Opinion ID: 1578403
Heading Depth: 1
Heading Rank: 6

Heading: The Energy Loan Insurance Pilot Program

Text: 31. The same five major areas covered by the analysis under the Business Loan Bond Insurance Pilot Program are covered by the credit analysis under the Energy Development Loan Pilot Program. There are two areas where differences in the standards occur. First, all energy development projects must be reviewed for technical feasibility. Second, the public purpose standards vary slightly. Ex. L-1; Laubach Aff. 32. An energy development loan is recommended for approval when the following public purpose standards for the Energy Development Loan Pilot Program have been met: A. The loan recipient is eligible to apply for the loan as provided in the Act, its rules and the Procedural Guide; B. The loan recipient reasonably can be expected to maintain a sound financial condition and to retire the principal and pay the interest on the loan made and insured in accordance with the terms of the loan agreement; C. The money saved or income produced by the capital improvements may reasonably be expected to exceed their total costs to the loan recipient within the greater of the term of the energy development loan or the economic useful life of the project; D. The Authority may reasonably be expected to sell the bonds if any are required for financing; E. The project and its development are economically advantageous to the State, that the provision to meet increased demand upon public facilities as a result of the project is reasonably assured, and that any feedstock availability, resource base or energy sources necessary to support the successful operation of the project is adequate; F. The project will tend to foster a reliable supply of energy to Minnesota's households, business establishments or municipalities, tend to reduce Minnesota's dependence on imported energy sources, or serve some other energy related public purpose; G. The project has a principal purpose of 1) energy conservation, 2) reduction of the usage of conventional fuels as a source of energy, or 3) development of Minnesota's alternative energy resources; and H. The project satisfies the priorities and criteria of the Act. Ex. L-1; 4 MCAR §§ 14.051-14.059. 33. The Energy Loan Insurance Pilot Program of the Minnesota Energy and Economic Development Authority is created pursuant to Minn.Stat. §§ 116J.921 through 116J.924. The program is intended to provide insurance for loans made by financial institutions for qualified energy projects. These projects include acquiring, installing or constructing land, buildings, capital improvements or equipment for (1) conservation of energy or use of alternative or renewable energy resources in the operation of a business, (2) recovery or production from alternative or renewable energy resources of energy to be sold in the course of business, or (3) production for sale in the course of business of equipment for the conservation or recovery of energy or for the use of energy from alternative or renewable resources. Exs. M, N; Dayton Aff. 34. By sharing the risk with private lenders, the State will facilitate investment of private capital in energy efficiency and will promote the creation of jobs, both directly and indirectly, by reducing energy consumption and by developing Minnesota's alternative energy resources. This partnership between the private and public sectors will enable emerging energy businesses to obtain capital and other financial resources necessary to fund their development. Ex. N; Dayton Aff. 35. The Energy Loan Insurance Pilot Program is currently structured to insure loans for qualified energy projects in an amount up to 90% of the principal amount of the loan. The Authority intends to use the monies in the energy loan insurance fund as an insurance pool which will insure a smaller percentage of loans for qualified energy projects than is the case under this pilot program. Once a pool of loans has been created, the energy loan insurance fund will operate in a manner similar to other insurance pools. Individual loans will be insured up to a contract amount, but the aggregate amount of the loans in the pool will be insured, in total, up to a lesser amount than the insurance for any given loan. Ex. N; Dayton Aff. 36. Because the pilot program is operating on a small scale basis, there are not a sufficient number of loans to leverage the risk of default with respect to any particular loan. Therefore, it is not feasible to operate the loan fund as a pool at this time. For this reason, the pilot program did not leverage funds within the energy loan insurance fund but rather dedicated a fixed amount of funds into an account set aside to insure a particular loan. Dayton Aff. 37. The same five areas of financial analysis required by the Business Loan Bond Insurance Pilot Program are required by the guidelines for the Energy Loan Insurance Pilot Program. In this program, the lender applying for insurance is required to perform the personal credit reference check and the cash flow analysis. Ex. N; 4 MCAR §§ 14.071-14.080. 38. The lender must also provide information related to the following requirements as part of the application for insurance. Upon receipt of appropriate information from the borrower, the lender must certify: A. That the borrower is eligible to apply for the loan as provided in the Act, its rules and the Procedural Guide; B. That the project is a Qualified Energy Project as defined in the Act; C. That the borrower reasonably can be expected to maintain a sound financial condition and to retire the principal and pay the interest on the loan made and insured in accordance with the terms of the loan agreement; D. That the money saved or income produced by the Qualified Energy Project may reasonably be expected to exceed its total costs to the borrower within the greater of the term of the energy loan insurance or the economic useful life of the Qualified Energy Project; E. That the project satisfies the priorities and criteria of the Act. Ex. N; 4 MCAR §§ 14.071-14.080. 39. Once the lender has provided the results of these checks to the Authority, the Financial Management Division performs the site visit and the technical analysis. Ex. N; Laubach Aff.