Green Bond Update: Wind Company Bonds
by Corporate Bonder Market Overview Data compiled by the Bank for International Settlements indicate that the total size of the global debt securities market (domestic and international) was $98.7 trillion as at September 2011, of which $89.9 trillion were notes and bonds. Governments accounted for $44.6 trillion of outstanding debt securities, financial organizations $41.9 trillion, corporations $11.2 trillion and international organizations $1.0 trillion. The focus of this report is on corporate borrowers. US corporations are the largest debt issuers, accounting for 46% of corporate debt globally, followed by the Eurozone with 20%, Japan 9%, China 6%, and...
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...
How Much Could Another Yieldco Pay For 8point3?
by Tom Konrad Ph.D., CFA
When SunPower (SPWR) and First Solar's (FSLR) YieldCo, 8point3 Energy Partners (CAFD), went public two years ago, I used the financial nerd joke in 8point3's ticker symbol as a launching point to explain what "cash available for distribution," or CAFD, means.
In that article, I cautioned against the risks of using a short-term cash flow measure for long-term investing decisions. That risk is becoming more and more real for investors in 8point3 because the YieldCo is using short-term, interest-only financing to fund its long-term investments.
All of 8point3's debt matures in 2020, and refinancing that debt will...
Buffet Bet Comes Out for Solar
by Sean Kidney Warren Buffet is a famous proponent of value investing and he surely received a sign of the value in solar investments over fossil fuels last week. The MidAmerican Energy $850m Topaz solar project bond we mentioned a couple of weeks ago was so successful that a second tranche is expected to cover the remaining debt of the project. The offer was oversubscribed by $400m which would have mopped up the total $1.2bn of debt in the project; Buffet's Berkshire Hathaway (BRK-A) controls MidAmerican. In contrast, Buffet’s investment in $2bn of bonds from gas company...
The Green Bond Trend
DTE Energy Company (DTE: NYSE) recently priced a ‘green bond’ issuance of $525 million to support renewable energy and energy efficiency. The thirty-year bonds provide a coupon payment at 4.05%. DTE is planning to buy solar arrays and wind turbines with its newly flush cash kitty. The capital raise is of significance less for its size and purpose and more for the fact that a U.S. electric utility company is tapping this unusual financing vehicle.
True enough, green bonds are nothing new. Created to fund projects with environmental or climatic benefits, the first green bonds were issued in May 2007 by the European Investment Bank (EIB). The...
Is Suzlon’s $650m Wind Bond the First of Many?
India had been trying to get a corporate bond market going for 15 years – search “growing India corporate bonds” and you’ll find papers on the subject from the Reserve Bank of India, Bank of International Settlement and others scattered over past years. The latest Indian 5 year plan has this as a priority – and has green finance as a priority in a separate section. India has a particular need: a miniscule local corporate bond market means restricted financing options for business, including for renewable and energy efficient building developers – diversity with financing options helps drive down costs...
One Week, Three YieldCo Deals. Are More Buyouts on the Horizon?
by Tom Konrad, Ph.D., CFA
It's been a busy several days in the YieldCo space.
On February 5, 8point3 Energy Partners (NASD:CAFD) announced an agreement to be acquired by an infrastructure investment fund managed by Capital Dynamics. While I was still writing an article on why the sale price was at a virtually unheard of discount relative to the stock market price, two more YieldCo deals were announced: NRG Energy (NYSE:NRG) agreed to sell its sponsorship stake in NRG Yield (NYSE:NYLD and NYSE:NYLD/A) to Global Infrastructure Partners, and YieldCo TerraForm Power (NASD:TERP) made an offer to buy out Spanish YieldCo Saeta Yield (Madrid:SAY) at a 20 percent...
Sunny Climate For Solar Income Up North
Tom Konrad CFA Disclosure: I am long PW and HASI. In a rational world, the sunniest places would have the warmest reception for solar technology and investment. While solar is having its day in the sun in Hawaii, state incentives make the economics of photovolatics equally attractive in Vermont, a state not known for its sunny skies. And while California is famous for its rapid deployment of solar, the economics are at least as good in Washington state, New York, New Hampshire, and chilly Maine. It’s not only the economics of solar which can counter-intuitively get better...
Tesla Issues First EV-Related Climate Bond
by Sean Kidney Tesla issues $600m, 5yr EV convertible bond Tesla Motors’ inaugural bond issue has been, as you’d expect, electrifying (just had to say that). The US electric sports car manufacturer has just issued a 5 year, $600m convertible bond in a fundraising program which has seen it raise approximately $1bn through shares and convertible bonds. Coupon is 1.5-2%; conversion premium is 35%; bookrunners were JPMorgan, Goldman Sachs, Morgan Stanley. Tesla had planned to raise $450m through convertible bonds, but this was raised to $600m after strong demand from investors. That demand allowed Tesla to drop what was going to be a 2-2.5% coupon down to...
Brookfield’s Yieldco Buying Spree
by Tom Konrad Ph.D., CFA
Last week, a Bloomberg reported on a rumor that Brookfield Asset Management (BAM) was in talks to buy Abengoa's (ABGOY) stake in its former YieldCo Atlantica Yield (ABY). Atlantica had been looking for a new sponsor for well over a year since parent Abengoa filed for bankruptcy.
Purchasing Yieldcos (companies that own clean energy infrastructure and use the cash flows to pay large dividends to shareholders) is not new to Brookfield. Not only has BAM long sponsored Brookfield Renewable Partners, LP (BEP), a limited partnership that has essentially been a Yieldco since before the term was...
What Yieldco Managers Are Saying About The Market Meltdown
by Tom Konrad Ph.D., CFA Note: This article was first published on GreenTechMedia on Noveber 27th. In the last six months, YieldCos have fallen from stock market darlings to pariahs. YieldCos are companies that buy clean energy projects such as solar and wind farms, and use the majority of free cash flow from these projects to pay dividends to investors. Many are listed subsidiaries or carve-outs of large developers of clean energy projects. Last year, investors repeatedly punished leading solar developers and manufacturer First Solar and SunPower for their reluctance to launch YieldCos. When...
Roundtable Greenlights Effort on Renewable Energy Covered Bonds
by Sean Kidney “There is more liquidity than ever being put into the system, but funds are still not being allocated to renewable energy projects” “The bottleneck for renewable energy is not in construction financing but a year or two after construction .” “ is not an asset class where risk changes over time – it changes between pre-completion to post-completion stages… it is incorrect to think that offloading an asset post-completion dumps risk onto others because the riskier part of the project is past.” “Alignment of interest with investors is strong as the issuing bank...
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...
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 swan, Black swan: No matter as long as it reduces stranded spending
by Prashant Vaze, The Climate bonds Initiative
In January, authors from several institutions under the aegis of BiS, published The Green Swan Central banking and financial stability in the age of climate change setting out their take on the epistemological foundations for, and obstacles against, central banks acting to mitigate climate change risk.
The book’s early chapters provide a cogent and up-to-date analysis of climate change’s profound and irreversible impacts on ecosystems and society. The authors are critical of overly simplistic solutions such as relying on just carbon taxes. They also recognize the all-too-evident deficits in global policy to respond to the threat.
In short, they accept the need for central banks to act.
The Two Arguments
The paper makes two powerful arguments setting out the challenges central banks face using their usual mode of working.
Firstly, climate change’s impact on financial systems is an unknowable unknown – a...
Three Clean Energy Stocks That Won’t Keep You Up At Night
Tom Konrad CFA If you want to green your portfolio, but the wild swings of First Solar (NASD:FSLR), Tesla (NASD:TSLA), SolarCity (NASD:SCTY), and even clean energy ETFs like Powershares Wilderhill Clean Energy (NYSE:PBW) are a bit too much to let you sleep at night, you’re not alone. A reader recently suggested I write about more green stocks like Waste Management (NYSE:WM), which readers can own and not worry about too much. I thought it was an excellent suggestion; I’ve recently been writing much more about much more exciting or terrifying stocks, because there is simply a lot more...
