the status of the yieldco
TRANSCRIPT
The Status of the Yieldco
Tom Konrad Ph.D. CFA
History
What is a YieldCo
Importance and Purpose
Common YieldCo features
Yieldco Assets
Benefits and Drawbacks
Tom Konrad Ph.D., CFA
Editor, Freelance writer
Hedge fund focused on green economy.Head of research.
Green Global Equity Income Portfolio
A seed fund with a dividend income strategy and a 2 year track record. Currently talking to potential sponsors about turning it into a mutual fund.
Portfolio Manager.
Disclosure
Tom Konrad, The Green Global Equity Income Portfolio, and/or the JPS Green Economy Fund own the following securities discussed:
US: BEP, EVA, HASI, PEGI, NYLD/A, GLBL, CAFD, ABY, TERP
Canada: CSE, RNW, AQN, INE
Disclaimer
Past performance is not a guarantee or a reliable indicator of future results. This presentation contains the current opinions of the author and such opinions are subject to change without notice. This presentation is intended for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
What Is A Yieldco?
Developer perspective: A way to raise (cheap) equity capital for clean energy projects
Investor perspective: A company that pays a (usually) high dividend based on cash flow from clean energy assets.
What isn't a Yieldco?
IPO Timeline: North American Yieldcos
What Is A Yieldco
A Yieldco...
Raises capital in public markets
Generates most of its cashflow from clean energy ownership
Distributes most of its cashflow to investors.
Funds clean energy projects with low-cost capital from income seeking public investors.
What Parts of the ”Yieldco Model” Will Survive?
Public Company
Owns Clean Energy Assets
Uses most cashflow for distributions
Has developer sponsor(s)
Right of first offer (ROFO) on projects
High dividend growth rate
Contagion: All In The Family
The Sponsor Effect
The Sponsor Effect
Yieldcos With Internal Development See Opportunity
Brookfield Renewable Energy Partners (BEP)
We're very different
Opportunity set will get better
Hannon Armstrong Sustainable Infra. (HASI)
Pullback is an opportunity
May allow higher returns on investment
Yieldcos With Private Sponsors Expect To Stand Out
Pattern Energy Group (PEGI)
Volatility in Yieldco sector is very healthy
Enviva Partners LP (EVA)
We expect to execute... and differentiate Enviva from the rest of the pack.
Yieldcos With Solvent Sponsors: 'The Model Works For Us'
NextEra Energy Partners (NEP)
The Yieldco model can work with the right structure and a world class sponsor.
8point3 Energy Partners (CAFD)
Both sponsors commited to dropdowns.
No need to issue new equity.
Yieldcos With Solvent Sponsors: Continuing As Planned
TransAlta Renewables (TSX:RNW)
– Will continue asset drop-downs
– 'Stable & moderate growth'
– Announced 2nd ROFO on Nov. 23.
NRG Yield (NYLD)
Investment proposition unchanged.
Continue to target 15% DPS growth
Abengoa (ABGB) Seeks Creditor Protection: Trouble for Abengoa
Yield (ABY)
Some project debt has cross-default clauses which may be triggered.
US DOE can restrict distributions from Solana & Mojave solar projects.
Spanish insolvency law may lead to reexamination of intercompany transactions – were valuations fair?
SunEdison Grabs Control at TERP and GLBL
November 25th:
SUNE replaces TERP & GLBL CEO, CFO, Chairman, and members of Corporate Governance and Conflicts Committees
Conflicts committee members resign –'unable to protect interests of stockholders'
GLBL will focus on acquisitions from SUNE
GLBL Cash Rescues SUNE- Is it good for GLBL?
November 26
GLBL Acquires 425 MW of Indian solar farms for $0.51/W plus assumed debt from SUNE
The projects replace 'lower yielding' planned acquisitions from initial portfolio, which have been cancelled.
SUNE uses cash to pay down margin loan.
Implications for Terrafrom Power/Global shareholders
Less oversight of conflicts of interest
Weaker balance sheets and credit ratings as capital is used to support SunEdison
Potential to acquire cheap assets from desperate seller.
Predictions for Future Yieldcos
More focus on yield - less on growth.
Yieldcos will be one of many capital raising options.
More independent Yieldcos, multiple & private sponsors (BEP, HASI, CAFD, PEGI)
Yieldcos with weak/highly leveraged sponsors will trade at significant discount.
What's Coming
Italy: Enel buying back Yieldco
China: Canadian Solar Yieldco IPO
Weak sponsor, needs cash
Unlikely to succeed
India: Sebi considerling Yieldco
