Industries
Energy and renewables
Energy projects move from development capital through construction debt to long-term amortising facilities. Lender appetite follows contracted revenue, grid access and the strength of the construction counterparty.
Energy and renewables
- Development and pre-construction capital
- Construction-to-term project debt
- Refinancing of operating portfolios
- Common structures
- Development capital, construction-to-term debt, PPA-backed senior debt, refinancing
- Typical facility size
- €2 million to €150 million+ depending on asset class and stage
- Indicative pricing
- SONIA/EURIBOR plus 3–7% depending on contract cover and stage
- Security
- Project company shares, fixed and floating charge, assignment of project contracts
- Time to funding
- 3–9 months from mandate to financial close
The capital structure of an energy asset
Energy and renewables projects move through distinct financing stages: development capital funds permitting, grid connection studies and land agreements before a project is bankable; construction debt is drawn against certified progress once contracts and consents are in place; and long-term term debt or refinancing follows commissioning, sized against contracted or regulated revenue.
Each stage carries a different risk profile and attracts different capital. Development-stage risk is largely binary — permits are granted or they are not — while operating assets with a power purchase agreement in place behave more like infrastructure, supporting longer tenors and lower margins.
Structures that fit energy assets
Construction-to-term facilities allow a single lender, or a club, to fund a project from notice to proceed through to a set number of years of operation, converting automatically on commissioning subject to agreed tests. Where revenue is contracted under a power purchase agreement or a contract for difference, senior debt is sized on the contracted cash flow, with any merchant exposure treated as additional headroom rather than base-case revenue.
Multilateral and development finance institutions, together with export credit agencies tied to turbine, panel or balance-of-plant suppliers, frequently participate alongside commercial lenders, particularly for projects in emerging or frontier markets or those using equipment from a supported exporting country.
What lenders scrutinise in energy financing
Diligence centres on the contract package: the engineering, procurement and construction contract and its liquidated damages provisions, the offtake or support mechanism, the operations and maintenance agreement, and grid connection terms. Lenders also assess resource data — irradiation, wind speed or hydrology — independently verified by a technical adviser, since revenue projections depend directly on it.
Covenants typically include minimum debt service coverage ratios, cash sweep mechanisms above a certain coverage level, and restrictions on additional indebtedness at the project company. Counterparty credit quality of the offtaker is scrutinised as closely as the sponsor's own balance sheet.
Common reasons energy financing applications stall
Financing is frequently sought too late, after commercial terms with an EPC contractor or offtaker have already been agreed in a form lenders will not accept without amendment, forcing costly renegotiation. Grid connection uncertainty, or a connection offer that has not been secured or paid for, is another frequent blocker.
Applications also stall where sponsors underestimate the diligence timetable for independent engineering and resource assessments and present an unrealistic financial close date to counterparties.
How GFG structures energy and renewables funding
GFG reviews the contract package and stage of a project before approaching lenders, flagging terms likely to require amendment ahead of a full submission. Development-stage and construction-stage requirements are structured separately from long-term refinancing, with appropriate providers identified for each.
Where a project suits multilateral, development bank or export credit agency participation, GFG identifies the relevant institutions and coordinates their involvement alongside commercial lenders. Success-based fees apply once funding completes.
At what stage should funding be approached?
Early. Structuring is cheapest to change before permitting and offtake terms are fixed.
Can a solar or wind project be financed before grid connection is confirmed?
Development capital can fund early-stage costs including connection applications, but senior construction debt generally requires a secured and, in most markets, paid-for grid connection offer. Financing the connection risk itself is possible only through specialist development capital priced for that uncertainty.
How does merchant power price exposure affect the size of a facility?
Lenders typically size senior debt on contracted or regulated revenue only, such as a power purchase agreement or contract for difference, treating any additional merchant revenue as coverage headroom rather than base-case cash flow. This generally reduces achievable leverage compared with a fully contracted project.
Are storage and grid-services assets financeable on a standalone basis?
Increasingly yes, where revenue is contracted through capacity payments, ancillary services agreements or tolling arrangements with a creditworthy counterparty. Purely merchant storage revenue supports materially lower leverage and is assessed on a case-by-case basis by specialist lenders.
What role do export credit agencies play in renewable energy financing?
An export credit agency in the country where major equipment such as turbines or panels is manufactured can guarantee part of the lender's exposure, typically extending tenor and improving pricing. This is common where equipment is sourced from Europe, the United States or East Asia for projects in other regions.
How long does financial close typically take for an energy project?
From a substantially complete information pack, three to nine months is typical, driven by independent technical, legal and insurance diligence rather than credit approval itself. Projects with an unfinalised contract package or unresolved permitting take considerably longer.