Obama's Half-a-Billion Green Bankruptcy Just a Preview

John RansomTownhall.com

I told you so.

There. I’ve said it.

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.

Earlier this 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.

The move 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.

“Despite strong growth in the first half of 2011 and traction in North America with a number of orders for very large commercial rooftops,” said the company in a press release, “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.

Minus 1,100. http://finance.townhall.com/columnists/johnransom/2011/09/01/obamas_half-a-billion_green_bankruptcy_just_a_preview/page/full/