When developing a power generation project, clients tend to seek equity when the country’s debt market is more liquid and, thus, equity is harder to find. Another scenario may call for an equity investment if the project utilizes new or unique technology – in this way an equity investment shows confidence in cutting-edge equipment.
With global expertise and in-depth industry knowledge, Siemens Financial Services (SFS) can shift from debt to equity on the basis of fluctuating project requirements. The specific market and transaction have big effects on the type of financing offered and we have the expertise to customize a capital solution based on the many unique factors facing different power generation projects around the world.
Challenges
In this phase of project development, securing adequate funding for early-stage project items is critical for power generation projects. Early-stage project developers are often thinly capitalized individuals or firms adept at site acquisition, permitting and counterparty contract negotiation. Development activities typically take 12-36 months and require early-stage capital to fund: Front End Engineering and Design (FEED) studies - this is often the single largest cost during the development phase; negotiation of air, water and other permits; payments for site acquisition, land lease agreements and easements; engagement of counsel and consultants; and applications for federal, state and local financial incentives.
Solution
Siemens provides equity, mezzanine and debt financing to support the development of projects. At SFS, we have a significant amount of sector specialists, including technical project managers, banking experts and insurance specialists, as well as general project and risk managers. Together, they are well equipped to handle a broad range of project and risk management tasks to ensure a project will be successfully implemented.
Construction & Operational-stage Financing
Challenges Demand for greater operating flexibility, energy efficiency and a reduction in CO2 emissions in power and the demand for gas-fired power plants is increasing at a rapid pace. The efficient use of fossil fuels is paramount to maintaining a stable power network in the U.S. Looking ahead, certain trends are being observed in Europe, the Middle East and Africa which will further shape the requirement for tailored financial solutions, for instance, a continuing demand for financial support in the African region and the establishment of capacity markets to cope with raising supply of renewable energy in various European countries (e.g. UK, France, Italy). Typically, power generation projects are large and require a consortium of lenders who are willing to take on the construction risks that these types of projects entail. Once a power generation project is constructed, it must be operated and maintained within the guidelines originally outlined in the project’s documents. The project must operate at the level required to generate revenue, while also being able to repay loans. Solution Siemens provides the following financial solutions to support the permanent financing of a power generation projects throughout the operational and construction phases: Construction-bridge loan Senior Secured debt Subordinated/holding company (holdco) debt Asset-backed revolvers Mezzanine capital Preferred equity Common equityChallenges
Demand for greater operating flexibility, energy efficiency and a reduction in CO2 emissions in power and the demand for gas-fired power plants is increasing at a rapid pace. The efficient use of fossil fuels is paramount to maintaining a stable power network in the U.S. Looking ahead, certain trends are being observed in Europe, the Middle East and Africa which will further shape the requirement for tailored financial solutions, for instance, a continuing demand for financial support in the African region and the establishment of capacity markets to cope with raising supply of renewable energy in various European countries (e.g. UK, France, Italy). Typically, power generation projects are large and require a consortium of lenders who are willing to take on the construction risks that these types of projects entail. Once a power generation project is constructed, it must be operated and maintained within the guidelines originally outlined in the project’s documents. The project must operate at the level required to generate revenue, while also being able to repay loans.
Solution
Siemens provides the following financial solutions to support the permanent financing of a power generation projects throughout the operational and construction phases:
- Construction-bridge loan
- Senior Secured debt
- Subordinated/holding company (holdco) debt
- Asset-backed revolvers
- Mezzanine capital
- Preferred equity
- Common equity
