The Link Between Project Finance and Bioenergy Policy

By Luke Geiver | November 08, 2012

When I talk to project finance experts about the use of government-based funding options, the consensus is simple: projects of today need to be commercially tight, infused with strong partnerships and established contracts, and, most importantly need to be viable without the financial presence of a government entity. That philosophy is certainly nothing new, but over the last few months the lead-up to the November elections has made it difficult to ignore the reality that no matter what, politics and project finance will always be linked.

Charlie Spies, managing director at CEI Capital Management, knows exactly why project finance and politics mix. His firm helped companies like ZeaChem Inc., build a biorefinery and Burgess BioPower, a biomass power facility by utilizing new market tax credits (NMTC). Using NMTC’s brought rural areas jobs and helped build bioenergy facilities that will benefit their respective regions for multiple generations. But, Spies says, that his firm is waiting for the government to appropriate more funding to the NMTC program and he is hoping Congress will pass a piece of tax legislation to allow that to happen.

For our December issue of the magazine we worked to provide a glimpse at the policies, election results and programs that will matter in the coming year. After speaking with several experts on everything from re-elected U.S. President Barack Obama’s role in bioenergy development to the state and importance of programs like USDA’s 9003 Biorefinery Loan Guarantee program, I can’t help but begin to feel the same anxiousness Spies must be feeling based on that inextricable link between finance and policy.

At the top of my mind is the 2012 Farm Bill Energy Title. The sources in the upcoming issue say that although Obama may be better for bioenergy than Romney, the real issue to watch (an issue that could suppress project finance and project development in the near term) is a world without a renewed Farm Bill, specifically one without an Energy Title with appropriate funding similar to 2008.

The general consensus at the moment is that the Farm Bill may not be touched until after the lame duck session or after the January recess. That puts a possible passage into early spring. There is however, a few things that appear to be favorable regarding the bill’s fate. Earlier this year the Senate Agriculture Committee did pass a version of the bill with a 16-5 bipartisan vote. And, although Sen. Kent Conrad, D-N.D., is now a former senator, his vacated Senate Agriculture Committee position has been filled by another North Dakotan, newly elected Sen. Heidi Heitkamp, D-N.D. Since being elected, Heitkamp has already said she will push for a Farm Bill in the lame duck. And, if for some reason current USDA Secretary Tom Vilsack leaves his position, a position that helps to push for programs in the Farm Bill and would be better suited with a strong understanding of what has worked in the past, many believe that his successor could be someone that would in fact be familiar with the Farm Bill, former Senator Kent Conrad.

Now, as another sign of why finance and policy are linked, we wait.