YieldCos Spread The Solar Boom

Avoiding or offloading corporate income taxes is business as usual for major players in the dirty fuel and real estate sectors. Now it’s renewable energy’s turn to reap the rewards of fancy math.

Enter the rise of the clumsily named YieldCo, which like real estate investment trusts (REITs) or the extraction industry’s master limited partnerships (MLPs) are publicly traded financial vehicles created to decrease risk and volatility — and increase capital and dividends. But instead of securitizing pipelines and properties, YieldCos sell millions of shares backed by global megawatts of solar power generation.

Just ask SunEdison, which was upgraded to Buy from Deutsche Bank this week, thanks to its solar YieldCo. “We expect the emergence of 5-6 publicly traded YieldCos over the next 12-18 months to act as a robust growth enabler,” Deutsche explained.

SunEdison’s $300 million IPO for its YieldCo comes on the heels of Spain’s Abengoa, whose YieldCo is ramping up a $600 million IPO, as well as NRG Inc’s NRG Yield and SolarCity’s securitization, all of which have mainstreamed the mechanism for Wall Street and Main Street investors.

“The yieldco is the cheapest equity you can find in the market,” Abengoa CEO Manuel Sanchez Ortega said in April. “You’re going to see more and more.”

It’s a sea change from but a few years back, when solar assets were being treated by both Streets like risky afterthoughts. Whereas solar companies once had to lean on unfairly structured tax, equity or debt albatrosses to nail the kind of funding institutional and private investors routinely give away to the already heavily subsidized oil, gas and real estate industries, YieldCos have come along to level the energy playing field for cleantech upstarts.

Now that the dark clouds are no longer hanging over renewables like solar and wind — thanks to cratering costs, rising investments and terrifying climate change reports from the White House, IPCC and more — pooling the people’s money to solarize the planet is a booming public trading option whose future is so bright…well, you know the rest.

This article appeared at Solar Energy