- Market doesn't value them, sponsors can't buy them back: Crane
- Units may be taken over by private investors, he says
Ousted NRG Energy Inc. Chief Executive Officer David Crane said on Tuesday that the model for yieldcos, once-popular investment vehicles for renewable energy projects, is “broken” and that some of the units will probably end up being taken over by private investors.
Under Crane, who was forced out in December, NRG formed a yieldco that was structured as a publicly traded unit controlled by the power generator. Since then, a proliferation of them has “overwhelmed the market,” and the business model, as well as the relationship with the companies that control them, “is completely broken,” he said in an interview on Bloomberg TV.
“Yieldcos have to be remade,” Crane said, adding that most of the companies that formed them can no longer afford to buy them back. “I’m actually surprised that there are more yieldcos that haven’t been taken private.”
Private equity and infrastructure funds may end up buying more of the companies now that some have lost nearly half their value, according to Crane. A Bloomberg Intelligence index of the companies in North America has slid 44 percent since June 1 as investors raise questions about the companies’ ability to raise cash.