YieldCos: Short-Term Selection, - Credit Suisse

YieldCos: Short-Term Selection,

Long-Term Accretion

Research Analysts

November 17, 2016

Andrew Hughes (415) 249-7928

(212) 325-8277 [email protected]

Maheep Mandloi

(212) 325-2345

[email protected]

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE

STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware

that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

YieldCo landscape and coverage universe

1/19/2017

Credit Suiss Estimates, I/B/E/S Estimate for all consensus numbers, Thomson, SNL, company

reports 2

TOP PICK

Company Name 8Point3 Energy Partners NEE Partners Pattern Energy NRG Yield Atlantica

Yield

Terraform

Global

Terraform

Power

Ticker CAFD NEP PEGI NYLD ABY GLBL TERP

Sponsor First Solar/SunPower NextEra Energy Pattern Development NRG Abengoa SA SunEdison SunEdison

Market cap ($m) $1,035.0 $3,921.5 $1,705.7 $2,780.3 $1,811.9 $685.5 $1,817.1

Current price $13.01 $25.10 $19.30 $15.20 $18.00 $3.80 $12.99

Rating UNDERPERFORM OUTPERFORM OUTPERFORM

Uncovered Uncovered Uncovered Uncovered

Target Price $12.00 $33.00 $22.00

CS Dividend CAGR

(2016-2020) 8.0% 16.3% 9.7%

Key points of

differentiation

High cost of capital and

compressing returns

threaten dividend and value

accretion beyond 2017

Unmatched and low-risk

growth visibility to drive

durable and long-term

dividend trajectory well

above peers

Locked-in near-term

dividend accretion and

improving longer-term

prospects with limited

exposure to more

uncertain US policy picture

Current yield 7.4% 5.4% 8.5% 6.6% 3.6% 28.9% 10.8%

Consensus 2016-19

dividend CAGR 11.2% 15.4% 8.2% 14.9% NM NM NM

Portfolio Solar Wind, Solar, Gas

Infrastructure Wind, Solar

Wind, Solar,

Conventional,

Thermal

Solar (CSP),

Wind,

Transmission,

Water,

Conventional

Wind, Solar Wind, Solar

Geography United States North America Americas and Japan United States Americas,

Spain, Africa International

Americas and

UK

Source: Credit Suisse Estimates, I/B/E/S Estimate for all consensus numbers, Thomson, FactSet Aggregates

YieldCo101 Heavily contracted dividend growth vehicles taxed as 1099 C-corps

− Long-term, low-risk cash flows generated by portfolios of contracted energy infrastructure assets

− Share attributes with, but are not structured as Master Limited Partnerships (MLPs)

Formed for investors seeking stable and growing dividend income from a diversified portfolio of cash

flowing assets to take advantage of trends in power generation through a lower cost of capital than that of traditional developers and Independent Power Producers

Dividend growth is paramount and financially engineered

− Dividend accretion through acquisition is the name of the game in the short-term

− Advantaged cost of capital drives longer term value creation

− Temporary tax protection through depreciation benefits (MACRs)

The right investors: long-term investment horizon, real asset/cash flow/yield oriented, looking for income and capital appreciation. Traditionally a lot of cross over with utilities, power, MLPs, REITs

Primary sector opportunities: large and growing TAM in a sector ripe for consolidation with a long

history of capital indiscipline, predictable cash flows, limited energy commodity price exposure, visible

growth opportunities, and limited political risk to tax benefits

Primary sector risks: limited organic growth, interest rates and capital availability, stock price

sensitivity to MLP valuation and energy commodity prices, financial health/viability of sponsor,

leverage, corporate governance, conflicts of interest, renewable energy policy and disclosure

Differentiating factors: corporate structure and incentive fees, asset types and geographies, sponsor

entities, disclosure, growth visibility, and dividend growth targets

1/19/2017


reports 3

Key themes Near term (0-12 months)

− US Energy Policy

− Rising interest rates

− Capital markets receptivity, particularly among new institutional and retail investors

− Parent company restructurings and strategy changes

− Energy commodity price correlation

Mid-term (1-3 years)

− Distribution growth and asset acquisition without overburdening capital markets

− Non-amortizing debt maturities

− Corporate renewable PPAs

− Return of third party M&A activity

− Consolidation of deregulated generation in the US, and rise of the international YieldCo

− Impact of low cost capital strategies on PPA prices and project returns

− Increased competition from non-YieldCo entities with less volatile cost of capital

− Short duration contracts will begin terming out for certain assets

Long-term (3+ years)

− Non-amortizing debt maturities

− Terminal or post-PPA and project site residual value

− Greenhouse gas and climate regulation

− Inclusion on alternative asset types like batteries or contracted baseload (nuclear, hydro, etc)

1/19/2017


reports 4

Seek quality and visibility, avoid return compression risk

NextEra Energy Partners (NEP) – TOP PICK

− Outperform, $33 Target Price

− Street high dividend CAGR, no longer a consensus long

− Largest and lowest risk growth visibility, least exposed to a more uncertain US energy policy

picture, and most likely to outperform in rising rate environment

8Point3 Energy Partners (CAFD)

− Underperform, $13 Target Price

− 80% of Street at Outperform

− Compressing development margins at sponsor as execution risk mounts means less dividend and

value accretion through acquisitions especially given high cost of capital

− Most exposed to negative turn in US renewables policy

Pattern Energy Group (PEGI)

− Outperform, $23 Target Price

− Consensus estimates do not reflect locked-in near-term growth, stock trading near net asset value

of current portfolio

− Longer-term growth less exposed to adverse US policies

1/19/2017


reports 5

Industry overview

1/19/2017 Credit Suiss Estimates, I/B/E/S Estimate for all consensus numbers, Thomson, SNL, company reports 6

Large, fragmented, and underpenetrated TAM

YieldCo ownership represents 2% of deregulated

power plant assets and 11% of operating wind and

solar in North America

1/19/2017


reports

786 GW

Operating deregulated power assets across

North America

365GW

Operating renewable and gas fired power

plants

85 GW

11% owned by YieldCos or sponsors

<20 GW

~2% owned by YieldCos

7

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

NextEra Energy Resources

Southern

First Solar

SunEdison

TerraForm Power

Sustainable Power Group

8Point3

12 portfolios of 300-400MW*

25 portfolios of 100-200MW*

SOLAR Megawatts Commissioned Financed Permitted

Solar(top) and wind (bottom) ownership is

particularly fragmented

0 5,000 10,000 15,000

NextEra Energy Resources LLCAvangrid

MidAmericaEDP Renewables

InvenergyE.ON

IberdrolaEnel

TerraformNRG Yield

Pattern Energy Group (PEGI)NEE Partners

NRGPattern Energy Group (PEG LP)

6 portfolios over 1,000 MW19 portfolios of 500-1,000MW*

38 portfolios of 250-500MW*270+ portfolios under 250MW*

WIND Megawatts Commissioned Financed Permitted

YieldCo ownership underrepresented but companies have

an inside track on industry consolidation

Ownership of Operating Wind

Assets in North America

Ownership of Operating Solar

Assets in North America

1/19/2017


reports

YieldCos 11%

YieldCo sponsors 14%

Other 75%

YieldCos 15%

YieldCo sponsors 11%

Other 74%

8

Renewable Market is Global and Growing

1/19/2017


reports

0

20

40

60

80

100

120

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

E

2016

E

2017

E

2018

E

2019

E

2020

E

Annual solar demand, GW

Others

Japan

India

Europe

China

US

0

10

20

30

40

50

60

70

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

E

2016

E

2017

E

2018

E

2019

E

2020

E

Annual wind demand, GW

Others

India

Europe

China

US

9

YieldCos a sound structure to own these assets

Capital costs all upfront, which public markets should efficiently supply

Contracted, high credit, and long duration cash flows that market should efficiently value

Unlevered IRRs 6-8% through contract period

~10% of acquisition NPV derived from assumptions regarding post contract period

1/19/2017


reports

($200.0)

($150.0)

($100.0)

($50.0)

$0.0

$50.0

$100.0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

$ m

illio

n

Contract year

EBITDA CAFD Total capex and debt paydown

$70M equity component on $200M asset (65% levered)

Non-recourse, fully amortizing debt termed ~2 years short of contract end date

EBITDA generated by long-term fixed price contract with high credit quality counterparty

CAFD = EBITDA less total debt service and maintenance capex

Final years of contract life (and post PPA value) can be highly cash flow accretive

10

Mutually beneficial and value-enhancing relationship

YieldCo’s benefit from sponsor

Recycled capital for increased development enhances YieldCo growth visibility

Cost of capital and

tax attributes

LP and GP distributions

Asset sale proceeds

1/19/2017


reports

Sponsor’s benefit from YieldCos

Dividend growth and visibility drives income and capital gains for shareholders

O&M, balance sheet,

downside protection

Dropdowns

Development pipeline

11

Accretion through acquisition means growth is financially

engineered, but sustainable in this market given size

1/19/2017


reports

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

6-May-13 22-Nov-13 10-Jun-14 27-Dec-14 15-Jul-15 31-Jan-16 18-Aug-16 6-Mar-17

Cas

h on

cas

h re

turn

Announcement date

Dropdowns 3rd Party M&A

12

Setup to issue equity, but volumes are not there yet and

there can be too much of a good thing

1/19/2017


reports 13

0%

5%

10%

15%

20%

25%

30%

35%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

Free float value Restricted float New issuance as % of float (RHS)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

17-Aug-2014 17-Jan-2015 17-Jun-2015 17-Nov-2015 17-Apr-2016 17-Sep-2016

Market Cap Weighted Sector Performance

Equity float only about half of market cap

¼ of existing float issued in new shares in 2Q15 was too much for market to handle

Ticker Free float Total outstanding Float %

CAFD.O CAFD 28.0 79.1 35.4%

NEP NEP 54.0 156.2 34.5%

NYLD.K NYLD 62.5 190.5 32.8%

PEGI.O PEGI 86.5 87.5 98.9%

ABY.O ABY 58.6 100.2 58.4%

GLBL.OQ GLBL 82.3 178.1 46.2%

TERP.O TERP 88.1 139.6 63.1%

Total Total 460.0 931.1 49.4%

Macro factors are turning more fundamental YieldCo correlations with 10 Year

Treasury yield (fundamental)

1/19/2017


reports

YieldCo correlation with Brent oil

price (technical)

14

(1.00)

(0.80)

(0.60)

(0.40)

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

17-Sep-2014 17-Feb-2015 17-Jul-2015 17-Dec-2015 17-May-2016

< le

ss c

orre

late

d/m

ore

corr

elat

ed >

T1M Brent correlation

(1.00)

(0.80)

(0.60)

(0.40)

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

17-Sep-2014 17-Feb-2015 17-Jul-2015 17-Dec-2015 17-May-2016

< le

ss c

orre

late

d/m

ore

corr

elat

ed >

T1M Rate correlation

(1.00)

(0.80)

(0.60)

(0.40)

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

< le

ss c

orre

late

d/m

ore

corr

elat

ed >

YC stock price correlation with US 10 Year Rate

(1.00)

(0.80)

(0.60)

(0.40)

(0.20)

0.00

0.20

0.40

0.60

0.80

1.00

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16

< le

ss c

orre

late

d/m

ore

corr

elat

ed >

YC stock price correlation with Brent oil price

Interest rates remain below level at sector inception

1/19/2017


reports 15

0

2

4

6

8

10

12

14

16

18

10/15/1965 10/15/1969 10/15/1973 10/15/1977 10/15/1981 10/15/1985 10/15/1989 10/15/1993 10/15/1997 10/15/2001 10/15/2005 10/15/2009 10/15/2013

10 Y

ear

Tre

asur

y Y

ield

(%)

1

2

3

4

5

6

1/3/2006 1/3/2007 1/3/2008 1/3/2009 1/3/2010 1/3/2011 1/3/2012 1/3/2013 1/3/2014 1/3/2015 1/3/2016

10 Y

ear

Tre

asur

y Y

ield

(%)

US 10 Year Treasury 10 Year Rate at NYLD IPO

Prefer high dividend growers to high dividend yielders in a

rising rate environment

2009 rising rate cycle

Div yield at outset, performance through cycle

2003-2005 rising rate cycle

Div yield at outset, performance through cycle

1/19/2017


reports

99.6

99.7

99.8

99.9

100

100.1

100.2

100.3

100.4

1/1/2009 3/1/2009 5/1/2009 7/1/2009 9/1/2009 11/1/2009

AEE D PNM ETR NEE SRE

0.00

1.00

2.00

3.00

4.00

5.00

6.00

AEE PEG D FE PPL NEE SRE PNM EXC ETR

99.4

99.6

99.8

100

100.2

100.4

100.6

100.8

6/2/2003 9/2/2003 12/2/2003 3/2/2004 6/2/2004 9/2/2004 12/2/2004 3/2/2005

AEE D PEG ETR EXC PNM

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

AEE PNM D FE PEG PPL EIX EXC ETR NEE SRE

16

Thoughts on a more uncertain outlook for US renewables

Global climate commitments and national carbon goals face greatest headwinds

− US is likely to back out of Paris climate accord

− Clean Power Plan will most likely not advance

− EPA GHG endangerment finding remains a factor

Rollback of renewable tax credits seems unlikely, but there are pathways

− 2015 bipartisan extension includes statutory phase-out

− Easiest pathway to rollback is via budget reconciliation

− Lower corporate tax rate cold shrink pool of available tax equity supply

− Solar ITC may face bigger headwinds on Fair Market Value challenge

FERC commissioner changes

Major demand drivers largely independent of carbon rules

− State RPS, corporate sustainability goals, utility long-term procurement

1/19/2017


reports 17

Sector overview


Magnitude AND quality of growth visibility both matter

MW, including development EBTIDA, excluding development

1/19/2017


reports

0

5,000

10,000

15,000

20,000

25,000

CAFD NEP NYLD PEGI

Meg

awat

ts

YieldCo ROFO operating Sponsor operating ROFO development Sponsor development$0

$500

$1,000

$1,500

$2,000

$2,500

CAFD NEP PEGI

$ m

illio

ns

19

Size and quality determine dividend yield

Consensus

Credit Suisse

1/19/2017


reports 20

CAFD

NEP

NYLD

PEGI

BEP

RNW

SAY

3%

4%

5%

6%

7%

8%

9%

10%

0.0% 5.0% 10.0% 15.0% 20.0%

Cur

rent

con

sens

us d

ivid

end

yiel

d

2016-19 consensus dividend CAGR

CAFD

NEP

PEGI

3%

4%

5%

6%

7%

8%

9%

10%

0.0% 5.0% 10.0% 15.0% 20.0%

Cur

rent

yie

ld im

plie

d by

Tar

get P

rice

2016-19 CS dividend CAGR

Dividend yield factors into cost of capital

1/19/2017


reports 21

DDM 8Point3 Energy Partners NEE Partners NRG Yield Pattern Energy

2016 consensus dividend estimate $0.93 $1.28 $0.95 $1.58

2017 $1.08 $1.58 $1.09 $1.75

2018 $1.19 $1.83 $1.26 $1.91

2019 $1.28 $1.97 $1.44 $2.00

2016-19 NPV10 $3.30 $5.20 $3.52 $5.27

Terminal growth rate 1.0% 1.0% 1.0% 1.0%

Terminal dividend $1.30 $1.99 $1.45 $2.02

Implied cost of equity 14.4% 11.0% 13.4% 15.4%

CAPM 8Point3 Energy Partners NEE Partners NRG Yield Pattern Energy

Market RF rate 2.24 2.24 2.24 2.24

Beta 0.74 0.68 2.05 0.89

Country risk premium 5.62 5.62 5.62 5.62

Dividend risk premium 0.54 (0.83) 0.30 0.95

Implied cost of equity 6.82% 5.52% 14.38% 8.11%

WACC 8Point3 Energy Partners NEE Partners NRG Yield Pattern Energy

Estimated cost of equity 12.76% 10.00% 13.56% 13.88%

Cost of debt 3.60% 5.60% 5.00% 4.25%

Weighted average cost of capital 10.4% 7.8% 8.1% 8.9%

Strategies differ

1/19/2017


reports

Solar 100%

CAFD

Wind 100%

PEGI

Solar 16%

Wind 84%

NEP

Solar 15%

Wind 42%

Conventional 41%

Thermal 2%

NYLD

22

Structures differ

Simple

1/19/2017


reports

Complicated

23

We Look Primarily at Dividend Yield

Coverage Universe 2-year

Forward Consensus Div Yield

Trade in-line with Dropdown

MLPs, varying spread to Treasury

1/19/2017


reports 24

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

01-Jan-2015 01-May-2015 01-Sep-2015 01-Jan-2016 01-May-2016 01-Sep-2016

CAFD NEP PEGI

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

01-Jan-2015 01-May-2015 01-Sep-2015 01-Jan-2016 01-May-2016 01-Sep-2016

YC Coverage US 10 Year Treasury Dropdown MLPs

We Also Consider EV/EBITDA and Net Asset Value (NAV)

EV/EBITDA

Wide range on consensus

− 8-13x 2018

Balance sheet nuances

− Off B/S debt

− Tax equity non-controlling interest

− Fully, partially and non-amortizing debt

More limited comp universe

− YieldCo group is small, and dropdown

MLPs do not trade on EBITDA

Net Asset Value

Discounted cash flow analysis of current portfolio at company WACC

− No post contract value

− No growth

− Full pay down of project financing

Fundamental assessment of floor value

Target prices imply a 1.1x – 1.9x range on NAV value assessment

− Reflects relative visibility and risks to

growth prospects

1/19/2017


reports 25

Credit Suisse versus the Street

1/19/2017


reports 26

Company 2016-2019

Outperform Neutral Underperform 2017 2018 2019 Dividend CAGR

8Point3 Energy Partners

Consensus 12 2 1 $1.08 $1.19 $1.28 11.2%

Credit Suisse Underperform $1.06 $1.17 $1.24 9.2%

NextEra Energy Partners

Consensus 10 6 $1.58 $1.83 $1.97 15.4%

Credit Suisse Outperform $1.52 $1.81 $2.13 16.7%

Pattern Energy Group

Consensus 14 1 $1.75 $1.91 $2.00 8.2%

Credit Suisse Outperform $1.76 $1.95 $2.16 11.0%

Rating Dividend per share

Comp sheets - YieldCos

1/19/2017


reports 27

As of 11/16/2016

Company Ticker Share price Indicated yield 2016-2018 2016-2019 2016-2020 NTM 2016 2017 2018 2019 2020

YieldCo Universe, consensus estimates

8Point3 Energy Partners CAFD $13.01 7.4% 13.1% 11.2% NM 8.0% 7.2% 8.3% 9.2% 9.9% NM

Atlantica Yield ABY $18.00 3.6% 40.7% NM NM 7.2% 4.9% 8.7% 9.7% NM NM

NEE Partners NEP $25.10 5.4% 19.3% 15.4% NM 5.8% 5.1% 6.3% 7.3% 7.8% NM

NRG Yield NYLD $15.20 6.6% 15.1% 14.9% 16.1% 6.7% 6.2% 7.2% 8.3% 9.5% 11.3%

Pattern PEGI $19.30 8.5% 9.8% 8.2% 8.3% 8.4% 8.2% 9.1% 9.9% 10.4% 11.3%

Terraform Power TERP $12.99 10.8% NM NM NM 11.2% 8.2% 9.7% NM NM NM

MEAN 7.0% 19.6% 12.4% 12.2% 7.9% 6.6% 8.2% 8.8% 9.4% 11.3%

Mean ex TERP/ABY 7.0% 14.3% 12.4% 12.2% 7.2% 6.7% 7.7% 8.6% 9.4% 11.3%

Consensus DPS CAGR Dividend yield (consensus estimates)

Company Ticker Target price Indicated yield2016-20 DPS CAGR

YieldCo Coverage Universe, Credit Suisse estimates NTM 2016 2017 2018 2019 2020

8Point3 Energy Partners CAFD $12.00 8.3% 8.0% 8.6% 7.3% 8.2% 9.0% 9.5% 9.9%

NEE Partners NEP $33.00 4.2% 16.3% 4.5% 4.1% 4.6% 5.5% 6.5% 7.4%

NRG Yield NYLD $16.00 6.3% 12.6% 6.5% 6.1% 7.0% 8.0% 9.2% 9.8%

Pattern Energy PEGI $22.00 7.4% 9.7% 7.8% 6.9% 7.6% 8.5% 9.4% 10.0%

MEAN 6.6% 11.7% 6.8% 6.1% 6.8% 7.7% 8.6% 9.3%

Dividend yields

Comp sheets – Dropdown MLPs

1/19/2017


reports 28

As of 11/16/2016

Company Ticker Share price Indicated yield 2016-2018 2016-2019 2016-2020 NTM 2016 2017 2018 2019 2020

Above average growth dropdown MLPs

Columbia Pipeline CPPL $17.10 4.6% 15.0% 20.8% 20.7% 5.2% 4.6% 5.2% 6.1% 8.1% 9.8%

Dominion Midstream DM $24.70 4.0% 22.0% 22.2% 22.1% 4.2% 3.9% 4.8% 5.8% 7.1% 8.7%

Phillips 66 PSXP $43.50 4.9% 22.0% 21.6% 17.3% 5.2% 4.7% 5.9% 7.1% 8.5% 9.0%

Valero Partners VLP $39.97 3.9% 23.9% 22.8% 21.4% 4.2% 3.7% 4.7% 5.7% 6.9% 8.1%

Shell Midstream SHLX $25.86 4.1% 22.8% 21.9% 19.8% 4.4% 3.9% 4.8% 5.9% 7.1% 8.0%

MEAN 4.3% 21.2% 21.9% 20.2% 4.7% 4.2% 5.1% 6.1% 7.5% 8.7%

Below average growth dropdown MLPs

EQT Midstream EQM $74.02 4.4% 18.3% 16.4% 15.1% 4.7% 4.3% 5.1% 6.0% 6.8% 7.5%

MPLX MPLX $31.95 6.4% 12.3% 12.3% 10.9% 6.7% 6.5% 7.3% 8.2% 9.2% 9.8%

Tallgrass Energy TEP $46.47 6.8% 17.5% 14.3% 10.9% 7.2% 6.5% 7.8% 9.0% 9.8% 9.9%

Tesoro Logistics TLLP $46.83 7.5% 11.6% 10.7% 9.8% 7.8% 7.3% 8.3% 9.1% 9.9% 10.6%

Western Refining Logistics WNRL $20.95 8.1% 13.6% 12.0% 10.0% 8.5% 8.0% 9.0% 10.3% 11.2% 11.7%

MEAN 6.6% 14.6% 13.2% 11.3% 7.0% 6.5% 7.5% 8.5% 9.4% 9.9%

Dropdown MLP mean 5.5% 17.9% 17.5% 15.8% 5.8% 5.4% 6.3% 7.3% 8.5% 9.3%

Consensus DPS CAGR Dividend yield (consensus estimates)

Stock picks/company tear sheets


8Point3 Energy Partners (CAFD)

1/19/2017

Credit Suisse estimates, I/B/E/S Estimate for all consensus numbers, Thomson, SNL, company

reports 30

8Point3 Energy Partners (CAFD.OQ) YieldCo Key Financials Business Summary

Rating: UNDERPERFORM $/millions 2014 2015 2016E 2017E 2018E CAGR (15-18)

Target Price: $12.0 (8% downside) Revenues NM $ 11 $ 62 $ 77 $ 101 72%

Analysts: Andrew Hughes Consensus 11 59 95 143 91%

Market Cap: $462m Shrs: 36m

EV $797m Gross Margin NM 74.3% 86.3% 80.7% 78.0%

Total Debt $365m Cash: $30m Operating Margin (64.5)% 36.7% 36.9% 31.4%

Price Performance EBITDA NM $ 18 $ 75 $ 136 $ 151

EBITDA Margin NM 156% 123% 176% 150%

Consensus -3 63 99 139

DPS NM $ 0.28 $ 0.96 $ 1.07 $ 1.18

y/y Growth NM NM 243% 12% 10%

Consensus $ 1.10 $ 0.89 $ 0.67 $ 0.99

CFO #ERR: NULL $ 7 $ 72 $ 125 $ 146

Capex NM $ 205 $ 0 $ - $ -

CAFD.OQ S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (10)% 0% Thesis

YTD (19)% 7% - Compressing development margins at sponsor will strain dividend accretion through acquisition capabilities

Price Nov 16: $ 13.01 $2,177 - Most exposed to risk of more uncertain US renewable policy

- Business strategies and execution of sponsors facing increased challenges

Valuation 2016E 2017E 2018E Current Issues

Current EV/EBITDA 10.6x 5.8x 5.3x - Sector high cost of capital faces additional pressure from rising interest rates

Target EV/EBITDA 10.1x 5.6x 5.0x - Business strategies and execution of sponsor companies facing increased challenges

Market EV/EBITDA 12.7x 8.1x 5.7x Catalysts

Current P/Sales 7.3x 5.8x 4.5x - SunPower guidance update call (Dec 7, 2016), Stateline acquisition close

Current div idend yield 7.4% 8.2% 9.0% - Dearth of additional near-term catalysts as future dropdowns may not accrete substantial value

Target div idend yield 8.0% 8.9% 9.8% - Management targets and investment grade debt rating

Market dividend yield 6.9% 5.1% 7.6% Valuation Methodology

Historical Divided Yield (NTM)

Valuation Risks

Source: Credit Suisse Estimates, I/B/E/S Estimate for all consensus numbers, FactSet Aggregates.

- Owner, operator and

acquirer of long-term

contracted solar assets

- Portfolio weighted-

average contract duration

remaining of 21 years

- Subsidiary of First Solar

and SunPower

Our $12 Target Price is based on a 9.5% yield applied to our 2018 dividend per share forecast of $1.17. Our target

yield represents a discount to peers in the both the YieldCo and dropdown MLP sectors given our lower than average

growth outlook for 8Point3. Our Underperform rating is a reflection of the company's uncertain longer-term growth

prospects. Recent acquisitions and the pending Desert Stateline dropdown are likely to enable dividend growth in-line

Interest rates, asset performance and limited access to capital markets to fund accretive acquisitions represent key

downside risks to our Target Price and Rating. Better than expected pricing on assets offered for acquisition from First

Solar and SunPower and growth in the contracted pipeline of both sponsors are key upside risks to our view.

$10

$12

$14

$16

$18

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

8Point3 Energy Partners (CAFD.OQ)

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12-Nov-14 12-May-15 12-Nov-15 12-May-16 12-Nov-16

NextEra Energy Partners (NEP) – TOP PICK

1/19/2017


reports 31

NEE Partners (NEP.N) YieldCo Key Financials Business Summary

Rating: OUTPERFORM $/millions 2014 2015 2016E 2017E 2018E CAGR (15-18)

Target Price: $33.0 (31% upside) Revenues $ 356 $ 477 $ 710 $ 971 $ 1,151 25%

Analysts: Andrew Hughes Consensus 471 764 1,037 1,271 28%

Market Cap: $3,672m Shrs: 146m

EV $7,203m Gross Margin 78.4% 78.8% 74.2% 76.4% 76.9%

Total Debt $3,664m Cash: $133m Operating Margin 44.4% 44.1% 48.4% 50.0%

Price Performance EBITDA $ 273 $ 406 $ 640 $ 894 $ 1,030

EBITDA Margin 77% 85% 90% 92% 89%

Consensus 356 645 851 1,046

DPS $ 0.38 $ 1.02 $ 1.34 $ 1.52 $ 1.81

y/y Growth (64)% (39)% 32% 14% 19%

Consensus $ 0.46 $ 1.14 $ 1.52 $ 1.79

CFO $ 184 $ 240 $ 324 $ 447 $ 532

Capex $ 773 $ 2,007 $ 917 $ 1,739 $ 1,179

NEP.N S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (10)% 0% Thesis

YTD (16)% 7% - Largest and lowest risk growth visibility

Price Nov 16: $ 25.10 $2,177 - Least exposed to risk of more uncertain US renewable policy, posed to benefit from continued build-out in gas infrastructure

- Best positioned to outerperform peers in rising interest rate environment


Current EV/EBITDA 11.2x 8.1x 7.0x - Rising interest rates

Target EV/EBITDA 13.1x 9.4x 8.1x - Incentive Distribution Right (IDR) fees may weigh on cost of capital advantage over time


Current P/Sales 5.2x 3.8x 3.2x - February 2017 updates on NET growth opportunity and continued wind repowering opportunity

Current div idend yield 5.3% 6.1% 7.2% - 1H2017 dropdown and capital markets activity

Target div idend yield 4.1% 4.6% 5.5% - Golden Hills energy storage project

Market dividend yield 4.5% 6.0% 7.1% Valuation Methodology


Valuation Risks




contracted wind, solar,

and gas infrastructure

assets




- Best-in-class growth

visibility

- Subsidiary of NextEra

Energy

We reach our $33 target price for NEP by employing a dividend yield based methodology. In our view, NEE Partners'

growth prospects will be as attractive at the end of our 2020 forecast period as they are currently. Accordingly, we apply

the value that the market is willing to pay for the company's current growth prospects to our forecasted 2020 dividend

per share estimate, and discount the implied value back the present at our assessment of NEP's weighted average cost

The risks for NEP that may impede achievement of our $35 target price and Outperform rating are: (1) a significant

increase in interest rates (2) limited access to capital markets (3) energy commodity price volatility, (4) competition from

other Yield Cos for investment capital, and (5) a slower place of less accretive dropdowns.

$10

$15

$20

$25

$30

$35

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

NEE Partners (NEP.N) S&P 500 (indexed)

0.0%

2.0%

4.0%

6.0%

8.0%


Pattern Energy Group (PEGI)

1/19/2017


reports 32

0.0%

2.0%

4.0%

6.0%

8.0%


Pattern Energy Group (PEGI.OQ) YieldCo Key Financials Business Summary


Target Price: $22.0 (14% upside) Revenues $ 265 $ 330 $ 381 $ 570 $ 641 18%



EV $2,925m Gross Margin 31.4% 21.8% 19.7% 32.4% 34.8%

Total Debt $1,428m Cash: $77m Operating Margin 10.4% 6.1% 17.9% 22.8%

Price Performance EBITDA $ 198 $ 251 $ 319 $ 427 $ 501

EBITDA Margin 75% 76% 84% 75% 78%

Consensus 251 293 372 433

DPS $ 1.30 $ 1.43 $ 1.58 $ 1.76 $ 1.95

y/y Growth 358% (355)% 10% 11% 11%

Consensus $ (0.46) $ (0.40) $ 0.20 $ 0.31

CFO $ 110 $ 118 $ 140 $ 189 $ 255

Capex $ 120 $ 380 $ 32 $ 893 $ 195

PEGI.OQ S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (14)% 0% Thesis

YTD (8)% 7% - Locked-in near-term dividend growth not accurately reflected in consensus

Price Nov 16: $ 19.30 $2,177 - Longer-term growth prospects less exposed to adverse US renewable policy developments

- Stock trading near estimated net asset value of current portfolio despite room for accretive growth


Current EV/EBITDA 9.2x 6.8x 5.8x - Poorly defined but much hyped integration plan with private parent company an overhang on the stock

Target EV/EBITDA 9.9x 7.4x 6.3x - High cost of capital relative to leading peers faces pressure in rising interest rate environment


Current P/Sales 4.1x 2.8x 2.5x - Broadview acquisition to close in early 2017, Meikle dropdown likely to follow in 2H2017

Current div idend yield 8.2% 9.1% 10.1% - Update on integration plan and additional long-term capital for growth at Pattern Development

Target div idend yield 7.2% 8.0% 8.9% - Flexible near-term capital needs

Market dividend yield -2.1% 1.0% 1.6% Valuation Methodology


Valuation Risks




contract wind and solar

assets




- Subsidiary of privately

held Pattern

Development

Our $22 Target Price is based primarily on an analysis of dividend yield. We ascribe an 9% target yield to our 2018

dividend per share estimate of $1.95 to arrive at our TP. Our target yield represents a discount to comparable dropdown

MLPs and higher growth YieldCos. Valuation is underpinned by an analysis of EBITDA and net asset value (NAV). Our

Outerperform rating is predicated on PEGI's strong near-term growth outlook, durable longer-term growth prospects,

Risks include a slower pace of less acctretive dropdowns, overhang from integration, energy commodity price exposure,

strengthening US dollar, rising interest rates, and asset performance

$10

$15

$20

$25

$30

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

Pattern Energy Group (PEGI.OQ) S&P 500 (indexed)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%


US Solar Update

Research Analysts

Andrew Hughes (415) 249-7928

(212) 325-8277 [email protected]

Maheep Mandloi

(212) 325-2345

[email protected]

Solar coverage

1/19/2017


reports 34

Ticker Company Rating

Target

Price Price

Upside /

Downside

Market

Cap ($m) Industry Analysts

FSLR First Solar NEUTRAL $30.00 $32.82 -9% $3,410 Solar Andrew Hughes

SPWR SunPow er NEUTRAL $9.00 $7.16 26% $991 Solar Andrew Hughes

RUN Sunrun OUTPERFORM $14.00 $4.85 189% $504 Solar - DG Andrew Hughes

SCTY SolarCity RESTRICTED R $19.83 na $1,949 Solar - DG Andrew Hughes

VSLR Vivint Solar NEUTRAL $4.00 $2.80 43% $308 Solar - DG Andrew Hughes

Utility scale solar development

Demand drivers

− Increasingly competitive source of power thanks

to declining PPA prices

− 92GW of RPS-driven demand through 2040 outside purview of Federal Government

− 30% Investment Tax Credit (ITC) begins to stepdown in 2020 unless Trump gets to it first

− Mid-high single digit unlevered IRRs for contracted cash flows with no fuel risk

Current issues

− Clean Power Plan (CPP) an important driver of longer-term demand

− Low gas prices and increasing competition among factors pressuring PPA prices and

compressing development margins

− Oversupplied manufacturing industry further pressuring margins for integrated developers

− Rising interest rates

1/19/2017


reports

$0

$50

$100

$150

$200

$250

$300

Oct-06 Feb-08 Jul-09 Nov-10 Apr-12 Aug-13 Dec-14 May-16

Lev

eliz

ed P

PA

-$/

MW

h

Operating Planned

US solar PPAs have declined >70%

in last five years

0 1 2

3 4 4

6

3 5

8 10

0 0 0

1 1

2

3

3

4

5

6

0 1

1

1

1 1

1

2

2

2

3

-

2

4

6

8

10

12

14

16

18

20

2010 2011 2012 2013 2014 2015E2016E2017E2018E2019E2020E

US

so

lar

dem

and

in G

W

Utility demand Resi demand Commercial demand

35

First Solar

1/19/2017


reports 36

First Solar (FSLR) Solar Key Financials Business Summary

Rating: NEUTRAL $/millions 2014 2015 2016E 2017E 2018E CAGR (15-18)

Target Price: $30.0 (9% downside) Revenues $ 3,392 $ 3,579 $ 2,870 $ 2,503 $ 2,831 (8)%

Analysts: Andrew Hughes Consensus 3,392 3,579 3,008 2,979 3,123 (4)%


EV $2,777m Gross Margin 24.4% 25.7% 25.6% 13.4% 15.8%

Total Debt $787m Cash: $1,414m Operating Margin 12.5% 14.4% 12.2% 1.8% 3.7%

Price Performance EBITDA $ 669 $ 774 $ 581 $ 307 $ 421 (18)%

EBITDA Margin 20% 22% 20% 12% 15%

Consensus 670 774 574 421 550 (11)%

EPS $ 3.94 $ 5.33 $ 4.66 $ 0.39 $ 1.06

y/y Growth (10)% 35% (13)% (92)% 174%

Consensus $ 3.91 $ 5.37 $ 4.48 $ 1.91 $ 2.65

CFO $ 681 $ (361) $ (124) $ 441 $ 656

Capex $ 258 $ 166 $ 251 $ 575 $ 450

FSLR S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (17)% 0% Thesis

YTD (50)% 7% - 2017 earnings cliff driven by shrinking systems business, and a higher mix of lower ASP module sales

Price Nov 16: $ 32.82 $2,177 - Module margins under pressure due to oversupply, system margins under pressure due to limited barriers to entry and low PPAs

- Revised technology roadmap carries significant execution risk

Valuation 2016E 2017E 2018E - Strongest balance sheet among solar peers, net cash of $12.6/s

Current EV/EBITDA 4.8x 9.0x 6.6x - 8Point3's high cost of capital may limit ability to drop future low margin projects at mutually accretive prices

Target EV/EBITDA 4.3x 8.1x 5.9x Catalysts / Current Issues

Market EV/EBITDA 4.8x 6.6x 5.0x - Shrinking backlog of legacy, high margin projects. System shipments in 2017 <30% vs >60% in 2016

Current P/Sales 1.2x 1.4x 1.2x - Additional efficiency improvements & cost reduction

Current P/E 7.0x 85.2x 31.1x - 2017 restructuring and revised technology roadmap carries significant execution risk

Target P/E 6.4x 77.9x 28.4x - More uncertain US renewable energy policy outlook

Market P/E 7.3x 17.2x 12.4x Valuation Methodology

Historical Forward P/E (NTM)

Valuation Risks


- Vertically integrated

player, manufactures

CdTe solar panels

- Focused on utility scale

project development

- Jointly owns YieldCo

(8point3 energy partners)

with SunPower

Our $30 target price for FSLR is derived from a sum of the parts valuation, which is also the basis for a Neutral

rating. We value the company’s core module and system sales business at $12/sh based on !14x 3018 EPS (ex

distributions from 8point3). FSLR’s share in the YieldCo has a market value of $2.8/sh, and the company’s net

Risks include lower government incentives, ability to lower costs, policy changes, toxicity concerns on Cadmium in

FSLR's panels, interest rates and capital availability, FX rates, and industry oversupply

$30

$40

$50

$60

$70

$80

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

First Solar (FSLR) S&P 500 (indexed)

0x

5x

10x

15x

20x

25x


SunPower

1/19/2017


reports 37

SunPower (SPWR) Solar Key Financials Business Summary


Target Price: $9.0 (26% upside) Revenues $ 2,619 $ 2,613 $ 2,654 $ 2,375 $ 2,427 (2)%

Analysts: Andrew Hughes Consensus 2,619 2,613 2,797 2,802 2,965 4%


EV $2,708m Gross Margin 19.6% 23.9% 10.9% 13.0% 14.9%

Total Debt $2,104m Cash: $ 411 Operating Margin 7.4% 9.3% (4.3)% (2.1)% (1.5)%

Price Performance EBITDA $ 303 $ 380 $ 44 $ 114 $ 117 (33)%

EBITDA Margin 12% 15% 2% 5% 5%

Consensus 300 437 244 314 395 (3)%

EPS $ 1.30 $ 2.16 $ (0.25) $ 0.48 $ 0.69 (31)%

y/y Growth (18)% 66% (112)% (289)% 46%

Consensus $ 1.33 $ 2.17 $ 0.00 $ 0.22 $ 0.82 (28)%

CFO $ 8 $ (726) $ (830) $ 80 $ 94 (151)%

Capex $ 103 $ 230 $ 224 $ 100 $ 100

SPWR S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (20)% 0% Thesis

YTD (76)% 7% - Highest efficiency panel, but highest cost structure in the industry

Price Nov 16: $ 7.16 $2,177 - Value creation opportunity from solar rooftop leasing and cash sales faces slowdown of DG demand

- New utility scale projects face margin pressures due to execution challenges, increasing competition, and lower PPA pricing

Valuation 2016E 2017E 2018E - New p-type technology gives access to low cost expansion, but competitiveness vs Chinese panels not yet commercially proven

Current EV/EBITDA 61.3x 23.8x 23.2x - 8Point3's high cost of capital may limit ability to drop future low margin projects at mutually accretive prices

Target EV/EBITDA 67.2x 26.1x 25.5x Catalysts / Current Issues

Market EV/EBITDA 11.1x 8.6x 6.9x - Restructuring and 2017 update on December 7 will focus on cash flow generation (Total asking for a profitable solar business)

Current P/Sales 0.4x 0.4x 0.4x - SPWR has grown its US residential business rapidly through installer/developer network, but new CA rates pose challenges

Current P/E -28.5x 15.1x 10.3x - More uncertain US renewable energy policy outlook may have an outsized impact on solar and DG specifically (FMV issues)

Target P/E -35.8x 18.9x 13.0x



Valuation Risks


Our $9 Target Price & Neutral rating is based of a sum of the parts valuation. We value the core business (DevCo)

at ~$17/sh by using a ~14x 2016 EBITDA, and SunPower's ownership in the YieldCo at ~$3.0/sh based on its

current trading value. We do not include value from IDRs.

The key risks for our $9 price target and Neutral rating for Sunpower include (i) overall decline in solar panel

demand, (ii) regulatory and policy changes that adversely impact support for solar industry ,(iii) timely execution of

projects, (iv) technology risk, (iv) currency risk, and (v) intense competition for panel supply and project

- SunPower

manufactures high

efficiency PV panels

- The company sells (or

leases) panels to

distributed generation

(eg. residential) and utility-

scale projects

- Jointly owns YieldCo

(8point3 energy partners)

with First Solar

$10

$15

$20

$25

$30

$35

Nov

-15

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

SunPower (SPWR) S&P 500 (indexed)

0x

20x

40x


Distributed Solar Generation (DG)

Demand drivers

− DG solar is cheaper than grid electricity in 41 states

− Major beneficiary of lower equipment costs

− 30% ITC an important driver of returns

Current issues

− Most exposed to Federal policy uncertainty given Republican scrutiny of Fair Market Value assessments

− Complicated state policy picture as utilities fight net metering with fee and electricity rate change proposals

− Valuation is complicated, and investors ascribe little or no value to post contract period

− High customer FICO scores notwithstanding, investors

see high counterparty credit risk

− High customer acquisition and soft costs

− Move to cash sales as investors focus on cashflow, and availability of tax equity and low cost project

financing has dwindled

1/19/2017


reports

1.4 2.2 3.4 5.5

8.3 11.8

15.6 20.4

26.2

0.3% 0.5%0.7%

1.2%

1.7%

2.4%

3.2%

4.2%

5.4%

0%

1%

2%

3%

4%

5%

6%

0

5

10

15

20

25

30

2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Pen

etra

tion

as %

GW

Inst

alle

d

Cumulative Residential Solar (GW)

Residential Penetration as % of Available Rooftops

US resi solar TAM of

41m rooftops

$ -

$ 1.00

$ 2.00

$ 3.00

$ 4.00

$ 5.00

$ 6.00

$ 7.00

1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16

Inst

alle

d C

ost (

$/W

)

Residential Non-Residential Utility

Declining installation costs

38

Sunrun

1/19/2017


reports 39

Sunrun (RUN) Solar Key Financials Business Summary





EV $1,276m Gross Margin 12.5% 7.9% 12.6% 32.2% 31.6%

Total Debt $985m Cash: $219m Operating Margin (72.0)% (43.2)% (9.6)% (6.9)%

Price Performance EBITDA $ (130) $ (216) $ (198) $ (60) $ (50) (39)%

EBITDA Margin (66)% (71)% (42)% (10)% (7)%

Consensus -147 -123 -92 -45 (33)%

EPS $ (0.74) $ (0.51) $ 0.27 $ (0.26) $ (0.31)

y/y Growth 1,666% (30)% (153)% (194)% 21%

Consensus $ (1.54) $ 0.37 $ 0.07 $ 0.40 (164)%

CFO $ (8) $ (105) $ (114) $ (10) $ 31

Capex $ 412 $ 595 $ 738 $ 757 $ 855

RUN S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (23)% 0% Thesis

YTD (59)% 7% - Unique platform model (direct and partner) enables broader and more efficient market penetration and cost advantages.

Price Nov 16: $ 4.85 $2,177 - Differentiated pricing structure and low cost financing maximizes project-level returns.

- Growing at 40%+ in 2016, above market growth rate of 34%, capturing market share with fastest cost reductions

Valuation 2016E 2017E 2018E

Current EV/EBITDA -6.4x -21.3x -25.6x

Target EV/EBITDA -11.3x -37.3x -44.9x Catalysts / Current Issues

Market EV/EBITDA -10.3x -13.9x -28.7x - Positive free cash flow generation

Current P/Sales 1.1x 0.8x 0.7x - Continued changes to rate design and net energy metering policy

Current P/E 17.8x -18.9x -15.5x - Demand slowdown due to new rate structure in California

Target P/E 51.4x -54.4x -44.8x - More uncertain US renewable energy policy outlook may have an outsized impact on solar and DG specifically (FMV issues)



Valuation Risks


- 2nd biggest residential

developer

- Fastest growing,

capturing market share

- Operates a sales

distribution business as

well

Our Outperform rating and $14 target price is based on a Discounted Cash Flow framework that assumes a 50%

discount to renewal value, a deployment growth rate of 41% in 2016, 19% in 2017, 16% in 2018, and then 10%, 5% in

2019, 2020. We assume a 15% development discount rate and a 6% project-level discount rate.

- Risks include increased competition, regulatory policy changes, interest rate increases, and availability of financing

$4 $5 $6 $7 $8 $9

$10

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

Sunrun (RUN) S&P 500 (indexed)

(20)x

(10)x

0x

10x


Vivint Solar

1/19/2017


reports 40

Vivint Solar (VSLR) Solar Key Financials Business Summary





EV $887m Gross Margin (177.1)% (107.2)% (19.6)% (0.6)% 7.7%

Total Debt $683m Cash: $113m Operating Margin (360.1)% (128.9)% (62.5)% (46.7)%

Price Performance EBITDA $ (115) $ (163) $ (100) $ (65) $ (44) (35)%

EBITDA Margin (456)% (254)% (67)% (27)% (15)%

Consensus -193 -143 -33 -31 (46)%

EPS $ (0.35) $ 0.11 $ (0.03) $ 0.14 $ (0.44)

y/y Growth (562)% (133)% (130)% (525)% (408)%

Consensus $ (2.39) $ (2.13) $ (1.78) $ (1.71) (11)%

CFO $ (136) $ (189) $ (160) $ (71) $ (122)

Capex $ 387 $ 547 $ 423 $ 477 $ 466

VSLR S&P 500 Investment Thesis, Key Themes & Issues, Catalysts

QTD (11)% 0% Thesis

YTD (71)% 7% - 2016 growth was constrained by capital availability after a failed SunEdison takeover

Price Nov 16: $ 2.80 $2,177 - Direct sales model may yield limited growth and market share gains

- New strategy of driving cross sales across parent channels yet to deliver results

Valuation 2016E 2017E 2018E

Current EV/EBITDA -8.8x -13.6x -20.1x Catalysts / Current Issues

Target EV/EBITDA -10.2x -15.7x -23.2x - New rate structure in California and net metering discussions across states

Market EV/EBITDA -6.2x -27.2x -28.6x - Securing more tax equity financing, as current facility drives growth only till 2Q17

Current P/Sales 2.1x 1.3x 1.1x - Restarting bookings growth engine (peaked at 80 MWs in 4Q15)

Current P/E -82.6x 19.5x -6.3x - More uncertain US renewable energy policy outlook may have an outsized impact on solar and DG specifically (FMV issues)

Target P/E -118.0x 27.8x -9.0x

Market P/E -1.3x -1.6x -1.6x Valuation Methodology


Valuation Risks


- Third largest residential

solar developers in US

- Most of the projects are

sold via leases to

customers

- growth historically

driven by a door-to-door

sales channel

We utilize a discounted cash flow framework to arrive at our Neutral rating and $4 Target Price. Our discounted cash

flow value assumes a 15% corporate discount rate, 50% discount to renewal value, a flat leasing deployment growth

rate till 2018, and then 1% in 2019/2020, and a 50% discount to fundamental value.

- Risks include increased competition, regulatory policy changes, interest rates increases, diversifying beyond door-to-

door sales channel, and availability of financing.

$2.0

$2.5

$3.0

$3.5

$4.0

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

Vivint Solar (VSLR) S&P 500 (indexed)

(10)x

(5)x

0x

5x


YieldCo Appendix


Material tax considerations

1099 C-corps

− YieldCos taxed as a corporation for US federal income tax purposes

− Distributions from current or accumulated earnings and profits taxable as ordinary dividend income

Return Of versus Return On Capital

− Distributions may exceed current and accumulate earnings and profits and therefore constitute a

non-taxable return of capital to the extent of a unitholders’ basis

− No guarantees, and may only be a portion of distributions

Modified Accelerated Cost Recovery (MACRs)

− Accelerated depreciation program that generates Net Operating Losses (NOLs) that are used to offset corporate income taxes

− Portfolios of assets can generate 10-15+ year tax shields via MACRS that roll forward as new acquisitions are made and MACRs restarts at higher basis

Optimized tax structure of an “Up-C”

− Not exclusive to YieldCos

Renewable energy tax credits

− Production Tax Credit (PTC, wind)

− Investment Tax Credit (ITC, solar)

1/19/2017


reports 42

Incentive distribution rights

Similar to traditional incentive distribution right (IDR) fees in MLP sector

− Computation and payment scheduled determined by Management Services Agreement

Entitles sponsor to receive and increasing share of distributions as thresholds for distributions from

the YieldCo are achieved

Unit Distribution Intervals/Thresholds (or “splits”) are set relative to a minimum quarterly distribution

(MQD) that is established at IPO

A subsequent thresholds cash distribution breakdown is achieved once distributions under the prior

threshold reach a maximum level

Example:

1/19/2017


reports 43

Thresholds

Quarterly Annually LP Unitholders GP Unitholders

Minimum quarterly distribution $0.2097 $0.8388 100% 0%

First Target Distribution level from MQD up to: $0.3146 $1.2582 100% 0%

Second Target Distribution level from top of 1st threshold to: $0.3670 $1.4679 85% 15%

Third Target Distribution level from top of 2nd threhold to: $0.4194 $1.6776 75% 25%

Thereafter above the level at the top end of 3rd threshold $0.4194 $1.6776 50% 50%

Distribtuion per unit target amount Share of cashflows

Corporate renewable PPA market

1/19/2017


reports 44

Companies Mentioned (Price as of 16-Nov-2016)

8Point3 Energy Partners (CAFD.OQ, $13.01, UNDERPERFORM, TP $12.0) Atlantica Yield (ABY.OQ, $18.0) Columbia Pipeline Partners, LP (CPPL.N, $17.1) Dominion Mstream (DM.N, $24.7) EQT Midstream Partners, LP (EQM.N, $74.02) First Solar (FSLR.OQ, $32.82) MPLX LP (MPLX.N, $31.95) NRG Yield (NYLD.N, $15.2)

NextEra Energy Partners (NEP.N, $25.1, OUTPERFORM, TP $33.0) Pattern Energy (PEGI.OQ, $19.3, OUTPERFORM[V], TP $22.0) Phillips 66 Partners, LP (PSXP.N, $43.5) Shell Midstream (SHLX.N, $25.86) SolarCity (SCTY.OQ, $19.82) SunPower Corp. (SPWR.OQ, $7.16) Sunrun (RUN.OQ, $4.85) Tallgrass Energy Partners, L.P. (TEP.N, $46.47) Terraform Global (GLBL.OQ, $3.8) Terraform Power (TERP.OQ, $12.99) Tesoro Logistics, LP (TLLP.N, $46.83) Valero Energy Partners, LP (VLP.N, $39.97)

Vivint Solar, Inc. (VSLR.N, $2.8) Western Refining Logistics, LP (WNRL.N, $20.95)

Disclosure Appendix

Analyst Certification

I, Andrew Hughes, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for NRG Yield (NYLD.N)

NYLD.N Closing Price Target Price

Date (US$) (US$) Rating

09-Jan-15 28.84 O *

22-Jun-15 24.50 R

24-Jun-15 24.50 30.17 O

22-Jul-15 24.50 28.00

05-Nov-15 24.50 22.00

02-Mar-16 24.50 NR

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

REST RICT ED

N O T RA T ED

3-Year Price and Rating History for NextEra Energy Partners (NEP.N)

NEP.N Closing Price Target Price


09-Jan-15 37.92 46.00 O *

04-Aug-15 32.62 40.00

10-Sep-15 26.18 R

11-Sep-15 25.99 40.00 O

02-Mar-16 25.90 NR


O U T PERFO RM

REST RICT ED

N O T RA T ED

3-Year Price and Rating History for SolarCity (SCTY.OQ)

SCTY.OQ Closing Price Target Price


18-Mar-14 77.10 75.00 O

24-Jul-14 72.16 93.00

07-Aug-14 75.71 97.00

23-Sep-14 60.40 R

25-Sep-14 63.04 97.00 O

06-May-15 60.13 99.00

29-Jul-15 58.05 105.00

29-Oct-15 38.07 90.00

21-Dec-15 55.09 124.00

10-Feb-16 18.63 89.00

02-May-16 29.55 62.00

09-May-16 22.51 38.00

01-Jul-16 23.71 27.00 N

01-Aug-16 24.72 R

03-Nov-16 18.55 *


O U T PERFO RM

REST RICT ED

N EU T RA L

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms repr esenting the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For La tin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential wit hin an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time.

Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 44% (63% banking clients)

Neutral/Hold* 39% (60% banking clients)

Underperform/Sell* 15% (55% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other indivi dual factors.

Important Global Disclosures

Credit Suisse’s research reports are made available to clients through our proprietary research portal on CS PLUS. Credit Suisse research products may also be made available through third-party vendors or alternate electronic means as a convenience. Certain research products are only made available through CS PLUS. The services provided by Credit Suisse’s analysts to clients may depend on a specific client’s preferences regarding the frequency and manner of receiving communications, the client’s risk profile and investment, the size and scope of the overall client relationship with the Firm, as well as legal and regulatory constraints. To access all of Credit Suisse’s research that you are entitled to receive in the most timely manner, please contact your sales representative or go to https://plus.credit-suisse.com .

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html .

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research:

Target Price and Rating Valuation Methodology and Risks: (12 months) for 8Point3 Energy Partners (CAFD.OQ)

Method: Our $12 Target Price is based on a 9.5% yield applied to our 2018 dividend per share forecast of $1.17. Our target yield represents a discount to peers in the both the YieldCo and dropdown MLP sectors given our lower than average growth outlook for 8Point3. Our Underperform rating is a reflection of the company's uncertain longer-term growth prospects. Recent acquisitions and the pending Desert Stateline dropdown are likely to enable dividend growth in-line with peers through the end of 2017. Longer-term, compressing margins and returns in the utility-scale solar sector, 8Point3's high relative cost of capital, and a high degree of exposure to an evolving US policy picture are likely to hamper the dividend trajectory.

Risk: Risks to our $12 Target Price and Underperform rating include interest rates, asset performance and limited access to capital markets to fund accretive acquisitions represent key downside risks to our Target Price and Rating. Better than expected pricing on assets offered for acquisition from First Solar and SunPower and growth in the contracted pipeline of both sponsors are key upside risks to our view.

Target Price and Rating Valuation Methodology and Risks: (12 months) for NextEra Energy Partners (NEP.N)

Method: We reach our $33 target price for NEP by employing a dividend yield based methodology. In our view, NEE Partners' growth prospects will be as attractive at the end of our 2020 forecast period as they are currently. Accordingly, we apply the value that the market is willing to pay for the company's current growth prospects to our forecasted 2020 dividend per share estimate, and discount the implied value back the present at our assessment of NEP's weighted average cost of capital. Specifically, we apply a 5.6% target yield to our 2020 dividend estiamte of $2.45, and discount the resulting value back to 2016 at at 7.7% WACC. Our Outperform rating on the stock is based on the total return profile and the growth outlook for the business, which are both higher than its peer group's average.

Risk: The risks for NEP that may impede achievement of our $33 target price and Outperform rating are: (1) a significant increase in interest rates (2) limited access to capital markets (3) energy commodity price volatility, (4) competition from other Yield Cos for investment capital, and (5) a slower place of less accretive dropdowns.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Pattern Energy (PEGI.OQ)

Method: Our $22 Target Price is based primarily on an analysis of dividend yield. We ascribe an 9% target yield to our 2018 dividend per share estimate of $1.95 to arrive at our TP. Our target yield represents a discount to comparable dropdown MLPs and higher growth YieldCos. Valuation is underpinned by an analysis of EBITDA and net asset value (NAV). Our Outperform rating is predicated on PEGI's strong near-term growth outlook, durable longer-term growth prospects, and share price close to our assessment of NAV.

Risk: Risks to our Outperform rating and $22 Target Price include a slower pace of less acctretive dropdowns, overhang from integration, energy commodity price exposure, strengthening US dollar, rising interest rates, and asset performance

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (PEGI.OQ, NEP.N, SCTY.OQ, NYLD.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (NEP.N, SCTY.OQ, NYLD.N) within the past 12 months.

Credit Suisse has managed or co-managed a public offering of securities for the subject company (SCTY.OQ, NYLD.N) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (NEP.N, SCTY.OQ, NYLD.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (PEGI.OQ, CAFD.OQ, NEP.N, SCTY.OQ, NYLD.N) within the next 3 months.

As of the date of this report, Credit Suisse makes a market in the following subject companies (SCTY.OQ).

Credit Suisse has a material conflict of interest with the subject company (SCTY.OQ) . Credit Suisse is acting as financial advisor to SolarCity Corporation (SQTY.OQ) on their sale to Tesla Motors Inc (TSLA.OQ).

For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=271186&v=2x2c2pur54tsrf5zhe52deixt .

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (NEP.N, SCTY.OQ, NYLD.N) within the past 3 years.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

This research report is authored by:

Credit Suisse Securities (USA) LLC ................................................................................................................... Andrew Hughes ; Maheep Mandloi

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.

This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited, Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines: Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2016 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.

When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only

YieldCos: Short-Term Selection, - Credit Suisse

Documents

Transcript of YieldCos: Short-Term Selection, - Credit Suisse