[Federal Register: August 14, 2006 (Volume 71, Number 156)]
[Notices]
[Page 46451-46460]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14au06-43]
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DEPARTMENT OF ENERGY
Loan Guarantees for Projects That Employ Innovative Technologies;
Guidelines for Proposals Submitted in Response to the First
Solicitation
AGENCY: Department of Energy (DOE).
ACTION: Notice.
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SUMMARY: DOE publishes policy guidelines that DOE intends to use in
connection with the first solicitation of proposals for a loan
guarantee for Eligible Projects under Title XVII of the Energy Policy
Act of 2005 that are expected to contribute to the goals of the
President's Advanced Energy Initiative.
Effective Date: The guidelines in this Notice are effective August 14,
2006.
FOR FURTHER INFORMATION CONTACT: Director, DOE Loan Guarantee Program
Office, 1000 Independence Avenue, SW., Washington, DC 20585-0121,
Phone: 202-586-8336. Email: LGProgram@hq.doe.gov.
With a copy to: Warren Belmar, Deputy General Counsel for Energy
Policy, Office of the General Counsel, 1000 Independence Avenue, SW.,
Washington, DC 20585-0121.
SUPPLEMENTARY INFORMATION:
Introduction
Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511-16514)
authorizes the Secretary of Energy, after consultation with the
Secretary of the Treasury, to make loan guarantees for projects that
``avoid, reduce, or sequester air pollutants or anthropogenic emissions
of greenhouse gases; and employ new or significantly improved
technologies as compared to commercial technologies in service in the
United States at the time the guarantee is issued.'' Commercial
technology is defined as a technology in general use in the
marketplace. More specifically, Title XVII identifies ten discrete
categories of projects that are eligible for a loan guarantee,
including those that employ:
1. Renewable energy systems;
2. Advanced fossil energy technology (including coal gasification
meeting the criteria in subsection 1703(d));
3. Hydrogen fuel cell technology for residential, industrial, or
transportation applications;
4. Advanced nuclear energy facilities;
5. Carbon capture and sequestration practices and technologies,
including agricultural and forestry practices that store and sequester
carbon;
6. Efficient electrical generation, transmission, and distribution
technologies;
7. Efficient end-use energy technologies;
8. Production facilities for fuel efficient vehicles, including
hybrid and advanced diesel vehicles;
9. Pollution control equipment; and
10. Refineries, meaning facilities at which crude oil is refined
into gasoline.
A principal purpose of the Title XVII loan guarantee program is to
encourage early commercial use in the United States of new or
significantly improved technologies in energy projects. DOE's loan
guarantee program is not intended for technologies in research and
development. Indeed as section 1702(d) requires a ``reasonable prospect
of payment'' of any loan or debt obligation issued to a project,
technologies for project proposals should be mature enough to assure
dependable commercial operations and generate sufficient revenues, and
not solely a demonstration project (i.e., a project designated to
demonstrate feasibility of a technology on any scale). DOE believes
that accelerated commercial use of these new or improved technologies
will help to sustain economic growth, yield environmental benefits, and
produce a more stable and secure energy supply.
Today, DOE begins implementation of Title XVII with two actions.
First, DOE publishes guidelines in the nature of a general statement of
policy that DOE intends to apply only to the first solicitation of
projects. Second, DOE makes available the first solicitation for Pre-
Applications for Federal Loan Guarantees for Projects that Employ
Innovative Energy Technologies by posting it on the internet at: http://www.LGProgram.energy.gov/.
Neither a procurement action (under Title
48 of the Code of Federal Regulations) nor a financial assistance award
(under 10 CFR part 600) is contemplated by these guidelines and the
solicitation. As further described in the solicitation, interested
parties are being asked to file an initial Pre-Application for review
by DOE. If the Pre-Application meets the suggested requirements of
these guidelines, DOE may invite the interested party to submit a
comprehensive Application.
DOE anticipates receiving a significant volume of interest in the
loan guarantee program, and therefore plans to issue multiple
solicitations, following adoption of final regulations within the next
year, that will cover the broad array of eligible projects under Title
XVII. Applicants who respond to the solicitation but are not approved
for a loan guarantee may submit a new or revised proposal in response
to future solicitations under the final regulations DOE plans to adopt.
DOE does not intend to review Pre-Applications or
[[Page 46452]]
approve loan guarantees for any proposal that is outside the scope and
does not conform with the specific requirements of the initial
solicitation. Likewise, only comprehensive applications submitted by
interested parties that were invited by DOE to submit a comprehensive
application for a Title XVII loan guarantee as a result of the initial
solicitation will be considered for a loan guarantee.
While most provisions of today's guidelines are not legally
binding, please note that some provisions of these guidelines are based
on non-discretionary provisions of law in Title XVII and under the
Federal Credit Reform Act of 1990, 2 U.S.C. 661 et seq. (``FCRA''). For
example, section 1702(f) of Title XVII specifically limits the term of
the loan guarantee by stating that ``the term of an obligation shall
require full repayment over a period not to exceed the lesser of (i) 30
years or (ii) 90 percent of the projected useful life of the physical
asset to be financed by the obligation (as determined by the
Secretary).'' Hence, Applicants should provide a detailed analysis of
the expected and generally accepted life cycle of the primary
technology and project facility that is the focus of the financing as
DOE cannot issue a guarantee that will extend beyond 90 percent of such
life cycle or a 30-year term, whichever is shorter.
Moreover, FCRA requires that Congress must authorize Federal loan
guarantees in an appropriations act in advance of the execution of a
final binding loan guarantee agreement. See 2 U.S.C. 661c(b). This
requirement applies even though Title XVII allows for the cost of a
loan guarantee, as defined in 2 U.S.C. 661a(5)(C), to be paid by the
recipient, see 42 U.S.C. 16512(b)(2), and even though today's
guidelines provide for a Conditional Commitment that will precede the
execution of a final binding Loan Guarantee Agreement. As a result, DOE
is currently restricted only to reviewing Pre-Applications and
Applications and entering into Conditional Commitments until it obtains
the requisite authorization in an appropriations act. DOE may not enter
into a binding Loan Guarantee Agreement or issue any loan guarantees
until this appropriations authority has been granted.
Discussion of the Guidelines
In this portion of the SUPPLEMENTARY INFORMATION, DOE highlights
key provisions and, as appropriate, explains the basis for them.
For the first solicitation, these guidelines set forth the type of
information that interested parties are expected to include in a Pre-
Application and, if invited by DOE, the type of information that
Applicants should additionally include in an Application. Information
is also provided in these guidelines as to the determining factors that
DOE expects to apply in its review of project proposals. DOE intends to
evaluate each Pre-Application and Application taking into
consideration, among other things, the requirements and conditions
contained in the solicitation, the criteria specified under Title XVII
to identify Eligible Projects, the project's ability to optimize the
probability of repayment of Guaranteed Obligations, and how the project
furthers the goals of the President's Advanced Energy Initiative.\1\
Please note that even if a Pre-Application or Application contains all
of the information specified in these guidelines, DOE retains the
right, in its sole discretion, to inform any Applicant that their
project proposal has been denied further review.
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\1\ One factor that warrants mentioning here is that a proposed
project should be constructed and operated in the United States. DOE
believes that the environmental benefits and deployment of new and/
or enhanced technologies associated with projects should reside
within the United States. In such circumstances it will be easier
for DOE to monitor the project, ensure repayment of guaranteed debt
in accordance with section 1702(d), and enforce its rights in the
event of default.
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The guidelines, in accordance with Section 1702(c), provide that
any loan guarantee issued by DOE may not exceed 80 percent of total
Project Costs. Section VII of the guidelines generally defines Project
Costs as those that are necessary, reasonable, and directly related to
the design, construction, and startup of a project. Conversely,
excluded costs which are also described with greater specificity in
Section VII of the guidelines include initial research and development
costs and operating costs after the facility has been constructed.
In addition, DOE notes that the Subsidy Cost of the loan guarantee,
as well as fees paid for by the Borrower for the Administrative Cost of
Issuing a Loan Guarantee, are excluded from Project Costs. As defined
in 2 U.S.C. 661a(5)(C), the Subsidy Cost is not a tangible cost
associated with the financing or construction of the project facility.
Rather, it constitutes the expected long-term liability to the Federal
government in issuing the loan guarantee. In addition, DOE believes
that it would be undesirable to allow Borrowers to count the Subsidy
Cost (including the financing cost of a Borrower paid Subsidy Cost) as
a Project Cost, whether funded by an appropriation or by payment made
by the Borrower. To do so could have the effect of including the
Subsidy Cost as an allowable cost under the loan guarantee, and thus
put the Federal government at risk for up to 80 percent of its Subsidy
Cost requirement. Additionally, the Borrower paid Subsidy Cost can not
be paid from the proceeds of Federally guaranteed or funded debt. For
similar reasons, fees required under Section 1702(h) of the Act to
cover DOE's administrative expenses are also disallowed from Project
Costs, thereby ensuring that the loan guarantee does not place the
Federal government at risk for up to 80% of these statutorily required
fees.
Consistent with section 1702(b), the guidelines specify that DOE
must receive either an appropriation for the Subsidy Cost or payment of
that cost by the Borrower. No funds have been appropriated for the
Subsidy Cost of loan guarantees; therefore DOE anticipates that the
project(s) approved pursuant to the first solicitation will require the
Borrower to pay this cost. The guidelines specify that a Project
Sponsor should include an estimate of the Subsidy Cost in an
Application. In accordance with 2 U.S.C. 661b(a), DOE will then perform
its own independent calculation of the Subsidy Cost and will consult
and obtain the approval of the Office of Management and Budget for this
computation prior to entering into any Loan Guarantee Agreement. DOE
will also consult with the Secretary of Treasury prior to entering into
any Loan Guarantee Agreement. The Applicant will be required to provide
updated project financing information and terms and conditions not
later than 30 days prior to closing, should any of the terms of the
project financing or project terms change between Conditional
Commitment and the Loan Guarantee Agreement.
In addition to the Subsidy Cost, section 1702(h) also requires DOE
to collect fees to cover the administrative expenses of issuing loan
guarantees. The guidelines specify that DOE will collect fees for
administrative expenses as provided for in the Conditional Commitment,
as well as additional fees during the term of a loan guarantee. These
fees will consist of the administrative expenses that DOE incurs
during:
(i) The evaluation of the Pre-Application and Application;
(ii) The offering, negotiation, and closing of a loan guarantee;
and
(iii) The servicing of the loan guarantee and monitoring the
progress of a project.
Title XVII, and section 1702(h) in particular, afford DOE
discretion with
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respect to how it imposes fees to cover applicable administrative
costs. For this first solicitation, DOE has elected not to impose such
fees in connection with the Pre-Application stage. In effect, this
means that Project Sponsors who submit Pre-Applications and are denied
further consideration will not be charged any fees for expenses
incurred by DOE in reviewing their Pre-Application materials. For
project proposals that progress to the Application stage, the
invitation to submit an Application that DOE will send to Project
Sponsors will specify whether DOE is charging an Application fee, and
the amount of any such fee. In addition to the Application fee that DOE
may assess, the other administrative fees that DOE will collect in
connection with the first solicitation will be from Borrowers who enter
into a Conditional Commitment, in an amount sufficient to cover DOE's
administrative expenses applicable to that Borrower's Pre-Application,
Application, Term Sheet, Conditional Commitment, the Loan Guarantee
Agreement, and subsequent monitoring and servicing expenses. With
respect to future solicitations, DOE may decide to assess a Pre-
Application and/or an Application fee. DOE will revisit this issue in
the forthcoming regulations that DOE will propose for public comment
later this year.
As for the financing structure of proposed projects, Title XVII
does not impose any specific limitations, other than the guarantee
``shall not exceed an amount equal to 80 percent of the project cost of
the facility that is the subject of the guarantee as estimated at the
time at which the guarantee is issued.'' 42 U.S.C. 16512(c). However,
section 1702(d)(1) provides: ``No guarantee shall be made unless the
Secretary determines that there is reasonable prospect of repayment of
the principal and interest on the obligation by the borrower.'' 42
U.S.C. 16512(d)(1). DOE believes this statutory provision requires DOE
to make repayment of debt a very high priority of the loan guarantee
program and authorizes DOE to adopt policies that ensure that Borrowers
and Lenders have a similar motivation and use their best efforts to
ensure repayment. Thus, DOE would prefer to limit the financial risk to
the Federal government from the first loan guarantees issued under
Title XVII as DOE gains valuable experience and expertise with these
financial and commercial arrangements. This intention is bolstered by
the mandate of Section 1702(g)(2)(B), which requires that ``with
respect to any property acquired pursuant to a guarantee or related
agreements, [the Secretary] shall be superior to the rights of any
other person with respect to the property.'' This statutory provision
requires DOE to possess a first lien priority in the assets of the
project and other collateral security pledged. Because DOE is not
permitted by Title XVII to adopt a pari passu financing structure, any
holders of non-guaranteed debt have a subordinate claim to DOE in the
event of default, and will not be able to recover on their debt until
DOE's claim is paid in full.
To harmonize and balance the twin goals of issuing loan guarantees
to encourage early commercial use of new or significantly improved
technologies in Eligible Projects while limiting the financial exposure
of the Federal government, DOE's first solicitation expresses a
preference that DOE not guarantee more than 80 percent of the total
face value of any single debt instrument. Under no circumstance does
DOE intend to guarantee 100 percent of the loan. Accordingly, if a
Borrower seeks a loan guarantee for more than 80 percent of the face
value of the underlying debt obligation, DOE's review of the project
proposal to determine whether to approve a loan guarantee for such
amount will be predicated on the sufficiency of evidence presented by
the Borrower in support of a higher guarantee percentage.\2\ DOE notes
however, that higher guarantee percentages will lead to higher Subsidy
Costs.
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\2\ DOE does not have a preference as to whether non-Projects
Costs, as defined in Section VII of these guidelines, are financed
with debt or equity, as long as DOE maintains a first lien priority
in the assets of the project and other collateral pledged as
security.
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For similar reasons of increasing the probability of repayment, in
reviewing project proposals, DOE intends to consider whether Project
Sponsors will make a significant financial commitment to the project.
In addition, DOE intends to consider whether a Project Sponsor will
rely upon other government assistance (e.g., financial assistance, tax
credits, other loan guarantees) to support financing, construction, or
operation of the project. DOE does not intend to disqualify project
proposals that employ other forms of Federal and non-Federal government
assistance, but in reviewing proposals, DOE will take into account how
much equity will be invested and the extent of the financial risk borne
by the Project Sponsor.\3\
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\3\ Since the guidelines are not substantive regulations, DOE
will not reject project proposals solely on the basis of the
guidelines. However, Applicants are advised of their heavy burden of
justification if they seek to persuade DOE to accept risk in excess
of the outer boundaries of what the guidelines indicate to be
preferable.
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In connection with any loan guaranteed by DOE that may be
syndicated, traded, or otherwise sold on the secondary market, DOE will
require that the guaranteed portion and non-guaranteed portion of the
debt instrument are resold on a pro-rata basis. The guaranteed portion
of the debt may not be ``stripped'' from the non-guaranteed portion,
i.e. sold separately as an instrument fully guaranteed by the Federal
government.
In further support of DOE's objective to ensure full repayment of
debt, DOE expects that participating Lenders will have to meet certain
eligibility requirements, as described in greater detail in Section VI
of these guidelines. These criteria are intended to ensure that the
Lender has the financial wherewithal and appropriate experience and
expertise to meet its fiduciary obligations in connection with the debt
guaranteed by DOE. DOE expects that the Lender and other appropriate
parties will exercise a high level of care and diligence in the
establishment and enforcement of the conditions precedent to all loan
disbursements and Borrower covenants, as provided for in the loan
agreement or related documents, throughout the term of the loan.
Moreover, DOE also expects each Lender to diligently perform its duties
in the servicing and collection of the loan as well as in ensuring that
the collateral package securing the loan remains uncompromised. The
Lender will also be expected to provide regular, periodic financial
reports on the status and condition of the loan, consistent with the
terms of the Loan Guarantee Agreement. The Lender is required to
promptly notify DOE if it becomes aware of any problems or
irregularities concerning the project or the ability of the Borrower to
make payment on the loan or other debt obligations.
In addition to the other measures described above limiting the
Federal government's risk exposure, commitments to guarantee loans will
not exceed a face value of $2 billion, in the aggregate, under the
first solicitation. Commencing with a loan guarantee program of this
size will allow DOE to achieve considerable progress in assisting new
or significantly improved energy technologies to market while also
enabling DOE to gain valuable experience and expertise that it will
incorporate in program regulations and apply to future solicitations.
DOE recognizes that some project proposals
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that would otherwise merit full consideration for a loan guarantee
under these guidelines will, because of DOE's self-imposed ceiling on
loan guarantee commitments, have to await full consideration under
future solicitations issued under the final regulations. To accommodate
concerns of Project Sponsors whose proposals are deferred full
consideration because they either exceed or comprise a substantial
amount of the total loan guarantee commitments available under the
first solicitation, DOE will consider whether such proposals should be
afforded expedited consideration under the final regulations, when
adopted.
Finally, please note that the solicitation issued in conjunction
with these guidelines addresses many important aspects of the
application process, including the relevant period of time during which
Pre-Applications for loan guarantees may be filed. Because each project
will be unique and each loan guarantee potentially subjects the Federal
government to significant financial liability, DOE plans to engage in a
rigorous review of a proposed project before determining that it may be
eligible for a loan guarantee or subsequently approving and issuing a
loan guarantee.
National Environmental Policy Act (NEPA)
Through the issuance of these guidelines DOE is making no decision
relative to the approval of a loan guarantee for a particular proposed
project. DOE has therefore determined that publication of the policy
guidelines is covered under the Categorical Exclusion found at
paragraph A.6 of Appendix A to Subpart D, 10 CFR Part 1021, which
applies to the establishment of procedural rulemakings. Accordingly,
neither an environmental assessment nor an environmental impact
statement is required at this time. However, appropriate NEPA project
review will be conducted prior to execution of a Loan Guarantee
Agreement.
Review Under the Paperwork Reduction Act
These guidelines provide that Pre-Applications submitted to DOE in
response to the solicitation and Applications, if invited by DOE,
should contain certain information. This collection of information must
be approved by the Office of Management and Budget pursuant to the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the
procedures implementing that Act, 5 CFR 1320.1 et seq. DOE is
requesting emergency processing of the Paperwork Reduction Act
Submission for this collection of information pursuant to 5 CFR
1320.13. DOE is requesting that OMB approve the collection of
information prior to the issuance of the solicitation. This emergency
collection will be valid for 180 days. Shortly after OMB's approval of
the emergency collection, DOE will issue a notice seeking public
comment on the information collection and will submit the proposed
collection of information to OMB for approval pursuant to 44 U.S.C.
3507(a). An agency may not conduct or sponsor, and a person is not
required to respond to a collection of information unless it displays a
currently valid OMB control number.
Issued in Washington, DC, on August 8, 2006.
James T. Campbell,
Acting Chief Financial Officer.
Loan Guarantees for Projects That Employ Innovative Technologies;
Guidelines for Proposals Submitted in Response to First Solicitation
Under Title XVII of the Energy Policy Act of 2005
I. Purpose
These guidelines set forth goals and procedures that the Department
of Energy (``DOE'') intends to use for receiving, evaluating, and,
after consultation with the Secretary of the Treasury, approving
applications for loan guarantees to support Eligible Projects under
Title XVII of the Energy Policy Act of 2005.
II. Definitions
As used in these guidelines:
A. ``Act'' means Title XVII of the Energy Policy Act of 2005 (42
U.S.C. 16511-16514).
B. ``Administrative Cost of Issuing a Loan Guarantee'' means the
combined total of all of the administrative expenses that DOE incurs
during:
1. The evaluation of a Pre-Application and an Application for a
loan guarantee;
2. The offering, negotiation, and closing of a loan guarantee; and
3. The servicing of the loan guarantee and monitoring the progress
of a project benefiting from a loan guarantee issued by DOE.
Payment of the Administrative Cost of Issuing a Loan Guarantee,
which is required to be collected by DOE under section 1702(h) of the
Act, is wholly distinct and separate from payment of the Subsidy Cost.
C. ``Applicant'' means any firm, corporation, company, partnership,
association, society, trust, joint venture, joint stock company, or
governmental non-Federal entity, that has the authority to enter into,
and is seeking, a loan guarantee issued by the Secretary for a loan or
other debt obligation of an Eligible Project under the Act.
D. ``Application'' means a written submission in response to a DOE
invitation to apply for a loan guarantee that DOE will solicit from
Applicant after reviewing and approving a completed Pre-Application,
and which should include the items listed in Section III.F. of these
guidelines.
E. ``Borrower'' means any project company or entity that enters
into a loan or other debt obligation for an Eligible Project.
F. ``Commercial Technology'' means a technology in general use in
the commercial marketplace, but does not include a technology solely by
use of such technology in a demonstration project funded by DOE.
G. ``Conditional Commitment'' means a Term Sheet offered by DOE and
accepted by the Applicant, with the understanding of the parties that
the Applicant thereafter satisfies all specified and precedent funding
obligations, and all other contractual, statutory, regulatory or other
requirements.
H. ``Credit Review Board'' means a board created by DOE in
accordance with Office of Management and Budget (OMB) Circular A-129 to
oversee the loan guarantee program and approve loan guarantees for
individual projects.
I. ``Eligible Project'' means a project located in the United
States that meets the applicable requirements of section 1703 of the
Act.
J. ``Guaranteed Obligations'' means loans or other debt obligations
that the Secretary guarantees under a Loan Guarantee Agreement.
K. ``Holder'' means any individual or legal entity that has
lawfully succeeded in due course to all or part of the rights, title,
and interest in a Guaranteed Obligation.
L. ``Lender'' or ``Eligible Lender'' means any individual or legal
entity, approved by DOE, formed for the purpose of, or engaged in the
business of, lending money, including, but not limited to, commercial
banks, savings and loan institutions, insurance companies, factoring
companies, investment banks, institutional investors, venture capital
investment companies, trusts, or other entities designated as trustees
or agents acting on behalf of bondholders or other lenders.
M. ``Loan Guarantee Agreement'' means a written agreement that,
when entered into by a Borrower, a Lender and the Secretary pursuant to
the Act
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after satisfaction of the conditions precedent specified in the
Conditional Commitment and any other applicable contractual, statutory,
and regulatory requirements, establishes the obligation of the
Secretary to guarantee payment of principal and interest on specified
loans or other debt obligations of a Borrower to the Lender subject to
the terms and conditions specified in the Loan Guarantee Agreement. The
term ``Loan Guarantee Agreement'' has the same meaning as a ``loan
guarantee commitment'' (as defined in section 502(4) of the Federal
Credit Reform Act of 1990 (2 U.S.C. 661a)).
N. ``Project Costs,'' as described with greater specificity in
Section VII of these guidelines, means the estimated sum of the amounts
to be expended or accrued by Borrower for costs that are necessary,
reasonable, and directly related to the design, construction, and
startup of an Eligible Project.
O. ``Project Sponsor'' means any individual, firm, corporation,
company, partnership, association, society, trust, joint venture, joint
stock company or the like that assumes substantial responsibility for
the development, financing, and structuring of a project eligible for a
loan guarantee and owns or controls the Applicant.
P. ``Pre-Application'' means a written submission in response to a
solicitation that broadly describes the project proposal, including the
proposed role of a loan guarantee in the project and the eligibility of
the project to receive a loan guarantee under the Act, and includes the
items listed in Section III.C. of these guidelines.
Q. ``Secretary'' means the Secretary of Energy or designee.
R. ``Subsidy Cost'' has the meaning given the term ``cost of a loan
guarantee'' within the meaning of section 502(5)(C) of the Federal
Credit Reform Act of 1990 (2 U.S.C. 661a(5)(C)). The ``Subsidy Cost''
represents the net present value, at the time when the guaranteed loan
or other debt obligation is disbursed, of the expected liability to the
Federal government from issuing the loan guarantee, inclusive of
estimated payments to be made by the Federal government, such as
default payments, and estimated payments to be made to the Federal
government such as recoveries. The Subsidy Cost amount is required by
section 1702(b) of the Act to be funded either by an appropriation or
by payment by Borrower. Payment of the Subsidy Cost is wholly distinct
and separate from payment of the Administrative Cost of Issuing a Loan
Guarantee.
S. ``Term Sheet'' means an offering document issued by DOE that
specifies the general terms and conditions under which DOE anticipates
it may guarantee payment of principal and accrued interest on specified
loans or other debt obligations of a Borrower in connection with an
Eligible Project. A Term Sheet is not a Loan Guarantee Agreement and
imposes no obligation on the Secretary to execute a Loan Guarantee
Agreement.
III. Loan Guarantee Application Process
A. In conjunction with these guidelines, DOE is issuing a
solicitation announcement to solicit the submission by Project Sponsors
of Pre-Applications for loan guarantees for projects that employ
innovative technologies. The guidelines will apply to this first
solicitation; all future solicitations will be issued pursuant to
program regulations that DOE will promulgate at a later time.
B. The solicitation announcement issued in conjunction with these
guidelines contains, among other things, the following information:
1. A brief description of the Eligible Projects for which loan
guarantee applications are solicited;
2. The place and time for Pre-Application submission;
3. The name and address of the DOE representative whom potential
applicants may contact to receive further information and a copy of the
solicitation; and
4. The form, format and page limits applicable to the submission of
a Pre-Application.
C. In response to the solicitation, interested parties are invited
to submit Pre-Applications to DOE. Pre-Applications should meet all
requirements specified in the solicitation; DOE does not intend to
review or approve loan guarantees for proposals that do not meet the
requirements provided for in the solicitation. In addition, the Pre-
Application should contain the following information and documentation:
1. A completed Pre-Application form signed by an individual with
full authority to bind the Project Sponsor;
2. A business plan including an overview of the proposed project
including:
(a) A description of the Project Sponsors, including their
experience in project investment, development, construction, operation
and maintenance;
(b) A description of the technology to be utilized, including its
commercial applications and social uses, the owners or controllers of
the intellectual property incorporated in and utilized by such
technology, and its manufacturer(s), and licensees, if any, of the
technology authorized to make the technology available in the United
States, and whether and how the technology is or will be made available
in the United States for further commercial use;
(c) The estimated amount of the total Project Costs (including
escalation and contingencies);
(d) The timeframe required for construction and commissioning of
the facility; and
(e) A description of the primary off-take or revenue-generating
agreement(s) that will primarily provide financial support for the
project.
3. A financing plan overview describing the amount of equity to be
invested and the sources of such equity, the amount of the total debt
obligations to be incurred and the funding sources of all such debt,
the anticipated guarantee percentage of the Government-guaranteed debt,
and a financial model detailing the investments and the cash flows
generated from the project over the project life-cycle;
4. An explanation of what impact the loan guarantee will have on
the interest rate, debt term, and overall financing structure for the
project;
5. A copy of a commitment letter from an Eligible Lender expressing
its commitment to provide the required debt financing necessary to
construct and fully commission the project subject to commercially
reasonable conditions governing disbursement commonly included in arm's
length debt financing arrangements for projects and loan amounts
similar to the proposed project;
6. A copy of the equity commitment letter(s) from each of the
Project Sponsors and a description of the sources for such equity;
7. An overview of how the project will comply with the eligibility
requirements under section 1703 of the Act;
8. An outline of the potential environmental impacts of the project
and how these impacts will be mitigated;
9. A description of the anticipated air pollution and greenhouse
gas reduction benefits;
10. A description of how the proposed project advances the
President's Advanced Energy Initiative; and
11. An executive summary briefly encapsulating the key project
features and attributes.
D. In reviewing completed Pre-Applications, DOE intends to utilize
the criteria referenced in the Act, the
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solicitation, and these guidelines.\4\ In addition, prior to a
comprehensive evaluation, an initial review of the Pre-Applications
will be performed to determine the following:
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\4\ While these factors are designed for review of Pre-
Applications, DOE intends to use these factors, as appropriate, in
reviewing Applications as well.
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1. The proposal is for an Eligible Project; and
2. The submission contains the information requested by the
solicitation.
If a Pre-Application fails to meet these requirements, it may be
deemed non-responsive and eliminated from further review. As part of
the subsequent and more comprehensive Pre-Application review, DOE may
conduct an independent review of the financial capability of an
Applicant (including personal credit information of the principal(s) if
there is insufficient information to assess the financial capability of
the organization). In addition, DOE may ask for additional information
during the review process and may request one or more meetings with the
Project Sponsor(s).
E. After reviewing a completed Pre-Application, DOE will provide a
written response to the Project Sponsor.\5\ In this response, DOE will
do one of two things. DOE will either invite an Applicant to submit a
comprehensive Application for a loan guarantee and specify the amount
of the Application fee that DOE has decided to assess, if any, or DOE
will advise the Project Sponsor that the project proposal is ineligible
for further consideration in the review process under the guidelines.
Project Sponsors whose proposals are denied further review will not be
barred from re-submitting an updated or revised project proposal in
response to future solicitations under the final regulations to be
adopted by DOE.
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\5\ While DOE intends to review Applicant's written submission,
neither the Pre-Application nor any written or other feedback that
DOE may provide in response to the Pre-Application is intended to
obviate the need for an Application. In addition, any response that
DOE may provide to a Pre-Application or subsequent Application does
not obligate DOE to issue a loan guarantee for a project; only a
duly executed Loan Guarantee Agreement may contractually obligate
DOE to guarantee any loan or other debt obligations.
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F. In response to an invitation to submit an Application,
interested Applicants are expected to meet all requirements specified
in the invitation, the solicitation and these guidelines. DOE will be
expecting that the information and documentation requested, as well as
the substance and content of such documentation required for the
Application, will conform substantially with that produced during the
course of an arm's length commercially negotiated project or commercial
financing. The maturity, balance sheet and experience of the Project
Sponsors, the credit rating of the Lenders and the off-take
counterparties, and the scope and breadth of the security package
supporting the loan are additional important factors that DOE will
consider in its review of an Application.\6\ An Application should
include, among other things, the following information and materials:
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\6\ Additional factors that DOE expects to consider when
reviewing Applications are described in Section IV of these
guidelines.
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1. A completed Application form signed by an individual with full
authority to bind Applicant;
2. Payment of the Application fee, if any;
3. A detailed description of all material amendments,
modifications, and additions made to the information and documentation
provided in the Pre-Application, including any changes in the proposed
project's financing structure or terms;
4. A description of the nature and scope of the proposed project,
including key milestones, location of the project, identification and
commercial feasibility of the new or significantly improved
technology(ies) to be employed in the project, how Applicant intends to
employ such technology(ies) in the project, and how the Applicant or
others intend to assure the further commercial availability of the
technology(ies) in the United States;
5. A detailed explanation of how the proposed project qualifies as
an Eligible Project;
6. A detailed estimate for the total Project Costs (including
escalation and contingencies), together with a description of the
methodology and assumptions used;
7. An estimate of the amount of the Subsidy Cost for the project,
including a description of the methodology used for this calculation
and any supporting documentation;
8. A detailed description of the construction contractor(s) and
equipment supplier(s), construction schedules for the project including
major activity and cost milestones as well as the performance
guarantees, performance bonds, liquidated damages provisions, and
equipment warranties to be provided;
9. A detailed description of the operations and maintenance
provider(s), the plant operating plan, estimated staffing requirements,
parts inventory, major maintenance schedule, estimated annual downtime,
and performance guarantees and related liquidated damage provisions, if
any;
10. A description of the management plan of operations that
Applicant will employ in carrying out the project, and information
concerning the management experience of each officer or key person
associated with the project;
11. A detailed description of the project decommissioning,
deconstruction and disposal plan and the anticipated costs associated
therewith;
12. An analysis of the market for the product(s) to be produced by
the project, including relevant economics justifying the analysis, and
copies of any contractual agreements for the sale of these products or
assurance of the revenues to be generated from sale of these products;
13. A detailed description of the overall financial plan for the
proposed project, including all sources of funding, equity, and debt,
and the liability of parties associated with the project over the
lifetime of the requested loan guarantee;
14. A copy of all loan documents that Borrower and Lender will sign
if the Application for a loan guarantee is approved, containing all of
the terms and conditions of the loan or other debt obligations to be
guaranteed, including the proposed amount of the loan, interest
charges, repayment position, principal repayment schedule, fees, pre-
payment and late payment penalties, and cure rights;
15. A copy of all material agreements, whether entered into or
proposed, relevant to the investment, construction and commissioning of
the project;
16. A copy of the financial closing checklist for the equity and
debt;
17. Applicant's business plan on which the project is based and
project pro forma statements for the proposed life of the loan
guarantee, including income statements, balance sheets, and cash flows.
All such statements should include assumptions made in their
preparation and the range of revenue, operating cost, and credit
assumptions considered;
18. Financial statements for the past three (3) years that have
been audited by an independent certified public accountant, including
all associated notes, as well as interim financial statements and notes
for the current fiscal year, of Applicant and parties relevant to
Applicant's financial backing, together with business and financial
interests of principal organizations, if appropriate, such as parent
and subsidiary corporations or partners of Applicant;
[[Page 46457]]
19. A copy of all legal opinions, engineering reports, and other
material reports, analysis, and reviews related to the project;
20. Credit history of Applicant and, if appropriate, any party who
owns or controls a five percent or greater interest in the project or
the Applicant;
21. A preliminary credit assessment for the project without a loan
guarantee from a nationally recognized rating agency;
22. A list of all project-related applications filed and approvals
issued by Federal, state, and local government agencies for permits and
authorizations to site, construct, and operate the project. If still
outstanding, the Application should contain an estimated date of
completion for any required filings and approvals;
23. A report containing an analysis of the potential environmental
impacts of the project that will enable DOE to assess whether the
project will comply with all applicable environmental requirements and
how and to what measurable extent the project avoids, reduces, or
sequesters air pollutants or anthropogenic emissions of greenhouse
gases, including how Borrower intends to verify those benefits;
24. A listing of assets associated, or to be associated, with the
project and any other asset that will serve as collateral for the
guaranteed loan and assure repayment of the loans and other debt
obligations of the project, including appropriate data as to the value
and useful life of any physical assets and a description of any other
associated security and its value. With respect to any ownership
interest in a real property asset described above or any pledged asset
that is not part of the project, an appraisal should be performed by
state licensed or certified appraisers that is consistent with the
``Uniform Standards of Professional Appraisal Practice,'' promulgated
by the Appraisal Standards Board of the Appraisal Foundation;
25. An analysis demonstrating that at the time of the Application,
there is a reasonable prospect that Borrower will be able to repay the
loan or other debt obligation to be guaranteed (including interest)
according to its terms, and a complete description of the operational
and financial assumptions on which this demonstration is based;
26. Written affirmation from an officer of the Lender confirming
that Lender is an Eligible Lender in good standing with DOE's and other
agencies' loan guarantee programs; and
27. Such other information requested in the solicitation or
invitation to submit an Application necessary for a complete assessment
of the loan guarantee application for the project.
G. Following Applicant's submission of an Application, DOE will
review the Application based on the factors mentioned in subsection F
of Section III and Section IV of the guidelines. If the Credit Review
Board determines that a project may be suitable for a loan guarantee,
because, among other things, it qualifies as an Eligible Project, there
exists a reasonable expectation of payment based on the materials
provided in the Application, and the proposed project will advance the
President's Advanced Energy Initiative, DOE may notify the Borrower and
Lender in writing and provide them with a copy of a proposed Term
Sheet. In the event that DOE reviews an Application and decides not to
proceed further with the issuance of a proposed Term Sheet, DOE will
inform Applicant in writing the reason(s) for the denial.
H. Concurrent with the review process described above, DOE will
consult with the U.S. Department of Treasury regarding the terms and
conditions of the potential loan guarantee and will work with OMB to
determine the Subsidy Cost for a potential loan guarantee based on the
particular set of terms and conditions associated with the project. OMB
will ultimately review and approve the final determination of the
Subsidy Cost.
I. Subsequent to any negotiations and revisions of the proposed
Term Sheet including the Subsidy Cost in accordance with subsection H
of Section III of the guidelines, the Term Sheet becomes a Conditional
Commitment if, and only if, both DOE and Applicant agree to the
proposed terms and conditions and sign the Term Sheet. Among other
things, the Conditional Commitment will specify the required payment of
fees for the Administrative Cost of Issuing a Loan Guarantee.
Subsequent to entering into a Conditional Commitment, and upon
agreement as to the detailed terms and conditions to be contained in
the Loan Guarantee Agreement and other related documents, as well as
availability of authority provided in an appropriations act for the
loan guarantee, and fulfillment of other applicable statutory,
regulatory, or other requirements, the Credit Review Board will set a
closing date. DOE will enter into a Loan Guarantee Agreement with an
Applicant that satisfies the specified conditions precedent if and only
if all funding and other contractual, statutory and regulatory
requirements have been satisfied.
J. Prior to the closing date, the Secretary will ensure that:
1. Pursuant to section 1702(b) of the Act, Congress has made an
appropriation for the Subsidy Cost of the loan guarantee, or that the
Secretary will receive payment in full from the Borrower as part of the
closing and Congress has provided sufficient additional authority in an
appropriations act;
2. Pursuant to section 1702(h) of the Act, and in accordance with
Section V.R. of these guidelines, the Secretary has received from
Borrower payment of a fee for DOE's Administrative Cost of Issuing a
Loan Guarantee or will receive payment of the fee as part of the
closing;
3. The Director of OMB has reviewed and approved DOE's calculation
of the Subsidy Cost of the loan guarantee;
4. The Secretary of the Treasury has been consulted as to the terms
and conditions of the Loan Guarantee Agreement;
5. The Loan Guarantee Agreement and related documents contain all
terms and conditions the Secretary deems reasonable and necessary to
protect the interests of the United States; and
6. All conditions precedent specified in the Conditional Commitment
have either been satisfied or waived by the Secretary and all other
applicable contractual, statutory, and regulatory requirements have
been satisfied.
IV. Evaluation of Applications
In evaluating Applications invited for submission, DOE plans to
consider the following factors: \7\
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\7\ While these factors are designed for review of Applications,
DOE intends to use these factors, as appropriate, in reviewing Pre-
Applications as well:
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A. Whether the Application is complete, signed by the appropriate
entity or entities with the authority to bind the Project Sponsor and
other relevant parties to the agreement, and complies with the
eligibility requirements stated in the Act, these guidelines, and the
solicitation;
B. Whether the Application contains sufficient information,
including a detailed description of the nature and scope of the project
and the nature, scope, and risk coverage of the loan guarantee sought,
to enable DOE to perform a thorough assessment of the project;
C. Whether and to what measurable extent the project avoids,
reduces, or sequesters air pollutants or anthropogenic emissions of
greenhouse gases;
D. Whether the new or significantly improved technology to be
employed in the project, as compared to commercial technologies in
service in the United States at the time the guarantee is
[[Page 46458]]
issued, is ready to be employed commercially in the United States, can
yield a commercially viable product(s) in the use proposed in the
project, and is or will be available for further commercial use in the
United States;
E. Whether the project will advance the goals of the President's
Advanced Energy Initiative;
F. Whether the requested amount of the loan guarantee is reasonable
relative to the nature and scope of the project;
G. The extent to which Project Costs are funded by guaranteed debt;
H. The extent to which Applicant and other principals involved in
the project have made a significant equity commitment to the project;
I. Whether the project will be ready for full deployment and
operations in the proximate future;
J. Whether there is sufficient evidence that Applicant will
initiate and complete the project in a timely, efficient, and
acceptable manner;
K. Whether and/or to what extent Applicant will rely upon other
Federal and non-Federal governmental assistance (grants, tax credits,
other loan guarantees, etc.) to support the financing and construction
and/or operation of the project;
L. Whether there is reasonable assurance that the project is
economically feasible and will produce sufficient revenues to service
the project's debt obligations over the life of the loan guarantee and
assure timely repayment of guaranteed loans and other debt obligations;
M. Whether the collateral, warrantees, and other assurance of
repayment described in the Application provide adequate safeguard to
the Federal government in the event of default;
N. Whether Applicant possesses the capacity and expertise to
successfully operate the project, based on factors such as financial
soundness, management organization, and the nature and extent of
corporate and personnel experience;
O. Whether the project will comply with all applicable laws and
regulations, including all applicable environmental statutes and
regulations;
P. Whether the levels of market, regulatory, legal, financial,
technological, and other risks associated with the project are
appropriate for a loan guarantee provided by DOE;
Q. Whether the entity issuing the loan or other debt obligation
subject to the loan guarantee is an Eligible Lender; and
R. Such other criteria that the Secretary and the Credit Review
Board deem relevant in evaluating the merits of an Application.
V. Findings by the Secretary
Prior to the issuance by DOE of a loan guarantee, the Secretary
should ensure that Applicant satisfies the following requirements and
conditions (some or all of which should be specified in the Loan
Guarantee Agreement):
A. The project qualifies as an Eligible Project under the Act;
B. The project will be constructed and operated in the United
States and the technology is or is likely to be available in the United
States for further commercial application;
C. The debt guaranteed by DOE is limited to no more than 80 percent
of total Project Costs;
D. The amount of the loan guarantee does not exceed 80 percent of
the total face value of the loan or other debt obligation of the
project, or provides sufficient evidence to support a guarantee
exceeding 80 percent (but in no event 100 percent);
E. Applicant and other principals involved in the project have made
a significant equity investment;
F. The prospective Borrower is obligated to make full repayment of
the guaranteed loan over a period of up to the lesser of 30 years or 90
percent of the projected useful life of the project's major physical
assets, as calculated in accordance with generally accepted accounting
principles and practices;
G. The loan guarantee does not finance, either directly or
indirectly, a Federally tax-exempt obligation. Accordingly, the loan
guarantee may not be used for a Federally tax-exempt obligation or
serve as collateral to secure a tax-exempt obligation;
H. The guaranteed portion of a loan must not be separated from or
``stripped'' from the non-guaranteed portion of the loan and resold in
the secondary debt market;
I. The amount of the loan guaranteed, when combined with other
funds committed to the project, will be sufficient to carry out the
project, including adequate contingency funds;
J. There is a reasonable prospect of repayment by Borrower of the
principal and interest of the Guaranteed Obligations;
K. The prospective Borrower has pledged project assets and other
collateral or surety, including non project-related assets, as
determined by the Secretary to be necessary as assurance for the
repayment of the loan;
L. The Loan Guarantee Agreement and related documents include
detailed terms and conditions as appropriate to protect the interests
of the United States in the case of default, including ensuring
availability of all the intellectual property rights, technical data
including software, and physical assets necessary for any person
selected, including, but not limited to, the Secretary, to complete and
operate the defaulting project;
M. The Borrower's interest rate on the guaranteed loan is
determined by the Secretary to be reasonable, taking into account the
range of interest rates prevailing in the private sector for similar
Federal government guaranteed obligations of comparable risk;
N. The guaranteed loan is not subordinate to any loan or other debt
obligation for the project not part of the Guaranteed Obligations and
is in a first lien position regarding all assets of the project and all
collateral security pledged;
O. There is satisfactory evidence that Borrower is willing,
competent, and capable of performing the terms and conditions of the
loan or other debt obligation and the loan guarantee;
P. The Lender is not a Federal entity, possesses sufficient
financial wherewithal and expertise, and will exercise the requisite
standard of care as deemed necessary by the Secretary and stated in
DOE's lender eligibility criteria in Section VI of these guidelines;
Q. Lender or other parties servicing the loan and monitoring the
project should be satisfactory to the Secretary. In addition, the
Secretary will need to find that the Lender and other appropriate
parties will exercise a high level of care and diligence in the
establishment and enforcement of the conditions precedent to all loan
disbursements and the Borrower covenants throughout the term of the
loan and that each Lender will be required to diligently perform its
duties in the servicing and collection of the loan as well as in
ensuring that the collateral package securing the loan remains
uncompromised. The Lender will also provide annual or more frequent
periodic financial reports on the status and condition of the loan, and
is required to promptly notify DOE if it becomes aware of any problems
or irregularities concerning the project or the ability of the Borrower
to make payment on the loan or other debt obligations. Even though DOE
will rely on Lender (or other servicer) to service and monitor the loan
with utmost care and expertise, Lender's responsibilities with regard
to the loan are separate from DOE's own monitoring and review of the
loan and the project;
R. As specified in the Conditional Commitment, the prospective
Borrower makes payment of the fee for the Administrative Cost of
Issuing a Loan Guarantee pursuant to section 1702(h)
[[Page 46459]]
of the Act. While covering the other costs included in the
Administrative Cost of Issuing a Loan Guarantee, this payment will not
include the servicing and monitoring costs identified in Section II.B.
of these guidelines. These latter costs will be assessed in accordance
with the Loan Guarantee Agreement which will require payment of
administrative fees to the Federal government by Borrower, either
directly or through the Lender, periodically thereafter for the
duration of the loan guarantee. DOE intends to use all of the fees
mentioned above to defray administrative expenses associated with
issuing and monitoring loan guarantees;
S. If Borrower is to make payment in full for the Subsidy Cost of
the loan guarantee pursuant to section 1702(b)(2) of the Act, such
payment must be received by the Secretary prior to, or at the time of,
closing;
T. DOE representatives have access to the project site at all
reasonable times in order to monitor the performance of the project;
U. DOE and Borrower have reached an agreement as to what project
information will be made available to DOE and which project information
will be made publicly available;
V. The prospective Borrower has filed applications for or obtained
any required regulatory approvals for the project and is in compliance
with all Federal and state regulatory requirements;
W. Applicant has no delinquent Federal debt, including tax
liabilities, unless the delinquency has been resolved with the
appropriate Federal agency in accordance with the standards of the Debt
Collection Improvement Act of 1996; and
X. The Loan Guarantee Agreement contains such other terms and
conditions as the Secretary deems reasonable and necessary to protect
the interests of the United States.
VI. Lender Eligibility
Lenders associated with a project should meet the following
requirements:
A. The Lender is a ``non-Federal qualified institutional buyer,''
as defined in 17 CFR 230.144A(a), including qualified retirement plans
and governmental plans;
B. The Lender is not a party debarred or suspended from
participation in a Federal government contract (under 48 CFR 9.4) or
participation in a non-procurement activity (under a set of uniform
regulations implemented in agency regulations for numerous agencies,
including DOE, at 10 CFR 1036);
C. The Lender is not delinquent on any Federal debt or loan;
D. The Lender is duly organized and legally authorized to enter
into the transaction;
E. The Lender is able to demonstrate experience in originating and
servicing loans for commercial deals similar in size and scope with the
project under consideration; and
F. The Lender is able to demonstrate experience or capability as
the lead lender or underwriter of other energy related projects.
VII. Project Costs
A. In conjunction with the Secretary's determination of the Project
Costs associated with the issuance of a loan guarantee, Applicant
should record such costs in accordance with generally accepted
accounting principles and practices. Applicant should calculate the sum
of reasonable and customary costs that it has paid and expects to pay,
and which are directly related to the project, to estimate the total
sum of Project Costs. Project Costs may include, but are not limited
to:
1. Costs of acquisition, lease or rental of real property,
including engineering fees, surveys, title insurance, recording fees,
and legal fees incurred in connection with land acquisition, lease or
rental, site improvements, site restoration, access roads, and fencing;
2. Engineering, architectural, legal and bond fees, and insurance
paid in connection with construction of the facility; and materials,
labor, services, travel and transportation for facility construction,
startup, and tests;
3. Equipment purchase and startup testing;
4. Costs to provide equipment, facilities, and services related to
safety and environmental protection;
5. Financial and legal services costs, including other professional
services and fees necessary to obtain required licenses and permits and
to prepare environmental reports and data;
6. Interest costs and other normal charges affixed by lenders;
7. Necessary and appropriate insurance and bonds of all types;
8. Costs of startup, commissioning and shakedown;
9. Costs of obtaining licenses to intellectual property necessary
to design, construct, and operate the project; and
10. Other necessary and reasonable costs approved by the Secretary.
B. Applicant should not record the following costs as Project Costs
associated with the loan guarantee:
1. Fees and commissions charged to Borrower, including finder fees,
for obtaining Federal funds;
2. Parent corporation's general and administrative expenses, and
non-project related parent corporation assessments, including
organizational expenses;
3. Goodwill, franchise, trade, or brand name costs;
4. Dividends and profit sharing to stockholders, employees, and
officers;
5. Research, development, and demonstration costs of readying the
energy technology for employment in a commercial project;
6. Costs that are excessive or are not directly required to carry
out the project, as determined by the Secretary;
7. Administrative Cost of Issuing a Loan Guarantee paid by the
Borrower;
8. The Subsidy Cost of the loan guarantee; and
9. Operating expenses incurred after startup, commissioning and
shakedown.
VIII. Principal and Interest Assistance Contract
With respect to any Guaranteed Obligation, the Secretary may enter
into a contract to pay Holders, for and on behalf of Borrower, from
funds appropriated for that purpose, the principal and interest charges
that become due and payable on the unpaid balance of the Guaranteed
Obligation, if the Secretary finds that:
A. Borrower is unable to meet the payments and is not in default;
B. Borrower will, and is financially able to, continue to make the
scheduled payments on the remaining portion of the principal and
interest due under the non-guaranteed portion of the debt obligation,
or an arrangement, approved by the Secretary, has otherwise been agreed
to avoid an impending payment default;
C. It is in the public interest to permit Borrower to continue to
pursue the purposes of the project;
D. In paying the principal and interest, the Federal government
expects a probable net benefit greater than it would receive in the
event of a default;
E. The payment authorized is no greater than the amount of
principal and interest that Borrower is obligated to pay under the
agreement being guaranteed; and
F. Borrower agrees to reimburse the Secretary for the payment
(including interest) on terms and conditions that are satisfactory to
the Secretary and executes all written contracts required by the
Secretary for such purpose.
IX. Full Faith and Credit
As specified in the Act, the United States pledges its full faith
and credit to the payment of all Guaranteed Obligations with respect to
principal
[[Page 46460]]
and interest under the terms and conditions of the Loan Guarantee
Agreement.
X. Default/Audit
As required by sections 1702(g)(1)(A) and 1702(i)(1) of the Act,
DOE in the near future will issue regulations pertaining to default and
audit requirements that will apply to any loan guarantee issued, and
Loan Agreement executed, by DOE.
[FR Doc. E6-13268 Filed 8-11-06; 8:45 am]
BILLING CODE 6450-01-P