Financing New-Build Solar Projects

Greenfield solar sits between development capital and operating infrastructure credit.

Before commercial operation, lenders carry construction, grid, permitting, completion and revenue commencement risk. Once the plant reaches COD and demonstrates stable generation, refinancing capacity usually broadens materially.

The financing strategy should account for that transition from development asset to operating power infrastructure.

Financely's broader solar project financing for developers capability covers projects across this lifecycle.

Capital We Arrange

Project Finance Starts With the Revenue Contract

For contracted solar projects, the PPA sits at the center of debt underwriting.

Lenders review the offtaker, tariff, tenor, currency, indexation, deemed-generation mechanics, curtailment allocation, dispatch regime, termination payments, change-in-law provisions and payment security.

A 20-year PPA with a strong utility, corporate or government-backed counterparty produces a different financing profile from a merchant project exposed to wholesale power prices.

Corporate PPAs add another layer of analysis around the buyer's credit quality and long-term electricity demand.

Government and utility PPAs can raise sovereign, convertibility, transfer and payment-delay considerations.

The financing structure follows the risk embedded in the revenue contract.

Merchant Solar Requires Different Underwriting

Solar projects with merchant exposure rely more heavily on power-price forecasts and market fundamentals.

Lenders may size against conservative capture-price assumptions, introduce shorter tenor, require greater equity or use hedging structures to protect a portion of projected revenue.

A project can also combine contracted and merchant revenue.

The contracted portion can anchor debt sizing while merchant exposure preserves upside for equity.

The financial model should distinguish base power price, captured price, cannibalization risk, curtailment and basis exposure where applicable.

The Solar Project Finance Model

Greenfield lenders underwrite cash available for debt service across the full debt tenor.

The model typically includes:

P50 and P90 Matter to Debt Sizing

The independent energy-yield assessment influences how much generation the lender recognizes.

P50 represents a central estimate of expected generation. P90 provides a more conservative production case with a higher probability of being exceeded.

Credit committees can use downside generation cases alongside lower tariffs, delayed COD, operating cost stress and other sensitivities.

A sponsor seeking aggressive leverage should therefore understand which generation case drives debt sizing.

EPC Bankability

The EPC contract allocates a large part of construction risk.

Lenders review contract price, scope, schedule, procurement responsibilities, completion tests, liquidated damages, performance guarantees, security package and contractor credit quality.

A lender-friendly structure usually provides clear responsibility for delivering a functioning plant by an agreed date and to an agreed performance level.

Relevant provisions can include:

• Fixed-price or tightly controlled pricing mechanics
• Date-certain completion obligations
• Delay liquidated damages
• Performance liquidated damages
• Minimum performance ratio
• Minimum plant capacity
• Module and inverter warranties
• Performance security
• Advance payment guarantees
• Defects liability
• Direct agreement and lender step-in rights

Equipment Procurement Can Influence the Financing Structure

Modules, inverters, trackers, transformers, switchgear and battery systems can carry long procurement lead times and significant deposit requirements.

Equipment origin also affects financing.

An export credit agency may support eligible equipment supplied from its home jurisdiction. Vendor credit can supplement project debt. Documentary letters of credit and advance payment guarantees can support cross-border procurement.

Procurement should therefore be considered alongside the debt structure before large deposits are committed.

Interconnection and Grid Risk

Grid access can determine the financing timetable.

Lenders need clarity around the point of interconnection, connection agreement, network upgrade obligations, interconnection cost, testing, energization schedule and responsibility for transmission works.

Delay between mechanical completion and grid energization creates carrying cost while revenue remains unavailable.

The model should capture that exposure through contingency, interest during construction and adequate sponsor liquidity.

Land and Site Control

The project company needs durable rights to occupy and operate the site throughout the financing tenor.

Those rights can come through ownership, long-term lease, concession, usufruct or another jurisdiction-specific structure.

Lenders review tenure, term, termination rights, access, easements, transmission corridors and the ability to take security or step into project rights following enforcement.

Site control should match the expected operating life of the solar plant and any extensions contemplated in the financing model.

Permits and Environmental Work

Financial close depends on a sufficiently advanced permit package.

Requirements vary by jurisdiction and can include planning permission, generation licences, environmental approvals, construction permits, grid approvals and land-use authorizations.

Projects involving DFI capital can also face extensive environmental and social diligence, including ESIA work and lender-specific environmental and social standards.

The development schedule should identify every permit required before first draw, construction, energization and COD.

Construction Debt

Solar construction facilities generally fund eligible project costs according to an agreed draw process.

Conditions precedent can include equity contributions, executed project documents, permits, insurance, technical adviser reports, legal opinions and evidence that cost-to-complete remains fully funded.

During construction, the lender may monitor progress through an independent engineer or technical adviser.

Draws are then tested against certified costs, construction progress, remaining contingency and the expected amount required to reach completion.

Conversion Into Term Debt

A construction facility can convert into long-term project debt after completion tests are satisfied.

Typical conversion conditions can reference mechanical completion, grid connection, COD, performance testing, permits, required reserve accounts and absence of material project-document defaults.

Another structure uses separate construction and permanent lenders.

The take-out plan should be defined early because construction lenders care about the route to long-term repayment.

Debt Service Reserve Accounts

A DSRA provides liquidity for scheduled debt service during periods of cash-flow stress.

The reserve can be funded with cash, built through project cash flow or supported through an eligible letter of credit where lenders accept that structure.

Required reserve size becomes part of project uses at financial close.

Other accounts can include major-maintenance reserves, inverter replacement reserves, tax accounts and distribution accounts depending on the financing.

Sponsor Equity

Equity absorbs development and first-loss risk.

Greenfield lenders therefore focus on the amount, timing and source of sponsor equity.

They also examine development expenditure already incurred, land contributions, shareholder loans and other amounts the sponsor proposes to count toward its contribution.

Recognition depends on documentation and lender policy.

For sponsors raising outside capital, Financely also provides equity fundraising for solar projects.

Equity Before Debt Distribution

A USD 150 million solar project with minimal committed equity presents a different mandate from a similarly sized project with a funded sponsor contribution and institutional co-investor.

Senior lenders want confidence that the project retains adequate capital beneath their loan.

When an equity shortfall exists, Financely can address the equity mandate alongside the debt process or sequence the raise so senior lenders see a credible capitalization plan.

Mezzanine and Subordinated Capital

Mezzanine capital can supplement senior project debt where the project's cash flows support a larger aggregate debt burden.

The junior provider accepts lower priority and charges accordingly.

Structures can include cash-pay interest, PIK accrual, exit fees, warrants or other negotiated economics.

Intercreditor terms then govern payment priority, enforcement rights, standstill periods and senior lender control.

Mezzanine works best where the gap is moderate and the project retains healthy downside coverage after the junior capital is introduced.

Preferred Equity

Preferred equity can fill part of the capital stack beneath debt.

The investor receives negotiated priority economics before common equity distributions.

Solar sponsors can use preferred capital to reduce common-equity dilution while maintaining more flexibility than another conventional debt obligation might provide.

The senior financing documents still need to accommodate the preferred investor's distribution and control rights.

DFI Capital for Emerging Markets

Development finance institutions can play a central role in jurisdictions where commercial lenders face sovereign, currency, regulatory or market constraints.

DFI participation can include senior debt, parallel loans, syndicated structures, guarantees and other forms of catalytic capital.

The process usually brings extensive legal, technical, environmental and social diligence.

Projects approaching DFI lenders should prepare for institutional documentation standards from the start.

Export Credit Agency Financing

ECA-supported financing can become relevant when meaningful project equipment or services originate in an eligible exporting country.

The structure can provide covered loans, buyer-credit arrangements, guarantees or insurance supporting bank lending.

Solar projects sourcing modules, inverters, transformers, storage systems or other large equipment packages should evaluate ECA eligibility during procurement planning.

Changing suppliers late in development can affect both equipment economics and the financing package.

Political Risk and Sovereign Support

Emerging-market solar projects can carry political and sovereign risks beyond ordinary construction and operating exposure.

These can include currency convertibility, transfer restrictions, expropriation, breach of contract and government payment obligations.

Political risk insurance, sovereign guarantees, partial risk guarantees and DFI participation can strengthen specific areas of the project credit.

The required support depends heavily on offtaker credit and the legal framework of the host jurisdiction.

Currency Risk

A project earning local-currency revenue while servicing hard-currency debt carries currency mismatch.

That mismatch can become the dominant credit risk during depreciation.

Possible structures include local-currency debt, indexed tariffs, currency hedging, partial hard-currency revenue or other arrangements accepted by lenders and the offtaker.

The financial model should stress the actual currency exposure over the debt tenor.

Tax Equity and Tax Credit Capital

Jurisdiction-specific incentives can create another layer of financing.

In the United States, transferable tax credits and tax-oriented investment structures can materially affect the capital stack for qualifying renewable projects.

Other jurisdictions use accelerated depreciation, investment allowances, renewable certificates, contracts for difference, feed-in tariffs or comparable support mechanisms.

These benefits should be modeled only where project counsel and tax advisers confirm eligibility and monetization mechanics.

Solar Plus Battery Storage

Adding BESS changes both the revenue model and technical underwriting.

The battery can support energy shifting, capacity revenue, ancillary services, curtailment management or other market opportunities depending on jurisdiction.

Lenders then review cell technology, degradation, augmentation schedule, cycling assumptions, warranty coverage, dispatch strategy and merchant revenue exposure.

A co-located project may use one financing package or separate facilities depending on ownership, contracts and revenue streams.

A 100 MW Greenfield Solar Example

Consider a 100 MW utility-scale solar project with total uses of USD 120 million.

The project has secured land, an executed PPA, grid connection rights, a selected EPC contractor and an independent energy-yield report.

The debt quantum would ultimately be driven by the project's actual cash flow, PPA economics, lender coverage requirements, construction case and country risk.

A stronger offtaker, lower EPC risk and conservative generation case can support a different debt profile. Merchant exposure, weaker counterparty credit or a more complex jurisdiction can push more of the capitalization toward equity and structured capital.

What Lenders Underwrite

Financial Close Requires More Than a Lender Term Sheet

A credible term sheet starts the final phase of execution.

Financial close can still require technical diligence, model audit, lender counsel, insurance review, environmental work, security documentation, intercreditor documentation, direct agreements and satisfaction of conditions precedent.

The sponsor should budget for these workstreams before lender distribution begins.

Execution is faster when project documents, technical reports and the financial model have already been organized for institutional diligence.

Project Documents We Expect to Review

Projects at Different Stages Need Different Capital

Bridge Capital to Ready-to-Build

Some sponsors control projects with meaningful development value while major construction debt remains premature.

The remaining milestones may include final permits, interconnection security, land payments, grid studies, detailed engineering or PPA-related conditions.

A development bridge can fund the project to a point where construction lenders and institutional equity can underwrite the final capitalization.

The take-out should be tied to identifiable development milestones and a credible RTB or NTP financing process.

Portfolio Financing

Developers with several solar assets can finance at portfolio level.

Diversification across sites, offtakers and operating dates can improve the credit profile.

The structure can include portfolio construction debt, cross-collateralized term facilities, holdco debt, warehouse facilities or asset recycling after COD.

Financely also works on broader utility-scale solar debt and equity placement mandates for sponsors building larger pipelines.

Non-Recourse Project Finance

Greenfield solar is well suited to project-finance structures once the risk allocation reaches institutional standards.

The borrower is usually a project SPV. Debt service comes from project cash flow. Lenders take security over project assets, accounts, material contracts and shares in the project company.

During construction, lenders can still require sponsor undertakings around completion, cost overruns, equity funding and other identified risks.

Limited-recourse economics therefore emerge from the full risk allocation rather than from the label placed on the loan request.

Bankability Before Distribution

Financely reviews the financing case before approaching lenders.

That review focuses on the areas likely to determine credit approval:

• Project stage and remaining development milestones
• Site control
• PPA or merchant revenue strategy
• Offtaker credit
• Grid and interconnection status
• EPC and equipment procurement
• Energy-yield assumptions
• Construction contingency
• Sponsor equity
• DSCR and LLCR
• Currency exposure
• Environmental and social diligence
• Available guarantees or credit enhancement
• Expected path to financial close

This work can form part of Financely's broader project finance advisory mandate.

How Financely Executes a Greenfield Solar Mandate

We Can Structure More Than Senior Debt

Some solar mandates reach us with an incomplete capital stack.

The project may have a strong PPA but insufficient equity. The sponsor may have equity and still require completion support. A DFI may be interested while a local-currency tranche remains missing. Equipment procurement may need ECA support. A senior lender may require additional credit enhancement.

Financely can structure several layers within the same mandate where the transaction requires them.

Our broader project finance debt, equity and credit enhancement capability covers these multi-source capital structures.

Transactions We Want to See

What Makes a Mandate Ready for Financing?

The strongest mandates come with a clear project company, development rights, identifiable site, credible grid pathway, realistic capex, sponsor capitalization and an executable route to revenue.

Projects further from RTB can still require advisory work, but the capital source changes with development stage.

A lender process launched too early can waste institutional relationships and produce term sheets carrying conditions the sponsor still needs months to satisfy.

Sequencing matters.

Paid Project Finance Advisory

Greenfield project finance requires transaction preparation, capital structuring, lender coverage and continuous execution through diligence.

Financely accepts these assignments through paid advisory mandates.

Once onboarded, the sponsor receives a dedicated consultant and access to the wider execution team assembled for the mandate. Complex projects can require project finance, credit, financial-modeling, technical, legal and market expertise across several workstreams.

External costs can include lender counsel, sponsor counsel, independent technical adviser, model audit, insurance adviser, environmental consultants and other specialists required by the financing process.

We expect sponsors to budget for those workstreams alongside the Financely mandate.

Submit a Financeable Project

For an initial review, provide:

• Country and project location
• MWdc and MWac capacity
• Current development stage
• Total project cost
• Equity committed to date
• Requested debt and equity
• PPA or offtake status
• Offtaker
• Tariff and tenor where available
• Land status
• Grid and interconnection status
• EPC status
• Energy-yield report
• Financial model
• Target NTP and COD