United States Department of Energy
Strategic Advisory / Program Creation / Underwriting
Client: U.S. Department of Energy (“DOE”) – Loan Guarantee Program Office (“LGPO").
Background: The American Recovery and Reinvestment Act of 2009 (“ARRA”, aka the “Stimulus Package”), Title 17 of the Energy Policy Act of 2005 (the “Act”), Section 1705, enacted February 17, 2009, granted the DOE LGPO $6bn of credit subsidy to fund loan guarantees of commercially deployed: i) renewable energy generation projects; ii) transmission projects; and iii) leading edge biofuel projects. The credit subsidy was expected to fund roughly $80bn of projects. This added to the DOE’s ability to provide $51bn of loan guarantees for “new or significantly improved technologies” under Section 1703 of the Act. All ARRA projects must have started construction by 9-30-11.
The Problem: The DOE needed to quickly develop market-oriented solutions and launch programs that would co-opt private market investors and provide funding necessary to construct and operate viable renewable energy projects.
The Solution: Izar Principals were engaged as investment bankers to the DOE LGPO, as well as the DOE’s Energy Efficiency and Renewable Energy (“EERE”) office, to assist in a wide variety of projects relating to the ARRA program and the various DOE LGPO finance programs, including the creation of programs and the underwriting of applicants seeking loan guarantees.
Background: The American Recovery and Reinvestment Act of 2009 (“ARRA”, aka the “Stimulus Package”), Title 17 of the Energy Policy Act of 2005 (the “Act”), Section 1705, enacted February 17, 2009, granted the DOE LGPO $6bn of credit subsidy to fund loan guarantees of commercially deployed: i) renewable energy generation projects; ii) transmission projects; and iii) leading edge biofuel projects. The credit subsidy was expected to fund roughly $80bn of projects. This added to the DOE’s ability to provide $51bn of loan guarantees for “new or significantly improved technologies” under Section 1703 of the Act. All ARRA projects must have started construction by 9-30-11.
The Problem: The DOE needed to quickly develop market-oriented solutions and launch programs that would co-opt private market investors and provide funding necessary to construct and operate viable renewable energy projects.
The Solution: Izar Principals were engaged as investment bankers to the DOE LGPO, as well as the DOE’s Energy Efficiency and Renewable Energy (“EERE”) office, to assist in a wide variety of projects relating to the ARRA program and the various DOE LGPO finance programs, including the creation of programs and the underwriting of applicants seeking loan guarantees.
Key Solutions / Deal Highlights
Financing / Advisory Programs
Deals
DOE LGPO Deal Origination
DOE LGPO-Deal-Specific Financial Advisory Services
■ Structuring
■ Negotiations with target company management and their investment and commercial bankers
■ Legal structuring and negotiations
■ Technical coordination with in-house and external consultants
■ Funding
Fundco / Finco
■ Financial models
■ Credit subsidy models
■ Reporting standards
■ Financial and operational covenants and covenant models
■ Board oversight structures
■ Compliance, monitoring and maintenance structures
Small Business Taskforce
Deals
- NextLight/FirstSolar Agua Caliente-$1.1bn, 290MW PV solar generation, using si-thin film deployment on large scale as the tech innovation; PV 1703/1705 manufacturing solicitation candidate
- Framework Lending-based on Finco/Fundco framework; will allow sponsors to aggregate DOE-funded projects and monetize via the public or private capital markets
- Abengoa Mojave Solar-$1.6bn, 250MW parabolic trough solar thermal generation, using wet cooling; PV 1703/1705 manufacturing solicitation candidate
- Solar Millennium-Blythe-$2.6bn, 484 MW CSP solar generation plant; using Helio-Trough solar thermal parabolic technology as the tech innovation
- Solaicx-maker of mono-crystalline silicon ingots using proprietary process which allows faster throughput and less silicon waste; PV 1703/1705 innovative solicitation candidate
DOE LGPO Deal Origination
- Work with private market funding sources (private equity, venture capital, insurance companies, institutional lenders) to create programs allowing portfolio delegated lending
- Structure financial and operational models for pooled investments into cleantech
DOE LGPO-Deal-Specific Financial Advisory Services
- Served as in-house investment banker for active DOE LGPO deals
- Conduct full-scale deal processing on behalf of DOE, including:
■ Structuring
■ Negotiations with target company management and their investment and commercial bankers
■ Legal structuring and negotiations
■ Technical coordination with in-house and external consultants
■ Funding
Fundco / Finco
- Created series of products/programs for DOE’s Loan Guarantee Program Office for the private equity and venture capital communities
- Designed comprehensive profiling document to ascertain composition of existing and prospective cleantech portfolio
- Conducted nationwide and direct 1-to-1 outreach to cleantech private equity and venture investors, as well as direct, private lender institutions, hedge funds and corporations
- Designed needs analysis documents to elicit fundamental issues creating capital constraints on cleantech portfolio companies
- Worked with various government and private enterprises to develop best practices from comparison of similar programs (OPIC, USDA, SBA)
- Created comprehensive structures for implementation and execution of Fundco/Finco programs, including:
■ Financial models
■ Credit subsidy models
■ Reporting standards
■ Financial and operational covenants and covenant models
■ Board oversight structures
■ Compliance, monitoring and maintenance structures
Small Business Taskforce
- Member of DOE Small Business Taskforce
- Created plan to accommodate small firms (<$50mm in revenue) in DOE’s Loan Guarantee Program Office
- Studied best practices of other governmental small business assistance programs
- Created methodology and process for special handling, outreach, pricing and processing
Energy Efficiency and Renewable Energy (“EERE”) Programs
EERE State Energy Program (“SEP”) Finance Programs – ARRA appropriated $3.1 billion for the DOE’s EERE SEP, which provides grants to state energy offices to carry out clean energy programs and projects in renewable energy and energy efficiency. The SEP Finance Products included:
EERE Risk Management Framework and Monitoring/Coaching Program over 3 broad categories:
EERE-Solar Demonstration Zone Grant Program
EERE-Property Assessed Clean Energy (“PACE”) Loan Securitization Program
■ Allowing for continual recycling of reserves
■ Leverage local allocation of federal funds
EERE State Energy Program (“SEP”) Finance Programs – ARRA appropriated $3.1 billion for the DOE’s EERE SEP, which provides grants to state energy offices to carry out clean energy programs and projects in renewable energy and energy efficiency. The SEP Finance Products included:
- Revolving Loan Funds (“RLF”s)
- Loan loss reserve funding
- Interest rate buy-down
- 3rd party loan insurance funding
EERE Risk Management Framework and Monitoring/Coaching Program over 3 broad categories:
- Credit / Financial Risk-including credit, underwriting, market and portfolio risk
- Operational Risk – including effectiveness of operations and internal processes
- Regulatory Compliance Risk-including compliance with use of funds, laws and regulations, target sectors, ARRA reporting.
EERE-Solar Demonstration Zone Grant Program
- Designed review criteria for $150mm grant program for innovative technologies in the concentrating solar power sector
- Involved analysis of both demonstration and commercial stage business plan elements
- Designed to identify top prospects for entry into DOE’s LGPO once innovation proves workable, scalable and commercialization has been proven effective
EERE-Property Assessed Clean Energy (“PACE”) Loan Securitization Program
- Structured program for pooling and securitization of existing PACE loans (loans issued by local municipalities used to finance energy efficiency retrofits and cleantech investments) for commercial and residential property owners, with the repayment mechanism tied to real estate property tax assessment and the real estate serving as collateral.
- Worked with private market investment banks for creation of collateral program, loan administration and servicing
- Designing DOE backed loan guarantee for local municipality with goals of:
■ Allowing for continual recycling of reserves
■ Leverage local allocation of federal funds