What is the primary financial benefit of this transaction for Bloom Energy?

The primary financial benefit is that the transaction provided the necessary financing for Bloom Energy's scheduled acceptances in the second quarter of 2021, ensuring operational continuity and project deployment.

What are Bloom Energy's key obligations under the EPC and O&M agreements?

Under the EPC agreement, Bloom has repurchase obligations for projects not mechanically completed by September 2022 and is liable for delay liquidated damages if commissioning is not achieved by December 2022. Under the O&M agreement, Bloom provides services and guarantees output, with potential penalties. It also faces a potential requirement to establish a reserve account if its Fixed Charge Coverage Ratio (FCCR) falls below 1.15x.

Are there any limitations on Bloom Energy's financial exposure from these agreements?

Yes, Bloom's liability for breaches under the EPC Agreement is generally capped at the purchase price of the applicable Project. For the O&M Agreement, liquidated damages for breach of the output guarantee are capped at 6% of the Portfolio purchase price.

What is the Fixed Charge Coverage Ratio (FCCR) covenant, and what happens if Bloom Energy fails to meet it?

The FCCR covenant requires Bloom Energy to maintain a ratio of 1.15x, assessed quarterly from December 31, 2022. If this ratio is not met, Bloom must establish a reserve account funded with project service fees payable to Bloom over the next 12 months. Funds can be released under certain conditions, including improved FCCR performance or a fixed anniversary date.

BE 8-K: Material Agreements

Summary

Bloom Energy Corporation (BE) announced a significant transaction on June 25, 2021, with RAD Bloom Project Holdco, LLC, a partnership involving RAD Energy Solutions and Bank of America. This deal involves the sale of five project companies owning 32.85 megawatts of Bloom Energy Servers. The transaction, valued at the purchase price of the applicable projects, is crucial for Bloom as it provided the necessary financing for its second-quarter 2021 scheduled acceptances. The deployment of these servers is set to occur over the next 18 months, starting in June 2021. While this sale offers immediate financial relief and supports ongoing operations, investors should note the material agreements attached. Bloom has entered into an EPC agreement to sell the portfolio and servers, and an O&M agreement to provide ongoing services. Importantly, Bloom retains certain repurchase obligations if projects aren't mechanically completed by September 2022, and faces penalties for delayed commissioning beyond December 2022. The company also has indemnification obligations for environmental risks, tax events, O&M failures, and project delays, though its liability is generally capped at the project's purchase price. The O&M agreement also includes potential financial covenants related to a Fixed Charge Coverage Ratio (FCCR), which could require Bloom to establish a reserve account if not met.

Key Highlights

1Bloom Energy entered into a material definitive agreement to sell five project companies holding 32.85 MW of Bloom Energy Servers to RAD Bloom Project Holdco, LLC.
2The transaction provided financing for Bloom's second-quarter 2021 scheduled acceptances.
3The 32.85 MW of Bloom Energy Servers are scheduled for deployment starting June 2021 and continuing over 18 months.
4Bloom will provide ongoing operations and maintenance (O&M) services for the sold projects under a separate O&M Agreement.
5Bloom has repurchase obligations for projects not reaching mechanical completion by September 30, 2022.
6Bloom faces liquidated damages for delays in project commissioning beyond December 31, 2022, capped at $500/kw.
7Bloom retains certain indemnification obligations for environmental risks, tax recapture events, O&M failures, and project delays, with liability generally capped at the project purchase price.

Bloom Energy Corp 8-K Report, Material Agreement (Jun 30, 2021)

Summary

Key Highlights

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