Loan Guarantee Program Status Update October 29, 2010 U.S. Department of Energy
Loan Programs Overview - Objectives Avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases through new or significantly improved technologies Employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued Can be deployed commercially Beyond research and development, pilot and demonstration stages Provide a reasonable prospect for repayment 2
Energy Policy Act of 2005 Section 1703 Supports innovative clean technologies not likely to obtain conventional private financing due to high technology risks Self pay credit subsidy Title XVII Eligible Technologies Renewable Energy Advanced Fossil Energy Hydrogen Fuel Cells Advanced Nuclear Energy Carbon Capture and Sequestration Efficient Electricity, Transmission and Distribution Energy Efficient Technologies Fuel Efficient Vehicles Manufacturing Pollution Control Equipment Refineries Types Power generation Manufacturing Fuels 3
American Recovery and Reinvestment Act 2009 Recovery Act of 2009 amended Title XVII adding Section 1705 Supports primarily commercial energy projects that begin construction prior to September 30, 2011 Energy sectors include: biomass, hydrogen, solar, wind/hydropower, geothermal, transmission, or any other renewable energy systems Credit Subsidy Cost is paid by DOE Appropriated Credit Subsidy Cost significant advantage for renewable energy sectors Companies unwilling or unable to accept loan guarantee with subsidy cost Too expensive Requires upfront, non-refundable, cash payment Dual Eligibility 1703 projects may also be eligible under 1705, thereby qualifying for appropriated Credit Subsidy Cost 4
Financing Challenges for Innovative Technologies Innovative technologies face financing challenges between development and commercialization Many commercial and institutional lenders are adverse to technology risk Loan guarantees induce long term debt to be employed in higher risk, innovative projects helping them cross the Valley of Death A specialized financing technique, project financing, is used to mitigate project risks by financing off balance sheet or in non recourse structures to the sponsoring company or partnership Each transaction is unique, complex and some involve billions of dollars 5
Bringing a deal to close is a long, complicated process Loan Guarantee Approval Process Part I Part II NEPA Compliance Solicitation Due Diligence Negotiation Approval Process External Reviews Closing Process Deal Monitoring FIPP Credit Analysis Activity Eligibility reviews Market Technology Financial / Credit Legal / Regulatory Term Sheet Credit Committee Credit Review Board Credit Subsidy Calculation Treasury Approval Final legal documents Performance tracking 6
Loan Guarantee Authority FY 2007 FY 2009 Loan Guarantee Authority (up to $73 Billion) FY 2006 FY 2008 FY 2009 Approp. FY 2009 Recovery Act $2.0 billion (Credit Subsidy Self Pay) $40.5 billion (Credit Subsidy Self Pay) $8.5 billion (Credit Subsidy Self Pay) Approximately $20-22 billion in Loan Guarantee Authority expires Sept 30, 2011 (estimated authority based on credit subsidy) Breakdown Breakdown Breakdown Breakdown SOLICITATION ISSUED $2.0 B Full applications invited from selected list of 2006 applicants SOLICITATIONS ISSUED $18.5 B-advanced nuclear power facilities $4.0 B-front end nuclear fuel cycle facilities $ 8.0 B-coal based power facilities $10.0 B-renewable and/or energy efficient systems and manufacturing, and distributed energy generation, transmission and distribution SOLICITATIONS ISSUED $8.5 B- renewable and/or energy efficient systems and manufacturing, and distributed energy generation, transmission and distribution* *New and innovative projects that applied under Section 1703, and met the criteria for Section 1705, could qualify for the appropriated credit subsidy as provided by Section 1705 of the Recovery Act. SOLICITATIONS ISSUED $.75 B-FIPP $2.5 B-Renewable (combined with 1703 $.75 B-Transmission $.75 B-Manufacturing (Appropriated Credit Subsidy Amounts) Projects must commence construction not later than Sept 30, 2011 7
The Solicitations LGP has issued total of nine solicitations Three solicitations were are still open in FY 2011 Energy Efficiency, Renewable Energy and Advanced Transmission and Distribution Technologies supports projects that constitute New or Significantly Improved Technologies and intended to facilitate accelerated commercialization of energy efficiency, renewable energy and advanced transmission and distribution technologies Last Part II Submission Due Date: December 31, 2010 Financial Institution Partnership Program (FIPP) solicitation was designed to leverage the experience and capital of private sector financial institutions by accelerating the loan application process while balancing risk between DOE and private sector FIPP will help accelerate the development of conventional renewable energy generation projects such as wind, solar, biomass, geothermal and hydropower. Last submission opportunity: January 6, 2011 8
Newest Solicitation A manufacturing solicitation to promote manufacturer of commercial renewable energy systems and components was issued on August 12 th Last Part II Submission Due Date: January 31, 2011 9
Response to Solicitations through FY 2010 $100 B $90 B $80 B $70 B Authority Available vs. Sought B i l l i o n s ( $ ) $60 B $50 B $40 B $30 B $20 B $10 B $10 B Mixed '06 Nuclear '08 Renewable '08 Fossil '08 Front-End'08 Renewable '09 Transmission '09 FIPP Manufacturing Authority Available $2 B $18.5 B $10 B $8 B $4 B $8.5 B $5 B* $5 B* $5 B* Support Sought $27.58 B $93.2 B $27.63 B $17.43 B $4 B $52.14 B $9.06 B $8.16 B $260 M *estimated authority based on $0.75B available credit subsidy 10
439 Applications Received for Projects Across All Energy Sectors Nuclear 20 4% Transmission, Distribution, & Storage 29 7% Hydropower 7 2% Solar 114 26% Wind 42 9% Hydrogen 17 4% Advanced Fossil 34 8% Biomass 126 29% Alternative Fuel Vehicles 3 1% Energy Efficiency 32 7% Geothermal 15 3% 11
52 Projects Currently in Due Diligence by Energy Sector Transmission, Distribution, & Storage 2 4% Wind 7 13% Advanced Fossil 6 11% Biomass 6 12% Energy Efficiency 2 4% Solar 22 42% Nuclear 4 8% Geothermal 3 6% 12
Projects in Due Diligence by Energy Sector by Dollar Volume Transmission, Distribution, & Storage $1.48 B 3% Wind $1.03 B 2% Solar $13.79 B 27% Advanced Fossil $11.93 B 23% Biomass $1.16 B 2% Energy Geothermal $716 M 1% Efficiency $264 M 1% Nuclear $20.6 B 41% 13
Projects Approved to Date Program 1703 Loan Amount Date of agreement Locations Energy Sector Red River $245 million Dec 2009 Louisiana Energy Efficiency Vogtle $8.3 billion Feb 2010 Georgia Nuclear Sage $72 million March 2010 Minnesota Energy Efficiency Areva $2 billion May 2010 Idaho Front End Nuclear 1705 Solyndra $535 million Sept 2009 California Solar Manufacturing Beacon $43 million July 2009 New York Battery Storage Nordic $16 million July 2009 Idaho Wind Manufacturing BrightSource $1.4 billion Feb 2010 California Solar Generation First Wind $117 million March 2010 Hawaii Wind Generation U.S. Geothermal $102 million June 2010 Oregon Geothermal Generation Blue Mountain $79 million June 2010 Nevada Geothermal Generation Abound Solar $400 million July 2010 CO/Indiana Solar Manufacturing Abengoa Solar $1.45 billion July 2010 Arizona Solar Generation AES Shepherds Flat ON Line $17 million $1.3 billion $350 million July 2010 Oct 2010 Oct 2010 New York Oregon Nevada Battery Storage Wind Generation Transmission Totals: $16.5 billion 4,184 permanent/ 14,210 construction jobs Note: Projects in Blue have closed 14
Program Highlights Jumpstarting the Green Energy Economy According to company estimates, LPO projects will lead to more than 4GW of clean power generating capacity equivalent to 8 large coal plants Avoid approximately 40 million tons of CO2 per year the same as removing about 7 million cars from the road Doubled the amount of concentrated solar power generated in the U.S. Program investments in two large geothermal projects have refocused attention on sector Offered a conditional commitment for first nuclear power plant in almost 30 years Robust pipeline includes biomass, geothermal, hydropower, transmission, wind, solar, nuclear and nuclear front-end projects 15
Loan Guarantee Program Current Staffing Full Time Equivalent Employees (FTEs) FY 2010: 83 FTEs on board as compared to 16 in FY 2008 4 Detailees Supporting Offices established within the Loan Guarantee Program Office NEPA (8 FTEs) General Counsel (12 FTEs) Engineering (7 FTEs) Origination (35 FTEs) Portfolio Management (3 FTEs) More than 40 Full-time Contracted Consultants 16
New Assignment Financing expertise was recognized when Secretary Chu assigned responsibility for Alaska Pipeline Project The 2004 Alaska National Pipeline Act currently authorizes up to $18 billion in loan guarantees Pipeline will extend via two potential routes from Prudhoe Bay to the Alaska-Canadian border Project will substantially increase domestic natural gas supply 17
Freedom of Information Act Constant Challenge LGP s FOIA Team worked off a significant backlog closing 83 requests since January A dedicated staff of ten coordinates with program staff, applicants, and requestors FOIA Team is currently working on 37 requests Many involve requests for all applications and correspondence for a given solicitation Confidentiality and intellectual property of applicants is protected Program staff must provide information and review for confidential business information FOIA requests divert staff attention from LGP s mission 18
For Additional Information Loan Guarantee Program Office Website http://lpo.energy.gov/ 2005 Energy Policy Act Loan Guarantee Final Rule http://lpo.energy.gov/wpcontent/uploads/2010/09/epaof2005.pdf http://lpo.energy.gov/wp-content/uploads/2010/09/fr-1703- Dec4.pdf Solicitation Update Subscription: Send email to lgprogram@hq.doe.gov 19 19