The funding route chosen should align with the project’s nature, size and evolving risk profile, says Marie Lucey, partner in financial advisory with Deloitte.

“As the project progresses through key development milestones, different financing options become available, offering opportunities for both equity and debt investment,” she says, explaining that a project’s risk profile evolves significantly over time.

“In Ireland, investor appetite tends to increase significantly in the post-permitting phase, where various larger risks have been sufficiently mitigated, making the project more attractive to those investors.

“For example, both wind and solar developers in Ireland frequently use internal financing to reach key milestones — such as planning — before seeking additional funding.” 

Reduction in risk

As the project advances, the reduction in risk then opens up opportunities for more structured financing options, including debt.

Equity investment offers the advantage of no immediate repayment obligations, which eases cash-flow pressures, particularly in the early stages of a large project. This is particularly useful for high-risk, capital-intensive projects, Lucey says. 

“It also spreads the financial risk among investors, so there is no need to repay the investment if the project fails,” she adds.

One downside, however, is that equity dilutes the developer’s ownership and control over the project.

“For example, bringing on private equity or infrastructure funds at an early stage may lead to reduced control over future decision-making and profits,” Lucey explains. “Furthermore, equity financing can be expensive, as investors expect a higher return to compensate for their risk, especially when compared to the lower costs associated with debt.” 

Another key piece of the funding picture is project finance, which is crucial for large-scale infrastructure and renewable energy projects in Ireland. This model allows developers to secure financing based on the project’s future cash flows rather than their own assets, enabling access to substantial capital. 

Large wind and solar farms in Ireland often utilise project finance once they have secured a route to market, either through the Renewable Electricity Support Scheme (RESS) or Corporate Power Purchase Agreements (CPPAs), as Stephen Prendiville, partner in financial advisory with Deloitte, explains.

“The use of CPPAs has risen sharply in the past two years in Ireland driven by price volatility and the growing emphasis on the role of corporates in achieving net zero targets,” says Prendiville. 

Balance sheet financing 

For developers with significant financial strength, such as cash-rich utilities, balance-sheet financing — raising debt at a company rather than project level — can be an option, especially in the early stages of a project.

“This approach allows developers to retain full control and avoid the complexities of external funding,” Prendiville says. “However, it ties up capital that could be used for other investments and exposes the developer to more financial risk.” 

While balance-sheet financing remains a viable option, it is becoming less common for large-scale projects in Ireland, Prendiville adds. Yet the appetite for financing infrastructure and renewable energy projects remains strong.

“With costs stabilising after two years of high inflation and the prospect of reduced interest rates, investors are increasingly motivated to advance projects,” says Prendeville. “A lower interest rate environment makes borrowing more affordable, thereby enhancing the attractiveness of financing major projects.” 

Another significant factor contributing to the attractiveness of the current investment environment in Ireland is the continued pressure on banks and investors to fulfil green asset ratio targets and sustainability reporting requirements.

“Financing sustainable infrastructure projects, such as energy-efficient buildings or green transport systems, helps banks align with regulatory and corporate ESG [environmental, social and governance] goals while securing long-term returns,” says Lucey. 

According to Keith McDonagh, head of corporate finance with Xeinadin, a gap has opened up in the Irish market since the exit of Ulster Bank and KBC.

“But at the same time, we are somewhat well serviced by the incumbents both mainstream and also secondary and specialist funding options in this space,” he says.

Depending on the project, there may be a specialist finder available — such as those targeting renewable energy projects, McDonagh suggests.

Another trend is the move away from loan to value as the primary driver, he adds: “Previously, if you were putting in a new product line and the new product line is going to cost €100,000, a lender would say, ‘We are only going to give you 70 per cent of that and you need to come up with some equity yourselves.’ 

“Now the trend has moved towards what can the company afford to pay off, so if the company can afford to fund the full €100,000 there are mainstream lenders who will take the view that the risk is low, as they can see that the cash flow allows for it.” 

McDonagh notes that the Strategic Banking Corporation Ireland (SBCI) has played its part in making lower-cost funding more accessible to SMEs.

“The banks are a little bit more open to risk where there are Government guarantees or supports in the background, so if you qualify for one of the SBCI schemes you find it is easier to access funding — we would always advise people to see if they qualify for one of those schemes, as it could be a simpler way of getting a major project backed.”

 These schemes, such as the Future Growth Loan Scheme, allow for a lend of up to €3 million, making them ideal for an SME client, adds McDonagh.

Lucey and Prendiville agree that a blend of equity investment and project finance appears to be the preferred approach for developers at present.

“These methods are particularly well suited for large-scale projects as they provide a robust framework for handling substantial capital needs and distributing financial risk,” says Lucey.