Introduction

In general large-scale solar power financing involves convoluted process of legal terms and agreements. Most often financing of large private and governmental solar power programs involves large sums of money that are either loaned or are financed by third-party lend lease agreements. A long-term legal contract between an electricity provider and power purchaser typically lasts 20 to 25 years, where the purchaser agrees to buy electrical energy from the electricity provider. Under such a contract agreement, the electrical energy supplier is considered to be an independent power provider (IPP). Energy sales under such contracts are regulated by state or local governments. Long-term contract agreement contracts where the electrical energy provider assumes total financing responsibility as well as maintenance of large-scale solar projects is also known as power purchase providers or PPA. Due to the importance and the complexities of PPA contract agreement, Chapter 8 of this book is entirely devoted to the subject. This portion of the book will be addressing various types of solar power financing options.

Long-Term Industrial Project Financing

Unlike conventional financing of capital equipment or construction projects, long-term financing of industrial projects is based upon cash flow generated by the projects. This type of financing involves schemes where private investors and their banks provide required loans for the project. Such loans are usually secured by revenue and income generated by the project operation as well as by project assets. Furthermore, in the event of compliance with loan compliance terms and conditions, lenders are given the right to assume partial or total of control the project.

In order to avert risks and liabilities associated from the failure of large-scale projects, lenders shield and protect their organizational assets by creating special-purpose entity structures for each project. Since large projects are usually quite complex in nature, they may involve considerable technical, economic, and environmental challenges; therefore, financing of large projects involves risk-identification and feasibility studies that determine fundamental basis for preventing unacceptable investment losses.

In large-scale programs, the financing of projects is distributed among a consortium of multiple parties, so as to distribute the risks associated among multiple stakeholders. In projects that involve large risks, financing of a project may necessitate so-called limited-resource financing, which involves the participation of surety or insurance companies.