By AGILE Consulting Engineers, Solar PV and Battery Energy Storage Systems (BESS) specialists.
Lenders do not finance a solar photovoltaic (PV) or battery energy storage system (BESS) project on the strength of a developer’s optimism. They finance it on documentation, and specifically on independent technical documentation that a credit committee with no engineering background can rely on. An Owner’s Engineer (OE) does not arrange finance and cannot guarantee a project reaches financial close, but the quality of an OE’s work through design and early construction has a direct bearing on how smoothly that process runs.
Table of Contents
- Why Lenders Care About Independent Technical Review
- Supporting Technical Due Diligence
- Building a Financeable Documentation Trail
- De-Risking the EPC Contract Structure
- Construction Monitoring for Drawdown and Covenant Compliance
- Completion Testing and Performance Verification
- What an Owner’s Engineer Cannot Guarantee
- What to Do Next
- FAQ
Why Lenders Care About Independent Technical Review
Project finance for renewable energy assets is underwritten against the expected performance and reliability of the asset itself, since the debt is typically serviced from the project’s own cash flows rather than the sponsor’s broader balance sheet. That structure means lenders need confidence in the technical assumptions behind the revenue forecast, the construction program, and the operating cost base, and they generally cannot get that confidence from the developer or the Engineering, Procurement and Construction (EPC) contractor alone, both of whom have a commercial interest in the project looking as favourable as possible. Independent technical input, whether from the owner’s own OE or the lender’s own advisor, exists to give the financing party a view they can actually rely on.
This is a general description of how project finance due diligence typically works. Specific lender requirements, risk appetite and documentation standards vary considerably by deal, by lender, and by market, and should always be confirmed directly with the relevant financing parties rather than assumed.
Supporting Technical Due Diligence
An OE engaged from feasibility or early development builds a body of technical work, including design reviews, yield assessments, connection studies and specification documents, that becomes a direct input into the technical due diligence process ahead of financial close. Rather than a Lender’s Technical Advisor (LTA) starting from a blank page and having to reconstruct the technical basis of the project from scratch, they are reviewing a project that already has a coherent, independently reviewed design record behind it.
This does not remove the need for the LTA’s own independent assessment, and it should not be treated as a substitute for it. What it does is generally reduce the number of open questions the LTA has to chase down, which tends to shorten the due diligence timeline and reduce the number of conditions attached to any resulting financing.
Building a Financeable Documentation Trail
A significant part of an OE’s ongoing value to the financing process is less about any single review and more about the cumulative documentation trail that review work produces. Design basis reports, non-conformance registers, test procedures and results, and correspondence tracking how technical issues were identified and closed out, all become part of the evidence base a lender’s credit process draws on. A project with thin or inconsistent documentation forces a lender’s advisor to spend more time filling gaps and asking for clarification, which adds time and cost to the financing process and can, in some cases, lead to more conservative lending terms as a way of compensating for that uncertainty.
This is one of the more concrete ways OE involvement supports financing outcomes generally, without implying any guarantee about the terms or availability of finance for a specific project, which depend on a much wider set of commercial, market and credit factors outside an OE’s scope.
De-Risking the EPC Contract Structure
Lenders pay close attention to how well an EPC contract allocates risk, because a poorly structured contract can leave the project exposed to cost overruns, schedule delays or performance shortfalls that ultimately threaten debt service. An OE’s review of the EPC contract’s technical schedules, including performance guarantees, liquidated damages provisions and testing methodologies, helps confirm that the contract’s protections are actually enforceable and measurable rather than aspirational language that would be difficult to act on if a dispute arose.
A contract that has been through this kind of independent technical review tends to present fewer red flags during a lender’s own contract review, since ambiguities that would otherwise need to be renegotiated or clarified during due diligence have generally already been addressed.
Construction Monitoring for Drawdown and Covenant Compliance
Once a project reaches financial close, many financing structures require ongoing technical monitoring as a condition of progressive loan drawdown, confirming that construction progress and cost genuinely align with what has been claimed before further funds are released. An OE already embedded in construction monitoring for the owner’s own purposes is well placed to support this reporting, since the underlying inspection and progress data is already being collected as part of the OE’s core scope.
This overlaps with, but does not replace, whatever independent monitoring the lender’s own advisor requires under the financing agreement. The specific reporting cadence, format and independence requirements for drawdown monitoring are set out in the financing documentation and vary by lender.
Completion Testing and Performance Verification
Most project finance structures tie a change in loan terms, such as a shift from a construction facility to term debt, to the project passing defined completion tests, typically covering capacity, reliability and performance criteria verified during Site Acceptance Testing (SAT) and an initial period of commercial operation. An OE’s involvement in specifying and reviewing these test methodologies during design, and then verifying results during commissioning, produces the kind of independently scrutinised performance data that supports a credible completion test outcome.
Because these tests often have direct financial consequences, including the release of retention amounts or the timing of a change in interest rate margin, the credibility of the underlying technical verification matters well beyond the immediate engineering question of whether the plant works.
What an Owner’s Engineer Cannot Guarantee
It is worth being direct about the limits of this role. An OE’s work supports the technical credibility of a project’s financing case, but it does not and cannot guarantee that a project reaches financial close, secures particular financing terms, or achieves a specific credit outcome. Financing decisions depend on a wide range of factors outside engineering, including market conditions, sponsor creditworthiness, offtake arrangements such as a Power Purchase Agreement (PPA), and the broader risk appetite of the lending market at the time. Any specific financing outcome should be discussed directly with the relevant lenders, financial advisors or legal counsel, not inferred from the presence of good technical documentation alone.
What to Do Next
If a project is heading toward a financing process and the technical documentation trail is thin, this is the point where independent technical review can genuinely tighten up the story a project tells its lenders. We’ve helped project teams build out design review and construction monitoring records that hold up well under due diligence scrutiny, and it is a conversation worth having before a financing process is already underway.
FAQ
Does an Owner’s Engineer guarantee a project will secure financing?
No, an OE’s work supports the technical credibility of a project but cannot guarantee financing outcomes, which depend on a wide range of commercial, market and credit factors outside engineering scope.
How does an Owner’s Engineer’s work differ from a Lender’s Technical Advisor’s due diligence?
The OE’s documentation and design record supports and can streamline the LTA’s due diligence, but it does not replace the LTA’s own independent assessment, which the lender relies on for its own credit decision.
What kind of documentation from an Owner’s Engineer matters most to lenders?
Design basis reports, non-conformance registers, test procedures and results, and a clear record of how technical issues were identified and resolved are generally the most useful inputs to a lender’s due diligence process.
Does Owner’s Engineer involvement affect financing terms?
Well-documented, independently reviewed projects can reduce the number of open questions a lender’s advisor needs to resolve, which may support a smoother process, though actual financing terms depend on the specific deal and lender and should not be assumed.
What are completion tests in a project finance context?
Completion tests are defined performance and reliability criteria, typically verified around commissioning and early operation, that a project must pass to trigger a change in loan terms such as moving from construction to term debt.
Should a developer rely on their Owner’s Engineer instead of getting independent financial advice?
No, an OE provides independent technical advice, not financial or investment advice, and any financing-specific questions should be directed to qualified financial advisors, lenders or legal counsel.
