Good morning,

Silicon Valley has discovered project finance.

Congratulations.

Only took them a few trillion dollars.

Clever guys…

For years, the story was simple.

AI will change everything.

Data centres will be built everywhere.

Power will somehow appear.

Permits will somehow be granted.

Communities will somehow be happy.

Debt markets will somehow fund it.

And if something goes wrong, someone will just raise another round.

Beautiful.

I love start-ups…

And business plans written by people who have never waited three years for a grid connection.

But now reality is arriving.

Recent reporting says AI-related debt issuance has already reached almost $500 billion this year.

Data-centre campuses are being financed with structures that look suspiciously familiar… like a Hitchcock movie:

Senior debt.

Mezzanine debt.

Delay-draw loans.

Construction milestones.

Anchor customers.

Power arrangements.

Permitting conditions.

Covenants.

Refinancing assumptions.

Community opposition.

In other words…

Infrastructure.

Not software.

And infrastructure has an annoying habit.

It does not care about your TAM slide.

It does not care about your keynote.

It does not care that your CEO wore a black T-shirt and said “exponential” fourteen times.

Infrastructure asks boring questions.

Where is the land?

The power?

The water?

Who takes construction delay risk?

Who pays if the chips arrive late?

What happens if the permit is appealed?

What happens if refinancing markets are closed when construction finishes?

Welcome to our world, guys of Silicon Valley.

This is the classic infrastructure story.

At the beginning, everyone talks about demand.

Huge demand.

Infinite demand.

Unprecedented demand.

Demand so large that risk apparently disappears.

Then, boring people called lenders arrive.

And they ask annoying things:

Is the revenue contracted?

Is the counterparty creditworthy?

Can we monitor construction?

Can we control cash?

Etc.

Suddenly, the AI revolution has a conditions precedent checklist.

Ah… I love it!

Me parto imaginándolo, jord€r!

The murder of a beautiful idea…

Not because the demand is fake.

… the project useless.

… or the strategy wrong…

But because the structure is not bankable.

A data centre without power is not an AI asset.

It is a very expensive warehouse.

And a PPP without a credible payment mechanism is not infrastructure finance.

It is public-sector optimism with a financial model attached.

The AI boom is useful because it reminds us of something very simple.

Capital does not remove project risk.

Capital prices project risk.

And when the risk is unclear, capital either becomes expensive or disappears.

Of course, lenders and investors are interested.

Everyone is interested until they read the risk allocation.

PPP and Infra people have seen the movie before.

Excitement.

Model.

Risk Matrix.

And then… Due Diligence.

Use this information at your own risk.

To solve your infrastructure projects, you can click below.

$49.90 1:1 The First Call This is a focused 30-minute conversation about one real PPP or infrastructure challenge. It could be a procurement... Read more Book The First Call

​

PD 1: If you liked this email, don't keep it in secret and forward it to a friend. They will thank you enormously one day.

PD 2: If somebody has sent you this email and you want to receive emails like this yourself, visit vicentevalencia.com

PD 3: If you want unsubscribe, click the link below.