USA: An Introduction to Projects: Agency Financing

Multilaterals, development finance institutions (DFIs), national government agencies and export credit agencies (ECAs) have traditionally been, and continue to be, a source of affordable financing for energy and infrastructure projects and can accept risks that commercial lenders are not willing to.

US Agencies in Transition

US agencies have played a significant role in the efforts to support alternative energy and energy transition projects where commercial funding was unavailable or unaffordable. Projects such as hydrogen production, transportation, storage and utilisation, battery storage, refurbishment or modernisation of fossil fuel and related facilities or energy-intensive industries, manufacturing of zero or low emission vehicles or their components, and the related supply chains and infrastructure, have been supported by the Loan Programs Office (LPO) and other offices of the Department of Energy (DOE) in the US and by the United States International Development Finance Corporation (DFC) in emerging markets.

While the future role of US agencies remains uncertain as of the date of publication, we expect the current Administration to at least reshape their priorities.

• DOE: Funding by LPO and other DOE offices remains available under the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. Although transactions entered pursuant to these authorities remain under review per the “Unleashing American Energy” Executive Order (20 January 2025), we expect DOE’s loan and grant programmes to continue playing an important role in an “all energy” strategy, focusing efforts on nuclear, hydro, geothermal and more efficient fossil fuel power, critical minerals, hydrogen and carbon capture, transportation and storage, among other technologies.

• DFC: DFC was created with bipartisan support under the prior Trump Administration, therefore, we expect its core debt, equity and political risk insurance programmes to continue being actively used, albeit with a greater emphasis on pursuing national interest objectives in jurisdictions considered strategically important for US foreign policy. The European Energy Security and Diversification Act, for example, has facilitated DFC investments in EU member countries for energy security, and we would expect such strategic projects to continue.  

• US EXIM: The Export-Import Bank of the United States (EXIM) has a “beachhead” team (temporarily appointed officials for the new Administration) who know the agency well. Before EXIM can approve new transactions or significant changes to existing ones, the President, with the advice and consent of the Senate, must appoint additional Directors to satisfy the three-member quorum. If quorum is not achieved within 120 days after the inauguration, a temporary board may be available to act. EXIM’s China Competition Committee recently emphasised the importance of the “Make More in America” programme, which offers potential financing for manufacturing and infrastructure projects that support exports, and we expect the programme to gain further momentum.

• DOC: The Department of Commerce’s CHIPS Program Office (CPO) continues to process applications and award funding for semiconductor manufacturing and related supply chain projects. CPO entered into multiple transactions and preliminary term sheets between August 2024 and January 2025. However, the future of the programme is not clear in the absence of an explicit pronouncement about it by the current Administration. In addition to traditional loans and grants, CPO funding includes direct funding awards, combining grant- and loan-like features, including, in some cases, collateral, parent guarantees and upside-sharing arrangements.

• DOD: The extent to which the Department of Defense’s Office of Strategic Capital (OSC) programme for dual-use technologies will be extended also remains unclear. OSC was authorised to act as a lender under the National Defense Authorization Act of 2024 and the window for initial applications – for up to USD984 million in equipment loans – closed in February 2025.

Global Developments

At the global level, multilateral development finance agencies such as the International Finance Corporation (IFC) and IDB Invest have actively supported solar, battery and wind projects, not only to greenify the grid and displace thermal generation, but also to supply industries looking to reduce their carbon footprint, such as mining. In recent times, due to Paris Treaty commitments, some agencies have been reluctant to support gas as a transition fuel, gradually shying away from gas-to-power projects, with exceptions for projects located in countries lacking baseload power; however this trend may be reversed under the influence of the Trump Administration. Small modular reactors and nuclear-related infrastructure are a growing area of interest for European, US and Asian agencies given the absence of commercial funding sources. Although several green hydrogen projects have been announced in countries with abundant and cheap renewable energy, some of the larger export projects may struggle to attract agency funding due to the difficulty of securing long-term committed offtakes and an uncertain regulatory environment.

Critical Minerals and Supply Chains

Ongoing geopolitical tensions have led to a prioritisation of the financing of projects that produce critical minerals for batteries, semiconductors and smart devices. Whilst ECAs have traditionally led financings in the mining sector, in particular K-EXIM, K-SURE, EDC and JBIC, certain DFIs have started to actively support projects involving extraction or processing of copper, nickel, lithium, graphite and other critical minerals, as well as the recycling or synthetic production of minerals.

Commonplace issues in securing long-term offtake and sourcing minerals from safe and reliable countries have prompted a wave of interest in on-shoring or near-shoring supply, such as graphite mining in the US and Canada and lithium mining in Argentina. The emphasis on continuity in the supply chain has led agencies worldwide to support value-added activities (eg, refining, manufacturing of battery components) that are co-located with and linked to mining projects, as well as large-scale EV factory and data centre projects. We expect the trend of ECAs from countries exporting materials or technology teaming up with domestic agencies to continue. On the flip side, the risk of trade wars may complicate the economics of such projects by making the sale of equipment or access to markets uncertain.

Innovations in Risk-Mitigation Products 

Various innovative agency products have evolved, especially amongst Washington DC-based multilaterals and DFIs, driven by political pressure for greater capital mobilisation and in some cases (particularly amongst certain DFIs) increased geopolitical and economic competition. IDB Invest has deployed its “B-bond” product (where bond investors fund projects under the umbrella of the IDB) across a variety of sectors and jurisdictions whilst the Multilateral Investment Guarantee Agency (MIGA) has made versatile use of its Non-Honoring of Financial Obligations’ insurance cover for default risk by sovereigns, sub-sovereigns and state-owned borrowers, including coverage for swap termination costs arising under dollar-funded local currency financings, as seen in the Findeter transaction in Colombia. Meanwhile, DFC, with its wider mandate under the BUILD Act, has made innovative use of both its investment guarantee and political risk insurance products to support local currency financings of infrastructure, such as in the Rio Smart Cities project, as well as coverage for sovereign debt swaps to help countries raise cheaper debt, with cost savings being deployed for conservation and development projects (eg, river conservation in El Salvador, marine conservation in Gabon). It is anticipated that these products will be deployed further to support financings for greenfield projects in countries facing political instability or security challenges.

Water, Food Security and Health 

Traditionally, agencies have been at the forefront of supporting healthcare, agriculture and water supply and treatment projects that are small-scale and have limited scope for private sector capital mobilisation. Post-COVID-19, the agencies’ participation in the healthcare space has expanded with several initiatives in Africa, Asia and Latin America to finance the construction of medical manufacturing facilities and distribution infrastructure, where European DFIs and regional multilaterals have provided substantial support (eg, Aspen Pharmacare’s injectables facility in South Africa and a further loan for Aspen Treasury in 2024 to extend operations in several emerging markets). Larger-scale water treatment, desalinisation and cold storage transportation projects have also taken off due to concerns about food security and climate change, attracting significant investments from agencies both on the debt and equity side. The key to the successful funding of these capital-intensive projects has been the application of public-private partnership models, where agencies, through their product offerings and innovative structuring solutions, have been well-placed to tackle the challenge of marrying the profitability and bankability priorities of private investors with the delivery of essential public goods and services at an affordable cost.