Lenders financing renewable electricity exports linked to the EU Carbon Border Adjustment Mechanism (CBAM) are seeking step-in arrangements that preserve plant operations and key contracts, alongside access to records supporting past and future electricity imports. The issue is that a project can keep generating capacity and grid connection while losing revenue assumed in its financing model if supporting documentation is unavailable. This adds an additional continuity requirement for project finance.
Contractual rights over the physical asset are described as needing support from arrangements that maintain the evidence required to demonstrate electricity eligibility. Those same arrangements are also expected to substantiate associated commercial claims. The continuity focus extends beyond operational continuity to the documentation used for CBAM-related treatment.
CBAM default values depend on specific documentation
Under the current CBAM framework, default values remain the standard route for imported electricity unless conditions for installation-specific actual emissions values are met. The conditions include a qualifying physical power purchase agreement (PPA), the relevant network condition, and a generating installation below a 550 g CO2/kWh fossil-fuel-origin emissions threshold. Additional requirements include firm nominations matched with production over periods of no more than one hour and independent verification supported by at least monthly interim evidence.
Changes in counterparties can disrupt access to the documentation used to support this treatment. The project may need continued access to PPA records, meter exports, nomination histories, network documentation, importer allocations, and correspondence with the verifier. Even if the generating asset and grid connection remain operational, obtaining those records can become difficult after a trader or offtaker replacement.
The risk is not limited to immediate contractual handovers. If historical records cannot be retrieved or if the data flow needed for future reporting cannot be maintained, support for the intended emissions treatment may be affected. The continuity requirement therefore includes maintaining access to information used for ongoing CBAM reporting.
Direct agreements and lender step-in roles
Direct agreements are described as needing provisions that protect data-access rights and enable controlled handover procedures. They should also allow the appointment of replacement service providers. The aim is to preserve operational records and supporting evidence following a default, counterparty replacement, or transfer of project responsibilities.
A lender exercising step-in rights is described as not automatically becoming the CBAM declarant. Instead, the lender’s role is presented as preserving contractual and operational infrastructure needed to maintain project value while parties and responsibilities are reorganised. This distinction is relevant where compliance responsibilities remain with other entities.
Multiple contract layers for industrial customers
The structure becomes more complex when renewable electricity supports industrial steel or aluminium customers through multiple contractual layers. Lenders are described as needing to identify which entity controls electricity transactions, Guarantees of Origin (GoOs), industrial customer data, and CBAM evidence. The contractual structure should prevent a default at one level from blocking access to records or value associated with other layers.
This approach links evidence access with transaction control across different parts of the contracting chain. It also reflects that CBAM-related documentation can be distributed across multiple roles rather than held in a single place within a project structure. Lenders therefore face continuity questions beyond physical asset control.
Counterparty indemnities and liquidity considerations
Counterparty assessments are described as needing to distinguish between the offtaker, intermediary, and guarantor. The practical value of an indemnity is described as depending on the counterparty’s financial capacity and the time needed to obtain payment. This is particularly relevant where a statutory liability must be funded before contractual compensation is received.
Insurance and guarantees are described as providing additional protection but not replacing operational controls or enforceable data-access arrangements. Policy exclusions, waiting periods, and counterparty credit risk can leave projects exposed to liquidity pressure even when contractual recovery rights exist. Debt sizing is therefore linked to cash flow available under selected stress scenarios.
The text also describes revenue dependent on regulatory eligibility or supporting evidence that has not yet been demonstrated as additional upside rather than essential debt-service capacity. This framing ties financing assumptions to whether evidence requirements can be met on an ongoing basis. It also reflects that CBAM treatment can depend on documentation availability rather than only physical delivery.
CBAM certificate timelines and guidance updates
For electricity imported in 2026, CBAM certificate sales are scheduled to begin on 1 February 2027. The first annual declaration and certificate surrender deadline is set for 30 September 2027. From 2027, general certificate pricing moves to weekly auction-price averaging, while quarterly certificate-holding requirements become part of treasury planning.
The European Commission published definitive-period sector guidance on 14 August 2026, including dedicated guidance for electricity, iron and steel, and aluminium. It updated its general CBAM questions and answers on 15 October 2026. These materials are described as explaining aspects of implementation while not replacing binding regulation and applicable implementing acts.
Electricity reform proposal remains under negotiation
The European Commission’s reform proposal COM(2025) 989 is described as set to materially change electricity treatment under CBAM if adopted. The changes include methodology for electricity default values and parts of conditions governing actual emissions values. It would also broaden physical PPAs to include intermediaries and modify congestion and nomination framework elements.
The Council adopted its negotiating position on 12 June 2026, followed by the European Parliament’s position on 15 September 2026. The proposal remains under interinstitutional negotiation and is described as not enacted legislation in current-law financing assumptions. As a result, financing linked to current CBAM rules may need separate treatment from any future framework changes.
Evidence-backed exports require continued record access
For evidence-backed electricity exports, control of the generating asset without continued access to supporting records may provide only partial control over the revenue stream. Step-in arrangements are described as needing to protect both operational continuity and the data infrastructure underpinning financial assumptions. This includes maintaining access relevant to CBAM-related eligibility evidence over time.