CSC: project finance use for renewable energy set to surge
Project finance use to finance large scale infrastructure projects is set to surge, especially for renewable energy projects and real estate development, according to new research by CSC, the global business administration and compliance solutions provider.
The study shows that that an overwhelming majority (86%) of industry experts believe project finance as a method of financing large scale infrastructure projects will grow in use over the next two years.
The top four industries industry professionals are currently focused on are renewable energy projects (cited by 55% of respondents); infrastructure, especially roads, bridges and airports (29%); oil and gas (25%); and real estate development.
“We’re seeing renewed momentum for project finance deals across various markets as pandemic-related obstacles recede and supportive regulatory changes and legislation take root,” says Bryan Gartenberg, managing director, CSC. “Growing urgency to invest in renewable energy infrastructure coupled with global demographic shifts and rising prosperity are all driving demand for project finance, giving rise to new opportunities and challenges for market participants.”
Within renewables, solar is expected to see the biggest increase in deals over the next 24 months, followed by wind, fuel cell and green hydrogen.
“Wind and solar are at the forefront because of their proven track record on bankability, but as emerging technologies are proven to be successful from a financing perspective, we can expect to see more growth in newer asset classes like hydrogen”, Gartenberg said. “This is, in turn, engendering ever-complex project finance structures needed to accommodate them.”
As these structures grow in complexity, “it’s increasingly important to ensure that all parties involved have the right levels of experience and knowledge, particularly when a project goes across multiple countries and local financial and regulatory expertise is needed”, he said.
North America is predicted to see the most significant uptick in activity, followed by Latin America, Europe and the UK. The US is benefitting from the Inflation Reduction Act (IRA) as well as the role Export Credit Agencies play in driving sponsorship of project finance structures and attracting institutional investors.
Europe is also enjoying supportive regulation in the form of European Long-Term Investment Funds, and the U.K., with 29% of those surveyed expecting each of these regions to see an increase in activity.
