Loan Guarantees for Projects That Employ Innovative Technologies; Guidelines for Proposals Submitted in Response to the First Solicitation, 46451-46460 [E6-13268]

Download as PDF Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices jlentini on PROD1PC65 with NOTICES September 14th, please contact Jennifer Graban at (202) 260–1491 or Jennifer.Graban@ed.gov by Friday, September 8, 2006, to reserve time on the agenda. Please include your name, the organization you represent, if appropriate, and a brief description of the issue you would like to present. Presenters will be allowed five minutes to make their comments. Presenters are requested to submit three written copies and an electronic file (CD or diskette) of their comments at the meeting, which should be labeled with their name and contact information. Individuals interested in solely attending the meeting are advised to register in advance to ensure space availability. Given the expected number of individuals interested in providing comments at the meeting, reservations for presenting comments should be made as soon as possible. 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We will attempt to meet requests for accommodations after this date, but cannot guarantee their availability. Records are kept of all Panel proceedings and are available for public inspection at the staff office for the Panel, from the hours of 9 a.m. to 5 p.m. Dated: August 9, 2006. Margaret Spellings, Secretary, U.S. Department of Education. [FR Doc. 06–6900 Filed 8–11–06; 8:45 am] BILLING CODE 4000–01–M VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 DEPARTMENT OF ENERGY Loan Guarantees for Projects That Employ Innovative Technologies; Guidelines for Proposals Submitted in Response to the First Solicitation Department of Energy (DOE). Notice. AGENCY: ACTION: SUMMARY: DOE publishes policy guidelines that DOE intends to use in connection with the first solicitation of proposals for a loan guarantee for Eligible Projects under Title XVII of the Energy Policy Act of 2005 that are expected to contribute to the goals of the President’s Advanced Energy Initiative. EFFECTIVE DATE: The guidelines in this Notice are effective August 14, 2006. FOR FURTHER INFORMATION CONTACT: Director, DOE Loan Guarantee Program Office, 1000 Independence Avenue, SW., Washington, DC 20585–0121, Phone: 202–586–8336. Email: LGProgram@hq.doe.gov. With a copy to: Warren Belmar, Deputy General Counsel for Energy Policy, Office of the General Counsel, 1000 Independence Avenue, SW., Washington, DC 20585–0121. SUPPLEMENTARY INFORMATION: Introduction Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511–16514) authorizes the Secretary of Energy, after consultation with the Secretary of the Treasury, to make loan guarantees for projects that ‘‘avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases; and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.’’ Commercial technology is defined as a technology in general use in the marketplace. More specifically, Title XVII identifies ten discrete categories of projects that are eligible for a loan guarantee, including those that employ: 1. Renewable energy systems; 2. Advanced fossil energy technology (including coal gasification meeting the criteria in subsection 1703(d)); 3. Hydrogen fuel cell technology for residential, industrial, or transportation applications; 4. Advanced nuclear energy facilities; 5. Carbon capture and sequestration practices and technologies, including agricultural and forestry practices that store and sequester carbon; 6. Efficient electrical generation, transmission, and distribution technologies; 7. Efficient end-use energy technologies; PO 00000 Frm 00006 Fmt 4703 Sfmt 4703 46451 8. Production facilities for fuel efficient vehicles, including hybrid and advanced diesel vehicles; 9. Pollution control equipment; and 10. Refineries, meaning facilities at which crude oil is refined into gasoline. A principal purpose of the Title XVII loan guarantee program is to encourage early commercial use in the United States of new or significantly improved technologies in energy projects. DOE’s loan guarantee program is not intended for technologies in research and development. Indeed as section 1702(d) requires a ‘‘reasonable prospect of payment’’ of any loan or debt obligation issued to a project, technologies for project proposals should be mature enough to assure dependable commercial operations and generate sufficient revenues, and not solely a demonstration project (i.e., a project designated to demonstrate feasibility of a technology on any scale). DOE believes that accelerated commercial use of these new or improved technologies will help to sustain economic growth, yield environmental benefits, and produce a more stable and secure energy supply. Today, DOE begins implementation of Title XVII with two actions. First, DOE publishes guidelines in the nature of a general statement of policy that DOE intends to apply only to the first solicitation of projects. Second, DOE makes available the first solicitation for Pre-Applications for Federal Loan Guarantees for Projects that Employ Innovative Energy Technologies by posting it on the internet at: http:// www.LGProgram.energy.gov/. Neither a procurement action (under Title 48 of the Code of Federal Regulations) nor a financial assistance award (under 10 CFR part 600) is contemplated by these guidelines and the solicitation. As further described in the solicitation, interested parties are being asked to file an initial Pre-Application for review by DOE. If the Pre-Application meets the suggested requirements of these guidelines, DOE may invite the interested party to submit a comprehensive Application. DOE anticipates receiving a significant volume of interest in the loan guarantee program, and therefore plans to issue multiple solicitations, following adoption of final regulations within the next year, that will cover the broad array of eligible projects under Title XVII. Applicants who respond to the solicitation but are not approved for a loan guarantee may submit a new or revised proposal in response to future solicitations under the final regulations DOE plans to adopt. DOE does not intend to review Pre-Applications or E:\FR\FM\14AUN1.SGM 14AUN1 46452 Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices jlentini on PROD1PC65 with NOTICES approve loan guarantees for any proposal that is outside the scope and does not conform with the specific requirements of the initial solicitation. Likewise, only comprehensive applications submitted by interested parties that were invited by DOE to submit a comprehensive application for a Title XVII loan guarantee as a result of the initial solicitation will be considered for a loan guarantee. While most provisions of today’s guidelines are not legally binding, please note that some provisions of these guidelines are based on nondiscretionary provisions of law in Title XVII and under the Federal Credit Reform Act of 1990, 2 U.S.C. 661 et seq. (‘‘FCRA’’). For example, section 1702(f) of Title XVII specifically limits the term of the loan guarantee by stating that ‘‘the term of an obligation shall require full repayment over a period not to exceed the lesser of (i) 30 years or (ii) 90 percent of the projected useful life of the physical asset to be financed by the obligation (as determined by the Secretary).’’ Hence, Applicants should provide a detailed analysis of the expected and generally accepted life cycle of the primary technology and project facility that is the focus of the financing as DOE cannot issue a guarantee that will extend beyond 90 percent of such life cycle or a 30-year term, whichever is shorter. Moreover, FCRA requires that Congress must authorize Federal loan guarantees in an appropriations act in advance of the execution of a final binding loan guarantee agreement. See 2 U.S.C. 661c(b). This requirement applies even though Title XVII allows for the cost of a loan guarantee, as defined in 2 U.S.C. 661a(5)(C), to be paid by the recipient, see 42 U.S.C. 16512(b)(2), and even though today’s guidelines provide for a Conditional Commitment that will precede the execution of a final binding Loan Guarantee Agreement. As a result, DOE is currently restricted only to reviewing Pre-Applications and Applications and entering into Conditional Commitments until it obtains the requisite authorization in an appropriations act. DOE may not enter into a binding Loan Guarantee Agreement or issue any loan guarantees until this appropriations authority has been granted. expected to include in a Pre-Application and, if invited by DOE, the type of information that Applicants should additionally include in an Application. Information is also provided in these guidelines as to the determining factors that DOE expects to apply in its review of project proposals. DOE intends to evaluate each Pre-Application and Application taking into consideration, among other things, the requirements and conditions contained in the solicitation, the criteria specified under Title XVII to identify Eligible Projects, the project’s ability to optimize the probability of repayment of Guaranteed Obligations, and how the project furthers the goals of the President’s Advanced Energy Initiative.1 Please note that even if a Pre-Application or Application contains all of the information specified in these guidelines, DOE retains the right, in its sole discretion, to inform any Applicant that their project proposal has been denied further review. The guidelines, in accordance with Section 1702(c), provide that any loan guarantee issued by DOE may not exceed 80 percent of total Project Costs. Section VII of the guidelines generally defines Project Costs as those that are necessary, reasonable, and directly related to the design, construction, and startup of a project. Conversely, excluded costs which are also described with greater specificity in Section VII of the guidelines include initial research and development costs and operating costs after the facility has been constructed. In addition, DOE notes that the Subsidy Cost of the loan guarantee, as well as fees paid for by the Borrower for the Administrative Cost of Issuing a Loan Guarantee, are excluded from Project Costs. As defined in 2 U.S.C. 661a(5)(C), the Subsidy Cost is not a tangible cost associated with the financing or construction of the project facility. Rather, it constitutes the expected long-term liability to the Federal government in issuing the loan guarantee. In addition, DOE believes that it would be undesirable to allow Borrowers to count the Subsidy Cost (including the financing cost of a Borrower paid Subsidy Cost) as a Project Cost, whether funded by an appropriation or by payment made by Discussion of the Guidelines In this portion of the SUPPLEMENTARY INFORMATION, DOE highlights key provisions and, as appropriate, explains the basis for them. For the first solicitation, these guidelines set forth the type of information that interested parties are 1 One factor that warrants mentioning here is that a proposed project should be constructed and operated in the United States. DOE believes that the environmental benefits and deployment of new and/or enhanced technologies associated with projects should reside within the United States. In such circumstances it will be easier for DOE to monitor the project, ensure repayment of guaranteed debt in accordance with section 1702(d), and enforce its rights in the event of default. VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 PO 00000 Frm 00007 Fmt 4703 Sfmt 4703 the Borrower. To do so could have the effect of including the Subsidy Cost as an allowable cost under the loan guarantee, and thus put the Federal government at risk for up to 80 percent of its Subsidy Cost requirement. Additionally, the Borrower paid Subsidy Cost can not be paid from the proceeds of Federally guaranteed or funded debt. For similar reasons, fees required under Section 1702(h) of the Act to cover DOE’s administrative expenses are also disallowed from Project Costs, thereby ensuring that the loan guarantee does not place the Federal government at risk for up to 80% of these statutorily required fees. Consistent with section 1702(b), the guidelines specify that DOE must receive either an appropriation for the Subsidy Cost or payment of that cost by the Borrower. No funds have been appropriated for the Subsidy Cost of loan guarantees; therefore DOE anticipates that the project(s) approved pursuant to the first solicitation will require the Borrower to pay this cost. The guidelines specify that a Project Sponsor should include an estimate of the Subsidy Cost in an Application. In accordance with 2 U.S.C. 661b(a), DOE will then perform its own independent calculation of the Subsidy Cost and will consult and obtain the approval of the Office of Management and Budget for this computation prior to entering into any Loan Guarantee Agreement. DOE will also consult with the Secretary of Treasury prior to entering into any Loan Guarantee Agreement. The Applicant will be required to provide updated project financing information and terms and conditions not later than 30 days prior to closing, should any of the terms of the project financing or project terms change between Conditional Commitment and the Loan Guarantee Agreement. In addition to the Subsidy Cost, section 1702(h) also requires DOE to collect fees to cover the administrative expenses of issuing loan guarantees. The guidelines specify that DOE will collect fees for administrative expenses as provided for in the Conditional Commitment, as well as additional fees during the term of a loan guarantee. These fees will consist of the administrative expenses that DOE incurs during: (i) The evaluation of the PreApplication and Application; (ii) The offering, negotiation, and closing of a loan guarantee; and (iii) The servicing of the loan guarantee and monitoring the progress of a project. Title XVII, and section 1702(h) in particular, afford DOE discretion with E:\FR\FM\14AUN1.SGM 14AUN1 jlentini on PROD1PC65 with NOTICES Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices respect to how it imposes fees to cover applicable administrative costs. For this first solicitation, DOE has elected not to impose such fees in connection with the Pre-Application stage. In effect, this means that Project Sponsors who submit Pre-Applications and are denied further consideration will not be charged any fees for expenses incurred by DOE in reviewing their Pre-Application materials. For project proposals that progress to the Application stage, the invitation to submit an Application that DOE will send to Project Sponsors will specify whether DOE is charging an Application fee, and the amount of any such fee. In addition to the Application fee that DOE may assess, the other administrative fees that DOE will collect in connection with the first solicitation will be from Borrowers who enter into a Conditional Commitment, in an amount sufficient to cover DOE’s administrative expenses applicable to that Borrower’s Pre-Application, Application, Term Sheet, Conditional Commitment, the Loan Guarantee Agreement, and subsequent monitoring and servicing expenses. With respect to future solicitations, DOE may decide to assess a Pre-Application and/or an Application fee. DOE will revisit this issue in the forthcoming regulations that DOE will propose for public comment later this year. As for the financing structure of proposed projects, Title XVII does not impose any specific limitations, other than the guarantee ‘‘shall not exceed an amount equal to 80 percent of the project cost of the facility that is the subject of the guarantee as estimated at the time at which the guarantee is issued.’’ 42 U.S.C. 16512(c). However, section 1702(d)(1) provides: ‘‘No guarantee shall be made unless the Secretary determines that there is reasonable prospect of repayment of the principal and interest on the obligation by the borrower.’’ 42 U.S.C. 16512(d)(1). DOE believes this statutory provision requires DOE to make repayment of debt a very high priority of the loan guarantee program and authorizes DOE to adopt policies that ensure that Borrowers and Lenders have a similar motivation and use their best efforts to ensure repayment. Thus, DOE would prefer to limit the financial risk to the Federal government from the first loan guarantees issued under Title XVII as DOE gains valuable experience and expertise with these financial and commercial arrangements. This intention is bolstered by the mandate of Section 1702(g)(2)(B), which requires that ‘‘with respect to any property acquired pursuant to a guarantee or VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 related agreements, [the Secretary] shall be superior to the rights of any other person with respect to the property.’’ This statutory provision requires DOE to possess a first lien priority in the assets of the project and other collateral security pledged. Because DOE is not permitted by Title XVII to adopt a pari passu financing structure, any holders of non-guaranteed debt have a subordinate claim to DOE in the event of default, and will not be able to recover on their debt until DOE’s claim is paid in full. To harmonize and balance the twin goals of issuing loan guarantees to encourage early commercial use of new or significantly improved technologies in Eligible Projects while limiting the financial exposure of the Federal government, DOE’s first solicitation expresses a preference that DOE not guarantee more than 80 percent of the total face value of any single debt instrument. Under no circumstance does DOE intend to guarantee 100 percent of the loan. Accordingly, if a Borrower seeks a loan guarantee for more than 80 percent of the face value of the underlying debt obligation, DOE’s review of the project proposal to determine whether to approve a loan guarantee for such amount will be predicated on the sufficiency of evidence presented by the Borrower in support of a higher guarantee percentage.2 DOE notes however, that higher guarantee percentages will lead to higher Subsidy Costs. For similar reasons of increasing the probability of repayment, in reviewing project proposals, DOE intends to consider whether Project Sponsors will make a significant financial commitment to the project. In addition, DOE intends to consider whether a Project Sponsor will rely upon other government assistance (e.g., financial assistance, tax credits, other loan guarantees) to support financing, construction, or operation of the project. DOE does not intend to disqualify project proposals that employ other forms of Federal and non-Federal government assistance, but in reviewing proposals, DOE will take into account how much equity will be invested and the extent of the financial risk borne by the Project Sponsor.3 2 DOE does not have a preference as to whether non-Projects Costs, as defined in Section VII of these guidelines, are financed with debt or equity, as long as DOE maintains a first lien priority in the assets of the project and other collateral pledged as security. 3 Since the guidelines are not substantive regulations, DOE will not reject project proposals solely on the basis of the guidelines. However, Applicants are advised of their heavy burden of PO 00000 Frm 00008 Fmt 4703 Sfmt 4703 46453 In connection with any loan guaranteed by DOE that may be syndicated, traded, or otherwise sold on the secondary market, DOE will require that the guaranteed portion and nonguaranteed portion of the debt instrument are resold on a pro-rata basis. The guaranteed portion of the debt may not be ‘‘stripped’’ from the non-guaranteed portion, i.e. sold separately as an instrument fully guaranteed by the Federal government. In further support of DOE’s objective to ensure full repayment of debt, DOE expects that participating Lenders will have to meet certain eligibility requirements, as described in greater detail in Section VI of these guidelines. These criteria are intended to ensure that the Lender has the financial wherewithal and appropriate experience and expertise to meet its fiduciary obligations in connection with the debt guaranteed by DOE. DOE expects that the Lender and other appropriate parties will exercise a high level of care and diligence in the establishment and enforcement of the conditions precedent to all loan disbursements and Borrower covenants, as provided for in the loan agreement or related documents, throughout the term of the loan. Moreover, DOE also expects each Lender to diligently perform its duties in the servicing and collection of the loan as well as in ensuring that the collateral package securing the loan remains uncompromised. The Lender will also be expected to provide regular, periodic financial reports on the status and condition of the loan, consistent with the terms of the Loan Guarantee Agreement. The Lender is required to promptly notify DOE if it becomes aware of any problems or irregularities concerning the project or the ability of the Borrower to make payment on the loan or other debt obligations. In addition to the other measures described above limiting the Federal government’s risk exposure, commitments to guarantee loans will not exceed a face value of $2 billion, in the aggregate, under the first solicitation. Commencing with a loan guarantee program of this size will allow DOE to achieve considerable progress in assisting new or significantly improved energy technologies to market while also enabling DOE to gain valuable experience and expertise that it will incorporate in program regulations and apply to future solicitations. DOE recognizes that some project proposals justification if they seek to persuade DOE to accept risk in excess of the outer boundaries of what the guidelines indicate to be preferable. E:\FR\FM\14AUN1.SGM 14AUN1 46454 Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices that would otherwise merit full consideration for a loan guarantee under these guidelines will, because of DOE’s self-imposed ceiling on loan guarantee commitments, have to await full consideration under future solicitations issued under the final regulations. To accommodate concerns of Project Sponsors whose proposals are deferred full consideration because they either exceed or comprise a substantial amount of the total loan guarantee commitments available under the first solicitation, DOE will consider whether such proposals should be afforded expedited consideration under the final regulations, when adopted. Finally, please note that the solicitation issued in conjunction with these guidelines addresses many important aspects of the application process, including the relevant period of time during which Pre-Applications for loan guarantees may be filed. Because each project will be unique and each loan guarantee potentially subjects the Federal government to significant financial liability, DOE plans to engage in a rigorous review of a proposed project before determining that it may be eligible for a loan guarantee or subsequently approving and issuing a loan guarantee. jlentini on PROD1PC65 with NOTICES National Environmental Policy Act (NEPA) Through the issuance of these guidelines DOE is making no decision relative to the approval of a loan guarantee for a particular proposed project. DOE has therefore determined that publication of the policy guidelines is covered under the Categorical Exclusion found at paragraph A.6 of Appendix A to Subpart D, 10 CFR Part 1021, which applies to the establishment of procedural rulemakings. Accordingly, neither an environmental assessment nor an environmental impact statement is required at this time. However, appropriate NEPA project review will be conducted prior to execution of a Loan Guarantee Agreement. Review Under the Paperwork Reduction Act These guidelines provide that PreApplications submitted to DOE in response to the solicitation and Applications, if invited by DOE, should contain certain information. This collection of information must be approved by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the procedures implementing that Act, 5 CFR 1320.1 et seq. DOE is requesting emergency VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 processing of the Paperwork Reduction Act Submission for this collection of information pursuant to 5 CFR 1320.13. DOE is requesting that OMB approve the collection of information prior to the issuance of the solicitation. This emergency collection will be valid for 180 days. Shortly after OMB’s approval of the emergency collection, DOE will issue a notice seeking public comment on the information collection and will submit the proposed collection of information to OMB for approval pursuant to 44 U.S.C. 3507(a). An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. Issued in Washington, DC, on August 8, 2006. James T. Campbell, Acting Chief Financial Officer. Loan Guarantees for Projects That Employ Innovative Technologies; Guidelines for Proposals Submitted in Response to First Solicitation Under Title XVII of the Energy Policy Act of 2005 I. Purpose These guidelines set forth goals and procedures that the Department of Energy (‘‘DOE’’) intends to use for receiving, evaluating, and, after consultation with the Secretary of the Treasury, approving applications for loan guarantees to support Eligible Projects under Title XVII of the Energy Policy Act of 2005. II. Definitions As used in these guidelines: A. ‘‘Act’’ means Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511–16514). B. ‘‘Administrative Cost of Issuing a Loan Guarantee’’ means the combined total of all of the administrative expenses that DOE incurs during: 1. The evaluation of a Pre-Application and an Application for a loan guarantee; 2. The offering, negotiation, and closing of a loan guarantee; and 3. The servicing of the loan guarantee and monitoring the progress of a project benefiting from a loan guarantee issued by DOE. Payment of the Administrative Cost of Issuing a Loan Guarantee, which is required to be collected by DOE under section 1702(h) of the Act, is wholly distinct and separate from payment of the Subsidy Cost. C. ‘‘Applicant’’ means any firm, corporation, company, partnership, association, society, trust, joint venture, joint stock company, or governmental PO 00000 Frm 00009 Fmt 4703 Sfmt 4703 non-Federal entity, that has the authority to enter into, and is seeking, a loan guarantee issued by the Secretary for a loan or other debt obligation of an Eligible Project under the Act. D. ‘‘Application’’ means a written submission in response to a DOE invitation to apply for a loan guarantee that DOE will solicit from Applicant after reviewing and approving a completed Pre-Application, and which should include the items listed in Section III.F. of these guidelines. E. ‘‘Borrower’’ means any project company or entity that enters into a loan or other debt obligation for an Eligible Project. F. ‘‘Commercial Technology’’ means a technology in general use in the commercial marketplace, but does not include a technology solely by use of such technology in a demonstration project funded by DOE. G. ‘‘Conditional Commitment’’ means a Term Sheet offered by DOE and accepted by the Applicant, with the understanding of the parties that the Applicant thereafter satisfies all specified and precedent funding obligations, and all other contractual, statutory, regulatory or other requirements. H. ‘‘Credit Review Board’’ means a board created by DOE in accordance with Office of Management and Budget (OMB) Circular A–129 to oversee the loan guarantee program and approve loan guarantees for individual projects. I. ‘‘Eligible Project’’ means a project located in the United States that meets the applicable requirements of section 1703 of the Act. J. ‘‘Guaranteed Obligations’’ means loans or other debt obligations that the Secretary guarantees under a Loan Guarantee Agreement. K. ‘‘Holder’’ means any individual or legal entity that has lawfully succeeded in due course to all or part of the rights, title, and interest in a Guaranteed Obligation. L. ‘‘Lender’’ or ‘‘Eligible Lender’’ means any individual or legal entity, approved by DOE, formed for the purpose of, or engaged in the business of, lending money, including, but not limited to, commercial banks, savings and loan institutions, insurance companies, factoring companies, investment banks, institutional investors, venture capital investment companies, trusts, or other entities designated as trustees or agents acting on behalf of bondholders or other lenders. M. ‘‘Loan Guarantee Agreement’’ means a written agreement that, when entered into by a Borrower, a Lender and the Secretary pursuant to the Act E:\FR\FM\14AUN1.SGM 14AUN1 jlentini on PROD1PC65 with NOTICES Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices after satisfaction of the conditions precedent specified in the Conditional Commitment and any other applicable contractual, statutory, and regulatory requirements, establishes the obligation of the Secretary to guarantee payment of principal and interest on specified loans or other debt obligations of a Borrower to the Lender subject to the terms and conditions specified in the Loan Guarantee Agreement. The term ‘‘Loan Guarantee Agreement’’ has the same meaning as a ‘‘loan guarantee commitment’’ (as defined in section 502(4) of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)). N. ‘‘Project Costs,’’ as described with greater specificity in Section VII of these guidelines, means the estimated sum of the amounts to be expended or accrued by Borrower for costs that are necessary, reasonable, and directly related to the design, construction, and startup of an Eligible Project. O. ‘‘Project Sponsor’’ means any individual, firm, corporation, company, partnership, association, society, trust, joint venture, joint stock company or the like that assumes substantial responsibility for the development, financing, and structuring of a project eligible for a loan guarantee and owns or controls the Applicant. P. ‘‘Pre-Application’’ means a written submission in response to a solicitation that broadly describes the project proposal, including the proposed role of a loan guarantee in the project and the eligibility of the project to receive a loan guarantee under the Act, and includes the items listed in Section III.C. of these guidelines. Q. ‘‘Secretary’’ means the Secretary of Energy or designee. R. ‘‘Subsidy Cost’’ has the meaning given the term ‘‘cost of a loan guarantee’’ within the meaning of section 502(5)(C) of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5)(C)). The ‘‘Subsidy Cost’’ represents the net present value, at the time when the guaranteed loan or other debt obligation is disbursed, of the expected liability to the Federal government from issuing the loan guarantee, inclusive of estimated payments to be made by the Federal government, such as default payments, and estimated payments to be made to the Federal government such as recoveries. The Subsidy Cost amount is required by section 1702(b) of the Act to be funded either by an appropriation or by payment by Borrower. Payment of the Subsidy Cost is wholly distinct and separate from payment of the Administrative Cost of Issuing a Loan Guarantee. VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 S. ‘‘Term Sheet’’ means an offering document issued by DOE that specifies the general terms and conditions under which DOE anticipates it may guarantee payment of principal and accrued interest on specified loans or other debt obligations of a Borrower in connection with an Eligible Project. A Term Sheet is not a Loan Guarantee Agreement and imposes no obligation on the Secretary to execute a Loan Guarantee Agreement. III. Loan Guarantee Application Process A. In conjunction with these guidelines, DOE is issuing a solicitation announcement to solicit the submission by Project Sponsors of Pre-Applications for loan guarantees for projects that employ innovative technologies. The guidelines will apply to this first solicitation; all future solicitations will be issued pursuant to program regulations that DOE will promulgate at a later time. B. The solicitation announcement issued in conjunction with these guidelines contains, among other things, the following information: 1. A brief description of the Eligible Projects for which loan guarantee applications are solicited; 2. The place and time for PreApplication submission; 3. The name and address of the DOE representative whom potential applicants may contact to receive further information and a copy of the solicitation; and 4. The form, format and page limits applicable to the submission of a PreApplication. C. In response to the solicitation, interested parties are invited to submit Pre-Applications to DOE. PreApplications should meet all requirements specified in the solicitation; DOE does not intend to review or approve loan guarantees for proposals that do not meet the requirements provided for in the solicitation. In addition, the PreApplication should contain the following information and documentation: 1. A completed Pre-Application form signed by an individual with full authority to bind the Project Sponsor; 2. A business plan including an overview of the proposed project including: (a) A description of the Project Sponsors, including their experience in project investment, development, construction, operation and maintenance; (b) A description of the technology to be utilized, including its commercial applications and social uses, the owners or controllers of the intellectual PO 00000 Frm 00010 Fmt 4703 Sfmt 4703 46455 property incorporated in and utilized by such technology, and its manufacturer(s), and licensees, if any, of the technology authorized to make the technology available in the United States, and whether and how the technology is or will be made available in the United States for further commercial use; (c) The estimated amount of the total Project Costs (including escalation and contingencies); (d) The timeframe required for construction and commissioning of the facility; and (e) A description of the primary offtake or revenue-generating agreement(s) that will primarily provide financial support for the project. 3. A financing plan overview describing the amount of equity to be invested and the sources of such equity, the amount of the total debt obligations to be incurred and the funding sources of all such debt, the anticipated guarantee percentage of the Government-guaranteed debt, and a financial model detailing the investments and the cash flows generated from the project over the project life-cycle; 4. An explanation of what impact the loan guarantee will have on the interest rate, debt term, and overall financing structure for the project; 5. A copy of a commitment letter from an Eligible Lender expressing its commitment to provide the required debt financing necessary to construct and fully commission the project subject to commercially reasonable conditions governing disbursement commonly included in arm’s length debt financing arrangements for projects and loan amounts similar to the proposed project; 6. A copy of the equity commitment letter(s) from each of the Project Sponsors and a description of the sources for such equity; 7. An overview of how the project will comply with the eligibility requirements under section 1703 of the Act; 8. An outline of the potential environmental impacts of the project and how these impacts will be mitigated; 9. A description of the anticipated air pollution and greenhouse gas reduction benefits; 10. A description of how the proposed project advances the President’s Advanced Energy Initiative; and 11. An executive summary briefly encapsulating the key project features and attributes. D. In reviewing completed PreApplications, DOE intends to utilize the criteria referenced in the Act, the E:\FR\FM\14AUN1.SGM 14AUN1 46456 Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices jlentini on PROD1PC65 with NOTICES solicitation, and these guidelines.4 In addition, prior to a comprehensive evaluation, an initial review of the PreApplications will be performed to determine the following: 1. The proposal is for an Eligible Project; and 2. The submission contains the information requested by the solicitation. If a Pre-Application fails to meet these requirements, it may be deemed nonresponsive and eliminated from further review. As part of the subsequent and more comprehensive Pre-Application review, DOE may conduct an independent review of the financial capability of an Applicant (including personal credit information of the principal(s) if there is insufficient information to assess the financial capability of the organization). In addition, DOE may ask for additional information during the review process and may request one or more meetings with the Project Sponsor(s). E. After reviewing a completed PreApplication, DOE will provide a written response to the Project Sponsor.5 In this response, DOE will do one of two things. DOE will either invite an Applicant to submit a comprehensive Application for a loan guarantee and specify the amount of the Application fee that DOE has decided to assess, if any, or DOE will advise the Project Sponsor that the project proposal is ineligible for further consideration in the review process under the guidelines. Project Sponsors whose proposals are denied further review will not be barred from re-submitting an updated or revised project proposal in response to future solicitations under the final regulations to be adopted by DOE. F. In response to an invitation to submit an Application, interested Applicants are expected to meet all requirements specified in the invitation, the solicitation and these guidelines. DOE will be expecting that the information and documentation requested, as well as the substance and content of such documentation required for the Application, will conform substantially with that produced during 4 While these factors are designed for review of Pre-Applications, DOE intends to use these factors, as appropriate, in reviewing Applications as well. 5 While DOE intends to review Applicant’s written submission, neither the Pre-Application nor any written or other feedback that DOE may provide in response to the Pre-Application is intended to obviate the need for an Application. In addition, any response that DOE may provide to a PreApplication or subsequent Application does not obligate DOE to issue a loan guarantee for a project; only a duly executed Loan Guarantee Agreement may contractually obligate DOE to guarantee any loan or other debt obligations. VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 the course of an arm’s length commercially negotiated project or commercial financing. The maturity, balance sheet and experience of the Project Sponsors, the credit rating of the Lenders and the off-take counterparties, and the scope and breadth of the security package supporting the loan are additional important factors that DOE will consider in its review of an Application.6 An Application should include, among other things, the following information and materials: 1. A completed Application form signed by an individual with full authority to bind Applicant; 2. Payment of the Application fee, if any; 3. A detailed description of all material amendments, modifications, and additions made to the information and documentation provided in the PreApplication, including any changes in the proposed project’s financing structure or terms; 4. A description of the nature and scope of the proposed project, including key milestones, location of the project, identification and commercial feasibility of the new or significantly improved technology(ies) to be employed in the project, how Applicant intends to employ such technology(ies) in the project, and how the Applicant or others intend to assure the further commercial availability of the technology(ies) in the United States; 5. A detailed explanation of how the proposed project qualifies as an Eligible Project; 6. A detailed estimate for the total Project Costs (including escalation and contingencies), together with a description of the methodology and assumptions used; 7. An estimate of the amount of the Subsidy Cost for the project, including a description of the methodology used for this calculation and any supporting documentation; 8. A detailed description of the construction contractor(s) and equipment supplier(s), construction schedules for the project including major activity and cost milestones as well as the performance guarantees, performance bonds, liquidated damages provisions, and equipment warranties to be provided; 9. 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 6 Additional factors that DOE expects to consider when reviewing Applications are described in Section IV of these guidelines. PO 00000 Frm 00011 Fmt 4703 Sfmt 4703 guarantees and related liquidated damage provisions, if any; 10. A description of the management plan of operations that Applicant will employ in carrying out the project, and information concerning the management experience of each officer or key person associated with the project; 11. A detailed description of the project decommissioning, deconstruction and disposal plan and the anticipated costs associated therewith; 12. An analysis of the market for the product(s) to be produced by the project, including relevant economics justifying the analysis, and copies of any contractual agreements for the sale of these products or assurance of the revenues to be generated from sale of these products; 13. A detailed description of the overall financial plan for the proposed project, including all sources of funding, equity, and debt, and the liability of parties associated with the project over the lifetime of the requested loan guarantee; 14. A copy of all loan documents that Borrower and Lender will sign if the Application for a loan guarantee is approved, containing all of the terms and conditions of the loan or other debt obligations to be guaranteed, including the proposed amount of the loan, interest charges, repayment position, principal repayment schedule, fees, prepayment and late payment penalties, and cure rights; 15. A copy of all material agreements, whether entered into or proposed, relevant to the investment, construction and commissioning of the project; 16. A copy of the financial closing checklist for the equity and debt; 17. Applicant’s business plan on which the project is based and project pro forma statements for the proposed life of the loan guarantee, including income statements, balance sheets, and cash flows. All such statements should include assumptions made in their preparation and the range of revenue, operating cost, and credit assumptions considered; 18. Financial statements for the past three (3) years that have been audited by an independent certified public accountant, including all associated notes, as well as interim financial statements and notes for the current fiscal year, of Applicant and parties relevant to Applicant’s financial backing, together with business and financial interests of principal organizations, if appropriate, such as parent and subsidiary corporations or partners of Applicant; E:\FR\FM\14AUN1.SGM 14AUN1 jlentini on PROD1PC65 with NOTICES Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices 19. A copy of all legal opinions, engineering reports, and other material reports, analysis, and reviews related to the project; 20. Credit history of Applicant and, if appropriate, any party who owns or controls a five percent or greater interest in the project or the Applicant; 21. A preliminary credit assessment for the project without a loan guarantee from a nationally recognized rating agency; 22. A list of all project-related applications filed and approvals issued by Federal, state, and local government agencies for permits and authorizations to site, construct, and operate the project. If still outstanding, the Application should contain an estimated date of completion for any required filings and approvals; 23. A report containing an analysis of the potential environmental impacts of the project that will enable DOE to assess whether the project will comply with all applicable environmental requirements and how and to what measurable extent the project avoids, reduces, or sequesters air pollutants or anthropogenic emissions of greenhouse gases, including how Borrower intends to verify those benefits; 24. A listing of assets associated, or to be associated, with the project and any other asset that will serve as collateral for the guaranteed loan and assure repayment of the loans and other debt obligations of the project, including appropriate data as to the value and useful life of any physical assets and a description of any other associated security and its value. With respect to any ownership interest in a real property asset described above or any pledged asset that is not part of the project, an appraisal should be performed by state licensed or certified appraisers that is consistent with the ‘‘Uniform Standards of Professional Appraisal Practice,’’ promulgated by the Appraisal Standards Board of the Appraisal Foundation; 25. An analysis demonstrating that at the time of the Application, there is a reasonable prospect that Borrower will be able to repay the loan or other debt obligation to be guaranteed (including interest) according to its terms, and a complete description of the operational and financial assumptions on which this demonstration is based; 26. Written affirmation from an officer of the Lender confirming that Lender is an Eligible Lender in good standing with DOE’s and other agencies’ loan guarantee programs; and 27. Such other information requested in the solicitation or invitation to submit an Application necessary for a VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 complete assessment of the loan guarantee application for the project. G. Following Applicant’s submission of an Application, DOE will review the Application based on the factors mentioned in subsection F of Section III and Section IV of the guidelines. If the Credit Review Board determines that a project may be suitable for a loan guarantee, because, among other things, it qualifies as an Eligible Project, there exists a reasonable expectation of payment based on the materials provided in the Application, and the proposed project will advance the President’s Advanced Energy Initiative, DOE may notify the Borrower and Lender in writing and provide them with a copy of a proposed Term Sheet. In the event that DOE reviews an Application and decides not to proceed further with the issuance of a proposed Term Sheet, DOE will inform Applicant in writing the reason(s) for the denial. H. Concurrent with the review process described above, DOE will consult with the U.S. Department of Treasury regarding the terms and conditions of the potential loan guarantee and will work with OMB to determine the Subsidy Cost for a potential loan guarantee based on the particular set of terms and conditions associated with the project. OMB will ultimately review and approve the final determination of the Subsidy Cost. I. Subsequent to any negotiations and revisions of the proposed Term Sheet including the Subsidy Cost in accordance with subsection H of Section III of the guidelines, the Term Sheet becomes a Conditional Commitment if, and only if, both DOE and Applicant agree to the proposed terms and conditions and sign the Term Sheet. Among other things, the Conditional Commitment will specify the required payment of fees for the Administrative Cost of Issuing a Loan Guarantee. Subsequent to entering into a Conditional Commitment, and upon agreement as to the detailed terms and conditions to be contained in the Loan Guarantee Agreement and other related documents, as well as availability of authority provided in an appropriations act for the loan guarantee, and fulfillment of other applicable statutory, regulatory, or other requirements, the Credit Review Board will set a closing date. DOE will enter into a Loan Guarantee Agreement with an Applicant that satisfies the specified conditions precedent if and only if all funding and other contractual, statutory and regulatory requirements have been satisfied. J. Prior to the closing date, the Secretary will ensure that: PO 00000 Frm 00012 Fmt 4703 Sfmt 4703 46457 1. Pursuant to section 1702(b) of the Act, Congress has made an appropriation for the Subsidy Cost of the loan guarantee, or that the Secretary will receive payment in full from the Borrower as part of the closing and Congress has provided sufficient additional authority in an appropriations act; 2. Pursuant to section 1702(h) of the Act, and in accordance with Section V.R. of these guidelines, the Secretary has received from Borrower payment of a fee for DOE’s Administrative Cost of Issuing a Loan Guarantee or will receive payment of the fee as part of the closing; 3. The Director of OMB has reviewed and approved DOE’s calculation of the Subsidy Cost of the loan guarantee; 4. The Secretary 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 the Secretary deems reasonable and necessary to protect the interests of the United States; and 6. All conditions precedent specified in the Conditional Commitment have either been satisfied or waived by the Secretary and all other applicable contractual, statutory, and regulatory requirements have been satisfied. IV. Evaluation of Applications In evaluating Applications invited for submission, DOE plans to consider the following factors: 7 A. Whether the Application is complete, signed by the appropriate entity or entities with the authority to bind the Project Sponsor and other relevant parties to the agreement, and complies with the eligibility requirements stated in the Act, these guidelines, and the solicitation; B. Whether the Application contains sufficient information, including a detailed description of the nature and scope of the project and the nature, scope, and risk coverage of the loan guarantee sought, to enable DOE to perform a thorough assessment of the project; C. Whether and to what measurable extent the project avoids, reduces, or sequesters air pollutants or anthropogenic emissions of greenhouse gases; D. Whether the new or significantly improved technology to be employed in the project, as compared to commercial technologies in service in the United States at the time the guarantee is 7 While these factors are designed for review of Applications, DOE intends to use these factors, as appropriate, in reviewing Pre-Applications as well: E:\FR\FM\14AUN1.SGM 14AUN1 jlentini on PROD1PC65 with NOTICES 46458 Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices issued, is ready to be employed commercially in the United States, can yield a commercially viable product(s) in the use proposed in the project, and is or will be available for further commercial use in the United States; E. Whether the project will advance the goals of the President’s Advanced Energy Initiative; F. Whether the requested amount of the loan guarantee is reasonable relative to the nature and scope of the project; G. The extent to which Project Costs are funded by guaranteed debt; H. The extent to which Applicant and other principals involved in the project have made a significant equity commitment to the project; I. Whether the project will be ready for full deployment and operations in the proximate future; J. Whether there is sufficient evidence that Applicant will initiate and complete the project in a timely, efficient, and acceptable manner; K. Whether and/or to what extent Applicant will rely upon other Federal and non-Federal governmental assistance (grants, tax credits, other loan guarantees, etc.) to support the financing and construction and/or operation of the project; L. Whether there is reasonable assurance that the project is economically feasible and will produce sufficient revenues to service the project’s debt obligations over the life of the loan guarantee and assure timely repayment of guaranteed loans and other debt obligations; M. Whether the collateral, warrantees, and other assurance of repayment described in the Application provide adequate safeguard to the Federal government in the event of default; N. Whether Applicant possesses the capacity and expertise to successfully operate the project, based on factors such as financial soundness, management organization, and the nature and extent of corporate and personnel experience; O. Whether the project will comply with all applicable laws and regulations, including all applicable environmental statutes and regulations; P. Whether the levels of market, regulatory, legal, financial, technological, and other risks associated with the project are appropriate for a loan guarantee provided by DOE; Q. Whether the entity issuing the loan or other debt obligation subject to the loan guarantee is an Eligible Lender; and R. Such other criteria that the Secretary and the Credit Review Board deem relevant in evaluating the merits of an Application. VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 V. Findings by the Secretary Prior to the issuance by DOE of a loan guarantee, the Secretary should ensure that Applicant satisfies the following requirements and conditions (some or all of which should be specified in the Loan Guarantee Agreement): A. The project qualifies as an Eligible Project under the Act; B. The project will be constructed and operated in the United States and the technology is or is likely to be available in the United States for further commercial application; C. The debt guaranteed by DOE is limited to no more than 80 percent of total Project Costs; D. The amount of the loan guarantee does not exceed 80 percent of the total face value of the loan or other debt obligation of the project, or provides sufficient evidence to support a guarantee exceeding 80 percent (but in no event 100 percent); E. Applicant and other principals involved in the project have made a significant equity investment; F. The prospective Borrower is obligated to make full repayment of the guaranteed loan over a period of up to the lesser of 30 years or 90 percent of the projected useful life of the project’s major physical assets, as calculated in accordance with generally accepted accounting principles and practices; G. The loan guarantee does not finance, either directly or indirectly, a Federally tax-exempt obligation. Accordingly, the loan guarantee may not be used for a Federally tax-exempt obligation or serve as collateral to secure a tax-exempt obligation; H. The guaranteed portion of a loan must not be separated from or ‘‘stripped’’ from the non-guaranteed portion of the loan and resold in the secondary debt market; I. The amount of the loan guaranteed, when combined with other funds committed to the project, will be sufficient to carry out the project, including adequate contingency funds; J. There is a reasonable prospect of repayment by Borrower of the principal and interest of the Guaranteed Obligations; K. The prospective Borrower has pledged project assets and other collateral or surety, including non project-related assets, as determined by the Secretary to be necessary as assurance for the repayment of the loan; L. The Loan Guarantee Agreement and related documents include detailed terms and conditions as appropriate to protect the interests of the United States in the case of default, including ensuring availability of all the PO 00000 Frm 00013 Fmt 4703 Sfmt 4703 intellectual property rights, technical data including software, and physical assets necessary for any person selected, including, but not limited to, the Secretary, to complete and operate the defaulting project; M. The Borrower’s interest rate on the guaranteed loan is determined by the Secretary to be reasonable, taking into account the range of interest rates prevailing in the private sector for similar Federal government guaranteed obligations of comparable risk; N. The guaranteed loan is not subordinate to any loan or other debt obligation for the project not part of the Guaranteed Obligations and is in a first lien position regarding all assets of the project and all collateral security pledged; O. There is satisfactory evidence that Borrower is willing, competent, and capable of performing the terms and conditions of the loan or other debt obligation and the loan guarantee; P. The Lender is not a Federal entity, possesses sufficient financial wherewithal and expertise, and will exercise the requisite standard of care as deemed necessary by the Secretary and stated in DOE’s lender eligibility criteria in Section VI of these guidelines; Q. Lender or other parties servicing the loan and monitoring the project should be satisfactory to the Secretary. In addition, the Secretary will need to find that the Lender and other appropriate parties will exercise a high level of care and diligence in the establishment and enforcement of the conditions precedent to all loan disbursements and the Borrower covenants throughout the term of the loan and that each Lender will be required to diligently perform its duties in the servicing and collection of the loan as well as in ensuring that the collateral package securing the loan remains uncompromised. The Lender will also provide annual or more frequent periodic financial reports on the status and condition of the loan, and is required to promptly notify DOE if it becomes aware of any problems or irregularities concerning the project or the ability of the Borrower to make payment on the loan or other debt obligations. Even though DOE will rely on Lender (or other servicer) to service and monitor the loan with utmost care and expertise, Lender’s responsibilities with regard to the loan are separate from DOE’s own monitoring and review of the loan and the project; R. As specified in the Conditional Commitment, the prospective Borrower makes payment of the fee for the Administrative Cost of Issuing a Loan Guarantee pursuant to section 1702(h) E:\FR\FM\14AUN1.SGM 14AUN1 Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices of the Act. While covering the other costs included in the Administrative Cost of Issuing a Loan Guarantee, this payment will not include the servicing and monitoring costs identified in Section II.B. of these guidelines. These latter costs will be assessed in accordance with the Loan Guarantee Agreement which will require payment of administrative fees to the Federal government by Borrower, either directly or through the Lender, periodically thereafter for the duration of the loan guarantee. DOE intends to use all of the fees mentioned above to defray administrative expenses associated with issuing and monitoring loan guarantees; S. If Borrower is to make payment in full for the Subsidy Cost of the loan guarantee pursuant to section 1702(b)(2) of the Act, such payment must be received by the Secretary prior to, or at the time of, closing; T. DOE representatives have access to the project site at all reasonable times in order to monitor the performance of the project; U. DOE and Borrower have reached an agreement as to what project information will be made available to DOE and which project information will be made publicly available; V. The prospective Borrower has filed applications for or obtained any required regulatory approvals for the project and is in compliance with all Federal and state regulatory requirements; W. Applicant has no delinquent Federal debt, including tax liabilities, unless the delinquency has been resolved with the appropriate Federal agency in accordance with the standards of the Debt Collection Improvement Act of 1996; and X. The Loan Guarantee Agreement contains such other terms and conditions as the Secretary deems reasonable and necessary to protect the interests of the United States. jlentini on PROD1PC65 with NOTICES VI. Lender Eligibility Lenders associated with a project should meet the following requirements: A. The Lender is a ‘‘non-Federal qualified institutional buyer,’’ as defined in 17 CFR 230.144A(a), including qualified retirement plans and governmental plans; B. The Lender is not a party debarred or suspended from participation in a Federal government contract (under 48 CFR 9.4) or participation in a nonprocurement activity (under a set of uniform regulations implemented in agency regulations for numerous agencies, including DOE, at 10 CFR 1036); VerDate Aug<31>2005 17:58 Aug 11, 2006 Jkt 208001 C. The Lender is not delinquent on any Federal debt or loan; D. The Lender is duly organized and legally authorized to enter into the transaction; E. The Lender is able to demonstrate experience in originating and servicing loans for commercial deals similar in size and scope with the project under consideration; and F. The Lender is able to demonstrate experience or capability as the lead lender or underwriter of other energy related projects. VII. Project Costs A. In conjunction with the Secretary’s determination of the Project Costs associated with the issuance of a loan guarantee, Applicant should record such costs in accordance with generally accepted accounting principles and practices. Applicant should calculate the sum of reasonable and customary costs that it has paid and expects to pay, and which are directly related to the project, to estimate the total sum of Project Costs. Project Costs may include, but are not limited to: 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. Engineering, architectural, legal and bond fees, and insurance paid in connection with construction of the facility; and materials, labor, services, travel and transportation for facility construction, startup, and tests; 3. Equipment purchase and startup testing; 4. Costs to provide equipment, facilities, and services related to safety and environmental protection; 5. Financial and legal services costs, including other professional services and fees necessary to obtain required licenses and permits and to prepare environmental reports and data; 6. Interest costs and other normal charges affixed by lenders; 7. Necessary and appropriate insurance and bonds of all types; 8. Costs of startup, commissioning and shakedown; 9. Costs of obtaining licenses to intellectual property necessary to design, construct, and operate the project; and 10. Other necessary and reasonable costs approved by the Secretary. B. Applicant should not record the following costs as Project Costs associated with the loan guarantee: 1. Fees and commissions charged to Borrower, including finder fees, for obtaining Federal funds; PO 00000 Frm 00014 Fmt 4703 Sfmt 4703 46459 2. Parent corporation’s general and administrative expenses, and nonproject related parent corporation 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 the energy technology for employment in a commercial project; 6. Costs that are excessive or are not directly required to carry out the project, as determined by the Secretary; 7. Administrative Cost of Issuing a Loan Guarantee paid by the Borrower; 8. The Subsidy Cost of the loan guarantee; and 9. Operating expenses incurred after startup, commissioning and shakedown. VIII. Principal and Interest Assistance Contract With respect to any Guaranteed Obligation, the Secretary may enter into a contract to pay Holders, for and on behalf of Borrower, from funds appropriated for that purpose, the principal and interest charges that become due and payable on the unpaid balance of the Guaranteed Obligation, if the Secretary finds that: A. Borrower is unable to meet the payments and is not in default; B. Borrower will, and is financially able to, continue to make the scheduled payments on the remaining portion of the principal and interest due under the non-guaranteed portion of the debt obligation, or an arrangement, approved by the Secretary, has otherwise been agreed to avoid an impending payment default; C. It is in the public interest to permit Borrower to continue to pursue the purposes of the project; D. In paying the principal and interest, the Federal government expects a probable net benefit greater than it would receive in the event of a default; E. The payment authorized is no greater than the amount of principal and interest that Borrower is obligated to pay under the agreement being guaranteed; and F. Borrower agrees to reimburse the Secretary for the payment (including interest) on terms and conditions that are satisfactory to the Secretary and executes all written contracts required by the Secretary for such purpose. IX. Full Faith and Credit As specified in the Act, the United States pledges its full faith and credit to the payment of all Guaranteed Obligations with respect to principal E:\FR\FM\14AUN1.SGM 14AUN1 46460 Federal Register / Vol. 71, No. 156 / Monday, August 14, 2006 / Notices and interest under the terms and conditions of the Loan Guarantee Agreement. X. Default/Audit As required by sections 1702(g)(1)(A) and 1702(i)(1) of the Act, DOE in the near future will issue regulations pertaining to default and audit requirements that will apply to any loan guarantee issued, and Loan Agreement executed, by DOE. [FR Doc. E6–13268 Filed 8–11–06; 8:45 am] BILLING CODE 6450–01–P DEPARTMENT OF ENERGY Office of Energy Efficiency and Renewable Energy [Docket ID: ERRE–BT–2006–WAV–0140] Energy Conservation Program for Consumer Products: Publication of the Petition for Waiver of Peerless Boilers Heat, LLC From the Department of Energy Residential Furnace and Boiler Test Procedures Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Notice of Petition for Waiver and request for comments. jlentini on PROD1PC65 with NOTICES AGENCY: SUMMARY: Today’s notice publishes a Petition for Waiver from Peerless Boilers Heat, LLC (PB). This petition (hereafter ‘‘PB Petition’’) request a waiver from the Department of Energy’s (hereafter ‘‘Department’’ or ‘‘DOE’’) test procedures for residential furnaces and boilers. Today’s notice also includes an alternate test procedure PB has requested DOE to include in the Decision and Order, should the Department grant PB a waiver. The Department is soliciting comments, data, and information with respect to the PB Petition and the proposed alternate test procedure. DATES: The Department will accept comments, data, and information regarding this Petition for Waiver until, but no later than September 13, 2006. ADDRESSES: Please submit comments, identified by Docket ID number: EERE– BT–2006–WAV–0140, by any of the following methods: • Mail: Ms. Brenda Edwards-Jones, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, Mailstop EE–2J, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585–0121. Telephone: (202) 586–2945. Please submit one signed original paper copy. VerDate Aug<31>2005 19:25 Aug 11, 2006 Jkt 208001 • Hand Deliver/Courier: Ms. Brenda Edwards-Jones, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, Room 1J–018, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585– 0121. • E-mail: PBPetitiion@ee.doe.gov. Include either the Docket ID number: EERE–BT–2006–WAV–0140, and/or ‘‘PB Petition’’ in the subject line of the message. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. Instructions: All submissions received must include the agency name and case number for this proceeding. Submit electronic comments in Microsoft Word, WordPerfect, PDF, or text (ASCII) file format and avoid the use of special characters or any form of encryption. Wherever possible, include the electronic signature of the author. Absent an electronic signature, comments should electronically must be followed and authenticated by submitting the signed original paper document. The Department does not accept telefacsimiles (faxes). Any person submitting written comments must also send a copy of such comments to the petitioner. (10 CFR 430.27(b)(1)(iv)). The contact information for the petitioner in today’s notice is: Mr. Jeffrey K. Alexander, Vice President, PB Heat, LLC, 9th & Rothermel Drive, P.O. Box 447, New Berlinville, PA 19545– 0477. According to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies: One copy of the document including all the information believed to be confidential, and one copy of the document with the information believed to be confidential deleted. The Department will make its own determination about the confidential status of the information and treat it according to its determination. Docket: For access to the docket to read the background comments relevant to this matter, go to the U.S. Department of Energy, Forrestal Building, Room 1J– 018 (Resource Room of the Building Technologies Program), 1000 Independence Avenue, SW., Washington, DC 20585–0121, (202) 586– 2945, between 9 a.m. and 4 p.m., Monday through Friday, except Federal holidays. Available documents include the following items: This notice, public comments received, the PB Petition, and prior Department rulemakings regarding residential furnace and boilers. Please PO 00000 Frm 00015 Fmt 4703 Sfmt 4703 call Ms. Brenda Edwards-Jones at the above telephone number for additional information regarding visiting the Resource Room. FOR FURTHER INFORMATION CONTACT: Mohammed Khan, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, Mail Stop EE–2J, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585– 0121, (202) 586–9611; E-mail: Mohammed.Khan@ee.doe.gov; or Thomas DePriest, Esq., U.S. Department of Energy, Office of General Counsel, Mail Stop GC–72, Forrestal Building, 1000 Independence Avenue, SW., Washington, DC 20585–0121, (202) 586–9507; E-mail: Thomas.DePriest@hq.doe.gov. SUPPLEMENTARY INFORMATION: I. Background and Authority II. Petition for Waiver III. Alternate Test Procedure IV. Summary and Request for Comments I. Background and Authority Title III of the Energy Policy and Conservation Act (EPCA) sets forth a variety of provisions concerning energy efficiency. Part B of Title III (42 U.S.C. 6291–6309) provides for the ‘‘Energy Conservation Program for Consumer Products other than Automobiles.’’ It specifically provides for definitions, test procedures, labeling provisions, energy conservation standards, and the authority to require information and reports from manufacturers. With respect to test procedures, Part B generally authorizes the Secretary of Energy to prescribe test procedures that are reasonably designed to produce results which reflect energy efficiency, energy use and estimated operating costs, and that are not unduly burdensome to conduct. (42 U.S.C. 6293(b)(3)) EPCA provides that the Secretary of Energy may amend test procedures for consumer products if the Secretary determines that amended test procedures would more accurately reflect energy efficiency, energy use and estimated operating costs, and that they are not unduly burdensome to conduct. (42 U.S.C. 6293(b)) Today’s notice involves residential products covered under Part B. The PB Petition requests a waiver from the residential furnace and boiler test procedures for PB’s PO–50, PO–60, PO– 63 and PO–73 models of oil-fired boilers. The test procedures for residential furnaces and boilers appear at 10 CFR Part 430, Subpart B, Appendix N. The Department’s regulations contain provisions allowing a person to seek a E:\FR\FM\14AUN1.SGM 14AUN1

Agencies

[Federal Register Volume 71, Number 156 (Monday, August 14, 2006)]
[Notices]
[Pages 46451-46460]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-13268]


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DEPARTMENT OF ENERGY


Loan Guarantees for Projects That Employ Innovative Technologies; 
Guidelines for Proposals Submitted in Response to the First 
Solicitation

AGENCY: Department of Energy (DOE).

ACTION: Notice.

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SUMMARY: DOE publishes policy guidelines that DOE intends to use in 
connection with the first solicitation of proposals for a loan 
guarantee for Eligible Projects under Title XVII of the Energy Policy 
Act of 2005 that are expected to contribute to the goals of the 
President's Advanced Energy Initiative.

Effective Date: The guidelines in this Notice are effective August 14, 
2006.

FOR FURTHER INFORMATION CONTACT: Director, DOE Loan Guarantee Program 
Office, 1000 Independence Avenue, SW., Washington, DC 20585-0121, 
Phone: 202-586-8336. Email: LGProgram@hq.doe.gov.
    With a copy to: Warren Belmar, Deputy General Counsel for Energy 
Policy, Office of the General Counsel, 1000 Independence Avenue, SW., 
Washington, DC 20585-0121.

SUPPLEMENTARY INFORMATION:

Introduction

    Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511-16514) 
authorizes the Secretary of Energy, after consultation with the 
Secretary of the Treasury, to make loan guarantees for projects that 
``avoid, reduce, or sequester air pollutants or anthropogenic emissions 
of greenhouse gases; and employ new or significantly improved 
technologies as compared to commercial technologies in service in the 
United States at the time the guarantee is issued.'' Commercial 
technology is defined as a technology in general use in the 
marketplace. More specifically, Title XVII identifies ten discrete 
categories of projects that are eligible for a loan guarantee, 
including those that employ:
    1. Renewable energy systems;
    2. Advanced fossil energy technology (including coal gasification 
meeting the criteria in subsection 1703(d));
    3. Hydrogen fuel cell technology for residential, industrial, or 
transportation applications;
    4. Advanced nuclear energy facilities;
    5. Carbon capture and sequestration practices and technologies, 
including agricultural and forestry practices that store and sequester 
carbon;
    6. Efficient electrical generation, transmission, and distribution 
technologies;
    7. Efficient end-use energy technologies;
    8. Production facilities for fuel efficient vehicles, including 
hybrid and advanced diesel vehicles;
    9. Pollution control equipment; and
    10. Refineries, meaning facilities at which crude oil is refined 
into gasoline.
    A principal purpose of the Title XVII loan guarantee program is to 
encourage early commercial use in the United States of new or 
significantly improved technologies in energy projects. DOE's loan 
guarantee program is not intended for technologies in research and 
development. Indeed as section 1702(d) requires a ``reasonable prospect 
of payment'' of any loan or debt obligation issued to a project, 
technologies for project proposals should be mature enough to assure 
dependable commercial operations and generate sufficient revenues, and 
not solely a demonstration project (i.e., a project designated to 
demonstrate feasibility of a technology on any scale). DOE believes 
that accelerated commercial use of these new or improved technologies 
will help to sustain economic growth, yield environmental benefits, and 
produce a more stable and secure energy supply.
    Today, DOE begins implementation of Title XVII with two actions. 
First, DOE publishes guidelines in the nature of a general statement of 
policy that DOE intends to apply only to the first solicitation of 
projects. Second, DOE makes available the first solicitation for Pre-
Applications for Federal Loan Guarantees for Projects that Employ 
Innovative Energy Technologies by posting it on the internet at: http:/
/www.LGProgram.energy.gov/. Neither a procurement action (under Title 
48 of the Code of Federal Regulations) nor a financial assistance award 
(under 10 CFR part 600) is contemplated by these guidelines and the 
solicitation. As further described in the solicitation, interested 
parties are being asked to file an initial Pre-Application for review 
by DOE. If the Pre-Application meets the suggested requirements of 
these guidelines, DOE may invite the interested party to submit a 
comprehensive Application.
    DOE anticipates receiving a significant volume of interest in the 
loan guarantee program, and therefore plans to issue multiple 
solicitations, following adoption of final regulations within the next 
year, that will cover the broad array of eligible projects under Title 
XVII. Applicants who respond to the solicitation but are not approved 
for a loan guarantee may submit a new or revised proposal in response 
to future solicitations under the final regulations DOE plans to adopt. 
DOE does not intend to review Pre-Applications or

[[Page 46452]]

approve loan guarantees for any proposal that is outside the scope and 
does not conform with the specific requirements of the initial 
solicitation. Likewise, only comprehensive applications submitted by 
interested parties that were invited by DOE to submit a comprehensive 
application for a Title XVII loan guarantee as a result of the initial 
solicitation will be considered for a loan guarantee.
    While most provisions of today's guidelines are not legally 
binding, please note that some provisions of these guidelines are based 
on non-discretionary provisions of law in Title XVII and under the 
Federal Credit Reform Act of 1990, 2 U.S.C. 661 et seq. (``FCRA''). For 
example, section 1702(f) of Title XVII specifically limits the term of 
the loan guarantee by stating that ``the term of an obligation shall 
require full repayment over a period not to exceed the lesser of (i) 30 
years or (ii) 90 percent of the projected useful life of the physical 
asset to be financed by the obligation (as determined by the 
Secretary).'' Hence, Applicants should provide a detailed analysis of 
the expected and generally accepted life cycle of the primary 
technology and project facility that is the focus of the financing as 
DOE cannot issue a guarantee that will extend beyond 90 percent of such 
life cycle or a 30-year term, whichever is shorter.
    Moreover, FCRA requires that Congress must authorize Federal loan 
guarantees in an appropriations act in advance of the execution of a 
final binding loan guarantee agreement. See 2 U.S.C. 661c(b). This 
requirement applies even though Title XVII allows for the cost of a 
loan guarantee, as defined in 2 U.S.C. 661a(5)(C), to be paid by the 
recipient, see 42 U.S.C. 16512(b)(2), and even though today's 
guidelines provide for a Conditional Commitment that will precede the 
execution of a final binding Loan Guarantee Agreement. As a result, DOE 
is currently restricted only to reviewing Pre-Applications and 
Applications and entering into Conditional Commitments until it obtains 
the requisite authorization in an appropriations act. DOE may not enter 
into a binding Loan Guarantee Agreement or issue any loan guarantees 
until this appropriations authority has been granted.

Discussion of the Guidelines

    In this portion of the SUPPLEMENTARY INFORMATION, DOE highlights 
key provisions and, as appropriate, explains the basis for them.
    For the first solicitation, these guidelines set forth the type of 
information that interested parties are expected to include in a Pre-
Application and, if invited by DOE, the type of information that 
Applicants should additionally include in an Application. Information 
is also provided in these guidelines as to the determining factors that 
DOE expects to apply in its review of project proposals. DOE intends to 
evaluate each Pre-Application and Application taking into 
consideration, among other things, the requirements and conditions 
contained in the solicitation, the criteria specified under Title XVII 
to identify Eligible Projects, the project's ability to optimize the 
probability of repayment of Guaranteed Obligations, and how the project 
furthers the goals of the President's Advanced Energy Initiative.\1\ 
Please note that even if a Pre-Application or Application contains all 
of the information specified in these guidelines, DOE retains the 
right, in its sole discretion, to inform any Applicant that their 
project proposal has been denied further review.
---------------------------------------------------------------------------

    \1\ One factor that warrants mentioning here is that a proposed 
project should be constructed and operated in the United States. DOE 
believes that the environmental benefits and deployment of new and/
or enhanced technologies associated with projects should reside 
within the United States. In such circumstances it will be easier 
for DOE to monitor the project, ensure repayment of guaranteed debt 
in accordance with section 1702(d), and enforce its rights in the 
event of default.
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    The guidelines, in accordance with Section 1702(c), provide that 
any loan guarantee issued by DOE may not exceed 80 percent of total 
Project Costs. Section VII of the guidelines generally defines Project 
Costs as those that are necessary, reasonable, and directly related to 
the design, construction, and startup of a project. Conversely, 
excluded costs which are also described with greater specificity in 
Section VII of the guidelines include initial research and development 
costs and operating costs after the facility has been constructed.
    In addition, DOE notes that the Subsidy Cost of the loan guarantee, 
as well as fees paid for by the Borrower for the Administrative Cost of 
Issuing a Loan Guarantee, are excluded from Project Costs. As defined 
in 2 U.S.C. 661a(5)(C), the Subsidy Cost is not a tangible cost 
associated with the financing or construction of the project facility. 
Rather, it constitutes the expected long-term liability to the Federal 
government in issuing the loan guarantee. In addition, DOE believes 
that it would be undesirable to allow Borrowers to count the Subsidy 
Cost (including the financing cost of a Borrower paid Subsidy Cost) as 
a Project Cost, whether funded by an appropriation or by payment made 
by the Borrower. To do so could have the effect of including the 
Subsidy Cost as an allowable cost under the loan guarantee, and thus 
put the Federal government at risk for up to 80 percent of its Subsidy 
Cost requirement. Additionally, the Borrower paid Subsidy Cost can not 
be paid from the proceeds of Federally guaranteed or funded debt. For 
similar reasons, fees required under Section 1702(h) of the Act to 
cover DOE's administrative expenses are also disallowed from Project 
Costs, thereby ensuring that the loan guarantee does not place the 
Federal government at risk for up to 80% of these statutorily required 
fees.
    Consistent with section 1702(b), the guidelines specify that DOE 
must receive either an appropriation for the Subsidy Cost or payment of 
that cost by the Borrower. No funds have been appropriated for the 
Subsidy Cost of loan guarantees; therefore DOE anticipates that the 
project(s) approved pursuant to the first solicitation will require the 
Borrower to pay this cost. The guidelines specify that a Project 
Sponsor should include an estimate of the Subsidy Cost in an 
Application. In accordance with 2 U.S.C. 661b(a), DOE will then perform 
its own independent calculation of the Subsidy Cost and will consult 
and obtain the approval of the Office of Management and Budget for this 
computation prior to entering into any Loan Guarantee Agreement. DOE 
will also consult with the Secretary of Treasury prior to entering into 
any Loan Guarantee Agreement. The Applicant will be required to provide 
updated project financing information and terms and conditions not 
later than 30 days prior to closing, should any of the terms of the 
project financing or project terms change between Conditional 
Commitment and the Loan Guarantee Agreement.
    In addition to the Subsidy Cost, section 1702(h) also requires DOE 
to collect fees to cover the administrative expenses of issuing loan 
guarantees. The guidelines specify that DOE will collect fees for 
administrative expenses as provided for in the Conditional Commitment, 
as well as additional fees during the term of a loan guarantee. These 
fees will consist of the administrative expenses that DOE incurs 
during:
    (i) The evaluation of the Pre-Application and Application;
    (ii) The offering, negotiation, and closing of a loan guarantee; 
and
    (iii) The servicing of the loan guarantee and monitoring the 
progress of a project.
    Title XVII, and section 1702(h) in particular, afford DOE 
discretion with

[[Page 46453]]

respect to how it imposes fees to cover applicable administrative 
costs. For this first solicitation, DOE has elected not to impose such 
fees in connection with the Pre-Application stage. In effect, this 
means that Project Sponsors who submit Pre-Applications and are denied 
further consideration will not be charged any fees for expenses 
incurred by DOE in reviewing their Pre-Application materials. For 
project proposals that progress to the Application stage, the 
invitation to submit an Application that DOE will send to Project 
Sponsors will specify whether DOE is charging an Application fee, and 
the amount of any such fee. In addition to the Application fee that DOE 
may assess, the other administrative fees that DOE will collect in 
connection with the first solicitation will be from Borrowers who enter 
into a Conditional Commitment, in an amount sufficient to cover DOE's 
administrative expenses applicable to that Borrower's Pre-Application, 
Application, Term Sheet, Conditional Commitment, the Loan Guarantee 
Agreement, and subsequent monitoring and servicing expenses. With 
respect to future solicitations, DOE may decide to assess a Pre-
Application and/or an Application fee. DOE will revisit this issue in 
the forthcoming regulations that DOE will propose for public comment 
later this year.
    As for the financing structure of proposed projects, Title XVII 
does not impose any specific limitations, other than the guarantee 
``shall not exceed an amount equal to 80 percent of the project cost of 
the facility that is the subject of the guarantee as estimated at the 
time at which the guarantee is issued.'' 42 U.S.C. 16512(c). However, 
section 1702(d)(1) provides: ``No guarantee shall be made unless the 
Secretary determines that there is reasonable prospect of repayment of 
the principal and interest on the obligation by the borrower.'' 42 
U.S.C. 16512(d)(1). DOE believes this statutory provision requires DOE 
to make repayment of debt a very high priority of the loan guarantee 
program and authorizes DOE to adopt policies that ensure that Borrowers 
and Lenders have a similar motivation and use their best efforts to 
ensure repayment. Thus, DOE would prefer to limit the financial risk to 
the Federal government from the first loan guarantees issued under 
Title XVII as DOE gains valuable experience and expertise with these 
financial and commercial arrangements. This intention is bolstered by 
the mandate of Section 1702(g)(2)(B), which requires that ``with 
respect to any property acquired pursuant to a guarantee or related 
agreements, [the Secretary] shall be superior to the rights of any 
other person with respect to the property.'' This statutory provision 
requires DOE to possess a first lien priority in the assets of the 
project and other collateral security pledged. Because DOE is not 
permitted by Title XVII to adopt a pari passu financing structure, any 
holders of non-guaranteed debt have a subordinate claim to DOE in the 
event of default, and will not be able to recover on their debt until 
DOE's claim is paid in full.
    To harmonize and balance the twin goals of issuing loan guarantees 
to encourage early commercial use of new or significantly improved 
technologies in Eligible Projects while limiting the financial exposure 
of the Federal government, DOE's first solicitation expresses a 
preference that DOE not guarantee more than 80 percent of the total 
face value of any single debt instrument. Under no circumstance does 
DOE intend to guarantee 100 percent of the loan. Accordingly, if a 
Borrower seeks a loan guarantee for more than 80 percent of the face 
value of the underlying debt obligation, DOE's review of the project 
proposal to determine whether to approve a loan guarantee for such 
amount will be predicated on the sufficiency of evidence presented by 
the Borrower in support of a higher guarantee percentage.\2\ DOE notes 
however, that higher guarantee percentages will lead to higher Subsidy 
Costs.
---------------------------------------------------------------------------

    \2\ DOE does not have a preference as to whether non-Projects 
Costs, as defined in Section VII of these guidelines, are financed 
with debt or equity, as long as DOE maintains a first lien priority 
in the assets of the project and other collateral pledged as 
security.
---------------------------------------------------------------------------

    For similar reasons of increasing the probability of repayment, in 
reviewing project proposals, DOE intends to consider whether Project 
Sponsors will make a significant financial commitment to the project. 
In addition, DOE intends to consider whether a Project Sponsor will 
rely upon other government assistance (e.g., financial assistance, tax 
credits, other loan guarantees) to support financing, construction, or 
operation of the project. DOE does not intend to disqualify project 
proposals that employ other forms of Federal and non-Federal government 
assistance, but in reviewing proposals, DOE will take into account how 
much equity will be invested and the extent of the financial risk borne 
by the Project Sponsor.\3\
---------------------------------------------------------------------------

    \3\ Since the guidelines are not substantive regulations, DOE 
will not reject project proposals solely on the basis of the 
guidelines. However, Applicants are advised of their heavy burden of 
justification if they seek to persuade DOE to accept risk in excess 
of the outer boundaries of what the guidelines indicate to be 
preferable.
---------------------------------------------------------------------------

    In connection with any loan guaranteed by DOE that may be 
syndicated, traded, or otherwise sold on the secondary market, DOE will 
require that the guaranteed portion and non-guaranteed portion of the 
debt instrument are resold on a pro-rata basis. The guaranteed portion 
of the debt may not be ``stripped'' from the non-guaranteed portion, 
i.e. sold separately as an instrument fully guaranteed by the Federal 
government.
    In further support of DOE's objective to ensure full repayment of 
debt, DOE expects that participating Lenders will have to meet certain 
eligibility requirements, as described in greater detail in Section VI 
of these guidelines. These criteria are intended to ensure that the 
Lender has the financial wherewithal and appropriate experience and 
expertise to meet its fiduciary obligations in connection with the debt 
guaranteed by DOE. DOE expects that the Lender and other appropriate 
parties will exercise a high level of care and diligence in the 
establishment and enforcement of the conditions precedent to all loan 
disbursements and Borrower covenants, as provided for in the loan 
agreement or related documents, throughout the term of the loan. 
Moreover, DOE also expects each Lender to diligently perform its duties 
in the servicing and collection of the loan as well as in ensuring that 
the collateral package securing the loan remains uncompromised. The 
Lender will also be expected to provide regular, periodic financial 
reports on the status and condition of the loan, consistent with the 
terms of the Loan Guarantee Agreement. The Lender is required to 
promptly notify DOE if it becomes aware of any problems or 
irregularities concerning the project or the ability of the Borrower to 
make payment on the loan or other debt obligations.
    In addition to the other measures described above limiting the 
Federal government's risk exposure, commitments to guarantee loans will 
not exceed a face value of $2 billion, in the aggregate, under the 
first solicitation. Commencing with a loan guarantee program of this 
size will allow DOE to achieve considerable progress in assisting new 
or significantly improved energy technologies to market while also 
enabling DOE to gain valuable experience and expertise that it will 
incorporate in program regulations and apply to future solicitations. 
DOE recognizes that some project proposals

[[Page 46454]]

that would otherwise merit full consideration for a loan guarantee 
under these guidelines will, because of DOE's self-imposed ceiling on 
loan guarantee commitments, have to await full consideration under 
future solicitations issued under the final regulations. To accommodate 
concerns of Project Sponsors whose proposals are deferred full 
consideration because they either exceed or comprise a substantial 
amount of the total loan guarantee commitments available under the 
first solicitation, DOE will consider whether such proposals should be 
afforded expedited consideration under the final regulations, when 
adopted.
    Finally, please note that the solicitation issued in conjunction 
with these guidelines addresses many important aspects of the 
application process, including the relevant period of time during which 
Pre-Applications for loan guarantees may be filed. Because each project 
will be unique and each loan guarantee potentially subjects the Federal 
government to significant financial liability, DOE plans to engage in a 
rigorous review of a proposed project before determining that it may be 
eligible for a loan guarantee or subsequently approving and issuing a 
loan guarantee.

National Environmental Policy Act (NEPA)

    Through the issuance of these guidelines DOE is making no decision 
relative to the approval of a loan guarantee for a particular proposed 
project. DOE has therefore determined that publication of the policy 
guidelines is covered under the Categorical Exclusion found at 
paragraph A.6 of Appendix A to Subpart D, 10 CFR Part 1021, which 
applies to the establishment of procedural rulemakings. Accordingly, 
neither an environmental assessment nor an environmental impact 
statement is required at this time. However, appropriate NEPA project 
review will be conducted prior to execution of a Loan Guarantee 
Agreement.

Review Under the Paperwork Reduction Act

    These guidelines provide that Pre-Applications submitted to DOE in 
response to the solicitation and Applications, if invited by DOE, 
should contain certain information. This collection of information must 
be approved by the Office of Management and Budget pursuant to the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the 
procedures implementing that Act, 5 CFR 1320.1 et seq. DOE is 
requesting emergency processing of the Paperwork Reduction Act 
Submission for this collection of information pursuant to 5 CFR 
1320.13. DOE is requesting that OMB approve the collection of 
information prior to the issuance of the solicitation. This emergency 
collection will be valid for 180 days. Shortly after OMB's approval of 
the emergency collection, DOE will issue a notice seeking public 
comment on the information collection and will submit the proposed 
collection of information to OMB for approval pursuant to 44 U.S.C. 
3507(a). An agency may not conduct or sponsor, and a person is not 
required to respond to a collection of information unless it displays a 
currently valid OMB control number.

    Issued in Washington, DC, on August 8, 2006.
James T. Campbell,
Acting Chief Financial Officer.

Loan Guarantees for Projects That Employ Innovative Technologies; 
Guidelines for Proposals Submitted in Response to First Solicitation 
Under Title XVII of the Energy Policy Act of 2005

I. Purpose
    These guidelines set forth goals and procedures that the Department 
of Energy (``DOE'') intends to use for receiving, evaluating, and, 
after consultation with the Secretary of the Treasury, approving 
applications for loan guarantees to support Eligible Projects under 
Title XVII of the Energy Policy Act of 2005.
II. Definitions
    As used in these guidelines:
    A. ``Act'' means Title XVII of the Energy Policy Act of 2005 (42 
U.S.C. 16511-16514).
    B. ``Administrative Cost of Issuing a Loan Guarantee'' means the 
combined total of all of the administrative expenses that DOE incurs 
during:
    1. The evaluation of a Pre-Application and an Application for a 
loan guarantee;
    2. The offering, negotiation, and closing of a loan guarantee; and
    3. The servicing of the loan guarantee and monitoring the progress 
of a project benefiting from a loan guarantee issued by DOE.
    Payment of the Administrative Cost of Issuing a Loan Guarantee, 
which is required to be collected by DOE under section 1702(h) of the 
Act, is wholly distinct and separate from payment of the Subsidy Cost.
    C. ``Applicant'' means any firm, corporation, company, partnership, 
association, society, trust, joint venture, joint stock company, or 
governmental non-Federal entity, that has the authority to enter into, 
and is seeking, a loan guarantee issued by the Secretary for a loan or 
other debt obligation of an Eligible Project under the Act.
    D. ``Application'' means a written submission in response to a DOE 
invitation to apply for a loan guarantee that DOE will solicit from 
Applicant after reviewing and approving a completed Pre-Application, 
and which should include the items listed in Section III.F. of these 
guidelines.
    E. ``Borrower'' means any project company or entity that enters 
into a loan or other debt obligation for an Eligible Project.
    F. ``Commercial Technology'' means a technology in general use in 
the commercial marketplace, but does not include a technology solely by 
use of such technology in a demonstration project funded by DOE.
    G. ``Conditional Commitment'' means a Term Sheet offered by DOE and 
accepted by the Applicant, with the understanding of the parties that 
the Applicant thereafter satisfies all specified and precedent funding 
obligations, and all other contractual, statutory, regulatory or other 
requirements.
    H. ``Credit Review Board'' means a board created by DOE in 
accordance with Office of Management and Budget (OMB) Circular A-129 to 
oversee the loan guarantee program and approve loan guarantees for 
individual projects.
    I. ``Eligible Project'' means a project located in the United 
States that meets the applicable requirements of section 1703 of the 
Act.
    J. ``Guaranteed Obligations'' means loans or other debt obligations 
that the Secretary guarantees under a Loan Guarantee Agreement.
    K. ``Holder'' means any individual or legal entity that has 
lawfully succeeded in due course to all or part of the rights, title, 
and interest in a Guaranteed Obligation.
    L. ``Lender'' or ``Eligible Lender'' means any individual or legal 
entity, approved by DOE, formed for the purpose of, or engaged in the 
business of, lending money, including, but not limited to, commercial 
banks, savings and loan institutions, insurance companies, factoring 
companies, investment banks, institutional investors, venture capital 
investment companies, trusts, or other entities designated as trustees 
or agents acting on behalf of bondholders or other lenders.
    M. ``Loan Guarantee Agreement'' means a written agreement that, 
when entered into by a Borrower, a Lender and the Secretary pursuant to 
the Act

[[Page 46455]]

after satisfaction of the conditions precedent specified in the 
Conditional Commitment and any other applicable contractual, statutory, 
and regulatory requirements, establishes the obligation of the 
Secretary to guarantee payment of principal and interest on specified 
loans or other debt obligations of a Borrower to the Lender subject to 
the terms and conditions specified in the Loan Guarantee Agreement. The 
term ``Loan Guarantee Agreement'' has the same meaning as a ``loan 
guarantee commitment'' (as defined in section 502(4) of the Federal 
Credit Reform Act of 1990 (2 U.S.C. 661a)).
    N. ``Project Costs,'' as described with greater specificity in 
Section VII of these guidelines, means the estimated sum of the amounts 
to be expended or accrued by Borrower for costs that are necessary, 
reasonable, and directly related to the design, construction, and 
startup of an Eligible Project.
    O. ``Project Sponsor'' means any individual, firm, corporation, 
company, partnership, association, society, trust, joint venture, joint 
stock company or the like that assumes substantial responsibility for 
the development, financing, and structuring of a project eligible for a 
loan guarantee and owns or controls the Applicant.
    P. ``Pre-Application'' means a written submission in response to a 
solicitation that broadly describes the project proposal, including the 
proposed role of a loan guarantee in the project and the eligibility of 
the project to receive a loan guarantee under the Act, and includes the 
items listed in Section III.C. of these guidelines.
    Q. ``Secretary'' means the Secretary of Energy or designee.
    R. ``Subsidy Cost'' has the meaning given the term ``cost of a loan 
guarantee'' within the meaning of section 502(5)(C) of the Federal 
Credit Reform Act of 1990 (2 U.S.C. 661a(5)(C)). The ``Subsidy Cost'' 
represents the net present value, at the time when the guaranteed loan 
or other debt obligation is disbursed, of the expected liability to the 
Federal government from issuing the loan guarantee, inclusive of 
estimated payments to be made by the Federal government, such as 
default payments, and estimated payments to be made to the Federal 
government such as recoveries. The Subsidy Cost amount is required by 
section 1702(b) of the Act to be funded either by an appropriation or 
by payment by Borrower. Payment of the Subsidy Cost is wholly distinct 
and separate from payment of the Administrative Cost of Issuing a Loan 
Guarantee.
    S. ``Term Sheet'' means an offering document issued by DOE that 
specifies the general terms and conditions under which DOE anticipates 
it may guarantee payment of principal and accrued interest on specified 
loans or other debt obligations of a Borrower in connection with an 
Eligible Project. A Term Sheet is not a Loan Guarantee Agreement and 
imposes no obligation on the Secretary to execute a Loan Guarantee 
Agreement.
III. Loan Guarantee Application Process
    A. In conjunction with these guidelines, DOE is issuing a 
solicitation announcement to solicit the submission by Project Sponsors 
of Pre-Applications for loan guarantees for projects that employ 
innovative technologies. The guidelines will apply to this first 
solicitation; all future solicitations will be issued pursuant to 
program regulations that DOE will promulgate at a later time.
    B. The solicitation announcement issued in conjunction with these 
guidelines contains, among other things, the following information:
    1. A brief description of the Eligible Projects for which loan 
guarantee applications are solicited;
    2. The place and time for Pre-Application submission;
    3. The name and address of the DOE representative whom potential 
applicants may contact to receive further information and a copy of the 
solicitation; and
    4. The form, format and page limits applicable to the submission of 
a Pre-Application.
    C. In response to the solicitation, interested parties are invited 
to submit Pre-Applications to DOE. Pre-Applications should meet all 
requirements specified in the solicitation; DOE does not intend to 
review or approve loan guarantees for proposals that do not meet the 
requirements provided for in the solicitation. In addition, the Pre-
Application should contain the following information and documentation:
    1. A completed Pre-Application form signed by an individual with 
full authority to bind the Project Sponsor;
    2. A business plan including an overview of the proposed project 
including:
    (a) A description of the Project Sponsors, including their 
experience in project investment, development, construction, operation 
and maintenance;
    (b) A description of the technology to be utilized, including its 
commercial applications and social uses, the owners or controllers of 
the intellectual property incorporated in and utilized by such 
technology, and its manufacturer(s), and licensees, if any, of the 
technology authorized to make the technology available in the United 
States, and whether and how the technology is or will be made available 
in the United States for further commercial use;
    (c) The estimated amount of the total Project Costs (including 
escalation and contingencies);
    (d) The timeframe required for construction and commissioning of 
the facility; and
    (e) A description of the primary off-take or revenue-generating 
agreement(s) that will primarily provide financial support for the 
project.
    3. A financing plan overview describing the amount of equity to be 
invested and the sources of such equity, the amount of the total debt 
obligations to be incurred and the funding sources of all such debt, 
the anticipated guarantee percentage of the Government-guaranteed debt, 
and a financial model detailing the investments and the cash flows 
generated from the project over the project life-cycle;
    4. An explanation of what impact the loan guarantee will have on 
the interest rate, debt term, and overall financing structure for the 
project;
    5. A copy of a commitment letter from an Eligible Lender expressing 
its commitment to provide the required debt financing necessary to 
construct and fully commission the project subject to commercially 
reasonable conditions governing disbursement commonly included in arm's 
length debt financing arrangements for projects and loan amounts 
similar to the proposed project;
    6. A copy of the equity commitment letter(s) from each of the 
Project Sponsors and a description of the sources for such equity;
    7. An overview of how the project will comply with the eligibility 
requirements under section 1703 of the Act;
    8. An outline of the potential environmental impacts of the project 
and how these impacts will be mitigated;
    9. A description of the anticipated air pollution and greenhouse 
gas reduction benefits;
    10. A description of how the proposed project advances the 
President's Advanced Energy Initiative; and
    11. An executive summary briefly encapsulating the key project 
features and attributes.
    D. In reviewing completed Pre-Applications, DOE intends to utilize 
the criteria referenced in the Act, the

[[Page 46456]]

solicitation, and these guidelines.\4\ In addition, prior to a 
comprehensive evaluation, an initial review of the Pre-Applications 
will be performed to determine the following:
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    \4\ While these factors are designed for review of Pre-
Applications, DOE intends to use these factors, as appropriate, in 
reviewing Applications as well.
---------------------------------------------------------------------------

    1. The proposal is for an Eligible Project; and
    2. The submission contains the information requested by the 
solicitation.
    If a Pre-Application fails to meet these requirements, it may be 
deemed non-responsive and eliminated from further review. As part of 
the subsequent and more comprehensive Pre-Application review, DOE may 
conduct an independent review of the financial capability of an 
Applicant (including personal credit information of the principal(s) if 
there is insufficient information to assess the financial capability of 
the organization). In addition, DOE may ask for additional information 
during the review process and may request one or more meetings with the 
Project Sponsor(s).
    E. After reviewing a completed Pre-Application, DOE will provide a 
written response to the Project Sponsor.\5\ In this response, DOE will 
do one of two things. DOE will either invite an Applicant to submit a 
comprehensive Application for a loan guarantee and specify the amount 
of the Application fee that DOE has decided to assess, if any, or DOE 
will advise the Project Sponsor that the project proposal is ineligible 
for further consideration in the review process under the guidelines. 
Project Sponsors whose proposals are denied further review will not be 
barred from re-submitting an updated or revised project proposal in 
response to future solicitations under the final regulations to be 
adopted by DOE.
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    \5\ While DOE intends to review Applicant's written submission, 
neither the Pre-Application nor any written or other feedback that 
DOE may provide in response to the Pre-Application is intended to 
obviate the need for an Application. In addition, any response that 
DOE may provide to a Pre-Application or subsequent Application does 
not obligate DOE to issue a loan guarantee for a project; only a 
duly executed Loan Guarantee Agreement may contractually obligate 
DOE to guarantee any loan or other debt obligations.
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    F. In response to an invitation to submit an Application, 
interested Applicants are expected to meet all requirements specified 
in the invitation, the solicitation and these guidelines. DOE will be 
expecting that the information and documentation requested, as well as 
the substance and content of such documentation required for the 
Application, will conform substantially with that produced during the 
course of an arm's length commercially negotiated project or commercial 
financing. The maturity, balance sheet and experience of the Project 
Sponsors, the credit rating of the Lenders and the off-take 
counterparties, and the scope and breadth of the security package 
supporting the loan are additional important factors that DOE will 
consider in its review of an Application.\6\ An Application should 
include, among other things, the following information and materials:
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    \6\ Additional factors that DOE expects to consider when 
reviewing Applications are described in Section IV of these 
guidelines.
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    1. A completed Application form signed by an individual with full 
authority to bind Applicant;
    2. Payment of the Application fee, if any;
    3. A detailed description of all material amendments, 
modifications, and additions made to the information and documentation 
provided in the Pre-Application, including any changes in the proposed 
project's financing structure or terms;
    4. A description of the nature and scope of the proposed project, 
including key milestones, location of the project, identification and 
commercial feasibility of the new or significantly improved 
technology(ies) to be employed in the project, how Applicant intends to 
employ such technology(ies) in the project, and how the Applicant or 
others intend to assure the further commercial availability of the 
technology(ies) in the United States;
    5. A detailed explanation of how the proposed project qualifies as 
an Eligible Project;
    6. A detailed estimate for the total Project Costs (including 
escalation and contingencies), together with a description of the 
methodology and assumptions used;
    7. An estimate of the amount of the Subsidy Cost for the project, 
including a description of the methodology used for this calculation 
and any supporting documentation;
    8. A detailed description of the construction contractor(s) and 
equipment supplier(s), construction schedules for the project including 
major activity and cost milestones as well as the performance 
guarantees, performance bonds, liquidated damages provisions, and 
equipment warranties to be provided;
    9. 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;
    10. A description of the management plan of operations that 
Applicant will employ in carrying out the project, and information 
concerning the management experience of each officer or key person 
associated with the project;
    11. A detailed description of the project decommissioning, 
deconstruction and disposal plan and the anticipated costs associated 
therewith;
    12. An analysis of the market for the product(s) to be produced by 
the project, including relevant economics justifying the analysis, and 
copies of any contractual agreements for the sale of these products or 
assurance of the revenues to be generated from sale of these products;
    13. A detailed description of the overall financial plan for the 
proposed project, including all sources of funding, equity, and debt, 
and the liability of parties associated with the project over the 
lifetime of the requested loan guarantee;
    14. A copy of all loan documents that Borrower and Lender will sign 
if the Application for a loan guarantee is approved, containing all of 
the terms and conditions of the loan or other debt obligations to be 
guaranteed, including the proposed amount of the loan, interest 
charges, repayment position, principal repayment schedule, fees, pre-
payment and late payment penalties, and cure rights;
    15. A copy of all material agreements, whether entered into or 
proposed, relevant to the investment, construction and commissioning of 
the project;
    16. A copy of the financial closing checklist for the equity and 
debt;
    17. Applicant's business plan on which the project is based and 
project pro forma statements for the proposed life of the loan 
guarantee, including income statements, balance sheets, and cash flows. 
All such statements should include assumptions made in their 
preparation and the range of revenue, operating cost, and credit 
assumptions considered;
    18. Financial statements for the past three (3) years that have 
been audited by an independent certified public accountant, including 
all associated notes, as well as interim financial statements and notes 
for the current fiscal year, of Applicant and parties relevant to 
Applicant's financial backing, together with business and financial 
interests of principal organizations, if appropriate, such as parent 
and subsidiary corporations or partners of Applicant;

[[Page 46457]]

    19. A copy of all legal opinions, engineering reports, and other 
material reports, analysis, and reviews related to the project;
    20. Credit history of Applicant and, if appropriate, any party who 
owns or controls a five percent or greater interest in the project or 
the Applicant;
    21. A preliminary credit assessment for the project without a loan 
guarantee from a nationally recognized rating agency;
    22. A list of all project-related applications filed and approvals 
issued by Federal, state, and local government agencies for permits and 
authorizations to site, construct, and operate the project. If still 
outstanding, the Application should contain an estimated date of 
completion for any required filings and approvals;
    23. A report containing an analysis of the potential environmental 
impacts of the project that will enable DOE to assess whether the 
project will comply with all applicable environmental requirements and 
how and to what measurable extent the project avoids, reduces, or 
sequesters air pollutants or anthropogenic emissions of greenhouse 
gases, including how Borrower intends to verify those benefits;
    24. A listing of assets associated, or to be associated, with the 
project and any other asset that will serve as collateral for the 
guaranteed loan and assure repayment of the loans and other debt 
obligations of the project, including appropriate data as to the value 
and useful life of any physical assets and a description of any other 
associated security and its value. With respect to any ownership 
interest in a real property asset described above or any pledged asset 
that is not part of the project, an appraisal should be performed by 
state licensed or certified appraisers that is consistent with the 
``Uniform Standards of Professional Appraisal Practice,'' promulgated 
by the Appraisal Standards Board of the Appraisal Foundation;
    25. An analysis demonstrating that at the time of the Application, 
there is a reasonable prospect that Borrower will be able to repay the 
loan or other debt obligation to be guaranteed (including interest) 
according to its terms, and a complete description of the operational 
and financial assumptions on which this demonstration is based;
    26. Written affirmation from an officer of the Lender confirming 
that Lender is an Eligible Lender in good standing with DOE's and other 
agencies' loan guarantee programs; and
    27. Such other information requested in the solicitation or 
invitation to submit an Application necessary for a complete assessment 
of the loan guarantee application for the project.
    G. Following Applicant's submission of an Application, DOE will 
review the Application based on the factors mentioned in subsection F 
of Section III and Section IV of the guidelines. If the Credit Review 
Board determines that a project may be suitable for a loan guarantee, 
because, among other things, it qualifies as an Eligible Project, there 
exists a reasonable expectation of payment based on the materials 
provided in the Application, and the proposed project will advance the 
President's Advanced Energy Initiative, DOE may notify the Borrower and 
Lender in writing and provide them with a copy of a proposed Term 
Sheet. In the event that DOE reviews an Application and decides not to 
proceed further with the issuance of a proposed Term Sheet, DOE will 
inform Applicant in writing the reason(s) for the denial.
    H. Concurrent with the review process described above, DOE will 
consult with the U.S. Department of Treasury regarding the terms and 
conditions of the potential loan guarantee and will work with OMB to 
determine the Subsidy Cost for a potential loan guarantee based on the 
particular set of terms and conditions associated with the project. OMB 
will ultimately review and approve the final determination of the 
Subsidy Cost.
    I. Subsequent to any negotiations and revisions of the proposed 
Term Sheet including the Subsidy Cost in accordance with subsection H 
of Section III of the guidelines, the Term Sheet becomes a Conditional 
Commitment if, and only if, both DOE and Applicant agree to the 
proposed terms and conditions and sign the Term Sheet. Among other 
things, the Conditional Commitment will specify the required payment of 
fees for the Administrative Cost of Issuing a Loan Guarantee. 
Subsequent to entering into a Conditional Commitment, and upon 
agreement as to the detailed terms and conditions to be contained in 
the Loan Guarantee Agreement and other related documents, as well as 
availability of authority provided in an appropriations act for the 
loan guarantee, and fulfillment of other applicable statutory, 
regulatory, or other requirements, the Credit Review Board will set a 
closing date. DOE will enter into a Loan Guarantee Agreement with an 
Applicant that satisfies the specified conditions precedent if and only 
if all funding and other contractual, statutory and regulatory 
requirements have been satisfied.
    J. Prior to the closing date, the Secretary will ensure that:
    1. Pursuant to section 1702(b) of the Act, Congress has made an 
appropriation for the Subsidy Cost of the loan guarantee, or that the 
Secretary will receive payment in full from the Borrower as part of the 
closing and Congress has provided sufficient additional authority in an 
appropriations act;
    2. Pursuant to section 1702(h) of the Act, and in accordance with 
Section V.R. of these guidelines, the Secretary has received from 
Borrower payment of a fee for DOE's Administrative Cost of Issuing a 
Loan Guarantee or will receive payment of the fee as part of the 
closing;
    3. The Director of OMB has reviewed and approved DOE's calculation 
of the Subsidy Cost of the loan guarantee;
    4. The Secretary 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 the Secretary deems reasonable and necessary to 
protect the interests of the United States; and
    6. All conditions precedent specified in the Conditional Commitment 
have either been satisfied or waived by the Secretary and all other 
applicable contractual, statutory, and regulatory requirements have 
been satisfied.
IV. Evaluation of Applications
    In evaluating Applications invited for submission, DOE plans to 
consider the following factors: \7\
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    \7\ While these factors are designed for review of Applications, 
DOE intends to use these factors, as appropriate, in reviewing Pre-
Applications as well:
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    A. Whether the Application is complete, signed by the appropriate 
entity or entities with the authority to bind the Project Sponsor and 
other relevant parties to the agreement, and complies with the 
eligibility requirements stated in the Act, these guidelines, and the 
solicitation;
    B. Whether the Application contains sufficient information, 
including a detailed description of the nature and scope of the project 
and the nature, scope, and risk coverage of the loan guarantee sought, 
to enable DOE to perform a thorough assessment of the project;
    C. Whether and to what measurable extent the project avoids, 
reduces, or sequesters air pollutants or anthropogenic emissions of 
greenhouse gases;
    D. Whether the new or significantly improved technology to be 
employed in the project, as compared to commercial technologies in 
service in the United States at the time the guarantee is

[[Page 46458]]

issued, is ready to be employed commercially in the United States, can 
yield a commercially viable product(s) in the use proposed in the 
project, and is or will be available for further commercial use in the 
United States;
    E. Whether the project will advance the goals of the President's 
Advanced Energy Initiative;
    F. Whether the requested amount of the loan guarantee is reasonable 
relative to the nature and scope of the project;
    G. The extent to which Project Costs are funded by guaranteed debt;
    H. The extent to which Applicant and other principals involved in 
the project have made a significant equity commitment to the project;
    I. Whether the project will be ready for full deployment and 
operations in the proximate future;
    J. Whether there is sufficient evidence that Applicant will 
initiate and complete the project in a timely, efficient, and 
acceptable manner;
    K. Whether and/or to what extent Applicant will rely upon other 
Federal and non-Federal governmental assistance (grants, tax credits, 
other loan guarantees, etc.) to support the financing and construction 
and/or operation of the project;
    L. Whether there is reasonable assurance that the project is 
economically feasible and will produce sufficient revenues to service 
the project's debt obligations over the life of the loan guarantee and 
assure timely repayment of guaranteed loans and other debt obligations;
    M. Whether the collateral, warrantees, and other assurance of 
repayment described in the Application provide adequate safeguard to 
the Federal government in the event of default;
    N. Whether Applicant possesses the capacity and expertise to 
successfully operate the project, based on factors such as financial 
soundness, management organization, and the nature and extent of 
corporate and personnel experience;
    O. Whether the project will comply with all applicable laws and 
regulations, including all applicable environmental statutes and 
regulations;
    P. Whether the levels of market, regulatory, legal, financial, 
technological, and other risks associated with the project are 
appropriate for a loan guarantee provided by DOE;
    Q. Whether the entity issuing the loan or other debt obligation 
subject to the loan guarantee is an Eligible Lender; and
    R. Such other criteria that the Secretary and the Credit Review 
Board deem relevant in evaluating the merits of an Application.
V. Findings by the Secretary
    Prior to the issuance by DOE of a loan guarantee, the Secretary 
should ensure that Applicant satisfies the following requirements and 
conditions (some or all of which should be specified in the Loan 
Guarantee Agreement):
    A. The project qualifies as an Eligible Project under the Act;
    B. The project will be constructed and operated in the United 
States and the technology is or is likely to be available in the United 
States for further commercial application;
    C. The debt guaranteed by DOE is limited to no more than 80 percent 
of total Project Costs;
    D. The amount of the loan guarantee does not exceed 80 percent of 
the total face value of the loan or other debt obligation of the 
project, or provides sufficient evidence to support a guarantee 
exceeding 80 percent (but in no event 100 percent);
    E. Applicant and other principals involved in the project have made 
a significant equity investment;
    F. The prospective Borrower is obligated to make full repayment of 
the guaranteed loan over a period of up to the lesser of 30 years or 90 
percent of the projected useful life of the project's major physical 
assets, as calculated in accordance with generally accepted accounting 
principles and practices;
    G. The loan guarantee does not finance, either directly or 
indirectly, a Federally tax-exempt obligation. Accordingly, the loan 
guarantee may not be used for a Federally tax-exempt obligation or 
serve as collateral to secure a tax-exempt obligation;
    H. The guaranteed portion of a loan must not be separated from or 
``stripped'' from the non-guaranteed portion of the loan and resold in 
the secondary debt market;
    I. The amount of the loan guaranteed, when combined with other 
funds committed to the project, will be sufficient to carry out the 
project, including adequate contingency funds;
    J. There is a reasonable prospect of repayment by Borrower of the 
principal and interest of the Guaranteed Obligations;
    K. The prospective Borrower has pledged project assets and other 
collateral or surety, including non project-related assets, as 
determined by the Secretary to be necessary as assurance for the 
repayment of the loan;
    L. The Loan Guarantee Agreement and related documents include 
detailed terms and conditions as appropriate to protect the interests 
of the United States in the case of default, including ensuring 
availability of all the intellectual property rights, technical data 
including software, and physical assets necessary for any person 
selected, including, but not limited to, the Secretary, to complete and 
operate the defaulting project;
    M. The Borrower's interest rate on the guaranteed loan is 
determined by the Secretary to be reasonable, taking into account the 
range of interest rates prevailing in the private sector for similar 
Federal government guaranteed obligations of comparable risk;
    N. The guaranteed loan is not subordinate to any loan or other debt 
obligation for the project not part of the Guaranteed Obligations and 
is in a first lien position regarding all assets of the project and all 
collateral security pledged;
    O. There is satisfactory evidence that Borrower is willing, 
competent, and capable of performing the terms and conditions of the 
loan or other debt obligation and the loan guarantee;
    P. The Lender is not a Federal entity, possesses sufficient 
financial wherewithal and expertise, and will exercise the requisite 
standard of care as deemed necessary by the Secretary and stated in 
DOE's lender eligibility criteria in Section VI of these guidelines;
    Q. Lender or other parties servicing the loan and monitoring the 
project should be satisfactory to the Secretary. In addition, the 
Secretary will need to find that the Lender and other appropriate 
parties will exercise a high level of care and diligence in the 
establishment and enforcement of the conditions precedent to all loan 
disbursements and the Borrower covenants throughout the term of the 
loan and that each Lender will be required to diligently perform its 
duties in the servicing and collection of the loan as well as in 
ensuring that the collateral package securing the loan remains 
uncompromised. The Lender will also provide annual or more frequent 
periodic financial reports on the status and condition of the loan, and 
is required to promptly notify DOE if it becomes aware of any problems 
or irregularities concerning the project or the ability of the Borrower 
to make payment on the loan or other debt obligations. Even though DOE 
will rely on Lender (or other servicer) to service and monitor the loan 
with utmost care and expertise, Lender's responsibilities with regard 
to the loan are separate from DOE's own monitoring and review of the 
loan and the project;
    R. As specified in the Conditional Commitment, the prospective 
Borrower makes payment of the fee for the Administrative Cost of 
Issuing a Loan Guarantee pursuant to section 1702(h)

[[Page 46459]]

of the Act. While covering the other costs included in the 
Administrative Cost of Issuing a Loan Guarantee, this payment will not 
include the servicing and monitoring costs identified in Section II.B. 
of these guidelines. These latter costs will be assessed in accordance 
with the Loan Guarantee Agreement which will require payment of 
administrative fees to the Federal government by Borrower, either 
directly or through the Lender, periodically thereafter for the 
duration of the loan guarantee. DOE intends to use all of the fees 
mentioned above to defray administrative expenses associated with 
issuing and monitoring loan guarantees;
    S. If Borrower is to make payment in full for the Subsidy Cost of 
the loan guarantee pursuant to section 1702(b)(2) of the Act, such 
payment must be received by the Secretary prior to, or at the time of, 
closing;
    T. DOE representatives have access to the project site at all 
reasonable times in order to monitor the performance of the project;
    U. DOE and Borrower have reached an agreement as to what project 
information will be made available to DOE and which project information 
will be made publicly available;
    V. The prospective Borrower has filed applications for or obtained 
any required regulatory approvals for the project and is in compliance 
with all Federal and state regulatory requirements;
    W. Applicant has no delinquent Federal debt, including tax 
liabilities, unless the delinquency has been resolved with the 
appropriate Federal agency in accordance with the standards of the Debt 
Collection Improvement Act of 1996; and
    X. The Loan Guarantee Agreement contains such other terms and 
conditions as the Secretary deems reasonable and necessary to protect 
the interests of the United States.
VI. Lender Eligibility
    Lenders associated with a project should meet the following 
requirements:
    A. The Lender is a ``non-Federal qualified institutional buyer,'' 
as defined in 17 CFR 230.144A(a), including qualified retirement plans 
and governmental plans;
    B. The Lender is not a party debarred or suspended from 
participation in a Federal government contract (under 48 CFR 9.4) or 
participation in a non-procurement activity (under a set of uniform 
regulations implemented in agency regulations for numerous agencies, 
including DOE, at 10 CFR 1036);
    C. The Lender is not delinquent on any Federal debt or loan;
    D. The Lender is duly organized and legally authorized to enter 
into the transaction;
    E. The Lender is able to demonstrate experience in originating and 
servicing loans for commercial deals similar in size and scope with the 
project under consideration; and
    F. The Lender is able to demonstrate experience or capability as 
the lead lender or underwriter of other energy related projects.
VII. Project Costs
    A. In conjunction with the Secretary's determination of the Project 
Costs associated with the issuance of a loan guarantee, Applicant 
should record such costs in accordance with generally accepted 
accounting principles and practices. Applicant should calculate the sum 
of reasonable and customary costs that it has paid and expects to pay, 
and which are directly related to the project, to estimate the total 
sum of Project Costs. Project Costs may include, but are not limited 
to:
    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. Engineering, architectural, legal and bond fees, and insurance 
paid in connection with construction of the facility; and materials, 
labor, services, travel and transportation for facility construction, 
startup, and tests;
    3. Equipment purchase and startup testing;
    4. Costs to provide equipment, facilities, and services related to 
safety and environmental protection;
    5. Financial and legal services costs, including other professional 
services and fees necessary to obtain required licenses and permits and 
to prepare environmental reports and data;
    6. Interest costs and other normal charges affixed by lenders;
    7. Necessary and appropriate insurance and bonds of all types;
    8. Costs of startup, commissioning and shakedown;
    9. Costs of obtaining licenses to intellectual property necessary 
to design, construct, and operate the project; and
    10. Other necessary and reasonable costs approved by the Secretary.
    B. Applicant should not record the following costs as Project Costs 
associated with the loan guarantee:
    1. Fees and commissions charged to Borrower, including finder fees, 
for obtaining Federal funds;
    2. Parent corporation's general and administrative expenses, and 
non-project related parent corporation 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 the 
energy technology for employment in a commercial project;
    6. Costs that are excessive or are not directly required to carry 
out the project, as determined by the Secretary;
    7. Administrative Cost of Issuing a Loan Guarantee paid by the 
Borrower;
    8. The Subsidy Cost of the loan guarantee; and
    9. Operating expenses incurred after startup, commissioning and 
shakedown.
VIII. Principal and Interest Assistance Contract
    With respect to any Guaranteed Obligation, the Secretary may enter 
into a contract to pay Holders, for and on behalf of Borrower, from 
funds appropriated for that purpose, the principal and interest charges 
that become due and payable on the unpaid balance of the Guaranteed 
Obligation, if the Secretary finds that:
    A. Borrower is unable to meet the payments and is not in default;
    B. Borrower will, and is financially able to, continue to make the 
scheduled payments on the remaining portion of the principal and 
interest due under the non-guaranteed portion of the debt obligation, 
or an arrangement, approved by the Secretary, has otherwise been agreed 
to avoid an impending payment default;
    C. It is in the public interest to per