The headline number in DOE's December 15, 2016 energy-guarantee rule is a limit, not an offer. Expected principal of Guaranteed Obligations, estimated at issuance, cannot exceed 80 percent of the eligible project's defined Project Costs. For anyone assessing financing incentives, the denominator matters: this is not a promise to guarantee 80 percent of each loan or fund every qualified applicant. [2016-30006][2016-23268]

The mechanism leaves a project financing question beyond that ceiling. It does not identify who will provide every other dollar or establish that private capital will arrive on attractive terms. Eligibility itself is selective, requiring an environmental purpose and new or significantly improved technology compared with commercial technology operating in the United States when the guarantee is issued. [2016-30006][2016-23268]

The October 3 proposal highlights a separate cost of the guarantee arrangement. Its proposed condition called for Credit Subsidy Cost coverage prior to or on closing, using an appropriation, full borrower payment of that cost, or a combination. Borrower payment of the subsidy cost is not synonymous with financing the entire project. Treating the two as interchangeable would obscure rather than explain the capital structure. [2016-30006][2016-23268]

DOE described the revision as an effort to improve clarity, transparency and workability, with the final rule effective January 17, 2017. Those objectives could matter to transaction planning, but the two documents measure neither financing savings nor additional competition. They come from one rulemaking chain. The supported market question is how eligibility and financing constraints shape an opportunity, not which project or investor is guaranteed to benefit. [2016-30006][2016-23268]

Source documents

  1. Loan Guarantees for Projects That Employ Innovative Technologieshttps://www.govinfo.gov/content/pkg/FR-2016-12-15/html/2016-30006.htm
  2. Loan Guarantees for Projects That Employ Innovative Technologieshttps://www.govinfo.gov/content/pkg/FR-2016-10-03/html/2016-23268.htm