Yieldcos have been a big topic in the solar industry lately, and not all of the news has been good. Despite the popularity of forming yield vehicles to hold solar and wind assets and generate stable returns for shareholders, yieldco stocks have taken a beating in 2015.
Despite depressed stock valuations, solar developers continue to see value in the structure. Today, Canadian Solar announced that it had confidentially submitted a draft registration statement to U.S. financial regulators for an initial public offering for a yield vehicle.
The company says that the number of securities to be sold and the price range for the proposed offering have not yet been determined.
Canadian Solar has ample solar assets in late-stage development and under construction to move into a yieldco, as well as a large project pipeline and plenty of experience as a developer. However, as recently as August the company was expressing reservations about forming a yieldco vehicle.
The yieldcos that serve OECD countries and have strong projects, the yields are still value accretive, but they are not in the ranges that you would wish, noted Canadian Solar Chief Financial Officer Michael Potter on the company’s Q2 results call. We do have good projects that are in high demand, and we do have alternative plans should that be necessary.
Canadian Solar’s timing of registration comes as some renewable energy yieldcos have seen modest stock price gains in the past week. 8Point3 Energy Partners, NextEra Energy Partners and NRG Yield all saw incremental increases, while TerraForm Power and TerraForm Global have seen little change. All of these yieldcos are significantly down from the stock prices that they commanded during their IPO launches.
"Yieldco stocks are starting to look up a bit over the last thirty days, which likely gave the management confidence that the worst days for Yieldco stocks might be behind us," notes Mercom Capital CEO Raj Prabhu.
Canadian Solar says that it is still proceeding with caution. "Clearly market conditions are not adequate for the launch of a YieldCo today, but we are not under pressure to make a go no-go decision today either, so we are keeping our options open," Canadian Solar Director of Investor Relations Ed Job told pv magazine. "We continue to evaluate alternative ways to monetize our utility scale solar power plant assets."
Mercom’s Prabhu agrees that Canadian Solar still has time to pursue other options. "It will still take a while to get from the S1 filing to IPO and anything can happen between now and then. I am sure they will change their strategy if the downturn continues or takes a turn for the worst."
Update: This article was modified at 2:20 PM EST on November 4 to include commentary by Mercom Capital. It was further modified at 8:45 AM EST on November 5 to include a response by Canadian Solar.