Spruce Power Holding Corporation · NYSE:SPRU
Spruce Power — XL Fleet — Merger or Acquisition (September 2022)
31 slides from Spruce Power's merger presentation, Sep 12, 2022
Slide 1: Acquisition of Spruce Power and New Corporate Strategy
Acquisition of Spruce Power and New Corporate Strategy September 12, 2022
Slide 2: Disclaimer: Use of Forward-Looking Statements
2 Disclaimer Use of Forward - Looking Statements Certain statements in this presentation may constitute “forward - looking statements” within the meaning of the federal securities laws . Forward - looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “co
Slide 3: Disclaimer (Cont'd)
3 Disclaimer (Cont’d) Adjusted EBITDA We define Adjusted EBITDA as consolidated net income (loss) plus interest expense, unrealized (gain) loss on derivatives, income taxes, depreciation and amortization, and certain identified items that we do not consider to be part of the ongoing businesses of XL
Slide 4: Management Presenters
4 Management Presenters Eric Tech CEO, XL Fleet Don Klein CFO, XL Fleet Christian Fong CEO, Spruce Power President, XL Fleet
Slide 5: Agenda
5 Agenda 01 Introduction Eric Tech, Chief Executive Officer, XL Fleet 03 Market Overview & Growth Strategy Christian Fong, Chief Executive Officer, Spruce Power and President, XL Fleet 02 Spruce Overview Eric Tech, Chief Executive Officer, XL Fleet 04 Financial Overview Don Klein, Chief Financial Of
Slide 6: 1. Introduction
ae 1. Introduction <LFleet.
Slide 7: Acquiring Spruce Power and Introducing New Corporate Strategy
7 Acquiring Spruce Power Introducing New Corporate Strategy Evaluating Options for Drivetrain Segment Aligning Leadership to New Strategy Maintaining Financial Flexibility Pivoting from nascent commercial HEVs to proven subscription - based services Goal is to maximize the value of the business for
Slide 8: Spruce Power Snapshot
8 Founded: 2012 Largest privately - held owner and operator of residential rooftop solar systems in the U.S. • More than 52,000 Subscribers across 16 states (1) • 343 MWdc of generating capacity (1) • Founded by one of the three co - founders of Sunrun • 10+ years of experience servicing rooftop sol
Slide 9: Why Spruce Power?
9 Gain Exposure to the Rooftop Solar Megatrend Attractive Subscription - Based Business with a Low Cost Customer Acquisition Model Opportunity to Accelerate Growth with Our Capital Residential solar installations expected to more than double by 2027 (1) Rising energy prices, increasing EV adoption a
Slide 10: The Shareholder Value Creation Opportunity
10 Public market investors use enterprise value to gross earning assets multiples as a valuation benchmark for TPO companies • Spruce’s publicly traded peers are Sunrun and Sunnova • Sunrun and Sunnova report their Gross Total Subscriber Value (aka “Gross Earning Assets” and “Estimated Gross Total C
Slide 11: 2. Spruce Overview
a 2. Spruce Overview
Slide 12: What is TPO Solar?
12 724 225 ~ 130 96 52 Sunrun Sunnova Tesla SunStrong All Homes with Solar • Two ownership models for rooftop solar: 1. Homeowner – The homeowner purchases the system from an installer for cash and is responsible for its ongoing maintenance 2. Third - Party Owner (“TPO”) – A third party owns and is
Slide 13: TPO Solar's Value Proposition
13 TPO Solar’s Value Proposition… …for Customers • Savings versus purchasing electricity from the grid • Reduced carbon footprint • Backup power during outage events (when combined with storage) • No upfront investment • No maintenance costs • 20+ year contracts that generate stable, recurring cash
Slide 14: Spruce Overview
14 Spruce Overview Spruce Power is the largest privately held Third Party Owner (“TPO”) of residential solar rooftop systems in the U.S.
Slide 15: The Spruce Business
15 Servicing Platform Merger & Acquisitions Group Rooftop Solar Portfolio The Spruce Business
Slide 16: Spruce Has a High Quality Rooftop Solar Portfolio
16 <700 16% 700 - 750 27% 750 - 800 32% >800 25% <20 5% 20 - 22.5 30% 22.5 - 25 57% >25 8% ~23 year Weighted Average <10 5% 10 - 12 22% 12 - 15 64% >15 9% Remaining Asset Life (yrs) (3) Remaining Contract Life (yrs) CA 44% NY 17% NJ 15% AZ 8% MA 7% CT 4% Other 5% Spruce Has a High Quality Rooftop So
Slide 17: The Spruce Servicing Platform is Scalable & Extensible
17 The Spruce Servicing Platform is Scalable & Extensible Spruce services both its own portfolio and systems owned by other companies Rooftop Solar Battery & EV Other Services ▪ Rooftop solar leases ▪ Rooftop solar PPAs ▪ Rooftop solar loans ▪ Leases for battery storage systems ▪ Leases for EV charg
Slide 18: Spruce's M&A Capabilities Are Unique
18 Spruce’s M&A Capabilities Are Unique Spruce has completed 10 acquisitions of residential solar portfolios since 2019 • Spruce’s business model is different than other major TPO companies like Sunrun and Sunnova in two key ways: – Spruce does not sell new solar systems directly to consumers and do
Slide 19: 3. Market Overview & Growth Strategy
3. Market Overview & Growth Strategy
Slide 20: Residential Solar is a Megatrend
20 2027 2021 Residential Solar is a Megatrend… 2018 2021 was a record year for residential solar in the U.S. with total installed capacity expected to more than double by 2027 12 states with >7,500 residential solar installs annually 16 states with >7,500 residential solar installs annually 21 state
Slide 21: Accelerated by Rising Energy Prices, Falling Battery Costs and EV Adoption
21 3.6 38.7 2022 2030 …That’s Being Accelerated By Rising Energy Prices, Falling Battery Costs and Increasing EV Adoption Change in Average Residential Utility Rate U.S. electricity prices are rising at one of the fastest paces in history driven by increases in the cost of natural gas Passenger EVs
Slide 22: Spruce Growth Strategy
22 Spruce Growth Strategy • Historically focused on M&A in rooftop solar only • Plan to accelerate growth in two dimensions – add more products and access new channels • Opportunity to expand platform to commercial market in collaboration with XL Fleet’s existing World Energy business unit Service R
Slide 23: Large Incremental Growth Opportunity with Existing Subscribers
23 23 (1) Management estimate. (2) Weighted average monthly payment of PPAs and leases, as of June 30, 2022. Excludes prepaid systems. • Evolving technology creates opportunities for customers to subscribe to new services • Current customer base is paying an average of $143 per month (2) • Opportuni
Slide 24: 4. Financial Overview
a 4. Financial Overview
Slide 25: How Spruce Makes Money
25 • Two primary sources of revenue: – Monthly payments from solar subscribers – Monthly payments from other TPOs that pay Spruce to manage their systems • Other revenues include the sale of environmental credits and one - time service fees • 48% of subscriber payments are fixed (1) • Balance are va
Slide 26: Spruce Has a Step-Change Rather Than Incremental Growth Pattern
26 Direct - to - consumer peers add small numbers of subscribers every month Spruce adds large numbers of subscribers at one time when the company acquires portfolios Publicly Traded Peers Spruce Spruce Has a Step - Change Rather Than Incremental Growth Pattern
Slide 27: Subscriber Value Metrics
27 Subscriber Value Metrics • Gross Total Subscriber Value reflects the remaining projected net cash flows from current customers discounted at 5% • Projected cash flows include the customer’s initial agreement plus renewal (1) Pro forma for acquisition of 2,655 systems completed in July 2022. (2) G
Slide 28: Spruce Transaction Summary and Capitalization at Closing
28 Summary Capitalization at Closing ($ in millions) Effective Interest Rate (%) (2) Maturity Pro Forma Combined (1) Cash Restricted Cash $244 28 Total Cash $273 Debt Senior Term Loan 1 Senior Term Loan 2 Senior Term Loan 3 4.58% 3.74% 4.05% Apr. 30, 2026 May 14, 2027 Nov. 13, 2027 239 72 66 Term Lo
Slide 29: Three Reasons to Invest in XL Fleet
29 (1) Represents the change in total installed MWs from 2H - 2022 to 2027E per SEIA & Wood Mackenzie’s U.S. Solar Market Insight, June 2 022. (2) Spruce’s Gross Subscriber Value as defined on page 27. (3) Based on unrestricted cash of $244 million, 143.8 million of shares outstanding and a share pr
Slide 30: Appendix
ALFleet Appendix
Slide 31: Non-GAAP Reconciliation of Spruce Power Net Income to Adjusted EBITDA
31 Non - GAAP Reconciliation of Spruce Power Net Income to Adjusted EBITDA Note : For the 12 months ended June 30 , 2022 . Figures are preliminary, unaudited and are subject to change . Adjusted EBITDA excludes $ 3 million of estimated purchase accounting adjustments related to the elimination of de