Project finance is booming in the US, with the market doubling since Donald Trump was last president. There is a sense more is at risk this time around following passage of the IRA. By Nic Stone
President Donald Trump will be back in the White House and since his election victory on November 5 he has spent countless hours at Mar-a-Lago planning for his second stint in control of the world’s biggest project finance market. Of course, he probably hasn’t much done thinking himself specifically about project finance, but his actions so far would indicate two major thrusts of his administration that will likely impact the market.
First, Trump has followed through on a promise to create a Department of Government Efficiency, helmed by businessmen and noted metaphorical chainsaw lovers Elon Musk and Vivek Ramaswamy, which embodies his administration’s desire to pare back a bloated government and has already singled out tax credits in current president Joe Biden’s Inflation Reduction Act as targets for the chainsaw’s ire.
Second, Trump has tapped North Dakota governor Doug Burgum as head of the Interior Department and energy czar, a newly created position, and billionaire oilman Harold Hamm, founder of Continental Resources, as part of the energy policy transition team which will bring the “drill, baby, drill” ethos from the campaign trail to fruition and has already seen renewable energy project sponsors scale back expectations.
Republicans are in control of the three legislative branches and have vowed to bring a tax bill early in the new year, which will likely mean the implications for project finance also come quickly and heavy with politicking. Put simply, the changes brought in with the IRA created new ways to finance renewable energy projects and they will be under the microscope, while the deference and assistance given to financing decarbonisation will go elsewhere.
The data suggest it could be a cautious time for project finance dealmaking in 2025. In 2016, at the time of Trump’s last election, the US market had a tough year and fell back by 40% to US$33.8bn prior to him taking office. At the time the question was whether Trump could boost infrastructure spending in the short term, as he had promised. Activity picked up in 2017, by 25% to US$42.5bn, according to LSEG data. By the end of Trump’s stay the market was at US$53.4bn, somewhat hampered by the outbreak of the pandemic.
But those numbers seem rather small now and it is fair to say Trump is inheriting a booming project finance market in the US. More than US$116bn was done in the US in 2023, up from US$104bn in 2022, according to LSEG data – both around twice as much as the biggest years under Trump.
This year records will likely be broken again – the US captured 67.7% of Americas loan activity and led the global market with US$87.7bn from 193 deals, recording the highest first three quarters to date. That figure doesn’t take into account tax equity and tax credit transfer activity likely to be around US$50bn or the US$30bn in project bonds also sold in the US.
The IRA created fertile land for renewables finance with US$400bn in funding for clean initiatives, expanding tax equity and introducing tax credit transfers. The Infrastructure Investment and Jobs Act (IIJA), another Biden administration feat, directed US$1.2trn over 10 years to infrastructure improvements.
Trump will inherit a power market that is growing in demand for the first time in 20 years, driven by data centre and computing needs, with 5% growth in 2023. In the US, data centre loans themselves made up US$28.3bn of the US$87.7bn total in the country through three quarters in 2024, according to LSEG data.
But a change of government has typically produced a down period in dealmaking in the power sector, as the market parses through what the new paradigm means and how new regulations or discontinued regulations might impact a deal.
Last time Trump was elected, power sector activity dropped 12.5% during his first six months in charge. Power sector activity during that 2017 was US$18.9bn from 92 deals, down from US$20.4bn from 100 deals in 2016 – a 7% year-on-year drop in terms of volume.
So, this time around there is more at stake, at least for project finance. That has meant the market response has been quite trepidatious, driven largely by fear about just how excited that metaphorical chainsaw will be when it is carried into Washington by Trump, DOGE, and the new team.
“Existing federal spending programmes, incentive programmes, and even routine government expenditures could be significantly scaled back, or even dismantled,” wrote David B Dixon, Aimee P Ghosh, Aaron S Ralph, and Alexis P Landrum in a grim note put out by Pillsbury.
“For those interested in appropriated but not yet obligated funds, focus on encouraging obligation as soon as possible. This includes grant applicants who are in the final stages of award negotiation. For those who have received federal awards and contracts, extra care should be given to ensure compliance with federal regulations and contract requirements to avoid termination and/or clawbacks,” they warned.
Banks are hitting pause on some IRA financings which include longer time horizons, another indication 2025 might be a case of wait and see. Newer technologies and projects that rely heavily on government subsidies are being pushed to the back of the queue, because the market expects cuts to come in those places first.
While pre-construction financings are drying up due to fears over the changes to the credit regime – tax credit transfer bridge loan structures are becoming more conservative.
Republican states have been major beneficiaries of some of those Biden policies and Trump may face opposition from his party to change legislation too much. But Trump’s pick for Treasury secretary Scott Bessent has pledged to rescind unspent money from the climate law.
For longer-term projects that are looking to borrow against future tax credits, “there is a pause to see how these situations are going to play out”, Vikrant Prakash, head of Societe Generale's Energy+ group in Houston, Texas, recently told IFR.
“The near-term stuff is in pretty good shape, but there will be concerns if you have something that’s going to start construction in 2025 or later,” said Matt Shanahan, managing director at Chicago-based investment bank Marathon Capital.
In terms of the immediate ramifications of the election, renewable energy projects that have started construction by the end of the year, either in terms of actual shovels in the ground or by fulfilling requirements for tax purposes, should remain eligible for all anticipated tax credits.
Going forward, however, changes to eligibility requirement for the full investment tax credit could be on the table. For example, one scenario could see wage and apprenticeship requirements which are viewed favourably by the incoming administration provide the base for the credit, rather than the bonus credit.
The domestic content bonus credit aligns with the perceived goals of the new administration, so may likely remain. There is less certainty on direct pay and transferability provisions, but they could remain based on the incoming administration's favourable view of private sector parties working out deals with each other and without government interference, one panelist noted.
Certain segments of the energy industry could be buoyed by Trump, however, including nuclear development and carbon capture and sequestration (CCS). Market participants are keeping a close eye on any changes that may be implemented at the Nuclear Regulatory Commission which could result in expedited design and permitting.
George Gianarikas, managing director and senior analyst at Canaccord Genuity, pointed out this type of change would be viewed as “hugely positive”, as there is lots of interest in nuclear from data centre developers.
CCS projects could garner favour with the new administration as they may be seen as adjacent to fossil fuel priorities. The market is watching for changes at the Environmental Protection Agency. Any movement that indicates there will be fewer coal project shutdowns is being watched as an indicator that fewer renewables projects will be needed.
Some groups have already adjusted expectations the other way and offshore wind is one area that will hit a speedbump. TotalEnergies has paused development of its Attentive Energy offshore wind project which it is developing alongside Corio Generation and Rise Light & Power, the French company’s CEO said at an industry event.
“In offshore wind, I decided to put the project on pause, because all the offshore wind projects are in Democratic states … we’ll see better in four years,” Patrick Pouyanne told the Energy Intelligence Forum.
The sponsors recently bid the 1,404MW Attentive scheme off the coast of New York into the NY5 offshore tender and it will be built on seabed lease OCS-A 0538 that was originally secured by TotalEnergies in February 2022 during the New York Bight auction.
Total owns 56% of the Attentive Energy project while partners Corio Generation and Rise Light & Power hold 27.7% and 16.3%, respectively.
German energy company RWE has said the risks for investment in offshore wind in the US have increased following the election, prompting the company to scale back its plans in the country.
The company said the election “affects RWE’s offshore wind project off the east coast of the US, which could be delayed due to outstanding permits”. RWE has a 6GW pipeline in the US and alongside National Grid is developing the 1.3GW Community Offshore Wind scheme off New York, which it bid into the recent NY5 tender.
“In light of these risks in our market environment, we have recalibrated our capital allocation. Our annual investments over the next two years will be lower than this year, reflecting expected delays in the US offshore wind business and slower progress in the hydrogen ramp-up,” said CFO Michael Mueller.
Trump’s team is filling out. He has revealed his picks for cabinet positions crucial to the future of energy and transportation programmes and incentives under the IRA. Aside from Burgum, he has already tapped a number of people for key roles.
Trump selected oil and gas executive Chris Wright as his pick to lead the Department of Energy, former Wisconsin congressman and Fox Business host Sean Duffy as transportation secretary, and former New York Congressman Lee Zeldin to oversee the Environmental Protection Agency.
Wright is the founder and CEO of Denver-based oilfield services firm Liberty Energy and is expected to support Trump's plan to maximise production of oil and gas. Zeldin voted against Biden’s 2022 climate law with all other House Republicans, and was among the majority of House Republicans who also voted against the 2021 bipartisan infrastructure law which contained EPA funding for clean school buses, toxic brownfields cleanup, and funding to replace lead pipes and service lines.
Duffy will take over from Pete Buttigieg in the role and will be tasked with managing the remaining funds from the US$1trn infrastructure law. He represented Wisconsin’s 7th district in the House of Representatives between 2011 and 2019.
He served as the chairman of the House Financial Services Subcommittee on Oversight and Investigations and was a member of the subcommittee on Capital Markets and Government-Sponsored Enterprises. Trump said Duffy will prioritise "excellence, competence, competitiveness and beauty when rebuilding America’s highways, tunnels, bridges and airports".
Trump’s transition team is putting together a wide-ranging energy package to roll out within days of his taking office that would approve export permits for new liquefied natural gas projects and increase oil drilling on federal lands, sources recently told Reuters.
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