3/3/2009

The recently adopted $787 billion economic stimulus package known as the American Recovery and Reinvestment Act of 2009 created a temporary program to facilitate the rapid deployment of renewable energy and electric power transmission projects by providing federal loan guarantees for certain projects that commence construction before September 30, 2011. Administered by the Department of Energy, the program includes $6 billion to pay for the costs of the guaranteed loans. The loans will be guaranteed by the full faith and credit of the United States.

The following types of projects are eligible for loan guarantees under the temporary program:

	1.	Renewable energy systems, including incremental hydropower, that generate electricity or thermal energy, and facilities that manufacture related components.
	2.	Electric power transmission systems, including upgrading and reconductoring projects.
	3.	Leading-edge biofuel projects that will use technologies (i) performing at the pilot or demonstration scale, (ii) that are determined likely to become commercial technologies, and (iii) that will produce transportation fuels that substantially reduce life-cycle greenhouse gas emissions compared to other transportation fuels.

The original loan guarantee program established by the Energy Policy Act of 2005 required that projects applying for loan guarantees "employ new or significantly improved technologies," as opposed to commercial technologies currently in service in the United States. However, there is no such requirement under the temporary program. This means that a project utilizing technology that is in general use in the marketplace may qualify for loan guarantees under the temporary program.

The $6 billion appropriated for the temporary program will be used to pay for the costs of the guaranteed loans. These costs are the estimated long-term costs to the government of the loan guarantees, calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays. Of the $6 billion, $25 million will be used for administrative expenses and $10 million will be transferred to the Advanced Technology Vehicles Manufacturing Loan Program. Of the remaining funds, a maximum of $500 million can be used for biofuel projects. In the House of Representatives Conference Report, it was estimated that $6 billion in appropriated funds would support more than $60 billion in loans under the temporary program. However, the actual dollar value of guaranteed loans that will be available to renewable energy and electric power transmission projects will depend on the leverage ratios required by the lenders that provide the loans to be guaranteed under the program.

According to Secretary of Energy Steven Chu, the Department of Energy hopes to begin offering loan guarantees under the temporary program by early summer. To meet this goal, Chu intends to overhaul the program to make the procedures more streamlined. However, securing a federal loan guarantee does not mean the project has secured financing—it just means the federal government has agreed to guarantee the loan if the project and the lender satisfy certain conditions.

If you have any questions or would like to discuss the possibility of your project applying for a federal loan guarantee under the temporary program, please contact:

Seattle, Washington
Graham Noyes at (206) 386-7615 or jgnoyes@stoel.com
Ron Lone at (206) 386-7638 or rjlone@stoel.com
David Benson at (206) 386-7584 or dlbenson@stoel.com

Portland, Oregon
Marcus Wood at (503) 294-9434 or mwood@stoel.com
Ed Einowski at (503) 294-9235 or eeinowski@stoel.com
William Holmes at (503) 294-9207 or whholmes@stoel.com
Dina Dubson at (503) 294-9675 or dmdubson@stoel.com

Minneapolis, Minnesota
Greg Jenner at (612) 373-8857 or gfjenner@stoel.com
Debra Frimerman at (612) 373-8819 or dhfrimerman@stoel.com