Energy and renewables funding

Energy funding is relevant to developers, independent power producers and industrial energy users pursuing solar, wind, storage, grid infrastructure or decarbonisation projects. It suits sponsors at any stage from early development through to operating assets seeking refinance, provided the underlying revenue case — whether contracted, subsidised or merchant — can be articulated with reasonable confidence to a funder.

It is also relevant to corporates seeking to fund on-site generation or storage to manage energy costs, where the facility is repaid from utility bill savings rather than external revenue. In both cases, the common thread is that business funding is being matched to a discrete, revenue-generating asset rather than the general balance sheet of the sponsor.

Development capital is typically drawn against a fixed budget for permitting, grid studies and engineering, and is higher-risk, higher-cost capital reflecting the chance a project does not proceed. Construction debt then converts to a term facility on commercial operation, amortising against the contracted or forecast revenue profile over ten to twenty years depending on asset life and offtake tenor.

Security is taken over the project company, its land rights or lease, the offtake or subsidy contract, and any grid connection agreement. Lenders size the facility using a debt service cover ratio, typically 1.20–1.40x on contracted cash flow, with lower leverage applied to any merchant or uncontracted portion of output.

Underwriting centres on the strength of the revenue contract — a power purchase agreement, contract for difference, feed-in tariff or capacity payment — and the counterparty credit behind it. Technical due diligence covers the equipment specification, warranties, grid connection status and the track record of the engineering, procurement and construction contractor.

Sponsors are expected to demonstrate relevant development or operating experience, either directly or through a competent operations and maintenance provider. Projects without full planning consent or a firm grid connection offer are funded, if at all, only by specialist development capital rather than mainstream project lenders.

Senior construction and term debt for contracted renewable assets is typically priced in the range of 6–9 per cent over relevant base rates, with development capital priced materially higher to reflect binary project risk. Storage and merchant-exposed assets attract a premium given greater revenue variability.

Cost is driven principally by the certainty of revenue, the counterparty rating on any offtake agreement, and the jurisdiction's regulatory stability. Multilateral or export credit agency participation can reduce blended pricing on larger schemes but adds time to documentation.

GFG reviews the project's technical, contractual and financial position, then structures the funding requirement — development, construction or term — before approaching lenders and, where relevant, multilateral or ECA participants with an appetite for the specific technology and geography.

Straightforward operating-asset refinancing can complete in six to ten weeks; construction financing for a new project typically takes three to six months given the volume of technical and legal diligence involved.