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Legal Update

Department of Energy Issues New Loan Guarantee Solicitations

3 August 2009
Mayer Brown Legal Update

The Department of Energy (DOE) issued two anticipated loan guarantee program solicitations on July 29, 2009, regarding (i) projects that employ innovative energy efficiency, renewable energy and advanced transmission and distribution technologies and (ii) electric power transmission infrastructure investment projects.

These solicitations invite the submission of applications for loan guarantees from DOE under Title XVII of the Energy Policy Act of 2005 (Title XVII) to support financing for projects located in the United States employing the technologies described in the solicitations. These are the first solicitations issued under the DOE loan guarantee program since the creation by the American Recovery and Reinvestment Act (Recovery Act) of a new program for rapid deployment of renewable energy and electric power transmission projects known as the Section 1705 Program.1

The loan guarantees authorized under these two solicitations, and the credit subsidy payments for projects eligible under the Section 1705 Program, will be funded in part through the Recovery Act, which was enacted in February of this year, and in part through 2009 appropriations.

Here are brief summaries of each solicitation.

Solicitation for Federal Loan Guarantees for Projects that Employ Innovative Energy Efficiency, Renewable Energy and Advanced Transmission and Distribution Technologies

The first solicitation is for projects that employ innovative energy efficiency, renewable energy and advanced transmission and distribution technologies. Projects are only eligible for this solicitation if they employ a “New” or “Significantly Improved Technology” (as defined in the Final Regulations for Title XVII) that is not a “Commercial Technology” (as defined in the Final Regulations) in general use in the commercial marketplace in the United States at the time the Term Sheet for the loan guarantee is issued by DOE. Up to $8.5 billion in loan guarantee authority has been made available to fund this solicitation. The full application for the DOE Loan Guarantee Solicitation for Projects that Employ Innovative Energy Efficiency, Renewable Energy and Advanced Transmission and Distribution Technologies is available at http://www.lgprogram.energy.gov/2009-ren-energy-sol.pdf.

Review process

As previously promised by US Energy Secretary Chu, DOE has moved the process toward that of a rolling review. In this solicitation, DOE has provided a schedule for multiple rounds of submission due dates rather than a single due date. Submissions are to be reviewed on a continuous basis as soon as they are received, and applicants in earlier rounds will enjoy a first-movers advantage in order of priority of review. Applications are to be submitted in two parts. Following submission of part I, DOE will make a response that provides information to permit an applicant to decide whether to proceed. The submission due date for the first round for part I applications is September 14, 2009.

Credit Subsidy Cost

Applicants may apply under this solicitation as either a project eligible under the Section 1705 Program or a project eligible under the original loan guarantee program known as the Section 1703 Program. To be eligible under the Section 1705 Program, a project must be able to satisfy certain conditions such as commencement of construction by September 30, 2011. Subject to the availability of funds, the Credit Subsidy Cost (as defined in the solicitation) for the loan guarantee for a project eligible under the Section 1705 Program may be covered by funds available under the Recovery Act. A project applying under the Section 1703 Program must pay its own Credit Subsidy Cost.

Solicitation for Federal Loan Guarantees for Electric Power Transmission Infrastructure Investment Projects

The second solicitation is for electric power transmission infrastructure investment projects. Electric transmission projects eligible for this solicitation are projects that employ Commercial Technology (as defined in the Final Regulations), that meet the requirements of the Section 1705 Program, including commencement of construction by September 30, 2011, and the creation or retention of jobs in the United States, and that meet certain other criteria, including technical criteria, described in the solicitation. Projects that support the generation of power from renewable energy sources will receive special consideration. The full application for the DOE Loan Guarantee Solicitation for Electric Power Transmission Infrastructure Investment Projects is available at http://www.lgprogram.energy.gov/2009-CPLX-TRANS-sol.pdf.

Review process

As previously promised by US Energy Secretary Chu, DOE has moved the process toward that of a rolling review. In this solicitation, DOE has provided a schedule for a single submission date for part I applications on September 14, 2009, with multiple rounds of submission due dates for part II applications. Submissions are to be reviewed on a continuous basis as soon as they are received and applicants in earlier rounds for part II applications will enjoy a first-movers advantage in order of priority of review. Following submission of the part I application, DOE will provide a response that provides information to permit an applicant to decide whether to proceed. 

Credit Subsidy Cost

Applicants under this solicitation must meet all the requirements for eligibility under the Section 1705 Program, including commencement of construction by September 30, 2011, and the creation or retention of jobs in the United States. Up to $750 million has been made available to pay the Credit Subsidy Cost (as defined in the solicitation) for the loan guarantee for projects applying under this solicitation.

If more information about any of the matters discussed in this Client Alert, please contact at +1 713 238 2650, at +1 312 701 7366, or at +1 202 263 3274.

Learn more about our Energy, Environmental, and Government Relations practices.


Endnote:

1. We have previously described the creation of and details regarding the Section 1705 Program. See our March 13, 2009, Client Alert, “Department of Energy Loan Guarantee Program Significantly Expanded by American Recovery and Reinvestment Act of 2009.”

Authors

  • J. Paul Forrester
    T +1 312 701 7366
  • Robert S. Goldberg
    T +1 713 238 2650
  • Marcia G. Madsen
    T +1 202 263 3274

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