Project Finance International Guest Article: DOE Loan Guarantees Under Attack


This article appeared in Project Finance International, Issue 473, January 25, 2012

On November 28, 2011, CAlifornians for Renewable Energy (“CARE”) filed a lawsuit in the Federal District Court in Washington, D.C., against the U.S. Department of Energy (“DOE”) and the Federal Financing Bank (“FFB”) that threatens the viability of more than 6.5GWs of clean energy projects. These projects have received DOE’s support under the so-called “alternative energy loan guarantee program” established by DOE pursuant to Section 1705 of the Energy Policy Act of 2005, as amended (“EPAct”). Among the projects affected are some of the most notable U.S. alternative energy transactions completed in recent years, including Shepherds Flat, an 854MW wind farm in Oregon (Caithness), Solana Generating Station, a 250MW concentrating solar power plant in Arizona (Abengoa), and the Ivanpah Solar Electric Generating Station, a 392MW “solar power tower” project in California (BrightSource).  If the loans supporting these projects are fully disbursed in the coming months, as expected, DOE will have outstanding approximately $13.76 billion in loan guarantees issued under Section 1705 (the “Section 1705 Guarantees”).

In this published article, the authors examine the DOE procedural irregularities alleged in the CARE lawsuit and the potential consequences of the lawsuit.  The authors also discuss the  applicable U.S. Constitutional issues raised and applicable precedents in case law, U.S. statutes and international law that may bear on those issues. The authors conclude that, while it is difficult at this stage to predict how the District Court will rule on the alleged DOE procedural irregularities, any such ruling by the District Court should not adversely affect affect the validity of the outstanding Section 1705 Guarantees.

To view the full article, click the PDF linked below.

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