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Solyndra Collapse Threatens $10 Billion In Green Pork

The collapse of solar panel manufacturer Solyndra has raised serious doubts about the legitimacy of the US Department of Energy’s (DOE) process for evaluating loan guarantees and its ability to successfully spend the remaining $10 billion earmarked to support clean technologies, observers said.

Fremont, California-based Solyndra, which designs and manufactures solar photovoltaic systems, filed for Chapter 11 bankruptcy on 6 September after failing to secure additional funds from the private sector to continue operations. Two days later, the Federal Bureau of Investigation raided the company’s headquarters and the homes of several Solyndra executives, for reasons as yet undisclosed.

In 2009, the DOE offered Solyndra the first loan guarantee for a renewable energy project, valued at $535 million, to cover debt financing for about 73% of the cost of building a solar panel fabrication facility in California.

In late 2010, Solyndra asked the department to increase its loan commitment because it was unsuccessful in its efforts to raise additional equity. The DOE refused and Solyndra sought a new $75 million emergency loan from its current equity investors. In order to avoid an imminent default by Solyndra, the department agreed in February to restructure its loan guarantee to give the investors repayment priority over the DOE.

Republicans slam Solyndra loan guarantee

In a contentious Congressional hearing on Wednesday, Republicans in the House of Representatives argued that the department erred in giving up the government’s primary recovery position, contrary to the plain language of the statute authorising the programme, which requires the DOE’s financial commitment not to be subordinate to any other funding sources.

Jonathan Silver, executive director of the Loan Programs Office, testified that DOE’s legal counsel signed off on the decision to restructure the loan guarantee.

“You didn’t have a very good lawyer and I think you got bad advice,” replied Stephen Scalise (R-Louisiana).

Several Republican members said the review process for the Solyndra loan was rushed due to White House pressure to promote its economic stimulus package. They also implied that the loan itself was made for political reasons, namely a financial contribution to President Barack Obama by George Kaiser, one of the company’s primary backers, which Silver denied.

US solar market flooded with Chinese imports, say Democrats

House Democrats and Silver blamed market conditions for Solyndra’s collapse, specifically the influx of Chinese-made solar products that has depressed cell prices by about 42% in the first eight months of 2011, Silver stated.

China has been the most aggressive country in supporting its clean-tech sector, providing more than $30 billion in credit to the country’s largest solar manufacturers through the government controlled China Development Bank, 20 times larger than the US investment, Silver said.

But several legislators also expressed concern that they were misled in July by Solyndra officials, who claimed the company was in a good financial position and would double its revenues this year. Solyndra’s chief executive officer and chief financial officer are scheduled to testify before Congress next week.

“I have no reason sitting here today to believe we were misled,” Silver said.

The DOE’s Section 1705 loan guarantee programme is set to expire on 30 September and staffers are working to complete all conditional commitments prior to the deadline. As of 12 September, 18 loan guarantees with a total value of about $8 billion have closed and another 18 projects have received conditional commitments totalling more than $10 billion.

“If the administration was so wrong about Solyndra after nine months of due diligence, how can it possibly exercise the proper controls when doling out $10 billion dollars in a matter of weeks?” asked Fred Upton (R-Michigan), chairman of the House energy and commerce committee.

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