The solar industry is growing up. In terms usually reserved for the tech sector, the solar industry is no longer a “startup” and must start running it’s affairs with a longer term business outlook aimed at minimizing costs and risks while maximizing revenue. The adoption of YieldCos by more and more renewable energy companies is a sign that the sector is becoming a “mainstream” part of the energy business.
YieldCos are very attractive to renewable energy companies. They work like this:
- Parent company sets up a YieldCo as a dividend growth oriented public company
- Parent company bundles renewable long term contracted operating assets in order to generate predictable cash flows i.e. solar projects
- YieldCo allocates cash for distribution (CAFD) each quarter to shareholders as dividends.
- Shareholders get a low risk return and the parent company gets capital it can use for R&D, pay down debt or finance new projects.
- YieldCos work in much the same way as a real estate investment trust (REIT) and master limited partnerships (MLP) in that they avoid double taxation (once at the corporate level and again at the shareholder level).
The latest to join the YieldCo bandwagon, Atlantic Wind & Solar announced today that it is in the process of forming a YieldCo named Power 1 Inc.. The new wholly owned subsidiary is intended to be the off-taker of Atlantic’s developed renewable energy projects. Power 1 will also invest in projects by other developers.
Atlantic announcement included the news that it has completed construction on a 160 KW utility scale solar project in Ontario, Canada. The $1 million commercial rooftop installation will produce approximately 3,300 megawatt hours of electricity over the next 20 years.
Tracey is an accountant and entrepreneur with a passion for nature. This passion is what spurred her interest in renewable energy, and the rest is history as they say. Tracey is a principal in Energy Think Group, the publisher of Solar Thermal Magazine and Tek-Think. She is also the principal at Women's Financial Help Desk. She spends her free time in the outdoors with her horses and dogs. She loves to travel.