European Yield companies (yieldcos) get higher dividend yields than US listed yieldcos. In preparation for YieldCon, The Renewable Energy Yieldco Conference, taking place on July 2nd in London, Solarplaza has mapped the current yieldco landscape worldwide. This seeks to explicate the differences between European and North American yieldcos in dividend yield, stock growth and size.
Top 5 dividend yields
Yieldcos are ‘hot’. The Deutsche Bank named yieldcos as the ‘single biggest game changer for the solar sector in 2014’. Solar and financial experts see the yieldco as a ‘financial catalyst for creating new solar parks’.
In our benchmark, striking similarities exist between European and Canadian listed funds versus US listed funds. European and Canadian yieldcos reach an average annual dividend yield between 4 to 7 percent. US listed yieldcos have with 2 to 4 percent a lower performance (see below stats).
The top 5 best performing yields (since their IPO) are:
- Capstone Infrastructure (8,13 %, Canada)
- Saeta Yield (6,7%, Spain)
- Greencoat Wind (6,19%, UK)
- Northland Power (6,10%, Canada)
- TransAlta Renewable (6,06%, Canada)
Rising stars: NextEra and Capital Stage
If we take stock price growth into perspective, NextEra Energy Partners, listed in the US, is the rising star in the US with a stock growth of almost 68%.
On the European side, Capital Stage, the largest operator of solar parks in Germany, does not consider itself a yieldco. CEO Felix Goedhart has his doubts about the yieldco phenomenon, but if we consider Capital Stage as a yieldco, it outperforms any other European listed fund with a stock growth of 82% (see below overviews).
North American vs European fund comparison (stock growth vs yield)
“Size matters“: the Abengoa Yield
If we look at size, US listed yieldcos are much bigger in size and have a more specific focus on growth.
Also experts stress the importance of size. As Gerard Reid, partner of corporate finance firm Alexa Capital LLP, said in an earlier article, scale is needed to make a yieldco a success. According to him, a total capacity of 750 megawatts is the minimum, as a big pipeline of projects means less selling costs and legal costs.
One of the examples is Abengoa Yield, which is seen by market followers as a ‘well diversified yieldco with significant growth potential’. The expected dividend growth yield for 2015 is 5 percent. The yieldco has a well-diversified portfolio (see below) with a weighted average contract duration of 24 years. Moreover, a good pipeline of projects is available via parent company Abengoa SA and third parties. All this adds up to a growth of CAFD (Cash Available For Duration), which is vital for the future success of a yieldco.
Capital Stage - Gothaer partnership
The European market for renewable energy is smaller compared to the (future) markets of US, China and India. Several experts question if European funds can keep dividends as high on the long term and still grow their portfolios. It seems that the before mentioned Capital Stage looks for alternate ways to fund their projects. It has partnered with German insurance firm Gothaer to form a fund of 150 million euros to buy solar parks in the future. According to Colm O’ Connor of Kleinwort Benson Investments, that equity in the firm, this kind of structure can be an attractive alternative for the yieldco in Europe’.
Furthermore, the Italian energy firm Enel is planning to bundle its North-American projects into a yieldco. The renewable energy developer, with a revenue of €3 billion and profit of €528 million in 2014, holds wind, solar, hydropower and geothermal power installations in 21 US states. Enel Green Power itself is publicly listed in Rome, but this won’t happen for its US yieldco. CEO Francesco Starace of Enel says that an IPO creates “a monster that you have to feed”, because it requires constantly added assets to feed the market’s need for growth. Starace also said to Bloomberg: “Now it’s time to create a yieldco”. Institutional investors already paid interest in the Enel yieldco.
Solarplaza organizes on the 2nd of July in London the first conference focused on the yieldco model in Europe´s renewable energy market. With the attendance of institutional investors, financiers, analysts, IPPs, energy utilities, project developers and other stakeholders, this is your chance to learn and discuss potential yieldcos with the top of the industry.
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