In the United States, nearly every project company is structured as a special-purpose entity (SPE) organized in the State of Delaware – typically as a limited liability company (LLC) that is treated as either a disregarded entity or a partnership for tax purposes (depending on whether there is more than one owner). The SPE holds all of the assets relevant to the specific project’s development, construction, and operation, and the SPE’s sole purpose is the development, construction, ownership, and operation of the project. Typically, the SPE project company is, in turn, directly owned by an SPE holding company (commonly referred to as a holdco). Such holding company is typically organized as an LLC and treated as a disregarded entity or partnership for tax purposes. It may itself be owned by one or more upstream holding entities, depending on the complexity of the capital structure, and may hold multiple SPE project companies. This nearly universal project-level ownership structure is driven primarily by the expectations of financing parties, who require “bankruptcy remoteness” characteristics to facilitate an eventual enforcement action.

The more substantive activity typically occurs above the SPE holding company level, where ownership structures can vary greatly by the nature and type of project, the industry sector, and the nature and type of investor capital. For example, in the renewable energy sector, where tax equity investors have historically played a key financing role, intermediate holding companies are often used to bifurcate tax credit-driven investor equity from sponsor equity (commonly referred to as tax equity partnerships). SPE project companies may be transferred or sold to such tax equity partnerships before the commercial operations date to obtain a more favorable tax basis. Intermediate holding company ownership structures also increasingly reflect the growing role of sophisticated private equity capital on a portfolio-wide basis, with investors focusing on sector- or region-specific markets and deploying equity and equity-like capital to support development activities and sponsor-led growth strategies.

In many non-US jurisdictions, the use of a project-level SPE and an immediate holding company SPE is also typical. However, depending on the country and sector, project company ownership structures may involve concession or concession-like arrangements with governmental and quasi-governmental entities, reflecting differences in the qualitative nature of the project company’s underlying assets. This distinction is particularly relevant to financing parties. In many cases, multilateral financing institutions and development banks may play a role in bridging the risk gap reflected in private lending parties’ generally lower valuation metrics.

Most foreign investors investing in US-based projects have an established track record in such activities and are familiar with Delaware corporate governance principles, US Generally Accepted Accounting Principles (GAAP) and/or International Financial Reporting Standards (IFRS) accounting practices, and the expectations and requirements of private financing parties. The Inflation Reduction Act (IRA) enacted in 2022 created new tax incentives for domestic content, energy communities, and low-income communities, as well as expanded existing categories. This IRA incentive framework was subsequently modified – and, in some respects, made more complex – by the passage of the One Big Beautiful Bill Act (OBBBA), which was signed into law on July 4, 2025. Among other impacts, the OBBBA narrowed certain IRA benefits and eliminated others, while also introducing a complex set of phase-outs and safe-harbor dates for tax credit eligibility, including provisions based on when construction began.

From a corporate governance and accounting perspective, the OBBBA’s introduction of prohibited foreign entity (PFE) restrictions – and related specified foreign entity and foreign influenced entity sub-classifications – is relevant to investors. Analysis of an entity’s PFE status, as well as the PFE-related sourcing rules, can be complex. However, as a general matter, foreign investors may need to demonstrate that they are not PFEs before being accepted as investors. This may include addressing questions regarding ties to, and control by, any “covered nation” (i.e., China (including Hong Kong), Russia, Iran, or North Korea) as well as conducting diligence to confirm the project company in which they are investing is not a PFE, and that the PFE rules have been complied with in the construction of the project to support eligibility for anticipated tax credits.

Most project financings continue to fall along a spectrum between non-recourse and limited recourse to project sponsors and, where applicable, governmental authorities. In a true non-recourse structure, financing parties look solely to project cash flows and collateral for repayment, with no ability to seek recourse against the project sponsor’s balance sheet beyond its equity investment in the project. In practice, however, sponsors in project financings manage balance sheet exposure by negotiating limited and clearly defined recourse obligations. Financing parties may receive support in the form of capped equity capital contribution commitments, make-whole arrangements, completion guarantees, or cost-overrun funding commitments, for example. Credit support also remains a key requirement for pre-financing project development activities, including the posting of letters of credit, bank guarantees, and surety bonds for construction activities, capacity auctions, interconnection obligations, and other counterparty arrangements. Governmental authorities may also require credit support in the form of corporate guarantees from a creditworthy sponsor entity, typically requiring an investment grade rating (i.e., at least a Baa3/BBB- from Moody’s, S&P, or Fitch, respectively) or, where the sponsor is unrated, alternative credit enhancement such as a letter of credit or cash collateral. Additionally, limited credit support structures are playing an increasing role in build-transfer transactions between utilities and renewable energy developers, continuing to blur the lines between mergers and acquisitions and financing in such deals.

Throughout US jurisdictions, the standard suite of security interests granted by project sponsors to construction financing parties continues to encompass all assets of the project company, including all rights relating to the project’s development, construction, ownership, and operation. This includes all personal property (UCC Article 9 collateral) and real property rights. Additionally, construction financing parties typically receive a pledge of all equity interests in the project company. Financing parties also seek to bolster their security interests in Article 9 collateral comprising contract rights by entering into direct agreements (also often referred to as consent agreements) with each major commercial counterparty to the project, whereby financing parties seek additional rights, including step-in rights, cure rights, and rights to receive notice of defaults or proposed terminations, directly from such project counterparties under the key project contracts.

In the area of renewable energy, these project-level security interests are often structured to fall away upon the project’s completion (or placed-in-service date, in tax terms). At that point, a back-leveraged financing structure may operate to remove liens at the project company level and refinance the outstanding project-level construction debt with proceeds of new debt issued to an intermediate holding company of the project, controlled by the project’s sponsor. This structure is typically supported by liens on all of the holding company’s personal property as well as contractual rights to distributions from the project company for application to holding company debt service.

Additionally, we have observed an increase in more complex structures of security interests granted at the intermediate holding company level of project structures, including hybrid collateral structures more familiar to private equity funds that include pledges of capital call rights against limited partner equity investment commitments. Such capital call pledges are not customary in traditional project financing debt capital structures but are increasingly included in bespoke structures in which project sponsors are deploying capital from private equity, insurance, and other co-venturer capital. These arrangements often require careful attention to the intercreditor relationships among project-level lenders and holdco lenders, as well as to the enforceability of capital calls under the governing fund documents and applicable partnership or LLC law.

In non-US jurisdictions, traditional security interest packages remain the standard requirement of financing parties; such packages include pledges of all project-level personal property and real property interests. There generally remains little appetite outside of the US for non-traditional approaches, and typically any valuation gaps are expected to be covered through credit support, often in the form of a sponsor corporate guaranty.

In the US, the primary method of perfecting project-level security interests remains the centralized filing of UCC financing statements over all assets of the project, often filed with the Delaware Secretary of State. This covers perfection over a majority of the usual Article 9 collateral. Common exceptions include the need to perfect by control over the project’s bank accounts, typically pursuant to an account control agreement and often, in the case of projects, subject to the sole dominion and control of the financing parties. Another exception often applies to the pledged ownership interests in the project company where such interests constitute LLC interests; rather than perfecting these interests as general intangibles pursuant to the filing of a UCC financing statement and in order to better protect themselves against a potential future priority claim by a competing creditor (including a bona fide purchaser for value), financing parties often require such equity interests to be expressly both certificated and deemed to comprise securities under and for all purposes of Article 8 of the UCC so that the financing parties can perfect such security interests by possession of the physical certificates representing such ownership interests. Real property interests, whether fee simple or leasehold, are perfected by the filing of a mortgage – and often accompanying fixture filings – in the appropriate state and local filing office. While not relevant to the perfection analysis, financing parties often view, for practical purposes, the contractual rights they seek to obtain from key project counterparties as essential counterparts to their perfected security interests, including direct agreements (in the case of contract rights in key project documents, such as operations and maintenance agreements, engineering, procurement, and construction contracts, and power purchase agreements); landlord estoppels and non-disturbance agreements (in the case of leasehold interests); and title insurance policies (in the case of fee simple interests).

In recent decades, there have been significant developments in countries outside of the US to modernize security interest recording systems, including through adopting more centralized registries for perfection of security interests resembling the UCC filing process in all US states. These more centralized registration processes have enhanced efficiencies and transparency for international financing parties. Local filing and registration regimes remain for real property interests. Further, these registration processes continue to involve more legal formalities than those generally required in the US, such as notarial requirements and stamp or documentary taxes.

The legal process for enforcing on project security is well established under US law. However, the practical and commercial considerations facing financing parties, including relationship management with sponsors, reputational concerns, regulatory constraints, and the complexities of operating infrastructure assets, often render the practice of enforcing on project security more arduous.

As a practical matter, distressed projects typically first enter an out-of-court workout process, commonly referred to as a forbearance arrangement. During this period, the project’s equity owners seek to restructure the project’s debt obligations in a manner acceptable to the financing parties. Workout negotiations often involve concessions on construction or operational timelines, revised budgets, temporary or permanent covenant relief, and modified reserve account funding requirements. Usually, this workout process is preceded by an extended period of incremental waiver requests from the project’s owners.

When financing parties are not inclined to agree to a waiver request – typically in cases involving an event of default resulting from a material problem that is not easily cured by the project’s sponsor (e.g., sustained underperformance, contractor insolvency, or irreparable technology failures) – an initial step is delivery to the project and sponsor of a reservation of rights letter. This letter memorializes the relevant event(s) of default and expressly reserves the financing parties’ rights to exercise all remedies available under the financing documents and applicable law at a future date. While a reservation of rights notice is not a formal legal prerequisite for financing parties to enforce on collateral, it is a practical tool utilized by financing parties while determining among themselves (and potentially among different classes of secured creditors in multi-tranche structures) how they intend to proceed.

If financing parties choose to proceed with foreclosure on project collateral on an out-of-court basis, Article 9 of the UCC provides several pathways for enforcement against personal property collateral, including strict foreclosure (whereby the secured party accepts the collateral in full or partial satisfaction of the secured obligations), public or private disposition sales, and collection of receivables. Consensual foreclosure (i.e., where the debtor agrees to the disposition) is generally preferred, as it avoids disputes over commercial reasonableness. Judicial foreclosure, while available, is less frequently pursued due to the associated time and expense. Typically, a financing party’s first action when enforcing on project collateral is to block the project’s access to its bank accounts by delivering control instructions to the account banks. Financing parties will deliver default notices to project counterparties under the various direct agreements and estoppel certificates, instructing such parties to recognize the financing parties (or their collateral agent) as the sole party entitled to direct performance and receive payments. Article 9 of the UCC provides financing parties authority to foreclose on collateral without judicial involvement, provided the statutory requirements of the UCC are strictly complied with, including delivery of commercially reasonable notice and adherence to the UCC’s overarching standard that all aspects of a disposition must be commercially reasonable.

In practice, traditional financing parties – including commercial banks, institutional investors, multilateral development banks, and export credit agencies – rarely seek to own and operate project assets directly. Their collateral enforcement strategies accordingly go hand-in-glove with such parties’ loan assignment rights under the financing documents. Traditional financing parties are typically not in the business of owning, constructing, and operating projects and often face regulatory constraints or corporate charter limitations that preclude direct ownership of operating infrastructure. Consequently, foreclosing financing parties typically seek to identify a buyer of the secured debt obligations – often a distressed debt fund, infrastructure-focused private equity sponsor, or strategic acquirer – at a negotiated discount to the par value of the outstanding debt. The foreclosure process is then coordinated with the debt purchaser, who upon assignment may elect to pursue its own UCC remedies to enforce on the project collateral and either assume ownership of project assets or negotiate a consensual restructuring with existing stakeholders.

In the event the project company files for protection under Chapter 11 of the US Bankruptcy Code, enforcement on collateral is effectively stayed at the outset of the filing. This stay prohibits secured creditors from taking any action to enforce their security interests, foreclose on collateral, or exercise setoff rights without bankruptcy court approval. The ultimate resolution of secured creditors’ claim on project collateral is then subject to a plan of reorganization (or liquidation under Chapter 7 of the US Bankruptcy Code) approved by the bankruptcy court.

In many non-US jurisdictions, enforcing on project collateral may be considered a more complicated process with less predictable outcomes, both legally and commercially. Whether due to labor protections or governmental regulations applicable to (or state interests in) key project assets, enforcing on local project collateral usually requires recourse to local courts and the concomitant legal risk and delays. For these reasons, foreign financing parties may seek to structure as much project collateral as possible in offshore vehicles, including offshore bank accounts and intermediate holding company share pledges, which are easier to enforce on quickly. Additionally, certain jurisdictions have developed local structures to facilitate foreign financing parties’ ability to enforce on project collateral without getting tied up in unpredictable and drawn-out court processes, including security trust vehicles and expedited enforcement on debt obligations evidenced by promissory notes.

In the US, the overriding principle governing the security regime is the parties’ broad ability to contract directly as to their relative rights, priorities, and remedies in an enforcement action, subject to the relatively light-touch and predictable UCC statutory regime applicable to the creation, perfection, and enforcement of security interests in personal property, as well as to court involvement in the event of a voluntary or involuntary bankruptcy/insolvency filing.

In the US, all traditional project risk considerations apply – including regulatory and permitting risk, technology risk, construction and completion risk, force majeure, supply chain risk, and offtake and market risk – though in different proportions depending on the nature of the project, sector, and sponsor profile. Construction risk is typically mitigated through fixed-price, date-certain engineering, procurement, and construction contracts, performance bonds, and sponsor completion guarantees, while technology risk varies significantly between proven technologies (e.g., solar PV and onshore wind) and emerging sectors (e.g., offshore wind, green hydrogen, nuclear in the form of small modular reactors, and geothermal). In recent years, political and policy risk has become an increasingly relevant consideration for financing parties, in part due to structural challenges to federal spending authorizations. Supply chain disruptions and inefficiencies have also had a significant flow-through effect on project timelines and inflation of project budgets. For renewable energy projects specifically, regulatory and permitting risk arising from multi-year interconnection queue backlogs at transmission organizations has emerged as a notable concern. Physical risks from extreme weather events have also received increased attention from financing parties, which could require environmental risk assessments and enhanced insurance coverage for projects in vulnerable geographical locations.

In the US, financing documents generally do not require governmental approval or filing to be valid, binding, or enforceable, nor to be admissible as evidence. UCC financing statements must be filed to perfect security interests in most relevant categories of personal property, and mortgages and deeds of trust must be recorded with county recorders to perfect real property liens, but these are security interest perfection tools to establish a financing party’s rights vis-à-vis other third-party creditors rather than legal requirements to establish contractual validity. Certain regulated sectors (e.g., energy, telecommunications, transportation) may require regulatory approvals for changes of control or the grant of security interests over licensed assets.

In Latin America, formality requirements may be more extensive. Many jurisdictions require notarization of financing documents. Security documents typically must be registered with public registries, including mercantile registries, real property registries, and pledge registries, to be perfected. Foreign currency loans may require registration with the central bank. Apostilles may be required for documents executed abroad to be admissible in local courts. These formalities vary by jurisdiction and should be confirmed with local counsel.

In the US, the OBBBA and related PFE restrictions are applicable to projects in the natural resources sector, most often affecting mining projects involving critical minerals and renewable energy supply chain inputs.

In the US, environmental considerations in project financing are shaped by a combination of federal and state regulatory requirements and financing party expectations. Environmental compliance is an established area, with projects potentially subject to federal review under the National Environmental Policy Act, species protections under the Endangered Species Act, and air and water quality regulations under the Clean Air Act and Clean Water Act. State environmental laws, such as the California Environmental Quality Act, may impose additional requirements. Financing parties typically require Phase I/II environmental site assessments and compliance representations. Social considerations include federal prevailing wage and apprenticeship requirements, as well as community benefit agreements for large infrastructure projects. In the rapidly expanding data center and artificial intelligence (AI) infrastructure sectors, environmental considerations for financing parties have become more pronounced. Water consumption for cooling systems has drawn regulatory scrutiny and community opposition in water-stressed locations, while concerns over energy demand and grid capacity have prompted certain jurisdictions to impose moratoriums on new data center development. Institutional investors and multilateral lenders may require adherence to international standards such as the International Finance Corporation Performance Standards or the Equator Principles. Governance requirements focus on SPE organizational covenants (e.g., anti-corruption compliance). The growing market for sustainability-linked loans and green bonds has introduced additional reporting and verification requirements.

Many states in the US have enacted public-private partnership (PPP) laws and structures, primarily in the context of transportation and social infrastructure. Notwithstanding these laws and structures, PPP transactions remain relatively uncommon in the US due largely to a continued preference for public financing regimes (including municipal bonds) and the relative depth of private financing markets.

Yes, these are key components to the widely held perception of the US as a jurisdiction with relatively low legal risk for projects and business activities generally.

Yes, see above.

Current key issues in the US for project financing generally are the dual headwinds of geopolitical and economic shifts, including price increases, among other factors, in energy commodities, as well as inflationary effects on project inputs and labor costs. These factors are broadly applicable across project types.

In the energy sector specifically, these general headwinds have arisen alongside increasing demand for energy, aging grid infrastructure, delays by grid interconnection authorities in certain regions, and the continued mismatch between a project’s costs and the contractually agreed purchase price for generated electricity in virtual power purchase agreements. These challenges, combined with the OBBBA rollbacks and resulting regulatory changes, have affected momentum in the renewables sector following the IRA’s substantial government investments, which had attracted inbound private capital investment in US renewables and energy transition assets.

Particularly relevant to the energy transition economy is the role the IRA played, prior to the passage of the OBBBA, in accelerating the advancement of projects in clean technology areas that, to date, have had limited, if any, private financeability. Battery storage projects have evolved from a frontier area of project finance a few short years ago to a more established component of the solar and broader renewables project financing market. Deployment of clean hydrogen (green and blue) alongside more established industrial applications, carbon capture technologies, and less mainstream generation sources like geothermal and small nuclear are gaining financeability through the monetization of tax credits under the IRA, many of which remain available following OBBBA rollbacks and reductions.

Critical minerals and mining represent an emerging focus for project financing stakeholders both within and beyond the US. Driven by the energy transition’s demand for lithium, cobalt, nickel, copper, and rare earth elements, financing parties have increasingly expressed interest in this sector. In the US, domestic content requirements and critical mineral sourcing rules are reshaping supply chains, while the US Department of Energy Loan Programs Office has expanded its mandate to include critical mineral processing facilities.

Additional growth trends include data center and AI infrastructure financing (driven by exponential growth in computing demand), grid infrastructure and transmission development, and the growing role of private credit funds across the project finance capital stack – although such role is still modest compared to bank financing.

See above. In the US, the IRA, as modified by the OBBBA, constitutes the primary legislative landscape with respect to the energy transition.

As described above, subsidies and incentives implemented through the tax code have historically been key features of renewable energy project financing in the US. Historically, the tax credit regime in the US was generally accessible via tax equity investment, which often presented a significant barrier to foreign investor capital, in part due to the legal complexity of the tax-driven financing regime and its particularity to the US. When combined with the relatively high US legal costs and the general bespoke nature of each project’s contractual arrangements, foreign investors have historically been reluctant to dedicate the resources and capital to such projects. The passage of the IRA, however, allowed such tax credits to be sold to unrelated third parties for cash, eliminating the long-term commitment and legal complexity required by a tax equity investment, and introduced subsidies that have enabled a larger pool of new projects to “pencil out” profitably. Additionally, although OBBBA restrictions have affected investor activity, increased focus on energy independence and continued demand for foreign private capital have partially offset those effects.

As described above, in the US the capital stack for projects is often deep and layered. Depending on the market sector, this capital stack may include federal grants and loans (such as those from the US Department of Energy Loan Programs Office and the Department of Transportation’s Transportation Infrastructure Finance and Innovation Act/Railroad Rehabilitation and Improvement Financing programs); local and state grants and subsidies; development/front end engineering design-stage debt from shareholders or investors; a growing class of private alternative lenders to energy project developments; traditional financial institutions for construction debt; tax credit-driven investment capital, whether from tax equity investors or tax credit buyers; private equity fund capital ranging from equity to mezzanine debt; and, in the case of credit funds, senior secured debt, and increasingly private equity capital funding development-level capital requirements of project portfolios to generate scale. Insurance players have recently begun entering the project development financing market with unfunded capital commitment facilities. Project bond issuances remain less common than bank debt.

In the US, development bank and export credit agency (ECA) financing is less common for project financings than in many non-US jurisdictions, given the depth of private capital markets in the US. However, there are relevant examples: The Export-Import Bank of the US may participate in US-based projects in certain circumstances; the Department of Energy’s Loan Programs Office provides concessional financing for innovative energy, infrastructure, and critical mineral projects; and non-US ECAs may combine with one or more private lending institutions to support the development and construction of a project in the US that involves the purchase of equipment or other content from a national company supported by such ECA.

In the US, financing parties require comprehensive insurance packages covering property damage, business interruption, general liability, and builder’s risk. Key considerations include adequate coverage limits, lender loss payee and additional insured endorsements, and compliance with financing document requirements. Insurance proceeds are typically subject to the cash waterfall provided under the financing documents and may be applied to restoration or debt prepayment at the financing parties’ discretion. Insurance products specific to tax credit risk, while not new, have evolved to meet the needs of tax credit buyers. Additionally, certain insurers are increasingly providing unfunded capital commitment facilities to support project development portfolios.