Yieldco Market Performance

Tom Konrad Ph.D., CFA

US YieldcosPerformance driversInternational Yieldcos

About Me

Editor, Freelance writer

Hedge fund focused on green economy.Head of research.

Global Equity Income PortfolioGlobal Equity Income PortfolioCo-Portfolio Manager.

Invests in high income Fossil Free Green Stocks, including some Yieldcos

Disclosure

Tom Konrad and/or his clients own the following securities discussed:

US: BEP, EVA, HASI, PEGI, PFBOF, PW, PW.PRA,

Canada: CSE, RNW, AQN UK: TRIG

Disclaimer

Past performance is not a guarantee or a reliable indicator of future results. This presentation contains the current opinions of the author and such opinions are subject to change without notice. This presentation is inteded for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

US Yieldcos

Standard NYLD PEGI ABY NEP TERP CAFD

REIT/MLP/LP HASI BEP HIFR EVA

US Yieldcos

Standard NYLD

PEGI

ABY

NEP

TERP

CAFD

REIT HASI

HIFR

MLP/LP BEP

EVA

Sol-Wind Sol-Wind was as proposed Yieldco that

attempted an MLP structure with a blocker corporation to pass tax benefits on to investors.

Pulled in Feb. Reasons cited: Too small ($100M) Too little cash flow ($26M) Unknown sponsor (hedge fund) /

management team MLP Structure still un-tested

Rising Yieldco Valuations Create Virtuous Cycle

Share Price Increase

Secondary Offerings At Higher Prices

More Invested Capital Per Share Higher CAFD

Per Share

Per ShareDividend Increases

More Money To Invest in Projects

What Might Break The Cycle?

Share PriceDecrease

Secondary Offerings At Lower Prices

Capital Per Share Stagnates CAFD Per

Share Stagnates

LessDividend Growth

Less Money To Invest in Projects

What Might Break The Cycle?

Rising interest rates Insufficient new investment opportunities Solar farm price bubble Investor concerns

Conflicts of interest PPA renewal

End of depreciation tax shield

More And Larger Yieldco Acquisitions

Sponsor Conflict Of Interest

Many Yieldcos buy assets from their asset developer/sponsor.

The Good Gives Yieldco access (ROFO) to asset

development pipeline. The Bad

Developer/sponsor has incentive to overprice or sell substandard assets

Ways To Mitigate Conflict of Interest

''Independent Review'' But how independent?

Large ownership stake But requires more capital

Incentive Distribution Rights (IDR) But will reduce dividend growth

Multi-Sponsor (CAFD) Internal development (IPP model)

How Yieldcos Manage Conflicts Independent review only: NYLD, ABY IDRs: NEP, TERP, CAFD, BEP, EVA, HIFR Internal development: BEP, HASI PEGI – Will internalize Pattern Development

when market cap reaches $2.5 Billion (currently $1.9B)

CAFD – Joint sponsors (FSLR & SPWR)

NRG Yield Recapitalization

Original Class A shares split into Class A (NYLD/A) and Class C (NYLD)

Class C shares have 1/100 voting rights Intended to allow more stock issuance while

NRG Energy maintains control. Announced Feb 2015 Completed May 2015

NRG Yield was worst-performing Yieldco around recapitalization period.

Takeaways Strong performance of US Yieldcos is at least

in part to funding acquisitions at ever higher prices.

This can continue as long as investors remain confident.

NYLD's recapitalization shows that conflicts of interest can undermine this confidence.

Many other factors might also undermine investor confidence.

US Yieldcos Underperforming Over Last Month

Only HASI (+3%) not down more than Global Yieldco ETF YLCO (-9%)

Worst Performer: NYLD

Canadian Yieldcos

Mostly former (tax advantaged) income trusts, akin to REITs

Canada ended special tax treatment in 2011, and most converted into corporate structures and/or merged with other companies.

Long tradition of income trusts led to a more stable market with solid comparables.

Canadian Yieldcos

Former Income Trusts Brookfield Renewable*

(BEP.UN) Innergex (INE) Capstone (CSE) Northland (NPI) Algonquin (AQN)

Newcomers Pattern Energy Group*

(PEG) TransAlta Renewables

(RNW)

* Also has US listing.

Canadian Yieldcos

Canadian vs US Yieldcos

Less price appreciation Higher yield (4% to 9% vs 2.5% to 5%) Slower dividend growth (0% to 9% vs 10%

to 30%+) More taxable income Higher retention rates Most both own and develop projects

UK Yieldcos – Investment Company Structure

The Renewable Infrastructure Group (TRIG- Closed-End)

Bluefield Solar Income Fund (BSIF)

Foresight Solar (FSFL)

John Laing Environmental Assets (JLEN)

Greencoat Wind (UKW)

GCP Infrastructure Investments (GCP)

Implications of Fund Structure

Advantages Fewer conflicts of

interest Transparent pricing Reduced price risk

Disadvantages No tax shield Share price tied to NAV Generally cannot be

bought by foreigners Limited leverage

UK Yieldcos – Coping with political risk

July 9 – Removal of exemption from climate change Levy.

Greencoat (UKW)- ''Already factored in'' John Lang (JLEN)- ''Offset by corp tax

reduction'' Worst hit: Renewable Infrastructure Group

(TRIG)- 4p NAV reduction (4%)

UK Yieldcos- ROC Phase-out

Renewables obligation certificates (ROCs) Solar ROCs lowered for new farms after

April 1, 2015. Wind ROCs will phase out in April 2015,

one year earlier than expected. Like ITC and PTC phase out in US, existing

plants keep thier subsidies, and so this may help Yieldco owners of existing plants.

Summary

US Yieldcos have been taking advantage of rising prices to fuel rapid dividend growth.

Many investors seem to be assuming this will continue forever, leading to high valuations and market risk in best known US Yieldcos.

Lesser known and foreign Yieldcos currently seem less speculative.

Questions?

Tom Konrad Ph.D., CFA(406) 686 6067tom@altenergystocks.com