A Solar Guide to Yieldcos, REITs and MLPs

According to the National Renewable Energy Laboratory a one percent drop in weighted average cost of capital in US solar translates to a drop of $0.20 - $0.25/W of project cost1. This means that more projects can achieve economic viability, accelerating the competitiveness of solar power and delivering profits to solar investors.

Today, it isn’t sufficient to take advantage of solar opportunities; solar power companies must also maximize their returns and assemble a portfolio with quality projects because solar investors depend on reliable, consistent cash flows. If a solar company can’t repeatedly source good projects and close them quickly, they will have difficulty raising capital from useful financing vehicles like Yieldcos, REITs and MLPs.

Chris Bailey, who was involved in the launch of Sun Edison’s yieldco, TerraForm Power Inc., summed it up this way. “You miss a dividend payment on a yieldco, fold up your shop and go home. It’s about making dividend payments. You’re taking people’s money in a low-risk business plan, taking pension fund money, other low-risk money, and you gotta make that payment.”

In this white paper we examine the opportunities and challenges with successfully raising and regularly accessing low cost capital. We’ll discuss three of the most exciting new mechanisms for raising capital - Yieldcos, REITs and MLPs.

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