The Department of Energy knew the risks of giving a loan guarantee to failed green energy company Solyndra, according to a former FBI agent hired to examine the company’s books.
Solyndra’s board hired R. Todd Neilson as chief restructuring officer and asked him to manage the company’s bankruptcy and look into whether or not the company committed any misdeeds on its way to bankruptcy.
Neilson found that Solyndra did not misuse any DOE funds, writing that, “The construction costs were correctly recorded in the accounting records and no material funds were diverted from their original intended use,” and that all DOE funds “were spent in accordance with the relevant loan documents.”
However, Neilson also concluded that the DOE knew the risks of granting federal funds to Solyndra, but went ahead with the project regardless.
The DOE “had sufficient information to understand the risks and challenges associated with the guarantee obtained from DOE and make an informed decision as to the ongoing financial condition of Solyndra throughout the loan guarantee time frame based upon the level of documentation and information provided,” according to Neilson’s report.
In fact, one employee of the White House Office of Management and Budget wrote in a March 10, 2009 email, “This deal is NOT ready for prime time.”
Furthermore, the Center for Public Integrity and ABC News reported that Energy Secretary Steven Chu announced last year a conditional commitment to back Solyndra before completing marketing and legal reviews.
Solyndra was part of the Obama administration’s plan to jump start the green energy sector, and the company received a $500 million dollar loan guarantee from the DOE in September 2009 before declaring bankruptcy in September 2011.
In 2009 the company’s financial statements presented ominous warnings, as sales figures were less than half of what was forecast, and in February 2010 management initiated a “ground-up” review of the company, including looking for a “new CEO and/or president.”
The findings of the review were not good. The review predicted further solar panel price drops due to increased competition from China, causing the market to be over-supplied. China’s share of the solar market in 2005, when Solyndra was founded, was 10 percent, but had risen to 50 percent by 2010.
China’s panels were made of polysilicon, the primary component in flat photovoltaic panels, and the price of these panels had fallen from $250 to $500 per kilogram in 2008, to $60 in 2010, due to Chinese government subsidies.
While Solyndra’s competitors could take advantage of this price drop, Solyndra itself couldn’t because their solar panels used a thin-film recipe that’s needed to coat a cylindrical panel, which remained costly.
CNN Money notes, “To meet competition, Solyndra had to lower its price nevertheless. Thus, the average sales price for all solar panels, including Solyndra’s, fell from $3.30 per watt at the beginning of 2010, to about $2.39 by the end of that year. Today they fetch about $1 per watt.”
This information comes after the failure of other DOE loan guarantee recipients.
Beacon Power Corp., an energy storage company that received $43 million in loan guarantees last year, filed for bankruptcy in September after finding it hard to raise private financing.
Ener1 Inc., an electric car battery manufacturer, filed for bankruptcy in January after receiving an $118 million DOE grant. The company had trouble competing with battery manufacturers in China and South Korea and reported $73.9 million of assets and $90.5 million of debt as of Dec. 31 Chapter 11 filings.
Also troubling, the Government Accountability Office recently found that the DOE had skirted its own rules when approving loans.
“What we found was problems in how they followed their process and in some cases deviated from the process without a clear explanation why,” said Frank Rusco, the GAO auditor who wrote the report. “This has gotten the program in trouble in the past and certainly raises questions that are hard for them to answer.”
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