Infrastructure and energy projects are financed against contracted cash flows, which means debt capacity is set by the quality of the offtake rather than the quality of the asset. Zenith builds the project finance models lenders test — debt sizing and sculpting to DSCR, covenant design, and commodity scenario analysis — on programmes from USD 100m to USD 600m across MENA, West Africa and Asia.
Equity is usually available for a credible energy transition project. Debt is where it stalls, because lenders size against contracted cash flows and emerging-technology projects rarely have a full offtake book at a bankable price. Hydrogen and ammonia are the clearest current example: immature offtake markets, thin pricing benchmarks, and equipment with limited operating history at scale.
The sponsor's instinct at this point is almost always to argue about the discount rate. That is the wrong argument. The lender isn't disputing the return — they're disputing whether the cash flow exists to service the debt in the downside.
A lender who can see exactly which assumption breaks the covenant, and by how much, can price that risk. A lender who can't, declines — not because the project is bad, but because the exposure is unbounded.
That means scenario analysis run as a matrix rather than as a set of single-variable sensitivities. On a hydrogen and ammonia programme, output price, input power cost and production ramp interact; testing them one at a time produces three answers, none of which describes the actual downside. The covenant headroom has to be tested scenario by scenario, with the breaking point named.
Export credit agency cover and vendor financing are usually treated as things to look at once the senior debt is sized. On projects with significant imported equipment, they should shape the structure from the start — they change the effective cost of capital, the tenor available, and in some cases the senior lenders' willingness to participate at all.
The same applies to available government support. Viability gap funding and tax incentives belong in the model as quantified line items, not as narrative in the information memorandum.
Sculpting the repayment profile to a target DSCR maximises debt capacity, which is usually the sponsor's objective. It also concentrates repayment in the years the model says cash flow is strongest — which means the sponsor carries the timing risk if the ramp is slower than modelled.
The trade-off is real and worth making explicit before term sheets rather than after. A sculpted profile with a covenant that breaks at a 15% production shortfall is a different instrument from one that breaks at 30%, even at the same headline leverage.
Limited-recourse debt sized to DSCR against contracted revenue. Most projects stall at debt sizing rather than at equity, and that is a bankability problem, not a marketing one.
Holdco and mezzanine tranches sitting behind project debt, sized on distributions rather than project cash flow, with intercreditor terms negotiated before the senior lender is asked.
Vehicle raises for managers deploying into contracted energy and infrastructure assets, where LPs test the pipeline and the attribution before they test the strategy.
Model ownership through development and construction, with drawdown mechanics, CP tracking and lender reporting run by someone who has closed a financing before.
Diligence on contracted assets: revenue contracts, availability history, O&M cost base, and the gap between the model and the as-built reality.
An operator inside the development team owning a financeable outcome — permits, offtake, or the bankability workstream — reporting on the project's cadence, not a consultant's.
Development-stage raises where the model, the risk allocation map and the permitting timetable have to agree before the first investor meeting.
Debt structuring for a green hydrogen and ammonia production programme
Project finance debt sizing, sculpting and DSCR covenant design for a Gulf hydrogen and ammonia programme
They size against contracted cash flow, not installed capacity or sponsor equity. Where the offtake book is partial, debt capacity is constrained to the portion of revenue that is genuinely contracted at a bankable price, with uncontracted volumes stress-tested rather than credited. The practical response is to make the uncertainty legible — a scenario matrix showing exactly which assumption breaks the covenant and by how much — rather than to argue the discount rate.
Sculpting shapes the repayment profile to a target DSCR rather than a flat amortisation schedule, which maximises debt capacity by concentrating repayment in the years the model projects strongest cash flow. The cost is timing risk: if the production ramp is slower than modelled, the sponsor carries that shortfall. A sculpted profile breaking at a 15% shortfall is materially riskier than one breaking at 30%, even at identical headline leverage.
From the start of structuring, not after senior debt is sized. On projects with significant imported equipment, ECA cover and vendor financing change the effective cost of capital, the tenor available, and sometimes whether senior lenders will participate at all. Treating them as residual items considered late in the process typically means the structure has already been optimised around the wrong assumptions.
There is no fixed threshold; it depends on offtake quality, commodity exposure and sector precedent, and lenders test it against covenant headroom under stress rather than as a single target number. What matters more than the headline ratio is the scenario at which the covenant actually breaks — a sculpted profile can carry the same DSCR while tolerating a materially different production or price shortfall before default.
It is a project finance model built to the standard lenders will actually test — debt sizing and sculpting to DSCR, covenant design, and commodity or offtake scenarios run as a matrix rather than one variable at a time — completed before term sheets are sought. It is needed whenever offtake, technology or commodity exposure is unproven, because assumptions surfaced during lender diligence rather than beforehand cost momentum and credibility.
Last reviewed August 2026
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