First Solar, SunPower reveal plans to form joint YieldCo

US solar giants First Solar and SunPower are in talks to form a joint “yieldco,” a listed equity vehicle that provides renewable power under long-term contracts and pays out much of its cash flow to shareholders.

In a joint statement released on Monday, the two revealed they were in advanced negotiations to form the YieldCo, to which they each expected to contribute selected solar generation assets from their existing portfolios.

Formation of the joint venture first required the solar companies to file a registration statement with America’s Securities and Exchange Commission (SEC) for an initial public offering of limited partner interests in the YieldCo. Regulatory approval, and that of each party’s board approval, would also be needed.

Alongside Green Bonds, YieldCos – as Tim Buckley wrote here last August – have been attracting plenty of attention from renewable energy companies as a new way to aggressively access global capital markets.

Over June 2014 alone, SunEdison listed TerraForm Power, Nextera Energy listed Nextera Energy Partners and Spain’s Abengoa listed Abengoa Yield on the New York Stock Exchange.

Each of the Yieldco’s, said Buckley, were “developed by traditional power generators and utilities making the transition to a low carbon future.”

Although new to the market, First Solar and SunPower companies have separately made statements in the past about possible YieldCo formations.

In SunPower’s interim results briefing last July, CFO Chuck Boynton pointed to continued strong progress in the development of alternative financing structures for the industry developments, he noted, that were having a significant impact on how solar projects are developed, financed and sold.

“We believe employing these structures will significantly reduce the overall cost of capital for the industry and for SunPower specifically. It’s a great time to be a project developer, and we’ll benefit whether we decide to do a YieldCo or not,” Boynton said.

First Solar likewise highlighted in its first quarter results briefing it was watching the development of the Yieldco market with special interest.

In late trading, First Solar shares were up 11 per cent and SunPower rose 13 per cent, according to The Wall Street Journal.

Both companies are set to report fourth-quarter results later today. First Solar’s third-quarter profit fell 55 per cent as it reported a revenue decline that was wider than analysts’ estimates, but the company said it was on track to meet or its exceed its goal for 2014 bookings.