Neo Solar to list a Yieldco

Listing a yieldco has become the new fashion in the solar energy industry with every Tom, Dick and Harry planning one despite having no experience or expertise in doing so. With solar manufacturing becoming a commoditized industry with low margins and lower returns, solar development has become the new mantra for solar energy companies. The unparalleled success of SunEdison in its solar development business, which has seen its market cap increase by 10 times in the last 3-4 years has made other companies try to copy its business model of developing plants and lowering their capital requirements by listing a yieldco.

Major Chinese companies such as Trina Solar, Canadian Solar and Jinko Solar are already well on their way to develop yieldcos, while First Solar/SunPower partnership is also listing one. Many of these companies do not have a good portfolio of projects to develop a yieldco, but market pressures have made them jump into the bandwagon. The latest new entrant into the yieldco industry is Neo Solar Power which is suffering from huge losses due to USA sanctions on Taiwan and Chinese made solar cells. The company now wants to do a JV with a solar systems developer and list a yieldco in HK. The company has very little experience in the solar development, with its main line of business being solar cell manufacturing.

Neo Solar made a big losses in Q115 as the selling prices of solar cells fell below its overall costs. The Taiwanese producers are being squeezed by their solar cell customers, which are generally large Chinese companies accounting for 50% of their total sales. Japanese companies such as Sharp, Kyocera and Mitsubishi are the other major customers. With USA imposing sanctions on Taiwan, Chinese players have almost no incentive to buy from Taiwan as it is raising their overall costs. Note manufacturing cells in China is cheaper that Taiwan, which differentiates itself through higher efficiency and quality. But the quality difference is not being able to make up to the difference in costs.

While some consolidation has happened in Taiwan, the industry still has too many players considering that it is dependent on the export market for most of its sales. I don’t think that Neo Solar Power will find too much success getting into the solar development field. For one, the company has no strengths in terms of experience, balance sheet strength or government support. Second a lot of the bigger companies have already established themselves in the segment with distinct advantages.

PV-Tech

Taiwanese cell and module producer Neo Solar Power (NSP) has become the latest solar firm to reveal plans for a yieldco vehicle to support a move into downstream PV project activity.The company said it planned to launch the yieldco on the Hong Kong stock exchange at the end of 2015 or in the first quarter of 2016.An NSP statement said the firm plans to invest US$50 million to form the yieldco with “an international project developer of solar systems”, allowing it to access funds from global capital markets to invest in solar projects.