A privately held start-up that makes solar panels announced today that they would be filing for bankruptcy. The company, Solyndra Inc., received a $535 million loan guarantee from the U.S. Department of Energy in September 2009. This follows two other bankruptcy announcements by solar start-ups this month. The explanation for these closures has been that world prices for solar products have fallen and made production unsustainable.
Noncompetitiveness is likely the reason for the sudden rush of venture capital funded bankruptcies. I’m not proficient enough in solar economics to know. But the story of Solyndra weaves together political influence, big dollars and shortcuts in oversight. Accusations have been swirling that loan guarantees from the Department of Energy were incomplete and rushed.
ABC News has been on the story of the ties between Solyndra and the Obama White House for about a year. In the excellent video above ABC questions the ties between presidential cash-bundler Steve Westly and the Department of Energy. Westly served as California Campaign Co-Chair for Obama for America and also as a member of Obama for America’s national finance committee. In an accompanying article, ABC talks about fellow Obama bundler George Kaiser, the 29th wealthiest person on the Forbes list of the richest 400 Americans and an investor in Solyndra. What is interesting and needs to be investigated is the financial dealings of Solyndra, Westly, Kaiser, the Department of Energy and the Obama White House. ABC says:
The loan guarantee, the administration’s first for a clean energy project, benefited a company [Solyndra] whose prime financial backers include Oklahoma oil billionaire George Kaiser, a “bundler” of campaign donations. Kaiser raised at least $50,000 for the president’s 2008 election effort.
In February 2011 Solyndra restructured their convertible notes with their investors, presumably including Kaiser, and renegotiated their loan guarantee with the Department of Energy. The new financing was described as a $75 million secured credit facility underwritten by existing investors. From Solyndra’s press announcement (emphasis mine):
The new financing also included the restructuring of the Company’s outstanding indebtedness. Solyndra’s existing convertible notes have been exchanged for new notes and the U.S. Department of Energy which provided a loan guarantee agreed to certain loan modifications including an extension of the amortization period. Together with the existing indebtedness, the new credit facility is secured by all assets of the Company.
Will Solyndra’s venture capital investors be repaid before the government? Did political influence play a part in the rushed loan guarantee for the company? Did the company have stable financial conditions before the DOE loan guarantee was made? Is the government’s claim secured?
There is no doubt that the federal government should help guarantee the development of alternative energy for the nation. You can see in this DOE chart that America is losing the race to produce solar energy products, particularly to China and Taiwan.
The U.S. government must undertake these financial commitments with full transparency and be first in line to recover their claims in case of bankruptcy. Our government is not an equity investor and stands to make no financial upside if a new technology is a runaway success. Because other forms of energy production, like oil exploration, have been so heavily subsidized through tax advantages and low royalty fees for decades, it makes sense to give some support to green energy technologies. But darkness and alleged political favoritism will kill public enthusiasm for reorienting energy policy. Solyndra seems to be a tale of dirty solar. Hopefully it won’t block out the sun.