Renewable Energy Project Funding Sources for Large Renewable

Arranging funds for big projects is not easy. . From purchasing equipment to installing machines, from hiring personnel to training them – there are several major expenses. So, here are some renewable energy project funding options:

• Equity capital 

It is possible for energy companies to gather funds from investors by distributing shares. This involves great risk, as investors can distribute the dividends only after all tax obligations are fulfilled. They also expect an impressive return on their investment. Moreover, the investors also have the right to take part in decision-making.

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• Investment lending

In the past few years, renewable energy projects such as establishment solar power plants have depended immensely on investment loans. Debt financing means getting a loan raising capital by issuing bonds. The company is liable to return the amount borrowed along with the interest. So, the risk is more for lenders than shareholders. Financial institutions that provide loans to renewable energy companies are:

1. Commercial banks- These banks determine the interest rests and maturity periods based on marked conditions.
2. State banks- A state bank conducts a detailed analysis of the borrowing company’s financial performance before lending money. State banks are actively involved in providing funds to alternate energy projects.
3. Development banks- There are several development banks that give investment loans at better terms than commercial banks. Some of these institutions mainly target a specific geographic location.

• Project finance

Off-balance sheet finance or project finance is perfect for large-scale renewable energy firms. It is a long-term funding and doesn’t focus on the project’s present financial situation. However, this option is not the best one for renewable energy projects. That’s because the expense of selling equipment of those facilities is generally low. A SPV (special purpose vehicle) is a legal entity that separates the project risk from the assets of the initiator.  

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• Bonds

Bond funding is a significant debt instrument. There are several fixed-term securities that the government or corporation issue. These bonds make the bondholder eligible for receiving interest and principal. Try to eliminate or minimize technological or construction risks. An instance of bond financing ideal for renewable energy firms is issuing municipal bonds.

The

Arranging funds for big projects is not easy. From purchasing equipment to installing machines, from hiring personnel to training them – there are several major expenses. So, here are some renewable energy project funding options:

• Equity capital 

It is possible for energy companies to gather funds from investors by distributing shares. This involves great risk, as investors can distribute the dividends only after all tax obligations are fulfilled. They also expect an impressive return on their investment. Moreover, the investors also have the right to take part in decision-making.

• Investment lending

In the past few years, renewable energy projects such as establishment solar power plants have depended immensely on investment loans. Debt financing means getting a loan raising capital by issuing bonds. The company is liable to return the amount borrowed along with the interest. So, the risk is more for lenders than shareholders. Financial institutions that provide loans to renewable energy companies are:

1. Commercial banks- These banks determine the interest rests and maturity periods based on marked conditions.
2. State banks- A state bank conducts a detailed analysis of the borrowing company’s financial performance before lending money. State banks are actively involved in providing funds to alternate energy projects.
3. Development banks- There are several development banks that give investment loans at better terms than commercial banks. Some of these institutions mainly target a specific geographic location.

• Project finance

Off-balance sheet finance or project finance is perfect for large-scale renewable energy firms. It is a long-term funding and doesn’t focus on the project’s present financial situation. However, this option is not the best one for renewable energy projects. That’s because the expense of selling equipment of those facilities is generally low. A SPV (special purpose vehicle) is a legal entity that separates the project risk from the assets of the initiator.  

• Bonds

Bond funding is a significant debt instrument. There are several fixed-term securities that the government or corporation issue. These bonds make the bondholder eligible for receiving interest and principal. Try to eliminate or minimize technological or construction risks. An instance of bond financing ideal for renewable energy firms is issuing municipal bonds.

The Bottom Line

Setting up a renewable energy project is not enough. Every company must always strive for continuous development for staying on the market. So, opting for financial advisory services is mandatory to make wise financial decisions. The right financial advisor will help you attract more investments which you can utilize in purchasing new equipment to overtake competitors. Therefore, start looking for a reliable financial advisory agency.

Bottom Line

Setting up a renewable energy project is not enough. Every company must always strive for continuous development for staying on the market. So, opting for financial advisory services is mandatory to make wise financial decisions. The right financial advisor will help you attract more investments which you can utilize in purchasing new equipment to overtake competitors. Therefore, start looking for a reliable financial advisory agency.

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