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Where’s the Transparency?



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Energy Secretary Chu is on a roll and giving out millions as if he were the banker in Monopoly. The latest is $535 million in the form of a loan guarantee to solar company Solyndra, a deal that could be exposed to a little more sunlight, if you ask me.

Demonstrating that it plans to act quickly with clean-energy loans, the U.S. Department of Energy has made $535 million available to solar start-up Solyndra.

The loan guarantee, announced on Friday, is the first to be approved by the Department of Energy in four years. As part of a broader government stimulus plan, the administration of Energy Secretary Steven Chu has committed to quickly disbursing loans to clean-energy companies.

Demonstrating that it plans to act quickly with clean-energy loans, the U.S. Department of Energy has made $535 million available to solar start-up Solyndra.

The loan guarantee, announced on Friday, is the first to be approved by the Department of Energy in four years. As part of a broader government stimulus plan, the administration of Energy Secretary Steven Chu has committed to quickly disbursing loans to clean-energy companies.

The loan should cover about three-quarters of the cost of the new plant and is conditional on Solyndra raising the rest in equity according to the article above. Some concerns, however. . .

1.  By what process was Solyndra chosen and why?

2.  What are the terms of the loan guarantee? Solyndra went into the private equity market last year to raise funds for this project with suboptimal results. So now Joe Q. Public gets to bet on it?  We really need to know what price Solyndra’s current investors paid for their equity piece and what really were Solyndra’s other financing options.  If the government was the only funder at this point, then taxpayers need to know what makes this company so special.  And if there were other financing options, taxpayers need to know why their dollars were needed at all.

3.  Get ready for the Goldman Sachs chatter, especially after what happened with AIG. Solyndra’s main competitor is a company by the name of First Solar. Rumors swirled last year that Goldman, which had been the investment banker for First Solar, downgraded First Solar to benefit Solyndra. This link also says that Goldman was out raising money for Solyndra last year. And Goldman was the exclusive advisor to Solyndra for the government guaranteed loan. How much of a fee did Goldman earn for arranging the financing and is the government financing actually rescuing a bad investment for Goldman’s clients?

4.  Goldman Sachs downgraded the solar industry last yearBarrons reports from October 2008:

Solar stocks are trading sharply lower this morning after Goldman Sachs analyst Michael Molnar declared he has become cautious on the solar group, “as less generous subsidies combined with a wave of supply pose a real risk.”

Molnar asserts in a research note that the risk of oversupply in the solar market “will soon become a reality as considerably less generous demand subsidies take hold just as a wave of supply and tight financing hit the market.” He thinks that “liberal subsidies of the past in markets like Germany and Spain are unlikely to be replicated in the future givne fears of their ultimate cost in a bad world economy.”

As supply increases, he contends, prices will have to “adjust strongly downward to generate demand.” He thinks that trend will lead to below-consensus estimates for module manufacturers and compressed valuations for stocks in the sector.

Since Goldman was advising Solyndra on this project, did anyone in Chu’s Department of Energy question why taxpayers are guaranteeing the debt on a new solar plant for a market that Goldman’s own analysts have downgraded? Has President Obama’s election changed Goldman’s view on alternative energy to the point that it is now recommending the sector?

5.  Solyndra has big name investors ($600 million invested to date) who will benefit from the deal. Such names as Abu Dhabi, Richard Branson of Virgin, and the Walton family (as in Wal-Mart, through Madrone Capital Partners.) These guys couldn’t arrange traditional debt financing? If not, why? Congress went nuts when Chrysler’s private equity backer asked for taxpayer money. Why is this different?

To me, this fundraising looks more like a bailout then an investment in a shiny new technology. And if it’s a bailout, then the same conditions imposed on other bailed-out companies should apply.

More to come I hope.



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