The apparently unstoppable trend of ever-tightening project finance margins finally hit the buffers in March 2020, as economies around the world ground to a halt in the face of a deadly and highly contagious new virus.

But now, even as the pandemic continues to rage, the race to the bottom is back with a vengeance.

After an initial period of confusion, project finance lenders reacted to the Covid-19 crisis – and a spike in their own funding costs – by resetting pricing roughly 25 bp to 50 bp wider, on the whole, than the going rate before the virus emerged (PFR, 7/10).

The shock of the pandemic therefore ended the era of sub-1% margins for wind farm construction loans that began in 2018.

One borrower that was pushing the limits back then was Invenergy. The developer had asked for an ambitious 87.5 bp over Libor on a $2 billion loan for its Wind Catcher project in Oklahoma, and seemed likely to get it, too. The build-transfer was ultimately scuppered by regulators in Texas (PFR, 7/26/18).

Now Michael Polsky’s Chicago-based outfit is back with another test case – or rather three test cases – that look very similar to Wind Catcher. This time the developer is looking to finance three wind farms of different sizes, still in Oklahoma, with three separate loans (PFR, 11/9).

The pricing on the smallest and shortest-tenored of the loans is said to be under 100 bp. “They were quoting 75,” says a banker who was offered a slice in the secondary market.

And it’s not just construction loans for build-transfer wind farms with seasoned developers that are returning to all-time tights. KeyBank is said to have won the mandate to finance a standalone battery storage project in California with an aggressive pitch of 175 bp over Libor (PFR, 11/11).

As an emerging technology with revenue streams that are far from typical in project finance, battery storage had been one of the corners of the market where lenders with risk appetite could look for yield. But as one New York-based project finance banker laments: “Batteries are not even sexy anymore. It’s becoming mainstream.”