Ready… aim… fire!
Are DOE loan standard requirements actually shooting down good projects?
We’re a country in search of affordable, sustainable, and “environmentally friendly” fuel. Right?
Well, good luck getting it!
You see… once again, Big Government is there to jump in and lend a hand.
How? Well… apparently by making it nearly impossible to get it.
I’ve told you about “government analysts” that are basically “hired guns,” whose job it is… to shoot down viable energy projects. Seriously.
“We have money and you can’t get it… Na-na-na-na-na-nahhhhhh!”
But wait! There’s more…
In Washington, the US Department of Energy is requiring that renewable energy projects meet a debt rating standard higher than 63 percent of all US corporate first-time debt issuers since 2007, in order to qualify for DOE loan guarantees. The loan guarantees were originally designed “to encourage early commercial use in the United States of new or significantly improved technologies in energy projects.”
A ‘BB or higher’ rating requirement chokes bioenergy development, say bankers, attorneys, and project developers.
Okay… here’s the meat of the issue;
Congressional legislation for DOE loan guarantees typically require “a reasonable prospect of repayment of the principal and interest on the obligation by the borrower.”
The Department of Energy is generally left with the responsibility of interpreting “reasonable”.
In this case, the DOE, as advised by investment banks, has developed minimum threshold for loan guarantees of a “BB” or higher rating (prior to the guarantee).
According to Standard & Poor’s, 333 of all US corporate first-time debt issues since 2007 – out of a total of 528, failed to meet that standard.
In many cases, these issuers would not have been attempting to bring transformative technologies to market in support of national policy – based on what EPA Administrator Lisa Jackson said was designed to produce “green jobs, innovation and technology, and action on global climate change.”
Once again, it’s apparent that money has been placed into a non-existent pipe by Congress, so that they can make claims that they’re actually doing their jobs.
Is it any wonder that all the jobs are going to Malaysia?
According to David Jacob, Executive Managing Director and Head of Structures Finance Ratings for Standard & Poor, ratings for renewable energy projects range from BBB- to CCC, with a preponderance of ratings weighted towards CCC, or two ratings below the threshold set by the DOE. Jacob was speaking at a recent meeting on energy finance in New Jersey.
My personal thanks to the fine folks at BioFuels Digest for bringing this to my attention, and for ruining my day…