NextEra lays out yieldco IPO plan

NextEra Energy Inc., the largest renewables generator in the US, has confirmed its intention to launch a yieldco onto the New York Stock Exchange, initially seeding the company with 990MW of wind and solar capacity.

The move, which NextEra had been openly contemplating, will in the short run add further momentum to the yieldco phenomenon, which has swept across stock markets in New York, Toronto and London over the past year.

NextEra initially seeks to raise up to $50m by selling shares in the new yieldco – known as NextEra Energy Partners LP – which will trade under the ticker symbol NEP.

NEP will initially own 10 projects representing 990MW of capacity, 30% of it solar and the rest wind.

The oldest project in the portfolio will be the 174.3MW Northern Colorado wind farm, which began operation in 2009, and employs Siemens and GE turbines.

The newest will be the 60MW Bluewater wind farm in Ontario, Canada, which employs GE 1.6-100 turbines, and is slated for commercial operation in the third quarter of this year.

Of the solar capacity to be owned by NEP, 40MW is PV – all of it in Ontario – and the remaining 250MW will come from NextEra’s recently completed Genesis concentrated solar power project, in California.

According to NextEra, the initial public offering seeks to take advantage of “the ongoing trend of clean energy projects replacing ageing or uneconomic projects, demand by utilities for renewable energy to meet state RPS requirements, and the improving competitiveness of clean-energy relative to other fuels”.

The yieldco model has increasingly caught on as a way for developer-owners of renewables projects to recycle capital from operational wind and solar plants back into risker development activities.

Both SunEdison and Abengoa have confirmed plans for their own yieldco IPOs this year, and several other renewables companies may follow suit.

One of the reasons behind the success of yieldcos is the generous and relatively low-risk dividends they provide investors. Pattern Energy, for example, which went public last year, offers investors a 4.4% dividend at present.

Beyond its initial portfolio, NEP will have Right of First Offer on 1.55GW of additional capacity from its parent company – more than one-third of it solar, including the First Solar-developed 250MW Silver State South PV project in Nevada.

NEP will target an annual growth in the amount of cash available for distribution of 12-25%, NextEra says.