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Energy project finance

Power demand has increased dramatically within the last 3 decades in both the UK and abroad and this growth, allied to the privatisation of power generation, transmission and distribution, has provided a new market for clients seeking to fund their power generation schemes through project financing rather than through equity funding.

Historically energy related project finance has been geared towards large scale conventional coal and gas power generators, but in the past decade there has been a significant increase in project financing of smaller scale renewable technology projects which are conducted within separate companies (SPVs) which ring fence liability from other projects that may be owned by the parent company.  This is because banks and lenders have become better able to cater for the nuances of renewable energy projects and the specific factors that apply when they are being financed and they have developed sophisticated systems to assess and understand the risk factors of the modern energy industry. These projects, which are relatively smaller in size, continue to be attractive to lenders seeking to lend on initial project financing at the build-out stage as well as the re-financing of established generation sites.

This attractiveness is largely due to the predictable cash-flows that come from governmental price support arrangements such as FiTs and ROCs.  But even in the absence of such price support, as renewable technologies becomes cheaper to develop and manufacture, these projects are going to become viable again and the market will again see a resurgence of initial project financing from many types of lender and investor.

Also, with the advent of a more defined market in long term power purchase agreements and the expected cash-flow security that this will provide to generators, undoubtedly there will be greater scope for a variety of energy projects to be financed without the need to have complicated corporate structures in place and with less reliance on equity funding arrangements.

Stephens Scown advises on all aspects of debt finance, working for banks, other institutional lenders and borrowers on energy and project related finance matters.

We can support your business, whether a funder or borrower, with a full range of legal services from the preparation of offer materials through to conducting due diligence, negotiating contracts and drafting appropriate documentation and finalising the security documents required for each individual project.

 

Our energy project finance expertise includes:

  • Facility agreements
  • Subordination
  • Security documents
  • Project finance specific security documents, such as assignments and direct agreements
  • Energy specific project documents – property leases, licences, power purchase agreements, grid matters, storage
  • Energy project due diligence

 

Our energy project finance experience

We have recently advised on projects including acting for:

  • The borrower in relation to the £19 million financing of a wind farm in Scotland
  • The lender in relation to a £2 million project financing of a wind farm in Gloucester
  • The borrower in relation to the £3.2 million project financing of a solar farm
  • A bank on the financing of a solar development company
  • A developer in relation to the funding of a portfolio of energy storage projects
  • A client on the finance of £7.5 million in relation to an energy from waste plant
  • A bank on a £3.6 million funding of a solar farm in the South West.
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Andrew Knox

Partner

Simon Morris

Partner

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