Solyndra Program Vilified by Republicans Turns a Profit

Nov. 13 (Bloomberg) — The U.S. expects to earn $5 billion
to $6 billion from the federal program that funded flops
including Solyndra LLC, bolstering President Barack Obama’s
decision to back low-carbon technologies.

It’s the first time the Energy Department has released an
estimate of the potential gains for the loan guarantee program,
designed to back clean-energy projects when venture capital or
financing from banks and other investors is unavailable. The
department expects a loss rate of about 2 percent on $32.4
billion set aside for loans to spur energy innovation, according
to a report today.

The loan program, which opened in 2009, was targeted by
Congressional Republicans who charged taxpayer money was wasted
on startups including Solyndra, the solar manufacturer that
closed its doors in 2011 after receiving $528 million. Jonathan
Silver resigned as director in 2011 after repeated congressional
inquires.

“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,” Michael Morosi, an analyst at Brentwood,
Tennessee-based Jetstream Capital LLC, which invests in
renewable energy, said in an interview. “A positive return over
20 years in cleantech? That’s not a bad outcome.”

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 successes didn’t stop Republican representatives John Shimkus of Illinois, California’s Darrell Issa, and Fred Upton
of Michigan who focused on the program’s failures in a series of
hearings on Capitol Hill.

Taxpayer Risk

“I’m obviously glad to hear that DOE doesn’t expect to
lose money on its post-Solyndra loans,” Shimkus said today in
an e-mailed statement. “That said, we can’t forget that no
matter how positive today’s projections may be, billions of
taxpayer dollars are still at risk.”

A spokesman for Issa didn’t immediately respond to phone
and e-mail messages seeking comment.

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.”

Blackburn said she’d prefer a tax-credit-based incentive
system to loans or grants.

Last Resort

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. Applicants view the Energy
Department as a lender of last resort, according to Peter
Davidson, the program’s director.

“When these project developers took their projects to
conventional financing sources, those lenders said, ‘Sorry,
there’s too much risk here,’” Davidson said in a phone
interview. “That’s the gap that we’ve filled.”

The department didn’t disclose terms for investments in
specific companies and 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.

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.

Considering the whole portfolio of projects, a $5 billion
return to taxpayers exceeds profits from many venture capital
and private equity investments in clean energy, Morosi said.

The department is weighing applications for nuclear, energy
efficiency and advanced fuels projects.

The program was the only source of funding for some
developers after financial markets crashed in 2008, said Joe
Aldy
, who worked in the White House as a special assistant to
the president for energy and environment from 2009 to 2010.

“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,” Aldy said. “They lost
money on a lot of other things.”

To contact the reporter on this story:
Justin Doom in New York at
jdoom1@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Jim Efstathiou Jr., Robin Saponar

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