The document discusses key considerations for yieldco acquisitions of renewable energy projects at different stages of development. It outlines what buyers look for, including financial metrics, land and permitting status, interconnection, offtake agreements, and optionality. The document also discusses potential transaction structures, including outright sales, joint ventures, and pre-structured deals with debt and tax equity financing already in place. Cash flow certainty, control provisions, and options to obtain 100% ownership over time are also addressed.

1. Dissecting the
YieldCo Structure:
Project Finance Perspective
John Marciano, Partner
Chadbourne & Parke LLP
jmarciano@chadbourne.com
@thejohnmarciano

2. Overview
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• At what stage are projects purchased?
• What do buyers want to see?
• How should a transaction be structured?

3. At What Stage Are
Projects Purchased
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• Development
• Missing one or more of: IA, PPA/Hedge, full site control,
permitting, environmental studies, initial site plan
• “Shovel Ready”
• Holds all of the above and/or BOP contract and TSA
• In Construction
• Post-COD (pre or post flip)

4. YieldCo as Buyer
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• There are many potential buyers.
• E.g., Strategics, P.E., New Entrants, Canadian Funds,
Hedge Funds
• A yieldco is just one option.
• Yieldcos prefer de-risked assets. That generally means
operational, but may mean operational with a few years of
operating history.
• That does not mean a yieldco will not look at a development or
construction stage project.

5. Motivations of Buyers
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• A yieldco’s motivations are CAFD and growth.
• Consistency
• First 10-12 years most important
• Other buyers may be looking to flip, green a reputation,
meet RPS requirements, RPS requirements, stave off
competition or buy in as a give to regulators that want
to shut down a brown resource.

6. So, what does a
buyer want to see?

7. Buyer’s want to see…
• Financial metrics vary depending on the buyer
• Resource
• Land
• Interconnection
• Permitting
• Offtake
• Optionality
• *Residual value
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8. What is the Target?
• 100% Ownership with no encumbrances
• Common “ask” for Development or In Construction
• Less likely if Post-COD
• Tax equity, JVs, carried interest of original developer
• Issues
• Control
• Additional capital funding
• Alienation
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9. Issues if Acquiring Less than 100%
• Member Voting Rights
• Deadlock provisions
• Limits on Alienation of Interests
• Project Administration
• Project Company Capital Accounts
• Capital Calls
• Deferred maintenance?
• Commitments to expand or dismantle?
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10. Financial return and other metrics
• Pre-tax/post-tax/levered/unlevered
• Cash?
• Accounting treatment
• Model inputs
• Capital cost of development, construction, interconnection
• Expenses—operation, maintenance and replacement
• Financing—debt and tax equity
• Price for power, RECs, capacity attributes (if any)
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11. Land and Title
• Site Control?
• Is sufficient land under control?
• Transmission easements, setbacks and good neighbors
• Surface vs mineral rights
• Title curatives
• Location, Location, Location
• Resource, market, local support
• Cost-to-develop—land costs, studies
• Cost-to-construct—winter?
• Wetlands, species issues
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12. Interconnection
• Availability and timing
• Cost of upgrades and cost of interconnection facilities
• Maintenance cost
• Risk of curtailment
• Transmission
• Who is buyer/who is transmitting utility
• Cost of transmission
• Losses
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13. Permitting
• Timing to complete permitting
• Cost-to-permit—mitigation requirements, risk of challenge
• Are there local community issues?
• Species issues—bats, Golden Eagles, condors, plovers,
desert tortoises?
• Airports
• Are there any unusual conditions in the permits?
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14. Offtake
• Does the project have a PPA or hedge?
• what is the term/remaining term?
• Does the term need to be 20 years?
• who and in which market is the offtaker located?
• is there an RPS?
• If no PPA, what is the market like to get one?
• Is there an offtake agreement for RECs?
•If not:
• who are the possible buyers?
• who or what is my competition?
• is there a liquid market if I lose my PPA?
• what are the market rules for intermittent resources?
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15. Offtake (cont’d)
• Operating Documents
• Availability and Performance Guaranties
• LDs
• Termination rights
• Offtaker Creditworthiness
• Curtailment
• Does your counterparty = your transmission provider = control
area?
• Regulatory 20/20 hindsight (particularly with FITs)
• Prices Relative to Market
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16. Optionality/Residual Value
• Optionality
• Are RECs included? Capacity Value?
• What’s the term? Are there renewal terms?
• Does the Offtaker have a ROFO/ROFR?
• Residual Value
• Term of leases and permits
• Useful life of equipment
• Liquidity of market beyond PPA
• O&M costs
• Availability of spare parts
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17. Optionality/Residual Value (cont’d)
• Site Permit
• Reduce number of turbines?
• Land Rights
• Potential for expansion?
• New Resources -- i.e., Thermal/Wind or Wind/Solar
• Interconnection capacity
• Net-Zero
• “Behind the Meter” Rules
• Market?
• Battery?
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18. Post COD Projects
• Site Control
• Has developer/owner maintained site control?
• Have leases lapsed?
• Priority in Chain of Title
• Still have to look at title?
• Post-Operation Reports
• Reports
• Mitigation Obligations
• Have they been met?
• Community support still strong?
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19. How should the
transaction be
structured?

20. Acquisition Structure Options
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• Acquisition Structure Type
• Outright sale
• Joint Venture
• Outright sale of pre-structured deal
• Acquisition Timing

21. Outright Sale
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• Share sale or asset sale
• What are you selling?
• Will the seller do EPC and then asset management?
• What, if anything will the seller guaranty?
• Do you have to retire an existing capital stack (debt/tax-
equity) to buy the project outright?
• How are payments structured?
• How creditworthy is the seller?

22. Joint Venture
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• Most yieldcos want to own assets outright.
• However, it may be important for the “seller” to remain
in the deal.
• Customer relations.
• Ability to monetize or use RECs or tax benefits.
• Seller may want to retain certain benefits?
• Avoid loss of tax “goodies.”
• What is the path to outright ownership?
• Purchase option, staged sell-down, flip partnership,
sale-leaseback
• Who controls?

23. Pre-structured Transaction
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• Alternatively, the seller can set up the capital stack prior
to selling.
• Partnership-level debt
• Back-leverage
• Tax-equity
• This really relieves the yieldco of a post-acquisition
obligation, filling the capital stack. While a yieldco has
access to cheapish equity, it will want to use other
peoples’ money to the extent possible.

24. Pre-structured Transaction (cont’d)
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• Selling a pre-structured deal layers on additional
issues, but can further de-risk the project.
• Each piece of the stack will have transfer restrictions.
• Tax-equity will often want a direct agreement with the
buyer, to address issues related to preserving tax
benefits.
• The parties will have to work out whether and to what
extent the seller continues to guarantee certain things to
the lender or tax-equity investor.
• Assess whether the transfer could cause the loss of a tax
benefit?

25. Post Acquisition Cash Flows
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• Cash Flow Certainty.
• Cash is king to a yieldco.
• That means that any contingency on cash flows can be an issue.
• Historically, most tax-equity investors swept cash if something bad
occurred or if the flip date was delayed.
• Many wind deals have a pre-defined period when cash is diverted to
the investor.
• Sweeps should be limited.
• Can a sponsor guarantee replace a sweep?
• Control by lenders and investors should be limited.

26. Obtaining 100% Ownership
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• Purchase Options
• A yieldco will want to push out other parties at some
point. This likely means it will want a preset purchase
option. If set at a fixed price, that is better.
• Some investors will want a withdrawal right and will want
to sweep cash flow if the investor is not paid out
immediately upon exercise. Lenders and yieldcos are
aligned in their dislike for these provision. Care should be
taken to minimize such a right’s effect on cash flows.