The renewable energy/clean tech investment universe continues to expand, fueled by technological advances, declining costs, volatile fossil fuel costs and government efforts to reduce greenhouse gas emissions.
Offering individual investors the opportunity to invest in the fast growing renewable/clean energy sector, large utilities have spun-off and launched yield companies, or "yieldcos," such as NRG Yield (NYSE:NYLD). The latest market entrant is Spanish sustainable energy and environmental engineering multinational Abengoa's Abengoa Yield Plc (NASDAQ:ABY).
Launched on June 13, Abengoa Yield is being received well by the market. Initially offering 24.85 million shares at a price of $29 per share, shares in Abengoa Yield have plateaued at around $36.50, having reached as high as $38.32 during their first day of trading.
Investor demand for the issue looks strong. Abengoa Yield's underwriters exercised their "greenshoe" allotment option on June 16, taking down an additional 3,727,500 ordinary shares. That brings total share issuance to 28,577,500 and the amount of capital raised by Abengoa to $828,747,500 before fees.
ABY aims to deliver growth and income
Stocked with a geographically and technologically diverse mix of renewable energy, power generation, and electric transmission assets, Abengoa Yield could turn out to be a solid investment for those seeking income, capital appreciation, or a mix of both.
As Abengoa explains, Abengoa Yield is a total return fund that will afford investors opportunity for both income and capital growth at low risk:
We are a dividend growth-oriented company which will own, manage and acquire renewable energy, conventional power and electric transmission lines and other contracted revenue-generating assets, initially focused on North America (the United States and Mexico) and South America (Peru, Chile, Uruguay and Brazil), as well as Europe (Spain).
We are a premier company for investors seeking a total return based on stable and growing dividend income from a diversified portfolio of low-risk, high-quality assets, and for investors with a key objective of accretive dividend growth.
The ABY portfolio
At launch, Abengoa Yield's portfolio consists of 710 MW of renewable energy generation, 300 MW of conventional power generation and 1,018 miles of electric transmission lines, as well as a convertible preferred equity investment in ACBH, a Brazilian subsidiary involved mainly in the business of managing transmission lines.
As Abengoa Yield management elaborates, "All of our assets have contracted revenues (regulated revenues in the case of the Spanish assets) with low-risk off-takers and collectively have an average remaining contract life of approximately 26 years as of December 31, 2013."
Following is a sample of key financial metrics divulged in Abengoa Yield's quarterly SEC F-1 filing for the three months ended March 31:
- Revenue: $84,130,000.00
- Net Loss: ($28,561,000.00)
- Total Assets: $5,995,266,000.00
- Total Liabilities: $4,509,281,000.00
Abengoa Yield management expects to pay out 90% of cash available for distribution. Initial quarterly dividends of $0.2592 per share ($1.04 per share annualized) have been announced. Given a share price of around $36, that amounts to a 2.9% annual dividend yield.
The threat and costs associated with climate change adaptation are rising while and oil and gas exploration has become increasingly costly and risky. That continues to fuel growth in clean energy investments. Abengoa Yield offers investors the opportunity to earn income and build wealth by backing a multinational sustainable energy company with a proven track record of success.
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