Enel Putting Final Touches on Yieldco for US Renewable Assets

Enel SpA is putting the final touches on a yieldco that would hold its U.S. renewable energy assets, making it the latest power-plant owner to opt for a structure that frees up capital.

The company won’t seek to publicly list the yieldco, which may be announced in weeks, Chief Executive Officer Francesco Starace said in an interview Tuesday at Bloomberg headquarters in New York. Creating a publicly traded entity makes a “monster that you have to feed,” requiring constantly added assets to feed the market’s need for growth.

Enel Green Power SpA, majority owned by Rome-based Enel, holds projects in operation and under development in 21 U.S. states, including wind, solar, hydropower and geothermal, according to the company’s website. The yieldco would also incorporate a Canadian wind farm, he said.

Other energy producers have created yieldcos to hold and operate power plants, offering investors dividends with long-term contracts and steady returns. NRG Yield Inc., the company NRG Energy Inc. formed to own and operate its power plants, has more than doubled since trading began more than 18 months ago. SunEdison Inc.’s TerraForm Power Inc. has gained 26 percent since it was formed in July.

“Yieldcos are especially attractive to renewable energy producers because they offer these usually small and fast growing companies an accessible source of cheap capital to accelerating development while potentially replacing tax equity as tax incentives expire,” Moody’s Investors Service wrote in an Oct. 17 report.

Enel has already received interest from institutional investors in a yieldco, Starace said. The company would add assets to the yieldco as production tax credits roll off the projects, he said.

“Now is the time to do this,” he said, referring to the current “fashion” for yieldcos. When the global economy recovers, inflation will rise and the returns from yieldcos will become less attractive in relation to other investments.

Copyright 2015 Bloomberg

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