Energy Department office gets an upgrade
The Energy Department's Loan Programs Office (LPO) has seen its portfolio upgraded two levels from "high-risk" single-B to "investment-grade" following an internal risk rating review, an office spokesman confirmed to Axios.
Why it matters: The LPO provides billions of dollars in loans and loan-guarantees for projects that might struggle to find backing elsewhere.
- The office had been largely dormant in closing new loans for more than 10 years, but Energy Secretary Jennifer Granholm has made LPO — and its $43 billion in loan authority — central to her efforts to decarbonize the nation's energy infrastructure.
- The rejuvenated LPO now has 77 applications in the pipeline requesting $71 billion of loan proceeds, director Jigar Shah says.
Catch up fast: LPO new loan activity all but came to a standstill after a $500 million loan guarantee to the solar manufacturer (wait for it) Solyndra went sideways in 2011, unleashing fierce partisan backlash against the Obama administration. The Trump administration showed no interest in LPO.
- However, LPO turned a profit on the $30 billion it had loaned, with a default rate of less than 3%. It today earns about $500 million a year in interest income, Shah says.
- To industry observers and political watchers, despite the breathless coverage of Solyndra, the program offers a relatively low-risk, low-cost way for the government to support domestic energy innovation.
What they're saying: "We'll probably provide $20 billion a year in conditional commitments. That will make us the single largest provider of commercial debt for B and CCC+ shadow-credit-rated deals in the energy space," Shah told a gathering at CERAweek.
Thought bubble: After 10+ years, your Axios Pro Climate Deals team believes we've reached the statute of limitations on mentioning "Solyndra" in every LPO story.
- The headline we didn't use: "Moody's to LPO: Let me upgrade u"
Mark your calendars: LPO is set to release its Annual Portfolio Summary Report this week.
Editor's note: This story has been corrected to reflect that the portfolio upgrade announced by director Jigar Shah at CERAWeek and confirmed by the LPO was an internal risk rating upgrade. The portfolio was not updated by the credit agencies.
(Disclosure: In 2020, Alan Neuhauser performed freelance writing for Jigar Shah.)