Navigating the Road to Bankability for Solar Project Financing

The financial meltdown is still impeding the flow of renewable energy project money, a pioneer of solar financing said during a Feb. 3 AltaTerra webinar. Still, says Matt Cheney, CEO of CleanPath Ventures, banks that do lend are in for longer hauls.

More than ever, “patience and passion is needed…to prevail even after hearing “no” a thousand times,” says Cheney, who has financed, owned, and operated over $300 million in solar energy assets. 

Banks might take a year to complete due diligence.  Always looking for a risk-free return on their debt financing, banks are scrutinizing the whole fabrication process now.  They often find the weak link in proprietary technology whose black boxes make them nervous.  Failures of new tech components in projects in the past have made bankers more cautious; so they are looking for manufacturers that will still be around to replace or upgrade the failing parts years down the road.  

The good news, Cheney says, is that such replacements can often be done with cheaper and better products.

 Cheney suggests some strategies to improve the odds that your project will get financing.  They include:

  • Making proprietary technology only a small part of a project that includes mainly products and processes that have a “pedigree.”
  • Working off the balance sheet of an established partner, or looking at balance sheet support with new (but expensive) insurance products now out.
  • Planning for bankability early in the R&D and demonstration process by collecting data and having it vetted by recognized third-party engineers.
  • Tackle quality control before it becomes a bigger problem.
  • Getting to the right price point, beyond R&D pricing, and bringing in the right management team to get you there.
  • Look at niche marketing opportunities that don’t require bankability, such as rooftop solar or large unique customers with special needs, such as a winery.

 

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Mark Braly was energy advisor to the mayor of Los Angeles during the 70s energy shock, author of the city's prize-winning energy plan, and president of a State of California non-profit corporation which made loans to renewable energy businesses. Now retired, he is a City of Davis, California, planning commissioner working on the city's zero-carbon program. He is president of the non-profit Valley Climate Action Center.

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