Project Funding

Renewable-energy projects are usually funded from a combination of sources, usually including some “skin in the game” from the customer itself. There are a great many such sources, especially given the world’s focus on reducing global emissions. The Needs Analysis and Feasibility Study are funded by the customer and reimbursed from the project funding.

The majority of funding is usually in the form of grants and very-long-term loans provided by DFIs (Development Finance Institutions) at below-market rates (also called “credits”). In the U. S., these include the International Development Finance Corporation (which manages the $60B Build-Act Fund), the Export-Import Bank, and the Trade and Development Agency. Internationally, there are the World Bank, many regional development banks, bilateral banks serving two countries each,, and national banks.

Other sources of funding include bonds issued by governments plus loans from investment groups and private banks.

Borrowers

The borrower can be the customer, whether public, private, or a public-private partnership. An alternative is to form an SPV as borrower for the project.

Credit

Credit structures can be corporate, sovereign, bank other guarantee, asset backed, or, most commonly for SPVs, non-recourse or limited-recourse project financing.

Many factors relative to each country and its energy market influence lenders’ willingness to lend. These include sovereign risk or ceiling; macroeconomic factors such as currency, inflation, and banks; microeconomic factors in local context; market trends; legal and regulatory factors; and security enforcement such as share pledges, lender revenue and payment accounts, real property and equity investments.

The project’s financial metrics are also key to obtaining attractive financing. These include income, asset efficiency, liquidity, leverage, and debt coverage. Any deficiencies can be compensated for by security, cash reserves, covenants, other enhancements, credit ratings, or special national standing.

Lending risk is typically mitigated through credit insurance of various types, sovereign guarantees, and bank guarantees.

Obtaining Funding

Securing funding for large projects is a complex specialty in itself. It requires intimate familiarity and experience with the important lenders, including how to work efficiently and effectively with them to get projects funded.

The GIRS team includes well-connected, highly experienced experts in international and domestic structured project-financing. They have succeeded in having over $100B in projects funded over the past 35 years. Functioning as part of the GIRS integrated team, they can be much more effective at lower cost than can separate, outsourced firms.

The Funding Process

The Needs Analysis and Feasibility Study prepares the way for funding the entire project. It results in a comprehensive report of great value to customers, regardless of subsequent actions. It details their exact needs and how best to fulfill them. For this reason, it is funded by the customer and reimbursed from overall project financing. The study

Prepares high-level commercial and financial models for potential lenders
Recommends best financial, contracting, and ownership structures for project
Identifies potential lenders, borrowers, and credit structures for the project
Evaluates these possibilities on credit factors, financial metrics, and risk mitigation
Recommends refinements to improve and enhance borrower’s creditworthiness
Helps customer choose most promising lenders and financial structure

Once the Needs Analysis and Feasibility Study are completed, GIRS works closely with the customer, local partners, and financing resources to

Negotiate reasonable documentation with selected lenders
Compiles a comprehensive project-application package for selected lenders with detailed financial model, project information details, and information on all responsible parties

After lenders issue loan commitments, GIRS helps prepare and negotiate all lender finance-documents.