Wall Street investors have gone cold on one of the main mechanisms banks invented to fund the green-energy revolution.
The business structure, known as the yieldco, feeds dividends from operating solar and wind farms to investors. Yieldcos raised $7.9 billion in public equity in 2014 and 2015 but only $1 billion since then.
The shift is further fallout from the collapse of Maryland Heights-based SunEdison Inc., a leading promoter of yieldcos, and has changed the way clean-energy developers finance themselves. In years past, they started yieldcos to buy projects once they were operating, recycling the capital into new installations. Now, they’re turning to a large and deepening pool of buyers — insurance companies and pension funds — to provide funding and sometimes take control of income-producing assets.
“The idea of a you-have-to-have-a-virtuous circle — that idea that you’re hooked at the hip between the public markets and growth — is dead,” Mike Garland, chief executive officer of the San Francisco-based yieldco Pattern Energy Group Inc., said in an interview. “The market is saying, ‘Come to us last, not first.’ When we started, it was ‘Come to us first.'”
Headwinds — most prominently the run-up to SunEdison’s bankruptcy in April 2016 — have stopped at least three would-be yieldcos from forming and have forced others to eschew public markets for private fundraising.