United States

United States

Yieldco expansion to continue

UNITED STATES: North American yieldcos now own 5.5GW of US wind capacity, with expansion of this investment vehicle expected to continue, according to Make Consulting.

US yieldco Pattern Energy owns just over 2GW of renewable energy projects in the US
US yieldco Pattern Energy owns just over 2GW of renewable energy projects in the US

Make analysed the explosion of yieldcos from practically nothing in 2013.

The firm believes the increase is set to continue at the same rate, if not faster, until 2017 as projects, which qualify for the production tax credit (PTC) are built.

Ryan Moody, market analyst for Make said: "Economically, yieldcos tend to be a good deal. They are delivering reliable dividends and they represent low risks for new types of investors.

"They are appealing to a new set of investors in the public domain, like debt or bond investors. Due to the low interest rates in the bond markets, yieldcos prove to be an attractive yet still low risk investment option."

Yieldcos are publically traded companies, focused on holding operating plants with long-term power contracts that generate reliable cash flows paid out to investors in the form of dividends.

The structure is attractive for both investors and industry. It provides wind-energy producers with an avenue to sell off some of their existing assets and plough the money back into their businesses. And by accessing the huge pool of stock-market investors, they can drive down the cost of capital.

Moody added: "Yieldcos contributing to a lower cost of capital are beneficial to the wind industry as a whole by making a more competitive levelised cost of energy.

"Yieldcos have helped drive a consolidation trend in US renewable ownership. Make expects further consolidation of wind assets in the US market during the next three years."

Yieldcos target projects that have power purchase agreements, service agreements and some kind of government support scheme, either the PTC or the investment tax credit.

Make found that over 20GW of wind projects operating in the US now could be possible yieldco targets.

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