CONFERENCE COVERAGE: Powered land is in demand, but there is still a financing gap

*This story was originally published exclusively for NPM subscribers.

New Project Media (NPM) is a leading market intelligence & data platform covering US & European power, renewables & data markets and serving the development, finance, advisory & corporate community. Click here to schedule a demo or learn more.

Longer lease terms are improving financing prospects
Capital availability has tightened for all but the largest end users

Demand for financing powered land is rising as AI and digital infrastructure buildout accelerates, said industry experts at the ‘Power Pennies and Data Dollars’ panel at the ACORE financing forum in New York City on Wednesday, May 13.

As the demand for data centers within the industry has grown, financing powered land has become more competitive.

Jon Edwards, executive vice president and head of capital markets at Switch, said that lease terms have increased to 15-20 years from five-seven years for land and data centers, which has positively impacted the financing arm.

“I think when you have a 15–20-year contract, you may be able to raise a higher LTC in a more responsible way to finance constructors,” said Edwards, adding that, “It’s an important development for the industry because without long-term leases, you would not be able to raise the same amount of debt financing.”

That being said, there is a consensus that the AI infrastructure space requires intensive capital needs, but those needs are not being fulfilled.

“There’s been a tightening in the market on capital availability for anything other than the top three or four end users,” said Brian Callaway, CFO at Copia Power.

When it comes to financing, the panelists noted that they are seeing an increase in the number of instances that involve financing data centers and power at the same time.

However, these structures still require separate assessments, especially as risks for lease terms for data centers differ from powered assets.

Claudia Correa Welch, Managing Director at Bank of America noted that there are different risks being passed on to tenants, especially as data center developers often grapple with tight timeline leases, which creates greater risks during the financing process.

Callaway underscored this, noting that the length of getting transmission lines up and running is a challenge.

Despite the differences, she noted that financing data centers and powered assets are also becoming similar in other ways, especially as data center leases are starting to increase and match the length of term leases.