In a preview of what’s likely to become a common occurrence in the Obama energy strategy, a California manufacturer of solar systems that was financed by a half-a-billion loan through the Obama administration announced that it would seek bankruptcy protection last week.
Last month publicly-traded Evergreen Solar filed for bankruptcy protection as the solar market continues to shake out on declining government handouts and fierce competition.
More trouble is expected in the solar industry in the weeks to come. Some of it will come from Congress.
"Last February, the House Energy and Commerce Committee launched an investigation. Now that Solyndra has bit the dust, the DOE loan guarantee program will be Republican’s crosshairs," says the blog on SmartPlanet.com. "This joint statement issued Wednesday from committee chairman Fred Upton and the panel’s oversight subcommittee chairman Cliff Stearns is a good indicator of how intense this investigation is about to become."
We smelled a rat from the onset. As the highly celebrated first stimulus loan guarantee awarded by the DOE, the $535 million loan for Solyndra was suspect from day one.
It is clear that Solyndra was a dubious investment, but the DOE doubled down in March of this year and restructured the loan, possibly further increasing taxpayers’ liability. That is a question we want answered. In this time of record debt such disregard for taxpayer dollars cannot be tolerated.
It doesn't help the administration that the decision to make the loans in the first place has crony capitalism written all over it.
Big time Obama donors and bundlers have a financial interest in Solyndra.
In May, the left-wing leaning Center for Public Integrity blasted Obama for putting the welfare of donors above that of taxpayers by killing important safeguards in the process of making the loans.
"The Energy Department in March 2009 announced its intention to award Solyndra Inc.a $535 million loan guarantee before receiving final copies of outside reviews typically used to vet such deals," wrote CPI. "An independent federal auditor who has reviewed the energy loan program said moving so quickly without completing thorough reviews exposed the program to perceptions of political influence and put taxpayers at greater risk.
There’s a consequence if you don’t follow a rigorous process that’s transparent, said Franklin Rusco, an analyst with the Government Accountability Office . It makes the agency more susceptible to outside pressures, potentially.
"Fueling that perception was the fact that George Kaiser, one of Solyndra’s top investors, raised about $50,000 for Obama’s presidential campaign," writes the Hertiage Foundation.
"The company benefited from another loan guarantee, this one for $10.3 million, as part of the Export-Import Bank’s Renewable Express program, which was created to encourage exports in the renewable energy industry. The Export-Import Bank’s president and chairman, Fred Hochberg, was also a major Obama donor, bundling an estimated $100,000 for his campaign."
The bankruptcy by Solyndra puts at risk $535 million in government loan guarantees granted in 2010 by the administration. Ironically, the company cited “regulatory and policy uncertainties in recent months” as one of the prime reasons the company “could not achieve full-scale operations.”
1,100 employees lost their jobs immediately by the move, although the administration previously claimed that the company “saved or created” 3,000 jobs with the loan.
Regulatory and policy uncertainties from this administration? Nah.
In 2010, Solyndra spent $550,000 on lobbying the federal government. In 2011, so far they have spent only $220,000 on lobbying. The administration is likely hopeful that this will teach others not to cut their lobbying budget.
Solyndra employees contributed over $10,000 to various Democrat candidates and committees in 2010 including Harry Reid, Gabrielle Gifford, the Democratic Congressional Campaign Committee, Diane Feinstein and Barbra Boxer.
The bankruptcy announcement by the struggling solar company comes amidst a glut of solar panels on the market, combined with tough financing conditions for an industry that can’t compete with old-fashioned fossil-fuel created electricity.
“Solyndra could not achieve full-scale operations rapidly enough to compete in the near term with the resources of larger foreign manufacturers," "This competitive challenge was exacerbated by a global oversupply of solar panels ," and a severe compression of prices that in part resulted from uncertainty in governmental incentive programs in Europe and the decline in credit markets that finance solar systems.”
In May, Italy announced that they would be cutting back subsidies to solar companies by about 35 percent with another 23 percent to be chopped off in 2012. With other European subsidies in doubt, private financing is becoming tougher for an industry that can’t scale up to commercial size without significant spending by governments.
In fact, Solyndra was forced in March to scrap plans for a $300 million initial public offering as the financial markets deteriorated and competition from China made the economics a tougher sale for the company.
Instead, the company was forced to take money from inside investors, according to the website Seeking Alpha.
“[Solyndra] had to take $175 million more from their existing investors,” wrote the site in June, “likely at onerous ‘cramdown terms.’ Earlier investors and stock-holding employees end up with shrinking equity shares of the company.”
All told, Seeking Alpha reports that the company received a billion dollars in venture capital plus the $535 million federal loan guarantee. While not all of the money included in the guarantee has been doled out apparently, it’s unclear how much money the government is on the hook for.
Even in June, the company’s viability was being questioned by Seeking Alpha’s green correspondent Green Tech Media, “a business to business site [that covers] daily news and market analysis” on green technology: “What are the repayment terms for the DOE loan?” asked Green Tech. “How does the U.S. expect to get this money back from a company that is losing cash with every shipment?”
Those are good questions that probably should have been asked by the Department of Energy before guaranteeing a half-a-billion in project financing.
Are the Obama folks the only ones now who believe their own rhetoric? I mean if you’ve lost Green Tech Media, haven’t you lost the war?
Last week we criticized the Department of Energy for guaranteeing a $133 million loan to Abegnoa, a Spanish biomass company. The loan will help build a biomass plant with technology that has yet to prove commercially viable despite decades of research and test plant construction.
“If the biomass plant made any sense at all economically the company would be able to get a loan on the strength of its balance sheet,” I wrote in Palin Thumps Harvard, “rather than having to rely on guarantees from the Department of Energy. Because in the end, this plant won’t make money, won’t make the rent and certainly won’t make enough ‘green’ fuel to power Kyle Orton’s Prius for a week.”
So far the Department of Energy has guaranteed $38.7 billion in green loans under Obama, loans that are little more than empty calories salted generously by government cash.
They claim that the program “created or saved” 68, 578 jobs.
Timeline of Energy and Commerce Committee Investigation
February 17, 2011 - Committee Leaders submit a letter to Energy Secretary Chu seeking documents and information about the $535 million loan guarantee that the DOE Loan Guarantee Program awarded Solyndra, Inc. DOE complies with the request.
March 14, 2011 - Committee Leaders submit a letter to OMB requesting key documents and information concerning the review of the Solyndra loan guarantee. A two week deadline is set.
March 17, 2011 – Subcommittee on Oversight and Investigations holds a hearing on DOE Recovery Act Spending.
March 28, 2011 – OMB fails to meet the Committee deadline.
June 7, 2011 – After weeks of back and forth, an in camera review takes place with Committee staff and OMB staff. OMB selected eight emails between OMB and DOE to make available to Committee staff, and refused to produce the rest of the emails or the agreed-upon internal OMB emails and documents.
June 23, 2011 - Oversight and Investigations Subcommittee Chairman Cliff Stearns responded in a letterto OMB after it refused to share requested documents by the Committee regarding the Solyndra loan guarantee investigation.
June 24, 2011 - The Subcommittee on Oversight and Investigations held a hearing regarding OMB’s Role in the DOE Loan Guarantee Process. Sole witness Jeffrey Zients, Deputy Director of the Office of Management and Budget was a no show.
July 11, 2011 - Committee staff conduct a second in camera review. Committee staff asked OMB about the production of the other categories of documents sought by this Committee, specifically, OMB’s internal communications and documents relating to Solyndra, and its communications with the White House. As the OMB had done for months, OMB staff refused to provide and answer about whether they would produce these materials, and instead maintained that the OMB-DOE communications sufficiently show whether or not OMB had has done its job with regard to Solyndra.
July 12, 2011 - Energy and Commerce Committee leaders announced the Subcommittee on Oversight and Investigations were to hold a business meeting on Thursday, July 14, 2011 to consider a motion authorizing the issuance of a subpoena for certain records of the Office and Management and Budget relating to the Department of Energy’s issuance of a loan guarantee to Solyndra, Inc. on September 2, 2009.
July 13, 2011 - Oversight and Investigations Subcommittee Chairman Cliff Stearns wrote a letter to the Director of the Office of Management and Budget (OMB) to provide a final opportunity to avoid the issuance of a subpoena. OMB refused.
July 14, 2011 - The Subcommittee on Oversight and Investigations held a business meeting to consider the issuance of the subpoena. The Subcommittee voted to issue the subpoena 14 to 8.
July 15, 2011 – The subpoena is issued to OMB, setting a July 22, 2011, deadline.
July 22, 2011 – OMB fails to meet the subpoena’s dealing. Oversight and Investigations Subcommittee Chairman Cliff Stearns informs OMB that they have failed to comply with the subpoena issued on July 15, 2011 regarding the Solyndra loan guarantee. Chairman Stearns requested that OMB produce the documents no later than 9:00 a.m. Monday, July 25, 2011.
July 25, 2011 – OMB fails to produce the documents by 9:00am deadline.
August 2011 – OMB agrees to produce all documents necessary to the Committee's investigation, with appropriate safeguards relating to proprietary information. Production continues.
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