Wall Street investors have gone cold on one of the main mechanisms banks invented to fund the green-energy revolution.
The business structure, known as the yieldco, feeds dividends from operating solar and wind farms to investors. Yieldcos raised $7.9 billion in public equity in 2014 and 2015 but only $1 billion since then, according to Bloomberg New Energy Finance.
The shift is further fallout from the collapse of yieldco promoter SunEdison Inc. and has changed the way clean-energy developers finance themselves. In years past, they started yieldcos to buy projects once they were operating, recycling the capital into new installations. Now, they’re turning to a large and deepening pool of buyers — insurance companies and pension funds — to provide funding and sometimes take control of income-producing assets.
“The idea of a you-have-to-have-a-virtuous circle — that idea that you’re hooked at the hip between the public markets and growth — is dead,” Mike Garland, chief executive officer of the San Francisco-based yieldco Pattern Energy Group Inc., said in an interview. “The market is saying, “‘Come to us last, not first.’ When we started, it was ‘Come to us first.’”
Yieldcos first emerged in 2013, when the largest U.S. independent power producer, NRG Energy Inc., launched NRG Yield Inc. The parent formed the yieldco to hold operating wind and solar farms that it had built or acquired. Revenue from those assets funded dividends.
Pattern Energy and NRG Yield are projected to pay 12-month dividend yields of 6.4 percent and 6.5 percent respectively, according to datacompiled by Bloomberg. That’s about three times higher than the average 2.1 percent yield of 500 companies on the Standard & Poor’s index.
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