Today, I had the pleasure to speak to some of the leading power industry players about the DOE Loan Program Office’s (LPO) Financial Institution Partnership Program (FIPP) at the Platt’s 12th Annual Financing U.S. Power Conference. While the conference was a platform to discuss recent project finance deals and the best financial strategies for upcoming projects, I took the opportunity to highlight how the U.S. renewable energy sector can be accelerated through clear and effective government policy and incentives. This is especially important since the Administration’s priorities on renewable energy policy will have long-term, strategic implications for our country and its standing in the world.
The American Recovery and Reinvestment Act of 2009 gave the FIPP program its start. Now, FIPP is bringing more certainty to the market by incentivizing the capital markets, and in particular long term debt. FIPP is increasing non-government lending capacity to the renewable sector and providing a bridge between innovative but high tech risk projects funded though the Sections 1703 and 1705 programs and commercial technology projects whose risk profiles banks readily assume. Since the FIPP deals are brought to DOE by lending institutions, we will guarantee up to 80% of the project debt. In addition, since the FIPP model creates a partnership between DOE and lenders, we do not crowd out financial institutions from the renewables sectors.
The FIPP program is also an example of how the Administration is working with the private sector to achieve its goal of a clean energy economy. Through FIPP, we have created strong relationships built on our deep project pipeline of both small and large deals. Furthermore, FIPP has made the inter-creditor model a success. We have been able to strike a balance between the Government’s obligations to taxpayers with ensuring that the private lender and project developers are able to make appropriate and timely decisions during construction and operations.
Through the FIPP program and the partnerships we have built with the private sector, we have made significant progress in reaching those goals. This month, the Loan Programs Office offered a conditional commitment for a $1.3 billion loan guarantee to Shepherds Flat. With a generating capacity of 845 megawatts, Shepherds Flat is the world’s largest wind farm to date. Last month we also closed a $98.5 million loan with Nevada Geothermal Power, a 49.5 megawatt geothermal electricity generating facility in Nevada that will refocus attention on that sector. Together, these two projects will create over 450 jobs. There are more exciting projects to come.