The Dummy’s Guide to Project Finance – an overview by NREL
This short overview on Project Finance by NREL gives a good introduction to this structure of financing energy projects.
In a great article published already in February, David Fledman of the National Renewable Energy Laboratory, provides a great overview on project finance.
So if you ever wondered how project finance works, this article provides the overview to get you started.
It describes how project finance is used for financing for large infrastructure projects. In a traditional corporate financing modal, equity investors and debt providers (banks and similar) are providing the financing directly to the sponsor/ owner of a project, while a project finance structure, generally uses a Special Purpose Vehicle (SPV) as tool.
Under this mode, the project sponsor (developer and its owners), tax equity investors (companies that can get tax deductions through investments in specific industries, such as renewable energy), debt providers (banks etc.) and other sources (this could be equity investment, grants and similar).
The article goes on in talking about the different advantages provided by a Project Finance Structure.
All in all a great overview and worth to read.
Another document by DOE, NREL and Navigant Consulting, published in 2011, provides a rather complete overview and guide on financing geothermal projects. It includes a brief primer on geothermal project development. The trends in geothermal project finance are the focus of this tool, relying heavily on interviews with leaders in the field of geothermal project finance.
The document, Guidebook to Geothermal Power Finance by J. Pater Salmon, J. Meurice, N. Wobus, F. Stern, and M. Duaime of Navigant Consulting, Boulder, Colorado , can be downloaded here (pdf).