Analyst sees healthier yieldcos starting to 'differentiate' themselves

There are signs that healthier US yieldcos are beginning to separate themselves from the rest of the pack, says Christopher Radtke, managing director for power, gas & renewables at Credit Suisse.

This week 8point3 Energy Partners, the yieldco of First Solar and SunPower, announced it will issue and sell new shares to help fund its purchase of a stake in the 102MW Henrietta solar project in California.

8point3 is the latest US renewables yieldco to move to raise capital on the public-equity markets in recent weeks, following a long drought that began amid the collapse of SunEdison.

SunEdison's spectacular collapse called into question the underlying model of its own two yieldcos, TerraForm Power and TerraForm Global, which hammered share prices across the young yieldco sector, locking many companies out of the public-equity markets.

But lately things have started turning around.

Earlier this month NextEra Energy Partners issued shares to buy a stake in the Desert Sunlight solar project, following Pattern Energy’s share-issuance in August.

Meanwhile, NRG Yield recently launched an At-The-Market programme that could see it issuing shares of its own.

“We’ve started seeing some yieldcos – Pattern and NextEra, to name some names – doing large capital raises in the equity markets to fund drop downs,” Radtke said Thursday at an industry conference in New York.

“Perhaps there’s a little bit of an understanding now that you can look at the actual core operating assets and growth profile [of individual yieldcos], and what people have delivered over time, and maybe you can now differentiate among the players,” Radtke says.

While yieldco share prices remain well off their highs of several years ago, many have recovered substantial ground since bottoming out in the wake of SunEdison’s collapse.

8point3 will sell 7 million Class A shares for $14.65 apiece, while a year ago its shares traded at less than $10.50. However, the company's stock price is still well below its $21 IPO price.

8point3 expects the offering to bring in gross proceeds of $102.6m, which will be used to fund the acquisition of a 49% stake in the 102MW Henrietta PV plant in California.

Southern Company owns the majority stake in Henrietta, which was built using SunPower modules.