How to write proposals for stimulus grants

Obtaining financing for an energy project in any market is a significant challenge. This challenge stems from the fact that energy projects are by definition costly endeavors whether the project is a fossil-fuel facility that uses tested technology, a renewable facility or a series of energy efficiency retrofits or upgrades. The successful construction and operation of any of these facilities involves land acquisition, consultant, engineering and other expert engagements, completion of state and local permitting requirements and in many cases compliance with the provisions of the National Environmental Policy Act (since more than 86 percent of the land in Nevada is owned by the federal government). So when the federal government announced the availability of federal grant money and low-interest government loans for renewable energy and energy efficiency projects, industry developers and supporters were overwhelmingly encouraged that the renewable energy and energy efficiency industries would burgeon.

The American Recovery and Reinvestments Act has published numerous opportunities to submit applications to obtain government grants and low interest loans. A grant consists of money that requires no repayment, in contrast to the low-interest government loan whose reduced interest rate offers lower-cost financing than that available at market rates, but which must be repaid. One example of an ARRA grant opportunity that is particularly appealing in Nevada given the significant push toward the development of renewable energy facilities is the Payment for Property in Lieu of Investment Tax Credits under Section 1603 of the ARRA. This opportunity converts the investment tax credits that apply to the net revenue earned from a renewable energy facility into a government grant for up to 30 percent of the qualifying project costs. Upon award of the Section 1603 grant, the ability to receive the investment tax credits over the life of the project are extinguished, For many renewable energy developers, the award of these up front dollars will make the difference between project success and project failure.

Like most ARRA applications, the Section 1603 grant application requires technical, financial and operational information and a complete understanding of the project including the construction and commercial operation schedule and the cost model for the project. The application form can appear basic, but the guidance information that accompanies the applications will reveal the actual amount of information and detail that is being sought. The application can be daunting for experienced well-staffed developers and particularly overwhelming for developers who are new to the market.

Some developers rely on in-house staff while others engage a combination of resources that include in-house staff for technical, financial and operational information and outside expertise for drafting the application in a manner that insures compliance with the application criteria and effectively competes with other applicants vying for the same grant or low interest loan.

At the outset, be certain that there is ample time prior to the submission deadline to complete the application and timely submit it. Typically the notice of application includes an information source or center that will respond to questions about the application that can be reached through an email address or toll-free number. Reliance on this resource for accurate information is far better than guessing at what is intended or required. Misunderstanding of the application requirements may result in an omission of information that is critical to the project evaluation.

The application must:

* Contain information up front that distinguishes the application from other competitors' applications and successfully piques the interest of the decision maker;

* Contain completely accurate information even when making use of terms like "significant," "cutting edge" or "forefront of the market" when describing the project attributes;

* Be strong and well-supported in every category for which factual, financial, technical or operational information is being provided;

* Strictly comply with each requirement related to the format in which the information must be submitted (e.g., Excel documents that are capable of manipulation); and;

* Demonstrate the developer's competence and experience.

Prior to devoting the time, effort and capital to completion of the application, make certain that the project clearly meets all of the basic application qualifications such as the date for commencement and/or completion of construction. Make certain that the resource qualifies as a renewable resource. (The statutory definition set forth in state law should not be relied upon for a federal fund application.) Be aware of the events that result in "recapture" or forfeiture of the grant or loan funds, for example the transfer of the project to a non-qualifying tax entity or a tax-exempt entity. Be prepared to read all of the information referred to in the application. As an example, the Section 1603 application warns that "[w]hile there are directions in this application, they are not a substitute for reading and understanding the Program Guidance, Terms and Conditions, Section 1603 of the American Recovery and Reinvestment Tax Act of 2009, and Sections 45 and 48 of the Internal Revenue Code."

Certain ARRA applications can only be completed on line and an understanding of the on-line requirements for submission is critical. As with the Section 1603 application, subsequent to submission, an email is sent advising that the application is complete and has been received. If it is determined that the application is incomplete, additional information will be sought from the applicant until a finding of completeness is made.

The bottom line is that the race to receive ARRA funds is extremely competitive. The applications that contain the most complete and comprehensive information and reveal on their face that the project for which the funds are being sought will be built, financed and competently operated over the long term will have the best opportunity at being awarded the grant or low interest loan.

Kathleen M. Drakulich is a partner with McDonald Carano Wilson, LLP in Reno. Contact her through:www.mcdonaldcarano.com.