Since last visiting the topic of development-stage debt financing with an analysis published in June 2024, NPM has found demand for such products undiminished, although the motivations behind doing such deals are evolving.

In the previous piece, it was clear that the non-dilutive nature of these transactions were proving highly desirable for developers, and the access to capital was also helping them deal with permitting delays.

As one contact pointed out, the high-single-digit or very low-double-digit interest paid on development-stage finance deals is preferable to having no pipeline at all because otherwise you run out of cash, or concede a significant dilution of equity.

That is still the case but, as will be explored in this piece, equity markets and grid issues are now impacting the operation of these kinds of debt transactions in different ways.

In April 2025, UK-based battery storage developer Noriker Power raised a GBP 15m financing facility from Triple Point, intended to support the development of a circa 2.2 GW pipeline of projects across the UK and Ireland. The deal also came in the midst of former 45% shareholder Equinor being bought out of the company by management.

However, the ongoing changes being enacted to grid connection queues in the GB electricity market are creating roadblocks for all kinds of deals in the sector which have been in the works over recent months, and, while it ultimately closed successfully, the Noriker process was no different.

“Noriker has a great track record in Ireland and GB and came with a number of transmission projects, but grid reform landed halfway through,” says Jonathan Hick,Triple Point’s head of energy transition.

While the deal managed to survive such a ruction, other contacts have remarked to NPM over recent weeks that some transactions – both debt and equity – had faced more complex issues as a result, or even been halted entirely.

For Hick, the ongoing changes to grid access in GB will mean a refocus on opportunities in other European countries where the route to connecting projects is slightly clearer.

“We will do a little less in the UK in the short-term due to grid reform. There is lots of demand but this is subject to the reform; you have developers that thought they had an 8 GW pipeline but now they have 1 GW,” he says.

Equity slow-down

However, this is expected to only be a short-term blip for GB-based projects and there will very likely be a healthy and growing development-stage finance market in the country over longer horizons.

This will also be supported by the continued difficulties in equity markets, both in the UK and other countries.

One dealmaker recently commented to NPM that sell-side equity mandates had over the past couple of years changed from a case of quick, almost formulaic processions from circulating teasers to execution within a matter of a few months, through to a period of mismatched valuations and delays. Closings, if they happen, can take up to a year.

Now, the latter has evolved once again into a situation where creative thinking is required to finally close complex and contested deals.

Steven Kassab, founding partner of Paris-based financial adviser Tevali Partners, which recently advised Vents du Nord Group (VDN) on its own EUR 20m development financing facility with CIC Private Debt, agrees.

He says: “Equity is now always tough to get through in a smooth and peaceful manner. These transactions are getting longer.

“IPPs are questioning whether they will get to the finish line, which is a totally different mindset. There used to be many more investors than available targets and transactions are getting much more painful and tactical. Development finance is more predictable than pure equity,” adds Kassab.

While the travails of equity over recent quarters are well covered elsewhere – essentially a product of dried up fundraising in both public and private markets – the point is that the lure of raising debt instead for developers and IPPs is being further embellished.

Structures

The flexibility of the structures of these deals are both advantageous for developers, but also reassert the relatively specialist nature of this segment of the market for lenders.

The Triple Point and CIC Private Debt facilities mentioned above have subtly different characteristics, and lenders such as the former are also comfortable offering different kinds of products to different clients.

“You need to understand the sector and where the value is. Firstly, we can do non-recourse finance, giving them more freedom to operate, but we can also lend to a holdco that sits beneath topco,” says Hick.

“[The facility] gets repaid through sale of projects, with ability to draw more from the facility over time. The developer can order long lead-time items, such as transformers, and also pay themselves,” he adds.

Meanwhile, Kassab explains a little more about the recent VDN transaction: “The structure uses the value of projects and also takes account of average success rate, which then gives you probabalised values.

“Most experienced lenders in development financing keen to have asset-backed aspect, and VDN deal has collateralised one operating asset,” adds Kassab.

Market landscape

These lenders are part of a small, but ever-so-steadily growing cohort of debt providers active in the space, which in the UK includes Novuna – lender in April to Luminous Energy with a GBP 5.5m development facility – but more broadly across the continent include Kommunalkredit, Edmond de Rothschild Asset Management, Zencap AM, Berenberg and LBP AM, among other banks with debt funds.

However, it remains a landscape that will likely stay clear of the traditional commercial lenders as they instead focus on at least some element of contracted revenues.

Nevertheless, the opportunities for those in the development-stage finance market remain strong, with reinvigorated mature European markets set to be at the fore.

“We are having initial discussions in target markets; the German BESS market is seeing very large projects about to get consent, and Italy is also fascinating where grid and development costs are higher,” says Hick.

*This story was originally published exclusively for NPM Europe subscribers.