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.
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The double edged sword of investment banking. They’ll unlock trillions of capital for you…but then it blows up in your face usually.
its a shift of money from FF to renewable yieldco, unstoppable.
divest FF, invest in Renewable yieldco for high yield for years to come.
“Solar PV is already the next financial instrument bubble”
How do you figure that? Yield Co’s are based on completed projects that have power purchase agreements for the next 15-25 years. They are coming from solar companies that build their own panels and used their own money to install them in big projects. Now they want to build more of these projects, for which there is current high demand, so in essence are selling off the previous projects (or the guaranteed profits from them) in order to finance the new ones. Which with the way the solar market is trending, the new projects will also become yield co’s to finance even more projects.
Yes at some point in the future the demand for new solar is going to taper down, but we are a long ways from seeing that. In the meantime the profits from the yield Co’s is guaranteed income for the duration of the contracts for the power purchased. And with the improving quality of the panels, and the diminished degradation, those power purchase contracts are likely to be renewed in the future, all without the variability of fuel purchase costs. These yield Co’s may not return the higher profits of high risk investments, but they are just as secure as any other bond.
more secure , the Sun is very stable, Solar Radiation Level is known for years to come, and the demand for Solar will never taper down.
Solar for heating with heatpumps, Solar for EV mobility.