Edward Zaelke Talks Yieldcos with Recharge Magazine
For its article “The yieldco effect,” Recharge spoke with Akin Gump global project finance practice co-head Edward Zaelke on renewable energy yieldcos, companies that are structured towards owning low-risk assets that produce cash flow.
Zaelke, who has recently been interviewed by financial media on the topic (see “Ed Zaelke Quoted on Yieldco Vehicles by The Deal”), began by commenting on the historical illiquidity attached to renewables that, according to the article, has been “tipped on its head” by the rapid trading of yieldco stocks on U.S. markets: “There was a theory at one point that the public shouldn’t be buying stock in renewables companies. Yieldcos, having hit the market... would indicate to the contrary.”
Regarding share prices of U.S. yieldcos, he noted, “What’s happening with these yieldcos is that the promoters are putting out very high-quality projects. The market is looking at them and saying, ‘This doesn’t feel like something I need a 5% return on’.”
On the topic of the reduced role for traditional capital sources in the face of yieldcos’ ability to raise money, Zaelke said, “What’s interesting is how this is going to impact banks and the traditional folks floating bonds, when they’re now in competition with what in essence is the public IPO market. The question is how far that can go.”