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yieldco

SunEdison Beats Own Forecast With Record Third Quarter, Stocks Plummet

by Joshua S Hill November 11, 2015

Despite a record third quarter delivery, the world’s largest global renewable energy development company, SunEdison, saw its stocks plummet 22%.

SunEdison has been under intense pressure over the last six months to perform across all metrics, a task that shareholders do not believe the company is living up to. In its third quarter financial earnings announcement, SunEdison revealed that it had delivered 640 MW through the quarter, smashing its own previous guidance of delivery between 540 MW to 600 MW. This puts the company up 343 MW year-over-year, with another 2.9 GW of projects under construction, and a pipeline of 7.9 GW and backlog of 5.5 GW.

The company brought in revenue of $476 million for the quarter, including reported adjusted revenue of $153 million from their widely publicized yieldco, TerraForm Power, and reported revenue of $29 million from the company’s newest yieldco, TerraForm Global.

However, despite relatively decent performance across the board from the company — and only slight losses for its two yieldcos — SunEdison also reported a loss of $0.92 per share — originally forecast to be only $0.60 per share — which subsequently managed to scare investors enough to cause the stock price to plummet.

“During the third quarter, we continued our track record of execution within the development business by delivering over 600 MW, more than double versus the prior year,” said Ahmad Chatila, SunEdison chief executive officer. “In addition, we made the difficult, but necessary decision to optimize our organization in the face of the current market conditions within the yieldco space. These changes will not only set up the business for long-term success, but also should position the development business to generate positive cash flow in mid 2016.”

MarketWatch is reporting that Wall Street has not lost any of its confidence in the company, despite its performance on the stock market today, with some analysts describing investors reaction to SunEdison’s earnings report as “unwarranted.”

SunEdison’s shares have been on a months-long downward-trend, after second quarter earnings which reported a net loss of $263 million that sent investors scurrying for safety — despite the confusion of many analysts. Investor reaction has forced SunEdison to refocus their attentions from acquiring capacity and equity, and to begin building up revenue. SunEdison announced that it would form a new $1 billion warehouse investment vehicle that it hoped would be the first sign it was turning their ship around, followed last month by the decision to lay off 15% of its work-force.

The long-term gains of SunEdison’s original acquisition-phase would have been of long-term benefit to investors, but short-term gains seem to be the order of business. The most telling factor will be the reaction over the next several months, and in particular, following the company’s fourth quarter and full-year 2015 earnings report due early next year.

November 11, 2015 0 comment

Investment PV Solar $Solar Projects Yieldcos

TerraForm Global Raises $675 Million In IPO

by Joshua S Hill August 4, 2015

written by Joshua S Hill

SunEdison has revealed that the IPO for its newest endeavour, TerraForm Global, raised $675 million for the new company.

Originally announced back in May, TerraForm Global is SunEdison’s “emerging markets yieldco subsidiary,” which will be “formed to own and operate contracted clean power generation assets in attractive, high-growth emerging markets.” SunEdison made available 45 million Class A shares on the NASDAQ stock exchange on July 31, sold at $15.00 per share, and representing total proceeds of $675 million.

Though the share price has since fallen from the original $15, reports are that TerraForm Global raised the planned $675 million — in addition to a further $67.5 million raised through Class A Common Private Placement.

TerraForm Global intends to use its new proceed, in addition to an existing $810 million in senior unsecured notes, to repay all outstanding indebtedness under its bridge facility, pay pending acquisition consideration, repay project-level indebtedness, and for general corporate purposes.

TerraForm Global announced back in July that it intends to offer, by way of a private transaction, up to $800 million in green bonds, or more accurately, “aggregate principal amount of senior notes due 2022.” Proceeds from the sale are intended to fund, in whole or in part, renewable energy projects.

August 4, 2015 0 comment

Investment PV Solar $Solar Projects Yieldcos

Canadian Solar Plans Yieldco Investment Vehicle For US Stock Market

by Aisha Abdelhamid March 19, 2015

written by Aisha Abdelhamid

Announcing plans to launch its first global yieldco investment structure, Canadian Solar anticipates the IPO may be available on a US Stock Exchange as early as the fourth quarter of 2015.

Dr Shawn Qu, chairman and CEO of Canadian Solar, spoke recently about the new yieldco investment product under development. “We have been reviewing various options to structure and potentially list our downstream business,” said Qu, “and we are now planning to form a yield co vehicle, in order to maximize value creation for our shareholders over the long-term.”

A leading manufacturer of solar PV modules and prominent provider of solar energy solutions, Canadian Solar is a major heavyweight in the global solar energy industry. With an international pipeline of utility-scale solar energy projects, Canadian Solar has deployed over 8 GW of photovoltaic modules in over 70 countries over the past 14 years. Founded in Canada in 2001, Canadian Solar has been publicly listed on the NASDAQ since 2006 (CSIQ).

The Yieldco Investment Structure

As the National Renewable Energy Laboratory (NREL) explains succinctly in an article titled, A Deeper Look into Yieldco Structuring, “A yieldco is a dividend growth-oriented public company, created by a parent company.” Yieldcos create portfolios of “renewable and/or conventional long-term contracted operating assets in order to generate predictable cash flows. Yieldcos allocate cash available for distribution (CAFD) each year or quarter to shareholders in the form of dividends.”

NREL explains that the parent company is required to own a majority share of the yieldco (Class B Common Stock). Public shareholders are entitled to a minority share (Class A Common Stock). The revenue produced from projects owned by the “operating subsidiaries” passes through this structure, delivering returns to the yieldco shareholders. Adapted from NRG Yield, the image below outlines the yieldco organizational structure:

The Current Crop of Yieldcos

Tom Konrad of Greentech Media notes that many large, publicly traded advanced energy companies have yieldco investment vehicles already in place, or have plans in the works. Currently, yieldcos are offered by NRG Yield, Pattern Renewable Energy Partners, NextEra Energy Partners, Abengoa Yield, TerraForm Power, and TransAlta Renewables. Jointly, First Solar and SunPower are planning the IPO of a yieldco for investment in solar PV farms.

Since their IPOs, reports Konrad, the current crop of yieldcos has gained from between 15% (Abengoa Yield) and 127% (NRG Yield). Simultaneously, these firms are paying out dividends and selling large quantities of stock in secondary offerings, which is funding their planned growth and raising cash for their sponsors.

Stocking its portfolio with a broad mix of assets is important to ensure a steady stream of revenue for a yieldco. The NREL reports that Abengoa Yield’s portfolio includes 86 miles of transmission lines, but TerraForm Power’s portfolio contains solar Distributed Generation (DG) projects. TerraForm Power is also expected in the future to add natural gas and hybrid energy generation assets. Assembling its initial portfolio with 25 assets spread over 10 states, NRG Yield has conventional generation assets accounting for 36%, renewables for 16%, and thermal energy/co-generation making up 48%.

Appealing Investment Tax Advantages of a Yieldco

According to the NREL, the structure of yieldco investment vehicles have additional tax advantages. Rather than taxation occurring twice, once at corporate level and then again at shareholder level, the yieldco may pass untaxed earnings through to investors. This is accomplished by matching strong positive cash flows, or basically asset income, with losses, or basically expenses and renewable asset depreciation. When losses exceed the taxable income on the assets, these “net operating losses” result in taxable income reduction, thereby resulting in taxation on lower annual earnings. The company may conceivably even avoid taxation completely.

Additionally, net operating losses may be “carried forward” for future taxable events. With this appealing strategy, many yieldcos anticipate not having to pay significant income tax, conceivably for several years. And at the shareholder level the dividends may be treated more favorably as a return of the original investment, rather than as a return on investment.

March 19, 2015 1 comment