Yield_co
A yield co or yieldco is a company that is formed to own operating assets that produce a predictable cash flow, primarily through long term contracts. Separating volatile activities (such as development, R&D, construction) from stable activities of operating assets can lower the cost of capital.[1] Yield cos are expected to pay a major portion of their earnings in dividends, which may be a valuable source of funding for parent companies which own a sizeable stake.[2]
Yield cos are commonly used in the energy industry, particularly in renewable energy to protect investors against regulatory changes.[3] They serve the same purpose as master limited partnerships (MLPs) and real estate investment trusts (REITs), which most utilities can't form due to regulatory constraints.[4] Yield cos give investors a chance to participate in renewable energy without many of the risks associated with it.[4]
The number of yield cos grew rapidly in 2013 and 2014 through initial public offerings. They include:
- NextEra Energy Partners
- NRG Yield[5]
- Brookfield Renewable Energy Partners[5]
- TransAlta Renewables [5]
- Pattern Energy Group[5]
- Atlantica Yield PLC[2]
- Hannon Armstrong Sustainable Infrastructure[6]
- TerraForm Power[7]
- TerraForm Global
- 8point3 Energy Partners.[8]
- Saeta Yield
There is also an ETF (Exchange Traded Fund)[clarification needed] that was set up by Global X Funds[clarification needed] under the ticker Symbol YLCO, which seeks investment results that correspond generally to the price and yield performance, of the Indxx Global YieldCo Index.