104 Energy Project Financing: Resources and Strategies for Success
the critical components of a bankable transaction. Once a structure is
determined to be bankable, the capital markets should welcome it with
virtually unlimited capacity.
Energy services transactions can take many different forms, as long
as they’re properly structured and documented. The initial challenge
is to accurately identify a structure that meets the needs of all three
parties to the transaction. In most cases, the parties begin with a com-
mon structure but work through a series of negotiated modifications to
achieve the final bankable result. Many ESCOs have learned the hard
way that leaving the lender out of these structural negotiations usually
results in unmet expectations and frustration for the customer.
The matrix below provides a sample of commonly used project
structures and corresponding financing solutions.RISK ASSESSMENTRisk assessment and allocation is the fundamental principal that
Project Structures Financing Structures
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Performance Contracts Capital Lease
Loan & Security Agreement
Operating or Synthetic Lease
Tax Exempt Lease
Municipal Lease
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Construction/Installation Capital Lease
Contracts with or Loan & Security Agreement
without Operations & Synthetic Lease
Maintenance Agreements Tax Exempt Lease
Municipal Lease
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Shared Savings Agreements Embedded Capital Lease
Embedded Operating Lease
Purchase & Assignment Agreement
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Energy Services Agreements Purchase & Assignment Agreement
Customized Debt & Equity
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Power Purchase Agreements Purchase & Assignment Agreement
Customized Debt & Equity
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