NatWest, Lloyds Bank and AIB have provided a £230 senior debt facility to Low Carbon for new solar projects. An accordion facility gives a £200 million extension for a total of 1 GW of new solar projects across the UK and the Netherlands.
Up to £430 million loaned to Low Carbon for large-scale solar PV projects in the UK and the Netherlands amounting to 1 GW of solar capacity.
The decision by three household name banks shows the confidence placed in Low Carbon and the solar market in the UK and the Netherlands.
Financially it demonstrates a shift from the specific project financing model.
Low Carbon has established an innovative finance facility with three leading commercial banks, NatWest, Lloyds Bank and AIB. The facility will enable the construction of large-scale renewable energy projects in the UK and the Netherlands.
The resulting capacity of at least 1 GW will provide clean, affordable power to more than 360,000 homes and avoid 308,000 tonnes of CO2e according to the company.
Large loan facility widens boundaries of project finance
Financing of renewable energy from banks usually takes the form of project finance where each project’s risks and future cash flows are assessed. The lenders to a project would have either no recourse or only limited recourse to the company that develops or “sponsors” the project. Lenders will not forgo recourse to a project’s Sponsor unless there is a projected revenue stream from the project that can be secured for purposes of ensuring repayment of the loans.
That such a large loan facility has been placed in the trust of Low Carbon for a cluster of projects, 17 mentioned, is testament to market expectations of growth in the solar market. At the same time, it says something about the reliance being placed on the management team, as the growth in appetite makes addressing execution risk a high priority.
Low Carbon Founder and Chief Executive, Roy Bedlow, said: “We are delighted that three of the UK and Ireland’s leading banks have demonstrated a major endorsement of our business and its ambitions for expansion. The next decade is crucial to slowing the pace of climate change, and it is imperative that we rapidly deploy renewable energy at scale.”
Low Carbon has set a goal to create 20GW of new renewable energy capacity by 2030.
Solar market in the UK and Netherlands
In the UK after a few years of withdrawn support for solar, the Contracts for Difference scheme re-allowed solar PV projects and onshore wind to participate, announced in 2019. That catalysed millions of pounds of funding for renewable projects bid in the fourth round auction held in December 2021.
Earlier this year the government announced that from 2023, CfD auctions will be held annually, which was welcomed heartily by the solar industry. Solar Energy UK’s chief executive Chris Hewitt said: “The UK needs to treble its solar energy output by 2030 to keep pace with net-zero targets. Investors are lining up to do just that, and this announcement will give them greater confidence.”
Lloyds Banking Group’s sustainability strategy targets the provision of £15 billion for sustainable finance by 2024.
James Taylor, Head of Infrastructure & Project Finance at Lloyds Bank, said of the investment: “Funding the development of renewable power generation is crucial to achieving UK’s Net Zero targets. In particular, low risk technologies such as solar PV will play a key role by accelerating the transition away from fossil fuels in a cost-effective manner.”
The Netherlands, according to figures released in 2022 by SolarPower Europe, has the most solar panels per capita in Europe, largely a result of government support.