Obama team backed Solyndra aid as auditors were wary

Solyndra LLC’s workers making solar-power panels in a California factory subsidized by U.S. taxpayers showed “the promise of clean energy isn’t just an article of faith,” President Barack Obama said on a visit to the company in May 2010.

Two months before Obama’s visit, accounting firm PricewaterhouseCoopers LLP warned that Solyndra, the recipient of $535 million in federal loan guarantees, had financial troubles deep enough to “raise substantial doubt about its ability to continue as a going concern.”

The Obama administration stood by Solyndra through the auditor’s warning, the abandonment of a planned initial public offering and a last-ditch refinancing where taxpayers took a back seat to new investors. That unwavering commitment has come under increasing scrutiny since the company’s travails culminated in its filing for bankruptcy protection on Sept. 6 and a raid on its headquarters by the Federal Bureau of Investigation two days later.

“People including our government put blinders on and did not want to believe in the obvious,” Jonathan Dorsheimer, an analyst in Boston for Canaccord Genuity Inc. of Vancouver, said in an interview with Bloomberg Government. “The fact that the government chose Solyndra as their white horse is mind-boggling.”

‘Merit-Based Decision’

Selection of companies to receive U.S. backing are “merit- based decisions made by career staffers at the Department of Energy, and the process for this particular loan guarantee began under President George W. Bush,” Eric Schultz, a White House spokesman, said in an e-mailed statement Sept. 1. “Every project that receives financing through the Energy Department goes through a rigorous financial, legal and technical review process.”

The House Energy and Commerce Committee, which has been investigating the Solyndra award since February, has scheduled a hearing on the loan guarantees for Sept. 14.

“We smelled a rat from the onset,” Representatives Fred Upton, a Michigan Republican and the committee chairman, and Cliff Stearns, a Florida Republican and chairman of the investigation subpanel, said in a statement Aug. 31 when the company announced it had dismissed 1,100 employees and planned to file for Chapter 11 bankruptcy reorganization.

A day before Solyndra ceased operations, the Energy Department turned down the company’s request to renegotiate the U.S. loan agreement, saying “a second restructuring was not feasible,” according to a memo from committee Republicans.

Stimulus Legislation

Originally authorized by Congress in a 2005 energy law, the loan guarantee program to encourage the development of clean-energy sources didn’t choose its first recipient until it was revamped under Obama’s 2009 stimulus legislation. Trade groups such as the Solar Energy Industries Association and the American Wind Energy Association lobbied Obama, urging in a letter that he prevent “further delay.”

Energy Secretary Steven Chu pledged during his Senate confirmation hearing to speed the approval of applications for the federal backing.

Solyndra, identified during Bush’s administration as a promising applicant, received the Energy Department’s first loan guarantee after Obama took office. Solyndra was given conditional approval in March 2009 and the award became final that September.

Easier, Lighter

The goal was to help the Fremont, California-based company develop its cylinder-shaped solar devices, which convert sunlight into electricity using a thin film made mainly of copper, indium, gallium and selenium. Standard solar panels are flat and made from silicon.

The company said its product was easier to install and lighter, giving it an edge over conventional panels, especially for large rooftops that can’t handle the weight of flat panels.

Solyndra used the U.S. backing to build the manufacturing plant Obama visited, shutting an older facility executives said couldn’t produce panels efficiently enough to compete in a market increasingly dominated by cheaper Chinese imports.

The company disclosed the “going concern” warning by PricewaterhouseCoopers, its accounting firm, in a Securities and Exchange Commission filing on March 16, 2010.

“The company has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit,” PricewaterhouseCoopers said.

In June 2010, the month after Obama’s visit, Solyndra executives withdrew a planned $300 million initial public offering.

Value ‘Evaporated’

The challenge facing Solyndra only increased as prices of the silicon used in conventional solar panels from China fell, declining 30 percent this year, according to Bloomberg New Energy Finance.

“When polysilicon prices dropped Solyndra’s value proposition evaporated,” Joseph Berwind, managing partner of Alternative Energy Investing LLC in Summit, New Jersey, and the author of “Investing in Solar Stocks,” said in an interview.

By December 2010, Solyndra was a month away from running out of cash, according to a government document obtained by Bloomberg News.

In what turned out to be a final effort to save the company, the Energy Department agreed to take a back seat to funds from new investors to keep the solar plant operating.

Public, Private Investors

Under the terms, $75 million in private financing will be paid ahead of all but $150 million of the federal government’s stake from any revenue from the sale of the company or its assets if Solyndra is liquidated, according to the January document. The government loaned about $527 million to the company by the time it shut down.

Solyndra also put up more collateral to the government, including intellectual property.

After “a due-diligence effort” to “determine if the company still had a viable business” the Energy Department concluded it “believes that the restructuring plan represents the best possible course of action to achieve the highest return on its invested capital,” according to the document.

House Republicans noted Solyndra’s financial troubles in a February 17 letter to Energy Secretary Chu announcing their investigation into the loan-guarantee program.

Kaiser Investment

Since then, Republicans have pointed to connections between Solyndra and billionaire George Kaiser, an Obama campaign fundraiser. The George Kaiser Family Foundation, a charitable organization based in Tulsa, Oklahoma, holds about 36.7 percent of the company, according to a filing with the Securities and Exchange Commission. Kaiser made 16 visits to the president’s aides since 2009, according to White House visitor logs.

“George Kaiser is not an investor in Solyndra and did not participate in any discussions with the U.S. government regarding the loan,” the foundation said in an e-mailed statement on Sept. 1.

As Solyndra struggled to stay afloat, it worked to reassure lawmakers. The company spent $480,000 this year to lobby Congress, according to Senate records.

In July, days after Republicans on the House Energy and Commerce Committee subpoenaed the White House for documents related to the loan guarantee, Solyndra retained Glover Park Group LLC, a public relations and lobbying firm of former congressional and White House aides based in Washington, to introduce executives to members of the committee, according to Senate records.

Solyndra Forecasts

A July 13 letter from Solyndra to the Energy committee said revenue had increased to $140 million from $6 million in 2008 and was projected to almost double again in 2011.

On July 21, at a news conference at Glover Park’s offices, Solyndra Chief Executive Officer Brian Harrison said policy makers should “separate Solyndra and its business results from the political process that is ongoing.”

Democratic Representatives Henry Waxman of California and Diana DeGette of Colorado said in a letter Sept. 8 that Harrison assured them in a meeting less than two months ago that the company was in a “strong financial position.”

The House Energy panel has asked Harrison to testify at this week’s hearing along with Jonathan Silver, who heads the Energy Department’s loan program, and Jeffrey Zients, deputy director of the White House Office of Management and Budget.

19 Comments

  1. Jennifer

    What happened to all that tax money he gave Solyndra?

    #1
  2. justbob

    no matter how hard you try, you cannot blame this on bush,
    the mention of his name is a stretch.

    #2
  3. bizag83

    What. A. Shock.

    #3
  4. JimFromTexas

    But justbob, it will NOT be Obama’s fault! It never is!

    With brilliant business decisions like that one, I doubt his Job Plan — I mean Stimulus Junior! Didn’t work, ain’t gonna work, and we have no money!

    #4
  5. Mark from Louisiana

    Other sources say different than this story.

    Solyndra’s most prolific financial backer is George Kaiser, an Oklahoma oil billionaire who was a bundler of campaign donations for Obama’s 2008 race. Kaiser’s Argonaut Ventures and its affiliates have been the single largest shareholder of Solyndra, according to SEC filings and other records. The company holds 39 percent of Solyndra’s parent company, bankruptcy records filed Tuesday show.

    And guess who gets paid out of the bankruptcy first?

    Under terms of the bankruptcy filing, investors including Argonaut — which led a $75 million round of financing for Solyndra earlier this year — will stand in line before the federal government and other creditors.

    When Solyndra announced that round of fundraising this February, it noted that the DOE had refinanced terms of the $535 million loan to extend the payment period. Under an “inter-creditor agreement” cited in the bankruptcy filing, the investors in the $75 million financing are considered first lien holders. That leaves Obama officials to confront the prospect of waiting behind private companies.

    #5
  6. Robert

    We can call this “Greenie Weenie Gate”

    #6
  7. luckyone

    Obama, resign NOW!

    #7
  8. Why is this story buried? It should be top headlines, but the Chron has completely sold out!

    #8
  9. Tom Fowler

    Gary Madden
    It was at the top of the page on FuelFix when we posted it around noon. There was a somewhat related story on the investigation about two hours earlier. This piece was also linked from the Chron.com homepage.

    #9
  10. disheveled1
    #10
  11. James

    It had to be Bush’s fault..or maybe the tea party “made” him do it…But all in All…he got about 50% of it back in Campaign donations…

    #11
  12. hughglass

    Obama finance..Secured GM lenders get screwed to enable First AH to give millions to the UAW. Taxpayers get screwed on Solyndra to provide millions to First AH’s donors. What’s not to like. Bozo has brought Zimbabwae to the US.

    #12
  13. Tom Mundakal

    Merit-Based Decision’

    Selection of companies to receive U.S. backing are “merit- based decisions made by career staffers at the Department of Energy, and the process for this particular loan guarantee began under President George W. Bush,” Eric Schultz, a White House spokesman, said in an e-mailed statement Sept. 1. “Every project that receives financing through the Energy Department goes through a rigorous financial, legal and technical review process.”

    Wonder how many companies were loaned money by GWB, and how many of them went belly up – I bet none. Taxpayer money was doled out to campaign contributors and looks like a bulk of the taxpayer money was used to cover the contributions to the Democrat party. A quick and thorough investigation with an Independent Counsel needs to be implemented ASAP.

    #13
  14. starchamber

    How does these companies hide the pay off to Obama and his minions? I know it’s being done I’m not a auditor. Could some one explain?

    #14
  15. BayouCrier

    Can you AFFORD 4 more years of this?

    #15
  16. Rhonda

    http://www.humanevents.com/article.php?id=46141

    Here’s another blow for Texas courtesy of anointed one.

    #16
  17. lab-handler

    This is the tip of the iceberg as to the corruption of this administration. The press is still carrying his water so we won’t see this followed up on. obama makes Nixon look honest.

    #17
  18. Coug78

    The WH could have given each of the 300million Americans $1 million and still would have saved $228 million which would have fixed the economy. They were told that the Solyndra would go belly up by Sep 2011. What a huge waste when you consider that every American could have been made millionares with the money the WH squandered on this special interest company.

    #18
  19. Joe

    “dominated by cheaper Chinese imports”
    ———————-
    Seems like they would have looked at this first…

    #19