• Renewable financing is not expected to slow down, though due diligence processes are becoming more stringent
• The renewables space is anticipated to stay active, but it is believed that gas-fired assets could drive more deal flow

Project financing activity in the US power sector is anticipated to wrap up 2025 with record-breaking results, industry stakeholders tell NPM. Banks and private credit shops have their hands full handling a deal flow comprised of projects of all sizes and technologies, in various geographies.

“MUFG’s project finance team is quite busy. We are inundated with project finance transactions,” said Elizabeth Waters, MUFG’s managing director for project finance in the Americas.

“We remain on track to break our 2024 record, which was already a record-breaking year for us,” she said. “The main drivers are datacenters, for which the number and size of deals continues to grow, and LNG projects that have come back in a very big way. Renewables business remains significant, and could potentially exceed 2024 levels, but unclear at the moment; 4Q25 will be telling.”

With the capital absorbed by datacenters, and LNG sponsors bringing deals to the market worth billions of dollars, it tells a lot about how much liquidity can be found in the financial system. However, not all financial entities are the same, and smaller banks are finding their budget fully allocated for the rest of the year.

“By the end of the 3Q25, we expect tighter liquidity in the credit markets, as we are hearing that some smaller banks have already -or are about to- meet their budgets for the year,” Waters said. “MUFG is reacting proactively, by seeking to expand our lending partner relationships to join our syndications, which may require us to educate new lenders on how to structure and understand the risks on certain kind of deals, such as datacenters, that have not traditionally been in their portfolios.”

Insatiable hunger for electrons

Datacenters, which dimensions keep getting bigger, are expected to take over a big chunk of the 2025 infrastructure debt pie.

Global AI-related datacenter revenues will reach USD 650bn by 2028, from less than USD 200bn in 2023, according to an S&P Global report. That is an opportunity for structured credit lenders, especially private credit shops.

“Datacenters continue to present interesting opportunities,” says Ralph Cho, co-CEO at Apterra Infrastructure Capital. “We’re always on the lookout for deals that call for creativity, and the digital sector, especially with sponsors exploring non-ABS alternatives, could be a good fit. Holdco structures may also play a role in refinancings, which are still relatively uncommon in this space.”

In the US, S&P Global research suggests that if datacenters’ power demand increases even more, by 12% annually through 2030 from roughly 4% of total US electricity demand that was at the onset of the datacenter boom, it could lead to natural gas meeting approximately 60% of new energy demand.

“The renewables space will stay active, but we think gas-fired assets could drive more deal flow,” Cho mentions. “There might be a few greenfield projects looking for financing, but it’s not quite a wave yet. What we’re really seeing is more action around operational assets—whether it’s for acquisitions, refinancings, or recaps.”

Waters predicts more sponsors bringing gas-fired power generation projects to lenders in the years to come.

“We expect more project finance transactions for gas-fired projects in the coming years, including projects sponsored by unregulated developers but also by traditional utilities,” she said. “The need for project financing by traditional utilities hasn’t really been seen as often in recent years as utilities typically shy away from using project finance. However, due to the large size of their potential upcoming gas projects and the long construction period, they are now looking at non-recourse project finance as a viable financing option.”

Before and after OBBB

Final numbers for 2025 will owe a lot to the back-breaking work in 1H25. As the year started, project finance teams were reporting high demand from clients to structure warehouse facilities, construction loans, as well as evaluating conditions to refinance existing debt.

Lenders and developers were logging in for long hours of work. Underneath the race to finalize deals, it was the uncertainty over potential regulatory changes.

“At CRC-IB, we were very busy during the 1H25, with many projects seeking to ink tax equity investments ahead of any change in legislation,” mentions Gary Durden, partner and managing director at CRC-IB, an investment bank that focuses on the sustainability sector.

Larger project finance transactions include Copia Power’s USD 1.71bn debt facility to build its paired Maricopa Energy Center project in Maricopa County, Arizona. In June,Earthrise Energy closed approximately USD 450m in debt to fund construction of two solar projects near Gibson City, in Ford and McLean Counties, Illinois. Clenera Renewable Energy closed two debt deals worth nearly USD 1bn in 1H25, wrapping up in April USD 243m in non-recourse debt for its 128 MW / 400 MWh Quail Ranch paired project in Bernalillo County, New Mexico, and closing in March USD 773m in construction financing for the 392 MW PV / 688 MWh Country Acrespaired project in Placer County, California.

“M&A activity, however, was slower as many potential buyers waited for more information on tax law changes,” Durden points out.

The US budget reconciliation bill, or “One Big Beautiful Bill” (OBBB), was enacted earlier July, bringing changes to the regulatory framework with direct impact on renewable development. Developers are working to bring projects to safe harbor, which will keep the financing activity high enough in the near term, but the industry is still evaluating the longer-term effects on the sector.

“Looking forward to the second half of the year, in the short term I expect financing activity to continue apace with projects that have been safe-harbored,” Durden says.

“We still have some level of uncertainty to navigate with respect to the administration’s executive order to redefine the start of construction as well as interpreting certain FEOC provisions, which might cause some slowdown in the months ahead,” he added. “In the long term, the growing demand for electricity should drive continued installations of new renewable and gas-fired generation projects.”

New trends

Although the pace of renewable financing is not expected to slow down, due diligence processes are becoming more stringent, and more time is required to bring deals to the finish line.

“It is a new regulatory landscape. Due diligence process will likely require more scrutiny around two main areas of uncertainty, namely the FEOC requirements and definitions around start of construction,” says Carl Fleming, partner and global co-head of energy and project finance at McDermott Will & Emery.

“We are fielding many questions from developers and investors around those two points,” he said. “While this could be the beginning of harder times for projects to qualify for tax credits, we are creating strategies and solutions for clients to keep them advancing projects.”

The tax equity market is already reacting to changes. The energy tax credit buyers, who fueled the transfer market last year helping to take tax credit monetization to record high, might now think twice.

“The changes in tax law will directly impact tax equity negotiations,” Fleming pointed out. “Tax credit qualification, particularly as it applies to legacy credits versus new credits and projects under construction or to be constructed, is already starting to impact tax equity markets. We are working on one of the first tech neutral tax equity deals under the executive order and will glean a lot from those negotiations in the upcoming weeks.”

While the terms of non-recourse debt transactions for renewables are still not influenced by the regulatory changes, language is appearing in the contracts to define who bears the new risks.

“For renewables, the financing structures will be relatively similar to those during 1H25, but we are now seeing more of a heightened focus on structuring around tariff and change in law risks,” says Waters. “Tenors are still typically construction plus five years or seven years door-to-door. Spreads, though, could possibly get slightly wider as the year enters the last trimester.”

While developers and investors are taking time to understand the new framework, the industry anticipates that, at some point, some developers will come to realize that capital needs are larger than they are able to access.

“Although it is still early for sponsors to react and make decisions on investments and project development or construction, we expect that some opportunistic M&A transactions will happen,” Durden said. “We anticipate that larger companies will find attractive deals with developers that need access to development capital.”

Opportunities will arise for both creditors and equity investors, because the demand for power is historical and the buildout is capital intensive.

Don Dimitrievich, senior managing director and portfolio manager in the Energy Infrastructure Credit group at Nuveen, recently said in a statement that his team was focusing on projects at risk of cancellation or delay, but still viable, pointing out that these assets can benefit from contracted cashflow offtake, inflation protection and lower default and loss rate. He pointed out that “flexible bespoke loans will be needed more than ever to bridge gaps in the ecosystem.”

Dimitrievich is betting on a space where private credit can play in, when traditional sources of capital no longer can deliver all the solutions required by the borrowers.

“If you think about the typical project capital stack being 60-80% debt versus equity, it makes no sense that the infrastructure equity market is nine times the size of infrastructure debt. The inverse should be true, and just as we have seen with private equity and private credit, infrastructure debt is primed to grow substantially over the coming years,” he concluded.