Bloomberg:
International Business Times:
U.S. Expects $5 Billion From Program That Funded Solyndra
By Justin Doom Nov 12, 2014 1:55 PM ET
The U.S. government expects to earn $5 billion to $6 billion from the renewable-energy loan program that funded flops including Solyndra LLC, supporting President Barack Obama’s decision to back low-carbon technologies.
The Department of Energy has disbursed about half of $32.4 billion allocated to spur innovation, and the expected return will be detailed in a report due to be released as soon as tomorrow, according to an official who helped put together the data.
The results contradict the widely held view that the U.S. has wasted taxpayer money funding failures including Solyndra, which closed its doors in 2011 after receiving $528 million in government backing. That adds to Obama’s credibility as he seeks to make climate change a bigger priority after announcing a historic emissions deal with China.
A $5 billion return to taxpayers exceeds the returns from many venture capital and private equity investments in clean energy, said Michael Morosi, an analyst at Jetstream Capital LLC, which invests in renewable energy.
“People make a big deal about Solyndra and everything, but there’s a lot of VC capital that got torched right alongside the DOE capital,” Morosi said. “A positive return over 20 years in cleantech? That’s not a bad outcome.”
Congresswoman Marsha Blackburn, a Tennessee Republican, said that while the loan program may be well intended, “what we have seen is incredible mismanagement, and it’s become the poster child for crony capitalism.”
Taxpayer Losses
“Taxpayers want us to completely end the program,” she said in a telephone interview Nov. 11. “When you look at what’s happened with solar, some of the battery companies, you see that most of these companies are bankrupt and are no longer in existence, and the taxpayer is left holding the bag.”
Blackburn said she’d prefer a tax-credit-based incentive system to loans or grants.
The potential gains are the first estimate for the loan guarantee program released by the Energy Department. The $5 billion to $6 billion figure was calculated based on the average rates and expected returns of funds dispersed so far, paid back over 20 to 25 years.
The agency’s goal is to fund clean-energy projects that banks and other investors have been reluctant to support, and any additional profits are simply a bonus, said Peter Davidson, the program’s director. Project applicants typically view the Energy Department as a lender of last resort.
“When these project developers took their projects to conventional financing sources, those lenders said, ‘Sorry, there’s too much risk here.’ That’s the gap that we’ve filled,” Davidson said in a phone interview.
Four Failures
The failure of four companies has cost about $780 million. Solyndra burned through $528 million of a $535 million loan guarantee before filing a bankruptcy plan approved in October 2012. The California-based solar manufacturer went bust pursuing an alternate photovoltaic technology that became too expensive as panel prices plunged worldwide.
The electric carmaker Fisker Automotive Inc. filed for bankruptcy in November 2013. Abound Solar Inc. and Vehicle Production Group LLC failed in 2012.
The Energy Department didn’t disclose terms for investments in specific companies, and it declined to estimate how much the rest of its portfolio may earn.
“There’s no picking winners and losers -- we’re just open for business and people apply,” Davidson said.
Loan Rates
Loans for individual companies, many pursuing breakthroughs in solar, wind and geothermal energy, typically were issued or guaranteed at about 37 basis points above Treasuries at time of issuance. Those rates may increase to T-bills plus 50 to 150 basis points as more loan guarantees become loans, the department said.
The department currently is finalizing requests for bids on nuclear power projects and considering ones linked to energy-efficiency projects and advanced fuels.
Supporters of the loan program say it has filled a gap in the market that emerged with the recession. Private financing, especially tax equity, dried up after markets crashed in 2008, leaving open the need for federal funding, said Joe Aldy, who worked in the White House as a special assistant to the president for energy and environment from 2009 to 2010.
“We had conversations on, ‘Look, we could have a much higher fail rate if you can show us one or two wins,’” said Aldy, who is now an assistant professor at the Harvard Kennedy School. “The people in the VC world who made a lot of money with IT and Internet companies -- they made their money on the EBays and the Googles and the Facebooks. They lost money on a lot of other things.”
Biggest Success
The program’s biggest success story has been Tesla Motors Inc. The Elon Musk-backed electric carmaker paid back its $465 million federal loan nine years early. Abengoa SA, which received a $132.4 million guarantee, opened in October a biofuels plant in Kansas.
The government’s loan guarantees are comparable to insurance, Aldy said.
“The whole point of insurance is that there should be claims against the insurance,” he said. “If we only go after projects we know are going to succeed, all we’re doing is subsidizing people for what they’d do anyway.”
International Business Times:
Obama's Green Programme that Sparked Solyndra Scandal Turns Profit
By Finbarr Bermingham
November 13, 2014 08:16 GMT
A US government renewable energy programme described by Republicans as "disgusting" and "a colossal failure" has turned a profit for the first time.
The Loans Program Office became a stick to beat President Barack Obama with during the campaigning for the 2012 election, after the solar energy company Solyndra defaulted on a $535m loan it received from the Department of Energy.
It was followed into bankruptcy by start-ups Fisker Automotive and Abound Solar, all of which received loans from the office.
Now, it has reported a profit of $30m, after collecting interest payments of $810m on total loans of $34.2bn, Reuters reports.
The lending programme was borne out of 2005's Energy Policy Act and was designed to stimulate the US' fledgling renewable energy sector. The intention was never to make money but to subsidise an industry that has always struggled to gain commercial financing. An initial $10bn was set aside to cover those losses.
"Part of this shortfall [in financing] can be attributed to the recent domestic financial crisis and global economic downturn. But much of it is due to the unique features of large-scale energy projects, which make traditional financing difficult to find—even in flush economic times," reads the initiative's website.
The programme allows renewable energy firms to borrow from the Treasury or private sector, with the Loans Program Office issuing a substantial guarantee on the loan. It's a model which is common in more traditional sectors, with the likes of Boeing and Caterpillar being substantial beneficiaries of the Export-Import Bank of the US, which guarantees loans to exporters to buy US goods.
However, during the run up to the last election, high profile Republicans rounded on the Obama administration's support for the programme – claiming that he was using it to assist his campaign funders.
Now, though, officials are toasting its success.
"Taxpayers are not only benefiting from some of the world's most innovative energy projects... but these projects are making good on their loan repayments," Peter Davidson, executive director of the Loan Programs Office, told Reuters.
The US Energy Secretary told NPR that it "literally kickstarted the whole utility-scale photovoltaic industry".
The news may offer some support for Obama as he faces Republican opposition to the climate change deal he agreed with China, upon his return from Beijing. Senate leader Mitch McConnell has suggested that Obama will not be in the White House for long enough to see the plan through and, given the widespread Republican hostility to green initiatives, the implication is that if Democrats fail to win 2016's election, the deal will be stopped.
"This unrealistic plan, that the president would dump on his successor would ensure higher utility rates and far fewer jobs. As I read the agreement it requires the Chinese to do nothing at all for 16 years while these carbon emissions regulations are creating havoc in my state and around the country," McConnell said.
