Solar PV Facility Project Financing & Contracting
Loan agreement
The Loan Agreement is designed for use
when the developer wants to obtain external
funding for a solar PV facility from a lender.
A Loan Agreement will contain provisions
of a corporate loan agreement as well as
project-specific clauses determining the
basis on which the loan can be drawn and
repaid. Revenue from the Power Purchase
Agreement pays back the loan debt and
generates a return for equity.
We have not included a precedent Loan
Agreement as it will always be provided by
the lender.
CEFC investment
The development may also be eligible
for funding from the Clean Energy
Finance Corporation (CEFC).
CEFC takes investment proposals on an
ongoing basis which progress through three
stages of assessment.
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•
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Preliminary screening. A high-level
review of the proposal and its suitability.
Detailed screening. Identifying the
unique and generic risk factors of the
project. Detailed investment terms and
conditions are in a term sheet.
Final capital approval. A review of
all due diligence and investment
structuring arrangements. Projects are
unlikely to proceed through to financial
close where key risks have not been
properly managed.
Projects will be screened against a
comprehensive range of risk parameters
which include investment risks, financial
structuring issues and other considerations
(emissions intensity, technology,
scalability, replicability, enabling other
transactions, etc.).
Financial terms
CEFC has a benchmark return of the five-
year Australian Government bond rate +3
to +4 per cent per annum. However, this
does not mean that funding will be made at
the portfolio benchmark return. The actual
return sought for an investment will be
market-based and risk-adjusted to reflect the
project, CEFC expenses and the portfolio
benchmark. Finance will be offered on the
least generous terms possible for a given
project to go ahead.
Simplified sequence of events
Owner identifies a need for external funding for solar PV facility.
Owner and Lender agree to enter into
Loan Agreement
Negotiation of terms of
Loan Agreement
Drawdown requirements
Representations and warranties
Consider whether the solar Facility
is also eligible for funding from the
Clean Energy Finance Corporation
.
Repayment formulas
•
Sign contract
Owner submits investment
proposal to CEFC
Owner draws down and repays loan in
accordance with the terms of the Loan
Agreement
Revenue from PPA pays back debt and
guarantees a return for equity
CEFC considers proposal in
three stages
Preliminary screening: high
level review
Detailed screening:
consideration of risk factors
and investment terms
and conditions
Final capital approval: review
of due diligence and investment
structure
Consider whether the solar
facility is also eligible for funding
from ARENA.View entire presentation