The outcome of the Baku COP29 may well have been a new global commitment to provide Climate Finance at a scale needed deliver the net zero targets. The reality is that globally it is public grants that are really needed rather than more expensive loans. Private sector take up of the challenge has been relatively muted so far.

By contrast, in a UK context, we have become reconciled to a paucity of grant opportunities and have seen an expansion of the availability of public and private commercially based credit through differing finance channels according to the precise financing requirement. Lenders do appear to be responding to the new opportunities.

How best for developers to identify and cultivate appropriate sources of finance?

The more developed and prepared projects will likely qualify for long term lower cost debt. This needs an organised asset base, some well-developed contractual positions that can deliver a stable route to market, and a convincing management team that has as much financial as technical understanding.

If that level of progression can't be fully demonstrated, we're in the realm of development finance. This will need more inputs from investors, likely including greater equity investment. This may enable preparatory work on pre-FID tasks or make it possible for key assets to be acquired. The interest coupon will be higher, and support may come with strings attached.

If that is not achievable, there will be a need to trawl through the various governmental and related agency grant bodies, or look at specialist providers of early stage capital, to see what levels of support are available, and on what terms including duration and clawback. They may be willing to provide late-stage development finance to assist with mitigating project risks to support the FID process.

What are the key points to keep in mind when approaching any funder ?

  • Keep it all simple and familiar. You may have great ideas on how to maximise returns and be innovative. One current idea is to combine technologies, onshore wind and solar as an example. Do you raise one loan facility for that, or several. Is there a positive cross subsidy effect, or negative cross contamination? Without a clearly defined implementation model that has been rigorously examined and tested, the cost and timing of delivery of a project of this nature can be problematic. Grid sharing has been on a similar journey, and now as a matter of some necessity appears to be more generally accepted.
  • Communicate well and clearly. Get the basics right, demonstrate good housekeeping, and explain fully anything that is out of the ordinary with your project. If particular solutions have been developed to deal with perceived issues, then be upfront with a full briefing for lenders. Don't leave it to a later stage to have the discussion. DD costs can expand rapidly if a dataroom is incomplete or if project details are half cooked and have to be re-worked.
  • Anticipate Iikely issues. Plan ahead and early. Landowners and their local lawyers may not be able to react quickly in a dynamic or fluid situation. Check your lease to see if it t needs a refresh and negotiate changes in advance, not at the time of lease drawdown.
  • Do your lender homework. Try to understand their standpoint and context. Potential lenders, whether banks or providers of private credit, will have identified their key requirements, their lending criteria and target rates of return, Each is slightly different, but they will be clearly expressed in a brief discussion with you. To some extent their views will be shaped by previous experiences. Public lenders will be looking for specific policy remits to be accepted and reported on. All lenders in the energy sector will be constrained by their ESG policies which will add to the reporting requirements imposed on developers.

Above all, don't be afraid to consult those who have the experience of closing deals and of getting clients through to financial close, by which I mean the lawyers and other advisers. Identify your exit/refinance strategies in advance so that they are borne in mind during the drafting of the initial funding deal. This will help you arrive a few years later with financing free of most asset level security that will enable new projects to be brought through for development, so starting the cycle investment again.

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