Bush admin pushed Solyndra loan guarantee for two years
Cross-posted from Climate Progress and coauthored by Richard Caperton.
It’s often claimed that the Solyndra loan guarantee was “rushed through” by the Obama administration for political reasons. In fact, the Solyndra loan guarantee was a multi-year process that the Bush administration launched in 2007.
You’d never know from the media coverage that:
- The Bush team tried to conditionally approve the Solyndra loan just before President Obama took office.
- The company’s backers included private investors who had diverse political interests.
- The loan comprises just 1.3 percent of the Department of Energy’s (DOE) overall loan portfolio. To date, Solyndra is the only loan that’s known to be troubled.
Because one of the Solyndra investors, Argonaut Venture Capital, is funded by George Kaiser — a man who donated money to the Obama campaign — the loan guarantee has been attacked as being political in nature. What critics don’t mention is that one of the earliest and largest investors, Madrone Capital Partners, is funded by the family that started Walmart, the Waltons. The Waltons have donated millions of dollars to Republican candidates over the years.
With a stagnant job market and Obama sinking in the polls, the media has decided on a narrative that matches right-wing talking points but not the facts. For instance, Bloomberg had this incredibly misleading headline yesterday: “Obama team backed $535 million Solyndra aid as auditor warned on finances.” If you replace “backed” with “touted,” that would be accurate. But the headline makes it seem like the White House had decided to give $535 million to a company after an auditor had said it was financially troubled.
You have to read half the story to learn that the loan guarantee was made in 2009, and the audit was done in 2010, after market conditions had sharply worsened. And the Bloomberg story never explains that the company itself raised $250 million from private investors after the supposedly devastating audit.
To set the record straight, Climate Progress is publishing this timeline — verified by Department of Energy officials — that shows how the loan guarantee came together under both administrations. In fact, rather than rushing the loan for Solyndra through, the Obama administration restructured the original Bush-era deal to further protect the taxpayers’ investment:
May 2005: Just as a global silicon shortage begins driving up prices of solar photovoltaics, Solyndra is founded to provide a cost-competitive alternative to silicon-based panels.
July 2005: The Bush administration signs the Energy Policy Act of 2005 into law, creating the 1703 loan guarantee program.
February 2006 – October 2006: In February, Solyndra raises its first round of venture financing, worth $10.6 million from CMEA Capital, Redpoint Ventures, and U.S. Venture Partners. In October, Argonaut Venture Capital, an investment arm of George Kaiser, invests $17 million into Solyndra. Madrone Capital Partners, an investment arm of the Walton family, invests $7 million. Those investments are part of a $78.2 million fund.
December 2006: Solyndra applies for a loan guarantee under the 1703 program.
Late 2007: Loan guarantee program is funded. Solyndra was one of 16 clean-tech companies deemed ready to move forward in the due diligence process. The Bush administration DOE moves forward to develop a conditional commitment.
October 2008: Then Solyndra CEO Chris Gronet touted reasons for building in Silicon Valley and noted that the “company’s second factory also will be built in Fremont, since a Department of Energy loan guarantee mandates a U.S. location.”
November 2008: Silicon prices remain very high on the spot market, making non-silicon based thin film technologies like Solyndra’s very attractive to investors. Solyndra also benefits from having very low installation costs. The company raises $144 million from ten different venture investors, including the Walton-family run Madrone Capital Partners. This brings total private investment to more than $450 million to date.
January 2009: In an effort to show it has done something to support renewable energy, the Bush administration tries to take Solyndra before a DOE credit review committee just one day before President Obama is inaugurated. The committee, consisting of career civil servants with financial expertise, remands the loan back to DOE because it wasn’t ready for conditional commitment.
March 2009: The same credit committee approves the strengthened loan application. The deal passes on to DOE’s credit review board. Career staff (not political appointees) within the DOE issue a conditional commitment setting out terms for a guarantee.
June 2009: As more silicon production facilities come online while demand for PV wavers due to the economic slowdown, silicon prices start to drop. Meanwhile, the Chinese begin rapidly scaling domestic manufacturing and set a path toward dramatic, unforeseen cost reductions in PV. Between June of 2009 and August of 2011, PV prices drop more than 50 percent.
September 2009: Solyndra raises an additional $219 million. Shortly after, the DOE closes a $535 million loan guarantee after six months of due diligence. This is the first loan guarantee issued under the 1703 program. From application to closing, the process took three years — not the 41 days that is sometimes reported.
January – June 2010: As the price of conventional silicon-based PV continues to fall due to low silicon prices and a glut of solar modules, investors and analysts start questioning Solyndra’s ability to compete in the marketplace. Despite pulling its IPO (as dozens of companies did in 2010), Solyndra raises an additional $175 million from investors.
November 2010: Solyndra closes an older manufacturing facility and concentrates operations at Fab 2, the plant funded by the $535 million loan guarantee. The Fab 2 plant is completed that same month — on time and on budget — employing around 3,000 construction workers during the build-out, just as the DOE projected.
February 2011: Due to a liquidity crisis, investors provide $75 million to help restructure the loan guarantee. The DOE rightly assumed it was better to give Solyndra a fighting chance rather than liquidate the company — which was a going concern — for market value, which would have guaranteed significant losses.
March 2011: Republican Representatives < a href=”http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8333″>complain that DOE funds are not being spent quickly enough.
House Energy and Commerce Committee Chairman Fred Upton (R-Mich.): “Despite the administration’s urgency and haste to pass the [American Recovery and Reinvestment Act] … billions of dollars have yet to be spent.”
And House Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-Fla.): “The whole point of the Democrats’ stimulus bill was to spend billions of dollars … most of the money still hasn’t been spent.”
June 2011: Average selling prices for solar modules drop to $1.50 a watt and continue on a pathway to $1 a watt. Solyndra says it has cut costs by 50 percent, but analysts worry how the company will compete with the dramatic changes in conventional PV.
August 2011: DOE refuses to restructure the loan a second time.
September 2011: Solyndra closes its manufacturing facility, lays off 1,100 workers, and files for bankruptcy. The news is touted as a failure of the Obama administration and the loan guarantee office. However, as of Sept. 12, the DOE loan programs office closed or issued conditional commitments of $37.8 billion to projects around the country. The $535 million loan is only 1.3 percent of DOE’s loan portfolio. To date, Solyndra is the only loan that’s known to be troubled.
Meanwhile, after complaining about stimulus funds moving too quickly, Upton and Stearns are now claiming that the administration was pushing funds out the door too quickly: “In the rush to get stimulus cash out the door, despite repeated claims by the administration to the contrary, some bets were bad from the beginning.”
What critics fail to mention is that the Solyndra deal is more than three years old, and started under the Bush administration, which tried to conditionally approve the loan right before Obama took office. Rather than “pushing funds out the door too quickly,” the Obama administration restructured the original loan when it came into office to further protect the taxpayers’ investment.
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