As Yieldco Buying Slows, Clean Energy Plants Attract Old Buyers

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  • Share prices for public yieldcos have slumped this year
  • `Yieldcos went from being aggressive to non-buyers' of assets

Yieldcos have pulled back from purchasing clean-power projects after their market values slumped, creating more space for utilities, private equity companies and other investors that have long been acquirers of wind and solar farms.

“Yieldcos went from being aggressive to non-buyers, so prices came up to make things work for other players,” Ed Feo, president of the Glendale, California-based renewable energy developer Coronal Group LLC, said in an interview Friday. “The buyer landscape is largely the same -- except for the non-participation of yieldcos.”

The emergence of yieldcos -- holding companies formed by renewable energy developers to buy, own and operate power plants -- has been one of the biggest shifts in the industry, raising at least $12 billion in public markets since early 2013. Those share sales funded acquisitions, and as the roster of yieldcos swelled, so did competition to buy assets. Higher-priced deals also meant lower returns for investors, making clean-energy plants less attractive to some buyers. 

Shares Slumping

That trend is now reversing itself as a potential increase in U.S. interest rates makes yieldco shares less appealing and curbs their purchasing power. The Bloomberg Intelligence North America Power Yieldco index of seven companies has slumped by more than one-third since June.

SunEdison Inc., the world’s biggest renewable energy developer and parent of two yieldcos, said in October that it doesn’t expect to sell projects to its two units, TerraForm Power Inc. and TerraForm Global Inc., this year or in 2016.

In the meantime, utilities including Southern Co. are announcing deals. The Atlanta-based company acquired a 15-megawatt solar farm in California in October, its eighth acquisition with partner Turner Renewable Energy LLC. It also announced deals for two wind farms this year in Oklahoma.

“Now you’re seeing people who were losing to the public yieldcos winning,” Ted Brandt, co-founder and chief executive officer of Marathon Capital LLC, a Bannockburn, Illinois-based energy and infrastructure adviser, said in an interview Friday. “They’re suddenly much more popular.”