Mid-Market Project Finance includes …
Sustainable Infrastructure, renewables/cleantech at scale, Master-planned Communities, Commercial Agriculture (regenerative, or at least with minimal tillage, certified organic), water, green buildings, healthcare and much more
The middle market includes projects with budgets of $10 million up to $750 million or more, though In3’s minimum is $25 million, within our sector focus, and sweet spot of ~$50M-$750M per project, with dry powder capacity well into the US$ billions range.
Why do we favor the middle market? Because, on the one hand, most project capital is geared toward larger projects as transaction costs are roughly the same for a $5 million project as for a $500 million one.
And on the other hand, much below $25 million for things like sustainable infrastructure (complete list of qualified sectors), with zero up-front fees, would tie up our human resources and/or increase overhead costs of due diligence without necessarily generating commensurate returns. On average, this is a proven model that achieves our mission and UN SDG Impact Investment Strategy.
With the right kind of preparation (a “Completion Assurance” guarantee or security of some sort, typically, alongside a robust commercial opportunity that requires $25 million or more), In3 Completion Assurance Program™ or In3CAP makes the middle market project finance “faster, easier, better.” We deliver on this promise thanks to hard-won efficiency in financing smaller projects — indeed, this is one of our key differentiators as a “boutique” capital formation solution, and we can fund 100% of the project’s total budget at any reasonable stage of development — “shovel readiness” is not required.
How to manage the moment if your project is under $25 million?
Aggregate. Think outside the box, or several boxes.
For example, if working in a sector like renewable energy generation that is inherently “distributed” (unlike centralized oil refineries, for example, that benefit from the economy of scale), then plan and build out a portfolio of projects instead of just the first one or two. Yes, that takes more work than you anticipated, but with In3CAP, you can secure funding under one contract with a longer-than-average draw period, with one or more Special Purpose Vehicles (SPVs perhaps owned by a single holding company, at least in part) and either arrange funding across similar or diverse types of renewables or other types of infrastructure. If you do things properly, this will afford some amount of portfolio optimization to balance performance and mitigate risk.
We can help you figure this out, in some cases, through In3 strategic advisory assistance. Bottom line is that the top line (funding request) has to be at least $25 million, with $75m+ preferred.
Other sectors can use a “multi-local” approach that is more akin to a corporate strategy than the aforementioned financial engineering, but it has been proven in certain markets (such as Consumer Packaged Goods) where products are mass produced but customized to meet the unique characteristic of diverse clientele, economies, and optimized geographic locations. In other words, think big(er).
Why we favor renewables, zero waste, circularity/sustainability, and impact industries
Back in 2015, Bloomberg New Energy Finance reported $329 billion in clean energy projects, but with anticipated $1.2 trillion by 2020, and 280GW (Gigawatts, 1,000 MW) actually achieved (more from IEA). Now, despite the COVID-19 pandemic, there continues to be “undaunted growth” — a dramatic increase in renewables — with global solar and wind installations setting new records that year and on track to continue doing so.
Simultaneously, overall US emissions dropped by ~9% in 2020, which was hard won — largely the result of decreased demand (more), but also the beginning of a strong commitment in many markets to switch to renewables “as if” climate change mitigation really matters. ESG, carbon credits and the overall renewables marketplace is rather robust.
According to BNEF’s New Energy Outlook (NEO), Bloomberg NEF’s annual analysis on the future of the energy economy, “renewables and batteries capture 80% of the total $15.1 trillion invested in new power capacity.” Further, infrastructure must also continue to grow alongside these new, cleaner power sources: “To enable the power system of the future, $14 trillion in grid investment is needed between now and 2050.” (source). Europe alone has now reached a US$5.3 trillion cleantech investment opportunity (source).
How will we “get there from here?” By helping construct a continuum of capital for smaller, more distributed infrastructure projects, spanning clean power generation, waste conversion and biomass, water production or purification, and related projects worldwide. See all qualified sectors. Check back periodically, as this list will change as markets evolve, or ask us.