Acciona Rules Out Yieldco, Seeing Growth From Solar Developments

  • Energy unit CEO to invest as much as 400 million euros a year
  • Solar spending may rival scale of wind-farm business

Acciona SA, the Spanish construction company that’s one of the world’s top owners of renewable power plants, ruled out forming a yieldco to absorb some of its developments, saying more of its growth will come from solar photovoltaics.

Wind and solar farms each will take about half the 300 million euros ($332 million) to 400 million euros in annual capital spending Acciona plans in the coming years, said Rafael Mateo, chief executive officer of the company’s energy unit.

The comments set the strategy for the company controlled by Spanish industrialist Jose Manuel Entrecanales following a decision this month to sell its turbine-manufacturing business to Nordex SE for 785 million euros. While Entrecanales built Acciona as a vertically-integrated wind company, leaving solar a minor part of the portfolio, it’s photovoltaics that will draw increasing amounts of capital.

“Our growth in the future will be both in PV and wind,” Mateo said in an interview in Madrid. “Next year, we will probably have more PV than wind.”

Acciona ranked fifth among Western owners of onshore wind farms, according to data compiled by Bloomberg. Among turbine makers, it ranks 15th and Nordex ninth, according to Navigant Consulting Inc.

About 80 percent of Acciona’s power production capacity was in wind last year, with hydroelectric plants making up much of the rest. Solar PV was less than 2 percent.

Acciona spent more on solar thermal plants, which use the sun’s energy to heat a fluid for driving generation equipment. PV cells produce electricity when sunlight falls on a specially treated cell, usually made of polysilicon.

Acciona had considered raising cash for its investments by forming a yieldco, a separate entity that would funnel income from operating power plants to investors. U.S. companies led by SunEdison Inc. and NRG Energy Inc. raised some $28 billion from yieldcos in the past three years, according to Bloomberg New Energy Finance. European companies including Enel SpA and Energias de Portugal have avoided the structures.

Yieldco Concerns

Mateo confirmed that idea is off the agenda at Acciona because it would require executives to deliver growth at all costs regardless of profitability.

“We finally decided not to use this financial mechanism and now we are very happy with the decision,” Mateo said. “The commitment to shareholders to deliver growth is very difficult. Yieldco investors were buying growth. Growth is easy. Profitable growth is not.”

Instead, Acciona will consider expanding its relationship with KKR & Co., the private-equity firm run by billionaires Henry Kravis and George Roberts. KKR bought a one-third stake in Acciona’s energy assets outside Spain for 417 million euros in 2014, giving it power plants in 14 nations. Mateo said a plant Acciona is developing in Chile will be offered to the venture with KKR, which is essentially functioning as a private yieldco.

Mateo said renewables in general and PV solar especially are dropping rapidly in cost, rivaling fossil fuels in some places. Wind, he said, is a more mature technology. Neither Acciona, based in Madrid, or Nordex, with a headquarters in Hamburg, works on more costly offshore wind farms.

“Offshore wind is still a new technology with many risks -- and it’s more expensive,” Mateo said. “Today it does not make sense for us to invest in high risk technologies.”

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