Sunedison Inc (NYSE:SUNE) Yieldco Facing The Brunt

In July, Ahmad Chatila, the CEO of Sunedison Inc (NYSE:SUNE) sold shares in his power-plant holding firm to the public, but the offering failed to get enough attention of investors. TerraForm Global Inc (NASDAQ:GLBL) plunged $1 in its trading debut and in fact has failed to move beyond its IPO price of $15. On Friday, the stock gained 1.01% and closed the week at $9.03.

The indications

TerraForm’s poor performance is an indication of declining interest in the model known as “yieldco”. These are the firms that are created to own and manage power plants. Since then, many renewable-energy firms have changed their focus on tapping low-cost financing as offered by these publicly traded ventures. The CEO of Sunedison said that they have tried to enter into the deals that market cannot absorb. All this began over a year ago, but they have started feeling the brunt over last some months.

The momentum

Many yieldcos that recorded strong gains in their initial offerings have plunged, including TerraForm’s sister firm TerraForm Power Inc (NASDAQ:TERP), which closed trading session on Friday at $21.58, almost 50% from its April high of $42.15 peak. NRG Yield Inc., established in 2013 by NRG Energy Inc (NYSE:NRG) has declined 35% so far in 2015, and Abengoa Yield PLC (NASDAQ:ABY) has plunged 33% since its IPO in June 2014.

The change

The chaos have prompted Trina Solar Limited (ADR)(NYSE:TSL) and Canadian Solar Inc. (NASDAQ:CSIQ) to evaluate different measures to attract investors to their portfolios and utilize the funds to support projects at lower costs. A couple of months ago, investors had a different approach towards yield firms. However, now they have become a less compelling way to reduce financing costs and private equity has become cheaper than yield firms.

Sunedison and other energy firms design yieldcos to purchase power plants from parent firms, offering funds to the developers to develop more projects.

 

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John Eisler

John Eisler

John is a special projects and general assignment reporter, noted for breaking several exclusive stories.