DOE is expected to announce in the coming weeks (maybe as soon as this week) that it will be publishing the final rules for the ARRA’s temporary loan guarantee program and that it will begin soliciting applications for loan guarantees for projects eligible under the temporary loan guarantee program. Recall that projects eligible under the temporary loan guarantee program include: (i) renewable energy systems and facilities manufacturing related components, (ii) electric power transmission systems and (iii) leading edge bio-fuel projects.
The expected announcement will also likely detail DOE’s proposed “delegated lender” or “pre-qualified lender” program which may allow commercial lenders (in concert with eligible applicants and project sponsors) to apply directly for loan guarantees from the DOE. As we understand the likely concept, the lender and the applicant will come to terms on a lending arrangement and the lender will directly apply to the DOE for the loan. The commercial lender will provide the bulk of the underwriting and due diligence analysis and will be expected to retain an un-guaranteed portion of the debt. It has been reported in the trade publication Power, Finance & Risk (subscription required) that the DOE has already hired several “seasoned project financiers” to assist with the implementation of this program.
The DOE review process for the lender-submitted application is unclear at this point but will likely include a limited review of all due diligence reports, NEPA compliance and substantive terms. Applications for large-scale projects (such as complex renewable energy projects or major power transmission systems) will likely not be eligible for the “delegated lender” or “pre-qualified lender” program and will continue to be underwritten and reviewed solely by DOE. DOE’s current proposal is before the Office of Management and Budget and is awaiting approval. Everything we are hearing leads us to expect the new rules to be released to the public in short order, perhaps as early as this week.