The Status of the Yieldco

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

Questions?

Tom Konrad Ph.D. CFA

tom@altenergystocks.com