Monday, October 12, 2015

"Renewable Energy Stocks Fall as YieldCo Structure Questioned"

I've mentioned we don't do anything with the yieldcos but believe they do have a place in some portfolios.
From Barron's Income Investing:
The New York Times took a skeptical look at renewable energy “yieldcos” in an article that, perhaps thankfully for the industry, was buried on page B3 of the print edition. Describing the stocks as “a new-fangled financing mechanism,” it reported that investors are starting to lose confidence and some companies are scaling back on plans to use the vehicles for financing. 
SunEdison (SUNE), which a week ago announced it plans to cut 15% of its workforce in an effort to “align” itself “with current and future market opportunities” and to “accelerate cash flow positive operations” was the news hook for the article. SUNE told investors following last week’s announcement that it would hold off on dropping down more projects to its yieldcos, TerraForm Power (TERP) and TerraForm Global (GLBL) until conditions improve. TERP was off a punishing 7% Monday to $18.70. GLBL was down 1.7% to $8.05 on Monday. 
Another case in point was NRG Energy (NRG), which said it was now pursuing a “more limited strategy” with its yieldco, NRG Yield (NYLD). NRG was down 4% Monday and NYLD  was off 6%. 
Moody’s downgraded the debt of that yieldco on October 6 explaining: 
The downgrade primarily reflects the lack of access to the equity markets due to a large decline (~30%) in its stock price in recent months. The inability to issue equity creates uncertainty regarding the company’s financial strategy going forward. The downgrade also considers the higher than expected cash flow volatility from its portfolio in first half of 2015 driven by a major outage at one of its natural gas generation facilities and the low wind generation resources in the first half of 2015
The New York [Times] also quoted Standard & Poor’s credit analyst Aneesh Prabhu saying “the bloom has come off the rose” for yieldcos....MORE
Also at Income Investing:
Why Kinder Morgan May Need to Lower Its Dividend Guidance