Financing green opportunities in digitalisation and green sustainable principles

Published

Jun 12 2023

Written By

Pierpaolo Mastromarini

Partner
Italy

I am a partner in our Banking & Finance Group, with a particular focus on the energy & utilities sector.

Jennifer Bird

Legal Director
UK

As a Legal Director in our Finance & Financial Regulation team in London, I act on project finance, property finance, acquisitions, asset finance and development bank work in the UK and internationally.

There are many new opportunities in the green energy market, where it is crucial to improve efficient energy use and secure energy supply whilst also accelerating the energy transition. In this regard, it becomes essential to consider that while financing opportunities related to energy efficiency or energy storage have often been carried out on a corporate or portfolio basis, today, in light of the expansion of projects there is the necessity to seek more typical project finance structures.

In fact, the production of intermittent renewable energy is not always sufficient to stimulate long-term investment, as lenders look for more stable revenue streams to support this kind of investment. The type of investment schemes and finance documents often mirror those in project financing but repayment profiles and ESG constraints may need to be re-aligned and adjusted in order to be more suitable for this purpose.

Initiatives following new energy trends need to take into account a combination of different revenue streams, including those from the capacity market and the wholesale market, and managed through a counterparty carrying out services to maximize the available revenue and cap/floor price structures for the energy generation.

Financing contract structures can help in mitigating certain risks associated with the above, such as securing revenue streams from alternative energy projects, adopting cash sweep mechanisms or more aggressive financial terms and evaluating ancillary guarantees for ensuring stability of production.

In addition, it should be noted that demand for the supply of goods has increased tremendously, playing a key role in accelerating sustainable finance. The impact of new technologies on the environment is enormous as everything is connected to saving energy consumption and finding solutions to savings in materials, creating from time-to-time new opportunities to be financed as well as ESG constraints to be met.