Restructuring in the YieldCo Space: Implications for Renewable Energy Access to Capital Markets

Abstract

A YieldCo is a publicly traded investment vehicle that owns operating energy assets, the majority of which are typically renewable, and whose stated purpose is to distribute the majority of its available cash to shareholders while minimizing corporate taxes. After three successful years in the market, multiple events during the summer of 2015 led investors to question the fundamental nature of the YieldCo structure. This project seeks to understand if the uncertainty surrounding the long-term viability of the YieldCo as a financing vehicle for renewable energy is well founded. Our analysis uses market data, firm disclosures, and equity research reporting to evaluate the macroeconomic, firm-specific, and intrinsic risks of the YieldCo structure. We explore several explanations for the sector’s turbulence since 2015 and propose recommendations to align YieldCo, sponsor, and shareholder incentives. This assessment of the YieldCo financing vehicle can be used to inform future action in the sector, as well as renewable energy financing more broadly.