The U.S. Department of Energy (DOE) is creating a new loan guarantee program that will offer attractive financing to American Indian tribes for energy development projects. While the Tribal Energy Loan Guarantee Program (Tribal Energy LGP) is authorized under the Energy Policy Act of 2005 to issue guarantees for eligible projects totaling in aggregate up to $2 billion, the program was only recently funded under the Fiscal Year 2017 Omnibus Spending Bill. Since the beginning of 2018, DOE has been actively engaging tribal stakeholders as it optimizes and finalizes the details of the program. Given the relative lack of restrictions on technologies or project locations, the Tribal Energy LGP promises to benefit a wide range of projects, including electric generation, transmission or energy storage projects; district heating and cool projects; and projects that entail drilling, mining, refining and/or the production of biofuels or chemicals. The official solicitation is slated for release in just a couple of weeks.
The Tribal Energy LGP is being stood up by the DOE’s Loan Programs Office (LPO)—which currently runs both the Advanced Technology Vehicle Manufacturing Program (ATVM) and the Title XVII Program for Innovative Energy Technologies—in consultation with the Office of Indian Energy Policy and Programs (IE). Unlike the ATVM and Title XVII programs, however, the Tribal Energy LGP would be a partnership between eligible lenders and DOE, where the lender as a commercial bank or other non-federal lender with suitable experience and capabilities would partially guarantee repayment of loan to an Indian tribe made under this program. More specifically, a tribe seeking financing would apply to an eligible lender, which in turn would apply to DOE for the partial guarantee. Eligible borrowers include American Indian tribes, Alaskan Native villages and related regional or village entities. Importantly, the Tribal Energy LGP will allow energy development projects to be partially owned by non-tribal participants.
While many details will only be clarified with the official solicitation release, it appears that there may be a small appetite for some technology risk within the Tribal Energy LGP, when a project is primarily utilizing commercially proven technology. It remains to be seen see if a threshold is established or additional clarifying guidance is provided. Moreover, eligible projects could hypothetically include generation projects serving both non-tribal customers and residents of Indian lands, wherever constructed; transmission projects facilitating the sale of electricity generated on Indian land to outside markets; and even transmission projects across Indian lands, connecting outside generation to outside markets, where no tribal customers are served. Eligible projects might even include projects in which a tribal borrower participates as an investor, but bears no other direct relationship to the tribe or Indian lands.
Holland & Knight’s Government Energy Finance Team bring decades of experience in structuring, securing and managing billions in loan guarantees on behalf of innovative technology clients across several federal agencies, such as the U.S. Departments of Energy, Agriculture, and Defense. Taking into consideration the Tribal Energy LGP is a totally new program, applicant success will depend upon matching a compelling business case along with an effective political strategy, as the White House Office of Management and Budget (OMB)—which must ultimately approve all DOE financing transactions—has been actively evaluating the program to ensure program funds are being utilized in an appropriate manner. While the LPO was under attack by the Trump Administration and OMB for the majority of 2017, it is no longer a political point of contention for the Trump Administration given its value to existing advanced nuclear technologies and innovative fossil energy applications. Holland & Knight’s energy advisors are always available to assist companies throughout all stages of the application process from inception to final negotiation and beyond.
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