Getting to Know LPO: LPO’s Rigorous Due Diligence of Projects in a Global Supply Chain

The U.S. Department of Energy (DOE) Loan Programs Office (LPO) provides financing to help deploy eligible clean energy technologies in the United States. Under the President’s Investing in America agenda, manufacturing in the United States is growing rapidly, while at the same time domestic demand for critical technologies such as lithium-ion batteries and photovoltaic solar severely exceeds domestic supply. These clean energy solutions are often dependent on a consistent and predictable supply chain. Onshoring and reshoring technologies are critical to growing America's clean energy and advanced vehicle manufacturing base and reaching the administration’s climate objectives while protecting taxpayer resources and our national security. LPO plays an important role in serving as a bridge to bankability for innovative and high-impact energy technologies and in the process bolsters domestic clean energy supply chains. This is critical as the DOE seeks to deploy clean energy at scale while protecting the research, technology, and economic security interests of the American people.

LPO projects are often first movers in these sectors, helping U.S. companies scale up domestic manufacturing capacity, develop technical know-how, and create good-paying American jobs in new sectors. By providing flexible access to capital for borrowers in clean energy sectors where traditional commercial debt is unavailable, LPO can help support American entrepreneurs' ability to deploy new technologies and scale up domestic supply chains. Investment in American manufacturing helps the United States lead the world in clean energy industries and positions U.S. firms to export these clean technologies to our global partners.  

Today, the United States relies heavily on importing clean energy supply chain components from abroad, exposing the nation to supply chain vulnerabilities that threaten to disrupt the availability and cost of these technologies, as well as the workforce that manufactures them. For example, DOE’s 2021 battery supply chain assessment found that currently the United States has less than a 10% global market share for manufacturing capacity across all major battery components and cell fabrication. Onshoring the clean energy manufacturing supply chain is important for increasing U.S. energy independence and reducing foreign governments’ dominance in these industries. Thanks to the President’s Investing in America agenda, U.S. entities are incentivized to bring back manufacturing jobs to American workers.

As LPO works to onshore critical supply chains that allow the United States to lead in the deployment of these technologies at scale, we may receive interest from borrowers for projects that are part of a global supply chain or present other factors related to potential foreign involvement. However, all LPO-supported projects must be built in the United States, and loans are only made to U.S. entities.

Before issuing a loan, LPO conducts due diligence of all borrowers with rigorous financial, technical, legal, and market analysis by the DOE's professional staff, including qualified engineers and financial and legal experts as well as third-party advisors. In the due diligence process, the Department ensures the project is evaluated to properly identify and manage risks and to ensure the loan will satisfy the intent of the authorizing legislation and provide a reasonable prospect of repayment. 

This rigorous evaluation and underwriting process includes vetting a potential borrower’s inputs and assumptions about the proposed project, including but not limited to the project sponsors' financial and technical assumptions, the market for their technology, and project risks. In addition, during its evaluation of a potential project, DOE can employ mitigation measures against the assessed risks of a potential project, as is routine in the evaluation and underwriting of any project loan. These factors are also carefully evaluated outside of LPO by a Department vetting process that draws on Committee on Foreign Investment in the United States (CFIUS) expertise in the Office of International Affairs. 

After a conditional commitment is offered, and prior to DOE issuing a loan, this rigorous evaluation continues. In negotiating a term sheet and financing documents with any borrower, LPO includes binding provisions that ensure the issues flagged in due diligence are appropriately addressed to the Department’s satisfaction prior to financial close and through the life of the loan, including provisions relating to foreign ownership and control.

For all potential project sponsors and borrowers, LPO employs robust Know Your Customer policies, background checks, and other measures to ensure a clear understanding of the potential borrower. This goes beyond the aforementioned due diligence process on a project’s financial, legal, and technical background to also include owners, sponsors, partners, and the project’s management structure. LPO also evaluates proposed facility locations and treatment of intellectual property. LPO follows this process in all projects including projects involving foreign entities as part of U.S.-based projects.   

The United States is the world's clean energy innovation starting place. With strategic financing decisions and rigorous due diligence of all borrowers, LPO can play a critical role in translating clean energy innovation into clean energy deployment and jobs right here in the United States.