Alternative Renewable Energy Financing
Alternative Sources of Financing for Renewable Energy Projects in Iberia
In the current context of high electricity prices in the Iberian wholesale market (206 €/MWh in average during H1-2022), many renewable energy developers are opting for selling 100% of the output power of their solar and wind plants on a “merchant basis” (i.e. without any PPA). Financing these “full merchant” power plants with non-recourse project financing schemes provided by commercial banks has significant limitations, namely:
1. Low leverage ratios (i.e. 60-65%)
2. Stringent conditions for merchant revenues (e.g. >1.5x DSCR, cash-sweeps, higher DSRA, etc.)
3. Limited tenors compared to asset lifetime
We at JLL are observing that other financing players are offering alternative sources of financing in the last 12-18 months, especially applicable to these full merchant plants. These alternative financing products provide more leverage, more flexibility and earlier disbursements to renewable developers (but also have some disadvantages).
In this Insight report, we provide an overview of these alternative financing products and their main features.
JLL can help renewable developers and investors find and structure these financing facilities. JLL’s Energy & Infrastructure Advisory team is a corporate finance advisory specialised in renewable energy.