Overview
Three Financing Themes Emerging Across Energy and Data Centers
During ACORE’s annual Finance Forum, McDermott’s co-head of Energy & Project Finance, Ed Zaelke, moderated a panel on “Making Markets: Sources of Capital to Meet the Challenge” with Alain Halimi of Nomura, Dwayne McNicholas of J.P. Morgan and Ines de Almeida Serrao of CIBC. Over the course of the discussion, several themes emerged around how capital providers are approaching today’s energy and infrastructure markets.
A few key takeaways from the panel included:
- High-yield debt continues to expand beyond traditional use cases. Panelists noted the growing role of high-yield bonds in financing contracted data center projects and other infrastructure assets, reflecting continued investor appetite for scaled, cash flow-oriented opportunities.
- Renewable energy financing remains available, but capital structures are evolving. While financing activity in the renewable sector continues, panelists discussed how concerns around FEOC and other regulatory and supply chain issues are creating additional diligence considerations for some projects. In that environment, corporate-level and holdco financings may provide greater flexibility, particularly for sponsors with diversified operating portfolios and existing cash flow-generating assets.
- Data center financings continue to favor conventional construction-to-term structures, but development risk remains a gating issue. Traditional project finance structures are still the predominant approach for financing data centers; however, lenders remain focused on resolving key development risks—particularly zoning, permitting and power-related issues—before capital is deployed.
Overall, the discussion highlighted that, despite ongoing market and policy uncertainty, capital remains available for well-structured projects and sponsors that can effectively navigate execution and development risks.