Bloomberg Government

Energy Loan Guarantees

BGOV — Wed, 16 May 2012 13:12:58 +0000

By Alison Williams, Energy Analyst, Bloomberg Government

As Congress takes up hearings on the Department of Energy’s loan guarantee program, stemming from the failure of the solar energy company Solyndra, Bloomberg Government takes a deeper look at the the program and the many energy projects that received loan guarantees under Section 1705. The report, “Beyond Solyndra: An Analysis of DOE’s Loan Guarantee Program” (subscription required), energy analyst Alison Williams evaluates the program and shows:

Loan Guarantees As Policy Tools Are Widely Misunderstood —

When the government agrees to a loan guarantee, it promises to pay off the debt if the borrower doesn’t. If the borrower pays the debt, the government incurs no cost for its guarantee. In energy, loan guarantees help new-to-market companies or technologies overcome the so-called “valley of death” — when a company or technology is too established to receive start-up venture capital yet not established enough to afford traditional debt financing.

Lower-Risk Energy Guarantees Far Outweigh Higher-Risk Ones —

This study finds that default is much less likely for power generation projects, which are 87 percent of loan guarantee value under the 1705 program, because DOE required them to find buyers for the generated power. As a result, these projects have a committed revenue stream that gives lenders confidence that project backers will be able to pay off debt. Manufacturing, fuel production and storage projects, which make up the remaining 13 percent of the portfolio value, were not required by DOE to find buyers to receive guarantees.

The Program Planned for Failure —

The DOE was appropriated $2.47 billion in credit subsidy costs—essentially an insurance fund to cover project losses. Beyond the two current project defaults, this fund could cover total defaults of all eight of the remaining higher-risk projects and have money in reserve.

Ending DOE’s Loan-Guarantee Authority Would Not Result In Budget Savings and Would Potentially Hinder Energy Development —

Loan-guarantee commitments are not included in the federal budget, which is limited to direct expenditures. So far, the DOE’s Loan Guarantee Program has paid for itself with fees from applicants. Future overhead would also be paid with applicant fees. Ending DOE’s loan-guarantee authority would have no budgetary impact and may jeopardize the remaining projects under review, calling into question the potential of new-to-market energy projects for renewable, nuclear power, advanced fossil fuel and carbon technology.

Health Insurers Eye $1 Trillion High Court Decision: BGOV Study

BGOV — Wed, 16 May 2012 10:48:19 +0000

Study by Matt Barry

The U.S. Supreme Court is expected in June to decide the fate of President Barack Obama’s health-care overhaul law, the Patient Protection and Affordable Care Act. Its ruling will also determine the fate of more than $1.2 trillion in federal revenue that’s projected to go to the health-care industry under the terms of the law.

The high court can go a number of ways in rendering a decision, making it difficult for insurers and health-care providers to know what business landscape awaits them.

Part 1 of this Bloomberg Government Study examines the financial impact that several potential decisions by the court may have on health insurers. Whether the court upholds all, none, or parts of the law, insurers have the most at stake. Part 2 will assess the impact on hospitals, nursing homes and other health-care industry providers.

The study uses the data sets of four independent sources from government and nonprofit research organizations to derive this new assessment of the revenue at stake for health-care insurers and providers.

Read the complete study here. For access to the study please contact us.

JPMorgan Shows Increased Capital’s Value, Analysts Say (Video)

BGOV — Mon, 14 May 2012 20:57:02 +0000

May 14 (Bloomberg) — Bloomberg Government economists Nela Richardson and Christopher Payne discuss how the JPMorgan Chase & Co.’s “egregious” trading blunder actually shows that the regulatory system is working. (Source: Bloomberg)

Coal Use Falls to Lowest Level Since 1995: Chart of the Day

BGOV — Mon, 14 May 2012 16:08:54 +0000

By Rob Barnett | May 11, 2012 03:27PM ET

(Bloomberg) — U.S. coal consumption, which rose steadily through the past century and into this one, has clearly reversed course.

The CHART OF THE DAY shows that domestic coal consumption sank to its lowest point since 1995 in the fourth quarter of 2011, the most recent period for which data is available from the U.S. Energy Department’s Energy Information Administration. Coal consumption dropped to 227 million tons in the last quarter of 2011, down from a peak of 304 million tons in the third quarter of 2005.

A recent Bloomberg Government study, “The Twilight of Coal-Fired Power?” concluded that coal’s use will continue to decline as a result of more competitive natural gas prices and Environmental Protection Agency regulations.

The EPA last month proposed a new greenhouse-gas standard for power plants that, if implemented, would effectively ban the construction of new coal plants. The proposed rule is one of many environmental regulations making it increasingly difficult to build or operate coal power plants in the U.S.

Natural gas, which is cheap relative to coal, is likely to gain market share in the power sector based on current prices. Natural gas prices reached a decade low of $1.84 per million British thermal units on April 20.

(Rob Barnett is an energy analyst for Bloomberg Government. The views expressed are his own.)

To contact the analyst: Rob Barnett in Washington at rbarnett12@bloomberg.net
To contact the editor responsible: Sanford Reback at sreback1@bloomberg.net

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Energy Loan Guarantees

Health Insurers Eye $1 Trillion High Court Decision: BGOV Study

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JPMorgan Shows Increased Capital’s Value, Analysts Say (Video)

Coal Use Falls to Lowest Level Since 1995: Chart of the Day

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