Solar yieldcos hit a bump as US$242m IPO pulled in France

[BERLIN] The business model known as yieldcos that raised US$5 billion for the solar industry in the past year hit a road bump as a French developer halted plans for an initial public offering.

Solairedirect SA postponed its 217 million-euro (US$242 million) share sale, which was due to be completed this week, after investors balked at funding developments in places where there is no government subsidy.

The decision is a sign not all investors are comfortable with the industry even though solar shares have risen 60 per cent in the past year. Yieldcos and their European equivalent, quoted funds that invest in projects, pass dividends to investors from operating renewable power plants.

"Solairedirect was brave enough to link shares to projects that ultimately were not backed by subsidies," said Pietro Radoia, an analyst at Bloomberg New Energy Finance in London. "The problem is that yieldco investors have a long-term, low- risk profile. Selling electricity at spot-market rates does not allow you to have visibility on your cashflows in 15 years' time."

Developers raised record sums last year with stock sales from companies such as NRG Yield Inc. in the US and Bluefield Solar Income Fund Ltd in the UK, according to data compiled by Bloomberg.

While Solairedirect got "considerable" interest in its IPO from investors in the U.S. and the Nordic region, it didn't manage to allocate as much stock as it desired, Chief Executive Officer Thierry Lepercq said in an interview.

Solairedirect may reattempt the IPO later, the CEO said. Growth plans for this year and next are unchanged by the delays.

His company develops profitable solar plants without relying on subsidies, a business model that already works in several countries. While investors in some regions know that, others are "less acquainted with competitive solar," the chief executive said.

Solairedirect, which had planned to use the proceeds from the sale to fund investments in solar parks in new markets, earlier this month said it sees pricing Wednesday and Euronext trading Thursday.

BLOOMBERG