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Facilitating the bankability of energy transition projects: Risk management and insurance considerations

A proactive and comprehensive approach to risk management and insurance is essential for enhancing the bankability of energy transition projects.

The global shift towards carbon neutral energy production technologies demands the transformation of our energy systems. This transition encompasses large-scale renewable energy deployment, electrification across various sectors, the adoption of green hydrogen, and enhancements in energy efficiency. Given the capital-intensive nature of these initiatives, securing financing with acceptable leverage, tenor, and cost of capital is crucial for both projects and investors.

Achieving bankability in non-recourse financings hinges on the identification, allocation, analysis, and management of project risks. Ideally, the project company—the borrower—should retain minimal exposure to risks deemed unacceptable by lenders. This is particularly critical when lenders lack financial guarantees from project counterparties and must rely solely on the asset's cash flows for debt servicing.

A proactive and comprehensive approach to risk management and insurance is essential for enhancing the bankability of energy transition projects. Early engagement with insurers, lenders, and brokers, along with the exploration of alternative protection mechanisms, can significantly improve project resilience in the evolving energy landscape.

This whitepaper delves into the uncertainties that impact the bankability of energy transition projects and outlines essential steps for effective insurance placement that aligns with project risks. It also addresses how to anticipate lenders’ requirements regarding risk management and insurance, and introduces innovative solutions beyond traditional insurance markets that can bridge existing gaps and enhance the bankability of debt-financed transactions.

Facilitating the bankability of energy transition projects

For more detailed insights and comprehensive analysis, we invite you to download the full whitepaper. Access the complete document to explore the intricacies of risk management and insurance considerations that can enhance the bankability of energy transition projects.

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Astrina Patten

Astrina Patten

Global Development Leader, Marsh Structured Finance Practice

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Christophe Pun sin

Structured Finance Practice Leader, United Kingdom