Private Credit Takes Bigger Role in Financing Energy, AI Infrastructure: Vinson & Elkins

By Jarrett Banks

Private credit has evolved from a niche alternative to traditional bank lending into a major source of financing for energy and infrastructure projects, as banks retreat from long-dated and complex loans, according to a new report from Vinson & Elkins partners Samuel Francis, Reed T. Schuster, Samara Shepherd and Matt Hortenstine.

Dedicated credit funds are increasingly financing renewable power, battery storage, transmission, midstream and other infrastructure assets, reshaping how projects are structured and funded, the report said.

The shift is particularly significant for the energy transition, where enormous capital requirements are colliding with constraints on traditional lenders, it said. Banks face regulatory capital costs on long-tenor loans, while some institutions have restricted hydrocarbon lending. Private credit funds are filling the gap with customized facilities tied to asset-level cash flows and structures including power-purchase agreements.

Artificial intelligence is creating another major opportunity. V&E cited estimates of more than $1 trillion in U.S. AI-related infrastructure investment over the next five years, encompassing data centers, power generation and grid infrastructure. Private lenders could play a central role financing construction and early operations, including increasingly complex “Bring Your Own Generation” structures that pair data centers with dedicated power supplies.

Read the full report HERE.