- Attracting early-stage private financing can be difficult for FOAK technologies because they require large infrastructure investments without a track record, creating a “bankability gap.”
- A few factors tend to separate FOAK deals that get financed from ones that stall.
- This is the kind of multilayer structuring problem Market Street Capital is built to help sponsors navigate, not as an energy-specific lender but as an independent advisor and structurer.
Every energy technology that eventually becomes “bankable” has to survive an awkward middle stage first, the point where the tech has been proven in a lab or pilot but hasn’t yet run at commercial scale long enough for lenders to trust it. These first-of-a-kind (“FOAK”) projects are demonstration- and deployment-stage projects being brought to final investment decision for the first time, without the operating history conventional lenders rely on. These projects can’t be financed like conventional infrastructure. There’s no historical performance data, technology risk is higher and it’s harder for lenders to feel comfortable. The fix isn’t a single loan or investor, but a layered capital stack, with each layer priced for a different piece of the risk. Helping sponsors assemble and negotiate that stack is where firms such as Market Street Capital come in, working across debt, equity and structuring as sponsors pursue a financing that lenders will support.
Conventional project finance works because lenders can underwrite predictable cash flows against proven technology backed by strong offtake. However, attracting early-stage private financing can be difficult for FOAK technologies because they require large infrastructure investments without a track record, creating a “bankability gap.” Performance guarantees are thin, construction costs are harder to pin down and counterparties are often unproven. The natural response from senior lenders is to pull back or shrink their check size, which makes equity more expensive and pushes sponsors toward hybrid capital to bridge the gap.
Senior debt remains the cheapest capital available, sitting first in line and wanting long-dated, contracted cash flow. For FOAK deals, senior debt typically covers a smaller share of total cost than in conventional projects, and senior lenders often need support from programs such as the U.S. Department of Energy loan programs administered under Title 17 (program naming and structure as of August 2026), export credit agencies or completion guarantees before they’ll commit.
Mezzanine debt can fill the gap between what senior lenders will underwrite and what sponsor equity can fund alone. Mezzanine sits between senior debt and equity, carries a higher coupon and is typically structured as subordinated debt with warrants or other equity features; it is flexible, but it requires careful intercreditor negotiation.
Tax equity monetizes incentives such as the Investment Tax Credit (“ITC”) or Production Tax Credit (“PTC”) along with accelerated depreciation. For example, according to Norton Rose Fulbright, about 80% of solar tax equity deals use a “partnership flip” structure, which typically raises 35% of project value (plus or minus 5%), alongside two other common structures: inverted leases and sale-leasebacks. Since the Inflation Reduction Act, sponsors have a further option: Section 6418 of the IRA allows an eligible taxpayer to transfer some or all of an eligible tax credit directly to an unrelated buyer in exchange for cash, giving sponsors an alternative to the more complex legacy tax equity structures.
In addition, offtake-backed structures, or power purchase agreements (“PPAs”), tolling agreements and product offtake contracts, de-risk revenue. An offtake agreement is a contract between a power producer and a purchaser for the future output of a project, providing revenue certainty that is crucial for securing financing. PPAs can be physical, with actual delivery of power, or financial hedges where a creditworthy buyer provides guaranteed offtake in exchange for cost predictability, without taking physical delivery. Either structure can be used to anchor project financing.
Sponsor/common equity and government co-investment sit at the bottom of the stack, absorbing first losses. Programs such as the DOE’s Energy Dominance Financing (Section 1706) program, which the DOE describes as guaranteeing loans to projects that add energy to the grid or enhance reliability (program guidance as revised May 2026), often function as much as a credibility signal to private lenders as a source of capital itself.
Layering five or more capital sources together means the real work isn’t just sourcing money. Rather, it’s sequencing it: Waterfall priority, covenant stacking and intercreditor agreements across senior debt, mezzanine, tax equity and offtake-linked capital all have to be negotiated so no single provider is left exposed to risk it didn’t sign up for.
A few factors tend to separate FOAK deals that get financed from ones that stall. Those factors can include creditworthy offtake counterparties, independent technical due diligence that validates performance claims, or completion and performance guarantees from sponsors or technology providers. Other factors could include risk allocated so no single capital source bears the technology risk alone and government co-investment that signals to private lenders the diligence has already been done.
This is the kind of multilayer structuring problem Market Street Capital is built to help sponsors navigate, not as an energy-specific lender but as an independent advisor and structurer. Through its Debt Capital Markets & Specialty Lending practice, the firm works on senior debt, unitranche and mezzanine structuring, and its private equity capital-raising capabilities extend that reach to the equity side of a deal. Market Street maintains a syndication network of more than 8,000 investor, family office, venture capital and bank contacts to date, which it uses to identify potential lenders and equity partners; network size does not indicate that any investor will participate in a given transaction. Its focus on designing facilities, negotiating intercreditor terms and preserving sponsor optionality maps directly onto the complexity of stacking senior debt, mezzanine and equity together.
FOAK financing is won or lost on structuring, not just capital availability. Sponsors typically need an adviser who can coordinate across five or more capital providers. That coordination role is the focus of Market Street’s middle-market advisory work.
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Disclosures
This article is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Any such offer may be made only pursuant to definitive offering materials and applicable transaction documents.
Nothing in this article is tax, legal or accounting advice. Readers should consult their own advisers.
Market data and third-party information are from sources believed to be reliable but have not been independently verified. No representation is made as to accuracy or completeness. Statements about financing structures are general in nature; no financing outcome can be assured.
Broker-dealer services are provided by Pickwick Capital Partners, LLC, Member FINRA/SIPC.
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