Deutsche Bank expects more publicly traded PV-based yield cos

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Deutsche Bank Securities expects as many as six yield co financial structures to be publically traded in the next 12-18 months, describing PV-based yield cos as “the most significant positive catalyst for the solar sector”.

Deutsche Bank, like many other financial and market analysts have signalled yield co financial structures to be a major boon for the downstream PV business, offering critical low-cost capital to complement ongoing cost reductions in PV manufacturing and systems.

In a research note to clients, Deutsche Bank analyst, Vishal Shah expects the yield co momentum to initially be US-based with major photovoltaics energy provider SunEdison leading the pack, having already launched one yield co on the US financial markets.

However, due to an increasing number of international markets expected to reach ‘solar grid parity’ from 2015 onwards, yield cos are expected to emerge outside of the US as well as diversify into other renewable energies, which is seen by the analyst as “significant opportunities”.

Praising SunEdison as a pathfinder in this investment vehicle, Shah believes the PVEP is in a strong position to diversify into other asset classes such as wind and hydro power markets.

Although not mentioned in the research note, emerging major downstream PV players, notably in China, such as Shunfeng have already indicated ambitions to broaden ambitions across renewables.

Overall, Deutsche Bank noted that there was strong interest from investors for yield co IPOs and a “robust pipeline of potential IPOs”, which are expected to result in significant capital injections into the downstream PV market. This will enable an increased level of project activity, notably in the US ahead of possible ITC reductions at the end of 2016.

Indeed, Shah believes that US EPA actions over carbon emissions could drive utilities in the US to increase investment in solar projects above the nominal 50MW to 100MW many of them have done until now.

However, the Deutsche Bank analyst also expects China-based PV manufacturers that have shifted emphasis to the downstream market to intensify with emphasis on capital spending for PV projects rather than capacity expansions.

The supply/demand dynamics are therefore expected to tighten, potentially pushing product and project pricing higher.

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