Free Markets, Free People

Solyndra


Was Solyndra just the tip of a failed taxpayer funded “green energy” iceberg?

It appears so.  CBS News’ Sharyl Attkisson (yes the same Ms. Attkisson who has been the only reporter following up on Fast and Furious) has checked and it seems Solyndra was just one of many “green companies” which the Obama administration attempted to pick as “winners” by “investing” your money via loan guarantees:

Take Beacon Power — a green energy storage company. We were surprised to learn exactly what the Energy Department knew before committing $43 million of your tax dollars.

Documents obtained by CBS News show Standard and Poor’s had confidentially given the project a dismal outlook of "CCC-plus."

Read the documents

Asked whether he’d put his personal money into Beacon, economist Peter Morici replied, "Not on purpose."

"It’s, it is a junk bond," Morici said. "But it’s not even a good junk bond. It’s well below investment grade."

Was the Energy Department investing tax dollars in something that’s not even a good junk bond? Morici says yes.

"This level of bond has about a 70 percent chance of failing in the long term," he said.

In fact, Beacon did go bankrupt two months ago and it’s unclear whether taxpayers will get all their money back. And the feds made other loans when public documents indicate they should have known they could be throwing good money after bad.

That’s one.  But there are more:

Others are also struggling with potential problems. Nevada Geothermal — a home state project personally endorsed by Senate Majority Leader Harry Reid –  warns of multiple potential defaults in new SEC filings reviewed by CBS News. It was already having trouble paying the bills when it received $98.5 million in Energy Department loan guarantees.

SunPower landed a deal linked to a $1.2 billion loan guarantee last fall, after a French oil company took it over. On its last financial statement, SunPower owed more than it was worth. On its last financial statement, SunPower owed more than it was worth. SunPower’s role is to design, build and initially operate and maintain the California Valley Solar Ranch Project that’s the subject of the loan guarantee.

First Solar was the biggest S&P 500 loser in 2011 and its CEO was cut loose – even as taxpayers were forced to back a whopping $3 billion in company loans.

Anyone – does the Constitution have a “venture capitalist” clause in it that we somehow missed?  Is it the job of our government to pick winners and losers in a market using taxpayer dollars?

Well according to the brilliant Steven Chu, Secretary of Energy, no politics were involved in any of this.  But:

Nobody from the Energy Department would agree to an interview. Last November at a hearing on Solyndra, Energy Secretary Steven Chu strongly defended the government’s attempts to bolster America’s clean energy prospects. "In the coming decades, the clean energy sector is expected to grow by hundreds of billions of dollars," Chu said. "We are in a fierce global race to capture this market."

The government is blowing it big time.  Why?  Because, despite Chu’s claim, it is all about politics.  And ideology. 

In fact this administration has no trust in markets to develop the technology they desire so they’re sold on the idea that the central government should be used to facilitate their ideology.  And that is precisely what this is all about.  Solyndra, Beacon Power, Nevada Geothermal, SunPower and First Solar are just failed indicators of the bankruptcy of their approach.  Given a treasury and the ability to spend money almost unchecked, they’ve committed to implementing their ideology on the back of taxpayers.  And, unsurprisingly, they’re failing miserably.

But we’re assumed to be so dumb we can’t see through their political scheme.

Unfortunately, as it has been for quite some time, no one will be held accountable for this fiasco that has cost us billions in money we simply don’t have.   If anyone ever wanted a case study of how out-of-control and outside the Constitutional box government has become, the failed “green energy” sector loan program provides the perfect scenario.

Meanwhile, in Canada:

Canada is now looking to Asian countries to market its abundance of oil, natural gas and minerals as plans to build the proposed Keystone XL pipeline have stalled with the U.S. administration.

Prime Minister Stephen Harper will travel to China next month to discuss selling Canada’s bounty to the rapidly growing nation.

The preferred initial plan was to build the $7 billion Keystone pipeline to deliver Alberta’s oilsands crude to refineries in Texas on the Gulf of Mexico.

Harper reasoned that the U.S. government would prefer to deal with a friendly neighbor to help meet its energy needs while creating thousands of jobs.

With widespread opposition by U.S. environmentalists, the Obama administration has delayed its decision on whether to approve the project proposed by energy giant TransCanada Pipelines.

The new plan would market to China and Asian countries through the proposed Northern Gateway pipeline that would transport Alberta’s oil and natural gas to British Columbia for shipment by tankers.

Yup, no politics at all.

~McQ

Twitter: @McQandO


Solyndra v 2.0 — It’s called SunPower

Another example of the poor job government does in picking winners and losers is emerging.   Solyndra, a solar panel company, was the first to go under, taking with it half a billion in taxpayer money.

Now we have the specter of another “green jobs company” that received guaranteed government loans doing the same.   But this one seems to have consumed over twice the amount of money that Solyndra did.

SunPower is its name and right now, bankruptcy seems to be its game.

How well did the government, via the Department of Energy, do this time?

The Energy Department says on its website that the $1.2 billion loan to help build the California Valley Solar Ranch in San Luis Obispo County, a project that will help create 15 permanent jobs, which adds up to the equivalent of $80 million in taxpayer money for each job.

Brilliant.

The DoE also claims:

“This project underwent many months of rigorous technical, financial and legal due diligence by career employees in the DOE loan program,” Energy spokesman Damien LaVera said in a statement to FoxNews.com. “It was approved for one reason only: because it meets all the requirements of the program – helping America win the clean energy race and create entire new industries for American workers.”

Did it indeed undergo such “rigorous” analysis?  Well if so, then they should have known all about this:

But SunPower posted $150 million in losses during the first half of this year and its debt is nearly 80 percent higher than the market value of all its outstanding shares. The company is also facing class action lawsuits for misstating its earnings.

It truly makes you wonder how bad a company would have to be not to get a DoE loan (obviously it would have to be a “clean energy” company, because those are the “winners” this administration has chosen to fund).

Oh, and then there’s this:

The company is also politically connected. Rep. George Miller’s son is SunPower’s top lobbyist. The elder Miller, a powerful California Democrat, toured the plant last October with Interior Secretary Ken Salazar, and reportedly said, "We’ve worked hard to make renewable energy a priority because it represents America’s future economic growth. Today, businesses like SunPower are moving forward, hiring 200 people for good clean energy jobs in the Easy Bay."

It’s not clear what role, if any, either of them played in securing the loan. Miller’s office did not respond to a request for comment.

An Energy Department official denied crony capitalism was a factor in the loan guarantee.

“The notion that political connections played any role in this application is simply false,” the official said. “This application was approved based on the exhaustive due diligence of the career professionals in the loan program, and nothing else.”

Of course.  Because there was such a sound financial basis to approve such a loan, wasn’t there?

And politicians wonder why people are more and more cynical and less trusting of our government all the time?

~McQ

Twitter: @McQandO


Green jobs? At $23 million a pop?

How many times have we said the government shouldn’t be involved economically in picking winners and losers?  And how many times have we seen examples of the government doing precisely that and the program ending up a disaster.

Solyndra, for instance.   But political agendas rarely yield to the laws of economics so it is fairly easy to predict how they’ll end.   The Obama administration’s “green jobs” agenda – again see Solyndra for the latest prime example – is a consummate failure.  And a look at where that agenda is headed serves as an example of why what has been said right here (and many other places) continues to be true.

But in case you’ve missed it or are inclined to wave off what we might say here, here’s a guy from CATO:

Jerry Taylor, senior policy analyst for the free-market Cato Institute, says the whole program shows that the federal government should not be picking private-sector winners and losers.

"It’s a lot of money for very few jobs if you do the math," Taylor said. "If nobody in the private sector is willing to invest their capital, that’s a pretty good signal."

What is he talking about?  Take a look at the chart.

Yes, those are Department of Energy numbers for the number of jobs that will be created for $6.5 billion in loan guarantees for the 9 companies in question.  That’s right, $6.5 billion in guarantees will create 283 permanent jobs.   That’s $23 million of your dollars (or borrowed money) per job.

Where’s the private investment?  Why are these companies having to seek federal loan guarantees so they can get loans?  If they’re viable, as Jerry Taylor points out, the private sector should be willing to invest in them.

Why aren’t they?

In fact, why, given that it appears the private sector is not willing to do so, is the DoE even considering these loans?

Because there’s an agenda at stake here.   This isn’t about market viability or sound economics, it’s about trying to save an agenda that promised 5 million green jobs, remember. 

And this is what you get.   A failed Solyndra and 9 companies the private sector won’t invest in which may create 283 jobs.  May.  Government estimates about programs it supports have never been known to be overly optimistic, have they?

$23 million a pop for 283 jobs that may or may not materialize. 

The fact that they’re even considering these loan guarantees tells you all you really need to know about how clueless they are. 

And there are people that still wonder why there is a growing body of us out here wanting smaller, less costly and less intrusive government that binds itself to the limits of the Constitution?

Really?

~McQ

Twitter: @McQandO


Observations: The QandO Podcast for 18 Sep 11

In this podcast, Bruce Michael, and Dale discuss Solyndra affair, and some troubling news from Turkey.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.


Solyndra applied for a 2nd loan

The Daily Caller is reporting that Solyndra, famed for going belly up and putting the taxpayers on the hook for half a billion dollars, applied for an additional DOE loan for $469 million.

Failed solar panel maker Solyndra’s Securities and Exchange Commission filings show that seven months after the Obama administration’s Department of Energy approved a $535 million federal loan guarantee, Solyndra applied for a second one valued at $469 million.

“On September 11, 2009, we applied for a second loan guarantee from the DOE, in the amount of approximately $469 million, to partially fund Phase II,” Solyndra wrote in a report it filed with the SEC on December 18, 2009. “If we are unable to obtain the DOE guaranteed loan in whole or in part, we intend to fund any financing shortfall with some combination of the proceeds of this offering, cash flows from operations, debt financing and additional equity financing.”

This application went in right after it received the original $535 million from the DOE. So, the question is, what happened to that application? Well, so far, it seems that no one can say.

It’s unclear if the now-bankrupt and scandal-embroiled green energy company actually received a second loan. Department of Energy officials did not immediately respond to The Daily Caller’s request for comment, and the company’s SEC filing left the question open.

So, did Solyndra get that second loan or not? Are we on the hook for more than a billion dollars? It seems like if the answer was "no", the DOE or Obama Administration would be fairly keen on letting us know that.

I’m really curious about this now.

(H/T: Ace)

~
Dale Franks
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Fed loan program that gave us Solyndra has created few jobs (update)

One of the center pieces of the Obama administration’s recovery plan has been its green jobs program.  It was touted by the President as an investment in the future.  And he even managed to snooker Congress into including $38.6 of your dollars in a federal guaranteed loan program in the Stimulus bill – a version, in this case, of the government going into the venture capitalism business.

The results, as they say, are predictable:

A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.

The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.

Half the money is gone and it has created 3,545 “new, permanent jobs”?  You do the math – pretty high cost of job creating wouldn’t you say?  Oh, and that number is actually down by 1,100 thanks to Solyndra.

So are green jobs, of the type to be found in alternative energy, the best way to approach easing unemployment?  Not really, say some experts:

Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-­energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.

“There are good reasons to create green jobs, but they have more to do with green than with jobs,” Princeton University economics professor and former Federal Reserve vice chairman Alan Blinder has said.

Which is a nice way of saying this is more about political agendas than putting Americans to work, and unemployment is an excuse, not  a reason, for pursuing this agenda.  And the cost of that agenda has been pretty prohibitive with no real worthwhile results in the ostensible problem it was supposed help solve – unemployment.  

Another example of government using your money to pick winners and losers and everyone coming out poorer in the bargain.

UPDATE: No, I didn’t see Dale’s post.  My bad.  I’ll leave mine, but now that Dale’s putting up a lot more stuff, I’m going to have to discipline myself to look first before I go popping something up (I use Live Writer, so unless I specifically look at the blog, I don’t see a list of what is up).

~McQ

Twitter: @McQandO


Solyndra – Administration warned it would fail in September, 2011. And, it did

In the old “what did they know and when did they know it” game concerning Solyndra, the failed solar company backed by half a billion dollars of federally guaranteed loans, it appears the administration was warned repeatedly that it would fail.

Even after Obama took office on Jan. 20, 2009, analysts in the Energy Department and in the Office of Management and Budget were repeatedly questioning the wisdom of the loan. In one exchange, an Energy official wrote of "a major outstanding issue" — namely, that Solyndra’s numbers showed it would run out of cash in September 2011.

There was also concern about the high-risk nature of the project. Internally, the Office of Management and Budget wrote that "the risk rating for the project sponsor [Solyndra] … seems high." Outside analysts had warned for months that the company might not be a sound investment.

And the reason?

Fairly simple, really:

"It’s very difficult to perceive a company with a model that says, well, I can build something for six dollars and sell it for three dollars," Lynch said. "Those numbers don’t generally work. You don’t want to lose three dollars for every unit you make."

But apparently not enough to warn off what was something that the administration badly wanted to back – “green” jobs.  The problem of course is they weren’t viable green jobs.   The company failed Econ 101 analysis, yet that didn’t stop our central planners from pushing ahead with the loan guarantees.

And all the info to determine this wasn’t a good risk was there:

In 2008, Solyndra, then just three years old, pushed ahead with its application for government backing to build a new plant to produce its unique solar panels. An outside rating agency, Fitch, gave Solyndra a B+ credit rating that August. Two months earlier, in June 2008, Dun & Bradstreet issued a credit appraisal of the company. Its assessment: "Fair."

Those are not top-of-the-line scores, Fitch Ratings spokeswoman Cindy Stoller told the Center for Public Integrity’s iWatch News, which has been investigating the deal in partnership with ABC News since March. She could not discuss the Solyndra review specifically, but said of a B+ rating: "It’s a non-investment grade rating." She provided a company ratings definition, showing that B+ falls between a "highly speculative" B and "speculative" BB.

Anyone with a 5th grade education would know enough to go “not where we should sink our money”.  But sink it they did.

What do we get back from the administration when questioned about all of this?

Asked about those ratings, and how significantly the department viewed the risk, Energy officials said Monday the department conducted "extensive due diligence" on the application, which included consideration of the Fitch rating.

"We believed the rating, which is used to inform our analysis of potential risks associated with the loan, was appropriate for the size, scale and innovative nature of the project and was consistent with the ratings of other innovative start-up companies," said Damien LaVera, an Energy Department spokesman.

"The Department conducted exhaustive reviews of Solyndra’s technology and business model prior to approving their loan guarantee application," LaVera said. "Sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment."

Well, if that’s the case, then the analysts at the DoE are utterly incompetent.  My guess is they came up with the analysis their bosses wanted, not that which actually told the truth about the situation.

Again, instead of letting the market do its job, the administration continued to ignore the warning signs and intrude, backing a company that was bound to fail and in the end, throwing a half billion taxpayer dollars down the drain.

And there’s this:

The White House has argued that any effort to finance start-up businesses in a relatively new field like solar energy is bound to include risky ventures that could fail. They reject the notion being pushed by Republicans that Solyndra was chosen for political reasons. One of the largest private investors in the deal, Oklahoma billionaire George Kaiser, was also a prominent fundraiser for Obama’s 2008 presidential campaign.

And, Solyndra’s CEO was a large contributor as well.

However, the big concern?

"This deal is NOT ready for prime time," one White House budget analyst wrote in a March 10, 2009 email, nine days before the administration formally announced the loan.

"If you guys think this is a bad idea, I need to unwind the W[est] W[ing] QUICKLY," wrote Ronald A. Klain, who was chief of staff to Vice President Joe Biden, in another email sent March 7, 2009. The "West Wing" is the portion of the White House complex that holds the offices of the president and his top staffers.

Yup, protect the White House.  And they didn’t even have the wits to back out when they could have, instead doubling down in the face of horrific numbers.  Sound familiar?

You’re in good hands, folks — can’t you just feel it?

~McQ

Twitter: @McQandO


Observations: The QandO Podcast for 11 Sep 11

In this podcast, Bruce Michael, and Dale discuss discuss the president’s proposed jobs bill, Gunwalker, and Solyndra.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.


Obama touted solar technology company files for bankruptcy

But not before sucking down over half a billion dollars in federal loan guarantees that will now be exercised.

Solyndra was touted by the Obama administration as a prime example of how green technology could deliver jobs. The President visited the facility in May of last year and said  "it is just a testament to American ingenuity and dynamism and the fact that we continue to have the best universities in the world, the best technology in the world, and most importantly the best workers in the world. And you guys all represent that. "

The federal government offered $535 million in low cost loan guarantees from the Department of Energy. NBC Bay Area has contacted the White House asking for a statement.

This is what happens when government tries to pick winners and losers economically with absolutely no understanding of the market in which they intrude.  What this clearly points out, unless there was true malfeasance by the company, is there is no market, at this time, for what they were selling.  Either that, or they were truly incompetent.

This was a “if we build it they will buy” project that apparently either misrepresented the market or misunderstood it. Either way, it failed.   And the Feds were apparently no more informed about the market potential of the product than the company.  Result – over half a billion in loans guaranteed by the Federal government are now being called in.  The taxpayer, as usual, is on the hook to pay off the mistake the government made.

One of the constant themes here is the government is way outside its charter when it engages in activities like this.  It is an example of what those Tea Party lunatics mean when they talk about government intrusion and call for smaller government.  Note, it has nothing to do with welfare reform or any other of the usual nonsense their opponents try to tag them with.   It has to do with out-of-control government and out-of-control spending in areas where none of the founders ever even hinted at envisioning a Federal presence.

It’s a pity this has to be constantly pointed out to Tea Party critics bent on stereotyping members of that group as racists.  But as usual, reality provides the perfect context and example to counter their baseless charges.

This is not what our government should be involved in, period.  And certainly not with tax payers money, exclamation point!

~McQ

Twitter: @McQandO