Solar Power Finance Without the Jargon by Jenny Chase

Solar Power Finance Without the Jargon by Jenny Chase

Author:Jenny Chase
Language: eng
Format: azw3, pdf
ISBN: 9781786347411
Publisher: World Scientific Europe
Published: 2019-07-01T16:00:00+00:00


13.4.SunEdison

SunEdison had a confusing history as a polysilicon manufacturer called MEMC, which acquired a rooftop solar project developer called SunEdison from its investors and from founder Jigar Shah in 2009, and from 2013 onwards made solar project development the focus of its business. The firm, then with a market capitalisation of $1.9 billion, raised debt and equity to acquire or develop pipelines of solar and wind projects around the world. It was extraordinarily ambitious, sending teams into India, Latin America and the Middle East to scout out project opportunities and buy options on land, as well as buying some successful wind project developers with pipelines. It even hired away one of BloombergNEF’s researchers in Japan to find its solar projects to build there.

A recurring danger of project development is that costs occur well before revenue, and project developers tend not to have a large pile of cash to fall back on. The idea of being a project developer is that a firm will sell projects once they have been built to long-term investors, realising cash to reinvest in further projects — but if something goes wrong with this process, the developer can find itself owning a large number of half-finished projects but unable to pay its bills. Consequently, the timing of project sales is very important to developers.

In May 2014, SunEdison launched a ‘yieldco’ called TerraForm Power. Yieldcos are worth devoting some time to a further explanation.

There are various risks in investing in a renewable energy project. Most of them are risks about whether you will get your money or not — performance risk, payment risk, curtailment risk (this last is when the grid does not have enough capacity to take the energy your project is generating, so you lose it). If the project pays in a currency other than your own, there is currency risk — the project may pay a constant and reliable stream of rupees, for example, but they may be worth less of the dollars and euros that you needed to buy the equipment in the first place, and that you need to pay your staff or pay dividends to your investors. However, another form of risk is liquidity risk: you may need to get your investment out in a hurry, for example if you are an insurance firm that needs to make a big payout. This is a big problem if you have invested your money in buying a solar or wind project, because to get a good price when you sell it will take time — a buyer will want to do due diligence on all aspects of the project. Hence, many funds have a restriction on how much of their money they can invest in such ‘illiquid assets’ which cannot quickly be sold for a fair price.

Yieldcos are, fundamentally, a way of reducing liquidity risk to attract a larger pool of investors with a low cost of capital. The idea is that a yieldco owns a portfolio of simple cash-generating assets — solar projects or wind farms, for example, or electricity transmission lines.



Download



Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.