Abengoa Yield Plc, formed to capitalize on growing dividends from revenue generated by the renewable-energy assets of Abengoa SA, surged in its trading debut after raising $721 million in an initial public offering.
Abengoa Yield gained 28 percent to $37 in New York trading after selling 24.85 million shares at $29. The Spanish energy company will hold a 71 percent stake in the unit.
Abengoa Yield joins other so-called yieldcos that energy providers have announced or may announce spinoff plans for this year. Most recently SunEdison Inc. said it would spin off solar projects, while NRG Yield Inc. raised $495 million in July and shares have more than doubled since. In this model, the yieldcos sell electricity from power plants, using the revenue to buy more projects, typically from their developer parent companies and other ventures.
“It’s a boring business, where you just have to collect the cash,” Abengoa SA’s Chief Executive Officer Manuel Sanchez Ortega said in an interview yesterday in New York, after the pricing was announced. “It’s a peaceful investment for five to ten years or more.”
Abengoa Yield will initially focus on projects in North America, South America and Europe, with later plans for projects in Africa and the Middle East, according to its IPO filing. The unit currently owns 11 assets in energy generation, conventional power, and electric transmission lines, the filing showed. The Brentford, U.K.-based Abengoa Yield expects to pay out 90 percent of cash available for distribution.
Having a yieldco partner makes it easier to finance large power plants, Ortega said.
“That reduces uncertainty when we start a project because we’ve got a buyer,” he said. “That reduces the borrowing costs of the entire project.”
Citigroup Inc. and Bank of America Corp. managed the offering. The shares are listed on the Nasdaq Stock Market under the symbol ABY.