* SunEdison to list first pure-play solar "yield co" in U.S.
* NRG Yield, which holds some solar assets, up 42 pct since
* JinkoSolar, Canadian Solar looking at power plant spinoffs
By Swetha Gopinath and Sayantani Ghosh
Jan 16 Long shunned by cautious investors, solar
companies have hit on a new way to deliver returns to
shareholders that could attract new money to an industry
notorious for its stock price volatility.
SunEdison Inc is the first of a wave of companies
preparing to bundle up existing solar power plants and then spin
them off into separate entities, known as "yield cos", to raise
money to build new plants.
The promise of regular dividend payouts, hitherto unknown in
the solar industry, offers an entry point to the sector for
retail investors and is expected to generate huge demand when
these companies go public, analysts and investors said.
"Yield cos appeal more to people who are looking for a safe
way to invest in solar, protected from the volatile stock prices
of manufacturing companies," said Edward Guinness, co-portfolio
manager at Guinness Atkinson Asset Management.
Bruised by a two-year slump in the price of panels, solar
companies are exploring new and cheaper ways to finance growth
and meet rising demand for solar power.
Asset-backed notes to securitize future income, such as
those launched by SolarCity Corp last year, are one way
to cut the cost of capital.
Yield cos work in a different way. These companies will own
and operate solar assets under long-term power-purchase
agreements with utilities - a guarantee of stable cash flow.
Most of this cash will be paid out as dividends, with the
remainder re-invested in new plants, a valuable source of
funding for parent companies that will retain a sizeable stake
in the new entities.
SunEdison expects to raise up to $300 million by spinning
off its unit, SunEdison Yield Co. The U.S. listing, planned by
the second quarter, will create the first pure-play solar yield
co in the United States.
SunEdison plans to float 20 to 30 percent of the unit which,
based on cash flow, could be valued at between $800 million and
$1 billion, Brian Wuebbels, SunEdison's chief financial officer,
By retaining a stake of up to 80 percent in the yield co,
the parent company would retain the lion's share of the
"It should help the parent companies strengthen their
balance sheet," said Guinness, who holds shares in several
solar companies, including Trina Solar Ltd, Yingli Green
Energy Holding Co Ltd and SunPower Corp.
Analysts say First Solar Inc, SunPower, and Warren
Buffett's MidAmerican Energy Holdings are among the U.S. solar
companies that could potentially launch yield cos.
The three companies declined to comment when asked about
plans for forming yield cos but others, such as Canadian Solar
Inc and JinkoSolar Holding Co Ltd, say they are
thinking about it.
The only U.S.-listed yield co that currently holds solar
assets is power company NRG Energy Inc's NRG Yield Inc
, which made its stock market debut last July.
Shares of NRG Yield, which also holds wind and natural gas
assets, have gained nearly 42 percent since going public.
The company pays an annual dividend of $1.20 per share and
plans to increase its dividend to $1.45 per share by the third
quarter of 2014, Chief Financial Officer Kirkland Andrews told
Canadian Solar is considering launching a yield co,
spokesman Ed Job said, adding that the process could take a year
The Guelph, Ontario-based company, which has most of its
manufacturing operations in China, believes Chinese plants can
offer competitive yields and is considering exchanges in the
United States, Hong Kong and Singapore for a possible listing.
China's JinkoSolar said on Monday it was looking at
alternatives for its power plant business, including taking it
Chinese companies, however, might be a harder sell for U.S.
retail investors dipping their toes into solar for the first
Plagued by over-capacity, solar investment in China
practically ground to a halt before new industry guidelines
introduced last year prompted a revival.
Jesse Pichel, an investment banker at Roth Capital Partners
who specializes in clean technology, said yield cos spun off
from Chinese companies were unlikely to fare well in the United
States and would have to pay higher dividends to offset risk.
Investors in Hong Kong or Singapore might be more receptive
to Chinese projects, he said.
SunEdison's Wuebbels said his company's U.S.-listed yield co
was likely to include projects in the United States, Canada,
Mexico, Chile, Britain and Japan.
The company plans to list a separate unit, holding projects
elsewhere in Asia and South Africa, on a stock exchange in Asia,