Power & Infrastructure · Renewables & IPPs
Yieldco CAFD Explained
The CAFD bridge from Adjusted EBITDA through BEP and Clearway filings, the 80-95% payout screen, and why sponsor pipelines sit off the yieldco balance sheet.
Selborne Research · Renewables & IPPs coverage: 7 guides, 6 company profiles, a primer and Excel model
Educational analysis. This guide is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
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CAFD Is What the Dividend Actually Pays From
Yieldcos are partnership structures. Investors care about cash available for distribution (CAFD). EBITDA is an operating proxy; CAFD is what remains after sustaining capex and partnership-level charges, before growth investment. The dividend payout ratio is distributions divided by CAFD.
C-corps in the same sector use different labels. Vistra reports Adjusted FCFbG ($3,592M, FY2025). NRG reports FCFbG ($2,210M). AES reports Parent FCF ($1,219M). None of these are CAFD. The PPA versus merchant guide explains why contract profile shapes the cash flow those metrics capture.
The BEP CAFD Bridge (FY2025)
Brookfield Renewable files the cleanest bridge in the comp set, starting from Normalized FFO, its own adjusted funds-from-operations line:
| Line | $M |
|---|---|
| Normalized FFO | 1,484 |
| Less: sustaining capex | (98) |
| Less: wind/solar amortisation | (122) |
| CAFD | 1,264 |
| Payout ratio | 90% |
Proportionate Adjusted EBITDA was $2,698M (FY2025). CAFD is roughly 47% of that EBITDA, reflecting sustaining capital, amortisation and partnership charges between the operating line and distributable cash.
At 90% payout, BEP distributed most of CAFD and retained ~$126M for balance-sheet flexibility. That sits inside the 80-95% sustainable band for contracted yieldcos when growth is sponsor-funded.
Clearway: Smaller CAFD, Lower Derived Payout
Clearway Energy (FY2025):
| Metric | Value |
|---|---|
| Adjusted EBITDA | $1,217M (R&S $1,039M, Flexible Gen $210M, corporate $(32)M) |
| CAFD | $430M |
| Distributions paid | $358M |
| Derived payout | ~83% ($358M ÷ $430M) |
Clearway does not file a single payout-ratio line. The ~83% figure is derived from the cash flow statement and supplemental Table 3. It leaves more headroom than BEP’s 90% while still inside the 80-95% screen.
The 80-95% Payout Screen
| Payout level | Interpretation |
|---|---|
| Below 80% | Dividend growth headroom; market may want a higher yield |
| 80-95% | Sustainable on contracted CAFD when sponsor funds growth |
| Above 95% | Needs recurring equity issuance or drop-downs to fund growth |
Both BEP (90%) and CWEN (~83%) land in the sustainable band. A yieldco above 95% with a large committed growth backlog (~1,871 MW on CWEN’s balance sheet) would strain the model unless the sponsor injects equity at the holdco, the holding company that sits above the yieldco.
Sponsor Pipelines Stay Off Balance Sheet
Operating CAFD funds the dividend. Growth MW often does not.
| Company | On balance sheet (committed) | Sponsor / group pipeline (not on yieldco BS) |
|---|---|---|
| CWEN | ~1,871 MW gross committed (613 MW Deriva; 967 MW repowerings; 291 MW BESS) | 29 GW pro-forma gross (Clearway Group; 11.2 GW late-stage) |
| BEP | Operating 47.2 GW | >200 GW total; ~84 GW advanced-stage |
When you value a yieldco on CAFD yield, treat the sponsor pipeline as optionality sitting outside that cash flow. Drop-downs convert pipeline MW into CAFD over time, but the development risk sits upstream until they do.
Worked Example: BEP Payout Arithmetic
Starting from the filed bridge:
| Step | Calculation | Result |
|---|---|---|
| CAFD | Filed FY2025 | $1,264M |
| Payout at 90% | $1,264M × 0.90 | ~$1,138M distributed |
| Retained CAFD | $1,264M × 0.10 | ~$126M |
| CAFD per $1 of EBITDA | $1,264M ÷ $2,698M | ~0.47× |
If BEP raised payout to 95% (top of the screening band), distributions would reach ~$1,201M, retaining only ~$63M. With proportionate net debt at ~5.8× EBITDA, that leaves thin room for unplanned sustaining capex without tapping capital markets.
What Matters Most
BEP’s filed bridge ($1,484M − $98M − $122M = $1,264M) is the teaching template. Clearway’s $430M CAFD at ~83% derived payout shows a more conservative posture. Compare payout only within the 80-95% screen and only after you have classified contract profile, because merchant re-pricing does not flow through CAFD the same way at C-corps.
Renewables & IPPs Sector Primer
A multi-period DCF splits contracted PPA years from the merchant tail, pricing each off realised power price and term, then checks the value against a flat EV/EBITDA multiple and the CAFD payout.
- 15 sections, PPA-term cash flows and merchant tail to a discounted cash-flow value
- 45 pages
- a contracted yieldco and a merchant combined-cycle generator
- 2 worked archetypes
- contracted share, CAFD and payout, leverage, EV/EBITDA by archetype
- 6-company screen
The Excel model is the primer's two archetype builds live across 10 sheets: a multi-period DCF with a contracted-or-merchant toggle, step-down discount rates for the PPA term and the merchant tail, a spark-spread build for the merchant case and a CAFD-and-payout bridge for the yieldco. Change the realised PPA price, the contracted discount rate or the merchant spread and the value per share moves; the premium and payout sheets update alongside it. It also splits the contracted premium into the part the pipeline explains and the part contract quality explains, splits the PV between contracted years and the merchant tail, and reads EV per kW on both archetypes.
See what's in the Renewables & IPPs Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Power & Infrastructure industries
Frequently Asked Questions
- What is CAFD in a yieldco?
- Cash Available for Distribution (CAFD) is the partnership-level cash metric yieldcos use for dividends: cash from operations after sustaining capital expenditure and partnership-level charges, before growth investment. Brookfield Renewable reported FY2025 CAFD of $1,264M from Normalized FFO of $1,484M less $98M sustaining capex and $122M wind/solar amortisation. Clearway reported $430M CAFD in FY2025. C-corps like Vistra and NRG disclose Adjusted FCFbG or FCFbG instead.
- What is a sustainable CAFD payout ratio?
- The payout screen this site uses: 80-95% on contracted CAFD when growth capex is funded at the sponsor or holdco level. Below 80% builds dividend-growth headroom; above 95% needs a recurring equity or drop-down story. BEP paid out 90% of FY2025 CAFD. Clearway's derived payout was ~83% ($358M distributions ÷ $430M CAFD). Both sit inside the band.
- Why do yieldcos keep sponsor pipelines off balance sheet?
- Growth MW at the sponsor level does not sit on the yieldco balance sheet until dropped down. Clearway has ~1,871 MW committed on its balance sheet but a 29 GW pro-forma sponsor pipeline (Clearway Group, not on CWEN). Brookfield carries >200 GW total pipeline with ~84 GW advanced-stage at the partnership level, funded outside the CAFD line. The yieldco pays distributions from operating CAFD; the sponsor funds development risk.
- How does CAFD differ from FCFbG at merchant C-corps?
- Vistra reports Ongoing Operations Adjusted FCFbG of $3,592M (FY2025). NRG reports FCFbG of $2,210M. AES reports Parent Free Cash Flow of $1,219M. These metrics include corporate capital allocation choices and merchant re-pricing that CAFD bridges strip out for partnership distributions. Do not compare CAFD payout at BEP directly to FCFbG yield at VST without normalising the metric.
Read next
PPA vs Merchant: How Generators Get Paid
Contract profile first; proxy hierarchy when no single % is filed; BEP ~89% LTA GWh split is the exception.
The Contracted Premium in Power Multiples
Bands 11–15× vs 6–9×; +3–5 turns for contracted cash flow, and why integrated books sit between the two.
CAFD vs Free Cash Flow in Yieldcos
CAFD is a yieldco's own cash metric, stopping before growth capex. What it leaves out that free cash flow keeps, and how to convert one to the other.
See it applied
These company profiles apply the concepts from this guide to real public companies.