WASHINGTON - The U.S. Department of Energy has extended its deadline to Jan. 29 from Jan. 15 for receiving responses to a request for information from state development finance agencies that want to participate in a new federal loan guarantee program.
The program, authorized by the American Recovery and Reinvestment Act, will provide federal guarantees on loans used to fund alternative energy production and manufacturing components for solar, wind, geothermal, biomass, and hydroelectric power.
It is not only a new program, but also the first time the DOE will evaluate capabilities of government-run development finance authorities to be credit underwriters for the loans.
This is the first stage of the program to assist financing for alternative energy projects, and it is expected to be used in conjunction with municipal bonds. The program will provide $6 billion of loan guarantees that sources estimate would leverage $50 billion to $100 billion of total project funding.
The extension is due to software difficulties related to the application process, according to Eleni Pelican, a spokeswoman for the DOE.
Responses are to include information about the resources state governments and utilities could employ, which could give some indication of how much bond issuance would result from the program.
The amount that would come from municipal bonds is unknown at this point, but it is estimated that it could be 20% or more of total project funding.
Development finance authorities will be able to act as third-party lenders under the program, as long as they provide direct debt or debt guarantees that are equal to at least 5% of the total project debt for the life of the loan, according to the DOE.
The authorities would issue revenue-backed debt or other kinds of secured debt to meet their required share of the project costs, after the department evaluates their default and loss rates over the previous 10 years, according to DOE documents.
The Council of Development Finance Agencies, a group that represents more than 265 public, private, and nonprofit development entities, has predicted that the program will encourage agencies to use more loan guarantees than in recent years. The agencies could issue taxable bonds and still be able to participate in the program, according to the CDFA.
It is possible that they could use Build America Bonds or recovery zone economic development bonds for government-owned energy projects, group said.
The DOE’s guaranteed loans are expected to be senior to or on parity with other debt, in contrast to another federal program that provides loan guarantees for infrastructure projects. That program, the Transportation Infrastructure Financing and Innovation Act, usually subordinates its credit to the project’s capital market or commercial bank debt, except in cases of bankruptcy, insolvency, or liquidation, when the TIFIA credit automatically springs up to parity debt.