April 5, 2012

Energy Dept. to Revitalize a Loan Guarantee Program

New York Times, Matthew Wald

Original News Source >

WASHINGTON — Six months after the expiration of a federal loan guarantee program that backed $16 billion in loans to solar, wind and geothermal energy projects, the Energy Department has decided to offer a smaller set of similar guarantees by tapping another pot of

money appropriated by Congress last year.

The department said Thursday that it had sent letters to potentially eligible companies inviting them to apply for the new money.

Under the other program, which was passed as part of the 2009 stimulus legislation, about three dozen companies that had applied for loan guarantees were told that they would not receive guarantees because the department had been unable to finish reviewing their applications before the program expired on Sept. 30, 2011.

Now, the department is saying that the companies can reapply under a loan guarantee program established under the Energy Policy Act of 2005 that is still in force.

Usually, applicants under the 2005 program have to pay a fee upfront, called a credit subsidy, to compensate the government for the risk it runs by guaranteeing such a loan. Those fees can be costly, and few companies have applied. But the Energy Department said on Thursday that it had $170 million, approved under the budget deal of April 2011, that it would use to pay all or part of those subsidies.

That would make the 2005 program more like the loan guarantee program financed by the American Recovery and Reinvestment Act of 2009, in which the government paid the subsidy. The solar module maker Solyndra borrowed $527 million under that program before it went bankrupt, prompting several government investigations.

It was unclear how much in loans the department could guarantee with the new money. The size of the subsidy depends on the government’s assessment of the risk. The government could also decide to pay only a portion of the credit subsidy.

Based on previous loan guarantees, however, the volume of loans is likely to run at least into the hundreds of millions of dollars.

Among the applicants whose loan guarantees were not completed before the clock ran out on the 2009 program was First Solar, which had sought a $1.93 billion loan; the company is still facing financing problems. Another company whose application was not approved by the deadline was SolarCity, but that company said it had found private financing and withdrawn its application.

Republicans have been trying for months to show that the Energy Department was negligent when it lent money to Solyndra, or that the choice of Solyndra was influenced by politics.

On Thursday, a spokesman for Senator Lisa Murkowski of Alaska, who is the ranking Republican on the Energy and Natural Resources Committee, raised no immediate objections to the new round of loans but said Republicans were watching the program.

“We’re always concerned when we’re using taxpayer money to pay for the credit subsidy, but this is money that’s already been appropriated,” the spokesman, Robert Dillon, said.

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