Yieldcos On Track To Become $100 Billion Market

Clean energy experts speaking at the Bloomberg New Energy Finance annual conference being held in New York believe that yieldcos are on track to become a $100 billion market — not bad, considering that yieldcos are a clean-energy financing model that didn’t exist three years ago.

Bloomberg New Energy Finance (BNEF) reported on a panel discussion which touched on yieldcos — a publicly traded company that is formed to own the operating assets of a company’s energy projects — including comments from Jeff McDermott, a managing partner at Greentech Capital Advisors LLC, a New York-based investment bank that invests in yieldcos.

According to McDermott, wind and solar developers are continuing to form yieldcos to reduce funding costs. “It really does lower the costs of renewables,” said McDermott regarding yieldcos during a panel discussion Wednesday. “It’s got a lot of room to run.”

Just in the past few months several new yieldcos have been announced: Canadian Solar announced in March that it would be looking to launch a global yieldco. According to Dr Shawn Qu, chairman and CEO of Canadian Solar, “We have been reviewing various options to structure and potentially list our downstream business and we are now planning to form a yield co vehicle, in order to maximize value creation for our shareholders over the long-term.”

And in February, Enel was reportedy only weeks away from unveiling its US renewable energy yieldco — though, many weeks later and still no word has reached us of a finalisation.

Maybe the biggest news of late was the news that First Solar and SunPower were set to create a yieldco together — one of the reasons that First Solar did not sell off any of its current projects, so that they could be transitioned to the yieldco. Such a decision cost the company in the first quarter earnings, but the expected yieldco will no doubt reap sufficient rewards.

One of the primary reasons yieldcos have reaped such a popular response is the dividends paid out to shareholders are often higher than corporate bonds, however that advantage may decrease in time if interest rates increase, according to Josh Steiner, head of industry verticals at Bloomberg LP.