29 February 2016


Yieldcos unlikely to take on in Asia

Author: Jason Deign, Solarplaza

The yieldco investment vehicle could be poorly suited to Asian markets because of a lack of sustainable growth opportunities, experts have told Solarplaza.

“The problem is they continuously have to keep adding new assets, so the development of these assets needs to ramp up at the same rate as the appetite [for investment],” said Benjamin Cohen, chief executive of T-REX Group. At the moment, few Asian markets appear to have sufficient momentum to sustain a big enough project pipeline for yieldco growth.

Growth of solar installations in Japan, which Solar Power Europe believes could have a cumulative 59 GW of PV by 2019, has assumed a more sedate pace over the last year and has suffered uncertainty over changes in regulation. And in China, where Solar Power Europe says cumulative installations could reach 114 GW by 2019, concerns over economic growth are feeding through to the solar market.

In February, for example, Bloomberg reported the Chinese government was considering state aid for Yingli Green Energy Holding, which until 2014 was the world’s biggest module maker. “China is starting to pick the companies most likely to survive a shakeout in the solar industry,” said Bloomberg.

Only India, where cumulative installations are expected to soar from 3 GW in 2014 to 54 GW in 2019, looks to have potential for yieldco growth. The market is already being mined by US companies present there. Last November, for example, Reuters reported on SunEdison plans to sell 425 MW of Indian projects to its TerraForm Global yieldco, for USD$231 million. No local companies have announced plans, however.

In fact, only one Asian PV firm is thought to have laid out yieldco proposals so far. Neo Solar Power, Taiwan’s largest PV maker, unveiled plans for a yieldco in May 2015. The yieldco was originally due for launch at the beginning of this year, but Neo Solar Power has since gone quiet on the issue. The company did not respond to a Solarplaza request for information.

Passion for yieldcos generally has waned a lot since last May due to negative market sentiment towards the listed vehicles over the course of 2015. Although there are indications that yieldco troubles may have been largely confined to the US version of the model, it remains to be seen whether the concept could be viable as a standalone in Asia.

“The US proved a warning for Asia,” said Tyler Ogden, a research associate at Lux Research. “I don’t think there’s any interest in setting up a yieldco in India as it a young market. It’s seen delays in development.”

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