Solar stocks' three-month "U-turn" on Wall Street stymied IPO action in Q3 and shows overall deceleration for fiscal 2015, according to a Mercom Capital report.
On its face, the fact that five solar companies filed IPOs in 2015 — besting 2014 levels — looks promising, Mercom Capital CEO Raj Prabhu told IBD. But a look behind the scenes tells a different story.
At least 10 solar firms have quietly staved off plans for their own IPOs, waiting out the stock market correction that ran from late July through late September.
"Most were trying to spin off yieldcos after seeing the (initial) success with TerraForm Power (NASDAQ:TERP)," Prabhu said. "A lot of them had a plan in the pipeline, but they haven't filed anything yet."
Canadian Solar (NASDAQ:CSIQ), JinkoSolar (NYSE:JKS), Trina Solar (NYSE:TSL), Sol-Wind Renewable Power, Gestamp Renewables, Neo Solar Power and LightBeam Electric all planned to jump on the yield-company bandwagon before they saw TerraForm Power hit several well-publicized speed bumps.
A yield company is a public company created to house assets producing a predictable cash flow in order to yield dividend growth. The parent company "drops down" to its "yieldco" these assets, such as solar projects that have long-term energy production contracts in place.
Of the four solar-energy IPOs filed in 2014, only one — TerraForm Power — was a yieldco. This year, that number doubled to two: 8Point3 Energy Partners (NASDAQ:CAFD) and TerraForm Global (NASDAQ:GLBL).
Bluefield European Solar Fund, NextEnergy European Solar Utility and Azure Power Global were also slated for IPOs this year.
Amid severe volatility, however, it makes little sense to file IPOs, Prabhu said. IBD's Energy-Solar industry group, ranked a low 185 out of 197 — is down 17% for the year and off 70% from its 2009 high.
Is The Yieldco Model Broken?
Before 2000, SunEdison (NYSE:SUNE) was a solitary solar power on Wall Street. SunEdison, under the name MEMC Electronic Materials, went public in 1995. But SunEdison didn't hit the solar market in any big way until 2006, when the pendulum began to swing....MORE
Friday, November 6, 2015
"Solar IPOs, Yieldcos Shelved Amid Stocks 'U-Turn'"
From Investors Business Daily: