[Federal Register Volume 81, Number 241 (Thursday, December 15, 2016)]
[Rules and Regulations]
[Pages 90699-90712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30006]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
10 CFR Part 609
RIN 1901-AB38
Loan Guarantees for Projects That Employ Innovative Technologies
AGENCY: Loan Programs Office, Department of Energy.
[[Page 90700]]
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Energy (DOE or the Department) publishes a
final rule to amend the existing regulations for the loan guarantee
program authorized by Title XVII of the Energy Policy Act of 2005
(Title XVII or the Act). Section 1703 of Title XVII (section 1703)
authorizes the Secretary of Energy (Secretary) to make loan guarantees
for projects that avoid, reduce, or sequester air pollutants or
anthropogenic emissions of greenhouse gases. Such projects must also
employ new or significantly improved technologies as compared to
commercial technologies in service in the United States at the time the
guarantee is issued. The two principal goals of section 1703 are to
encourage commercial use in the United States of new or significantly
improved energy-related technologies and to achieve substantial
environmental benefits. Section 1703 also identifies ten categories of
technologies and projects that are potentially eligible for loan
guarantees. Commercial use of these technologies is expected to help
sustain and promote economic growth, produce a more stable and secure
energy supply and economy for the United States, and improve the
environment.
As a result of experience gained implementing the loan guarantee
program authorized by section 1703, and information received from
program participants, including applicants, borrowers, sponsors, and
lenders, as well as various energy industry groups, DOE finalizes
amendments to the existing regulations to provide increased clarity and
transparency, reduce paperwork, and provide a more workable
interpretation of certain statutory provisions in light of DOE's
experience with operation of the Title XVII program.
DATES: This rule is effective on January 17, 2017.
FOR FURTHER INFORMATION CONTACT: Mark S. Westergard, Assistant Chief
Counsel Regulatory Affairs, Loan Programs Office, United States
Department of Energy, 1000 Independence Avenue SW., Washington, DC
20585-0121, (202) 287-5621, email: [email protected].
SUPPLEMENTARY INFORMATION:
I. Introduction and Background
II. Public Comments on the NOPR and DOE's Responses
A. Competition with Potential Future Applications
B. Risk-Based Charge
C. Section 609.8(c)(2) and section 609.8(c)(3)
III. Regulatory Review
IV. Approval of the Office of the Secretary
I. Introduction and Background
This final rule amends the regulations implementing the loan
guarantee program authorized by Title XVII of the Energy Policy Act of
2005 (42 U.S.C. 16511-16514) (referred to as Title XVII). Section 1703
of Title XVII (section 1703) authorizes the Secretary of Energy
(Secretary) to make loan guarantees for projects that: (1) Avoid,
reduce, or sequester air pollutants or anthropogenic emissions of
greenhouse gases; and (2) employ new or significantly improved
technologies as compared to commercial technologies in service in the
United States at the time the guarantee is issued. (42 U.S.C 16513(a)).
Section 1702 of Title XVII (section 1702) authorizes the Secretary,
after consultation with the Secretary of the Treasury, to enter into
loan guarantees on such terms and conditions as he or she determines to
be appropriate, in accordance with the provisions of section 1702.
Section 1702 also directs the Secretary to include in loan guarantees
``such detailed terms and conditions as the Secretary determines
appropriate to (i) protect the interests of the United States in the
case of a default; and (ii) have available all the patents and
technology necessary for any person selected, including the Secretary,
to complete and operate the project.'' (42 U.S.C. 16512(g)(2)(c)).
On October 3, 2016, the Department published a proposed rule and
request for comment on amendments to the regulations for the Title XVII
loan guarantee program. (81 FR 67924) The proposed rule also provides
additional background on DOE's experience in implementing the loan
guarantee program and the history of its implementing regulations. In
this final rule, DOE adopts the changes set forth in the proposed rule,
except where DOE made changes in consideration of comments received on
the proposal. In Section II of this final rule, DOE summarizes the
comments received, and provides its responses to those comments and a
discussion of the changes made to the proposal in this final rule.
In this final rule, DOE adopts the proposed rule changes that
clarify the circumstances under which potential applicants may
communicate with DOE prior to submitting an application. DOE expects
that the changes will increase transparency and result in more
applications by qualified applicants with respect to potential eligible
projects.
The final rule eliminates the pre-application process and codifies
procedures that divide the application into two parts.
The final rule revises the definition of Eligible Project to
explicitly state that a project may be located at two or more locations
in the United States if the project is comprised of installations or
facilities employing a single New or Significantly Improved Technology
that is deployed pursuant to an integrated and comprehensive business
plan.
The final rule provides for the use of Risk-Based Charges. Use of
Risk-Based Charges is permitted pursuant to the grant of authority to
the Secretary in Section 1702(a) to determine the terms and conditions
of the Title XVII loan guarantee program.
The final rule increases clarity and transparency. For example:
Definitions have been clarified, shortened where possible, and added;
specific references to the Cargo Preference Act and the Davis Bacon Act
have been added; an introductory section on how the rule is to be
interpreted has been added; and various provisions of the existing rule
have been re-organized to more-appropriate places in the rule.
DOE received comments on the proposed rule, which are summarized in
Section II of this final rule. DOE also provides its responses and
explains any changes to the proposal made in response to the comments
received. (For additional background on DOE's experience in
implementing the loan guarantee program and the history of its
implementing regulations, please see the proposed rule.)
II. Public Comments on the NOPR and DOE's Responses
A. Competition With Potential Future Applications
Public comment: One commenter requests clarification and revision
of the proposed changes in Sec. 609.5(a) to the competitive process
for evaluating completed Applications, which would require completed
Applications to be evaluated against potential projects that may become
the subject of an Application. The commenter is concerned that the
proposed changed will delay the Application process and put otherwise
qualified projects in ``limbo'' while the DOE awaits the filing of
Applications that may be filed on other projects. In the commenter's
view, this may result in a longer and more opaque process, because
fewer projects would be able to withstand the additional timing delays,
as well as in greater market uncertainty about the DOE loan guarantee
program.
[[Page 90701]]
DOE Response: DOE notes that applications are reviewed against all
other applications filed within the same round. For that reason DOE
does not believe the proposed change would delay the application
process or put otherwise qualified projects in ``limbo.'' Nevertheless,
DOE agrees that the proposed change could cause a more opaque process
and market uncertainty regarding, among other matters, whether a
project will be competed against potential projects that may become the
subject of an application. The proposal to consider potential future
Applications is inconsistent with competing filed Applications against
all other Applications filed within the same round. For those reasons
DOE has decided to withdraw the proposed change to the competitive
process which would allow consideration of potential projects during
the competition.
B. Risk-Based Charge
Public comments: Both commenters requested clarification regarding
the ``Risk-based-charge'' which they believe is duplicative of other
existing fees. The commenters urge DOE not to impose this additional
fee on recipients of DOE's Title XVII loan guarantees.
One commenter also pointed out that the Title XVII loan guarantee
program currently charges two fees to compensate DOE for the credit
risk it assumes. First, the program charges a ``Credit-Based Interest
Rate Spread'' based on the credit rating of the Applicant's project.
Second, the program charges a ``Credit Subsidy Fee'' to directly
compensate the United States for the specific credit risk of the
applicant's project. The commenter requested clarification that the
reference to a ``Risk-based charge'' means the ``Credit Based Interest
Rate Spread'', and that the program is not intending to impose a new
fee and increase the interest rate spreads beyond the current spreads.
DOE Response: Section 1702(e) of Title XVII requires the Secretary
to establish interest rates that do not exceed a level that the
Secretary determines appropriate, taking into account the prevailing
rate of interest in the private sector for similar loans and risks. In
the proposed rule, DOE proposed a ``Risk-Based Charge'' that, taking
into account all interest and interest-related costs, is intended to
make DOE's charges and costs consistent with the commercial markets and
other federal credit programs. Thus, the Risk-Based Charge will be used
only to the extent the aggregate of other interest-related charges do
not sufficiently reflect creditworthiness or specific risks arising
from individual transactions. The Risk-Based Charge, while distinct
from the fee for the Credit Subsidy Cost, may incidentally affect that
fee by increasing expected inflows to the United States that are
considered in calculating the amount of the fee. In that respect,
taking into account the time value of money, the Risk-Based Charge can
be viewed as affecting the time of payment rather than the amount of
payment based on the creditworthiness of the borrower and the
expectations regarding probability of repayment. After factoring in the
Risk-Based Charge, DOE does not expect the present value of the
interest amounts expected to be paid by the borrower as the cost of the
loan should be significantly different than the interest amounts that
would be paid without the Risk-Based Charge.
C. Section 609.8(c)(2) and Section 609.8(c)(3)
Public comment: One commenter requested clarification of what it
views as an apparent inconsistency between Sec. Sec. 609.8(c)(2) and
609.8(c)(3) of the proposed rule. The commenter stated that Sec.
609.8(c)(2) appears to require that the guaranteed and nonguaranteed
portions of a loan partially guaranteed by DOE be repaid pro rata, and
on the same amortization schedule. Section 609.8(c)(3) appears to the
commenter to provide for exceptions to this requirement under certain
conditions.
The commenter also requested that DOE modify Sec. 609.8 to allow
for commercial co-lenders to provide structured loan facilities that
would have the same amortization schedule as the guaranteed portion of
the facility but with a shorter loan tenor and a related refinancing
requirement at maturity of the structured loan facility.
DOE Response: DOE does not view Sec. Sec. 609.8(c)(2) and
609.8(c)(3) as inconsistent. Section 609.8(c)(2) deals with the
guaranteed and nonguaranteed portions of loans partially guaranteed by
DOE. Section 609.8(c)(3) deals with financing or credit arrangements
not guaranteed by DOE.
The commenter's request for a shorter loan tenor in connection with
certain commercial loan products is similar to a comment DOE received
in response to a proposed rule to amend the Title XVII regulations
published in 2009. (74 FR 39569, Aug. 7, 2009) In the final rule,
published on December 4, 2009, DOE made adjustments, retained by the
proposed rulemaking and subject to the same conditions set forth in the
current rule, to permit shorter or faster amortization schedules for
project-related financing or other credit arrangements not guaranteed
by DOE. See 74 FR 63544, 63546, Section II.C. Shorter Amortization of
Non-Guaranteed Obligations. DOE has reviewed the issue in response to
the comment and has determined that the provisions established in the
2009 rule address the concern while at the same time protecting the
interests of the United States. For that reason, DOE has determined
that no change in the existing language of the final rule is warranted.
Other Changes: While reviewing the proposed rule in response to
public comments, DOE found certain areas in the proposed rule that
should be modified consistent with DOE's intent to increase
transparency and clarity. On further consideration, DOE determined that
its treatment of the prohibition in Section 149(b) of the Internal
Revenue Code in Sec. 609.8(c)(4) created ambiguity and made
application of the provision more complicated. Therefore, DOE
eliminated the changes in the proposed rule and restored the language
of the existing rule to tie the rule to the requirements of law as they
related to tax-exempt debt obligation financing. Finally, DOE clarified
a provision relating to communications with applicants by deleting a
sentence that was unclear and not required by law.
III. Regulatory Review
A. Executive Order 12866
This final rule has been determined to be a significant regulatory
action under Executive Order 12866, ``Regulatory Planning and Review,''
58 FR 51735 (October 4, 1993). Accordingly, this action was subject to
review under that Executive Order by the Office of Information and
Regulatory Affairs (OIRA) of the Office of Management and Budget (OMB).
B. National Environmental Policy Act
DOE has determined that this final rule is covered under the
Categorical Exclusion found in DOE's National Environmental Policy Act
regulations at paragraph A.5 of appendix A to subpart D, 10 CFR part
1021, which applies to rulemaking that amends an existing rule or
regulation which does not change the environmental effect of the rule
or regulation being amended.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis for any rule
that by law must be proposed for public comment, unless the agency
certifies that the rule, if
[[Page 90702]]
promulgated, will not have a significant economic impact on a
substantial number of small entities. As required by Executive Order
13272, ``Proper Consideration of Small Entities in Agency Rulemaking,''
67 FR 53461 (August 16, 2002), DOE published procedures and policies on
February 19, 2003, to ensure that the potential impacts of its rules on
small entities are properly considered during the rulemaking process
(68 FR 7990). DOE has made its procedures and policies available on the
Office of General Counsel's Web site: http://www.energy.gov/gc/downloads/executive-order-13272-consideration-small-entities-agency-rulemaking.
DOE is not obligated to prepare a regulatory flexibility analysis
for this rulemaking because there is not a requirement to publish a
general notice of proposed rulemaking for rules related to loans under
the Administrative Procedure Act (5 U.S.C. 553(a)(2)).
D. Paperwork Reduction Act
Information collection requirements for the DOE regulations at 10
CFR part 609 have been submitted for approval to OMB pursuant to the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the
procedure implementing that Act (5 CFR 1320.1 et seq.) under OMB
Control Number 1910-5134. The revised recordkeeping and reporting
requirements associated with this rulemaking are not mandatory until
the information collection is approved by OMB.
Public reporting burden for the revised requirements in this final
rule is estimated to average 130 hours per response, including the time
for reviewing instructions, searching existing data sources, gathering
and maintaining the data needed, and completing and reviewing the
collection of information. All responses are expected to be collected
electronically.
Notwithstanding any other provision of law, a person is not
required to respond to a collection of information unless it displays a
currently valid OMB control number.
E. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (Act) (Pub. L. 104-4)
generally requires Federal agencies to examine closely the impacts of
regulatory actions on State, local, and tribal governments. The term
``Federal mandate'' is defined in the Act to mean a Federal
intergovernmental mandate or a Federal private sector mandate. Although
the final rule would impose certain requirements on non-Federal
governmental and private sector applicants for loan guarantees, the
Act's definitions of the terms ``Federal intergovernmental mandate''
and ``Federal private sector mandate'' exclude among other things, any
provision in legislation, statute, or regulation that is a condition of
Federal assistance or a duty arising from participation in a voluntary
program. The final rule would establish requirements that persons
voluntarily seeking loan guarantees for projects that would use certain
new and improved energy technologies must satisfy as a condition of a
Federal loan guarantee. Thus, the final rule falls under the exceptions
in the definitions of ``Federal intergovernmental mandate'' and
``Federal private sector mandate'' for requirements that are a
condition of Federal assistance or a duty arising from participation in
a voluntary program. The Act does not apply to this rulemaking.
F. Treasury and General Government Appropriations Act, 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule that may affect family
well-being. The final rule would not have any impact on the autonomy or
integrity of the family as an institution. Accordingly, DOE has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
G. Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions. DOE has examined this final rule and has
determined that it would not preempt State law and would not have a
substantial direct effect on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government. No further
action is required by Executive Order 13132.
H. Executive Order 12988
With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on
Executive agencies the general duty to adhere to the following
requirements: (1) Eliminate drafting errors and ambiguity; (2) write
regulations to minimize litigation; and (3) provide a clear legal
standard for affected conduct rather than a general standard and
promote simplification and burden reduction. With regard to the review
required by section 3(a), section 3(b) of Executive Order 12988
specifically requires that Executive agencies make every reasonable
effort to ensure that the regulation: (1) Clearly specifies the
preemptive effect, if any; (2) clearly specifies any effect on existing
Federal law or regulation; (3) provides a clear legal standard for
affected conduct while promoting simplification and burden reduction;
(4) specifies the retroactive effect, if any; (5) adequately defines
key terms; and (6) addresses other important issues affecting clarity
and general draftsmanship under any guidelines issued by the Attorney
General. Section 3(c) of Executive Order 12988 requires Executive
agencies to review regulations in light of applicable standards in
section 3(a) and section 3(b) to determine whether they are met or it
is unreasonable to meet one or more of them. DOE has completed the
required review and determined that, to the extent permitted by law,
the final rule meets the relevant standards of Executive Order 12988.
I. Treasury and General Government Appropriations Act, 2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by OMB.
OMB's guidelines were published at 67 FR 8452 (February 22, 2002),
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002).
DOE has reviewed this final rule under the OMB and DOE guidelines and
has concluded that it is consistent with applicable policies in those
guidelines.
J. Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to the
OMB, a Statement of Energy Effects for any proposed significant energy
action. A ``significant energy action'' is defined as any action by an
agency that
[[Page 90703]]
promulgated or is expected to lead to promulgation of a final rule, and
that: (1) Is a significant regulatory action under Executive Order
12866, or any successor order; and (2) is likely to have a significant
adverse effect on the supply, distribution, or use of energy, or (3) is
designated by the Administrator of OIRA as a significant energy action.
For any proposed significant energy action, the agency must give a
detailed statement of any adverse effects on energy supply,
distribution, or use should the proposal be implemented, and of
reasonable alternatives to the action and their expected benefits on
energy supply, distribution, and use. This regulatory action would not
have a significant adverse effect on the supply, distribution, or use
of energy and has not been designated by OIRA as a significant energy
action, and is therefore not a significant energy action. Accordingly,
DOE has not prepared a Statement of Energy Effects.
K. Executive Order 12630
The Department has determined, under Executive Order 12630,
``Governmental Actions and Interference with Constitutionally Protected
Property Rights,'' 53 FR 8859 (March 18, 1988), that this rule would
not result in any takings which might require compensation under the
Fifth Amendment to the United States Constitution.
L. Congressional Notification
As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is not a ``major rule''
as defined by 5 U.S.C. 804(2).
IV. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this final
rule.
List of Subjects in 10 CFR Part 609
Administrative practice and procedure, Energy, Loan programs, and
Reporting and recordkeeping requirements.
Issued in Washington, DC, on December 6, 2016.
Mark A. McCall,
Executive Director, Loan Programs Office.
For the reasons stated in the preamble, DOE revises part 609 of
chapter II of title 10 of the Code of Federal Regulations as set forth
below:
PART 609--LOAN GUARANTEES FOR PROJECTS THAT EMPLOY INNOVATIVE
TECHNOLOGIES
Sec.
609.1 Purpose and scope.
609.2 Definitions and interpretation.
609.3 Solicitations.
609.4 Submission of applications.
609.5 Programmatic, technical and financial evaluation of
applications.
609.6 Term sheets and conditional commitments.
609.7 Closing on the loan guarantee agreement.
609.8 Loan guarantee agreement.
609.9 Lender servicing requirements.
609.10 Project costs.
609.11 Fees and charges.
609.12 Full faith and credit and incontestability.
609.13 Default, demand, payment, and collateral liquidation.
609.14 Preservation of collateral.
609.15 Audit and access to records.
609.16 Deviations.
Authority: 42 U.S.C. 7254, 16511-16514.
Sec. 609.1 Purpose and scope.
(a) This part sets forth the policies and procedures that DOE uses
for receiving, evaluating, and approving applications for loan
guarantees to support Eligible Projects under section 1703 of the
Energy Policy Act of 2005 (Act).
(b) This part applies to all Applications, Conditional Commitments,
and Loan Guarantee Agreements.
(c) Part 1024 of chapter X of title 10 of the Code of Federal
Regulations shall not apply to actions taken under this part.
Sec. 609.2 Definitions and interpretation.
(a) Definitions. When used in this part the following words have
the following meanings.
Act means Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511-
16514), as amended.
Administrative Cost of Issuing a Loan Guarantee means the total of all
administrative expenses that DOE incurs during:
(1) The evaluation of an Application for a loan guarantee;
(2) The negotiation and offer of a Term Sheet;
(3) The negotiation of a Loan Guarantee Agreement and related
documents, including the issuance of a Guarantee; and
(4) The servicing and monitoring of a Loan Guarantee Agreement,
including during the construction, startup, commissioning, shakedown,
and operational phases of an Eligible Project.
Applicant means a Person, including a prospective Borrower or Project
Sponsor, that submits an Application to DOE.
Application means a written submission of materials responsive to a
Solicitation that satisfies Sec. 609.4.
Application Fee means the fee or fees required to be paid by an
Applicant in connection with submission of an Application and specified
in a Solicitation. The Application Fee does not include the Credit
Subsidy Cost.
Attorney General means the Attorney General of the United States.
Borrower means any Person that enters into a Loan Guarantee Agreement
with DOE and issues Guaranteed Obligations.
Cargo Preference Act means the Cargo Preference Act of 1954, 46 U.S.C.
55305, as amended.
Commercial Technology means a technology in general use in the
commercial marketplace in the United States at the time the Term Sheet
is offered by DOE. A technology is in general use if it is being used
in three or more facilities that are in commercial operation in the
United States for the same general purpose as the proposed project, and
has been used in each such facility for a period of at least five
years. The five-year period for each facility shall start on the in-
service date of the facility employing that particular technology or,
in the case of a retrofit of a facility to employ a particular
technology, the date the facility resumes commercial operation
following completion and testing of the retrofit. For purposes of this
section, facilities that are in commercial operation include projects
that have been the recipients of a loan guarantee from DOE under this
part.
Conditional Commitment means a Term Sheet offered by DOE and accepted
by the offeree of the Term Sheet, all in accordance with Sec.
609.6(c); provided, that the Secretary may terminate a Conditional
Commitment for any reason at any time prior to the execution of the
Loan Guarantee Agreement; and provided, further, that the Secretary may
not delegate this authority to terminate a Conditional Commitment.
Contracting Officer means the Secretary of Energy or a DOE official
authorized by the Secretary to enter into, administer or terminate DOE
Loan Guarantee Agreements and related contracts on behalf of DOE.
Credit Subsidy Cost has the same meaning as ``cost of a loan
guarantee'' in section 502(5)(C) of the Federal Credit Reform Act of
1990, which is the net present value, at the time the
[[Page 90704]]
Loan Guarantee Agreement is executed, of the following estimated cash
flows, discounted to the point of disbursement:
(1) Payments by the Government to cover defaults and delinquencies,
interest subsidies, or other payments; less
(2) Payments to the Government including origination and other
fees, penalties, and recoveries; including the effects of changes in
loan or debt terms resulting from the exercise by the Borrower,
Eligible Lender or other Holder of an option included in the Loan
Guarantee Agreement.
Davis-Bacon Act means the statute referenced in section 1702(k) of the
Act.
DOE means the United States Department of Energy.
Eligible Lender means either:
(1) Any Person formed for the purpose of, or engaged in the
business of, lending money that, as determined by DOE in each case, is:
(i) Not debarred or suspended from participation in a Federal
government contract or participation in a non-procurement activity
(under a set of uniform regulations implemented for numerous agencies,
such as DOE, at 2 CFR part 180);
(ii) Not delinquent on any Federal debt or loan;
(iii) Legally authorized and empowered to enter into loan guarantee
transactions authorized by the Act and these regulations;
(iv) Able to demonstrate experience in originating and servicing
loans for commercial projects similar in size and scope to the Eligible
Project, or able to procure such experience through contracts
acceptable to DOE; and
(v) Able to demonstrate experience as the lead lender or
underwriter by presenting evidence of its participation in large
commercial projects or energy-related projects or other relevant
experience, or able to procure such experience through contracts
acceptable to DOE; or
(2) The Federal Financing Bank.
Eligible Project means a project that:
(1) Is located in the United States at one location, except that
the project may be located at two or more locations in the United
States if the project is comprised of installations or facilities
employing a single New or Significantly Improved Technology that is
deployed pursuant to an integrated and comprehensive business plan. An
Eligible Project in more than one location is a single Eligible
Project;
(2) Deploys a New or Significantly Improved Technology; and
(3) Satisfies all applicable requirements of section 1703 of the
Act, the applicable Solicitation, and this part.
Equity means cash contributed to the permanent capital stock (or
equivalent) of the Borrower or the Eligible Project by the shareholders
or other owners of the Borrower or the Eligible Project. Equity does
not include proceeds from the non-guaranteed portion of a Guaranteed
Obligation, proceeds from any other non-guaranteed loan or obligation,
or the value of any government assistance or support.
Facility Fee means the fee, to be paid in the amount and in the manner
provided in the Term Sheet, to cover the Administrative Cost of Issuing
a Loan Guarantee for the period from the Borrower's acceptance of the
Term Sheet through issuance of the Guarantee.
Federal Financing Bank means an instrumentality of the United States
government created by the Federal Financing Bank Act of 1973, under the
general supervision of the Secretary of the Treasury.
Guarantee means the undertaking of the United States of America, acting
through the Secretary pursuant to Title XVII of the Energy Policy Act
of 2005, to pay in accordance with the terms thereof, principal and
interest of a Guaranteed Obligation.
Guaranteed Obligation means any loan or other debt obligation of the
Borrower for an Eligible Project for which DOE guarantees all or any
part of the payment of principal and interest under a Loan Guarantee
Agreement entered into pursuant to the Act.
Holder means any Person that holds a promissory note made by the
Borrower evidencing the Guaranteed Obligation (or his designee or
agent).
Intercreditor Agreement means any agreement or instrument (or amendment
or modification thereof) among DOE and one or more other Persons
providing financing or other credit arrangements to the Borrower or an
Eligible Project) or that otherwise provides for rights of DOE in
respect of a Borrower or in respect of an Eligible Project, in each
case in form and substance satisfactory to DOE.
Loan Agreement means a written agreement between a Borrower and an
Eligible Lender containing the terms and conditions under which the
Eligible Lender will make a loan or loans to the Borrower for an
Eligible Project.
Loan Guarantee Agreement means a written agreement that, when entered
into by DOE and a Borrower, and, if applicable, an Eligible Lender,
establishes the obligation of DOE to guarantee the payment of all or a
portion of the principal of, and interest on, specified Guaranteed
Obligations, subject to the terms and conditions specified in the Loan
Guarantee Agreement.
New or Significantly Improved Technology means a technology, or a
defined suite of technologies, concerned with the production,
consumption, or transportation of energy and that is not a Commercial
Technology, and that has either:
(1) Only recently been developed, discovered, or learned; or
(2) Involves or constitutes one or more meaningful and important
improvements in productivity or value, in comparison to Commercial
Technologies in use in the United States at the time the Term Sheet is
issued.
OMB means the Office of Management and Budget in the Executive Office
of the President.
Person means any natural person or any legally constituted entity,
including a state or local government, tribe, corporation, company,
voluntary association, partnership, limited liability company, joint
venture, and trust.
Project Costs mean those costs, including escalation and contingencies,
that are to be expended or accrued by a Borrower and are necessary,
reasonable, customary and directly related to the design, engineering,
financing, construction, startup, commissioning and shakedown of an
Eligible Project, as specified in Sec. 609.10(a). Project Costs do not
include costs for the items set forth in Sec. 609.10(b).
Project Sponsor means any Person that assumes substantial
responsibility for the development, financing, and structuring of an
Eligible Project and, if not the Applicant, owns or controls, by itself
and/or through individuals in common or affiliated business entities, a
five percent or greater interest in the proposed Eligible Project, the
Borrower or the Applicant.
Risk-Based Charge means a charge that, together with the principal and
interest on the guaranteed loan, or at such other times as DOE may
determine, is payable on specified dates during the term of a
Guaranteed Obligation.
Secretary means the Secretary of Energy or a duly authorized designee
or successor in interest.
[[Page 90705]]
Solicitation means an announcement that DOE is accepting Applications
that is widely disseminated to the public on the DOE Web site or
otherwise, and which satisfies the requirements of Sec. 609.3(b).
Term Sheet means a written offer for the issuance of a loan guarantee,
executed by the Secretary (or a DOE official authorized by the
Secretary to execute such offer), delivered to the offeree, that sets
forth the detailed terms and conditions under which DOE and the
Applicant will execute a Loan Guarantee Agreement.
United States means the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa
and any territory or possession of the United States of America.
(b) Interpretations. This part shall be interpreted using the following
guidelines.
(1) The word ``discretion'' when used with reference to DOE,
including the Secretary, means ``sole discretion.''
(2) Defined terms in the singular shall include the plural and vice
versa, and the masculine, feminine or neuter gender shall include all
genders.
(3) The word ``or'' is not exclusive.
(4) References to laws by name or popular name are references to
the version of such law appearing in the United States Code and include
any amendment, supplement or modification of such law, and all
regulations, rulings, and other laws promulgated thereunder.
(5) References to information or documents required or allowed to
be submitted to DOE mean information or documents that are marked as
provided in 10 CFR 600.15(b). A document or information that is not
marked as provided in 10 CFR 600.15(b) will not be considered as having
been submitted to or received by DOE.
(6) A reference to a Person includes such Person's successors and
permitted assigns.
(7) The words ``include,'' ``includes'' and ``including'' are not
limiting and mean include, includes and including ``without
limitation'' and ``without limitation by specification.''
(8) The words ``hereof,'' ``herein'' and ``hereunder'' and words of
similar import refer this part as a whole and not to any particular
provision of this part.
Sec. 609.3 Solicitations.
(a) DOE may invite the submission of Applications for loan
guarantees for Eligible Projects pursuant to a Solicitation.
(b) Each Solicitation must include, at a minimum, the following
information:
(1) The dollar amount of loan guarantee authority potentially being
made available by DOE in that Solicitation;
(2) The place and deadline for submission of Applications;
(3) The name and address of the DOE representative whom a potential
Applicant may contact to receive further information and a copy of the
Solicitation;
(4) The form, format, and page limits applicable to the
Application;
(5) The amount of the Application Fee and any other fees that will
be required;
(6) The programmatic, technical, financial and other factors that
DOE will use to evaluate response submissions, and their relative
weightings in that evaluation; and
(7) Such other information as DOE may deem appropriate.
(c) Using procedures as may be announced by DOE a potential
Applicant may request a meeting with DOE to discuss its potential
Application. At its discretion, DOE may meet with a potential
Applicant, either in person or electronically, to discuss its potential
Application. DOE may provide a potential Applicant with a preliminary
response regarding whether its proposed Application may constitute an
Eligible Project. DOE's responses to questions from potential
Applicants and DOE's statements to potential Applicants are pre-
decisional and preliminary in nature. Any such responses and statements
are subject in their entirety to any final action by DOE with respect
to an Application submitted in accordance with Sec. 609.4.
Sec. 609.4 Submission of applications.
(a) In response to a Solicitation, an Applicant must meet all
requirements and provide all information specified in this part and the
Solicitation in the manner and on or before the date specified therein.
DOE may direct that Applications be submitted in more than one part;
provided, that the parts of such Application, taken as a whole, satisfy
the requirements of Sec. 609.4(c) and this part. In such event,
subsequent parts of an Application may be filed only after DOE invites
an Applicant to make an additional submission. The initial part of an
Application may be used by DOE to determine the likelihood that the
project proposed by an Applicant will be an Eligible Project, and to
evaluate such project's readiness to proceed. If there have been any
material amendments, modifications or additions made to the information
previously submitted by an Applicant, the Applicant shall provide a
detailed description thereof, including any changes in the proposed
project's financing structure or other terms, promptly upon request by
DOE. Where DOE has directed that an Application be submitted in parts,
DOE may provide for payment of the Application Fee in parts.
(b) An Applicant may submit only one Application for one proposed
project using a particular technology. An Applicant may not submit an
Application or Applications for multiple Eligible Projects using the
same technology. An Applicant may submit Applications for multiple
proposed projects using different technologies. For purposes of this
paragraph (b), the term Applicant shall include the Project Sponsor and
any subsidiaries or affiliates of the Project Sponsor.
(c) An Application must include, at a minimum, the following
information and materials:
(1) A completed Application form signed by an individual with full
authority to bind the Applicant, including the commitments and
representations made in each part of the Application;
(2) The applicable Application Fee;
(3) A description of how and to what measurable extent the proposed
project avoids, reduces, or sequesters air pollutants and/or
anthropogenic emissions of greenhouse gases, including how to measure
and verify those effects;
(4) A description of the nature and scope of the proposed project,
including:
(i) Key project milestones;
(ii) Location or locations of the proposed project;
(iii) Identification and commercial feasibility of the New or
Significantly Improved Technology to be deployed;
(iv) How the Applicant intends to deploy such New or Significantly
Improved Technology in the proposed project; and
(v) How the Applicant intends to assure, to the extent possible,
the further commercial availability of the New or Significantly
Improved Technology in the United States.
(5) An explanation of how the proposed project qualifies as a
project within the category or categories of projects referred to in
the Solicitation;
(6) A detailed estimate of the total Project Costs together with a
description of the methodology and assumptions used;
(7) A detailed description of the engineering and design
contractor(s), construction contractor(s), and equipment supplier(s);
[[Page 90706]]
(8) The construction schedules for the proposed project, including
major activity and cost milestones;
(9) A description of the material terms and conditions of the
development and construction contracts to include the performance
guarantees, performance bonds, liquidated damages provisions, and
equipment warranties;
(10) 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;
(11) A description of the management plan of operations to be
employed in carrying out the proposed project, and information
concerning the management experience of each officer or key person
associated with the proposed project;
(12) A detailed description of the proposed project
decommissioning, deconstruction, and disposal plan, and the anticipated
costs associated therewith;
(13) An analysis of the market for any product (including but not
limited to electricity and chemicals) to be produced by, or services to
be provided by, the proposed project, including relevant economics
justifying the analysis, and copies of
(i) Any contracts for the sale of such products or the provision of
such services, or
(ii) Any other assurance of the revenues to be generated from sale
of such products or provision of such services;
(14) A detailed description of the overall financial plan for the
proposed project, including all sources and uses of funding, equity and
debt, and the liability of parties associated with the proposed project
over the term of the Loan Guarantee Agreement;
(15) A copy of all material agreements, whether entered into or
proposed, relevant to the investment, design, engineering, financing,
construction, startup commissioning, shakedown, operations and
maintenance of the proposed project;
(16) A copy of the financial closing checklist for the equity and
debt to the extent available;
(17) The Applicant's business plan on which the proposed project is
based and Applicant's financial model with respect to the proposed
project for the proposed term of the Guaranteed Obligations, including,
as applicable, pro forma income statements, balance sheets, and cash
flows. All such information and data must include assumptions made in
their preparation and the range of revenue, operating cost, and credit
assumptions considered;
(18) Financial statements for the three immediately preceding
fiscal years of the Applicant (or such shorter period as the Applicant
has been in existence) that have been audited by an independent
certified public accounting firm, including all associated
certifications, notes and letters to management, as well as interim
financial statements and notes for the current fiscal year for the
Applicant and all other Persons the credit of which is material to the
success of the transactions described in the Application;
(19) A copy of all legal opinions, and other material reports,
analyses, and reviews related to the proposed project that have been
delivered prior to submission of any part of the Application;
(20) An independent engineering report prepared by an engineer with
experience in the industry and familiarity with similar projects. The
report should address the proposed project's siting and permitting
arrangements, engineering and design, contractual requirements,
environmental compliance, testing, commissioning and operations, and
maintenance;
(21) A credit history of the Applicant and each Project Sponsor;
(22) A preliminary credit assessment for the proposed project
without a loan guarantee from a nationally recognized rating agency for
projects where the estimated total Project Costs exceed $25 million.
For proposed projects where the total estimated Project Costs are $25
million or less and where conditions justify, in the sole discretion of
the Secretary, DOE may require such an assessment;
(23) A list showing the status of and estimated completion date of
Applicant's required applications for federal, state, and local
permits, authorizations or approvals to site, construct, and operate
the proposed project;
(24) A report containing an analysis of the potential environmental
impacts of the proposed project that will enable DOE to--
(i) Assess whether the proposed project will comply with all
applicable environmental requirements; and
(ii) Undertake and complete any necessary reviews under the
National Environmental Policy Act of 1969;
(25) A listing and description of the assets of or to be utilized
for the benefit of the proposed project, and of any other asset that
will serve as collateral pledged in respect of the Guaranteed
Obligations, including appropriate data as to the value of such assets
and the useful life of any physical assets. With respect to real
property assets listed, an appraisal that is consistent with the
``Uniform Standards of Professional Appraisal Practice,'' promulgated
by the Appraisal Standards Board of the Appraisal Foundation, and
performed by licensed or certified appraisers, is required;
(26) An analysis demonstrating that, at the time of the
Application, there is a reasonable prospect that Borrower will be able
to repay the Guaranteed Obligations (including interest) according to
their terms, and a complete description of the operational and
financial assumptions and methodologies on which this demonstration is
based; and
(27) If proposed project assets or facilities are or will be
jointly owned by the Applicant and one or more other Persons, each of
which owns an undivided ownership interest in such proposed project
assets or facilities, a description of the Applicant's rights and
obligations in respect of its undivided ownership interest in such
proposed project assets or facilities.
(d) During the Application evaluation process pursuant to Sec.
609.5, DOE may request additional information, potentially including a
preliminary credit rating or credit assessment, with respect to the
proposed project.
(e) DOE will not consider any part of any Application or the
Application as a whole complete unless the Application Fee (or the
required portion of the Application Fee related to a particular part of
the Application) has been paid. An Application Fee paid in connection
with one Application is not transferable to another Application. Except
in the discretion of DOE, no portion of the Application Fee is
refundable;
(f) DOE has no obligation to evaluate an Application that is not
complete, and may proceed with such evaluation, or a partial
evaluation, only in its discretion.
(g) Unless an Applicant requests an extension and such an extension
is granted by DOE in its discretion, an Application may be rejected if
it is not complete within four years from the date of submission (or
date of submission of the first part thereof, in the case of
Applications made in more than one part).
(h) Upon making a determination to engage independent consultants
or outside counsel with respect to an Application, DOE will proceed to
evaluate and process such Application only following execution by an
Applicant or Project Sponsor, as appropriate, of an agreement
satisfactory
[[Page 90707]]
to DOE to pay the fees and expenses charged by the independent
consultants and outside legal counsel.
Sec. 609.5 Programmatic, technical and financial evaluation of
applications.
(a) In reviewing completed Applications, and in prioritizing and
selecting those as to which a Term Sheet should be offered, DOE will
apply the criteria set forth in the Act, any applicable Solicitation,
and this part. Applications will be considered in a competitive
process, i.e. each Application will be evaluated against other
Applications responsive to the Solicitation. Applications will be
denied if:
(1) The proposed project is not an Eligible Project;
(2) The applicable technology is not ready to be deployed
commercially in the United States, cannot yield a commercially viable
product or service in the use proposed in the Application, does not
have the potential to be deployed in other commercial projects in the
United States, or is not or will not be available for further
commercial use in the United States;
(3) The Person proposed to issue the loan or purchase other debt
obligations constituting the Guaranteed Obligations is not an Eligible
Lender;
(4) The proposed project is for demonstration, research, or
development;
(5) Significant Equity for the proposed project will not be
provided by the date of issuance of the Guaranteed Obligations, or such
later time as DOE in its discretion may determine; or
(6) The proposed project does not present a reasonable prospect of
repayment of the Guaranteed Obligations.
(b) If an Application has not been denied pursuant to Sec.
609.5(a), DOE will evaluate the proposed Project based on the criteria
set forth in the Act, any applicable Solicitation and the following:
(1) To what measurable extent the proposed project avoids, reduces,
or sequesters air pollutants or anthropogenic emissions of greenhouses
gases, or contributes to the avoidance, reduction or sequestration of
air pollutants or anthropogenic emissions of greenhouse gases;
(2) To what extent the technology to be deployed in the proposed
project--
(i) Is ready to be deployed commercially in the United States, can
be replicated, yields a commercially viable product or service in the
use proposed in the proposed project, has potential to be deployed in
other commercial projects in the United States, and is or will be
available for further commercial use in the United States; and
(ii) Constitutes an important improvement in technology, as
compared to available Commercial Technologies, used to avoid, reduce or
sequester air pollutants or anthropogenic emissions of greenhouse
gases;
(3) To what extent the Applicant has a plan to advance or assist in
the advancement of that technology into the commercial marketplace in
the United States;
(4) The extent to which the level of proposed support in the
Application is consistent with a reasonable prospect of repayment of
the Guaranteed Obligations by considering, among other factors:
(i) The extent to which the requested amount of the loan guarantee,
the requested amount of Guaranteed Obligations and, if applicable, the
expected amount of any other financing or credit arrangements, are
reasonable relative to the nature and scope of the proposed project;
(ii) The total amount and nature of the Project Costs and the
extent to which Project Costs are to be funded by Guaranteed
Obligations; and
(iii) The feasibility of the proposed project and likelihood that
it will produce sufficient revenues to service its debt obligations
over the life of the loan guarantee and assure timely repayment of
Guaranteed Obligations;
(5) The likelihood that the proposed project will be ready for full
commercial operations in the time frame stated in the Application;
(6) The amount of Equity committed and to be committed to the
proposed project by the Borrower, the Project Sponsor, and other
Persons;
(7) Whether there is sufficient evidence that the Borrower will
diligently implement the proposed project, including initiating and
completing the proposed project in a timely manner;
(8) Whether and to what extent the Applicant will rely upon other
Federal and non-Federal Government assistance such as grants, tax
credits, or other loan guarantees to support the financing,
construction, and operation of the proposed project and how such
assistance will impact the proposed project;
(9) The levels of safeguards provided to the Federal Government in
the event of default through collateral, warranties, and other
assurance of repayment described in the Application, including the
nature of any anticipated intercreditor arrangements;
(10) The Applicant's, or the relevant contractor's, capacity and
expertise to operate the proposed project successfully, based on
factors such as financial soundness, management organization, and the
nature and extent of corporate and individual experience;
(11) The ability of the proposed Borrower to ensure that the
proposed project will comply with all applicable laws and regulations,
including all applicable environmental statutes and regulations;
(12) The levels of market, regulatory, legal, financial,
technological, and other risks associated with the proposed project and
their appropriateness for a loan guarantee provided by DOE;
(13) Whether the Application contains sufficient information,
including a detailed description of the nature and scope of the
proposed project and the nature, scope, and risk coverage of the loan
guarantee sought to enable DOE to perform a thorough assessment of the
proposed project; and
(14) Such other criteria that DOE deems relevant in evaluating the
merits of an Application.
(c) After DOE completes its review and evaluation of a proposed
project pursuant to Sec. 609.5(b) and this part, DOE will notify the
Applicant in writing of its determination whether to proceed with due
diligence and negotiation of a Term Sheet in accordance with Sec.
609.6. DOE will proceed only if it determines that the proposed project
is highly qualified and suitable for a Guarantee. Upon written
confirmation from the Applicant that it desires to proceed, DOE and the
Applicant will commence negotiations.
(d) A determination by DOE not to proceed with a proposed project
following evaluation pursuant to Sec. 609.5(b) shall be final and non-
appealable, but shall not prejudice the Applicant or other affected
Persons from applying for a Guarantee in respect of a different
proposed project pursuant to another, separate Application.
Sec. 609.6 Term sheets and conditional commitments.
(a) DOE, after negotiation of a Term Sheet with an Applicant, may
offer such Term Sheet to an Applicant or such other Person that is an
affiliate of the Applicant and that is acceptable to DOE. DOE's offer
of a Term Sheet shall be in writing and signed by the Contracting
Officer. DOE's negotiation of a Term Sheet imposes no obligation on the
Secretary to offer a Term Sheet to the Applicant.
(b) DOE shall terminate its negotiations of a Term Sheet if it has
not offered a Term Sheet in respect of an
[[Page 90708]]
Eligible Project within four years after the date of the written
notification set forth in Sec. 609.5(c), unless extended in writing in
the discretion of the Contracting Officer.
(c) If and when the offeree specified in a Term Sheet satisfies all
terms and conditions for acceptance of the Term Sheet, including
written acceptance thereof and payment of all fees specified in Sec.
609.11(f) and therein to be paid at or prior to acceptance of the Term
Sheet, the Term Sheet shall become a Conditional Commitment. Each
Conditional Commitment shall include an expiration date no more than
two years from the date it is issued, unless extended in writing in the
discretion of the Contracting Officer. When and if all of the terms and
conditions specified in the Conditional Commitment have been met, DOE
and the Applicant may enter into a Loan Guarantee Agreement.
(d) If, subsequent to execution of a Conditional Commitment, the
financing arrangements of the Borrower, or in respect of an Eligible
Project, change from those described in the Conditional Commitment, the
Applicant shall promptly provide updated financing information in
writing to DOE. All such updated information shall be deemed to be
information submitted in connection with an Application and shall be
subject to Sec. 609.4(b). Based on such updated information, DOE may
take one or more of the following actions:
(1) Determine that such changes are not material to the Borrower,
the Eligible Project or DOE;
(2) Amend the Conditional Commitment accordingly;
(3) Postpone the expected closing date of the associated Loan
Guarantee Agreement; or
(4) Terminate the Conditional Commitment.
Sec. 609.7 Closing on the loan guarantee agreement.
(a) Subsequent to entering into a Conditional Commitment with an
Applicant, DOE, after consultation with the Applicant, will set a
closing date for execution of a Loan Guarantee Agreement.
(b) Prior to or on the closing date of a Loan Guarantee Agreement,
DOE will ensure that:
(1) One of the following has occurred:
(i) An appropriation for the Credit Subsidy Cost has been made;
(ii) The Secretary has received from the Borrower payment in full
for the Credit Subsidy Cost and deposited the payment into the
Treasury; or
(iii) A combination of one or more appropriations under paragraph
(b)(1)(i) of this section and one or more payments from the Borrower
under paragraph (b)(1)(ii) of this section has been made that is equal
to the Credit Subsidy Cost;
(2) Pursuant to section 1702(h) of the Act, DOE has received from
the Applicant the remainder of the Facility Fee referred to in Sec.
609.11(b);
(3) OMB has reviewed and approved DOE's calculation of the Credit
Subsidy Cost of the Guarantee;
(4) The Department 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 DOE deems reasonable and necessary to protect the
interest of the United States;
(6) Each holder of the Guaranteed Obligations is an Eligible
Lender, and the servicer of the Guaranteed Obligations meets the
servicing performance requirements of Sec. 609.9(b);
(7) DOE has determined the principal amount of the Guaranteed
Obligations expected to be issued in respect of the Eligible Project,
as estimated at the time of issuance, will not exceed 80 percent of the
Project Costs of the Eligible Project;
(8) All conditions precedent specified in the Conditional
Commitment are either satisfied or waived by the Contracting Officer
and all other applicable contractual, statutory, and regulatory
requirements have been satisfied or waived by the Contracting Officer.
If the counterparty to the Conditional Commitment has not satisfied all
such terms and conditions on or prior to the closing date of the Loan
Guarantee Agreement, the Secretary may, in his discretion, set a new
closing date, or terminate the Conditional Commitment; and
(9) Where the total Project Costs for an Eligible Project are
projected to exceed $25 million, the Applicant must provide a credit
rating from a nationally recognized rating agency reflecting the
revised Conditional Commitment for the project without a Federal
guarantee. Where total Project Costs are projected to be $25 million or
less, the Secretary may, on a case-by-case basis, require a credit
rating. If a credit rating is required, an updated rating must be
provided to the Secretary not later than 30 days prior to closing.
Sec. 609.8 Loan guarantee agreement.
(a) Only a Loan Guarantee Agreement executed by the Contracting
Officer can obligate DOE to issue a Guarantee in respect of Guaranteed
Obligations.
(b) DOE is not bound by oral representations.
(c) Each Loan Guarantee Agreement shall contain the following
requirements and conditions, and shall not be executed until the
Contracting Officer determines that the following requirements and
conditions are satisfied:
(1) The Federal Financing Bank shall be the only Eligible Lender in
transactions where DOE guarantees 100 percent (but not less than 100
percent) of the principal and interest of the Guaranteed Obligations
issued under a Loan Guarantee Agreement.
(i) Where DOE guarantees more than 90 percent of the Guaranteed
Obligation, the guaranteed portion cannot be separated from or
``stripped'' from the non-guaranteed portion of the Guaranteed
Obligation if the loan is participated, syndicated or otherwise resold
in the secondary market; and
(ii) Where DOE guarantees 90 percent or less of the Guaranteed
Obligation, the guaranteed portion may be separated from or
``stripped'' from the non-guaranteed portion of the Guaranteed
Obligation, if the loan is participated, syndicated or otherwise resold
in the secondary debt market;
(2) The Borrower shall be obligated to make full repayment of the
principal and interest on the Guaranteed Obligations and other debt of
a Borrower over a period of up to the lesser of 30 years or 90 percent
of the projected useful life of the Eligible Project's major physical
assets, as calculated in accordance with U.S. generally accepted
accounting principles and practices. The non-guaranteed portion (if
any) of any Guaranteed Obligations must be repaid pro rata, and on the
same amortization schedule, with the guaranteed portion.
(3) If any financing or credit arrangement of the Borrower or
relating to the Eligible Project, other than the Guaranteed
Obligations, has an amortization period shorter than that of the
Guaranteed Obligations, DOE shall have determined that the resulting
financing structure allocates to DOE a reasonably proportionate share
of the default risk, in light of:
(i) DOE's share of the total debt financing of the Borrower,
(ii) Risk allocation among the credit providers to the Borrower,
and
(iii) Internal and external credit enhancements.
(4) The loan guarantee does not finance, either directly or
indirectly tax-exempt debt obligations, consistent with the
requirements of section 149(b) of the Internal Revenue Code;
(5) The principal amount of the Guaranteed Obligations, when
combined with funds from other sources
[[Page 90709]]
committed and available to the Borrower, shall be sufficient to pay for
expected Project Costs (including adequate contingency amounts), the
applicable items specified in Sec. 609.10(b), and otherwise to carry
out the Eligible Project;
(6) There shall be a reasonable prospect of repayment by the
Borrower of the principal of and interest on the Guaranteed Obligations
and all of its other debt obligations;
(7) The Borrower shall pledge collateral or surety determined by
DOE to be necessary to secure the repayment of the Guaranteed
Obligations. Such collateral or security may include Eligible Project
assets and assets not related to the Eligible Project;
(8) The Loan Guarantee Agreement and related documents shall
include detailed terms and conditions that DOE deems necessary and
appropriate to protect the interests of the United States in the case
of default, including ensuring availability of all relevant
intellectual property rights, technical data including software, and
technology necessary for DOE or any Person selected by DOE, to
complete, operate, convey, and dispose of the defaulted Borrower or the
Eligible Project;
(9) The Guaranteed Obligations shall not be subordinate to other
financing. Guaranteed Obligations are not subordinate to other
financing if the lien on property securing the Guaranteed Obligations,
together with liens that are pari passu with such lien, if any, take
priority or precedence over other charges or encumbrances upon the same
property and must be satisfied before such other charges are entitled
to participate in proceeds of the property's sale. In DOE's discretion,
Guaranteed Obligations may share a lien position with other financing;
(10) There is satisfactory evidence that the Borrower will
diligently pursue the Eligible Project and is willing, competent, and
capable of performing its obligations under the Loan Guarantee
Agreement and the loan documentation relating to its other debt
obligations;
(11) The Borrower shall have paid all fees and expenses due to DOE
or the U.S. Government, including such amount of the Credit Subsidy
Cost as may be due and payable from the Borrower pursuant to the
Conditional Commitment, upon execution of the Loan Guarantee Agreement;
(12) The Borrower, any Eligible Lender, and each other relevant
party shall take, and be obligated to continue to take, those actions
necessary to perfect and maintain liens on collateral in respect of the
Guaranteed Obligations;
(13) DOE or its representatives shall have access to the offices of
the Borrower and the Eligible Project site at all reasonable times in
order to monitor the--
(i) Performance by the Borrower of its obligations under the Loan
Guarantee Agreement; and
(ii) Performance of the Eligible Project;
(14) DOE and Borrower have reached an agreement regarding the
information that will be made available to DOE and the information that
will be made publicly available;
(15) The Borrower shall have filed applications for or obtained any
required regulatory approvals for the Eligible Project and is in
compliance, or promptly will be in compliance, where appropriate, with
all Federal, state, and local regulatory requirements;
(16) The Borrower shall have no delinquent Federal debt;
(17) The Project Sponsors have made or will make a significant
Equity investment in the Borrower or the Eligible Project, and will
maintain control of the Borrower or the Eligible Project as agreed in
the LGA; and
(18) The Loan Guarantee Agreement and related agreements shall
include such other terms and conditions as DOE deems necessary or
appropriate to protect the interests of the United States.
(d) The Loan Guarantee Agreement shall provide that, in the event
of a default by the Borrower:
(1) Interest on the Guaranteed Obligations shall accrue at the rate
stated in the Loan Guarantee Agreement or the Loan Agreement, until DOE
makes full payment of the defaulted Guaranteed Obligations and, except
when such Guaranteed Obligations are funded through the Federal
Financing Bank, DOE shall not be required to pay any premium, default
penalties, or prepayment penalties; and
(2) The holder of collateral pledged in respect of the Guaranteed
Obligations shall be obligated to take such actions as DOE may
reasonably require to provide for the care, preservation, protection,
and maintenance of such collateral so as to enable the United States to
achieve maximum recovery.
(e)(1) An Eligible Lender or other Holder may sell, assign or
transfer a Guaranteed Obligation to another Eligible Lender that meets
the requirements of Sec. 609.9. Such latter Eligible Lender shall be
required to assume all servicing, monitoring and reporting requirements
as provided in the Loan Guarantee Agreement. Any transfer of the
servicing, monitoring, and reporting functions shall be subject to the
prior written approval of DOE.
(2) The Secretary, or the Secretary's designee or contractual
agent, for the purpose of identifying Holders with the right to receive
payment under the Guaranteed Obligations, shall include in the Loan
Guarantee Agreement or related documents a procedure for tracking and
identifying Holders of Guaranteed Obligations. Any contractual agent
approved by the Secretary to perform this function may transfer or
assign this responsibility only with the Secretary's prior written
approval.
(f) Each Loan Guarantee Agreement shall require the Borrower to
make representations and warranties, agree to covenants, and satisfy
conditions precedent to closing and to each disbursement that, in each
case, relate to its compliance with the Davis-Bacon Act and the Cargo
Preference Act.
(g) The Applicant, the Borrower or the Project Sponsor must
estimate, calculate, record, and provide to DOE any time DOE requests
such information and at the times provided in the Loan Guarantee
Agreement all costs incurred in the design, engineering, financing,
construction, startup, commissioning and shakedown of the Eligible
Project in accordance with generally accepted accounting principles and
practices.
Sec. 609.9 Lender servicing requirements.
(a) When reviewing and evaluating a proposed Eligible Project, all
Eligible Lenders (other than the Federal Financing Bank) shall at all
times exercise the level of care and diligence that a reasonable and
prudent lender would exercise when reviewing, evaluating and disbursing
a loan made by it without a Federal guarantee.
(b) Loan servicing duties shall be performed by an Eligible Lender,
DOE, or another qualified loan servicer approved by DOE. When
performing its servicing duties, the loan servicer shall at all times
exercise the level of care and diligence that a reasonable and prudent
lender would exercise when servicing a loan made without a Federal
guarantee, including:
(1) During the construction period, monitoring the satisfaction of
all of the conditions precedent to all loan disbursements, as provided
in the Loan Guarantee Agreement, Loan Agreement or related documents;
(2) During the operational phase, monitoring and servicing the
Guaranteed Obligations and collection of the outstanding principal and
accrued interest as well as undertaking to ensure that the collateral
package
[[Page 90710]]
securing the Guaranteed Obligations remains uncompromised; and
(3) Until the Guaranteed Obligation has been repaid, providing
annual or more frequent financial and other reports on the status and
condition of the Guaranteed Obligations and the Eligible Project, and
promptly notifying DOE if it becomes aware of any problems or
irregularities concerning the Eligible Project or the ability of the
Borrower to make payment on the Guaranteed Obligations or its other
debt obligations.
Sec. 609.10 Project costs.
(a) Project Costs include:
(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) Costs of engineering, architectural, legal and bond fees, and
insurance paid in connection with construction of the facility;
(3) Costs of equipment purchases, including a reasonable reserve of
spare parts to the extent required;
(4) Costs to provide facilities and services related to safety and
environmental protection;
(5) Costs of financial, legal, and other professional services,
including services necessary to obtain required licenses and permits
and to prepare environmental reports and data;
(6) Costs of issuing Eligible Project debt, such as fees,
transaction, and costs referred to in Sec. 609.10(a)(5), and other
customary charges imposed by Eligible Lenders;
(7) Costs of necessary and appropriate insurance and bonds of all
types including letters of credit and any collateral required therefor;
(8) Costs of design, engineering, startup, commissioning and
shakedown;
(9) Costs of obtaining licenses to intellectual property necessary
to design, construct, and operate the Eligible Project;
(10) To the extent required by the Loan Guarantee Agreement and not
intended or available for any cost referred to in Sec. 609.10(b),
costs of funding any reserve fund, including without limitation, a debt
service reserve, a maintenance reserve, and a contingency reserve for
cost overruns during construction; provided that proceeds of a
Guaranteed Loan deposited to any reserve fund shall not be removed from
such fund except to pay Project Costs, to pay principal of the
Guaranteed Loan, or otherwise to be used as provided in the Loan
Guarantee Agreement;
(11) Capitalized interest necessary to meet market requirements and
other carrying costs during construction; and
(12) Other necessary and reasonable costs.
(b) Project Costs do not include:
(1) Fees and commissions charged to Borrower, including finder's
fees, for obtaining Federal or other funds;
(2) Parent corporation or other affiliated entity's general and
administrative expenses, and non-Eligible Project related parent
corporation or affiliated entity 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 an
innovative technology for employment in a commercial project;
(6) Costs that are excessive or are not directly required to carry
out the Eligible Project, as determined by DOE;
(7) Expenses incurred after startup, commissioning, and shakedown
before the facility, or, in DOE's discretion, any portion of the
facility, has been placed in service;
(8) Borrower-paid Credit Subsidy Costs, the Administrative Cost of
Issuing a Loan Guarantee, and any other fee collected by DOE; and
(9) Operating costs.
Sec. 609.11 Fees and charges.
(a) Unless explicitly authorized by statute, no funds obtained from
the Federal Government, or from a loan or other instrument guaranteed
by the Federal Government, may be used to pay for the Credit Subsidy
Cost, the Application Fee, the Facility Fee, the Guarantee Fee, the
maintenance fee and any other fees charged by or paid to DOE relating
to the Act or any Guarantee thereunder.
(b) DOE may charge Applicants a non-refundable Facility Fee, with a
portion being payable on or prior to the date on which the Applicant
executes the Commitment Letter and the remainder being payable on or
prior to the closing date for the Loan Guarantee Agreement.
(c) In order to encourage and supplement private lending activity
DOE may collect from Borrowers for deposit in the United States
Treasury a non-refundable Risk-Based Charge which, together with the
interest rate on the Guaranteed Obligation that LPO determines to be
appropriate, will take into account the prevailing rate of interest in
the private sector for similar loans and risks. The Risk-Based Charge
shall be paid at such times and in such manner as may be determined by
DOE, but no less frequently than once each year, commencing with
payment of a pro-rated payment on the date the Guarantee is issued. The
amount of the Risk-Based Charge will be specified in the Loan Guarantee
Agreement.
(d) DOE may collect a maintenance fee to cover DOE's administrative
expenses, other than extraordinary expenses, incurred in servicing and
monitoring a Loan Guarantee Agreement. The maintenance fee shall accrue
from the date of execution of the Loan Guarantee Agreement through the
date of payment in full of the related Guaranteed Obligations. If DOE
determines to collect a maintenance fee, it shall be paid by the
Borrower each year (or portion thereof) in advance in the amount
specified in the applicable Loan Guarantee Agreement.
(e) In the event a Borrower or an Eligible Project experiences
difficulty relating to technical, financial, or legal matters or other
events (e.g., engineering failure or financial workouts), the Borrower
shall be liable as follows:
(1) If such difficulty requires DOE to incur time or expenses
beyond those customarily expended to monitor and administer performing
loans, DOE may collect an extraordinary expenses fee from the Borrower
that will reimburse DOE for such time and expenses, as determined by
DOE; and
(2) For all fees and expenses of DOE's independent consultants and
outside counsel, to the extent that such fees and expenses are elected
to be paid by DOE notwithstanding the provisions of paragraphs (f) and
(g) of this section.
(f) Each Applicant, Borrower or Project Sponsor, as applicable,
shall be responsible for the payment of all fees and expenses charged
by DOE's independent consultants and outside legal counsel in
connection with an Application, Conditional Commitment or Loan
Guarantee Agreement, as applicable. Upon making a determination to
engage independent consultants or outside counsel with respect to an
Application, DOE will proceed to evaluate and process such Application
only following execution by an Applicant or Project Sponsor, as
appropriate, of an agreement satisfactory to DOE to pay the fees and
expenses charged by the independent consultants and outside legal
counsel. Appropriate provisions regarding payment of such fees and
expenses shall also be included in each Term Sheet and Loan Guaranty
Agreement or, upon a determination by DOE, in other appropriate
agreements.
[[Page 90711]]
(g) Notwithstanding payment by Applicant, Borrower or Project
Sponsor, all services rendered by an independent consultant or outside
legal counsel to DOE in connection with an Application, Conditional
Commitment or Loan Guarantee Agreement shall be solely for the benefit
of DOE (and such other creditors as DOE may agree in writing). DOE may
require, in its discretion, the payment of an advance retainer to such
independent consultants or outside legal counsel as security for the
collection of the fees and expenses charged by the independent
consultants and outside legal counsel. In the event an Applicant,
Borrower or Project Sponsor fails to comply with the provisions of such
payment agreement, DOE in its discretion, may stop work on or terminate
an Application, a Conditional Commitment or a Loan Guarantee Agreement,
or may take such other remedial measures in its discretion as it deems
appropriate.
(h) DOE shall not be financially liable under any circumstances to
any independent consultant or outside counsel for services rendered in
connection with an Application, Conditional Commitment or Loan
Guarantee Agreement except to the extent DOE has previously entered
into an express written agreement to pay for such services.
Sec. 609.12 Full faith and credit and incontestability.
The full faith and credit of the United States is pledged to the
payment of principal and interest of Guaranteed Obligations pursuant to
Guarantees issued in accordance with the Act and this Part. The
issuance by DOE of a Guarantee shall be conclusive evidence that it has
been properly obtained; that the underlying loan qualified for such
Guarantee; and that, but for fraud or material misrepresentation by the
Holder, such Guarantee shall be legal, valid, binding and enforceable
against DOE in accordance with its terms.
Sec. 609.13 Default, demand, payment, and foreclosure on collateral.
(a) If a Borrower defaults in making a required payment of
principal or interest on a Guaranteed Obligation and such default has
not been cured within the applicable grace period, the Holder may make
written demand for payment upon the Secretary in accordance with the
terms of the applicable Guarantee. If a Borrower defaults in making a
required payment of principal or interest on a Guaranteed Obligation
and such default has not been cured within the applicable grace period,
the Secretary shall notify the Attorney General.
(b) Subject to the terms of the applicable Guarantee, the Secretary
shall make payment within 60 days after receipt of written demand for
payment from the Holder, provided that the demand for payment complies
in all respects with the terms of the applicable Guarantee. Interest
shall accrue to the Holder at the rate stated in the promissory note
evidencing the Guaranteed Obligation, without giving effect to the
Borrower's default in making a required payment of principal or
interest on the applicable Guarantee Obligation or any other default by
the Borrower, until the Guaranteed Obligation has been fully paid by
DOE. Payment by the Secretary on the applicable Guarantee does not
change Borrower's obligations under the promissory note evidencing the
Guaranteed Obligation, Loan Guarantee Agreement, Loan Agreement or
related documents, including an obligation to pay default interest.
(c) Following payment by the Secretary pursuant to the applicable
Guarantee, upon demand by DOE, the Holder shall transfer and assign to
the Secretary (or his designee or agent) the promissory note evidencing
the Guaranteed Obligation, all rights and interests of the Holder in
the Guaranteed Obligation, and all rights and interests of the Holder
in respect of the Guaranteed Obligation, except to the extent that the
Secretary determines that such promissory note or any of such rights
and interests shall not be transferred and assigned to the Secretary.
Such transfer and assignment shall include, without limitation, all of
the liens, security and collateral rights of the Holder (or his
designee or agent) in respect of the Guaranteed Obligation.
(d) Following payment by the Secretary pursuant to a Guarantee or
other default of a Guaranteed Obligation, the Secretary is authorized
to protect and foreclose on the collateral, take action to recover
costs incurred by, and all amounts owed to, the United States as a
result of the defaulted Guarantee Obligation, and take such other
action necessary or appropriate to protect the interests of the United
States. In respect of any such authorized actions that involve a
judicial proceeding or other judicial action, the Secretary shall act
through the Attorney General. The foregoing provisions of this
paragraph shall not relieve the Secretary from its obligations pursuant
to any applicable Intercreditor Agreement. Nothing in this paragraph
shall limit the Secretary from exercising any rights or remedies
pursuant to the terms of the Loan Guarantee Agreement.
(e) The cash proceeds received as a result of any foreclosure on
the collateral, or other action, shall be distributed in accordance
with the Loan Guarantee Agreement (subject to any applicable
Intercreditor Agreement).
(f) The Loan Guarantee Agreement shall provide that cash proceeds
received by the Secretary (or his designee or agent) as a result of any
foreclosure on the collateral or other action shall be applied in the
following order of priority:
(1) Toward the pro rata payment of any costs and expenses
(including unpaid fees, fees and expenses of counsel, contractors and
agents, and liabilities and advances made or incurred) of the
Secretary, the Attorney General, the Holder, a collateral agent or
other responsible person of any of them (solely in their individual
capacities as such and not on behalf of or for the benefit of their
principals), incurred in connection with any authorized action
following payment by the Secretary pursuant to a Guarantee or other
default of a Guaranteed Obligation, or as otherwise permitted under the
Loan Agreement or Loan Guarantee Agreement.
(2) To pay all accrued and unpaid fees due and payable to the
Secretary, the Attorney General, the Holder, a collateral agent or
other responsible person of any of them on a pro rata basis in respect
of the Guaranteed Obligation;
(3) To pay all accrued and unpaid interest due and payable to the
Secretary, the Attorney General, the Holder, a collateral agent or
other responsible person of any of them on a pro rata basis in respect
of the Guaranteed Obligation;
(4) To pay all unpaid principal of the Guaranteed Obligation;
(5) To pay all other obligations of the Borrower under the Loan
Guarantee Agreement, the Loan Agreement and related documents that are
remaining after giving effect to the preceding provisions and are then
due and payable; and;
(6) To pay to the Borrower, or its successors and assigns, or as a
court of competent jurisdiction may direct, any cash proceeds then
remaining following the application of all payment described above.
(g) No action taken by the Holder or its agent or designee in
respect of any collateral will affect the rights of any person,
including the Secretary, having an interest in the Guaranteed
Obligations or other debt obligations, to pursue, jointly or severally,
legal action against the Borrower or other liable
[[Page 90712]]
persons, for any amounts owing in respect of the Guaranteed Obligation
or other applicable debt obligations.
(h) In the event that the Secretary considers it necessary or
desirable to protect or further the interest of the United States in
connection with exercise of rights as a lien holder or recovery of
deficiencies due under the Guaranteed Obligation, the Secretary may
take such action as he determines to be appropriate under the
circumstances.
(i) Nothing in this part precludes, nor shall any provision of this
part be construed to preclude, the Secretary from purchasing any
collateral or Holder's or other Person's interest in the Eligible
Project upon foreclosure of the collateral.
(j) Nothing in this part precludes, nor shall any provision of this
part be construed to preclude, forbearance by any Holder with the
consent of the Secretary for the benefit of the Borrower and the United
States.
(k) The Holder and the Secretary may agree to a formal or informal
plan of reorganization in respect of the Borrower, to include a
restructuring of the Guaranteed Obligation and other applicable debt of
the Borrower on such terms and conditions as the Secretary determines
are in the best interest of the United States.
Sec. 609.14 Preservation of collateral.
(a) If the Secretary exercises his right under the Loan Guarantee
Agreement to require the holder of pledged collateral to take such
actions as the Secretary (subject to any applicable Intercreditor
Agreement) may reasonably require to provide for the care,
preservation, protection, and maintenance of such collateral so as to
enable the United States to achieve maximum recovery from the
collateral, the Secretary shall, subject to compliance with the
Antideficiency Act, 31 U.S.C. 1341 et seq., reimburse the holder of
such collateral for reasonable and appropriate expenses incurred in
taking actions required by the Secretary (unless otherwise provided in
applicable agreements). Except as provided in Sec. 609.13, no party
may waive or relinquish, without the consent of the Secretary, any such
collateral to which the United States would be subrogated upon payment
under the Loan Guarantee Agreement.
(b) In the event of a default, the Secretary may enter into such
contracts as he determines are required or appropriate, taking into
account the term of any applicable Intercreditor Agreement, to care
for, preserve, protect or maintain collateral pledged in respect of
Guaranteed Obligations. The cost of such contracts may be charged to
the Borrower.
Sec. 609.15 Audit and access to records.
Each Loan Guarantee Agreement and related documents shall provide
that:
(a) The Eligible Lender, or DOE in conjunction with the Federal
Financing Bank where loans are funded by the Federal Financing Bank or
other Holder or other party servicing the Guaranteed Obligations, as
applicable, and the Borrower, shall keep such records concerning the
Eligible Project as are necessary, including the Application, Term
Sheet, Conditional Commitment, Loan Guarantee Agreement, Credit
Agreement, mortgage, note, disbursement requests and supporting
documentation, financial statements, audit reports of independent
accounting firms, lists of all Eligible Project assets and non-Eligible
Project assets pledged in respect of the Guaranteed Obligations, all
off-take and other revenue producing agreements, documentation for all
Eligible Project indebtedness, income tax returns, technology
agreements, documentation for all permits and regulatory approvals and
all other documents and records relating to the Borrower or the
Eligible Project, as determined by the Secretary, to facilitate an
effective audit and performance evaluation of the Eligible Project; and
(b) The Secretary and the Comptroller General, or their duly
authorized representatives, shall have access, for the purpose of audit
and examination, to any pertinent books, documents, papers and records
of the Borrower, Eligible Lender or DOE or other Holder or other party
servicing the Guaranteed Obligation, as applicable. Such inspection may
be made during regular office hours of the Borrower, Eligible Lender or
DOE or other Holder, or other party servicing the Eligible Project and
the Guaranteed Obligations, as applicable, or at any other time
mutually convenient.
Sec. 609.16 Deviations.
(a) To the extent that the requirements under this part are not
specified by the Act or other applicable statutes, DOE may authorize
deviations from the requirements of this part upon:
(1) Either receipt from the Applicant, Borrower or Project Sponsor,
as applicable, of--
(i) A written request that the Secretary deviate from one or more
requirements; and
(ii) A supporting statement briefly describing one or more
justifications for such deviation; or
(iii) A determination by the Secretary in his discretion to
undertake a deviation;
(2) A finding by the Secretary that such deviation supports program
objectives and the special circumstances stated in the request make
such deviation clearly in the best interest of the Government; and
(3) If the waiver would constitute a substantial change in the
financial terms of the Loan Guarantee Agreement and related documents,
consultation by DOE with OMB and the Secretary of the Treasury.
(b) If a deviation under this section results in an increase in the
applicable Credit Subsidy Cost, such increase shall be funded either by
additional fees paid by or on behalf of the Borrower or, if an
appropriation is available by means of an appropriations act. The
Secretary has discretion to determine how the cost of a deviation is
funded.
[FR Doc. 2016-30006 Filed 12-14-16; 8:45 am]
BILLING CODE 6450-01-P