Bridging the Gap: Securing Funding for a Renewable Energy Project

Case Study: Bridging the Gap: Securing Funding for a Renewable Energy Project
Client: Renewable energy developer and operator (“EnergyCo”)
Industry: Renewable Energy

Challenge: EnergyCo faced an obstacle in securing traditional debt financing from banks for their renewable energy project during the crucial construction phase. Banks are typically hesitant to lend for construction projects due to inherent risks associated with unforeseen delays and cost overruns.

Solution: We partnered with EnergyCo to develop a strategic financing plan tailored to their specific needs:

  • Cash flow analysis: Collaboratively, we meticulously analyzed the project’s projected cash flow upon completion, focusing on estimated energy production, power purchase agreements (PPAs), and operational expenses. This exercise provided a clear picture of the company’s future debt servicing capacity.
  • Bridge funding and refinancing strategy: We devised a solution involving bridge financing to cover the construction phase, followed by refinancing upon project completion with long term debt from traditional lenders. We engaged in discussions with various banks to assess their appetite for refinancing the project based on its projected cash flow and the established track record of the technology involved.
  • Private debt placement: Utilizing our network and expertise, we identified and approached suitable private debt investors with a specific interest in financing renewable energy projects. We presented a comprehensive financing plan outlining the project’s potential, risk mitigation strategies, and the clear exit strategy through bank refinancing.

Outcome: The financing plan proved successful, and the bridge loan was fully subscribed by private debt investors. This enabled EnergyCo to proceed with the project’s construction without delay. As per the plan, upon project completion, the bridge loan was successfully refinanced with a traditional bank loan, and the private debt was fully repaid with accrued interest.

Benefits: The outcome yielded positive results for all parties involved:

  • Client: Secured the necessary funding to construct the project and establish a long-term financing solution through bank refinancing.
  • Debt investors: Received attractive returns on their investment while contributing to a sustainable energy project.
  • Environment: Contributed to the development of clean energy infrastructure, aligning with the project’s core objective.

Key Takeaways: This case study demonstrates the importance of:

  • Understanding the specific challenges faced by non-traditional projects: Tailoring financing solutions to address unique risks associated with construction phases and innovative technologies.
  • Creating a comprehensive financing plan: This includes thorough cash flow analysis, exploring various financing options, and identifying suitable investors with aligned interests.
  • Building strong relationships with lenders and investors: Engaging in open communication and fostering trust through transparency and strategic planning.

By adopting this multi-faceted approach, we facilitated a successful financing solution for EnergyCo, enabling them to build their renewable energy project and contribute to a more sustainable future.