CoBank Inks Another Giant Energy Deal

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CoBank, the largest Farm Credit System (FCS) institution, has a habit of lending to big companies with a tenuous connection to agriculture: Louisiana-Pacific, a publicly-traded building materials manufacturer; Greif, Inc., an industrial packaging firm; and Growve, a cosmetics company. Seems like it just can’t get enough, can it?

Its latest questionable loan is to Intersect Power, LLC, a company which builds solar power installations. With a loan to the tune of $2.6 billion, CoBank serves as one of the loan’s joint lead arrangers. According to Intersect Power, this will “cover construction financing, tax equity, land financing and portfolio level term debt with industry-leading partners.” 

CoBank is the only Farm Credit institution authorized to lend to electric cooperatives (§2141). CoBank proudly advertises this point: “CoBank offers a broad range of competitively priced, flexible loan programs, leasing services and other financial services that enable electric cooperatives to fulfill their mission of providing reliable power to rural communities. [emphasis added]

If one of CoBank’s core functions is to lend to cooperatives, then what is it doing lending to Intersect Power?

Intersect Power, a relatively new company founded in 2016, is most likely not a cooperative. How many utility cooperatives have more than $750 million in investments from private equity firms? This clearly isn’t CoBank’s first foray into deals with well-funded energy companies either; only a month after the Intersect Power announcement, WattBridge Energy announced its own financing arrangement with CoBank!

Though it seems strange, it ultimately doesn’t matter: CoBank is authorized to lend to Intersect Power and WattBridge Energy because they are entities with “operations that are functionally similar to a person that is eligible for a loan (§2206a).” But is this really what Congress had in mind when it granted CoBank this authority? Does Congress really think that it’s ok for a federally-chartered instrumentality, originally created to provide loans for small farmers, to be lending to large companies that can clearly receive financing and credit elsewhere?

The pattern here is unmistakable: CoBank uses its “similar entity” authority to lend to companies that Congress wouldn’t imagine as being eligible for financing from a federal instrumentality. Congress needs to take a long hard look at these deals to determine whether CoBank, or any Farm Credit institution, should be involved.