Infocast Projects & Money – 2022 Conference on Financing of Energy Projects

Foley team members recently attended the Infocast Projects & Money conference, which was held in person in New Orleans from January 25-27, 2022. This was Infocast’s second in-person conference since COVID-19 began, and there were approximately 280 attendees, which Infocast indicated was consistent with attendance from the 2019 conference. Attendees at the event included representatives from a number of energy project developers, advisors, construction contractors and capital providers, including private equity as well as financial institutions.

Approximately 50 speakers participated in panels discussing financing trends from 2021 and expected developments in 2022, financing energy storage, gas-fired power, green hydrogen, PPAs and power prices, and tax equity and M&A opportunities, among many other topics. Presenters generally reported that energy project development and project finance and investment activity was not negatively affected by COVID-19 and remained strong in 2021, a trend expected to continue into 2022. Panelists also discussed trends developing on the horizon, including advancement in EV technology, development of offshore wind projects, the increasing importance and growth of the broad “ESG” sector, and energy storage. However, speakers also addressed some of the problems the industry experienced in 2021, such as supply chain issues affecting project development timelines, international trade and forced labor issues, labor shortages throughout the supply chain and interconnection challenges.

Panels:

Energy Transition Panel: Foley partner Tim Spear (based in the Houston office), moderated “The Role of Gas-Fired Power in the Energy Transition” panel, which included Jonathan Sacks of Genon, Everett Smith of Goldenset Capital Partners, Raj Suri of Emberclear and Patrick Verdonck of Verdonck Partners as panelists. The group primarily discussed the viability of natural gas and other fossil fuel fired power generation plants in coming years as power sources amidst the ongoing energy transition. The consensus view was that natural gas will remain a source for North American power generation for at least the next decade although panelists felt that the days of coal fired generation in North America were numbered.
2022 Financing Outlook: Washington-based Foley partner Darin Lowder moderated “The Financing Outlook for 2022”. The panelists included Matt Curtin of MUFG, Chris Schneider of CoBank, and Larry Stone of FTI Consulting & FTI Capital Advisors. The group noted that the current major headlines for 2022 are forced labor/supply chain issues, financing merchant tails, and addressing energy storage issues. Panelists reported that forced labor and supply chain issues pose widespread problems affecting projects across the board and that it is not uncommon for banks to receive weekly notices of force majeure events. They explained that banks are getting comfortable with these risks by conducting enhanced due diligence on supply chain matters and building additional construction schedule cushion into financing documents, including flexibility on key milestone dates. The group also reported that they are seeing increased requests to build uncontracted merchant tail revenue into debt sizing, which is not surprising given that typical PPA terms have decreased in recent years. The consensus was that banks have a healthy appetite for merchant revenue, but typically only for a 3-7 year period following termination of the PPA, and this revenue will be subject to additional lender protections (including a higher debt service coverage test and potentially additional sponsor equity requirements or cash sweeps). The panelists also see battery storage as a rapidly growing area of interest in financing, and have started to see both blended energy plus storage projects as well as standalone storage projects. The group echoed the thoughts of other conference panels describing the financing market for renewable energy projects as very competitive, with both high supply and demand for construction, bridge and term debt in an established, relatively stable and well performing asset class.

Foley attorneys also plan to attend the Infocast Solar & Wind Finance and Investment Summit, taking place March 6-9 in Scottsdale, Arizona.

Foley is committed to helping our clients in the Energy sector. For more information, please contact Natalie Neals, Tom Hoffmann, Darin Lowder, Tim Spear, Sarah Slack or your Foley attorney.

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