In announcing that Solyndra executives would invoke their Fifth Amendment rights when they appear before Congress this week, a spokesman for the bankrupt solar energy company laid the blame for its demise at the feet of the same Department of Energy that invested $527 million into the failed enterprise.
Solyndra’s statement yesterday evening included a brief explanation of how the company ended up filing for Chapter 11 at the end of August.
Spokesman David Miller wrote that, at the same time Solyndra was building out the production facility that its hefty DOE loan guarantee had helped fund, the landscape for its solar photovoltaic panels was in flux. Miller noted that those conditions led to an oversupply of solar panels worldwide, which had a substantial impact on pricing for the company’s panels and Solyndra’s ability to ramp up its sales.
“As late as August, the company believed that existing investors and the DOE would come to a financing arrangement that would have secured the capital the company needed to achieve positive cash flow from operations,” Miller wrote. “The Company’s investors had offered a transaction pursuant to which the required capital would have been invested, however, the terms of such transaction were not acceptable to the DOE.”
Miller said that the failure to secure that financing “left the company with no other option but to seek to reorganize through a bankruptcy filing under Chapter 11.”
One Obama administration official with knowledge of the deal offered some additional insight last night into what happened during the final days of Solyndra.
In August, the official said, Solydra’s investors informed the company and DOE that they would not loan Solyndra any more money unless DOE agreed to another restructuring that would have required significant concessions. It was determined that those concessions would have the government, and taxpayers, in a significantly worse position and DOE rejected the terms. DOE did offer to consider whether there might be other more mutually acceptable ways forward. But before those discussions could be completed, the company ran out of available cash.
In other words, Solyndra’s investors were prepared to dish out more money to the failing company, but only if the DOE agreed to “significant concessions.” Fortunately, the DOE had the sense pull the plug, but considering the concessions agreed to as part of the first restructuring agreement in February 2011, in which priority was given to private investors — ahead of taxpayers — with respect to the first $75 million recovered in the event of Solyndra’s collapse, it’s hard to imagine how bad the terms must have been for DOE to reject them.