Presentation at "The Rise of The Yieldco" Workshop, July 2015. International comparison of Yieldcos (income oriented companies investing in clean energy) in US, UK, and Canada

1. Yieldco Market Performance

Tom Konrad Ph.D., CFA
US Yieldcos
Performance drivers
International Yieldcos

2. About Me
Editor, Freelance writer
Hedge fund focused on green economy.
Head of research.
Global Equity IncomePortfolioGlobal Equity IncomePortfolio
Co-Portfolio Manager.
Invests in high income Fossil Free Green Stocks, including some Yieldcos

3. 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

4. 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.

5. US Yieldcos

Standard

NYLD

PEGI

ABY

NEP

TERP

CAFD

REIT/MLP/LP

HASI

BEP

HIFR

EVA

6. US Yieldcos

Standard
NYLD
PEGI
ABY
NEP
TERP
CAFD

REIT
HASI
HIFR

MLP/LP
BEP
EVA

7. 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

10. Rising Yieldco Valuations Create
Virtuous Cycle
Share Price
Increase
Secondary Offerings
At Higher Prices
More Invested
Capital Per Share Higher CAFD
Per Share
Per Share
Dividend
Increases
More Money To
Invest in Projects

11. What Might Break The Cycle?
Share Price
Decrease
Secondary Offerings
At Lower Prices
Capital Per Share
Stagnates CAFD Per
Share
Stagnates
Less
Dividend
Growth
Less Money To
Invest in Projects

12. 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

13. More And Larger Yieldco Acquisitions

15. 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

16. 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)

17. 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)

18. 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

19. NRG Yield was worst-performing Yieldco around recapitalization period.

20. 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.

21. US Yieldcos Underperforming
Over Last Month

Only HASI (+3%) not down more than
Global Yieldco ETF YLCO (-9%)

Worst Performer: NYLD

22. 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.

24. 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.

25. Canadian Yieldcos

26. 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

27. 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)

29. 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

31. 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%)

32. 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.

33. 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.

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