Newly surfaced confidential documents show credit agency Standard and Poor’s considered Beacon Power — a now-bankrupt green energy storage company — a risky investment, even with the $43 million loan guarantee President Barack Obama’s Energy Department was planning to, and eventually did give the company.
The documents, first obtained by CBS News investigative correspondent Sharyl Attkisson, show how the Department of Energy’s (DOE) Jonathan Silver — the now-former loan guarantee program administrator — asked Standard and Poor’s to conduct a credit analysis prior to investing taxpayer money in Beacon Power.
Silver resigned in mid-October 2011 as congressional inquiries into the DOE loan guarantee program heated up following the loss of $528 million of taxpayer money to solar panel manufacturer Solyndra when it went bankrupt. Solyndra received the first-ever loan guarantee under the program, and was the first to go bankrupt. At least four more loan guarantee recipients have filed for bankruptcy in Solyndra’s wake, and other recipients have shown signs of financial weakness.
In the case of Beacon Power, even if the company ended up receiving the DOE loan guarantee, Standard and Poor’s analysis indicated it still wouldn’t be a smart investment. The credit agency’s ratings services division assigned Beacon Power a “CCC+” Final Rating.
Standard and Poor’s defines a “CCC” rating as “currently vulnerable” and “dependent upon favorable business, financial, and economic conditions to meet its financial requirements.”
California Republican Rep. Darrell Issa, the chairman of the House Committee on Oversight and Government Reform, is one of the leaders in Congress spearheading investigations into the DOE’s loan guarantee program. On Friday morning, Issa released a letter he sent to Energy Secretary Steven Chu on Jan. 3 demanding answers.
Issa’s letter requested documents detailing how and why the DOE approved Beacon Power’s $43 million loan guarantee despite Standard and Poor’s “CCC+” rating, which falls below the DOE’s own required “BB” rating for a company to qualify for taxpayer assistance. Additionally, Issa requested Chu provide information on every company that was given a rating during the loan guarantee process. That letter gives Chu until 5 p.m. next Tuesday, Jan. 17, to respond.
Issa also released a second letter he sent to Chu about another company that received a loan guarantee, Nevada Geothermal. The company received a $98.5 million partial loan guarantee purportedly to refinance its Blue Mountain Geothermal Project. The company was apparently going to use that partial loan guarantee to refinance a loan it had from financial firm TCW through another firm, John Hancock. Issa points to documents from the Energy Department and internal documents from Nevada Geothermal that illustrate the company never planned to use the taxpayer funds to finance its project.
Nevada Geothermal, instead, according to Issa, planned to bail itself out with the taxpayer funding because it was about to default on its TCW loan. Issa gave Chu until Jan. 25 at 5 p.m. to respond to his specific questions and requests for documents about Nevada Geothermal.
“American taxpayers continue to foot the bill for this administration’s poor choices,” Issa said in a statement. “The Department of Energy has engaged in reckless speculation that has led to the squandering of taxpayer dollars. The American people have a right to know how and why these decisions were made.”
The Department of Energy considers the criticisms of the loan guarantee program baseless.
“When Congress established this program, it recognized the risk of investing in innovative technologies and accounted for that risk in the budget, which is why they set aside $2.4 billion to cover potential losses in our total loan portfolio,” DOE spokesman Damien LaVera said in an email to The Daily Caller. “As independent analysts like Bloomberg Government have noted, even if all of the riskiest manufacturing projects supported under the program defaulted, there would still be $446 million left over in that reserve. When it comes to clean energy, we have a choice to make. We can concede the race to countries like China, or we can compete in the global marketplace — creating American jobs and selling American products.”
In an October 2011 blog post, the DOE points out that Beacon’s loan guarantee was for a Stephentown Regulation Services, LLC. Though the company is bankrupt, there are cash reserves and proceeds from the plant the loan guarantee was creating that have been set aside as collateral.
As for Nevada Geothermal, the DOE said in another October 2011 blog post that the company “has been consistently making its payments on time and in full,” and projects that it will continue being able to move forward.
