  Let $G$ be an algebraic group and let $\widetilde{\mathfrak g}$ be the
corresponding affine algebra on some level. Consider the induced module
$V:=Ind^{\widetilde{\mathfrak g}}_{{\mathfrak g}[[t]](O_{G[[t]]})$, where
$O_{G[[t]]}$ is the ring of regular functions on the group $G[[t]]$.
  In this paper we show that $V$ is naturally a vertex operator algebra, which
is "responsible" for D-modules on the loop group $G((t))$. Using the techiques
of VOA we show that $V$ is in fact a bimodule over the affine algebra. In
addition, we show that $V$ possesses a remarkable property related to its BRST
reduction with respect to $\widetilde{\mathfrak g}$.
  This paper has a considerable intersection with a recent preprint of
Gorbunov, Malikov and Schechtman.
