Publications

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The US Department of Energy has announced two new solicitations for loan guarantees pursuant to its loan guarantee program under the Energy Policy Act of 2005 (EPACT), both of which are initial steps to use the $5.965 billion in funds that Congress provided for the program in the American Recovery and Reinvestment Act of 2009 (Stimulus Act).

These solicitations, announced late last week, closely follow the procedures and substantive terms established under prior solicitations. They are not the abbreviated and simplified application process that industry participants were expecting. DOE has pledged, however, to review applications quickly. We are also expecting DOE to propose a new mechanism for implementing a portion of the loan guarantee program that relies to some degree on the expertise and resources of private lenders.

General Renewable Energy Solicitation

Under one of the solicitations, DOE will provide up to $8.5 billion of loan guarantees for projects that employ new or significantly improved technologies to avoid, reduce or sequester air pollutants or emissions of greenhouse gases and fall within the following categories:

Alternative Fuel Vehicles

Biomass

Efficient Electricity Transmission, Distribution and Storage

Energy Efficient Building Technologies and Applications

Geothermal

Hydrogen and Fuel Cell Technologies

Energy Efficiency Projects

Solar

Wind and Hydropower

For some of these projects (highlighted in bold above), DOE will use $2.5 billion of the $5.965 billion allocated by Congress to cover DOE’s credit subsidy cost and remove this financial obligation from the applicants. This is a significant improvement over the terms offered in prior rounds. However, to be eligible for this subsidy support, the project must also meet the separate requirements of Section 1705 of the Stimulus Act, which require that construction on the project begin by September 30, 2011, that it create or preserve US jobs and that it be in the sectors covered by Section 1705, which are:

• Renewable Energy Systems
• Electric Power Transmission Systems
• Biofuels

This component is designed to channel funding to projects that will stimulate the economy in the near term. Projects that do not qualify for Section 1705 and DOE’s payment of the credit subsidy cost may still participate and pay that cost themselves. DOE has scheduled the solicitation in seven separate rounds, the first of which will close on September 14, 2009.

With this solicitation, DOE intends to support only projects that have completed a full-scale demonstration project and are ready to proceed to commercialization. Applicants must provide in their applications a minimum of six months operating and performance data, including 1,000 to 2,000 hours of operation data, obtained from their demonstration project. Accordingly, companies developing projects using innovative technologies that are at an earlier stage may need to wait until a later round until such data is available, or await the announcement by DOE of an alternative process for loan guarantees and then evaluate which program is best. DOE expects to analyze projects primarily on a limited recourse project finance basis. DOE will not assume any pre-construction risks; but DOE is prepared to consider a variety of financing structures as long as the structure provides DOE with a reasonable prospect of repayment.

As with prior solicitations under the program, applications will be submitted in two separate parts. Applicants initially submit Part I, and then, based on DOE’s response, may or may not be requested to submit Part II. The solicitation will remain available for seven rounds through August 24, 2010, unless all guarantee authority is used before that date.

Applicants may submit applications pursuant to the following schedule:

Part I Submission Deadline	Part II Submission Deadline
September 14, 2009	November 13, 2009
October 22, 2009	January 15, 2010
December 23, 2009	March 12, 2010
February 18, 2010	May 14, 2010
April 22, 2010	July 19, 2010
June 24, 2010	September 17, 2010
August 24, 2010	December 31, 2010

Electric Transmission Solicitation

DOE is separately soliciting projects that (i) that utilize a “Commercial Technology” (a defined term meaning a technology in use in three commercial projects for at least two years at each site); (ii) will commence construction before September 30, 2011; (iii) meet the other requirements of the EPACT; (iv) cannot be financed from private sources on standard commercial terms; and (v) involve an electric transmission project of a type described in detail in the solicitation.

DOE did not specify the volume of loan guarantees that it would make available, but stipulated that $750 million of the $5.965 billion allocated to cover credit subsidy costs would be available to meet the credit subsidy costs of projects in this solicitation. Projects in this solicitation, because they are implemented through Section 1705 of the Stimulus Act, need not employ new or significantly improved technology. The solicitation stipulates, however, that all of the other procedural and substantive requirements of the EPACT and related regulations, excluding the eligibility requirements, are applicable.

This solicitation is also broken into two parts. Applicants initially submit Part I, and then based on EPA response, the applicant may or may not submit Part II. Part I applications are due by September 14, 2009. There is only one due date for Part I submissions.

To Learn More

To learn more about the Department of Energy’s loan guarantee program and how your company can benefit, please contact:

Gary Klein

Steven Phillips

Thomas Reems

Mark Radcliffe

Marshall Taylor

or your DLA Piper relationship partner.

DLA Piper has also prepared a Guide to the Department of Energy Loan Guarantee Program  which describes the key elements of the program.

For a link to DOE’s loan guarantee webpage and the recent solicitations please visit here. For additional information about the solicitations, please read our earlier Alert.