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Solar stocks have had a very ugly year, but there's one group that even the most risk-averse investors out there should take a closer look at: yieldcos. Listen in to find out why the power producers have great long-term prospects and should prove to be the safest, most reliable stocks in the renewable-energy and solar industries.
A full transcript follows the video.
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This video was recorded on Dec. 20, 2018.
Nick Sciple: These are similar to traditional utilities, but they do own and operate some solar systems. We're not seeing any yieldcos that are pure plays right now. Most of these businesses have significant investments in other types of renewable energy, whether that's wind, hydroelectric, things like that.
What are you seeing with the yieldcos? Are there any companies that stand out as particularly attractive to you?
Jason Hall: If you go back a couple of years ago, there were a couple of pure plays. SunPower and First Solar had 8point3, which was their combined yieldco. I think the challenge is that if you're a power producer, you really want to be flexible. You want to be able to invest where you're going to get the best cash on cash return you can capture. And solar isn't always that. These businesses were too limited if they were strictly solar-focused.
There's been a lot of consolidation. You talk about companies that do a lot of things, NextEra Energy Partners is really interesting. It's a big electric owner, owns a little bit of wind. It also owns a lot of natural gas distribution. It's tied to NextEra Energy, the big utility that owns Florida Power & Light. It's really interesting. I think it's worth following closely because it's going to be adding a lot more renewables over time, especially a lot of solar.
Brookfield Renewable (NYSE: BEP), the majority of its cash flows come from hydroelectric. The whole Brookfield Asset Management (NYSE: BAM) family of companies, Brookfield Renewable owns around two-thirds of TerraForm Power, which is a third solar, two-thirds wind. It's a really interesting growth story that Brookfield Renewable is using as a way to drive its growth in solar and wind. I really like Brookfield Renewable a lot. It's down like 25% from its high close to the beginning of the year. Its yield is almost 8%, which I think is an absolute steal.