Sunnova Energy International Inc. has implemented a shareholder rights plan to protect its long-term value by preserving the availability of its net operating loss carryforwards (NOLs) and other tax benefits. This initiative, known as the Tax Asset Preservation Plan, is designed to prevent ownership changes that could significantly limit Sunnova’s ability to use these tax assets under the Internal Revenue Code.
As of December 31, 2024, Sunnova had approximately $1.4 billion in U.S. federal NOLs, which could be used to offset future taxable income. However, under Section 382 of the Internal Revenue Code, the company’s ability to utilize these NOLs would be severely restricted if its “5-percent shareholders” collectively increase their ownership by more than 50 percentage points within a rolling three-year period. This scenario, classified as an “ownership change,” would reduce the potential benefits of these tax assets.
To mitigate this risk, the Tax Asset Preservation Plan discourages any person or group from acquiring 4.9% or more of Sunnova’s outstanding common stock. If a shareholder surpasses this threshold, the rights attached to the plan would become exercisable. In such a case, all shareholders, except for the triggering investor, would have the right to purchase additional shares at a 50% discount or receive one additional share per right they hold.
Existing shareholders who already own 4.9% or more of Sunnova’s common stock will not be required to sell their shares but will be restricted from acquiring additional shares without triggering the provisions of the plan. The Board of Directors retains the authority to exempt any individual or group from these restrictions if deemed in the best interest of the company.
The Tax Asset Preservation Plan is similar to measures adopted by other public companies with significant NOLs and is not intended to prevent strategic actions that the Board determines to be beneficial for Sunnova. It ensures that the Board remains in a position to fulfill its fiduciary duties while safeguarding the company’s tax benefits. The plan became effective on March 28, 2025, and is set to remain in place until March 27, 2028, unless terminated earlier according to its terms.
