Project Finance and Leasing
CARE Funding provides financing for its client's clean and renewable energy and energy efficiency projects using structures that are focused on the client's business and financial position. Clients, generally, fall into the following catagories:
- Commercial, for profit firms
- Not-for-Profits such as hospitals, private schools and colleges, service entities
- Governmental and Municipal such as school and higher ed districts, state and local government facilities, Federal facilities, prisions, etc.
Each of these groups have unique financing needs and therefor CREF has developed financing structures designed to fit each entities specific needs. These include:
- Capital and Operating Leases
- Energy Servides Contracts (ESCs)
- Power Purchase Agreements (PPAs)
- PACE Financing (Property Assessed Clean Energy) a unique property tax based long term cost effective energy efficiency financing tool
Each of these financial structures has unique features and advantages that must be tailored to our client's particular circumstances. This is one of our specific areas of expertise. We welcome the opportunity to put our experience and expertise to work for you.
Renewable Energy Project Finance
We define project finance as financing that does not depend on the creditworthiness of the sponsors, namely, the parties proposing the business idea to launch the project. Approval does not depend on the value of assets sponsors are willing to make available to financiers as collateral. Instead, it is basically a function of the project's ability to repay the debt contracted and repay capital invested at a rate consistent with the degree of risk interest in the project.
Project finance is the structured financing of a specific economic entity – the SPV, or special purpose vehicle, also known and the project company – created by the sponsors using equity or mezzanine debt and for which the lender considers the cash flows as being the primary source of loan reimbursement, whereas assets represent only collateral.
Project Equity & Tax Equity
Structuring a project finance package entails deciding how much of the project resources should come in the form of equity; the rest will be project debt. Project Equity refers to funds put into the project company by shareholders of the company. Equity holders are owners of the company, and they receive dividends and capital gains based in net profits.
Project Equity makes up 5% to 15% of project cost while Tax Equity makes up 20% to 40% of project cost and is provided through a limited number of specialized Tax Equity investors with significant and consistent taxable income, and Project Equity is provided through:
• Sponsor's own capital and subordinated loans
• Multilateral institutions
• International equity markets
• Local capital markets
• Certain investment funds
• Governments, a host of official lending and aid agencies, if the projects is state-owned or joint venture between the private and public sectors
The senior debt can be broken down into several parts (tranches or facilities), depending on the unique requirements and characteristics of the project. In the start-up phase of the project, all that needs to be considered is a loan to cover design and construction costs and a facility to cover possible project increases.
The characteristics of the loan in terms of margins, tenor, minimum acceptable ratios, and so forth reflect the capacity to pay back project financing and the requests of the banks that may be interested in supporting the deal in a later, syndication phase.
Debt makes up 40% to 80% of the project cost based on project cash flows available for debt service and is provided through:
• Institutional investors (pension funds, insurance companies, and mutual funds)
• International commercial banks
• The International Finance Corporation and regional development banks
• Local banks and bond markets
• Supplier's credit
• Specialized energy funds
• Government-guaranteed official loans from multinational institutions, regional banks, and bilateral agencies, if the project is owned by a state agency or is a joint venture by the private and public sectors.