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Webinar: How State Energy Financing Institutions are Designing Programs in Partnership with LPO
U.S. Department of Energy Loan Programs Office

Under the Title 17 Clean Energy Financing Program, as amended by the Infrastructure Investment and Jobs Act, the U.S. Department of Energy's (DOE) Loan Programs Office (LPO) can finance certain eligible projects that receive meaningful financial support or credit enhancements from State Energy Financing Institutions (SEFIs).  SEFI-supported projects are exempt from Title 17’s technological innovation requirement. While each determination is made on a case-by-case basis, this blog outlines and discusses potentially eligible sources of SEFI “financial support or credit enhancements” and provides guidance on LPO’s criteria for assessing “meaningfulness” of SEFI support. 

If you have a project that may be eligible for financing, please request a no-cost pre-application consultation. If you have questions that are preliminary to a project, please reach out to SEFI@hq.doe.gov and refer to LPO’s State Energy Financing Institution (SEFI) Toolkit for more information on SEFI eligibility.
 

Eligibility for Financial Support or Credit Enhancements 

A SEFI is an entity established by a State, or an Indian Tribal entity or Alaska Native corporation, to take steps to “reduce financial barriers” to deploying eligible projects. It must do so by “providing financing support or credit enhancements” that reduce a project’s risk profile (42 USC § 16511(7)(A)).

Examples of how a SEFI can participate in eligible projects may include, but are not limited to: 

  • Providing equity/subordinate portion of capital stack.   
  • Providing loan loss reserve with respect to junior portion of capital stack.   
  • Co-lending with LPO (pari passu or mezzanine).   
  • Providing financial backstop for specific key project elements that may be subject to regulatory or local market risk.   

Policies such as a state Renewable Portfolio Standard, property tax exemption, or other state tax credit that is not project-specific do not constitute financial support or credit enhancement. 
 

Definition of Meaningful SEFI Support 

DOE determines whether SEFI support is “meaningful” in the context of the specific project and proposed financing structure. As such, projects are evaluated on a case-by-case basis, and potential SEFIs and applicants should consult LPO through a pre-application consultation on the specifics of their proposed project. 

The evaluation of whether a SEFI provides meaningful support may include, but is not limited to, consideration of the following factors: 

1. The overall amount of support provided by the SEFI(s). 

LPO may look to the dollar value of SEFI support, both in an absolute sense and in proportion to the project’s overall costs or financing needs and anticipated DOE support. In evaluating the amount of support being provided by a SEFI, LPO will take into account any direct or indirect transfer rights proposed to be allowed to the SEFI. 

2. The risk level of the type of support the SEFI(s) provides. 

Certain types of financial support or credit enhancements represent a higher degree of risk-taking or risk-sharing than others. Higher degrees of risk taking on the SEFI’s part may constitute more meaningful support.

Considerations and factors based on the level of risk of SEFI projects may include: 

  • The position of the SEFI financial support or credit enhancement in the project’s capital structure. 
  • Whether the financial support is expected to be repaid (i.e., if it is a grant or a loan).
  • Timing of disbursement relative to LPO commitment/disbursement.
  • Duration/tenor of the financial support.
  • Project risk.

LPO may look to the disbursement schedule and conditions for SEFI support in relation to DOE debt, the relative seniority of SEFI support (loan or other) in relation to DOE debt, the tenor of the SEFI facility and, if applicable, the amortization schedule. 

3. Whether SEFI support is offered at below-market terms. 

LPO may look to the rate of return, interest, and fees required or anticipated by the SEFI, and the extent to which these terms are standard under current market conditions for the degree of risk assumed by the SEFI or are instead below-market or concessionary in nature and, thereby, meaningfully reduce financial barriers that may otherwise prevent the deployment of eligible projects. 

The more of a concession the SEFI is taking versus earning a market return, the more “meaningful” the support may be. Where a SEFI offers financial support or credit enhancements on market terms, the existence of this factor is not meant to imply such support cannot be meaningful in accordance with factors 1 and 2. 

LPO will consider the meaningfulness of all types of SEFI financial support or credit enhancements provided in multiple forms in the aggregate. All determinations of meaningfulness of SEFI support will be made on a case-by-case basis taking into account all relevant facts and circumstances. 

The final determination as to meaningfulness of SEFI support will be made when all relevant facts and circumstances of a potential project have been identified and application materials have been submitted, which generally will happen with the issuance of the conditional commitment. Changes to the type and level of SEFI support after conditional commitment could impact DOE’s determination.

If you have a project that may be eligible for financing, please request a no-cost pre-application consultation

 

Jigar Shah
Director of the Loan Programs Office
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