Important. The following parameters are indicative and intended for preliminary financing discussions. Final leverage, pricing, tenor, amortization, security, reserve requirements and availability are determined through project underwriting, due diligence and credit approval.
Indicative Term Sheet for Solar Project Finance
Illustrative financing parameters for utility-scale solar, commercial and industrial solar, distributed generation portfolios and solar-plus-storage projects.
Financing may be structured across the project lifecycle through construction facilities, construction-to-term debt, senior secured project loans, bridge facilities, subordinated capital or refinancing. Debt capacity is primarily determined by contracted revenues, projected cash flow available for debt service, construction risk, sponsor support, jurisdiction and the underlying technical profile of the asset.
| Eligible Projects |
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|---|---|
| Financing Structures |
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| Facility Size | Indicatively USD or EUR 10 million to 300 million per project or portfolio. Larger transactions may be financed through club, syndicated or multi-tranche capital structures. |
| Borrower | Typically a bankruptcy-remote project company or special purpose vehicle holding the project assets, contractual rights, permits, land interests, project accounts and associated revenues. |
| Project Stage | Preference for projects at late-stage development, ready-to-build, notice-to-proceed, construction or operating stage. Earlier-stage transactions may require additional sponsor equity, development capital or other forms of credit support. |
| Senior Debt Leverage | Indicatively 60% to 80% of eligible project costs. Maximum leverage is determined through debt-service capacity, contracted revenue quality, production sensitivities, construction risk, technology, jurisdiction and sponsor strength. |
| Sponsor Equity | Indicatively 20% to 40% of total project costs. Equity may be contributed before senior debt, progressively alongside senior funding or pursuant to an agreed milestone-based funding schedule. |
| Debt Sizing | Senior debt is generally sized to the lower of the applicable loan-to-cost limit and the amount supportable by forecast cash flow available for debt service. Lender base cases and downside production scenarios apply. |
| Minimum DSCR |
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| Construction Tenor | Typically 12 to 36 months according to project capacity, EPC schedule, procurement programme, interconnection works, commissioning requirements and contractual long-stop dates. |
| Term Debt Tenor | Indicatively 10 to 20 years following commercial operation. Final maturity is determined by asset life, PPA tenor, revenue visibility, refinancing assumptions and the required debt tail. |
| Amortization | Principal may be sculpted against forecast cash flow available for debt service to maintain required coverage ratios. Annuity, straight-line, mini-perm, balloon and cash-sweep structures may also be considered. |
| Senior Debt Pricing |
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| Subordinated Capital | Mezzanine debt, junior capital and preferred equity may be introduced where additional leverage is required beyond senior debt capacity. Pricing and return requirements are determined according to ranking, security, repayment priority and project risk. |
| Arrangement Fees |
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| Revenue Profile |
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| Power Purchase Agreement | Underwriting considers PPA tenor, contracted tariff, indexation, minimum purchase obligations, curtailment provisions, payment security, change-in-law protection, termination payments and assignment rights. |
| Offtaker | Offtaker financial strength, payment history, sovereign or utility exposure, contractual obligations and termination risk form a central part of credit assessment and debt sizing. |
| EPC Structure | Preference for a fixed-price and date-certain EPC contract incorporating defined completion tests, performance guarantees, delay liquidated damages, performance liquidated damages, warranties and adequate contractor security. |
| Equipment | Modules, inverters, trackers, transformers, battery systems and other major components are subject to lender technical review. Equipment bankability, warranties, degradation assumptions, manufacturer strength and supply-chain execution are considered. |
| Operations and Maintenance | A suitable O&M programme or contract should establish performance standards, availability requirements, maintenance procedures, warranty administration, monitoring, reporting and replacement obligations. |
| Energy Yield | Independent technical analysis generally considers P50 and P90 generation, irradiation, module degradation, availability, curtailment, soiling, clipping, electrical losses, grid constraints and other relevant production sensitivities. |
| Interconnection | Interconnection rights should be sufficiently advanced before financial close. Lenders review grid capacity, connection agreements, upgrade costs, deposits, energization milestones, curtailment exposure and transmission dependencies. |
| Land and Site Control | The project company should hold enforceable ownership, leasehold, concession, easement or equivalent site rights extending through the financing tenor and an appropriate period thereafter. |
| Permits and Approvals | Material construction, environmental, land-use, generation, grid, operating and governmental approvals should be obtained or sufficiently advanced before initial debt funding. |
| Security Package |
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| Project Accounts | Project cash flows are generally routed through controlled accounts and applied according to an agreed waterfall covering operating costs, taxes, senior debt service, reserve funding, subordinated obligations and permitted distributions. |
| Debt Service Reserve | A Debt Service Reserve Account may be sized at approximately 6 to 12 months of scheduled senior debt service. Funding may be provided through cash, eligible bank support or another lender-approved mechanism. |
| Additional Reserves | Depending on the asset, reserves may be established for major maintenance, inverter replacement, battery augmentation, taxes, insurance, operating expenditure or other lifecycle requirements. |
| Completion Support | Sponsor support during construction may include committed equity, cost-overrun undertakings, contingency funding, delay support and other completion obligations until the project satisfies agreed completion tests. |
| Insurance | Coverage may include construction all-risk, delay in start-up, operational property damage, machinery breakdown, business interruption, natural catastrophe and third-party liability insurance. |
| Hedging | Interest-rate and currency hedging may be required where project revenues, capital expenditure, operating costs and debt obligations create material mismatch or floating-rate exposure. |
| Cash Sweep | Excess project cash flow may be applied to accelerated senior debt repayment under agreed conditions, particularly in mini-perm structures, highly leveraged transactions or projects carrying meaningful merchant exposure. |
| Distribution Conditions | Sponsor distributions are generally permitted once applicable DSCR, reserve, completion and default tests are satisfied and the project remains compliant with its financing documents. |
| Financial Covenants |
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| Conditions Precedent |
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| Technical Due Diligence | Independent engineering review may address project design, solar resource, equipment selection, generation forecasts, construction programme, interconnection, EPC terms, operating assumptions, degradation, capex, contingency and expected useful life. |
| Environmental and Social Review | Projects are assessed against applicable environmental, social, land, labour, health and safety, community and biodiversity requirements relevant to the project jurisdiction and financing parties. |
| Use of Proceeds | Eligible uses may include EPC expenditure, equipment procurement, construction, interconnection, grid works, approved development costs, financing costs, reserves, contingencies and refinancing of eligible existing project debt. |
| Construction-to-Term Conversion | Construction debt may convert into term financing following commercial operation and satisfaction of defined completion, performance, documentation and reserve requirements. |
| Refinancing | Operational assets may be refinanced to extend debt tenor, reduce financing costs, restructure amortization, release sponsor capital or consolidate multiple operating projects into a portfolio facility. |
| Solar Plus Storage | Battery energy storage may be incorporated into the project financing where degradation, augmentation, warranties, dispatch assumptions, revenue contracts and technical performance satisfy lender requirements. |
| Governing Law | Financing documents may be governed by English law, New York law or another lender-acceptable jurisdiction. Local security documentation generally follows the law applicable to the project assets. |
| Indicative Financing Process |
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| Advisory Basis | Financing structures and indicative parameters are presented on a best-efforts basis. Final financing terms remain subject to lender, investor, insurer, credit committee, technical, legal and compliance approvals as applicable. |
Indicative Terms. Actual leverage, pricing, coverage ratios, tenor, amortization, reserve requirements and security depend on project stage, contracted revenue profile, offtaker strength, technology, jurisdiction, sponsor capability and prevailing financing conditions.
