Farm Credit is again stretching its lending authority and this time the financing deal is especially egregious: Farm Credit lender CoBank is serving as the “sole lead arranger” for a loan to a multinational energy company building solar panels slated to power Facebook servers. Yes, you read that correctly: a Farm Credit lender, tasked with supporting farmers and ranchers, is instead financing a construction project that will ultimately benefit one of the largest tech companies in the world.
According to Renewables Now, CoBank is providing the “financing, comprising a construction loan, letter of credit facility and back-leverage term loan” for solar energy centers in Oregon. As Renewables Now explains, once operational, another company named PacifiCorp, “will buy the output of the solar plants under a long-term contract to supply Facebook’s data centre in Prineville, Oregon.”
Financing the construction of a renewable energy project with a purchaser and future contracts already lined up sounds like a great deal for CoBank. The trouble is that CoBank, a Farm Credit lender, is supposed to live up to the clearly defined mission of the Farm Credit System (FCS): supporting America’s farmers and ranchers by providing affordable credit, especially to vulnerable groups like young, beginning and small farmers. Put simply, it’s hard to see how financing energy projects that serve Facebook fits within that mission.
To be clear, Farm Credit lenders, particularly CoBank, have a legitimate role to play in energy as it relates to rural infrastructure. Indeed, CoBank is the only Farm Credit lender authorized to lend to cooperatives. Specifically, CoBank’s lending authority extends to “cooperatives and other agricultural and rural infrastructure businesses.” This makes sense, rural cooperatives providing services like water, electricity and phone services that serve U.S. agriculture should have access to the Farm Credit System.
CoBank’s investment in the solar faculties clearly seem outside of that narrow mandate. Invenergy is a multinational power company headquartered in Chicago. PacifiCorp is a wholly owned subsidiary of Berkshire Hathaway Energy, an affiliate of Berkshire Hathaway. And Facebook certainly isn’t a cooperative, isn’t related to agriculture and clearly isn’t among the intended beneficiaries of the Farm Credit System.
So how is CoBank justifying its financing of a project so far afield from Farm Credit’s mission? The answer lies in “similar entity” lending authority – a workaround which allows Farm Credit lenders leeway to loan to “similar entities” — entities which wouldn’t usually be eligible for financing, but provide services “that are ‘functionally similar’ to activities that are conducted by FCS-eligible borrowers.”
Even considering this generous loophole, CoBank’s financing of solar facilities to power Facebook does not seem remotely comparable to providing credit for rural infrastructure projects. In fact, it seems that CoBank has simply cast its obligation to famers aside in pursuit of a lucrative deal.
Unfortunately, this isn’t the first time that CoBank has taken advantage of its taxpayer-backed and tax break-subsidized lending to put the needs of large companies before those of farmers. In 2019, CoBank expended a $140 million loan to EsVolta, a battery company and in 2016, CoBank extended Cyrus One LP, a publicly-traded real estate investment trust (REIT), $1.55 billion in financing for “server farms.”
Congress must examine how Farm Credit lenders, including CoBank, decide which borrowers to work with and how “similar entity” qualification is determined. Should Farm Credit, a Government-Sponsored Enterprise, pour its resources into projects like Invenergy’s Facebook-powering solar facilities? Or should Farm Credit lenders focus on serving struggling farmers and ranchers that that FCS lenders have repeatedly failed to adequately support? Clearly, the Farm Credit Administration and Congress need to exercise oversight authority to understand how taxpayer-subsidized loans meant for farmers ended up supporting a project to power Facebook.