Infrastructure investments have entered the spotlight within the past couple of years with renewed focus on energy infrastructure, renewables, critical minerals, data center construction and more in the age of AI and power modernization.
Large-scale investments in energy, infrastructure and digital infrastructure often rely on project finance—financing structures in which lenders primarily look to the cash flows and assets of a particular project for repayment.
UMB recently expanded its corporate trust and agency services business with a dedicated project finance agency services team. To learn more about this new division, we sat down to interview one of our project finance experts, Brian Studdert, corporate trust senior regional manager.
Through key questions, Brian explains how project finance works, why these transactions require specialized administrative support and where an independent third-party agency provider fits in.
What is project finance?
Brian: At its simplest, project finance is a way to finance a large, capital-intensive project based primarily on the project’s own economics. Typically, a special-purpose entity owns and operates the project, and lenders rely on the project’s assets and cash flow for repayment rather than the broader balance sheet of its sponsors.
You see these structures across a wide range of projects including:
- Renewable energy such as solar, wind and battery storage
- Traditional power generation
- Roads and other infrastructure
- Liquefied natural gas (LNG) and pipelines
- Data centers and other digital infrastructure
Many projects in these sectors require substantial amounts of debt capital and sophisticated financing structures. As the number and scale of transactions grow, the need for experienced teams that can administer them also grows.
How does an agency services provider support project financing?
Brian: Someone needs to handle the administrative responsibilities that sit between the borrower, lenders and other transaction parties throughout the life of the financing.
Depending on the transaction, we can maintain the lender register, open accounts and facilitate payments, coordinate amendments and consents, track required documentation, hold collateral on behalf of secured parties and administer project accounts.
The objective is to ensure the mechanics of a complex financing continue to work as intended while allowing the lenders and project sponsors to focus on their respective roles.
What is the difference between project finance and a conventional corporate loan?
Brian: The project itself is at the center of the financing, which makes the structure highly specialized. Multiple lenders and multiple secured parties may participate, and a significant number of contracts may govern construction, operations, revenue, collateral and other aspects of the project.
For example, during construction, you may enter into engineering and construction agreements, require sponsor equity contributions, and have an independent engineer review progress before you advance additional funds. Once a project is operating, other agreements may govern operations and maintenance, power purchases, or other sources of revenue.
Imagine a consortium of international lenders financing the construction of a utility-scale solar farm through a 70% debt and 30% equity package, backed by a long-term power purchase agreement with an investment-grade utility. Such a deal often requires the establishment of construction, reserve and collection accounts and may be governed by engineering, procurement and construction (EPC) contracts, operations and maintenance (O&M) agreements and an offtake agreement, such as a power purchase agreement (PPA).
What are the principal ‘agent’ roles in a project-finance transaction?
Brian: The exact structure varies by transaction, but four common agent roles are:
- Administrative agent/facility agent – Manages the lender register, facilitates flow of funds, coordinates amendments/consents, tracks the receipt of compliance deliverables and manage correspondence between borrower and lenders under the credit agreement.
- Collateral agent – Holds and manages the collateral for the projects under the direction of the secured parties.
- Depositary agent/Account bank – Acts as the account bank to hold funds and facilitate vendor payments under the depositary agreement or other types of account control agreements.
- Intercreditor agent – Coordinates among the various creditor groups with potentially overlapping claims on the same collateral.
One institution may perform several or all these roles, or they may be divided among multiple providers.
Why might lenders use an independent third-party provider for those functions?
Brian: Many lending institutions have strong internal agency capabilities, but capacity, policy considerations or the requirements of a particular transaction may lead the lender group to engage a third-party provider.
In our experience, clients value a neutral, third-party servicer who understands the intricacies of the deal across the project lifecycle and helps coordinate communication between deal parties. Sector-specific knowledge and the ability to work seamlessly with all deal participants can mitigate risk and enhance the overall administration of the transaction.
How do project finance agency services fit into UMB’s broader corporate trust and agency services business?
Brian: UMB already performs this work across its corporate trust platform as a natural extension. We added project finance as a logical addition to our growing corporate trust division, and it strengthens our ability to serve as a one-stop resource for clients who need trust and agency services.
UMB has built an established reputation in the market as a bank that commits to providing premium service to clients while also valuing their associates. This combination has been a winning formula for growth at the bank, allowing us to better serve clients across the nation. If you’re interested in project finance services, please visit our website.
