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SunPower and First Solar’s Yieldco Prices Its IPO

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Updated

A yieldco

A yieldco is an investment vehicle formed to own operating assets that generate predictable cash flows. Just like MLPs (master limited partnerships) and REITs, a yieldco doesn’t have to pay corporate level taxes. Renewable energy projects face uncertainties while under construction, but they tend to generate predictable cash flows once they’re operational. As a result, the yieldco structure also helps the parent company separate risky activities from predictable activities, while also getting a tax benefit.

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8point3 Energy

In 1Q15, SunPower (SPWR) and First Solar (FSLR) announced plans to set up a joint yieldco. In March 2015, 8point3 Energy—the yieldco—filed the registration document with the SEC (U.S. Securities and Exchange Commission) for an IPO (initial public offering). Each sponsor will pool in assets for the yieldco. The initial portfolio will consist of 432 MW (megawatts) in solar assets. Residential and industrial solar—solar PVs (photovoltaics) mounted on rooftops—will account for 55 MW, or 12.7%, of the initial portfolio. SunPower will contribute the entire residential and industrial piece.

Out of 377 MW of utility-scale solar (TAN) capacity, SunPower is contributing 115 MW and First Solar is contributing the rest. The portfolio has a weighted average remaining life of 21.3 years.

Recent update

On June 10, 8point3 Energy priced the IPO at around $19–$21 per share. The yieldco is expected to raise around $483 million from the IPO by selling 23 million shares. The yieldco will trade on NASDAQ under the ticker CAFD. The proceeds from the IPO will be used to pay SunPower and First Solar. With the IPO, 8point3 Energy joins other companies like NRG Yield (NYLD) and NextEra Energy Partners (NEE) in the yieldco space.

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