A solar developer that signs a power purchase agreement walks away owning nothing the lender can put a charge over. The array is bolted to a factory roof the developer does not own, supplying a tenant who pays per kWh and could be anyone from an investment-grade manufacturer to a single-site SME on a short lease. The conventional asset-finance question, what is the kit worth if we repossess it, returns almost nothing, because nobody is going to unbolt 300kW of modules from a live roof and sell them on. The thing of value is the contract, not the plant.
That is the structural fact most generic funding advice misses about third-party-owned clean-tech. A UK commercial solar PPA is typically a 15 to 25 year contract under which the developer funds, owns, operates and maintains the system, and the occupier of the building buys the electricity it generates at a rate below grid retail. The developer keeps the export revenue, the asset, and the capital allowances. The occupier takes no ownership risk. Everyone gets what they want, and the developer is left needing to finance an asset whose entire worth lives in a stream of future payments from a counterparty it does not control.
Lenders underwrite the offtake, not the panels
When the asset is owned by a special-purpose vehicle and the revenue comes from a long contract, the file gets underwritten the way project finance is underwritten everywhere: against the cash flow, on a largely non-recourse basis, with the lender's security sitting inside the SPV rather than against the sponsor's wider balance sheet. The questions that move terms are about the contract.
- Who is the offtaker and how good is their covenant. A 20-year PPA with an investment-grade tenant is bankable on its own. The same PPA with a thinly capitalised single-site occupier is not, however good the irradiation modelling looks.
- What happens if the occupier fails. Lenders want a direct agreement with the offtaker and step-in or replacement rights, so that if the developer goes under the contract can be assigned to a replacement operator rather than collapsing. This is standard in serious offtake financing and its absence is a red flag.
- Where the money lands. Mature structures route the offtaker's payments into a collection account the lender controls, so debt service is taken before cash reaches the developer.
- What the contract is worth net of the wrong tenant. Counterparty concentration in a small portfolio of rooftops is the equivalent of customer concentration in a trading business, and it is priced the same way.
Get those four documented, with the PPA term-sheeted and the offtaker's covenant independently assessed, and the file moves. Leave the offtake still in negotiation and it sits, because there is nothing else to lend against. The discipline here is the same one that governs ground-mount and storage project finance for energy businesses: the offtake document is the most important file in the data room, not a supporting exhibit.
The installer has a different problem entirely
A developer financing owned-but-not-on-its-land assets is one thing. An installer or EPC contractor that builds these systems for others has the opposite cash-flow shape and needs a different conversation. The squeeze is procurement.
A commercial install runs through design and the DNO application, then procurement, then weeks on site, then commissioning. Major equipment, modules and inverters, commonly carries a 6 to 10 week lead time, longer for specialist hybrid or three-phase inverters, and suppliers want a deposit before they release a custom batch. So the installer pays out for stock weeks before it can issue a stage invoice, and the gap between deposit and first payment is exactly the period when working capital is thinnest and the order book is busiest. Win three large contracts in the same quarter and the deposits alone can exhaust the bank.
This is not an asset problem and it should not be solved with an asset facility. It is a timing problem, and it is solved by matching funding to the cash cycle:
- A revolving facility against the contract or invoice trail. Where the installer raises stage invoices to a commercial client, invoice finance advances against those receivables and releases cash as the job progresses rather than at the end. It fits B2B installation work where the debtor is solid and the retention is understood.
- Working capital sized to the procurement gap. Where the pressure is the supplier deposit rather than an unpaid invoice, a cashflow loan bridges the weeks between paying for modules and billing the client, so a busy pipeline does not become a liquidity event.
The mistake is funding deposits out of retained profit and then discovering the pipeline has outgrown the balance sheet mid-quarter. Lead times do not flex to suit cash flow.
Where equity belongs, and where it does not
Developers building a portfolio of PPA-backed rooftops eventually hit the limit of what debt against early contracts will support. At that point the question is whether to keep funding the next tranche of installs from senior debt or to bring in capital that shares the development risk. A clean-tech developer with a proven offtake template and a pipeline of signed or near-signed PPAs is exactly the profile infrastructure and energy-transition funds want, and an equity introduction can fund growth that debt alone will not stretch to. The judgement is whether the portfolio is contracted enough to be debt-bankable, in which case keep the equity, or still speculative on offtake, in which case it is not yet a debt story at all.
The thread running through all of this is that ownership and value have come apart. The installer who never owns the roof, the developer who owns an asset worth only as much as its contract, the EPC firm whose real exposure is a supplier deposit rather than a depreciating machine. Fund the contract and the cash cycle, not the hardware, and the structures fall into place. Try to charge the panels and you will find there is nothing there to take.