Construction and Operation Financing Options
During the construction and operation stage of geothermal power projects, financing options, such as insurance company, pension fund, and bank financing; and mini-perm loans are utilized.
Once a substantial amount of the geothermal resource has been proven project developers are able to seek project-level debt to finance construction and operation of a geothermal power plant.
Insurance Companies, Pension Funds, and Banks
Geothermal construction financing is offered by a number of insurance companies, pension funds, and a select number of banks. This type of construction financing is typically converted to term loans at the end of construction.
One lending option available for the construction and operation stage of a geothermal power project is a "mini-perm" loan, which is a term loan that is longer than a typical bank debt but shorter than long-term "permanent" facilities. These types of loans are typically payable over five to seven years and include a balloon payment at the end of the loan. This structure enables the investor to reduce their risk (through the shorter loan tenor) while allowing the developer time to obtain a longer-term loan after building an operational track record, thereby lowering the "permanent" loan's cost to the developer.
Learn more about financing options for the construction and operation stage of a geothermal power project, as well as examples of "mini-perm" loans and insurance company, pension fund, and bank financing in the Guidebook to Geothermal Power Finance.