How the structure works
A project is typically held in a special-purpose company whose only business is building and operating the asset. Lenders look mainly to the project's revenue for repayment, with limited recourse to the sponsor, so the contracts that produce and protect that revenue become the lenders' real collateral. Construction risk is often placed on a contractor through a fixed-price construction contract with a committed completion date, operating risk on an operator, and market risk on a long-term buyer of the output, such as a utility under a power purchase agreement. Gaps between those contracts, where a risk falls on nobody, are what lenders work hardest to find.
What lenders will examine
Expect diligence on permits and land rights, environmental approvals, grid or transport connections, and the creditworthiness of each counterparty. Lenders usually take security over the project's assets, accounts, and the equity in the project company, and they often require direct agreements with key counterparties that let them step in if the project company defaults. Tax equity investors and government incentive programs bring conditions of their own in sectors such as renewable energy. Sponsors should assemble the project contracts, permits, engineering reports, financial model, and insurance program early, since a gap in any of them can delay financial close.
Where early advice saves the most
The most expensive problems are usually built in before lenders arrive: a construction contract that caps the contractor's liability too low, an offtake agreement with termination rights lenders will not accept, or a land arrangement that does not run as long as the debt. We review the core contracts for bankability early, identify the consents needed to grant security, and work with the financial model so the legal terms and the numbers tell the same story. For public-private partnerships, procurement rules and government approvals add another layer to plan around. Sponsors also benefit from deciding early which risks they are prepared to keep, because lenders will ask for sponsor support wherever the contracts leave a gap.
