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US to Provide Loan Guarantees for Energy Projects |
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| US: October 8, 2007 | ||
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WASHINGTON - The US government hopes to encourage investment in clean energy by agreeing to repay a portion of the commercial loans that fund alternative-energy projects, in the event of default in the financing.
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The loan guarantees could cover financing for refineries that produce ethanol made from farm waste, electric generating plants that capture greenhouse gas emissions and other clean-energy projects. The US Energy Department issued final regulations for the loan guarantees Thursday. Congress has already authorized the Energy Department to issue up to US$4 billion in loan guarantees and the White House has asked for US$9 billion more for the 2008 spending year which began on Oct. 1. "Loan guarantees aim to stimulate investment and commercialization of clean energy technologies to reduce our nation's reliance on foreign sources of energy," said US Energy Secretary Sam Bodman. Under the regulations, the department can guarantee repayment on up to 100 percent of any loan as long as the loan did not cover more than 80 percent of a project's total cost. The energy projects must use new or improved technology. "By putting the full faith and credit of the United States government behind these efforts, DOE's loan guarantees will help mitigate the financial risks inherent in the commercial deployment of innovative technologies," Bodman said. The final rules will be published next week in the Federal Register of government regulations. The department in August 2006 sought requests for US$2 billion in loan guarantees for clean energy projects. By the end of the solicitation period, it had received 143 requests for US$27 billion in loan guarantees on projects estimated to cost more than US$51 billion. The department is now inviting sponsors of 16 of those projects to submit full loan guarantee applications, which will be subject to the new regulations. The department said it hoped to issue the loan guarantees as early as next spring. The proposed projects include: a power plant that captures and stores global warming emissions, a facility that makes energy-efficient windows, a plant that makes cellulosic ethanol from low-cost farm waste, and a battery-electric-powered vehicle that can travel long distances. When evaluating an application, the department said it will consider what other government assistance a project will receive, such as grants, tax credits and accelerated depreciation. The energy secretary would also have to determine that there is a "reasonable prospect" of a project's sponsor to repay the guaranteed debt. In the event of a loan default, the department would have the right to all of a project's assets pledged as collateral for the guaranteed loan.
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Story by Tom Doggett
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REUTERS NEWS SERVICE
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