The Energy Act of 2020, passed as part of the Consolidated Appropriations Act, 2021, included language regarding certain administrative fees for Title 17 loan guarantee applicants. The U.S. Department of Energy (DOE) is releasing its interpretation of the Energy Act of 2020 amendments that clarifies the categories of fees it will collect at the financial closing of a Title 17 loan guarantee, as well as the other fees and charges it may collect from a Borrower. 

Regarding Application Fees, the Energy Act of 2020 required the Secretary to charge and collect a fee sufficient to cover applicable administrative expenses (including costs associated with third-party consultants) only on or after the transaction’s financial closing. Prior to the Energy Act of 2020, DOE used Application Fees, Facility Fees, and Maintenance Fees to recover the administrative expenses associated with the Title 17 Loan Guarantee Program from program applicants.  As a result of the change in law, DOE ceased collecting Application Fees from Title 17 applicants in connection with the submission of a Part 1 and Part 2 application and deferred collection of the Facility Fee until financial closing. In the updated Title 17 Program Guidance, DOE has eliminated Title 17 Application Fees altogether.

DOE will continue the practice of charging and collecting a Facility Fee associated with administrative expenses at the time of a transaction's financial closing. The updated Title 17 Program Guidance reduces the Facility Fee. The Facility Fee is now equal to 0.6% for the portion of the principal amount of the Guaranteed Obligation (net of any capitalized interest) that does not exceed $2 billion. For applications as to which the principal amount of the Guaranteed Obligation (net of any capitalized interest) exceeds $2 billion, applicants pay an amount equal to 0.6% for the portion of the principal amount of the Guaranteed Obligation that does not exceed $2 billion plus, for the portion of the principal amount that exceeds $2 billion, an additional 0.1%. These administrative expenses include payroll, expenses associated with third-party contractors and consultants that have been engaged by DOE in support of administering the Title 17 Loan Guarantee Program, and other overhead costs of the Loan Programs Office (LPO).

Immediately following the enactment of the Energy Act of 2020, DOE elected to temporarily suspend its practice of requiring applicants to enter into Borrower Support Letters when engaging third-party advisors but required a Borrower to reimburse DOE for those project-specific costs at financial closing. In evaluating the text of the Energy Act of 2020, DOE has confirmed that the third-party advisor costs of DOE as loan guarantor represent the transaction costs associated with providing financing to the applicable project and do not represent administrative expenses of the Department. The services provided by third-party advisors directly support the financing and potential deployment of the project, are appropriately borne by the applicant, and are easily distinguished from administrative expenses associated with administering the program. In addition, unlike administrative expenses, third-party advisor costs may be included in the overall amount of Eligible Project Costs for a Title 17 loan guarantee and, therefore, potentially financeable by LPO. There is no change to the Maintenance Fee as a result of this interpretation.

 

 

Pre-Energy Act of 2020

2021-2022

Today

Application Fees

Part I, Part II, Due Diligence
Temporarily suspended, but required at financial close
Eliminated in full

Third-Party Advisor Costs

Required at Due Diligence
Temporarily suspended
Required at Due Diligence
(Eligible project cost, can be amortized in loan itself)

Facility Fee

25% required at Conditional Commitment and 75% prior to financial close (see 10 CFR 609.11)
Required at financial close
Required at financial close

Maintenance Fee

Required annually post-closing
Required annually post-closing
Required annually post-closing

These and other changes are reflected in the recently released Title 17 Interim Final Rule and Program Guidance.

 

 

Jigar Shah
Director of the Loan Programs Office
more by this author