On July 9, 2014, the Department of Energy’s Loan Program Office (“DOE”) issued a supplement (“Supplement”) to its Advanced Fossil Energy Project Solicitation issued on December 12, 2013 (“Solicitation”) to announce the reduction of application and facility fees.

The Supplement may be accessed at: http://1.usa.gov/1jhfn3S. The Solicitation may be accessed at: http://1.usa.gov/1ts47WW. Our legal alert published on December 12, 2013 analyzing the Solicitation may be accessed at: http://bit.ly/1sD6hi8.

On the same date, DOE announced that a credit-based interest rate spread will be added to certain loans under Title XVII of the Energy Policy Act of 2005 (“Title XVII”). The Solicitation was authorized by Title XVII and, therefore, the credit-based interest rate spread will apply to fossil energy projects, along with all other applications made under Section 1703 of Title XVII.

The credit-based interest rate spread announcement may be accessed here:

http://1.usa.gov/1mDApJ0.

Application and Facility Fees for DOE’s Fossil Energy Loan Guarantee Program

Previously, projects applying for loans under the Solicitation were paying a total non-refundable application fee of $1,000,000 (Part I - $75,000 and Part II - $925,000 per round) and a total non-refundable facility fee of 0.5% of the senior debt.

Now, under the Supplement, the application and facility fees remain non-refundable and are structured as set forth below. However, DOE has reduced the application fee, but it also has increased the facility fee. As   before, these fees must be borne independently by the applicant and cannot be recovered under this program’s loan funding from the Federal Finance Bank, U.S. Department of Treasury (“FFB”), underlying the loan guarantee, or through any other federal government funds.

Application Fee

The total and reduced application fee now is targeted at between $150,000 and $400,000, payable in two installments, as follows:

Click here to view the table.

Facility Fee

The increased facility fee now ranges from 1% to 1.6% of senior debt, depending on the amount of senior debt:

Click here to view the table.

The facility fee is payable in two installments: 25% upon the applicant’s execution of a DOE-approved term sheet, and 75% upon financial closing.

Credit-Based Interest Rate Spreads for Title XVII Programs

Certain loans that are issued by the FFB and backed by a 100% DOE loan guarantee will be subject to a new credit-based interest rate spread, as set forth below.

Click here to view the table.

The tenor of a FFB loan and term of a DOE loan guarantee may be up to 30 years, but typically range between 12 and 20 years. The tenor is a key factor in the calculation of the interest rate applicable to the FFB loan.

Interest rates charged to loans issued by the FFB will be computed as follows:

Interest Rate = U.S. Treasury Rate then-in effect for the loan tenor + 37.5 basis points FFB liquidity spread + credit-based interest rate spread.