KBRA Releases Research – 2025 European Project Finance and Infrastructure Sector Outlook: Resilient Amid Headwinds

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DUBLIN, December 20, 2024–(BUSINESS WIRE)–KBRA releases its 2025 European project finance and infrastructure (PF&I) Sector Outlook, examining themes that will likely take centre stage in 2025 as well as developments and ratings trends from 2024.

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KBRA expects a generally more favourable environment for European PF&I credit quality in 2025, characterised by a supportive policy environment, slightly improved economic conditions with a relative softening in commodity prices (despite continued volatility), and ongoing reliance on PF&I as a funding tool to support the energy transition and digital sector. KBRA affirmed the majority (91%) of its European PF&I credits over the year. For next year, we anticipate continued ratings stability in the sector and further significant investment in energy transition-related asset classes, including traditional renewables such as onshore wind and solar as well as sectors such as offshore wind. This Outlook also considers the notable investment growth in newer PF&I asset classes, such as data centres, battery storage, and electric vehicle charging, which are supported by significant private and public funding sources.

While European governments have supported the energy transition and digital transformation with significant funding and policy measures, national and European Union (EU) targets are unlikely to be met without greater private capital involvement. Looking ahead, EU bodies may focus on setting clear and stable guidelines and streamlining permitting. Similarly, market participants may innovate in response to credit risks—including technology, merchant, recontracting, and refinancing risk.

Key Takeaways

We expect the macroeconomic environment to improve slightly in 2025, supporting European PF&I, with more benign financing conditions, a relative softening in commodity prices (despite continued volatility), and power prices underpinned by healthy gas storage levels and an increasing steady supply of renewable energy.
Renewable energy and artificial intelligence (AI)-driven development of data centres will benefit from a supportive policy environment, providing additional momentum for growth.
Despite the broadly benign environment, three important risks from 2024 remain in focus that will likely impact PF&I growth and performance in 2025: merchant and recontracting risk, regulatory and geopolitical risk, and climate change-related risks.
KBRA’s European PF&I portfolio has demonstrated resilience, with 94% of credits maintaining a Stable Outlook and the majority of credits affirmed in the past year, reflecting a broadly supportive macro backdrop.

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