Yieldco 8point3’s ‘limited’ growth leads to CapDyn deal

The publicy traded yieldco struggled to maintain value as the cost of solar projects fell and competition increased.

Swiss fund manager Capital Dynamics has agreed to purchase yieldco 8point3 Energy Partners from two US solar developers in a deal worth an enterprise value of $1.7 billion.

First Solar and SunPower are selling their publicly traded yieldco, formed in 2015 to fuel growth by acquiring solar projects they developed, for $12.53 per share. The deal gives 8point3 an equity value of $977 million.

John Breckenridge, head of CapDyn’s clean energy infrastructure group, said the manager will pay around $600 million in equity and use $1.1 billion in debt to add 8point3’s 710 MW of assets to its portfolio. Overall, CapDyn manages over 3GW of clean energy assets in operation or under development across the world.

CapDyn invested through its Clean Energy Infrastructure V JV, a $1.2 billion vehicle now fully committed, Breckenridge said.

Yieldcos became popular among solar developers earlier this decade as a way to offload operating assets to separate holding companies, using sales proceeds from investors to fund further asset development and make acquisitions.

First Solar and SunPower said in a statement that 8point3’s growth has been “very limited” after changes in the solar industry have forced them to sell projects at an earlier stage of development, meaning their yieldco is no longer needed.

“The cost of capital is a little bit too high,” Breckenridge said. “The yieldco, at its pinnacle, was buying assets at such high prices that it was squeezing private equity out of the market. That’s now flipped completely the other way.”

In 2014, CapDyn was the one selling assets to a yieldco – then SunEdison’s TerraForm Power – at a time when such vehicles were growing rapidly and in search of assets. CapDyn agreed to sell its US Solar Energy Fund and its 75MW of assets for $250 million.

Jigar Shah, president of Generate Capital and a founder of SunEdison, who left the company in 2008, said yieldcos are “no longer the most aggressive bidders on projects”.

“At these rates of return, being private is a much more efficient way of holding these assets,” he said.