42 U.S.C. § 8833 — Guaranteed construction loans

(a) Authority of Secretary^* of Energy Subject to sections 8835 and 8836 of this title, the Secretary of Energy can commit to guarantee, and guarantee, against loss on up to 90 percent of the principal and interest, any loan that is made solely to provide funds for the construction^* of a municipal waste^* energy proj­ect and which does not exceed 90 percent of the cost of the construction of the project^* involved, as estimated by the Secretary on the date of the guarantee or commitment to guarantee.

(b) Estimated project construction costs as determinative of revised amount of guarantee if the total estimated costs of construction of the project after that exceed the total estimated costs initially determined by the Secretary of Energy, the Secretary can in addition, upon application for that, guarantee, against loss on up to 90 percent of the principal and interest, a loan for so much of the additional estimated total costs as does not exceed 10 percent of the total estimated costs.

(c) Terms and conditions The terms and conditions of loan guarantees under this section must provide that, if the Secretary of Energy makes a payment of principal or interest upon the default by a borrower, the Secretary must be subrogated to the rights of the recipient of such payment (and such subrogation must be expressly set forth in the loan guarantee or related agreements).

(d) Termination, cancellation, or revocation, and conclusive nature of guarantee Any loan guarantee under this section must not be terminated, canceled, or otherwise revoked, except under the terms of it and must be conclusive evidence that such guarantee complies fully with the provisions of this chapter and of the approval and legality of the principal amount, interest rate, and all other terms of the securities, obligations, or loans and of the guarantee.

(e) Payment to lender If the Secretary of Energy determines that—
(1) the borrower is unable to meet payments and is not in default,
(2) it is in the public interest to permit the borrower to continue to pursue the purposes of such project, and
(3) the probable net benefit to the United States in paying the principal and interest due under a loan guarantee agreement will be greater than that which would result if of a default, then the Secretary can pay to the lender under a loan guarantee agreement an amount not greater than the principal and interest which the borrower is obligated to pay to such lender, if the borrower agrees to reimburse the Secretary for such payment on terms and conditions, including interest, which the Secretary determines are sufficient to protect the financial interests of the United States.

(f) Preconditions A loan must not be guaranteed under this section unless the applicant for such loan has established to the satisfaction of the Secretary of Energy that the lender is not willing without such a guarantee to extend credit to the applicant at reasonable rates and terms, taking into consideration prevailing market rates and terms for loans for similar periods of time, to finance the construction of the project for which such loan is sought.

(g) Payment of interest; tax consequences
(1) about any loan or debt obligation that is—
(A) issued after June 30, 1980 , by, or on behalf of, any State^* or any political subdivision or governmental entity of it,
(B) guaranteed by the Secretary of Energy under this section, and
(C) not supported by the full faith and credit of the issuer as a general obligation of the issuer, the interest paid on such obligation and received by the purchaser of it (or the purchaser’s successors in interest) must be included in gross income for the purposes of chapter 1 of title 26.
(2) about the amount of obligations described in paragraph
(1) that the issuer would have been able to issue as tax exempt obligations (other than obligations secured by the full faith and credit of the issuer as a general obligation of the issuer), the Secretary of Energy is authorized to pay only to the issuer any portion of the interest on such obligations, as determined by the Secretary of the Treasury after taking into account the interest rate which would have been paid on the obligations had they been issued as tax exempt obligations without being so guaranteed by the Secretary of Energy and the interest rate actually paid on the obligations when issued as taxable obligations. Such payments must be made in amounts determined by the Secretary of Energy, and under such terms and conditions as the Secretary of the Treasury must require.

(h) Fees
(1) A fee or fees can be charged and collected by the Secretary of Energy for any loan guarantee under this section.
(2) The amount of such fee must be based on the estimated administrative costs and risk of loss, except that such fee must not exceed 1 percent of the maximum of the guarantee.