The Yield Created by the Yieldco

by Akin Gump Strauss Hauer & Feld LLP
Contact

In our post on August 19, “Yieldcos – The New “Promised Land” of the Renewable Energy Space?”, we explored the Yieldco structure and why some renewable energy companies are considering them. We will now turn our attention to an analysis of several recent Yieldcos.

In the last 12 months, a number of significant developers in the renewable energy space have either formed Yieldcos, filed for an initial public offering of Yieldco securities or announced plans to form a Yieldco. By most measurements of the success of an initial public stock offering, the Yieldcos have done quite well.

Some of the more significant Yieldco activity, in reverse order of funding dates, include:

  1. SunEdison, on July 18, 2014, spun off 524 MW of solar project assets in the U.S., Canada, the U.K. and Chile to form TerraForm Power, in an IPO that raised $501.6 million and saw its IPO price surge about 35 percent in its first day of trading. Based on the anticipated initial distribution, as described in its S-1 filing, at its initial offering price TerraForm was to provide a yield of about 3.7 percent. However, due to the buying frenzy for the security, the yield was down closer to 2.6 percent by the end of its first day of trading. 
  2. Abengoa Yield, was spun off from Abengoa on June 18, 2014 with 10 assets, including solar projects in Arizona, California and Spain, and a wind farm in Uruguay.  It also includes conventional power in Mexico. It too, saw a strong demand at its initial public offering, with shares being bid up 28 percent on their first day of trading. As of August 22, Abengoa Yield is trading up about 38 percent over its IPO price with a 2.9 percent yield, but many expect that to increase next year when its Mojave power plant in Southern California goes operational.
  3. On July 2, 2014, NextEra Energy Partners closed its initial public offering, raising $442.7 million net proceeds, with 10 projects representing 990 MW of renewable capacity.  NextEra Energy Partners also saw its shares increase by 28 percent on the day of its IPO launch. It has since dropped slightly below those levels but still current yield is a very skinny 2.2 percent, as projected based on the distribution for the first year as described in its S-1.
  4. NRG Yield Inc., which allowed NRG to raise $471 million last July by selling a 34.5 percent interest in 1,324 MW of conventional and solar power plants, 1098 MW of thermal facilities and 123 MW of small cogeneration. The yield initially went out at 5.45 percent, but it currently trades with a 2.73 percent yield. NRG Yield is one of only a few Yieldcos that is comprised of both renewable and conventional assets, which may explain it very low yield. NRG Yield Inc. also completed its acquisition of the Alta Wind facility in Tehachapi, CA from Terra-Gen on August 12, adding an additional 947 MW of operating wind capacity to its portfolio.
  5. Transalta Renewables, allowed Canada’s Transalta Corporation to raise $202 million Canadian in August of last year by selling a 19.3 percent interest in 1,112 MW of wind and hydro projects. It initially yielded about 7.5 percent, but that yield stands at about 6.50 percent currently.
  6. Pattern Energy spun off 1,041 MW of wind farms in the U.S. Canada and Chile and was able to raise $318.6 million this past September by selling a 36.8 percent share of the company formed to hold the assets, which included 6 operating wind farms and two wind farms under construction. Pattern’s Yieldco initially yielded 6.25 percent, but is recently trading with a 4.2 percent yield.

Some companies have formed vehicles that are “yieldco-like”, although not formally yieldcos.  Hannon Armstrong Infrastructure Fund converted itself into a Real Estate Investment Trust (REIT) in April of 2013 and is currently offering a yield of 6.4 percent. Solar City went the route of a securitization of debt secured by revenues from solar PPAs and leases from rooftop solar.

In addition, it is noteworthy that a number of other significant players in the solar industry have also publically announced that they are considering forming Yieldcos. These include SunPower, First Solar, Canadian Solar and several others.

So, why the rush to Yieldcos?  In next week’s post, we will discuss the many benefits that a Yieldco brings to the parent company.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Akin Gump Strauss Hauer & Feld LLP | Attorney Advertising

Written by:

Akin Gump Strauss Hauer & Feld LLP
Contact
more
less

Akin Gump Strauss Hauer & Feld LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!