First Solar’s competitor SunPower has similarly received a $1.3 billion loan guarantee for a solar project in California, but Wall Street has been less than optimistic about the company’s financial health.
SunPower’s stock, like First Solar’s has lost enormous value in recent months. The stock peaked at $21.40 on April 29, 2011, and now trades at $8.36 per share. Morningstar forecasts the company “will post losses in both 2011 and 2012.” SunPower’s technology, Morningstar warns, is likely to remain “too costly compared to its peers” and it expects “mediocre” returns from the stock in the foreseeable future.
SunPower’s political action committee gave $15,650 to Democratic congressional candidates in 2010 and only $500 to a single Republican candidate. Reid received the largest slice of that pie, a $4,000 campaign contribution.
The Spanish firm Abengoa Solar received a $1.45 billion loan guarantee for an Arizona solar project, yet it has similar financial woes. Abengoa also recently reached an agreement for a second loan guarantee, $1.2 billion for another Arizona project.
Yet despite its success appealing to the Obama administration for financing, the company has consistently lost value since March. Its stock fell from a high of $16.50 six months ago to just $10.45 per share on Wednesday.
Abengoa Solar’s lobbying efforts are spearheaded internally by Fred Morse, a veteran of the Department of Energy from the Carter and Reagan administrations. Since 2009, the company has paid Ernst and Young $330,000 in lobbying fees, according to information made available by the Center for Responsible Politics.
Abengoa also enlisted the help of California Democratic Sen. Dianne Feinstein, according to the Institute for Energy Research, to pressure the Department of Energy to expedite the loan guarantees.
“It is wrong when we let the country pick the winners and the losers,” said Mark Kramer, a project faculty member of the University of Pennsylvania’s Wharton School of Business. “If they can’t get funding privately, they probably shouldn’t exist.”
In an interview with TheDC, Kramer described these companies as bad investments whose collapse taxpayers shouldn’t be bankrolling.
But Rhone Resch, CEO of the Solar Energy Industries Association, defends the loan guarantee program as an investment in clean technologies that has created thousands of jobs and has spurred innovation.
He contends the United States needs to invest in solar to allow it to thrive in the face of Chinese competition, which has made it difficult for American companies.
This stiff competition was described as a key factor when Massachusetts-based Evergreen Solar and New York-based SpectraWatt filed for bankruptcy protection earlier this year.