TIME TO SPEND ON BIG SUN?

CSP project finance: Time to throw caution to the wind? Project finance is becoming more readily available for CSP projects, and the finance models are changing.
Helen Campbell, 4 February 2011 (CSP Today)

"For some developers, the ‘Spanish Trilogy’ - a model that saw EPC contractors also taking on the roles of backer and operator - has been the only way to beat banks’ recession-driven pre-cautionary conditions and get a project off the starting block.

"While helpful in the short-term, funding projects in this way is not seen as a sustainable form of financing for CSP in the long-term, whether due to a lack of competition, a reluctance to innovate, conflicts of interest or reduced bargaining power for the developer. And while government-backed loan guarantee schemes have got projects started in the US, they could never be expected to be the dominant form of financing forever."

click to enlarge

"But, as a technology, CSP is still sci-fi to the traditional moneymen…Although project finance markets are, in general, alive and well for renewables, CSP seems to be the stranger in the room and it is this lack of familiarity that holds it back…Moreover, unlike more mainstream energy projects, where ongoing costs associated with fuel, for example, are high, CSP costs are almost all upfront…

"The tide is turning, albeit slowly, and CSP ventures still have some proving up to do if they are to achieve the same status in the financial markets as other energy developers…The impacts of the global recession may be easing but have left the financial sector more risk-averse. That caution means new technologies are at the back of the queue…[but some say] strong CSP projects with the right structure in stable regulatory regimes have access to the same debt markets as other renewable and conventional generation projects…"

One of the obstacles to lower costs is the unresolved competition between technologies. (click to enlarge)

"Some of the traditional project finance options, which have not been open to CSP but may begin to emerge as realistic options as projects begin to show good performance reliability, could include leverage lease; construction equity; project equity; project debt, and even tax equity…

"…[I]t will be a while yet before ratings conditions improve and developers are able to go to the bond or capital markets…[Insiders] say CSP is much further along the route to mainstream project finance than it was one or two years ago, but is still a considerable way off. And some tough times still lie ahead…"