Green Bonds From Terraform Global, SolarCity, and Hannon Armstrong

by the Climate Bonds Team Yieldco TerraForm Global (GLBL) issues a whopping $810m green bond (7 years, 9.75%, B2/B+) TerraForm Global Operating has issued an $810m green bond, with 7-year tenor, 9.75% coupon and ratings of B2 and B+ from Moodys and S&P respectively. TerraForm Global is a recent yieldco spin off (IPO last month) of SunEdison (SUNE) group (have a look here if the yieldco concept is new to you). Terraform Global owns and operates renewable energy assets - solar, wind and hydro - in emerging markets, in the following locations: Solar: China, India, South Africa,...

New Green Bonds From Terraform And Goldwind

by the Climate Bonds Team Second green bond from TerraForm to finance wind power acquisition, $300m 10yr, 6.125% s/a coupon, BB-/B1 TerraForm Power Operating , the yieldco spin off from SunEdison , has issued a second green bond shortly after tapping its inaugural green bond for a further $150m (making their first green bond a whopping $950m!). The new $300m green bond has 10-year tenor and semi-annual coupon of 6.125%, and was issued in the US private placement market. It is sub-investment grade with a rating of BB- from S&P and B1...

Recent Green Bonds: Toyota Hybrids, SunRun, Efficient Homes and Data Centers

by the Climate Bonds Team Last month Toyota closed their second green bond for a whopping $1.25bn. Standard auto loans backed the issuance with proceeds to be used for electric and hybrid car loans; that means it’s more like a corporate green bond, where proceeds from a bond backed by existing (non-green) assets are directed green loans still to be made. Sunrun issued $111m of solar ABS, and a small unlabelled energy efficiency ABS was also issued by Renew Financial and Citi for $12.58m. Sunrun and Citi/Renew Financial are examples of ABS where the assets backing the issuance...

CAFD: Don’t Let The Joke Be On You

Tom Konrad CFA Sunpower and First Solar are indulging in nerd jokes.  Their YieldCo, called 8point3 Energy Partners had its initial public offering on June 19th. The name is an astronomy nerd joke and a reference to the time it takes the sun's rays to reach the Earth, 8.3 minutes. Last week, we found out that its ticker symbol is CAFD, a "financial nerd joke" because it stands for "cash available for distribution."  CAFD is an important YieldCo metric, but it's not a perfect one. If you're not a financial nerd but are interested in...

How Much Can YieldCo Dividends Grow?

Tom Konrad CFA U.S.-listed YieldCos seem to offer the best of two worlds: high income from dividends, combined with high dividend per share growth. YieldCos are listed companies that own clean energy assets, and like the real estate investment trusts (REITs) and master limited partnerships (MLPs) they are modeled after, they return almost all the income from their investments to their shareholders in the form of dividends. Unlike REITs and MLPs, however, U.S.-listed YieldCos have management targets to deliver double-digit per-share dividend growth. YieldCos shown are NRG Yield (NYLD), Abengoa Yield (ABY), TerraForm Power...

Are YieldCos Overpaying for Their Assets?

Tom Konrad CFA YieldCos buy and own clean energy projects with the intent of using the resulting cash flows to pay a high dividend to their investors.  Several such companies, often captive subsidiaries of listed project developers, have listed on U.S. markets since 2013. So far, YieldCos have been a win-win: The developers that list YieldCos have gained access to inexpensive capital, and income investors have gotten access to a new asset class paying stable and growing dividends.  So far, they have also gained from significant stock price appreciation. The seven U.S.-listed YieldCos are up...

My Yieldco Raised Its Dividend With This Weird Trick

Tom Konrad CFA Clean energy yieldcos buck the general trend by paying out a large proportion of cash flow to investors, and rapidly increasing their dividends at the same time.  The key to this trick has been their rapidly appreciating stock prices. High yield companies generally grow slowly, while high growth companies have low dividend yields. Normal companies grow by investing some profits in new business opportunities.  Early stage growth companies typically retain all their earnings to invest in new business.  More mature companies have fewer opportunities, and so share a larger proportion of...

Green Bond Market Heats Up After Slow Start To 2015

$7.2 billion of green bonds issued.  Market shows signs of maturity, including more currencies, and non-investment grade bonds.  Emerging market green bonds are ramping up, while green munis are booming. by Tess Olsen-Rong, Climate Bonds Market Analyst The first three months of 2015 (Q1) have seen 44 green bond deals totalling $7.2bn of issuance. After relatively low issuance in January the amount of green bonds issued has been climbing each month, with March three times bigger than January. This year will be the biggest year ever for green bonds: there’s a healthy pipeline of bonds in the...

Why This German Solar Executive Is Skeptical About American YieldCo Assumptions

by Tom Konrad CFA Ever since the first YieldCo, NRG Yield (NYSE:NYLD), went public in 2013, it and other similar YieldCos have been reshaping the market for operating renewable energy assets, especially wind and solar PV farms.  A YieldCo is, to put it simply, a publicly traded subsidiary of a developer and operator of clean energy farms that uses the cash flow from its assets to return a high current dividend to shareholders. Most large, publicly traded clean energy developers have already launched or are preparing to launch a YieldCo. The current crop includes NRG Yield, Pattern...

Terraform Power Issues $800m High Yield Green Bond

by the Climate Bonds Team This week the yieldco TerraForm Power (TERP) issued a huge high-yield green bond; seeing more high-yield bonds is a sign that the green bond market is continuing to mature. In addition to TerraForm, more green bonds from repeat issuers OPIC, World Bank, IFC and Credit Agricole have been announced and will be closing in the coming weeks. For today, let’s dig deeper into the latest green high-yield offering. The US-based renewable energy company TerraForm Power Operating has issued US$800m of senior unsecured green bonds (debentures), making it the largest green bond of 2015...

$37B 2014 Green Bond Issuance Triples Market

by Tess Olsen-Rong Following a landmark green bond growth year in 2013, the labelled green bond market has once again experienced a year of incredible growth in 2014: by year-end there had been $36.6bn of green bonds issued by 73 different issuers – that’s more than a tripling of the market! The final figure was boosted by a late flurry of green municipal bonds. This exponential growth takes the total amount of green bonds outstanding to $53.2bn by the end of 2014. So, what happened to cause this tripling of issuance? Well, corporate and municipal bond...

A Flurry Of Green Muni Bonds

by Tess Olsen-Rong Green municipal bonds are set to take off in 2015 after a flurry of issuances in the latter half of 2014. With interest rates at an all time low, this is the time to finance the vast backlog of infrastructure upgrades and developments needed – and to green that infrastructure. This, according to the Financial Times, is especially so in the US. With green muni growth has come a growing diversity in the use of proceeds. Some green municipal bonds are using proceeds for projects where the green credentials are more complex to analyse...

Northland Power’s Solar-Backed Bond

New Canadian Climate bond: Northland Power releases a pretty big ABS - CA$232m (US$206m) - backed by solar projects with proceeds for renewables. 18-year tenor, 4.397% coupon, BBB. Securitisation key future area for green bonds.

Will Investors Flock to SunEdison’s Emerging-Market YieldCo?

by Tom Konrad CFA SunEdison is proposing something entirely new: a YieldCo with a focus on projects in Africa and Asia, but it's a long way between an S-1 filing with the SEC and and IPO. The June launch of SunEdison's (SUNE) first YieldCo, TerraForm Power (NASD:TERP), transformed the parent company's prospects. Now it wants to repeat the performance with a first-of-its kind YieldCo that will focus on investment in Africa and Asia. A YieldCo is a publicly traded company that is formed to own operating clean energy assets that produce a steady cash flow,...

Solar Bonds and Other Green Income Investments Compared

by Tom Konrad CFA Clean-energy stocks’ performance over the last couple of years proves that it’s possible to do well – sometimes very well – while doing good. Unfortunately, it’s also possible to lose a lot of money. Case in point: solar installer SolarCity’s stock (SCTY) price has more than quintupled since its 2012 IPO, but has fallen 40% since the start of the year. Swings like these are just too wild for many investors to stomach. So the news that California-based SolarCity launched the first public offering of solar bonds last week likely piqued the interest of sustainability-minded...

Solar Bonds For Small Investors

By Beate Sonerud SolarCity (NASD:SCTY) is issuing US$200m of asset-linked retail bonds, with maturities ranging from 1-7 years and interest rates from 2-4%. Wells Fargo is the banking partner. While the bonds are registered,SolarCity expects the bonds to be buy and hold, and not traded in the secondary markets. The bond is issued for small-scale investors, with investment starting at US$1000, giving this bond issuance a crowdfunding aspect. Choosing such a different structure allows SolarCity to diversify their investor base – the company stresses that small-scale investors are a complement, not substitute, for large-scale institutional investors. While...