17 November 2015


Canadian Solar

What’s behind reversing yieldco decisions

Author: Susan Kraemer, Solarplaza

Recent weeks have seen Acciona shying away from a yieldco plan and Canadian Solar coming back round to the concept.

When Canadian Solar backed away from the yieldco route in the midst of the summer’s rout, clean energy portfolio manager Tom Konrad expressed confidence that it would be back by the New Year.

With its announcement this month of a yieldco registration statement, Canadian Solar appears poised to fulfil Konrad’s prediction.

In contrast, Acciona took investors by surprise announcement at the end of October, less than a month after announcing a yieldco with private equity firm KKR, when it reversed its decision. What is behind these two reversals?

“It probably has a lot to do with how much they each need the money,” opined Konrad. “Canadian Solar has a recent loan from Credit Suisse, at rumoured high interest rates, that I expect it's hoping to pay off with the yieldco listing.”

Meanwhile, he added: “Acciona is on much more stable financial footing than solar manufacturers like Canadian Solar, and can turn to other sources for funding, such as its relationship with KKR."

Both companies had said at the beginning of October that they planned to launch a yieldco internationally.

KKR had already bought a one-third stake in Acciona’s global portfolio, for USD$451 million, giving it operating renewable energy assets in 14 nations.

“We finally decided not to use this financial mechanism and now we are very happy with the decision,” Rafael Mateo, chief executive of Acciona’s energy division, told Bloomberg in October.

PV’s exponential growth rate makes it the ideal asset for a yieldco focused on growth. However, of Acciona’s diverse renewable portfolio assets, which generate a cash flow of around $130 million a year globally, less than 2% are PV.

More than 80% of its operating assets are wind farms, with hydro power and solar thermal projects comprising most of the remainder. Wind is a more mature technology than PV, beginning to enter a slower, steady growth phase.

Similarly, hydropower is not a fast-growing, quickly constructed renewable energy source like PV.

Although Acciona expects to add about as much new PV as wind next year, its operating projects are much more diverse than Canadian Solar’s focused PV asset portfolio.

With its wind, hydro and solar thermal focus, Acciona's would have been among the less PV-centric yieldcos on the market.

By contrast, as a vertically integrated PV firm, Canadian Solar has a strong pipeline of PV assets about to become operational and ready to drop into a yieldco.

With plenty more lined up in the development pipeline, and the manufacturing capability to keep more PV rolling off the assembly line, Canadian Solar clearly feels secure in the yieldco model despite the problems the model has experienced so far.

YieldCon, the renewable energy yieldco conference, takes place in New York City, USA, on December 3. Register now to secure your place.

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