Information about Clean, Renewable Energy.

Want to Get Your Project Financed?

Big wad of cash.

Then check out the excellent two part series on Foundations of Project Energy Finance over at Cleantech Finance Insider. Bill Lemon has done an excellent job explaining the topics that need to be considered when bringing a project forward for consideration. Remember, it’s all about risk vs. reward. Your job as a developer is to minimize the risks and maximize the rewards, if you can crack that code, you’ll find money for your project.

Foundations of Project Energy Finance Part 1
Foundations of Project Energy Finance Part 2

4 Comments so far

  1. Susan Kishner May 13th, 2008 7:34 am

    Nice writing style. I will come back to read more posts from you.

    Susan Kishner

  2. Matt G May 13th, 2008 2:15 pm

    This brings up a question I have about geothermal. How do they get funding? It seems like the process is: 1. do above-ground research to find general good geothermal areas, 2. dig shallow holes to see how warm the ground is, 3. dig a several km deep hole, 4. then possibly try to fracture rock, 5. finally, if all of that is successful, build a plant on top along with power infrastructure. And of course 6. hope the well doesn’t cool down right away. It seems like steps 3, 4, and 5 are very capital intensive yet have high risks – so how do you get investers for such a project?

  3. mike May 13th, 2008 5:20 pm

    Hi Matt,

    You deserve a more complete answer than I’ll give in this comment reply, so perhaps I’ll write (or I’ll invite Bill to write) an answer as an entry.

    The process generally looks like this:

    Small group of people come together with “friends and family” money and secure asset(s) to characterize.

    Above ground surveys (seismic, satellite imaging, magnetography, H3 scans, and perhaps shallow temperature surveys happen.) These constitute ‘target’ areas for resource. Equity financing is typically the finance mechanism to this point where large portions of the company are exchanged for very little money in the scheme of the whole project. Some companies are able to use the public market in this phase (Western GeoPower for instance in South Meager.)

    Test wells are sunk, based on results, production wells and power purchase agreements happen in concert, equity and debt financing start to kick in at this stage – generally, geothermal wells that reach this stage are pretty successful.

    Power plant construction and testing is nearly always debt financed usually after the power purchase agreement and tax credit monetization is put in place.

    In renewable projects right now, there is a popular play called a “flip” where the developer and a tax-exposed finance partner form an LLC (benefits do not have to be issued in a proportional ratio to ownership like a C Corp) where for some period of time the investor gets x% of tax benefits and operating profits and the developer gets y% of the same. At a point where the investor reaches a pre-determined ROI, the asset flips and the investor gets a different percentage of earnings for instance. Ownership of the asset is transferred at different times as well. See the recent Ormat monetization schemes spelled out in their SEC filings for details – it’s a good example and had to be disclosed as a publicly traded company.

    Hope this helpful. Each project is different, but this is the most common means of approach.

  4. Bill Lemon May 15th, 2008 12:01 pm

    Mike and Matt –

    I don’t have that much to add. Nice job of describing the process. Since I was invited to write _something_ in addition, I would say that the bigger names in project equity, the US Renewables and such, are not so tax-exposed. Their investors tend to be retirement funds, trusts and the like who have no tax liabilities.

    Depending on who is bringing the money, some will want to do the “flip” to monitize the PTCs, some will want to do a straight investment and some will look to flip but let you keep the tax credits for your own use.

    For those who are interested in a more detailed description of the development process, financing and all, I’d suggest visiting the Stoel Rives website ( and requesting their “Lava Law” publication. It is one of a series of pubs on a variety of cleantech development topics. And I have no close friends or relatives working there. I just like what they do.