Yieldco

Yieldcos are fast gaining traction in the solar industry today. A yieldco is a spin off from the parent company, wherein the latter transfers its assets related to solar projects to the former. Yieldcos thus help in maximizing profits by reducing costs. Yieldcos are a great way to create value for the shareholders, as they pay a major portion of their earnings as dividends. They provide sustainable and reliable cash flows and provide attractive financing for project sales.

SunEdison and Terraform Power Yieldco

SunEdison (SUNE) was the first one in the solar industry in creating a yieldco where it held a 65% stake. Terraform Power (TERP) was also listed in July 2014, with a successful IPO for 20 million Class A shares at $25 per share. TERP has performed very well in 2014, reporting revenues at $96 million and gross profit at $34 million for the full year. The company has also raised its dividend guidance to $1.30 per share, which is a 44% increase.

SunPower and First Solar Yieldco

SunPower (SPWR) and First Solar (FSLR) have decided to form a yieldco together. It will be a joint venture between these two leading solar companies in the industry. It is a deviation from what SunEdison had done, because in this case two leading solar  companies will form a yieldco together. This joint venture also sounds quite interesting and will provide uniqueness by imbibing the strength of both the companies. First Solar is a leader in ground mounted power plants and Cd-Te technology, whereas SunPower has rich experience in rooftop installations and high efficiency silicon photovoltaic panels.

Conclusion

SunEdison was the pioneer in the solar industry to form a yieldco. The success story of Terraform Power has compelled many in the industry to follow the same path. The investors have always lauded the news of new Yieldcos, as is evident from the surge in the stock prices after the announcement. 2015 will be a year of many more yieldcos. Jinko Solar (JKS), Canadian Solar (CSIQ) and Trina Solar (TSL) have expressed their interest in creating potential yieldcos in the next year. It remains to be seen what newness they will bring to the industry at large.