Market ‘Saturated’ by Yieldcos After 15 IPOs, Says NRG Yield CEO

There may be too many renewable-energy holding companies, according to David Crane, chief executive officer of NRG Yield Inc., one of the first of these ventures to sell shares in an initial public offering.

The growing number of these companies, often called yieldcos, is driving up competition to buy wind and solar power projects and boosting prices, said Crane, who’s also CEO of NRG Energy Inc., the largest independent U.S. power producer, which controls NRG Yield.

NRG Yield felt “priced out” of buying some wind farms recently because prices were “far beyond any thing we could make work,” Crane said on an earnings conference call Tuesday.

Yieldcos have become increasingly popular in the renewable-energy industry. They’re essentially holding companies for a portfolio of operating power plants. Developers always need capital for new projects, so they create a separate, publicly traded unit to buy the assets once they’re completed. The yieldco’s function is to collect revenue from selling electricity, helping fund the purchase of more power plants.

Fifteen U.S. and European companies raised $12 billion in IPOs over the past 30 months, and their market values have climbed 84 percent to almost $28 billion, according to Bloomberg New Energy Finance. That provides the yieldcos with money to buy power plants.

With so much demand, “the market is saturated with yield paper,” Crane said. NRG Yield went public in July 2013.

Paying higher prices for power plants is reducing returns on investment, according to a July 30 report Mercatus Inc., a supplier of energy project finance analysis software.

NRG Yield hopes that the market becomes less heated while focusing more on the “organic opportunities” for acquiring projects from its parent NRG, Crane said.

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