DOE to release eagerly awaited commercial solicitation
On a webinar yesterday, Michael Fraser, Senior Program Manager at the DOE, advised that the DOE plans to release a commercial solicitation for the loan guarantee program later this month or in early October. The current solicitation that is active for renewable energy projects requires that projects satisfy the innovative requirement. A project is defined as innovative only if it has not been employed in three or more similar applications in the US of five years duration. Thus many established renewable energy projects such as those utilizing wind or geothermal technology that is tested and proven, cannot apply under the current solicitation. The release of a commercial soliciation has been eagerly awaited by renewable energy project developers. These loans will be backed by private banks as well with DOE typically only guaranteeing 80-90% of the loan. DOE hopes that this structure will motivate private lenders to perform much of the due diligence necessary and only bring shovel-ready and bankable projects to the table. Interest rates on the loan are anticipated to run at Treasury plus 25 to 75 basis points. This is a very attractive interest rate but there are substantial fees associated with the program that will offset a portion of this value. The other key factor for projects to consider is whether they will be able to meet American Reinvestment and Recovery Act requirements and thus be eligible to have their credit subsidy costs covered by government funding. I am cautiously optimistic that DOE will be successful with these efforts and we will see a flurry of good projects moving forward Q1-Q2 2010 with the assistance of this program.
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