An Update on the US Energy Department’s Loan Programs

by Jonathan Silver (US Department of Energy) ...One of the three types of loans or loan guarantees offered by our office – Section 1705 loan guarantees from the Recovery Act – will expire by statute on September 30, 2011. To qualify, projects must have commenced construction and closed their loan guarantees by that date. Under 1705, we have issued 19 loan guarantees or conditional commitments since March 2009 that total $11 billion in investment.
Sample projects include ... a biodiesel refinery that will triple America’s domestic biodiesel production.
These 19 projects are expected to account for nearly two-thirds of the program’s $2.4 billion in appropriated funding. In light of the impending, statutorily imposed deadline, we expect that all, or nearly all, of the remaining funding will be utilized by a group of other projects already in the pipeline that have the strongest chance of completing all necessary steps prior to the September 30th deadline. Unfortunately, this means that we will simply not have the opportunity to support every project that has applied for the program.
Accordingly, today we are notifying a group of companies that are farthest along in the process that we will be working with them to take the final steps required to complete a loan guarantee. Given the rigorous technical, legal, and financial requirements, it is possible that not all of these projects will succeed by September 30th, but each of them will have a chance to compete for the remaining funding.
Recognizing that generating an application and supporting it through the review process is both time consuming and expensive, we are placing a number of other applications on hold. This does not mean they are not quality projects, it simply means other applicants that are further along are more likely to meet the program’s deadline and consume the available funding.
If, in the future, the Loan Programs Office has sufficient budget resources, we may be able to continue evaluating these projects. Some might also be eligible for new funding that was recently approved by Congress for the 1703 program, which also provides loan guarantees for renewable energy projects. We are working to develop a process for implementing this new provision.
Copies of the two letters sent today are available HERE and HERE.
The success and impact of this program is already clear in the major projects under construction and coming online across the country, creating jobs and building the foundation for a clean energy economy. As with any major grant or loan program, it is unfortunate that not every project deserving of support will be able to receive a conditional loan, but the overwhelming response is a testament to the ingenuity of Americans and our ability to stay competitive in the 21st century clean energy economy. READ MORE and MORE (Biofuels Digest)
From Biofuels Digest: ...Meanwhile, the Digest has learned that there are at least two efforts underway to in some way privatize the loan guarantee process. A group including Citibank has indicated interest in running the loan guarantee program on a private basis for the federal government, with the requirement that the government continue to fund the program. A second effort, in the earliest stages, is looking at the possibility of establishing a “credit enhancement” facility, utilizing an insurance model, where guaranteed projects would contribute premiums towards a self-insurance pool of funds, and private entities or sovereign wealth funds with sufficient balance sheets would provide the loan guarantees. READ MORE