have raised more
than $9.4 billion in total capital commitments from equity, debt and tax equity
investors.

In addition to providing ongoing service as a standard component of our solar
service agreements, we also offer ongoing energy services to customers who
purchased their solar energy system through third parties. Under these
arrangements, we agree to provide monitoring, maintenance and repair services to
these customers for the life of the service contract they sign with us. We also
offer complimentary products to our agreements as well as non-solar financing.
Specifically, our offerings include a non-solar loan program enabling customers
to finance the purchase of products independent of a solar energy system or
energy storage system. We believe the quality and scope of our comprehensive
energy service offerings, whether to customers that obtained their solar energy
system through us or through another party, is a key differentiator between us
and our competitors.

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In April 2021, we acquired SunStreet, Lennar Corporation's ("Lennar")
residential solar platform that focuses primarily on solar energy systems and
energy storage systems for homebuilders. In connection with that acquisition, we
entered into an agreement pursuant to which we would be the exclusive
residential solar and storage provider for Lennar's new home communities with
solar across the U.S. for a period of four years. We believe the acquisition
provides a new strategic path to further scale our residential solar business,
reduces customer acquisition costs, provides a multi-year supply of homesites
through the development of new home solar communities and allows us to pursue
the development of clean and resilient residential microgrids across the U.S.

We also enter into leases with third-party owners of pools of solar energy
systems to receive such third party's interest in those systems. In connection
therewith, we assume the related customer PPA and lease obligations, entitling
us to future customer cash flows as well as certain credits, rebates and
incentives (including SRECs) under those agreements, in exchange for a lease
payment, whether upfront or over time, to the third-party owner, which may be
made in the form of cash or shares of our common stock. We believe such
arrangements enhance our long-term contracted cash flows and are complementary
to our overall business model.

We commenced operations in January 2013 and began providing solar energy
services under our first solar energy system in April 2013. Since then, our
brand, innovation and focused execution have driven significant, rapid growth in
our market share and in the number of customers on our platform. We operate one
of the largest fleets of residential solar energy systems in the U.S.,
comprising more than 1,238 megawatts of generation capacity and serving over
207,000 customers.

Recent Developments

COVID-19 Pandemic

The ongoing COVID-19 pandemic has resulted and may continue to result in widespread adverse impacts on the global economy. We have experienced some resulting disruptions to our business operations as the COVID-19 virus has continued to circulate through the states and U.S. territories in which we operate.



Social distancing guidelines, stay-at-home orders and similar measures
associated with the COVID-19 pandemic, as well as actions by individuals to
reduce their potential exposure to the virus, contributed to a decline in
origination. This decline reflected an inability by our dealers to perform
in-person sales calls based on the stay-at-home orders in some locations. To
adjust to these government measures, our dealers expanded the use of digital
tools and origination channels and created new methods that offset restrictions
on their ability to meet with potential new customers in person. Such efforts
drove an increase in new contract origination. We have seen the use of websites,
video conferencing and other virtual tools as part of our origination process
expand widely and contribute to our growth.

Throughout the COVID-19 pandemic, we have continued to service and install solar
energy systems and energy storage systems. The industry is currently facing
shortages and shipping delays affecting the supply of energy storage systems,
modules and component parts for inverters and racking used in solar energy
systems. These shortages and delays can be attributed in part to the COVID-19
pandemic and to government action in response to the pandemic, as well as to
allegations regarding the use of forced labor in the Chinese polysilicon supply
chain. While a majority of our dealers have secured sufficient quantities to
permit them to continue installing and conducting repairs through much of 2022,
if these shortages and delays persist, they could impact the timing of when
solar energy systems and energy storage systems can be installed and repaired
and when we can acquire and begin to generate revenue from those systems. In
addition, if supply chains become significantly disrupted due to additional
outbreaks of the COVID-19 virus or otherwise, or more stringent health and
safety guidelines are implemented, our ability to install and service solar
energy systems and energy storage systems could become adversely impacted.

We cannot predict the full impact the COVID-19 pandemic will have on our
business, cash flows, liquidity, financial condition and results of operations
at this time due to numerous uncertainties. We will continue to monitor
developments affecting our workforce, our customers and our business operations
generally, and will take actions we determine are necessary in order to mitigate
these impacts.

Financing Transactions

In February 2022, we admitted a tax equity investor with a total capital commitment of approximately $150.0 million. See "-Liquidity and Capital Resources-Financing Arrangements-Tax Equity Fund Commitments" below.



In February 2022, one of our subsidiaries issued $131.9 million in aggregate
principal amount of Series 2022-A Class A solar loan-backed notes, $102.2
million in aggregate principal amount of Series 2022-A Class B solar loan-backed
notes and
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$63.8 million in aggregate principal amount of Series 2022-A Class C solar
loan-backed notes (collectively, the "HELVIII Notes") with a maturity date of
February 2049. The HELVIII Notes bear interest at an annual rate of 2.79%, 3.13%
and 3.53% for the Class A, Class B and Class C notes, respectively. See
"-Liquidity and Capital Resources-Financing Arrangements-Securitizations" below.

Securitizations



As a source of long-term financing, we securitize qualifying solar energy
systems, energy storage systems and related solar service agreements into
special purpose entities who issue solar asset-backed and solar loan-backed
notes to institutional investors. We also securitize the cash flows generated by
the membership interests in certain of our indirect, wholly-owned subsidiaries
that are the managing member of a tax equity fund that owns a pool of solar
energy systems, energy storage systems and related solar service agreements that
were originated by one of our wholly-owned subsidiaries. The federal government
currently provides business investment tax credits under Section 48(a) (the
"Section 48(a) ITC") and residential energy credits under Section 25D (the
"Section 25D Credit") of the U.S. Internal Revenue Code of 1986, as amended. We
do not securitize the Section 48(a) ITC incentives associated with the solar
energy systems and energy storage systems as part of these arrangements. We use
the cash flows these solar energy systems and energy storage systems generate to
service the monthly, quarterly or semi-annual principal and interest payments on
the notes and satisfy the expenses and reserve requirements of the special
purpose entities, with any remaining cash distributed to their sole members, who
are typically our indirect wholly-owned subsidiaries. In connection with these
securitizations, certain of our affiliates receive a fee for managing and
servicing the solar energy systems and energy storage systems pursuant to
management, servicing, facility administration and asset management agreements.
The special purpose entities are also typically required to maintain a liquidity
reserve account and a reserve account for equipment replacements and, in certain
cases, reserve accounts for financing fund purchase option/withdrawal right
exercises or storage system replacement for the benefit of the holders under the
applicable series of notes, each of which are funded from initial deposits or
cash flows to the levels specified therein. The creditors of these special
purpose entities have no recourse to our other assets except as expressly set
forth in the terms of the notes. From our inception through March 31, 2022, we
have issued $2.8 billion in solar asset-backed and solar loan-backed notes.

Tax Equity Funds



Our ability to offer long-term solar service agreements depends in part on our
ability to finance the installation of the solar energy systems and energy
storage systems by co-investing with tax equity investors, such as large banks
who value the resulting customer receivables and Section 48(a) ITCs, accelerated
tax depreciation and other incentives related to the solar energy systems and
energy storage systems, primarily through structured investments known as "tax
equity". Tax equity investments are generally structured as non-recourse project
financings known as "tax equity funds". In the context of distributed generation
solar energy, tax equity investors make contributions upfront or in stages based
on milestones in exchange for a share of the tax attributes and cash flows
emanating from an underlying portfolio of solar energy systems and energy
storage systems. In these tax equity funds, the U.S. federal tax attributes
offset taxes that otherwise would have been payable on the investors' other
operations. The terms and conditions of each tax equity fund vary significantly
by investor and by fund. We continue to negotiate with potential investors to
create additional tax equity funds.

In general, our tax equity funds are structured using the "partnership flip"
structure. Under partnership flip structures, we and our tax equity investors
contribute cash into a partnership. The partnership uses this cash to acquire
long-term solar service agreements, solar energy systems and energy storage
systems developed by us and sells energy from such solar energy systems and
energy storage systems, as applicable, to customers or directly leases the solar
energy systems and energy storage systems, as applicable, to customers. We
assign these solar service agreements, solar energy systems, energy storage
systems and related incentives to our tax equity funds in accordance with the
criteria of the specific funds. Upon such assignment and the satisfaction of
certain conditions precedent, we are able to draw down on the tax equity fund
commitments. The conditions precedent to funding vary across our tax equity
funds but generally require that we have entered into a solar service agreement
with the customer, the customer meets certain credit criteria, the solar energy
system is expected to be eligible for the Section 48(a) ITC, we have a recent
appraisal from an independent appraiser establishing the fair market value of
the solar energy system and the property is in an approved state or territory.
Certain tax equity investors agree to receive a minimum target rate of return,
typically on an after-tax basis, which varies by tax equity fund. Prior to
receiving a contractual rate of return or a date specified in the contractual
arrangements, the tax equity investor receives substantially all of the non-cash
value attributable to the solar energy systems and energy storage systems, which
includes accelerated depreciation and Section 48(a) ITCs; however, we typically
receive a majority of the cash distributions, which are typically paid
quarterly. After the tax equity investor receives its contractual rate of return
or after a specified date, we receive substantially all of the cash and tax
allocations.

We have determined we are the primary beneficiary in these tax equity funds for
accounting purposes. Accordingly, we consolidate the assets and liabilities and
operating results of these partnerships in our consolidated financial
statements. We
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recognize the tax equity investors' share of the net assets of the tax equity
funds as redeemable noncontrolling interests and noncontrolling interests in our
consolidated balance sheets. The income or loss allocations reflected in our
consolidated statements of operations may create significant volatility in our
reported results of operations, including potentially changing net loss
attributable to stockholders to net income attributable to stockholders, or vice
versa, from quarter to quarter.

We typically have an option to acquire, and our tax equity investors may have an
option to withdraw and require us to purchase, all the equity interests our tax
equity investor holds in the tax equity funds starting approximately five years
after the last solar energy system in the applicable tax equity fund is
operational. If we or our tax equity investors exercise this option, we are
typically required to pay at least the fair market value of the tax equity
investor's equity interest and, in certain cases, a contractual minimum amount.
From our inception through March 31, 2022, we have received commitments of
approximately $1.4 billion through the use of tax equity funds, of which an
aggregate of $1.0 billion has been funded and $199.4 million remains available
for use.

Key Financial and Operational Metrics



We regularly review a number of metrics, including the following key operational
and financial metrics, to evaluate our business, measure our performance,
identify trends affecting our business, formulate our financial projections and
make strategic decisions.

Number of Customers. We define number of customers to include every unique
premises on which a Sunnova product is installed or on which Sunnova is
obligated to perform services for a counterparty. We track the total number of
customers as an indicator of our historical growth and our rate of growth from
period to period.

                                       As of                  As of
                                    March 31, 2022       December 31, 2021      Change

          Number of customers               207,800                 192,600      15,200



Weighted Average Number of Systems. We calculate the weighted average number of
systems based on the number of months a customer and any additional service
obligation related to a solar energy system is in-service during a given
measurement period. The weighted average number of systems reflects the number
of systems at the beginning of a period, plus the total number of new systems
added in the period adjusted by a factor that accounts for the partial period
nature of those new systems. For purposes of this calculation, we assume all new
systems added during a month were added in the middle of that month. The number
of systems for any end of period will exceed the number of customers, as defined
above, for that same end of period as we are also including any additional
services and/or contracts a customer or third party executed for the additional
work for the same residence. We track the weighted average system count in order
to accurately reflect the contribution of the appropriate number of systems to
key financial metrics over the measurement period.

                                                                                  Three Months Ended
                                                                                       March 31,
                                                                                                     2022                  2021

Weighted average number of systems (excluding loan agreements and cash sales)


                          155,800              89,800
Weighted average number of systems with loan agreements                                                41,700              20,600
Weighted average number of systems with cash sales                                                      2,400                   -
Weighted average number of systems                                                                    199,900             110,400



Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) plus net
interest expense, depreciation and amortization expense, income tax expense,
financing deal costs, natural disaster losses and related charges, net, losses
on extinguishment of long-term debt, realized and unrealized gains and losses on
fair value instruments, amortization of payments to dealers for exclusivity and
other bonus arrangements, legal settlements and excluding the effect of certain
non-recurring items we do not consider to be indicative of our ongoing operating
performance such as, but not limited to, costs of our initial public offering
("IPO"), acquisition costs, losses on unenforceable contracts and other non-cash
items such as non-cash compensation expense, asset retirement obligation ("ARO")
accretion expense, provision for current expected credit losses, non-cash
inventory impairments and other (income) expense from solar receivables.

Adjusted EBITDA is a non-GAAP financial measure we use as a performance measure.
We believe investors and securities analysts also use Adjusted EBITDA in
evaluating our operating performance. This measurement is not recognized in
accordance with accounting principles generally accepted in the United States of
America ("GAAP") and should not be viewed
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as an alternative to GAAP measures of performance. The GAAP measure most
directly comparable to Adjusted EBITDA is net income (loss). The presentation of
Adjusted EBITDA should not be construed to suggest our future results will be
unaffected by non-cash or non-recurring items. In addition, our calculation of
Adjusted EBITDA is not necessarily comparable to Adjusted EBITDA as calculated
by other companies.

We believe Adjusted EBITDA is useful to management, investors and analysts in
providing a measure of core financial performance adjusted to allow for
comparisons of results of operations across reporting periods on a consistent
basis. These adjustments are intended to exclude items that are not indicative
of the ongoing operating performance of the business. Adjusted EBITDA is also
used by our management for internal planning purposes, including our
consolidated operating budget, and by our board of directors in setting
performance-based compensation targets. Adjusted EBITDA should not be considered
an alternative to but viewed in conjunction with GAAP results, as we believe it
provides a more complete understanding of ongoing business performance and
trends than GAAP measures alone. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as a substitute
for analysis of our results as reported under GAAP.

                                                                                Three Months
                                                                                   Ended
                                                                                  March 31,
                                                                                       2022               2021
                                                                                           (in thousands)
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss                                                                           $ (20,629)         $ (24,064)
Interest expense, net                                                                 (2,490)             8,051

Interest income                                                                      (10,932)            (7,180)

Depreciation expense                                                                  24,740             19,543
Amortization expense                                                                   7,288                 32
EBITDA                                                                                (2,023)            (3,618)
Non-cash compensation expense                                                         10,864              7,924
ARO accretion expense                                                                    840                652
Financing deal costs                                                                     384                  1

Acquisition costs                                                                      1,259              4,010

Unrealized gain on fair value instruments                                            (10,122)              (113)

Amortization of payments to dealers for exclusivity and other bonus arrangements

                                                                             928                614

Provision for current expected credit losses                                           6,657              3,313

Other expense from solar receivables                                                   3,760                  -

Adjusted EBITDA                                                                    $  12,547          $  12,783



Interest Income and Principal Payments from Customer Notes Receivable. Under our
loan agreements, the customer obtains financing for the purchase of a solar
energy system from us and we agree to operate and maintain the solar energy
system throughout the duration of the agreement. Pursuant to the terms of the
loan agreement, the customer makes scheduled principal and interest payments to
us and has the option to prepay principal at any time in part or in full.
Whereas we typically recognize payments from customers under our leases and PPAs
as revenue, we recognize payments received from customers under our loan
agreements (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; (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;
and (c) as revenue, to the extent attributable to payments for operations and
maintenance services provided by us.

While Adjusted EBITDA effectively captures the operating performance of our
leases and PPAs, it only reflects the service portion of the operating
performance under our loan agreements. We do not consider our types of solar
service agreements differently when evaluating our operating performance. In
order to present a measure of operating performance that provides comparability
without regard to the different accounting treatment among our three types of
solar service agreements, we consider interest income from customer notes
receivable and principal proceeds from customer notes receivable, net of related
revenue, as key performance metrics. We believe these two metrics provide a more
meaningful and uniform method of analyzing our operating performance when viewed
in light of our other key performance metrics across the three primary types of
solar service agreements.
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                                                                             Three Months
                                                                                Ended
                                                                               March 31,
                                                                                    2022              2021
                                                                                        (in thousands)
Interest income from customer notes receivable                                   $ 10,832          $  7,097
Principal proceeds from customer notes receivable, net of related
revenue                                                                          $ 20,413          $ 12,302



Adjusted Operating Expense. We define Adjusted Operating Expense as total
operating expense less depreciation and amortization expense, financing deal
costs, natural disaster losses and related charges, net, amortization of
payments to dealers for exclusivity and other bonus arrangements, legal
settlements, direct sales costs, cost of revenue related to cash sales,
unrealized gains and losses on fair value instruments and excluding the effect
of certain non-recurring items we do not consider to be indicative of our
ongoing operating performance such as, but not limited to, costs of our IPO,
acquisition costs, losses on unenforceable contracts and other non-cash items
such as non-cash compensation expense, ARO accretion expense, provision for
current expected credit losses, non-cash inventory impairments and other income
(expense) from solar receivables. Adjusted Operating Expense is a non-GAAP
financial measure we use as a performance measure. We believe investors and
securities analysts will also use Adjusted Operating Expense in evaluating our
performance. This measurement is not recognized in accordance with GAAP and
should not be viewed as an alternative to GAAP measures of performance. The GAAP
measure most directly comparable to Adjusted Operating Expense is total
operating expense. We believe Adjusted Operating Expense is a supplemental
financial measure useful to management, analysts, investors, lenders and rating
agencies as an indicator of the efficiency of our operations between reporting
periods. Adjusted Operating Expense should not be considered an alternative to
but viewed in conjunction with GAAP total operating expense, as we believe it
provides a more complete understanding of our performance than GAAP measures
alone. Adjusted Operating Expense has limitations as an analytical tool and you
should not consider it in isolation or as a substitute for analysis of our
results as reported under GAAP, including total operating expense.

We use per system metrics, including Adjusted Operating Expense per weighted
average system, as an additional way to evaluate our performance. Specifically,
we consider the change in this metric from period to period as a way to evaluate
our performance in the context of changes we experience in the overall customer
base. While the Adjusted Operating Expense figure provides a valuable indicator
of our overall performance, evaluating this metric on a per system basis allows
for further nuanced understanding by management, investors and analysts of the
financial impact of each additional system.

                                                                             Three Months Ended
                                                                                  March 31,
                                                                                       2022               2021
                                                                                      (in thousands, except per
                                                                                            system data)

Reconciliation of Total Operating Expense, Net to Adjusted Operating Expense: Total operating expense, net

$   99,928          $ 64,582
Depreciation expense                                                                  (24,740)          (19,543)
Amortization expense                                                                   (7,288)              (32)
Non-cash compensation expense                                                         (10,864)           (7,924)
ARO accretion expense                                                                    (840)             (652)
Financing deal costs                                                                     (384)               (1)

Acquisition costs                                                                      (1,259)           (4,010)

Amortization of payments to dealers for exclusivity and other bonus arrangements

                                                                             (928)             (614)

Provision for current expected credit losses                                           (6,657)           (3,313)

Direct sales costs                                                                       (380)                -
Cost of revenue related to cash sales                                                  (5,815)                -
Unrealized gain on fair value instruments                                               9,967                 -
Other expense from solar receivables                                                   (3,760)                -

Adjusted Operating Expense                                                         $   46,980          $ 28,493
Adjusted Operating Expense per weighted average system                             $      235          $    258



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Estimated Gross Contracted Customer Value. We calculate estimated gross
contracted customer value as defined below. We believe estimated gross
contracted customer value can serve as a useful tool for investors and analysts
in comparing the remaining value of our customer contracts to that of our peers.

Estimated gross contracted customer value as of a specific measurement date
represents the sum of the present value of the remaining estimated future net
cash flows we expect to receive from existing customers during the initial
contract term of our leases and PPAs, which are typically 25 years in length,
plus the present value of future net cash flows we expect to receive from the
sale of related solar renewable energy certificates ("SREC"), either under
existing contracts or in future sales, plus the cash flows we expect to receive
from energy services programs such as grid services, plus the carrying value of
outstanding customer loans on our balance sheet. From these aggregate estimated
initial cash flows, we subtract the present value of estimated net cash
distributions to redeemable noncontrolling interests and noncontrolling
interests and estimated operating, maintenance and administrative expenses
associated with the solar service agreements. These estimated future cash flows
reflect the projected monthly customer payments over the life of our solar
service agreements and depend on various factors including but not limited to
solar service agreement type, contracted rates, expected sun hours and the
projected production capacity of the solar equipment installed. For the purpose
of calculating this metric, we discount all future cash flows at 4%.

The anticipated operating, maintenance and administrative expenses included in
the calculation of estimated gross contracted customer value include, among
other things, expenses related to accounting, reporting, audit, insurance,
maintenance and repairs. In the aggregate, we estimate these expenses are $20
per kilowatt per year initially, with 2% annual increases for inflation, and an
additional $81 per year non-escalating expense included for energy storage
systems. We do not include maintenance and repair costs for inverters and
similar equipment as those are largely covered by the applicable product and
dealer warranties for the life of the product, but we do include additional cost
for energy storage systems, which are only covered by a 10-year warranty.
Expected distributions to tax equity investors vary among the different tax
equity funds and are based on individual tax equity fund contract provisions.

Estimated gross contracted customer value is forecasted as of a specific date.
It is forward-looking and we use judgment in developing the assumptions used to
calculate it. Factors that could impact estimated gross contracted customer
value include, but are not limited to, customer payment defaults, or declines in
utility rates or early termination of a contract in certain circumstances,
including prior to installation. The following table presents the calculation of
estimated gross contracted customer value as of March 31, 2022 and December 31,
2021, calculated using a 4% discount rate.

                                                    As of                  As of
                                                March 31, 2022        December 31, 2021

                                                             (in millions)

Estimated gross contracted customer value $ 4,735 $

4,337





Sensitivity Analysis. The calculation of estimated gross contracted customer
value and associated operational metrics requires us to make a number of
assumptions regarding future revenues and costs which may not prove accurate.
Accordingly, we present below a sensitivity analysis with a range of
assumptions. We consider a discount rate of 4% to be appropriate based on recent
transactions that demonstrate a portfolio of residential solar service
agreements is an asset class that can be securitized successfully on a long-term
basis with a coupon of less than 4%. We also present these metrics with a
discount rate of 4% based on industry practice. The appropriate discount rate
for these estimates may change in the future due to the level of inflation,
rising interest rates, our cost of capital and consumer demand for solar energy
systems. In addition, the table below provides a range of estimated gross
contracted customer value amounts if different cumulative customer loss rate
assumptions were used. We are presenting this information for illustrative
purposes only and as a comparison to information published by our peers.

                            Estimated Gross Contracted Customer Value
                                                      As of March 31, 2022
                                                          Discount rate
               Cumulative customer loss rate      2%           4%           6%
                                                          (in millions)
               5%                              $ 5,079      $ 4,499      $ 4,059
               0%                              $ 5,397      $ 4,735      $ 4,236

Significant Factors and Trends Affecting Our Business

Our results of operations and our ability to grow our business over time could be impacted by a number of factors and


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trends that affect our industry generally, as well as new offerings of services
and products we may acquire or seek to acquire in the future. Additionally, our
business is concentrated in certain markets, putting us at risk of
region-specific disruptions such as adverse economic, regulatory, political,
weather and other conditions. See "Risk Factors" in our Annual Report on Form
10-K filed with the SEC on February 24, 2022 and in this Quarterly Report on
Form 10-Q for further discussion of risks affecting our business.

Financing Availability. Our future growth depends, in significant part, on our
ability to raise capital from third-party investors on competitive terms to help
finance the origination of our solar energy systems under our solar service
agreements. We have historically used debt, such as convertible senior notes,
asset-backed and loan-backed securitizations and warehouse facilities, tax
equity, preferred equity and other financing strategies to help fund our
operations. From our inception through March 31, 2022, we have raised more than
$9.4 billion in total capital commitments from equity, debt and tax equity
investors. With respect to tax equity, there are a limited number of potential
tax equity investors, and the competition for this investment capital is
intense. The principal tax credit on which tax equity investors in our industry
rely is the Section 48(a) ITC. Starting January 1, 2020, the amount for the
Section 48(a) ITC was equal to 30% of the basis of eligible solar property that
began construction before 2020 if placed in service before 2026. By statute, the
Section 48(a) ITC percentage decreased to 26% for eligible solar property that
began construction during 2020 or 2021 or begins construction in 2022, 22% if
construction begins in 2023 and 10% if construction begins after 2023 or if the
property is placed into service after 2025. This reduction in the Section 48(a)
ITC will likely reduce our use of tax equity financing in the future unless the
Section 48(a) ITC is increased or replaced. IRS guidance includes a safe harbor
that may apply when a taxpayer (or in certain cases, a contractor) pays or
incurs 5% or more of the costs of a solar energy system before the end of the
applicable year (the "5% ITC Safe Harbor"), even though the solar energy system
is not placed in service until after the end of that year. We expect
substantially all the solar energy systems installed in 2022 to qualify for the
26% Section 48(a) ITC. Additionally, we may make further inventory purchases in
2022 and future periods to extend the availability of each period's applicable
Section 48(a) ITC by satisfying the 5% ITC Safe Harbor. Our ability to raise
capital from third-party investors is affected by general economic conditions,
the state of the capital markets, inflation levels and concerns about our
industry or business. Specifically, interest rates remain subject to volatility
that may result from action taken by the Federal Reserve. Recent data have
suggested inflationary pressures may be more durable than anticipated, which
could result in interest rate increases and/or the tapering of quantitative
easing policies enacted towards the outset of the COVID-19 pandemic sooner than
previously expected.

Cost of Solar Energy Systems and Energy Storage Systems. Upward pressure on
prices of solar energy systems and energy storage systems may occur due to
growth in the solar industry, regulatory policy changes, tariffs and duties,
inflationary cost pressures and an increase in demand. As a result of these
developments, we may pay higher prices on solar modules, which may make it less
economical for us to serve certain markets. Attachment rates for energy storage
systems have trended higher while the price to acquire has remained steady and
increased slightly for some suppliers due to several market variables, including
COVID-19, raw material shortages and freight prices, but this still remains a
potential area of growth for us.

Energy Storage Systems. Our energy storage systems increase our customers'
independence from the centralized utility and provide on-site backup power when
there is a grid outage due to storms, wildfires, other natural disasters and
general power failures caused by supply or transmission issues. In addition, at
times it can be more economic to consume less energy from the grid or,
alternatively, to export solar energy back to the grid. Recent technological
advancements for energy storage systems allow the energy storage system to adapt
to pricing and utility rate shifts by controlling the inflows and outflows of
power, allowing customers to increase the value of their solar energy system
plus energy storage system. The energy storage system charges during the day,
making the energy it stores available to the home when needed. It also features
software that can customize power usage for the individual customer, providing
backup power, optimizing solar energy consumption versus grid consumption or
preventing export to the grid as appropriate. The software is tailored based on
utility regulation, economic indicators and grid conditions. The combination of
energy control, increased energy resilience and independence from the grid is
strong incentive for customers to adopt solar and energy storage. As energy
storage systems and their related software features become more advanced, we
expect to see increased adoption of energy storage systems.

Climate Change Action. As a result of increasing global awareness of and
aversion to climate change impacts, we believe the renewable energy market in
which we operate, and investment in climate solutions more broadly, will
continue to grow as the impact of climate change increases. This trend, along
with increasing commitments to reduce carbon emissions, is expected to result in
increased demand for our products and services. Under the current presidential
administration, the focus on cleaner energy sources and technology to
decarbonize the U.S. economy continues to accelerate. The federal government's
administration under President Joe Biden ("Biden administration") has taken
immediate steps that we believe signify support for cleaner energy sources,
including, but not limited to, rejoining the Paris Climate Accord,
re-establishing a social price on carbon used in cost/benefit analysis for
policy making and announcing a commitment to transition the U.S. economy to a
net-zero carbon economy by 2050. We expect the Biden administration, combined
with a closely divided Congress, to continue to take actions that are supportive
of the renewable energy industry, such as incentivizing clean energy sources and
supporting
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new investment in areas like renewables.

Government Regulations, Policies and Incentives. Our growth strategy depends in
significant part on government policies and incentives that promote and support
solar energy and enhance the economic viability of distributed residential
solar. These policies and incentives come in various forms, including net
metering, eligibility for accelerated depreciation such as the modified
accelerated cost recovery system, SRECs, tax abatements, rebates, renewable
targets, incentive programs and tax credits, particularly the Section 48(a) ITC
and the Section 25D Credit. Policies requiring solar on new homes or new roofs,
such as those enacted in California and New York City, also support the growth
of distributed solar. The sale of SRECs has constituted a significant portion of
our revenue historically. A change in the value of net metering credits or SRECs
or changes in other policies or a loss or reduction in such incentives could
decrease the attractiveness of distributed residential solar to us, our dealers
and our customers in applicable markets, which could reduce our customer
acquisition opportunities. Such a loss or reduction could also reduce our
willingness to pursue certain customer acquisitions due to decreased revenue or
income under our solar service agreements. Additionally, such a loss or
reduction may also impact the terms of and availability of third-party
financing. If any of these government regulations, policies or incentives are
adversely amended, delayed, eliminated, reduced, retroactively changed or not
extended beyond their current expiration dates or there is a negative impact
from the recent federal law changes or proposals, our operating results and the
demand for, and the economics of, distributed residential solar energy may
decline, which could harm our business.

Components of Results of Operations



Revenue. 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, net of cash incentives. 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.

PPAs. We have determined solar service agreements under which customers purchase
electricity from us should be accounted for as revenue from contracts with
customers. We recognize revenue based upon the amount of electricity delivered
as determined by remote monitoring equipment at solar rates specified under the
contracts. The PPAs generally have a term of 20 or 25 years with an opportunity
for customers to renew for up to an additional 10 years, via two five-year or
one 10-year renewal options.

Lease Agreements. We are the lessor under lease agreements for solar energy
systems and energy storage systems, which we account for as revenue from
contracts with customers. 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. The lease agreements generally have a term of 20 or 25
years with an opportunity for customers to renew for up to an additional 10
years, via two five-year or one 10-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. 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 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 solar energy 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.

If the solar energy system does not produce the guaranteed production amount, we
are required to provide a bill credit or refund a portion of the previously
remitted customer payments, where the bill credit or 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 bill credits or 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 13, Commitments and Contingencies, to our interim unaudited condensed
consolidated financial statements ("interim financial statements") included
elsewhere in this Quarterly Report on Form 10-Q.

SRECs. Each SREC represents the environmental benefit of one megawatt hour
(1,000 kWh) generated by a solar energy system. We sell SRECs to utilities and
other third parties who use the SRECs to meet renewable portfolio standards and
can do so separate from the actual electricity generated by the renewable-based
generation source. We account for SRECs generated
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from solar energy systems owned by us, as opposed to those owned by our
customers, 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 SRECs as inventory held until sold and delivered to third parties. We
enter into economic hedges with major financial institutions related to expected
production of SRECs through forward contracts to partially mitigate the risk of
decreases in SREC market rates. While these fixed price forward contracts serve
as an economic hedge against spot price fluctuations for the SRECs, the
contracts do not qualify for hedge accounting and are not designated as cash
flow hedges or fair value hedges. The contracts require us to physically deliver
the SRECs upon settlement. We recognize the related revenue upon the transfer of
the SRECs to the counterparty. The costs related to the sales of SRECs are
generally limited to fees for brokered transactions. Accordingly, the sale of
SRECs in a period generally has a favorable impact on our operating results for
that period. In certain circumstances we are required to purchase SRECs on the
open market to fulfill minimum delivery requirements under our forward
contracts.

Cash Sales. Cash sales revenue represents revenue from a customer's purchase of
a solar energy system from us typically when purchasing a new home. We recognize
the related revenue upon verification of the home closing.

Loan Agreements. We recognize payments received from customers under loan
agreements (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; (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;
and (c) as revenue, to the extent attributable to payments for operations and
maintenance services provided by us. Similar to our lease agreements, we provide
customers under our loan 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.

Other Revenue. Other revenue includes certain state and utility incentives,
revenue from the direct sale of solar energy systems and energy storage systems
to customers with financing provided by us, sales of service plans and revenue
from our investments in solar receivables. We recognize revenue from state and
utility incentives in the periods in which they are earned. 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 10 years.

Cost of Revenue-Depreciation. Cost of revenue-depreciation represents depreciation on solar energy systems under lease agreements and PPAs that have been placed in service.



Cost of Revenue-Other. Cost of revenue-other represents costs related to cash
sales, costs to purchase SRECs on the open market, SREC broker fees and other
items deemed to be a cost of providing the service of selling power to customers
or potential customers, such as certain costs to service loan agreements, costs
for filing under the Uniform Commercial Code to maintain title, title searches,
credit checks on potential customers at the time of initial contract and other
similar costs, typically directly related to the volume of customers and
potential customers.

Operations and Maintenance Expense. Operations and maintenance expense
represents costs from third parties for maintaining and servicing the solar
energy systems, property insurance, property taxes and warranties. When services
for maintaining and servicing solar energy systems are provided by Sunnova
personnel rather than third parties, those amounts are included in payroll costs
classified within general and administrative expense. During the three months
ended March 31, 2022 and 2021, we incurred $3.8 million and $3.3 million,
respectively, of Sunnova personnel costs related to maintaining and servicing
solar energy systems, which are classified in general and administrative
expense. In addition, operations and maintenance expense includes write downs
and write-offs related to inventory adjustments, gains and losses on disposals
and other impairments and impairments due to natural disaster losses net of
insurance proceeds recovered under our business interruption and property damage
insurance coverage for natural disasters.

General and Administrative Expense. General and administrative expense
represents costs for our employees, such as salaries, bonuses, benefits and all
other employee-related costs, including stock-based compensation, professional
fees related to legal, accounting, human resources, finance and training,
information technology and software services, marketing and communications, IPO
costs, acquisition costs, travel and rent and other office-related expenses.
General and administrative expense also includes depreciation on assets not
classified as solar energy systems, including information technology software
and development projects, vehicles, furniture, fixtures, computer equipment and
leasehold improvements and accretion expense on AROs. We capitalize a portion of
general and administrative costs, such as payroll-related costs, that is related
to employees who are directly involved in the design, construction, installation
and testing of the solar energy systems but not directly associated with a
particular asset. We also capitalize a portion of general and administrative
costs, such as payroll-related costs, that is related to employees who are
directly associated with and devote time to internal information technology
software and development projects, to the extent of the time spent directly on
the application and development stage of such software project.
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Other Operating Income. Other operating income primarily represents changes in
the fair values of certain financial instruments related to our investments in
solar receivables and contingent consideration.

Interest Expense, Net. Interest expense, net represents interest on our borrowings under our various debt facilities, amortization of debt discounts and deferred financing costs and realized and unrealized gains and losses on derivative instruments.

Interest Income. Interest income represents interest income from the notes receivable under our loan program and income on short term investments with financial institutions.

Other Income. Other income primarily represents changes in the fair value of certain financial instruments related to non-operating assets.



Income Tax. We account for income taxes under Accounting Standards Codification
740, Income Taxes. As such, we determine deferred tax assets and liabilities
based on temporary differences resulting from the different treatment of items
for tax and financial reporting purposes. We measure deferred tax assets and
liabilities using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to reverse.
Additionally, we must assess the likelihood that deferred tax assets will be
recovered as deductions from future taxable income. We have a full valuation
allowance on our deferred tax assets because we believe it is more likely than
not that our deferred tax assets will not be realized. We evaluate the
recoverability of our deferred tax assets on a quarterly basis.

Net Income Attributable to Redeemable Noncontrolling Interests and
Noncontrolling Interests. Net income attributable to redeemable noncontrolling
interests and noncontrolling interests represents tax equity interests in the
net income or loss of certain consolidated subsidiaries based on hypothetical
liquidation at book value.
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Results of Operations-Three Months Ended March 31, 2022 Compared to Three Months
Ended March 31, 2021

The following table sets forth our unaudited condensed consolidated statements of operations data for the periods indicated.



                                                                       Three Months Ended
                                                                             March 31,
                                                                     2022                2021             Change
                                                                                   (in thousands)
Revenue                                                          $   65,722          $  41,276          $ 24,446

Operating expense:
Cost of revenue-depreciation                                         21,958             17,408             4,550
Cost of revenue-other                                                 7,569              1,234             6,335
Operations and maintenance                                            6,761              3,620             3,141
General and administrative                                           70,223             42,320            27,903
Other operating income                                               (6,583)                 -            (6,583)
Total operating expense, net                                         99,928             64,582            35,346

Operating loss                                                      (34,206)           (23,306)          (10,900)

Interest expense, net                                                (2,490)             8,051           (10,541)

Interest income                                                     (10,932)            (7,180)           (3,752)

Other income                                                           (155)              (113)              (42)
Loss before income tax                                              (20,629)           (24,064)            3,435

Income tax                                                                -                  -                 -
Net loss                                                            (20,629)           (24,064)            3,435

Net income attributable to redeemable noncontrolling interests and noncontrolling interests

                                         12,954              8,919             4,035
Net loss attributable to stockholders                            $  (33,583)         $ (32,983)         $   (600)



Revenue

                                           Three Months Ended
                                                March 31,
                                           2022            2021         Change
                                                    (in thousands)
                 PPA revenue           $    21,185      $ 16,834      $  4,351
                 Lease revenue              21,780        16,397         5,383
                 SREC revenue                6,244         5,957           287
                 Cash sales revenue         11,348             -        11,348
                 Loan revenue                3,376         1,195         2,181
                 Other revenue               1,789           893           896
                 Total                 $    65,722      $ 41,276      $ 24,446



Revenue increased by $24.4 million in the three months ended March 31, 2022
compared to the three months ended March 31, 2021 primarily as a result of an
increased number of solar energy systems in service and the April 2021
acquisition of SunStreet. The weighted average number of systems (excluding
systems with loan agreements and cash sales) increased from approximately 89,800
for the three months ended March 31, 2021 to approximately 155,800 for the three
months ended March 31, 2022. Excluding SREC revenue, revenue under our loan
agreements and cash sales revenue, on a weighted average
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number of systems basis, revenue decreased from $380 per system for the three
months ended March 31, 2021 to $287 per system for the same period in 2022 (24%
decrease) primarily due to an increase in the number of service-only customers
acquired from SunStreet, which generate significantly less revenue per customer.
SREC revenue increased by $0.3 million in the three months ended March 31, 2022
compared to the three months ended March 31, 2021 primarily as a result of an
increase in SREC prices and volumes in New Jersey, offset by decrease due to a
forward sale that occurred in the fourth quarter of 2021. The amount of SREC
revenue recognized in each period is also affected by the total number of solar
energy systems, weather seasonality and hedge and spot prices associated with
the timing of the sale of SRECs. On a weighted average number of systems basis,
revenues under our loan agreements increased from $58 per system for the three
months ended March 31, 2021 to $81 per system for the same period in 2022 (40%
increase) primarily due to (a) higher battery attachment rates and (b)
increasing expected battery replacement costs which are included in the loan
resulting in larger customer loan balances.

Cost of Revenue-Depreciation

                                                 Three Months Ended
                                                      March 31,
                                                 2022            2021        Change
                                                          (in thousands)
            Cost of revenue-depreciation     $    21,958      $ 17,408      $ 4,550



Cost of revenue-depreciation increased by $4.6 million in the three months ended
March 31, 2022 compared to the three months ended March 31, 2021. This increase
was primarily due to an increase in the weighted average number of systems
(excluding systems with loan agreements, service-only agreements and cash sales)
from approximately 89,400 for the three months ended March 31, 2021 to
approximately 116,400 for the three months ended March 31, 2022. On a weighted
average number of systems basis, cost of revenue-depreciation remained
relatively flat at $195 per system for the three months ended March 31, 2021
compared to $189 per system for the same period in 2022 (3% decrease).

Cost of Revenue-Other

                                            Three Months Ended
                                                 March 31,
                                             2022             2021        Change
                                                     (in thousands)
              Cost of revenue-other   $     7,569           $ 1,234      $ 6,335



Cost of revenue-other increased by $6.3 million in the three months ended
March 31, 2022 compared to the three months ended March 31, 2021. This increase
was primarily due to costs of $5.8 million related to cash sales revenue, which
began with the April 2021 acquisition of SunStreet.

Operations and Maintenance Expense



                                               Three Months Ended
                                                    March 31,
                                                2022             2021        Change
                                                        (in thousands)
           Operations and maintenance    $     6,761           $ 3,620      $ 3,141



Operations and maintenance expense increased by $3.1 million in the three months
ended March 31, 2022 compared to the three months ended March 31, 2021 primarily
due to higher truck roll and property insurance costs. Operations and
maintenance expense per weighted average system, excluding net natural disaster
losses and non-cash inventory impairments, increased from $40 per system for the
three months ended March 31, 2021 to $43 per system for the three months ended
March 31, 2022.

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General and Administrative Expense

                                               Three Months Ended
                                                    March 31,
                                               2022            2021         Change
                                                        (in thousands)
             General and administrative    $    70,223      $ 42,320      $ 27,903



General and administrative expense increased by $27.9 million in the three
months ended March 31, 2022 compared to the three months ended March 31, 2021
primarily due to increases of (a) $10.4 million of payroll and employee related
expenses primarily due to equity-based compensation expense, the hiring of
personnel to support growth and the additional personnel from SunStreet, (b)
$7.3 million of amortization expense primarily due to the amortization of
intangible assets acquired from SunStreet, (c) $3.3 million of provision for
current expected credit losses primarily due to the growth in loan customers,
(d) $2.6 million in consultants, contractors, and professional fees and (e) $1.7
million in marketing and communications expenses.

Other Operating Income



Other operating income increased by $6.6 million in the three months ended
March 31, 2022 compared to the three months ended March 31, 2021 primarily due
to the change in the fair value of certain financial instruments and contingent
consideration.

Interest Expense, Net

                                           Three Months Ended
                                                 March 31,
                                            2022             2021         Change
                                                     (in thousands)
              Interest expense, net   $    (2,490)         $ 8,051      $ (10,541)



Interest expense, net decreased by $10.5 million in the three months ended
March 31, 2022 compared to the three months ended March 31, 2021. This decrease
was primarily due to an increase in unrealized gains on derivatives of $16.6
million. This was partially offset by an increase in interest expense of $5.0
million primarily due to the issuance of additional debt in 2021 and 2022.

Interest Income

                                         Three Months Ended
                                               March 31,
                                          2022             2021        Change
                                                  (in thousands)
                  Interest income   $    10,932          $ 7,180      $ 3,752



Interest income increased by $3.8 million in the three months ended March 31,
2022 compared to the three months ended March 31, 2021. This increase was
primarily due to an increase in the weighted average number of systems with loan
agreements from approximately 20,600 for the three months ended March 31, 2021
to approximately 41,700 for the three months ended March 31, 2022. On a weighted
average number of systems basis, loan interest income decreased from $345 per
system for the three months ended March 31, 2021 to $260 per system for the
three months ended March 31, 2022 primarily due to a decrease in the average
annual interest rate for customer loans due to market conditions.

Income Tax



We do not have income tax expense or benefit due to pre-tax losses and a full
valuation allowance recorded for the three months ended March 31, 2022 and 2021.
See "-Components of Results of Operations-Income Tax".

Net Income Attributable to Redeemable Noncontrolling Interests and Noncontrolling Interests

Net income attributable to redeemable noncontrolling interests and noncontrolling interests increased by $4.0 million in


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Table of Contents the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in income attributable to noncontrolling interests from tax equity funds added in 2020 and 2021.

Liquidity and Capital Resources



As of March 31, 2022, we had total cash of $324.9 million, of which $208.5
million was unrestricted, and $311.8 million of available borrowing capacity
under our various financing arrangements. We seek to maintain diversified and
cost-effective funding sources to finance and maintain our operations, fund
capital expenditures, including customer acquisitions, and satisfy obligations
arising from our indebtedness, which may include reducing debt prior to
scheduled maturities through debt repurchases, either in the open market or in
privately negotiated transactions, through debt redemptions or tender offers, or
through repayments of bank borrowings. For a discussion of cash requirements
from contractual and other obligations, see Note 13, Commitments and
Contingencies, to our interim financial statements included elsewhere in this
Quarterly Report on Form 10-Q. Historically, our primary sources of liquidity
have included non-recourse and recourse debt, investor asset-backed and
loan-backed securitizations and cash generated from operations. Our business
model requires substantial outside financing arrangements to grow the business
and facilitate the deployment of additional solar energy systems. We will seek
to raise additional required capital, including from new and existing tax equity
investors, additional borrowings, securitizations and other potential debt and
equity financing sources. We believe our cash and financing arrangements, as
further described below, will be sufficient to meet our anticipated cash needs
for at least the next twelve months. As of March 31, 2022, we were in compliance
with all debt covenants under our financing arrangements.

Financing Arrangements

The following is an update to the description of our various financing arrangements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Financing Arrangements" in our Annual Report on Form 10-K filed with the SEC on February 24, 2022 for a full description of our various financing arrangements.

Tax Equity Fund Commitments

As of March 31, 2022, we had undrawn committed capital of approximately $199.4 million under our tax equity funds, which may only be used to purchase and install solar energy systems. In February 2022, we admitted a tax equity investor with a total capital commitment of approximately $150.0 million.

Securitizations



In February 2022, one of our subsidiaries issued $131.9 million in aggregate
principal amount of Series 2022-A Class A solar loan-backed notes, $102.2
million in aggregate principal amount of Series 2022-A Class B solar loan-backed
notes and $63.8 million in aggregate principal amount of Series 2022-A Class C
solar loan-backed notes with a maturity date of February 2049. The HELVIII Notes
bear interest at an annual rate of 2.79%, 3.13% and 3.53% for the Class A, Class
B and Class C notes, respectively.


Historical Cash Flows-Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table summarizes our cash flows for the periods indicated:



                                                     Three Months Ended
                                                          March 31,
                                                    2022            2021          Change
                                                               (in thousands)

     Net cash used in operating activities       $ (92,129)     $  (49,908)     $ (42,221)
     Net cash used in investing activities        (357,650)       (226,213)      (131,437)
     Net cash provided by financing activities     382,813         161,691        221,122
     Net decrease in cash and restricted cash    $ (66,966)     $ (114,430)     $  47,464



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Operating Activities

Net cash used in operating activities increased by $42.2 million in the three
months ended March 31, 2022 compared to the three months ended March 31, 2021.
This increase is primarily a result of increases in purchases of inventory and
prepaid inventory of $16.0 million and payments to dealers for exclusivity and
other bonus arrangements of $9.6 million. This increase is offset by a decrease
in net outflows of $5.3 million in 2022 compared to net outflows of $14.8
million in 2021 based on: (a) our net loss of $20.6 million in 2022 excluding
non-cash operating items of $15.3 million, primarily from depreciation,
impairments and losses on disposals, amortization of intangible assets,
amortization of deferred financing costs and debt discounts, unrealized net
gains on derivatives, unrealized net gains on fair value instruments and
equity-based compensation charges, which results in net outflows of $5.3 million
and (b) our net loss of $24.1 million in 2021 excluding non-cash operating items
of $9.2 million, primarily from depreciation, impairments and losses on
disposals, amortization of deferred financing costs and debt discounts,
unrealized net gains on derivatives, unrealized net gains on fair value
instruments and equity-based compensation charges, which results in net outflows
of $14.8 million. These net differences between the two periods resulted in a
net change in operating cash flows of $9.5 million in 2022 compared to 2021.

Investing Activities



Net cash used in investing activities increased by $131.4 million in the three
months ended March 31, 2022 compared to the three months ended March 31, 2021.
This increase is primarily a result of increases in payments for investments and
customer notes receivable of $123.7 million and purchases of property and
equipment, primarily solar energy systems, of $20.7 million. This increase is
partially offset by increases in proceeds from customer notes receivable of
$10.3 million and proceeds from investments in solar receivables of $1.8
million.

Financing Activities



Net cash provided by financing activities increased by $221.1 million in the
three months ended March 31, 2022 compared to the three months ended March 31,
2021. This increase is primarily a result of increases in net borrowings under
our debt facilities of $218.0 million and net contributions from our redeemable
noncontrolling interests and noncontrolling interests of $8.1 million. This
increase is partially offset by an increase in payments of costs related to
redeemable noncontrolling interests and noncontrolling interests of $4.2
million.

Seasonality



The amount of electricity our solar energy systems produce is dependent in part
on the amount of sunlight, or irradiation, where the assets are located. Because
shorter daylight hours in winter months and poor weather conditions due to cloud
cover, rain or snow results in less irradiation, the output of solar energy
systems will vary depending on the season or the year. While we expect seasonal
variability to occur, the geographic diversity in our assets helps to mitigate
our aggregate seasonal variability.

Our Easy Plan PPAs with variable billing, Solar 20/20 Plan Agreements and Fixed
Rate Power Purchase Agreements are subject to seasonality because we sell all
the solar energy system's energy output to the customer at either a fixed price
per kWh or indexed, variable rate per kWh. Our Easy Plan PPAs with balanced
billing are not subject to seasonality (from a cash flow perspective or the
customer's perspective) within a given year because the customer's payments are
levelized on an annualized basis so we insulate the customer from monthly
fluctuations in production. In addition, energy production true-ups and
production estimate adjustments for Easy Plan PPAs with balanced billing are
calculated over an entire year. However, our Easy Plan PPAs with balanced
billing are subject to seasonality from a revenue recognition perspective
because, similar to the Easy Plan PPAs with variable billing, we sell all the
solar energy system's energy output to the customer. Our lease agreements are
not subject to seasonality within a given year because we lease the solar energy
system to the customer at a fixed monthly rate and the reference period for any
production guarantee payments is a full year. Finally, our loan agreements are
not subject to seasonality within a given year because the monthly installment
payments for the financing of the customers' purchase of the solar energy system
are fixed and the reference period for any production guarantee is a full year.

In addition, weather may impact our dealers' ability to install solar energy
systems and energy storage systems. For example, the ability to install solar
energy systems and energy storage systems during the winter months in the
Northeastern U.S. is limited. This can impact the timing of when solar energy
systems and energy storage systems can be installed and when we can acquire and
begin to generate revenue from solar energy systems and energy storage systems.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
is based upon our interim financial statements, which have been prepared in
accordance with GAAP which requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, cash
flows and related disclosures. We base our estimates on historical experience
and on various other assumptions we believe to be reasonable under the
circumstances. In many instances, we could have reasonably used different
accounting estimates, and in other instances, changes in the accounting
estimates are reasonably likely to occur from period-to-period. Actual results
may differ from these estimates. Our future financial statements will be
affected to the extent our actual results materially differ from these
estimates. For further information on our significant accounting policies, see
Note 2, Significant Accounting Policies, in our Annual Report on Form 10-K filed
with the SEC on February 24, 2022 and Note 2, Significant Accounting Policies,
to our interim financial statements included elsewhere in this Quarterly Report
on Form 10-Q.

We identify our most critical accounting policies as those that are the most
pervasive and important to the portrayal of our financial position and results
of operations, and that require the most difficult, subjective, and/or complex
judgments by management regarding estimates about matters that are inherently
uncertain. We believe the assumptions and estimates associated with our
principles of consolidation, the valuation of assets acquired and liabilities
assumed in acquisitions, the estimated useful life of our solar energy systems,
the valuation of the removal assumptions, including costs, associated with AROs,
the valuation of redeemable noncontrolling interests and noncontrolling
interests and our allowance for current expected credit losses have the greatest
subjectivity and impact on our interim financial statements. Therefore, we
consider these to be our critical accounting policies and estimates. There have
been no material changes to our critical accounting policies and estimates as
described in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 2, Significant Accounting Policies, to our interim financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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