It is no secret that obtaining funding for renewable energy projects is difficult. This is especially true for the many new players into the field.
Lenders by nature are risk adverse and we have no shortage of risks. Contractors with limited experience are a risk. Projects with ROI’s that depend on of REC values to steadily climb are a risk. Projects whose PPAs involve off takers whose credit status is not investment grade are a risk. The list goes on.
That said, how does a developer with a renewable energy project minimize risk and secure the financing needed to bring a project on line? In short; the best approach is to be open to options and to anticipate that the financing structure for a project can evolve if a the lender and developer work together to build a deal that will work for both.
For example: a project’s ROI numbers may work, the PPA may be with a highly rated utility, but the lender has an issue with the experience of the EPC contractor. To move this project forward the developer is going to have add experience to his team.
Another example is with a project that has development costs a lender believes are too high. Something has to give; can the lease rate for the site be lowered? Is the cost for product too high? Is there an alternative available?
The above problems and fixes may seem simple enough, the point is that when seeking financing for your renewable energy project a developer should identify and work with a lender early the project development stage to identify problem areas as they arise. It is not good enough to develop a project and then at the end simply apply for financing with the HOPE the application gets approved.
Identifying and addressing “lender defined risks” should be part of every project’s development, and developers should look to include lenders in developing projects to build a “finance –able” deal.
http://theenergycollective.com/don-madden/61879/collaborative-financing-renewable-energy
Lenders by nature are risk adverse and we have no shortage of risks. Contractors with limited experience are a risk. Projects with ROI’s that depend on of REC values to steadily climb are a risk. Projects whose PPAs involve off takers whose credit status is not investment grade are a risk. The list goes on.
That said, how does a developer with a renewable energy project minimize risk and secure the financing needed to bring a project on line? In short; the best approach is to be open to options and to anticipate that the financing structure for a project can evolve if a the lender and developer work together to build a deal that will work for both.
For example: a project’s ROI numbers may work, the PPA may be with a highly rated utility, but the lender has an issue with the experience of the EPC contractor. To move this project forward the developer is going to have add experience to his team.
Another example is with a project that has development costs a lender believes are too high. Something has to give; can the lease rate for the site be lowered? Is the cost for product too high? Is there an alternative available?
The above problems and fixes may seem simple enough, the point is that when seeking financing for your renewable energy project a developer should identify and work with a lender early the project development stage to identify problem areas as they arise. It is not good enough to develop a project and then at the end simply apply for financing with the HOPE the application gets approved.
Identifying and addressing “lender defined risks” should be part of every project’s development, and developers should look to include lenders in developing projects to build a “finance –able” deal.
http://theenergycollective.com/don-madden/61879/collaborative-financing-renewable-energy
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