Renewables specialty finance solutions provider Fundamental Renewables, which has allocated over USD 7bn in credit transactions in the last nine years, is noticing an upward trend in the portfolio size that developers bring for financing.

Fundamental is a lender of structured deals mostly in the form of non-recourse, project finance debt.

“The biggest trend we have observed lately is the exponential growth of developers’ portfolios. A few short years ago, a 1 GW portfolio of projects under development was considered big. Today the portfolios, in many cases, have grown two to five times or greater in size. The volume and opportunities to find value are simply much bigger,” said Mark Dominé, managing director and head of Originations at Fundamental Renewables.

The company has positioned itself in a space where traditional project finance lenders are not very active. Fundamental offers customized structured financing for renewables project developers that require debt when their portfolios under development are not shovel-ready yet, or that are still awaiting achievement of a few milestones required by more traditional construction lenders.

In September, low-carbon fuels company Twelve closed a USD 25m construction loan with Fundamental Renewables, which was part of a larger USD 645m capitalization in equity and debt financing, that the borrower intends to use to advance its production of E-Jet fuel made from renewable energy-powered combination of biogenic carbon dioxide (CO2) and water, as it was reported at the time.

“We provide credit before the projects are ready for term loans, and we aim to do it faster, more efficiently, and with fewer conditions precedent,” said Dominé. “This gives the sponsor more flexibility and the ability to monetize the value of their development assets more expeditiously and with better alignment to project or takeout financing deadlines,” he added.

The lender seeks to maintain diversity across various factors in its loan portfolio, as a risk mitigation strategy. Geographical diversity is one element, which is achieved by lending to portfolios of projects that span different states. To date, their loans cover projects that are located in 44 states across the US, which also has helped the team to fortify and expand their understanding of, and experience with, different market dynamics.

One of the projects supported by Fundamental was in Hawaii. Holu Hou Energy, a provider of design-to-service solar plus energy storage systems, worked with Fundamental to raise a construction loan for a contract to build solar and energy storage systems across the Island Palm Communities in Hawaii, one of the largest residential solar project in the US, as announced.

“Although our mandate extends to support renewable energy development more broadly, our loan portfolio is made up of mostly solar, solar plus storage and standalone solar projects,” Dominé mentioned. “Our work has been mostly relationship driven, whether we work with newer developers, or more well-established companies that have built a solid track record. And a lot of our clients return to do additional and/or expanded loans with us.”

Birch Creek, Pivot Energy, and Longbow Solar have worked with Fundamental in the past years.

“In general, for our late-stage development loans, when we analyze the risks associated with a credit, we want to see four major milestones: interconnection agreement already in place, some form of offtake agreement or contracted cash flow or some hedge, site control, and discretionary permits,” Dominé pointed out.

As lender, Fundamental can advance up to approximately 90% of the portfolio’s value, or cost, to enable the developer to get to commercial operations faster. The primary focus is the bottom-up valuation of each project by the company’s deal team.

After the passing of the IRA legislation and all incentives available for clean energy development, the volume and flow of project and portfolio development have increased in size and speed. The capital needs have grown alongside.

Fundamental Renewables closed in 2022 a USD 400m credit facility led by Delaware Life Insurance Co. Fundamental Renewables is the clean energy investment arm of Fundamental Advisors, which was founded in 2007 as alternative asset manager dedicated to municipal, public purpose and community assets.

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