Power Finance: The Year of the "YieldCo"

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Reporter Amy Poszywak of SNL Energy recently reported on a panel presentation at Platts US Power Finance conference moderated by Stoel Rives attorney Greg Jenner. Many experts have dubbed 2013 "the year of the YieldCo" in the power finance world, with a number of electric utilities evaluating whether such an investment structure would benefit them.

Jenner said a broad definition of a YieldCo is an investment vehicle designed to hold assets giving rise to sustained and perhaps increasing cash flows. Within that definition one would find four different types of YieldCos: PTPs or MLPs, REITs, Canadian income trusts and a fourth structure that has commonly been referred to as a YieldCo in the power industry.

Jenner explained the latter are typically c-corporations, with potentially double the level of tax, that hold renewable or other traditional energy assets that give rise to a relatively high sustainable cash flow. He gave as an example the highly publicized creation of NRG Yield, which went public in July.

"Many people have thought of YieldCos as a company for holding assets for which tax benefits have been burned out, such a renewable projects where all the credits have been used up or expired," Jenner said, adding that there are other reasons to create such a structure.

"Industry leaders debate pros and cons of YieldCo structures" was published by SNL FERC Power Report, November 6, 2013. Subscription required.

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