WASHINGTON: The Trump administration is exploring legal options to cancel loans issued under a US$400bil programme to finance clean energy technology as it considers overhauling the initiative, according to a person familiar with the matter.
The newly installed director of the Energy Department’s loan programme, John Sneed, told agency officials in a meeting last week the effort will be retooled to focus on technologies favoured by the new administration such as nuclear power and liquefied natural gas, according to the person who wasn’t authorised to discuss the matter publicly.
Sneed also has said he’s exploring cancelling existing financing deals, although it remains to be seen if that would be legally viable and no decisions have been made, the person said.
The Department of Energy said the loans are being considered as part of an agency-wide review “to ensure all activities are consistent with President Trump’s executive orders and priorities”.
The initiative, which was created under President George W. Bush and named the Loan Programmes Office, provides guarantees and direct financing for innovative energy projects that reduce greenhouse gas emissions.
To date it has finalised more than US$60bil in financing to companies including a record US$15bil to PG&E Corp for clean energy projects, US$9.2bil to Ford Motor Co for battery factories and US$1bil for an Nevada lithium mine being developed by Ioneer Ltd.
It also provided a US$465mil loan to Elon Musk’s Tesla Inc to help get its Model S into production.
It’s unclear which loans the Trump administration could try to claw back, though a US$6.6bil commitment to Rivian Automotive Inc and a US$7.54bil loan for a joint venture between Samsung SDI Co and Stellantis NV have received scrutiny.
The programme has made the government more than US$5bil in interest, but is also best known for one of its few failures – a US$535mil loan guarantee during the Obama administration to Solyndra, a solar manufacturer that later when bankrupt.
Reclaiming funding or cancelling financing deals could be challenging, especially if the money has been spent, according to Peter Davidson, who served as the office’s executive director from 2013 to 2015.
“If it’s been dispersed, I don’t know how you can claw it back,” Kevin Book, managing director at ClearView Energy Partners LLC, said at an event held last week by the Centre for Strategic and International Studies. “It seems like that’s very difficult.”
But it’s still possible, Jim Lucier, managing director at Capital Alpha Partners, wrote in a research note last month.
“Money that has been disbursed is probably least at risk, but is still potentially subject to clawbacks in our view.
“Money that has been obligated but not disbursed will likely be withheld for 90 days or longer. Money that has not been obligated will likely be withheld indefinitely,” the note said.
The programme has nearly US$47bil in conditional commitments to companies it has yet to finalise. — Bloomberg
