Canadian Solar was careful not to overcommit to a yield co throughout 2015. Source: Canadian Solar.
Do you remember 2014? It seems like a long, long time ago. Donald Trump was just a billionaire TV personality, the industry was holding a vigil for the soon-to-die investment tax credit and yieldcos were the hottest thing in solar.
Twenty-fifteen was a transformative year for yieldcos. At the start of the year SunEdison was basking in the success of TerraForm’s IPO and plotting the TerraForm Global sequel for emerging markets. Meanwhile every other major module manufacturer with eyes on the downstream market was being linked with their own iteration of the yieldco model. Results conference calls never finished before an analyst asked what their plans were or how pre-announced plans were progressing.
A mini gold rush of solar yieldcos followed, with the likes of First Solar and SunPower jumping on the bandwagon and setting up their joint yieldco vehicle, 8Point3. But that honeymoon period came to abrupt end when share prices for some the most high-profile yieldcos started tumbling and carried on doing so throughout much of the second half of 2015.
All of which would go a long way to explaining why when Canadian Solar announced its Q4 results on Thursday, it gave a somewhat cooler statement on yieldcos than it had done previously.
A quick look through the company's statements on yieldcos in each of its four 2015 results announcements gives an excellent insight into the fate of yieldcos as the year progressed.
In Q1 the plan sounded like a done deal, it was just a case of execution:
" …All of this provides momentum as we continue to pursue our yieldco strategy to build value for Canadian Solar and our shareholders...We plan to update the market on our business and progress around our evaluation of a potential YieldCo structure at our Investor Day on May 18, 2015..."
By Q2 the plans are still in the pipeline with the added caveat that they will cover OECD countries and alternative plans are in the works, should they be needed.
"We continue to make good progress towards our business model transformation into a build, own and operate model, and remain on track in our plan to launch a yieldco. We recognise that the market has recently experienced volatility around yieldco valuations and we have alternative plans to monetise our utility-scale solar power plant assets, if necessary...
"We continue to plan the launch of our renewable energy yieldco with high quality assets in OECD countries."
By Q3 the commitment to a yieldco has been severed…
"We remain committed to maximising the valuation of our asset portfolio for our shareholders. We continue to work hard on a potential yieldco, while keeping all options open given recent market volatility.
"Separately, we are keeping our options open regarding the potential launch of a yieldco with quality assets in OECD countries, and we continue to work on alternative exit strategies for our project portfolio, and expect to make a decent developer's margin if we decide to sell to, or partner with, end-buyers of renewable energy assets."
On Thursday, the Q4 results listed a number of alternatives without excluding yieldcos but with a pointed reminder of the overall goal of any change to their downstream structure.
"We remain flexible on our plans to launch a yieldco and are willing to sell projects in the short term to recycle growth capital while maintaining enough size and scale to launch a yieldco should market conditions become favourable.
"We have several options to monetise our project development expertise and our solar power plant assets. These options include, for example, outright sale of our solar power plants, asset-backed securitisation or a yieldco launch subject to market conditions. Our goal is to maximise the long-term return to our shareholders."
It is difficult to imagine that of those three options a yieldco is the one that shareholders would be most enthusiastic about. But as 2015 proved, a lot can change in an awfully short space of time. The yieldco bandwagon may yet make a comeback. Whether the appetite to jump on board remains could well depend on the success of Terraform, 8Point3, NRG Yield and their peers.