Preparing a Strong Energy Infrastructure Reinvestment Project Application for Efficient Loan Processing

As described in the first blog in this series, LPO’s Energy Infrastructure Reinvestment (EIR) loan authority can help utilities achieve their capital transition plans while reducing costs to customers. To access this financing opportunity, utilities must apply according to LPO’s Title 17 loan application process and meet all relevant criteria. This blog describes some features of LPO’s loan evaluation process and key factors that can support an expedient application process between LPO and utilities.

Utility Characteristics Can Help to Streamline the Application Process

Prior to the passage of the Inflation Reduction Act, Title 17 provided financing for large-scale, innovative projects deploying one of a number of eligible technologies. With the authorization of EIR and given its broad definition of energy infrastructure and resulting eligible project types, LPO is seeing utility applications that include projects with a variety of technologies, locations, and timeframes. These applicants are often seeking debt financing at the operating company level.

LPO financing for regulated utilities seeking to deploy established technologies has different features to consider than our historical lending practices, including the possibility for more standardized loan approval processes than for unique, first-of-a-kind projects with new technologies and inherent commercial or technology risk.

Utilities applying for EIR financing must meet established Title 17 lending criteria and prepare a complete application that responds to all relevant questions. In many cases, a utility can use its existing resources, such as Integrated Resource Plans (IRPs), standard operating procedures, contracting procedures, documented permitting and environmental review processes, and more to respond to these questions. 

The remainder of this blog provides tips and focused recommendations to help facilitate a more streamlined application process for utility applicants. 

Tips for a Quicker Application Review Process 

• Talk with LPO throughout the application process. We are happy to discuss eligibility questions, help you scope your preliminary application, review draft applications, clarify what’s needed for different parts of the application, and provide other guidance. 
• Turn around LPO information requests as quickly as possible. This enables us to keep your application progressing through the application process within LPO.
• Use editable documents like Microsoft Word and Excel (vs PDFs) for drafts you’d like us to review so that we can easily provide comments. 
• Begin preparing your Part II application early. Start collecting and developing relevant Part II documents as soon as you submit the Part I application (if not before), especially the information needed for the environmental report and anything that will take longer to aggregate. Note however, not all applicants are invited to submit a Part II application to LPO and there is no guarantee that applicant will be invited to submit a Part II application. 
• Don’t reinvent the wheel. Usually, a summary of a given project, process, or analysis with reference to an underlying document is sufficient (and preferred). The key is to have the information organized and presented in the application in a manner that allows us to connect the referenced documents to the application and loan requirements. 

Think Early About the Deal Structure

Deal structure and terms will depend heavily on the borrowing entity (parent corporation, operating company, special purpose vehicle (SPV), etc.), and we encourage applicants to identify and communicate the borrowing entity and desired deal structure early in the process. This helps to streamline the application process once eligibility has been determined. 

For reference, all Title 17 loan guarantees must meet the following criteria:

• Loan amount cannot exceed 80% of the eligible project costs.
• Loan tenor cannot exceed 30 years from time of loan closing.
• Loans cannot be subordinate in payment or lien priority to other financing.

Prepare Early for Environmental Reviews 

All Title 17-financed projects must undergo a National Environmental Policy Act (NEPA) review, which commences after an applicant is invited to due diligence. State environmental reviews and NEPA reviews conducted by other federal agencies can support and streamline LPO’s NEPA review but cannot replace it. The NEPA review must precede project construction and must be completed prior to the loan’s financial close. 

To facilitate the NEPA review process, we recommend the following:

• Review information on the NEPA process for LPO loans and see LPO’s previously published NEPA documents here. Engage with an environmental consultant with experience supporting NEPA reviews for federal agencies.
• Provide detailed site information, permit information, and construction timelines in the Part I application, and provide a complete environmental report in the Part II application.
• Aggregate and share existing environmental review documents as early as possible.

Prepare a Community Benefit Plan to Describe Community and Worker Engagement

Title 17 loans require a Community Benefits Plan (CBP) that explains how the applicant is partnering with Tribal governments, state and local governments, and other local stakeholders, such as labor unions and nonprofits, to ensure residents and workers will share in the benefits of the proposed project(s). Utilities typically already do the type of work that underpins a quality CBP and most often can utilize key documents, such as sustainability reports, as references for their CBPs. We encourage applicants to ask for a consultation with the LPO team before you start drafting your plan. 

Additional Guidance for Utilities on Part I Applications

The Part I Application Instructions provide detailed instructions on what to include in a Part I application. Given the nuances of utility EIR applications, we provide additional guidance for a few sections to help facilitate a streamlined application review process. 

Section B – Organization (page 7 of the Part I instructions)

• Include an organizational chart showing the relationship of the borrowing entity to the corporate structure (e.g. operating company to parent company). 
• Include an organizational chart and bios for the key people involved in the application and overseeing the included projects (e.g. CFO, SVP of Regulatory Affairs, VP Renewable Project Development, etc.).

Section C – Project Description (pages 7-9 of the Part I instructions)

• Include a summary of the utility’s regulatory context, rate recovery mechanism, and relevant regulatory filings in the executive summary (C.1.).
• See the previous blog post for information on key elements to include in questions C.5. (Details of Energy Infrastructure) and C.6. (Description of Project Nexus with Existing or Retired Energy Infrastructure).

Section D – Technical Information (pages 9-13 of the Part I instructions)

• Provide project details for all identified projects as available. This includes location, ownership status, engineering diagrams, technology types, etc. It’s okay to have placeholders for projects that do not currently have identified sites. 
• Summarize key processes and reference relevant documents. For example, provide brief summaries of the utility’s experience with project development, construction, and operations with references to existing acquisition, project management, construction, and operations and maintenance (O&M) strategies and standards.

Have Questions? Contact Us. 

Interested applicants are invited to request a pre-application consultation at any time. LPO’s Outreach and Business Development staff will meet with potential applicants and provide step-by-step assistance to navigate the application process. Requestors should come prepared with a description of the proposed project(s) and identified financing needs.