Investment strategy for green energy projects viola-funding September 27, 2023

Investment strategy for green energy projects

Green energy projects financing
Green energy projects financing

According to experts’ forecasts, by 2040 the share of renewable energy sources will exceed 65%, which will make them the main source of electricity and ensure sustainable growth of the world economy. A global green transformation strategy resilient to environmental and regulatory risks requires more active green energy project financing and carbon-free renewable energy investment projects.

Renewable energy sources combine innovative engineering and technical solutions aimed at generating electricity and heat without using scarce fossil fuels.

The development of advanced engineering projects, the construction of new capital-intensive sites and the installation of special equipment for the production of green energy require huge investments in the early stages. A serious problem that hinders the development of renewable energy sources in the world is their insufficient investment provision.

Ambitious energy transition plans, requiring the introduction of new financial models.

Sources and models of financing green energy projects

Bank loans remain an important source of borrowed funds for the construction of large power plants, accounting for more than half of total investments in many renewable energy projects.

Commercial banks today are more careful in selecting projects for financing and have stringent requirements for securing loans.

The main sources of financing for green energy projects are;

Bank loans in the host country: These are usually local banks and branches of large multinational financial institutions that have deployed in the host country. Many of them set up special units that finance green projects or open subsidiary banks under a new brand specifically for this purpose.

Long-term loans from commercial banks are a common source of financing for renewable energy projects.

Due to the sufficiently high liquidity, specialized banks are willing to lend to large, high-quality renewable energy projects. The advantage of such financial institutions lies in excellent market knowledge and a well-developed approach to the selection and control of projects. Banks that focus primarily on green energy finance offer more attractive solutions and generally demonstrate greater flexibility in dealing with key players in the sector.

For various reasons, not all banks are ready to offer adequate rates for the development of this sector. In each case, it is important to ensure that the host country’s financial system maintains a delicate balance between risks to the banking system and growth opportunities for renewables.

Looking for a reliable capital provider?

Viola Funding Limited provides large bank loans from 50 million euros with maturities up to 20 years, adapted to the needs of the green energy sector.

Financing green energy projects: long-term loans

The long payback period, the uncertainty of the business environment and the changing legal framework for the implementation of green energy projects require a well-considered strategy and effective financial solutions.

Attracting external financing for large projects in the field of energy production from renewable sources (RES) is critical for the development of the sector.

We provide professional services in the field of international project financing (PF) and financial modeling, as well as provide our clients with full technical and legal support at any stage of the project. Today our team is ready to provide useful business contacts and rich international investment experience for your business.

Viola Funding Limited offers flexible long-term financing for green energy projects, including bank loans of 50 million euros or more.

If you are planning the construction (expansion, modernization) of an onshore or offshore wind farm, solar power plant of any type, geothermal power plant or biomass power plant, contact our team for advice.

We also offer the services of an experienced EPC contractor with a worldwide reputation for the implementation of large projects at a high engineering level on a turnkey basis.

Loans from international financial institutions

Chinese financial institutions, including the China Development Bank, are also showing increased interest in financing renewable energy sources in developing countries. These players largely determine modern opportunities for the development of green energy, increasing their share in this sector.

World Bank Group financial institutions such as the European Bank for Reconstruction and Development and the International Finance Corporation, along with the OPIC (Overseas Private Investment Corporation) structures, are currently offering large loans for the construction of wind farms and other green energy projects.

Applying for a loan to international financial institutions requires the development of a high-quality investment project, which is practically impossible for small energy companies without the involvement of outside specialists and expert groups.

Taking on high investment risks, Chinese banks provide professional support for projects and control over their implementation.

Funding through international grants: Funding for renewable energy sources through international grants is widespread, but serious obstacles to attracting such funding are the lack of professional experience of the applicants and limited resources.

Given the enormous importance of the green transition for the world’s economy, large international financial institutions often provide gratuitous financial assistance for the implementation of strategic projects in this area.

This can be both the construction of new power plants and projects of large-scale energy modernization and expansion of existing facilities. Projects are selected through an open competition in order to allocate resources for high quality projects.

Project finance (PF): The essence of project finance is to raise borrowed funds against the future cash flows of the project. The collateral in this case is the project assets allocated to an independent project company (SPV / SPE). This is off-balance sheet financing that does not affect the creditworthiness of the companies that initiate the project.

Unlike asset-backed securities, project finance is considered more risky for lenders.

However, the PF opens up ample opportunities for the development of long-term projects for companies that are unable to use other financing models.

At Viola funding Limited, we are ready to assist the development of your project at any stage.

Our personalized approach and extensive international investment experience will be the key to the success of your business.

Renewable energy financial support and loans

It can be carried out in various forms, including the allocation of government funding, concessional lending, tax incentives, and so on. Special funds and support programs for renewable energy make a great contribution to this industry, reallocating financial resources to support investments, compensating interest on loans and introducing mechanisms of government and municipal guarantees.

World experience shows that an effective form of financing green energy projects is the creation of so-called energy service companies, both national and regional.

In many European countries, along with the use of internal resources to support the development of renewable energy, municipalities attract loans from international financial organizations, banks or other credit institutions.

Energy Service Companies (ESCOs) are implementing energy saving measures using their own or credit funds instead of subsidies and subventions from the budget. Theoretically, they can finance energy generating projects, but in practice the activities of such companies are more focused on the implementation of projects in the field of energy saving and energy efficiency (including the modernization of large consumers).

Borrowed funds from international organizations and government support play an important role in financing green energy projects. It can be carried out in various forms, including the allocation of government funding, concessional lending, tax incentives, and so on.

Special funds and support programs for renewable energy make a great contribution to this industry, reallocating financial resources to support investments, compensating interest on loans and introducing mechanisms of government and municipal guarantees.

Cooperatives and joint ventures: Renewable energy projects are highly dispersed, and their efficient financing requires economies of scale. Small consumers / producers do not have enough resources, which leads to the cooperation.

The European practice of building solar power plants and wind farms shows that the promising options for the merger are the establishment of joint ventures for the generation of energy from renewable sources. Such projects can be implemented, for example, through co-financing.

An energy cooperative can be created in the form of an autonomous association of private investors, companies and organizations. Their activities are aimed at the decentralized production and consumption of green energy, independent of energy companies.

Today, energy companies focus their efforts mainly on attracting bank loans for the construction of new facilities.

The development of renewable energy projects through the issuance of green bonds, leasing and other forms of investment financing also remains important for the growing sector.

Do you need help financing green energy projects?

Viola Funding Limited has been providing investment services for over 20 years, ensuring the success of large energy projects around the world.

Contact us to find out more.

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