4 High-Yielding Alternative Energy Investments

Alternative energy is a fast growing and exciting industry that promises to provide renewable, clean, and cheap electricity that will create jobs and fuel economic growth. 

US Wind Energy Production Chart
US Wind Energy Production data by YCharts

Over the last decade US solar and wind generation have experienced annual growth of 20% and 31% respectively. Globally, the growth prospects for renewables are even better.

IHS estimates that through 2020 537 GW of solar installations will account for $1 trillion in new investments. Meanwhile total renewable energy spending is estimated at $200 billion/year. Investors wanting to take part in the boom have traditionally had to resort to riskier investments such as solar panel makers, which can often be fraught with peril.

^SASE Chart
^SASE data by YCharts

YieldCos: a safer, income-generating alternative
Solar and wind assets cannot be structured as MLPs under current tax rules. However, companies such as NextEra Energy (NYSE: NEE  ) and Brookfield Asset Management are able to offer limited partnerships and yieldCos that act in much the same way. YieldCos such as NextEra Energy Partners (NYSE: NEP  ) are able to use tax rebates and accelerated depreciation to avoid taxes for up to 15 years and generate predictable cash flows via long-term power purchase agreements (PPAs). They then use this cash flow to pay distributions, manage debt, and make accretive acquisitions to grow their distributions. 

Sponsors of yieldCos own incentive distribution rights (IDRs), which means past a predetermined distribution, a greater portion of distributable cash flow flows to them. This creates an incentive to drop down, or sell, long-term contracted assets to the yieldCo. This provides cash and increasing IDR fees to the sponsor and creates a symbiotic relationship that benefits investors in both.

This slide show highlights four less risky, high-yielding companies/yieldCos and limited partnerships, that offer income-seeking investors a way to cash in the renewable energy boom. These companies are: NextEra Energy, NextEra Energy Partners, Pattern Energy Group Inc (NASDAQ: PEGI  ) and Brookfield Renewable Energy Partners (NYSE: BEP  ) .

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3039648, ~/Articles/ArticleHandler.aspx, 9/22/2014 8:33:24 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement